STI: Annual Report

1 7 4 6
S T I E D U C A T I O N S Y S T E M S
H O OL D I N G S, I N C.
7/ F i A C A D E M Y B L D G. ,
6 7 6 4 A Y A L A A V E. , M A K A T I C I T Y
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Elizabeth M. Guerrero/Katelyne Ann Brooks ARSENIO C. CABRERA, JR. (6 3 2) 8 4 4 9 5 5 3
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N A
C F D N A
Dept. Requiring this Doc.
1 2 4 5 N A N A
Total No. of Stocholders
To be accomplished by SEC Personnel concerned
Last Friday of September
Day
Annual Meeting
SEC FORM 17-A For the Fiscal Year ended 31 March 2014
Month
Total Amount of Borrowings
S T A M P S
Domestic Foreign
File Number
Document I.D.
LCU
Cashier
Month Day FORM TYPE
Fiscal Year
Secondary License Type, If Applicable
Amended Articles Number/Section
Company Telephone Number Contact Person
COVER SHEET
(Company's Full Name)
(Business Address : No. Street City / Town / Province)

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A
ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE AND SECTION 141
OF CORPORATION CODE OF THE PHILIPPINES

1. For the fiscal year ended March 31, 2014

2. SEC Identification Number 1746

3. BIR Tax Identification Number 000-126-853

4. Exact name of registrant STI EDUCATION SYSTEMS HOLDINGS, INC.
as specified in its charter

5. Province, country or other Metro Manila,
jurisdiction of incorporation Philippines
or organization

6. Industry Classification Code
(SEC Use Only)

7. Address of Principal Office 7
th
Floor i-ACADEMY Building
6764 Ayala Avenue
1226 Makati City

8. Registrants telephone (632) 844-9553
number (including area code)

9. Former name, former address, JTH DAVIES HOLDINGS, INC.
former fiscal year, if changed
since last report

10. Securities Registered pursuant to Sections 4 and 8 of the RSA.

Title of Each Class Number of Shares of Common Stock Outstanding
and Amount of Debt Outstanding
----------------------------- --------------------------------------
Common Stock 9,904,806,924 shares Issued and Outstanding

11. Are any or all of these securities listed on a Stock Exchange?

Yes [ / ] No [ ]

Name of Stock Exchange: Philippine Stock Exchange Class of Securities: Common

12. Check whether the registrant:

(a) has filed all reports required to be filed by Section 17 of the Securities Regulations Code
(SRC) and SRC Rule 17 (a) - 1 there under and Sections 26 and 141 of the Corporation
Code of the Philippines during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports);

Yes [ / ] No [ ]

(b) has been subject to such filing requirements for the past 90 days.

STI Education Systems Holdings, Inc.
SEC Form 17 A
As of 31 March 2014
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Yes [ / ] No [ ]

13. State the aggregate market value of the voting stock held by non-affiliates of the registrant.

3,555,405,214shares x Php0.69 per share = P2,453,229,597.66

Note: As of the last trading date which was on 31 March 2014, the Companys shares were
traded at Php0.69 each.

14. The Company was not involved in any insolvency/suspension of payments proceedings in the
last five (5) years.

DOCUMENTS INCORPORATED BY REFERENCE

15. The March 31, 2014 Audited Consolidated Financial Statements is incorporated by reference in
this SEC Form 17-A (Item 7)

SEC Form 17 A
As of 31 March 2014
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TABLE OF CONTENTS

PART I BUSINESS AND GENERAL INFORMATION

PAGES

Item 1 Description of Business 4
Item 2 Properties 32
Item 3 Legal Proceedings 35
Item 4 Submission of Matters to a Vote of Security Holders 36

PART II OPERATIONAL AND FINANCIAL INFORMATION

Item 5 Market for Issuers Common Equity and Related Stockholder Matters 36
Item 6 Managements Discussion and Analysis of Financial Condition and
Results of Operation and Plan of Operation 40
Item 7 Financial Statements 51
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures 51

PART III CONTROL AND COMPENSATION INFORMATION

Item 9 Directors and Executive Officers of the Issuer 52
Item 10 Executive Compensation 60
Item 11 Security Ownership of Certain Beneficial Owners and Management 61
Item 12 Certain Relationships and Related Transactions 65

PART IV CORPORATE GOVERNANCE

Item 13 Corporate Governance 68

PART V EXHIBITS AND SCHEDULES

Item 14 Exhibits and Reports on SEC Form 17-C 68

SIGNATURES 72

MARCH 31, 2014 AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY SCHEDULES

SEC Form 17 A
As of 31 March 2014
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PART 1 - BUSINESS AND GENERAL INFORMATION

Item 1. DESCRIPTION OF BUSINESS

Group History and Structure


STI Education Systems Holdings, Inc. (STI Holdings or the Company) was originally established in 1928
as the Philippine branch office of Theo H. Davies & Co., a Hawaiian corporation. It was reincorporated as a
Philippine corporation in 1946. After many years of operations as part of the Jardine-Matheson group, STI
Holdings was sold to local Philippine investors in 2006. In March 2010, Capital Managers and Advisors, Inc.
(CMA), a member of the Tanco Group of Companies (Tanco Group), purchased the majority interest in
STI Holdings and simultaneously conducted a tender offer for all the remaining shares held by minority
shareholders. As a result, CMA acquired a 68.57% interest in the Company and assumed control and
management of the Company.

STI Holdings is the holding company within the Tanco Group that drives investment in its education
business. It is a publicly-listed company in the Philippine Stock Exchange (PSE) and its registered office
address and principal place of business is 7
th
Floor iACADEMY Building, 6764 Ayala Avenue, Makati City.
Unless indicated otherwise or the context otherwise requires, reference to the Group are to STI Holdings
and its subsidiaries, including STI Education Services Group, Inc., after consolidation.

The Company is a party to a joint venture agreement and a shareholders agreement by and among the
Philippine Womens University (PWU), UNLAD Resources Development Corporation (UNLAD) and
Attenborough Holdings Corporation. UNLAD is a real estate company controlled by the Benitez Family,
whose assets are used to support the educational mission of PWU. Under the agreements, the parties
engaged in a series of transactions which resulted in the Company extending loans to PWU and UNLAD that
shall be repaid by the conversion of the loans into a 40.0% interest in the total issued and outstanding capital
stock of UNLAD. As a result, the Group nominates its representatives as members and trustees of PWU, the
board of directors of UNLAD and certain key officers of PWU and UNLAD. STI Holdings has submitted all
the required documents to effect the conversion of this loan to equity.

On 14 June 2012 and 10 August 2012, the Board of Directors and stockholders of the Company, respectively,
approved the following: (a) a change in the corporate name from JTH Davies Holdings, Inc. to STI Education
Systems Holdings, Inc.; (b) the share-for-share swap transaction (the Share Swap) with the shareholders of
STI Education Services Group, Inc. (STI ESG Shareholders); and (c) the corresponding increase in the
Companys authorized capital stock from 1,103,000,000 shares with an aggregate par value of P 551.5 Million
to 10,000,000,000 shares with an aggregate par value of P 5 Billion. The change in the corporate name was
approved by the Securities and Exchange Commission (SEC) on 10 September 2012 while the Share Swap
and increase in authorized capital stock were approved by the SEC on 28 September 2012.

On 28 August 2012, the Board of Directors of STI Holdings approved the offering and issuance by way of a
follow-on offering of up to a maximum 3 Billion common shares (the Offer Shares) at an offer price to be
determined based on a bookbuilding process and from discussions between STI Holdings and the
International Lead Manager and Domestic Lead Manager. The Offer comprised the following: (a) up to
2,627,000,000 common shares offered to the public on a primary basis (Primary Offering); (b) up to
105,209,527 common shares offered to the public on a secondary basis by Korea Merchant Banking
Corporation (Secondary Offering); and (c) over-allotment option to purchase up to 273,000,000 common
shares (Over-Allotment Option) granted to UBS AG in its role as Stabilizing Agent and on the same terms
and conditions as the Primary Offering and Secondary Offering. The offer price was set at P 0.90 per share
on 22 October 2012. The Primary Offering and Secondary Offering were completed on 7 November 2012
while the Over-Allotment Option was exercised on 28 November 2012.

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Consolidation of STI Education Services Group, Inc. (STI ESG) into STI Holdings

On 20 December 2011, STI Holdings acquired a 4.4% interest in STI ESGs outstanding common shares
(equivalent to approximately 3.3% interest in STI ESGs outstanding common shares prior to Share Swap) for
a combined purchase price of P80.8 million.

On 10 August 2012, STI Holdings shareholders approved an increase in share capital from 1,103,000,000
shares with an aggregate par value of P 551.5 million to 10,000,000,000 shares with an aggregate par value of
P 5 Billion and a share swap agreement with the stockholders of STI ESG (the STI Stockholders) and
completed the consolidation of the two companies. Pursuant to the share swap transaction, STI Holdings
issued new shares to STI Stockholders in exchange for shares of STI Stockholders in STI ESG at an exchange
ratio of 6.5 Shares of STI Holdings for every 1 STI ESG share. Since STI Holdings and the majority of STI
Stockholders are related parties, STI Holdings obtained a waiver from the majority of its minority
shareholders of the requirement to conduct a rights or public offering during the STI Holdings Special
Stockholders Meeting held on 10 August 2012. On 28 September 2012, the SEC approved the increase in
share capital of STI Holdings.

