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66 Annual Report 2007 Under the Technology Services Framework Agreement, fees payable to us for technology services provided are calculated on the basis of our actual costs for providing such services plus a margin of up to 15% by reference to industry practice for comparable transactions. The costs for providing each technology service include operating costs, cost for the aggregate time spent by our staff and any equipment depreciation that we incurred or may incur, in connection with providing such service. The fee payable for research and development services provided by us to Alibaba Group is computed on a cost-plus basis. During the year, total amount we received from Alibaba Group under the Technology Services Framework Agreement was RMB522,000. Cooperation framework agreements We have entered into certain cooperation framework agreements dated October 19, 2007 with Alibaba Group with respect to the provision of products and services developed by it to us and to users of our marketplaces (the “Cooperation Framework Agreements”). These products and services currently include the provision of the online payment platform operated by Zhejiang Alipay Network Technology Co., Ltd. and Alipay Software (Shanghai) Co., Ltd., each a wholly-owned subsidiary of Alibaba Group, and Zhejiang Alibaba E-Commerce Co., Ltd., a consolidated affi liate of Alibaba Group (collectively “Alipay”), to us and to users of our China marketplace, instant messenger development and maintenance services to users of our marketplaces, as well as the sale of keywords on websites operated by Alibaba Group for the promotion of our marketplaces. The Cooperation Framework Agreement will expire on December 31, 2009 and is automatically renewable for further periods of no more than three years subject to compliance with the applicable provisions of the Listing Rules, unless it is terminated earlier by either party giving three months’ prior written notice. Fees payable by us under the Cooperation Framework Agreement are based on market rates and on normal commercial terms no less favorable than terms offered to us by independent third-party service providers for similar products and services. Market rates are determined based on the rates offered by independent third-party providers for similar products and services. During the year, total amount of fees paid by us to Alibaba Group was RMB2.9 million which related to the purchase of keywords on websites operated by Alibaba Group for the promotion of our marketplaces. (C) Non-exempt continuing connected transactions subject to reporting, announcement and independent shareholders’ approval requirements Cross-selling services framework agreement We have entered into a cross-selling services framework agreement dated October 19, 2007 with Alibaba Group to govern our existing and future arrangements under which we cross sell the products and services of the other party to our respective customers (the “Cross-Selling Services Framework Agreement”). We have provided, and under the terms of the Cross-Selling Services Framework Agreement will continue to provide, cross-selling services to Alibaba Group, which include the sale to our users of software products of Alibaba Software (Shanghai) Co., Ltd., a wholly-owned subsidiary of Alibaba Group, and Alipay’s online payment services for the settlement of transactions between users of our marketplaces.
Directors’ Report Alibaba Group has sold, and under the terms of the Cross-Selling Services Framework Agreement will continue to sell, our website inventory to customers of Alibaba Group. “Website inventory” refers to parts of the website pages which are reserved for promotional displays. The Cross-Selling Services Framework Agreement will expire on December 31, 2009 and is automatically renewable for further periods of no more than three years subject to compliance with applicable provisions of the Listing Rules, unless it is terminated earlier by either party giving three months’ prior written notice. Under the Cross-Selling Services Framework Agreement, payments will be made in the form of commissions or on the basis of revenue sharing arrangements. In particular: • we will receive a commission fee of between 20% to 80% or pay a revenue share of 20% to 80% of the transaction amount for cross-selling services provided by us to Alibaba Group; and • we will pay a commission fee of between 15% to 40% or receive a revenue share of 60% to 85% of the transaction amount for cross-selling services provided to us from Alibaba Group. The commission fees and revenue share payable and receivable by us vary as they relate to the cross-selling of different products and are therefore at different rates. Commission fees and revenue sharing arrangements for additional cross-selling services are subject to negotiation between the parties, except that commission fees paid to or revenue shared with us shall not be less than the prevailing market rate and commissions or revenue share payable by us shall not exceed the prevailing market rate. During the year, total amount received by us was RMB29.0 million which included amounts received by us in relation to the same cross-selling arrangements in existence prior to the entering of the Cross-Selling Services Framework Agreement . Technology and intellectual property framework license agreement We have entered into a technology and intellectual property framework license agreement dated October 19, 2007 with Alibaba Group (the “Technology and Intellectual Property Framework License Agreement”) whereby: • we have been granted, to the extent relevant to our B2B business, a renewable license to use all patents, pending patents and related know-how in existence, including a license of any future patents the development of which was undertaken by our Company on behalf of Alibaba Group pursuant to the Technology Services Framework Agreement; • we have the right to be granted, to the extent relevant to our B2B business, a renewable sub-license to use all technology and intellectual property that Alibaba Group has an existing license to use from a third party and which Alibaba Group is permitted to sub-license to us and subject to the other terms of the third-party license to Alibaba Group; and • we have the right to be granted, to the extent relevant to our B2B business, an option to use all technology and intellectual property that Alibaba Group may license from third parties in the future to the extent Alibaba Group has the right to do so. 67
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Financial and Operational Highlight
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orld’s leading nline marketplace
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CORPORATE HEADQUARTERS 6th Floor, C
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November Launched TradeManager inst
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Awards and Recognitions Awards and
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Global E-Commerce Leader Alibaba.co
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Along with other members of Alibaba
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2007 Financial highlights We achiev
Page 19 and 20: CEO’s Statement This mission star
Page 21 and 22: Global Trade Starts Here Alibaba.co
Page 23 and 24: BUSINESS ENVIRONMENT Buoyant China
Page 25 and 26: International marketplace operating
Page 27 and 28: localize user services and facilita
Page 29 and 30: selling branded advertisements main
Page 31 and 32: Management Discussion and Analysis
Page 33 and 34: provider and other related expenses
Page 35 and 36: expenses include a royalty fee paid
Page 37 and 38: Profi t attributable to equity owne
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Page 41: Corporate Social Responsibility —
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Page 85 and 86: The Leading B2B E-Commerce Company
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