COVER SHEET PHILIPPINE SEVEN CORPORATION - 7-Eleven

points partly due to the dilution brought about by the increase in the Company’s sales to franchisestores accounted for at zero mark-up. The company shares in the gross profit of franchise-operatedstores and is recognized as franchise revenue.Moreover, aggregate merchandise transfers through the distribution center subsidiary, ConvenienceDistribution, Inc. (CDI) to franchise-operated stores in 2007 amounted to P927 million, higher by 80%from P513 million in 2006.Commission income amounted to P21.9 million in 2007, 23% lower than last year. Down trend incommission continues due to other competitors in downstream channels and maturing telco business.Other IncomeOther income consists of marketing income, franchise revenue and rent income from rentable spaces.The Company’s total other income increased by P97.8 million, to P368.4 million as a result of thefollowing;Marketing income, which pertains mainly to promotional support and display allowance, had grown byP15.1 million from the 2006 level. This can be attributed to the higher promotional support collectedfrom suppliers. In addition, the Company penalized suppliers when valuable shelf space was vacantdue to production problem.Franchise revenue climbed to P204 million from P148 million in 2006. This was the result of theincreased number of franchise-operated stores. The number of stores operated under the conventionalfranchise package or FC1 increased by 28 ending 2007 with 85 stores. On the other hand, stores underlabor franchise or service agreement (SA) increased to 75 stores.Rent income arising from the stores’ subleased spaces reached P39.6 million and was slightlyunchanged from the level registered a year ago.No significant element of income came from sources other than the result of the Company’s continuingoperations.General and Administrative ExpenseGeneral and administrative expense which is comprised of store operating and selling expenses as wellas HQ expenses went up by four percent or P71.9 million and totaled to P1.68 billion in 2007. As apercentage of sales, general and administrative expense is pegged at 34.0% and 34.8% in 2007 and2006, respectively.Communication, light and water accounted for almost one fifth of the total expense and were thehighest contributor. This is followed closely by personnel costs with 19% share and rent expenseaccounting for 15% of the total general and administrative expense in 2007.Communication, light and water amounted to P327.1 million or 6.6% of total revenue and went up by4% versus the same period in 2006. Bulk of this expense caption pertains to electricity whichcomprises 93% and grew by 2% vis a vis the 2006 levelPersonnel costs aggregated to P316.2 million, versus P336.9 million in 2006. Ratio to sales was 6.4%