In view of the increase in its authorized capital stock and pursuant to the Share Swap, STI Holdings issued
5,901,806,924 shares to STI ESG Shareholders in exchange for 907,970,294 common shares of STI ESG
(exclusive of the 32,324,618 STI ESG shares acquired in December 2011). As a result, immediately after the
Share Swap, the STI ESG Shareholders who joined the Share Swap owned approximately 84% interest in STI
Holdings while STI Holdings increased its shareholdings to 96.0% of the total issued and outstanding capital
stock of STI ESG. As of 31 March 2014, STI ESG holds 502,307,895 shares of STI Holdings equivalent to 5.07%
ownership in the Company.

In November and December 2012, STI Holdings subscribed to 2.1 Billion STI ESG shares at a consideration
price equal to its par value of P 2,100.00 Million. As a result, STI Holdings ownership interest in STI ESG
increased to approximately 98.71% as of 31 March 2013. STI Holdings ownership in STI ESG is at 98.66% as
of 31 March 2014.

Acquisition of West Negros University

On October 1, 2013, STI Holdings acquired 99.45% of the issued and outstanding common shares and 99.93%
of the issued and outstanding preferred shares of West Negros University Corp. (WNU), a leading
university in the City of Bacolod in Negros Occidental.

WNU offers a wide variety of programs and complements the courses offered by the Companys other
subsidiary, STI ESG.

The acquisition is part of the planned expansion of the Company. It not only widened its course offerings at
the tertiary level but the acquisition also provided STI Holdings another entry into basic education which is
the focus of the governments K+12 program, and into the graduate school level which is vital in updating
the development of human capital in the country.

Business Development

STI ESG was founded on August 21, 1983 to address the IT education needs of the Philippines. The first
courses that it offered were in modular forms that covered basic programming concepts and the COBOL and
Basic programming languages. These short courses were patterned to satisfy the demand of college
graduates and working professionals who wanted to learn more about the emerging computer technology.

Shortly after the establishment of its first wholly-owned training center, STI ESG began granting franchises
for other locations within Metro Manila. In 1985, STI ESG established its first provincial school with a wholly-
owned campus in Baguio City. In l986, expansion moved to the southern part of the Philippines with a
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wholly-owned school in Cebu. In 1988, STI ESG established its first campus in Mindanao, with a wholly-
owned school in Davao City.

In the mid 1990s, STI ESG began to shift its focus from short courses to college degree programs to adjust to
the changing business environment. In 1994, STI ESG developed a 2-year associate degree in computer
programming. In 1995, STI ESG was granted a permit by the Commission on Higher Education (CHED) to
operate colleges. It started to roll out the four-year college programs in 1996 with the Bachelors Degree in
Computer Science.

In 2001, the Tanco Group, a minority shareholder at that time, acquired control of STI ESG by purchasing a
controlling interest from the founders. The Tanco group then installed a new management team. The
management team conducted a series of consultations, market studies, and strategy reviews. The resulting
market strategy aimed to escalate STI ESGs strength beyond IT, by expanding the existing programs to
bachelors degree in the fields of business administration, computer engineering, secondary education, and
by introducing new programs in electronics and communications engineering, nursing, and hotel and
restaurant management. To date, new programs continue to be considered and reviewed when STI ESG
introduced a bachelors degree in Tourism in 2010, Accounting Technology in 2011, and Communication in
2012. In August 2013, STI ESG has also officially applied for the initial offering of the Senior High School
program (Grades 11 and 12) beginning SY 2014-15.

STI ESG continued to embark on expansion and capital improvement projects as it encouraged schools to
move from rented space into school-owned stand-alone campuses. STI ESG also acquired certain franchises
and converted them into wholly-owned schools. In addition, STI ESG has centralized its focus into academic
quality and started investing on trainings on awareness, documentation, and internal quality audit to achieve
ISO 9001:2008 certification for its core academic processes the courseware development process, the
faculty certification process, and the faculty training process.

In August 2009, STI ESG subscribed to a 20% interest in a newly created holding company, STI Investments,
Inc. (STI Investments). STI Investments subsequently acquired a 100.0% interest in PhilPlans First, Inc., an
existing pre-need investment company as well as a 99.74% interest in Philhealthcare, Inc., a health
maintenance organization company. In May 2012, STI Investments acquired 70% of Philippine Life Financial
Assurance Corp., formerly Asian Life Financial Assurance Corp.

The Shift in the Education Landscape in the Philippines: The Senior High School
Program

The education landscape in the Philippines has changed with the signing of Republic Act (RA) 10533
on May 15, 2013, also known as the Enhanced Basic Education Act of 2013. The emphasis of RA 10533 is
the introduction of the K+12 program which in summary adds two (2) years prior to tertiary education.
For the schools in the Philippines that offer tertiary education, similar to STI ESG, this will mean two (2)
academic years with no incoming college freshmen students.

This threat has been constructively converted into an opportunity for the STI ESG network of campuses
nationwide. STI ESG has decided to capitalize on its nationwide presence and ample facilities to be able
to implement the first-to-market approach of the Senior High School program. In August 2013, STI ESG
has filed its application for the Senior High School modeling program in support of the K+12 program
that is regulated by the Department of Education (DepEd). However, by the first quarter of 2014, the
DepEd has decided to stop the Senior High School modeling program. It is due to this that the 73 STI
Colleges and Education centers nationwide decided to apply for the advance implementation of Senior
High School for SY 2014-15 and six (6) STI campuses for SY 2015-16.

The two program tracks that the STI ESG has applied for are the Academic and Technical-Vocational-
Livelihood tracks.

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Academic Track
Accountancy and Business and Management
Humanities and Social Science
Science, Technology, Engineering, and Mathematics
General Academic Strand

Technical Vocational Track
Hotel Management
Tourism Management
Information Technology
Pastry & Restaurant Services

The Senior High School offering of STI ESG aims to minimize the impact of the expected reduction in
enrollment since there will be no incoming freshmen during the transition period from Senior High School to
College. Likewise, there is an opportunity for STI ESG to increase its student retention and migration when
the students graduate in Senior High School and decide to pursue a Baccalaureate degree.

Non-STI Branded Schools

In addition to the schools in the STI Network, STI ESG operates three schools that are not branded as STI
schools: iACADEMY, which specializes in course offerings in animation and multimedia and graphic arts;
De Los Santos STI (DLS STI) College, a health science and nursing school and its wholly-owned
subsidiary, STI College Quezon Avenue; and West Negros University (WNU) which is a subsidiary of STI
Holdings that focuses on the widening of the course offerings in the tertiary level and likewise serve as an
entry to the basic education and graduate school level.

iACADEMY

iACADEMY started in 2002 with an initial class of 72 students. At the beginning of SY 2013-2014,
iACADEMY had 823 students enrolled. The school is located in the Makati Business District. The faculty is
comprised of both experienced academics and industry practitioners. Highlights of the iACADEMY
programs are that it is the first and only Wacom Authorized training partner in the Philippines, the first
college appointed as an IBM Center of Excellence in the ASEAN region. iACADEMY prides itself in being
one of the pioneers in industry-partnered education. Aside from bringing in industry professionals to teach
at iACADEMY, it has instituted an internship program, which is one of the most intensive in the country
today. Under the program, iACADEMY student interns work full-time in partner companies for at least 960
hours. To date, this model has resulted in a 98% job placement success rate within the first six months after
graduation.

De Los Santos STI (DLS STI) College

De Los Santos STI College was established and recognized by the Department of Education Culture and
Sports (DECS) in 1975 as part of the expanding services of the De Los Santos Medical Center to the Filipino
community. The school opened its College of Nursing with only 65 students. In the schools interest to ensure
quality students for its system, only student applicants with a minimum rating of 95% in their NCEE were
accepted into the College of Nursing. By 1979, 42 of its first nursing students graduated with 135 students
enrolled. Through diligence and careful management, the population increased to 300.

Since its opening in 1975, the School of Nursing has always been a separate institution from the hospital. It
became the De Los Santos School of Nursing in 1976 with Mrs. Lydia G. Tapia as its first Executive Dean.

The courses, which the school offered, continued to increase as it kept pace with its maturing years. In 1981
the School opened Junior Secretarial courses and Midwifery. Two years later, its first batch of enrollees
graduated.
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In the next decade, the De Los Santos College has added to its line, the College of Physical Therapy, which
received DECS authority to operate in June 1993.

In September 2002, the merger with STI ESG was established. This merger was a strategic move on both
parties to be globally competitive as the leading ICT Enhanced Healthcare learning institution. Thus, the
name De Los Santos-STI College of Health Professions, Inc. (DLS STI) was established. To this date, DLS STI
as a learning institution is continuously creating and providing an educational environment responsive to the
national goals in order to achieve the best for its students and the community it serves.

STI ESG has a 52.0% interest in DLS STI, which is a CHED licensed college specializing in health science
education. Approximately 80% of the students are enrolled in health sciences. In addition, it offers programs
in hotel and restaurant management, and tourism. The school is adjacent to De Los Santos Medical Center,
and benefits from its proximity to the prestigious medical establishment.
DLS STIs wholly-owned subsidiary, STI College Quezon Avenue, Inc., is incorporated in the Philippines
and registered with the Philippine Securities and Exchange Commission (SEC) on March 20, 2007. Its
registered office address is 133 Quezon Avenue, Quezon City.

