2011 Annual Report - the solid group inc website

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29.2 Distributorship Agreement with Sony Corporation of Hong Kong
Limited (Sony HK)
SVC has a non-exclusive Distributorship Agreement (the Agreement) with Sony HK, a
corporation organized and existing under and by virtue of the laws of Hong Kong. Under
the Agreement, SVC was designated by Sony HK as its non-exclusive distributor of
Sony products in the Philippines. In addition, SVC shall provide the customers in the
Philippines with repair and parts replacement services, including but not limited to repair
and parts replacement services rendered by SVC which are covered under the
12 month-warranty period at its own costs and expenses (see Note 17). Management
believes that the Agreement continuous to be effective although no formal renewal has
been made since 2007.
30. COMMITMENTS AND CONTINGENCIES
The following are the significant commitments and contingencies involving the Group:
30.1 Operating Lease Commitments – Group as Lessor
Certain subsidiaries lease various properties for a period of one to ten years. Some of these
lease transactions are subject to 5% to 10% escalation rate. The future minimum rentals
receivable under these non-cancellable operating leases as of December 31 are as follows:
2011 2010 2009
Within one year P 85,906,404 P 84,506,562 P 53,682,958
After one year but not more
than five years 137,864,538 159,674,701 91,966,581
More than five years 806,905 865,866 1,810,700
30.2 Operating Lease Commitments – Group as Lessee
P 224,577,847 P 245,047,129 P 147,460,239
The Group is a lessee to non-cancellable operating leases on land. As of
December 31, 2009, these leases have a remaining term of 10 years, expiring in 2019. Lease
payments are fixed for the first five years. Thereafter, the lease on land is subject to 100%
escalation rate every five years while the lease on land improvements is subject to an annual
escalation rate of 10%.
2011 2010 2009
Within one year P 11,131,271 P 6,984,946 P 6,664,895
After one year but not more
than five years 40,612,597 33,500,497 29,065,715
More than five years 25,977,359 36,195,820 52,122,286
P 77,721,227 P 76,681,263 P 87,852,896
Total rental expense from these operating leases amounted to P7.4 million each in 2011,
2010 and 2009, and are shown as part of Rentals under Cost of Services in the consolidated
statements of income (see Notes 19.2 and 21).