STI College Quezon Avenue, Inc. was established as an Educational Center in San Juan (1993-1995), then
transferred to Sta. Mesa (1996-2000). It was upgraded to College status in 2001 offering bachelor degree
programs. STI College Quezon Avenue, Inc. was formerly situated at 1050 CDC Bldg. Quezon Avenue,
Quezon City near Pantranco until second quarter of 2009. In June 2009, it moved to its present location in a
four-storey building with mezzanine floor conducive for a campus setting.

West Negros University (WNU)
West Negros University was founded on February 14, 1948 by three Baptist women leaders, Luciana Aritao,
Teresa Padilla, and Rosario Remetio.
The school, then West Negros College, first operated as a sectarian educational institution in an old rented
Valentine Memorial Hall at corner Rosario and San Juan Streets, offering six undergraduate programs that
attracted 710 students handled by 33 faculty members.
In 1951, the school was re-established as a non-sectarian school on its present location along Burgos Street,
utilizing a three-storey wooden building that housed classrooms and administrative offices. A separate
building was also built for elementary and high school pupils.
It has since gone through years of providing education responsive to the needs of the community as seen in
the continued increase in enrolment. Taking the challenge, then President Leodegario N. Agustin initiated
the construction of a P2.2 million concrete five-storey building. The building accommodated all academic
departments and administrative offices, laboratories, clinic, library, and classrooms.

To enrich the college life of students, a gymnasium was constructed in 1968 for the school's extra-curricular
and sports activities. It also hosted convocations, cultural presentations and graduation activities, and
extended its services to the community by accommodating, among others, basketball games, boxing
tournaments, social gatherings, and concerts.

The following year, the school's enrolment rose to 6,843 students, with a pool of 200 faculty members. The
increase brought about further expansion; hence in 1972 the construction of a concrete three-storey building
for the high school and elementary department was initiated.

In 1980, responding to the changing times with the advent of computers, the college put up its own
Computer Center and expanded its curricular offerings by opening computer courses and short-term or
technical programs. It was then considered among the biggest and was recognized among the pioneers of
computer schools in WesternVisayas.
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On October 1, 2007, as initiated by then President, Dr. Suzette Lilian A. Agustin, an application for
University status was submitted at the CHED Central Office, Manila. CHED Central Office sent a Special
Team on November 22-23, 2007 to evaluate and verify compliance of WNC to the university standards. The
schools readiness for a final CHED visit to inspect and evaluate WNCs level of compliance was conveyed
on January 25, 2008 to the Commission en banc and to the Office of Programs and Standards of the
Commission on Higher Education, which resulted to the conduct of the detailed and rigorous process of
verification by the CHED Commissioners on February 5, 2008.

On February 11, 2008, the Commission on Higher Education has found West Negros College in full
compliance of CHED requirements, and granted West Negros College the UNIVERSITY STATUS, per
Resolution No. 78, s. 2008. The WNC Board of Trustees then unanimously approved the change of the
schools name from West Negros College to WEST NEGROS UNIVERSITY, per Board Resolution No. 007-
02-26-08 dated February 26, 2008. On June 10, 2008, West Negros University received the official
confirmation through a Certificate of University Status from CHED, by virtue of Resolution No. 290, s. 2008,
dated June 2, 2008.
On October 1, 2013, WNU was turned-over to STI Education System Holdings, Inc.
On its 66
th
Foundation Anniversary, a groundbreaking ceremony of the five-storey Integrated School
Building was held and lauded by members of the local government units, Department of Education,
Commission on Higher Education and other stakeholders. With various renovations taking place in the
campus under the leadership of its new President, Atty. Monico V. Jacob, the communitys awareness of the
schools existence along with its vision and mission of providing excellent education has again made noise
and underscored.

Enrollment

STI ESG

STI ESG had an average total enrollment of 61,553 for the first and second semesters of School Year (SY) 2011-
12, posting a 1.19% increase from SY 2010-11. By SY 2012-13, an increase of 3.04% in the average total
enrollment for the first and second semesters was obtained. For SY 2013-14, STI ESG had an average total
enrollment of 66,259 for the first and second semesters, posting a 4.47% increase from SY 2012-13.

Freshmen enrollees in SY 2011-12 dipped 7.27%. In SY 2012-13, the total freshmen enrollees of the network
improved by 2.30%. There was no significant increase in the freshmen enrollees of SY 2013-14.

The average percentage of students retained in a semester for SY 2011-12 was at 96%, and was at 95% in SY
2012-13. The average percentage of students retained in a semester for SY 2013-14 increased at 96%. While the
average percentage of students who migrated to the succeeding semester is at 87% in SY 2011-12 and SY
2012-13. The average percentage of students who migrated to the succeeding semester in SY 2013-14 is at a
high of 91%.

In the past three years, significant increases in the enrollment are more evident in the degree programs of STI
compared to its technical/vocational programs. The ratio of associate and baccalaureate degree programs to
technical/vocational programs improved from 65% versus 35% in SY 2011-12, to 71% versus 29% in SY 2012-
13. The ratio of associate and baccalaureate degree programs to technical/vocational programs continued to
improve in SY 2012-13 with a ratio of 76% versus 24% in SY 2013-14.

In SY 2011-12, there were 11,779 graduates, and in SY 2012-13, there were 12,301 graduates. In SY 2013-14, STI
has generated 13,647 graduates for the first and second semesters.

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iACADEMY

iACADEMY had an average total enrollment of 523 for the first, second and third trimesters of SY 2011-12,
posting a 31% increase from SY 2010-11. By SY 2012-13, an increase of 24% in the average total enrollment for
the first, second, and third trimesters was obtained. By SY 2013-14, the average enrollment for the first,
second, and third trimesters improved by 23%.

Freshmen enrollees in SY 2011-12 increased by 31%. In SY 2012-13, the total freshmen enrollees of the school
improved by 19%. There was a 39% growth in the total number of freshmen students by SY 2013-14.

The average percentage of students retained in a trimester for SY 2011-12 was at 95%, and was at 93% in SY
2012-13 and for SY 2013-14, the retention rate was 90%.

In the past three years, a significant proportion of the student population are enrolled in the School of
Design, with 49% of the student population in SY 2011-2012, increased to 58% in SY 2012-2013 and this year
with 63% of the student population.

In SY 2011-12, iACADEMY has generated 63 graduates for the school. In SY 2012-13, there were 81
graduates. For SY 2013-14, the number of graduates increased to 90.

De Los Santos STI (DLS STI) College and STI College Quezon Avenue

For the past three school years (SY 2011-12, SY 2012-13, and SY 2013-14), DLS STI and STI College Quezon
Avenue had a total average enrollment of 1,106 students per semester.


For SY 2011-12, enrollment for WNU is at 5,359 and increased to 5,527 in SY 2012-13. Enrollment dipped
to 5,000 in SY 2013-14. Majority of the enrollment went to BS Education and Integrated School averaging
14% and 15% respectively. BS Engineering is on a steady trend; Maritime Studies, Criminology, and
Graduate Studies have erratic trends, while the rest of the programs have a declining trend.

Tuition Fee Increases

STI ESG

For SY 2011-12, there was no tuition fee increase but the other school fees had an average increase of 3% due
to the new Students Services fee and other items in the other school fees.

For SY 2012-13, there was no increase in the tuition fees and other school fees.

For SY 2013-14, there was an average increase of 5% in the tuition fees.

iACADEMY

For SY 2011-12, there was an average increase in tuition fee of 21.88% due to the increase in the salaries of
teaching and non-teaching personnel and school renovation. Other school fees did not increase this year.



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For SY 2011-12, there was no tuition fee increase but the other school fees had an average increase of
17.14%% due to the extended laboratory and RLE hours as mandated by CHED.

For SY 2012-13 and SY 2013-14, there were no increase in the tuition fees and other school fees.

The average increase on tuition fee of STI College Quezon Avenue for SY 2013-2014 is at 5%.

For the school years covering SY 2011-2012, SY 2012-2013 and SY 2013-2014, WNU has not implemented any
increase in tuition and other charges. This resulted to very affordable pricing in both basic education and
college/post-college courses versus immediate competitors in the market.

New Programs/Majors and Revised Curricula

STI ESG

STI ESG regularly conducts market studies to determine what programs, both degree and technical-
vocational, are needed by the industry and the market. Moreover, revisions to existing programs are
implemented to meet changes in the identified needs, as well as changes in government regulatory
requirements.

In SY 2011-12, STI ESG started to offer the BS in Accounting Technology program, and in SY 2012-13,
Bachelor of Arts in Communication, BS in Culinary Management, BS in Real Estate Management, 2-Yr.
Information Technology, 2-Yr. Computer and Consumer Electronics, 2-Yr., and 2-Yr. Tourism and Events
Management programs were offered.

Existing course offerings are likewise reviewed as needed. The streamlining of program curricula in response
to the needs of the market and developments in the industry drives the rationalization of STI course
offerings. In SY 2011-12, three programs underwent program revisions, and 13 programs in SY 2012-13.

STI ESGs Standardized Courseware

STI ESG develops courseware to ensure the standard delivery of courses across all campuses in the STI
network. These are sets of teaching materials used by the instructors which include the course syllabus that
sets the general objectives of the course with the course outline, presentation slides, class hand-outs and other
materials for use throughout the duration of the course, with accompanying instructors guides. The
instructors guides identify the specific objectives of each class session, the appropriate teaching
methodologies to be used, and how the provided materials are to be used to achieve the set objectives.

As of this writing, STI ESG had developed courseware for over 500 courses and new courseware are being
developed as new courses and programs are offered. Moreover, existing courseware are regularly revised
and updated to keep up with recent developments in target industries and the schools. In SY 2011-12, eight
courseware in the general education, ICT, engineering, business and management, and tourism and
hospitality management courses were developed, while in SY 2012-13, nineteen(19) new courseware in the
ICT, engineering, business and management, and tourism and hospitality management programs were
developed. During SY 2013-14, sixty-seven (67) new and revised courseware were developed. For Arts and
Sciences programs, there are nine (9) new and thirteen (13) revised courseware; for Business and
Management programs, there is one (1) new and five (5) revised courseware; for IT and Engineering
programs, there are ten(10) new and fifteen (15) revised courseware; and for Tourism and Hospitality
Management, there are eleven (11) new and three (3) revised courseware.

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Following recent developments in the industry and the trends in academic delivery, courseware revisions are
likewise developed at STI ESG. The traditional courseware materials were converted to LCD-version in SY
2011-12, and course delivery was improved with the incorporation of multimedia materials.

New Programs

In compliance with the DepEd requirements and at the same time prepare for the pending approval of the
application for the Senior High School offering of STI ESG, the following curricula and courseware, and
competency-based learning materials were prepared:

Curriculum for the following Academic Tracks:
1. Science, Technology, Engineering, and Mathematics
2. Humanities and Social Sciences
3. Accountancy, Business and Management
4. General Academics

Curriculum for Technical-Vocational-Livelihood Tracks:
1. Information Technology
2. Tourism Management
3. Pastry and Restaurant Services
4. Hotel Management

Development of competency-based Learning Materials (CBLMs) for ECs and Colleges:
1. Bartending NC II
2. Housekeeping NC II
3. Attractions and Theme Parks Operations NC II
4. Front Office Services NC II
5. Food and Beverage Services NC II
6. Tour Guiding Services NC II
7. Cookery NC II
8. Travel Services NC II
9. Tourism Promotion Services NC II
10. Events Management NC III

Milestones

STI ESG

STI ESG remains steadfast to its commitment to strive for academic excellence and search for milestones
directed towards the development of the institution and the improvement of the quality of its graduates.

Kabalikat Award

STI Calbayog was the sole educational institution to receive the Kabalikat Award under the Institution
category from TESDA in SY 2011-12 for its active support to TESDA Region VIIs various activities and
projects.

The Kabalikat Award is an annual institutional recognition to outstanding local government units,
institutions, and private firms for their best practices and contribution to the promotion and development of
mid-level manpower in terms of skills, abilities, proper work attitudes, and values.

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Leaders Convention

STI ESG held its 26
th
Annual Leaders Convention in Bangkok, Thailand on July 2013. More than 100 School
Leaders, School Operations Managers, Senior School Administrators, and Senior Operations Committee
members together with the STI ESG Executives attended the convention which was aimed to provide an
overview of the impact of the Philippines K+12 Program to STI and how the network intends to address this
impending shift in the education landscape. Professor Tomas B. Lopez, Jr., one of the pioneers of the
implementation of the K+12 program in the Philippines, served as the keynote speaker and shared with the
leaders possible school management strategies that may be applied at the onset of the K+12 program.

Administrative Planning Sessions and Workshops

The overall strategic objective of STI ESG is to gain first-to-market advantage by offering Senior High School
program in the STI ESG network of campuses before SY 2016-17. To ensure the smooth transition in the
operations of all campuses of STI ESG during the initial stages of the program, the School Operations Group
and the School Management Group spearheaded a strategic planning session for each campus to assess the
impact of the K+12 Program to STI ESG. The session focused on strategic objectives and pathways for each
school that will allow them to ride on the wave of K+12 and convert disruption into an opportunity.

Consequently, after most of the campuses have gone through the strategic planning process to draw the
pathways leading into the full implementation of K+12 in 2014 and 2015, and the transition years beginning
2016, the STI ESG also conducted a School Administrators Workshop to discuss various operational
challenges that the schools will face once the Senior High School program is implemented in STI ESG and at
the same time, collaborate on possible solutions to address these challenges. The workshop covered the areas
of finance, marketing, human resource, and academics as well as day-to-day administration of the school.

TESDA Accreditation Centers

In SY 2011-12, STI College Digos, on the other hand, completed all the pre-requisites of TESDA and became
the first TESDA-Accredited Computer Programming NC IV Assessment Center in Davao del Sur.

STI College San Pablo is also the first in the area of San Pablo City to be acknowledged as a TESDA
Certified Assessment Center for Commercial Cooking NC II and Computer Hardware Servicing NC II.

Rotaract Club

The Rotaract Club of STI College Baguio was also awarded with the Change Maker Award by Rotary
International in SY 2011-12. The school also received the following awards for SY 2012-13: DRR Citation
Award, Peace through Service Award, and Presidential Citation by the Rotary Club District 3790.


WNU in its decades of existence in the field of academe has always been an achiever, whether in the
military, sports, research or culture.

The Design of Collapsible Toilet using 5-Gallons Mineral Water Containers and Used Tarpaulins by Engr.
Rey Ramos (Adviser), Jun Anthony Golez, Ma. Gina Sanares, John Michael Paderog and Lorven E. Libo-on
won First Runner-up in the 2011 Invention Category of Regional Invention Contest and Exhibits (RICE)
hosted by Department of Science and Technology (DOST).

Meanwhile, the Design and Development of Modular Beams for Single Storey Building also by Engr. Rey
Ramos (Adviser), Jun Anthony Golez, Ma. Gina Sanares, John Michael Paderog and Lorven E. Libo-on
bagged Second Runner-up in the 2011 Invention Category of RICE hosted by DOST.

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Bio-Power Up Hybrid Fuel Additive for Both Gasoline and Diesel Fuel Engines by Engrs. Paolo Petalver and
Dioscoro Maraon Jr. were RICE Finalist in the 2011Creative Research Category or the Likha Award for
College hosted by DOST.

Densifier Briquetting Machine for Low Density Biomass by Engrs. Paolo Petalver and Dioscoro Maraon Jr.
were also RICE Finalist in the 2011 Creative Research Category or the Likha Award for College hosted by
DOST.

In the 2012 Regional Annual Administrative Tactical Inspection, ROTC bagged the championship and over
the years it has consistently been at the top three slots.

Moreover, WNU has also been the host in or venue for various national endeavors like Philippine Basketball
Association (PBA) games, Metropolitan Basketball Association (MBA) games, Negros Occidental Private
Schools Sports Cultural and Educational Association (NOPSSCEA) games, Philippine University Games
(UNIGAMES) and Leodegario N. Agustin Foundation (LNAF) Cup.

Faculty Achievements

STI ESG

In SY 2011-12, more assessors were recognized in other STI ESG campuses. From STI College Digos,
Eduard Pulvera and Anamerthyl Regala were recognized as TESDA Assessors for Computer Programming
NCIV in their region. Receiving the same recognition are faculty members from STI College Surigao
namely, Nathaniel Abris, Lex Angelo Estrella, Joemel Resare, and Iricher Supera. Ornel Lloyd Edao was
also certified as an ORACLE Professional, JAVA SE6 Programmer.

For SY 2012-13, the following faculty members of STI Ozamis were recognized as TESDA Assessors for
Computer Programming NCIV, Mark Fajardo, Jhobet Barogra, Marvin Aya-ay, and Junnel Gallemaso.
Cartney Lagaya of STI College San Pablo, on the other hand, was recognized as a TESDA Assessor for
Bartending NCII and Leonides Gonzales of STI College Baguio was elected as a member of the Board of
Directors of the Philippine e-Learning Society Luzon Chapter.

In SY 2013-14, STI ESG provided assistance to faculty members by coordinating with an accredited
Assessment Center to facilitate their TESDA Assessments and consequently, achieved a 100% passing rate.
Thirty-six (36) faculty members passed the Tour Guiding Services NC II and twenty-five (25) faculty
members passed the Tourism Promotion Services NC II.

Moreover, two faculty members were added to STI ESGs roster of TESDA assessors in the same school year.
Leandro Bautista of STI Pasay became an assessor in Bartending NC II and Jay Ian Lim of STI Valencia in
Front Office NC II, Bartending NC II, and Food and Beverage NC II.

Reputable IT companies also gave recognitions to our faculty members: Jerry Agbayani of STI College
Fairview was certified as a Microsoft Office Specialist; Jefferson Costales of STI College San Fernando was
acknowledged both as a Microsoft Certified Technology Specialist and an IBM Certified Database Associate,
Ricky Jay Riel of STI College Fairview, and Gualberto Coquilla II of STI Maasin were recognized as Cisco
Certified Network Associates; and Abraham Saldivia of STI College Southwoods earned his Six Sigma
Green and Black Belts.

Other notable achievers were: Dr. Darwin Jaime of STI College Baguio, recipient of the Institutional Award
2013 from the Philippine e-Learning System; Jamielyn Yaneza, also from STI College Baguio, placed 2
nd

runner-up in the Toastmasters International Evaluation Speech Contest; and Christian Santos of STI College
Calamba who competed in the Professional Division of the National Food Showdown and won two bronze
medals in the Mocktail Mixing and Cocktail Mixing.

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In 2011, an Engineering faculty member, Engr. Dioscoro Maraon, was awarded in the 2011 The
Outstanding Mechanical Engineering (TOME) in the field of research. The activity was sponsored by PSME
Integrated Association of Mechanical Engineers.
The adviser/moderator of The Wesneco Torch, official student publication of WNU, was recently awarded
Best Performing School Paper Adviser 2013 by the Presidential Communications Operations Office
Philippine Information Agency Region VI in Iloilo City.

Student Achievements

STI ESG

In SY 2011-12, STIers continued to excel in academics and other co-curricular activities. Celeste Abansi from
STI College Baguio was also recognized as one of the TOSP in the Cordillera region. She was also awarded
as Outstanding Rotaract Club President by the Rotary Club District 3790.

Six 3
rd
year BS Hotel and Restaurant Management students from STI College General Santos were given the
opportunity to put their skills and knowledge to test as they embarked on a six-month on-the-job training
program at various hotels in the USA. The hotels are Accor Hotels in Holbrook, Arizona; Super 8 Hotel in
Moab, Utah; Omni Austin Southpark Hotel in Austin, Texas; and the Crowne Plaza in Hilton Head, South
Carolina.

Florence Jill Dela Victoria Polina, a BS Nursing graduate of STI College Cebu, ranked 6
th
out of 78,135
examinees of the Philippine Nursing Licensure Examination. With an average of 86.60, Florence was among
the 37,513 nurses that were registered in 2011.

The Team Kabalikat comprised of students from STI College Global City placed 1
st
runner-up in the
UNILAB Ideas Positive: Transforming Communities with the Filipino Youth competition aimed to address
key issues concerning the health and wellness of the Filipino people. Team Kabalikats project dubbed as
Hitong Buhy, Hitong Bhay, focused on the raising of catfish or hito as a means to create a positive impact
in their chosen community.

Fifteen graduating Multimedia Arts students of STI Laoag bagged the Best in Visual Effects awards at the 3
rd

Annual Advertising Competition in the province. Also a Multimedia Arts student in STI College Las Pias,
James Magallanes won the plum in the Flash Banner Ad category of the 4
th
Student Advertising Congress.

Diana Grace Dumaoang, a 4
th
year BS Computer Science student of STI College La Union received four
leadership awards in the annual awarding ceremony of the Federation of Student Council-Student Body
Organization of the City of San Fernando, La Union. Diana bested student body presidents from different
public and private high schools, colleges, and universities in La Union.

BS in Information Technology and BS Hotel and Restaurant Management students of STI College Santa
Rosa bagged two championships in the PSITE 5
th
Regional Competition under the IT Quiz, Programming,
and Region IV JAVA Programming categories. The students bested representatives from the CALABARZON
Region.

From more than 150 countries and 1,900 submissions worldwide, Maria Elizabeth Catura, a 4
th
year BS
Information Technology student of STI College Marikina was proclaimed one of the Best 200 Authors in the
World Banks International Essay Competition, with her entry titled Hello, Where Are You From.

In SY 2012-13, STI College Baguio was once again cited in the TOSP through its student Joshua Rarama.
Likewise, Loijer Salto from STI Valencia was recognized as one of the Ten Outstanding Pupils and Students
(TOPS) in their region.
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In this same school year, various STI students were able to go abroad for their OJT and as a foreign exchange
student.

Sergiris A. Ortega who was then a 5
th
year BS Computer Engineering student of STI College Davao secured
a slot as one of the Philippine-Tohoku Goodwill Ambassadors that were sent to Hokkaido, Japan as part of a
student delegation that focused on disaster risk management, greener environment, cultural appreciation,
and mutual understanding between Japan and the Philippines. This exchange program was organized by the
Japan Information and Culture Center together with the Embassy of Japan, and the National Youth
Commission of the Philippines.

Carla Nicole Basilio, Patrick Abila, and Mary Joan Erlano, all 3
rd
year BS Hotel and Restaurant Management
students of STI College Dasmarias, successfully passed the rigorous screening interview of the Six Flags
Discovery Kingdom in California, USA, thus securing international OJT slots in the 135-acre theme park. The
international OJT program of STI College Dasmarias is in partnership with Pearl of the Orient Education
and Consultancy International.

Students of STI College San Pablo received numerous awards in the TESDA Laguna Provincials Skills
Competition in categories such as Commercial Cooking, Web Programming, and IT/Software Applications
besting the contestants of 25 other Laguna-based campuses. 2-Yr. Information Technology student Paul
Angelo Lacanilao represented the province of Laguna in the Web Programming TESDA National Skills
Competition.

Hotel and Restaurant Management students of STI College Surigao displayed their mettle in the pasta live
cooking category and cocktail mixing with flair tending category of the Tilaw Festival, a regional competition
sponsored by the Department of Tourism and Surigao Association of Hotel and Restaurants, Inc.

2
nd
year Information Technology student of STI Iligan Jay Dan Serojales championed the Association of
Lanao Technical Institutions, Inc. (ALTI) Olympics in Iligan.

In SY 2013-14, STI Valencia made it once again to the Ten Outstanding Pupils and Students (TOPS) as 2
nd

year HRS student Angelica Jacob Babalo landed in the top ten. Alijoy Marie Amores of STI College
Tacurong, on the other hand, placed second in an Essay Writing competition organized by the local
government of Tacurong.

Students of STI College Dagupan piled up an impressive medal haul of ten gold, two silver, and six bronze
medals to end up as one of the top finishers in the Pangasinan Taekwondo Championship.

STI College Balayans Bachelor of Science in Secondary Education students went home as champions of the
3
rd
Educational Congress for Batangas Future Educators (BAFED) as they swept the championship title in
Impromptu Speech, Cultural Dance, and Challenge Team competition.

Aside from being hailed as champions of the inter-school tourism quiz bee organized by the Aklan Tourism
Officers Association, Aklan Provincial Tourism Office, and the Aklan Press Club, Inc., STI College Kalibo
was also recognized as the Best Performing School and 1
st
year BS Travel Management student Esrah Jims
Gutierrez as the Best Performing Student.

Multimedia Arts students of STI Laoag likewise showed off their creativity in video production and editing
when they won first place in the 5
th
Advertising Competition.

Dan Christian Mendoza and Diane Cassandra Relleja participated in a six-month OJT program at the
Enchantment Resort in Sedona, Arizona, USA.

STI College Tacloban also emerged victorious in the Society of Mechatronics and Information Technology
Enthusiasts, Inc. (SMITE) Robotics and Web Programming Festival 2013 as its students Lester Ag Padul,
Peachy Joyce Manasis, and Maico Soledad bested their competitors in the Web Programming category.

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STIs HRM students were also triumphant in various competitions across the nation. 4
th
year BSHRM
students William Reyes, Kenneth Valliente, and Kelly Gonzales of STI College San Fernando won the gold
medal in the cake decorating category of the Mimosa Toque Off: Culinary Skills Showdown. STI College La
Union took home two silvers and one bronze in the commercial cooking, table skirting, and waitering
competitions of the Association of Technical Vocation Institutions of La Union (ATVILU) Olympic Skills
Competition. On the other hand, 2
nd
year BSHRM student Mark Aries Libiran of STI College Sta. Maria won
the Best Chicharon dish in the On-the-Spot Cooking competition.

Two more HRS students from STI San Francisco came out on top of the culinary contest held during the
Nutrition Month celebration of San Francisco, Agusan del Sur. Jayson Escabal, 2
nd
year HRS student from STI
College Surigao, also bagged the top prize in the Table Skirting competition during the Surigaonon Food
Festival. Not to be left behind, STI College Cagayan de Oro was awarded the bronze medal in the Fruit and
Vegetable Carving during the Kumbira Festival.

Students from STI College Calamba won numerous awards as well in the Laguna Hospitality Exposition
2013 and Malayan Colleges Laguna Tourism and Hospitality Expo 2013.

Meanwhile, STI Iligan reaped awards in the annual Association of Lanao Technical Institutions, Inc. (ALTI)
Olympics. 2
nd
year HRS student Christy Marie Sabanal placed second in the Cooking competition while 1
st

year CCE student Kirk Anthony Aana finished first in the Information Network Cabling event and 2
nd
year
IT student Lorebill de Amor Loresto also took the first spot in the Programming NC II competition.

STI College Koronadal also emerged victorious in the Tnalak Festival as 4
th
year BSIT student Julius
Marcelino took home the gold medal in the Quiz Bee event while its BSHRM students grabbed the
championship titles in Table Skirting, Table Setting, and Table Napkin Folding.

iACADEMY

SY 2011-12 proved to be a fruitful year for iACADEMY as its students received accolades from various
institutions. iACADEMYs Central Student Organization participated in JobStreet.coms Career Congress
2011 and won the grand prize for the Project Shout Out Challenge. A group of students swept the top three
spots in the PICCAFEST 2011 Caricature-making Contest, organized by the Philippine International Cartoon,
Comics, and Animation, Inc. Another student, Darylle Mon Alon, was awarded first place in the Digital Arts
category in the Ateneo Association for Communications Technology Management Numina 2011 Graphic
Design and Photo Manipulation Competition. Another remarkable achievement was the participation of four
students in the Autodesk Panorama 2012. Their animation entry entitled them to participate in a four-day
boot camp in Singapore with the other finalists.

In SY 2012-13, six iACADEMY students joined the 2013 Agora Youth Awards and placed 2
nd
Runner-up. The
students submitted a marketing plan for Philippine Wacoal Corporation under the new category, Wacoal
Marketing Plan Competition. On the other hand, a group of students joined the nationwide Animahenasyon
2012 Poster Design Contest, the flagship project of The Animation Council of the Philippines, Inc. that
features the different animation works of both aspiring and professional animators in the country.

A number of iACADEMYs alumni were also given notable recognitions. Vinzel Frago received the Service
Excellence Award from the Philippine Marketing Association and Outstanding Leadership Awards which
entitled him to a full scholarship in Nanyang Technological University in Singapore. Isamu Shinozaki was
recognized as Microsofts Most Valuable Professional. Krista Lozada was the first in Asia to perfect an
international certification exam for IBMs Websphere Software while JR Parelejo won the 2004 International
Marketing Competition and Aisaku Yokugawa was named the Philippine Ambassador for Operation Smile
International.


Meanwhile, DLS STI maintains its unwavering commitment to strive for academic excellence and is
committed towards the continuing improvement of the institution as well as the quality of its graduates. In
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SY 2012-13, 12 of its BSHRM students joined the Aji No Moto Umami Challenge held at the SMX Convention
Center and earned rave reviews as they bagged the gold award for its Pilipino Umami Dish.For the SY 2013-
14, BS Psychology students were invited by Psychological Association of the Philippines Junior Affiliates
(PAPJA) to join in their 27
th
Annual PAPJA Convention. The students battled it out with students of other
colleges and universities across the country. They were not declared winner, but still the experience gained
by the students in the activity makes them winners as well.

In the recently concluded Tagisan ng Talino 2014 cluster competition, STI College Quezon Avenue had
garnered various major awards. Odeza R. Bautista garnered 1
st
place in Worth the Whisk competition. Also
in 1
st
place for the All in Place competition was Jake Christian Z. Escobar and Jonalyn H. Bardoquillo.
Meanwhile, three students represented the school in the Think Quest competition and won 2
nd
place. In Chef
Express, another three students garnered 2
nd
place in the said competition.

Student Paul Eugene Mangahas, the batch magna cum laude, was voted national finalist in the STI Student
of the Year competition.

Licensure Examination for Teachers
Marie Franz D. Jeruta, a graduate of the Teachers Certificate Program (TCP) of West Negros University
ranked 10
th
place in the Licensure Examination for Teachers conducted on September 2012. Other successful
examinees were 11 graduates from TCPand 54 graduates from the Bachelor of Elementary Education (BEED)
and Bachelor of Secondary Education (BSED).
Nursing Board Examination
Ma. Ellen A. Gabrido, SY 2011-2012 BS Nursing graduate placed 10
th
in the 2012 Nursing Board Exam.
Charity Mondragon, a 2013 BS Nursing graduate landed 6
th
place in the Nursing Board Examination given in
December 2013.
Ten Outstanding Students of the Philippines (TOSP)
Lucellie P. Santibaez, a summa cum laude graduate of Bachelor of Science in Psychology was awarded as
one of 2013 TOSP. She was also a delegate to the Ayala Young Leaders Award (AYLC).
Marlie Joie A. Bombita, a nursing graduate represented West Negros University (WNU) in the national
finals of the 50th search for TOSP in Metro Manila.
Carlos J. Gerogalin, a summa cum laude graduate of Bachelor of Secondary Education in 2010 was also
awarded as one of TOSP.
TOSP is an Awards and Formation Program that seeks to galvanize the youth into nation building through
exemplary academic performance, social involvement, and inspiring leadership services to their school, local
communities, and the country. It is also serves as a beacon of hope for the Filipino youth through its
significant contribution in encouraging the students to aspire more despite of the adversaries experienced.
Philippine Rescue 2012
Four Wesnecans represented the university and the country in the 2012 Life Saving World Championships in
Adelaide, South Australia last November 2-13, 2012. The Biennial Lifesaving Sports World Championships
Event is participated by 112 nations worldwide and it is a great opportunity to showcase skills in the various
life-saving events like swimming pool events, beach and surf events.
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West Negros University (WNU)Wins in 2nd Regional Newscasting Tilt
Beverly Apple Remo, third year Bachelor in Elementary Education, Major in Special Education bested 10
other finalists from Bacolod and Iloilo City in the tertiary level of the ABS-CBN 2
nd
regional Newscasting
Competition held November 10 in Iloilo City.
In a related field, Theoniko Del Mundo, a graduate of B.S. Education (SY 2012-2013) was recognized as one
of the IWAG Awardees.
Philippine Information Agency Awards
Seven recognitions were awarded to The Wesneco Torch, official student publication of WNU in the Campus
Journalism Seminar-Workshop held last August 6-8, 2012 at Casa Real, Iloilo Grand Hotel, Iloilo City
spearheaded by the Philippine Information Agency (PIA). TWT bagged the Most Promising Copy Editor
Award for English and Promising Awards for News Writer (English), Feature Writer (English) News Writer
(Filipino), Copy Editor (Filipino), Photojournalism and Promising Page Design.
Center for Performing Arts and Culture
West Negros University has been known in its commitment for preservation of Filipino Culture through its
Kaanyag Pilipinas Dance Company (KPDC) that has been recognized not only in the local setting but also in
international competitions. It represented the Philippines in the International Festival at Port Island
Exposition (Portopia 81), in Kobe, Japan. Among the 35 participating countries, KaanyagPilipinas Dance
Company was awarded with the gold medal together with Bolshoi Ballet of Russia.
The KPDC continues to receive citations and awards from various civic and religious groups, professional
organizations and government agencies locally, nationally and internationally.
Provincial Sports Dominance
The West Negros University has always been known as the proud home of the Mustangs. Since its inception
in 2005, WNUs mens basketball team has been a force to be reckoned with in Region VI. Some of the teams
noteworthy achievements are 14 championship titles in the Negros Occidental Private School Sports Cultural
Educational Association (NOPSSCEA) and another title in the Basketball Association of the Philippines
(BAP) National Students Finals. The NOPSSCEA is an athletic, cultural, and educational program in
Negros Occidental with 54 private high schools, colleges, and universities as members.
The mens football team has likewise garnered respect in the region having won two national football titles
and having produced prominent players who later on played for the Philippine Football Federation such as
Norman Nonoy Fegidero, Afredo Dioso, Melo Sabacan, Loreto Kalalang, Jezurel Tono, Joshua Fegidero,
and Richard Canedo, among others.

Faculty Development and Certification

STI ESG provides faculty development programs to its members which are designed as a system of services,
opportunities, and projects that assist faculty members in acquiring competencies necessary to effectively
perform their respective function.

Under its faculty development program, STI ESG has two major types of national trainings held regularly
every school year, the Courseware-based training (CBT) and Teaching Skills Training (TST).

The CBT are training programs for all faculty members from wholly-owned and franchised schools that are
aimed to improve the teaching methodologies and content knowledge for specific courses held during
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semestral and summer breaks. Courses offered for training vary year-to-year depending on the needs
analysis of the faculty members of the whole STI network.

Since SY 2011-12, the CBT included trainings in courses such as Web Programming, Neural Networks,
Operation Research, Control Systems, VB. NET, Culinary Hands-on Training, Databases, Java Programming,
Computer Security, Electronics, Computer Networks, Communication Arts, Nursing Practicum/Competency
Appraisal, AMADEUS Basic Certification (a training provided by AMADEUS, one of STIs corporate
partners), Discrete Math, Operating System, Mobile Applications Development, Data Structures, Software
Engineering, Theory of Computations, Web Applications Development, Robotics, and Quickbooks. In SY
2011-12, the CBT had 246 participants and increased to 290 participants in SY 2012-13. For SY 2013-14, the
CBT focused on courses such as AMADEUS Basic Certification, Microcontroller System, HRM System,
Quickbooks, Broadband Technology, Mobile Technology, Fundamentals of VB (Using VBA), Advance
Microcontroller System, Tour Guiding Services, Tourism Promotion Services, and Travel Services. The CBT
had 403 participants nationwide.

STI ESG also administers a faculty competency certification program (FCC) which serves as the process of
evaluating a faculty members knowledge of the course in order to ascertain that he/she has the minimum
level of competence needed to teach that course. Certification requirements include passing a comprehensive
certification exam and garnering above average faculty evaluation ratings from superiors, peers, and
students.

The number of FCCs granted by STI has continually increased from SY 2011-12 with 936 FCCs granted, SY
2012-13 with 1601 FCCs granted, andin SY 2013-14, a total of 973 faculty members were certified and 2,628
certificates were released.

Student Development

STI ESG believes that learning should not be confined within the four corners of the classroom. With the
effort to ensure that its graduates will be equipped with a well-rounded education that will help them reach
their highest potential, STI allows students to explore, enjoy, and learn through a wide array of academic, co-
curricular, and extra-curricular activities.

The STI National Youth Convention

Since 1995, the STI National Youth Convention has been an annual venue where students are provided with
opportunities to learn the latest trends from the industry leaders and motivate them to apply the values and
information they have gained with the objective of contributing to their school and community. The theme
and topics vary every school year but always focus on alternative and innovative learning to discover the
latest trends in technology, acquire the most in-demand and job-ready skills, and enhance specific values
anchored on attributes that a model citizen should exhibit.

In SY 2011-12, a total of 32,789 students attended the event which was held in 10 key cities nationwide
namely Baguio, Iloilo, Bacolod, Cebu, Tacloban, Cagayan de Oro, Davao, Legazpi, Puerto Princesa, and
Metro Manila. The number of student attendees continued to grow to 34,394 in SY 2012-13 while the venues
remained the same. In SY 2013-14, the attendees slightly dipped to 33,404 students while General Santos and
Naga replaced Tacloban and Legazpi in the line-up of venues.

Tagisan ng Talino (TNT)

The TNT is an annual academic competition that tests the capabilities of students on impromptu speech,
essay writing, programming, cooking, cake and table design, and general knowledge. Over the years, specific
competitions comprising the TNT have been enhanced to ensure that the competitions objectives are met.

SY 2011-12 saw a total number of 1,450 students nationwide who participated in the competitions. In SY
2012-13, 863 students nationwide participated after reducing the total number of competitions from 10 in SYs
SEC Form 17 A
As of 31 March 2014
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21
2010-11 and 2011-12 to 8 in SY 2012-13.For SY 2013-14, the participants slightly increased to 879 students and
the number of competitions remain the same.

Tagisan ng Sining (TNS)

Launched in SY 2013-14, the TNS is an annual competition that aims to challenge the students artistry,
creativity, and originality in the field of photography and music video making. During the launch, 147
students nationwide competed in the TNS.

Talent Search

The STI Talent Search is an annual showcase of talents that aims to recognize the various skills of STIers
nationwide from singers and musicians to dancers and the up-and-coming models. Every year, 130
contestants compete for the STI Idol Singing competition, Battle of the Bands, Hataw Sayaw Dance
competition, and the search for Mr. and Ms. STI.

Since SY 2011-12, the Talent Search competitions have been held at the Enchanted Kingdom in Santa Rosa,
Laguna. An impressive number of 18,809 students witnessed the event in SY 2011-12. The numbers soared to
20,839 in SY 2012-13while SY 2013-14 saw a slight decrease in attendees to 20,000 students.

STI College Olympians

STI ESG joined the National Athletic Association of Schools, Colleges, and Universities (NAASCU) in order
to develop its roster of student athletes by competing against different colleges and universities. STI formed
several teams in basketball, volleyball, track and field, badminton, table tennis, chess, billiards, and cheer
dancing.

SY 2011-12 showed remarkable improvements in sports. The Mens Basketball team finished second in three
tournaments Collegiate Developmental League, the NAASCU, and the MNCAA. The Track and Field
team, meanwhile, won third place for the Womens team and the Mens team got the championship title. The
Womens Table Tennis team also finished second whereas the Womens Billiards team was the champion
once again. STI College Cagayan de Oro also went on to beat all the schools in Mindanao to become the
champion in their region which qualified them to the Sweet 16 of the Philippine Collegiate Champions
League.

In SY 2012-13, the Mens Junior Basketball team placed second in NAASCU while the Mens Senior
Basketball team finished third. In Mindanao, STI Valencia won the championship title in the 3
rd
Philippines
Collegiate Championship League (PCCL) which qualified them to the regional finals. PCCL is a national
collegiate basketball championship tournament endorsed by the Samahang Basketbol ng Pilipinas.

Institutional Linkages

STI ESG has developed corporate partnerships to aid in scholarship programs and increase employment
opportunities of STI graduates.

Gift of Knowledge

To provide educational opportunities to deserving individuals who have no means to pursue post-secondary
education, STI, through the STI Foundation, strengthens its partnership with various TV programs from
different TV networks. There were 113 scholars registered from the TV programs in SY 2011-12 and 63
scholars in SY 2012-13. In SY 2013-14, the number of scholars declined to 43.

SEC Form 17 A
As of 31 March 2014
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Sponsored Scholarship Programs

STI ESG and STI Foundation for Leadership in Information Technology and Education, Inc. (STI Foundation)
continually strengthen partnerships with corporations to be able to provide scholarship programs to support
the tertiary education of deserving individuals. As such, STI ESG has established a partnership with the
Jollibee Foods Corporations Skills Enhancement and Education Development for Students (SEEDS)
program.

The SEEDS program is designed to enable qualified students to pursue their post-secondary education
through the provision of financial assistance, while at the same time providing them with practical training to
develop their skills, competencies, attitudes and work values and enhance their employability upon
completion of the program. Through the program, a students tuition and miscellaneous fees is sponsored by
Jollibee in any STI campus nationwide, provided the student is deployed to a Jollibee store as a trainee for
not more than eight hours a day. The student should be able to balance ones academic requirements and face
the challenges presented in an actual working environment.

The STI Foundation, on the other hand, also has corporate and government partners who support the
education of their selected deserving scholars. In SY 2011-12, the STI Foundation and its partners were able to
support 155 scholars nationwide, 109 scholars received financial support in SY 2012-13, and 104 scholars in
SY 2013-14.


The following grantors sponsor scholarship programs through the University:

CHED Scholars
FAPE Scholarship
Green Scholars Engr. Dioscoro Maraon and Engr. Paolo Petalver
Pastor Paul Pineda Scholarship
SEEDS Scholarship from Jollibee, Greenwich and Chowking

Additional scholarships are as follows:

Academic Scholarship

1. Institutional- Free tuition, registration, miscellaneous and laboratory fees [one (1) lab. Subject] for one
(1) semester only.
2. College Scholars- 50% discount on tuition, registration & miscellaneous fees for one semester only.
3. Engineering Scholars- free tuition, registration & miscellaneous fees for one (1) semester only.
4. Entrance Scholars- free tuition, miscellaneous, registration and laboratory fees [one (1) lab. Subject
per semester] for one school year excluding summer.
5. First honorable mention- 50% discount on tuition, registration miscellaneous & laboratory fees [one
(1) lab. Subject per semester] for one school year excluding summer.
6. Second Honorable Mention- 35% discount on tuition, registration, miscellaneous & laboratory fees
[one (1) lab. Subject per semester] for one school year excluding summer.
7. Third Honorable Mention- 25% discount on tuition, registration, miscellaneous & laboratory fees [one
(1) lab. Subject per semester] for one school year excluding summer.
8. Top Ten Graduates of WNU Integrated School- (high school level)- Discounts on registration, basic
miscellaneous, laboratory fees (for 1lab. Subject per semester) and tuition fee for one school year
excluding summer.
a. Third to Fifth in Rank 80%
b. Sixth to Tenth in Rank 50%

SEC Form 17 A
As of 31 March 2014
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9. High School and Elementary Scholars
a. Valedictorian / First Honors- free tuition, registration and miscellaneous fees for one school year.
b. Salutatorian / Second Honors- 50% discount on tuition, registration and miscellaneous fees for
one (1) school year.
c. Top Ten Graduates of WNU Integrated School
c.1 Valedictorian & Salutatorian- 100%
c.2 Third to Tenth in Rank- 50%

Athletic Scholarship
(Units allowed with miscellaneous, registration, laboratory and other fees; ID & NSTP are not included)

a. Football-Men
b. Basketball-Men
c. Chess- Men & Women
d. Track & Field- Men & Women
e. Football-Boys
f. Basketball-Boys
g. Chess- Boys & Girls

Cultural Scholarship
(Units allowed with miscellaneous, registration)

a. Rondalla
b. KPDC
c. Glee Club
d. Kalingaw
e. Brass Band

Ministers and Ministers Children- 18 units with miscellaneous, registration

WNU Special Scholarship Program for Advertising Partners (SSPAP) - 18 units only

WESNECO TORCH- full tuition, miscellaneous, registration and other fees except ID.

STI Partnership Program (PP)

STI ESG establishes, maintains, and promotes partnerships with the legitimate members of the industry to
increase our students and graduates employability under the PP. Through the PP, opportunities such as on-
the-job training (OJT), employment, courseware enhancements, faculty development are made available to
STI, its students, and partners. In addition, activities such as mock recruitment, employment preparation
seminars, job fairs, scholarships, postings of employment opportunities, and faculty trainings are also made
possible.

On the other hand, the employment placement of graduates is also covered by the PP. As such, partners for
job placement of STI graduates are enabled to post their job openings and request for lists of graduates
through www.i-cares.com or the Interactive Career Assistance and Recruitment System (ICARES) at no
cost. The ICARES is an exclusive job search system for STI graduates which facilitates the easy dissemination
of STIs partners for their placement opportunities and provision of candidates (STI graduates) to fill in job
openings. Registration to ICARES is required for all graduating STI students. In SY 2011-12, 94partners
utilized the ICARES system, the number slightly increased in SY 2012-13 to 96, and in SY 2013-14, ICARES
reached a total of 104 academic partners wherein 73 of its partners were able to post job vacancies on the
ICARES website.

On-the-ground school activities such as job fairs are conducted for recruitment purposes and to provide
employment preparation seminars for graduating STI Students. In SY 2011-12, 26 partners participated in STI
SEC Form 17 A
As of 31 March 2014
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24
job fairs, there were 28 partners who participated in SY 2012-13, and 30 partners who participated in SY 2013-
14.

iACADEMY Industry Partners

iACADEMY is the first Lotus Academic Institute Partner in the Philippines and the ASEAN Region. It is also
the first and only college that is a Wacom Authorized Training Partner in the country today. iACADEMY
equips students with state-of-the-art facilities and technology through its partnership with Wacom.

In 2010, iACADEMY was appointed by IBM as its first IBM Center of Excellence (CoE) in the ASEAN
region. As an IBM CoE, iACADEMY will serve as a venue to expose existing and prospective IBM clients to
current state-of-the-art technology solutions. Furthermore, iACADEMY aims to be the source of technical
skills and talent to feed the IBM Ecosystem, which is composed of IBM, IBM Business Partners, and IBM
Clients.

The Philippine Stock Exchange (PSE) has chosen iACADEMY to offer the PSE Certified Financial Analyst
Program. iACADEMY became the best choice primarily because of its strategic location.

iACADEMY was the official school partner for season 3 of Project Runway Philippines (PRP), a search for
the next big Filipino fashion designer. The reality show, which airs on free TV channel ETC, features 15
aspiring designers and the whos who of the Philippine fashion scene. Supermodel-turned-entrepreneur
Tweetie de Leon-Gonzalez plays the glamorous host while trailblazing designer Jojie Lloren was the
contestants mentor. Style columnist Apples Aberin and fashion whiz Rajo Laurel are on PRPs panel of
judges. iACADEMY provides its state-of-the-art fashion design room as its official workspace.

De Los Santos STI (DLS STI) College Affiliations

DLS STI has been a loyal partner of notable healthcare institutions in the Philippines which further enhances
the capabilities and skills of its students. These institutions include the De Los Santos STI Medical Center,
National Childrens Hospital, National Center for Mental Health, San Lazaro Hospital, TLC Psychiatric
Facility, QCHD LyingIn Clinic, St. Camillus Medhaven Nursing Home, Philippine Orthopedic Center, East
Avenue Medical Center, Dr. Fe Del Mundo Medical Center, Hospicio De San Jose, St. Vincent General
Hospital, Jose Reyes Memorial Medical Center, Philippine Heart Center, National Kidney & Transplant
Institute and Home for the Aged.

These Institutions covered special areas which allow DLS STI students to have a hands-on practice in
providing healthcare to patients in areas such as Pediatrics, Intensive Care Unit (ICU), Surgical, Delivery,
Orthopedic, Communicable Diseases, Neonatal ICU(NICU), and Geriatrics.

West Negros University (WNU) International and Local Linkages

West Negros University has international and local linkages for research purposes. WNU has two
international linkages, namely: Asian University Digital Resource Network (AUDRN) and German
Development Cooperation (GIZ), both organizations provide financial support to the institution while
WNU provide logistics and human resources. As for national linkages, Miriam College, DepEd
Kabankalan and Partnership for Clean Indoor Air (PCIA) help provide human resources and logistics in
conducting researches.

WNU students are also enjoying scholarship grants attributable to the institutions tie-up with
Commission on Higher Education (CHED) under the Tulong Dunong (ACT-CIS Party List) Program,
Public Employment Service Office (PESO), AFPEBSO and Skills Enhancement and Educational
Development for Students (SEEDS). The latter provides WNU Students training through Jollibee Food
Corporation, Chowking and Greenwich.

Other organization or business organization providing tie-up to WNU for students training include 2GO
Group Incorporated for Maritime students; Teresita Lopez Jalandoni Provincial Hospital, The Doctors
SEC Form 17 A
As of 31 March 2014
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25
Hospital, Murcia Health Center and Corazon Locsin Montelibano Memorial Regional Hospital for
Nursing Students; Bacolod City Police Office (BCPO), Bureau of Fire Protection (BFP), Parole and
Probation Office of Bacolod City and Bureau of Jail Management and Penology (BJMP) for Criminology
students; and Philippine National Bank (PNB) and Yusay Credit and Lending Corporation for Business
students.

Community Extension and Outreach Programs

Given the national reach of STI ESG, the company has taken upon itself to uphold socially responsible
activities that are aimed to better the communities that individual campuses belong to, and at the same time,
develop a positive environment that will be beneficial to all stakeholders.

The STI Foundation

The STI Foundation aims to contribute to the improvement of the countrys educational system through
programs and projects that address the digital divide and promote excellence in education.

The Voice of the Youth National Oratorical Competition

Set towards inspiring the youth to actively stay informed with the current issues, STI partnered with the
Department of Education (DepEd) and the National Youth Commission (NYC) for the Voice of the
Youth (VOTY) National Oratorical Competition. This advocacy serves as a platform to encourage the
students to fluently express their views in English for global competency as well as develop critical thinking
through the art of public speaking.

Since SY 2011-12, more than PhP2 Million worth of prizes were awarded every year to the winners, their
coaches, and their respective schools. In SY 2011-12, 676 high schools from Luzon, Visayas, and Mindanao
joined the competition while 660 high schools participated in this nationwide competition for SY 2012-13 and
SY 2013-14.

In SY 2012-13, VOTY joined the 4
th
PANATA Awards and received the Bronze Award under the Cause
Marketing Special Events category as the Philippine Association of National Advertisers recognized its goal
to promote positive Filipino values.

The advocacy also won in SY 2013-14 an Award of Merit under the Advocacy Communications category of
the Philippine Quill Awards organized by the International Association of Business Communicators
(IABC) Philippines. The Philippine Quill Awards is the local counterpart of IABCs Gold Quill Awards,
joined in by the worlds biggest corporations and agencies, and regarded as the highest standard in business
communication.

The STI Mobile School

The STI Mobile School is a tourist-sized bus that has been converted into a roving computer laboratory. It is
equipped with a state-of-the-art computer laboratory with internet access, multimedia computers, LCD
monitors, sound system, and other top-of-the-line computer equipment.

Since SY 2011-12 until SY 2013-14, the STI Mobile School has travelled to 872 sites and trained 105,218
participants nationwide. Today, a total of six mobile school buses travel across Luzon, Visayas, and
Mindanao.

Run for Pasig

Since SY 2011-12 until SY 2013-14, STI ESG has supported the advocacy of ABS-CBN Foundation's Kapit Bisig
Para sa Ilog Pasig, which aims to raise awareness and funds for the rehabilitation of Ilog Pasig and the esteros
SEC Form 17 A
As of 31 March 2014
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26
connected to it. In SY 2013-14, the Run for Pasig, for the first time, was staged as a simultaneous eco-run held
in different key locations nationwide namely Quezon City, Cebu, Bacolod, Davao, and in Los Angeles, USA.

14 STI Colleges in Metro Manila (Alabang, Caloocan, Cubao, Shaw, Fairview, Global City, Las Pias, Makati,
Muoz-EDSA, Novaliches, Paraaque, Quezon Avenue, Recto, and Taft) mobilized 5,391 STIers in SY 2011-
12.

In SY 2012-13, STI College Ortigas-Cainta joined for the first time and added to the strong number
of 11,240 students, faculty members, and staff. Thus, STI was recognized as the school with the largest
contingent based on CHED data.

For SY 2013-14, 21 STI Colleges in Metro Manila, Visayas, and Mindanao (Alabang, Caloocan, Cubao,
Fairview, Global City, Las Pias, Makati, Marikina, Muoz-EDSA, Novaliches, Paraaque, Pasay, Quezon
Avenue, Recto, Shaw, Taft, Ortigas-Cainta, Bacolod, Cebu, Davao, and Tagum) mobilized 13,672 students,
faculty members, and staff to participate in the 3k category.

Halalan

STIs partnership with ABS-CBN started in 1998 and has now spanned for more than a decade which
included five national polls.

In SY 2013-14, STI partnered once again with ABS-CBN for the 2013 national elections. Thousands of
students, faculty members, and staff heeded the call to become Bayan Patrollers. The STI volunteers were
tasked to be the key content aggregators wherein they received and verified reports from the Bayan
Patrollers through face-to-face interviews and various media platforms.

Super Typhoon Yolanda

At the height of the calamity that struck the country during SY 2013-14, STI ESG and its campuses, STI
Alumni Association, and STI Foundation pooled together resources to assist in the rebuilding efforts for the
families devastated by the Super Typhoon Yolanda.

A total of PhP1.185 Million, both cash and in-kind donations, were collected wherein a portion was used to
help the affected STI ESG campuses in Tacloban, Ormoc, Kalibo, and Iloilo.

The English Department of WNU extends its expertise in TESOL in Puroks/Barangays where out-of-
school youth, willing mothers and pupils need extra help in English. This is done on weekends and
extends until December when a joint culminating and Christmas activity takes place. The English
teachers take turns in teaching these young people and their mothers English for Speakers of Other
Languages (ESOL).
WNU continues to extend outreach activities to its adopted community in Purok Tunggoy, Mandalagan,
Bacolod City and an adopted school in Granada, Bacolod City, specifically, VAGRES (Vista Alegre
Granada Relocation Elementary School).
WNU had the Care and Share Yolanda Survivors project days after the huge devastation brought by
Super Typhoon Yolanda on November 8, 2013. The project is a collaborative effort of the Wesnecan
Community and the Protestant Church of Laichingen in South Germany through its volunteer student
Nadja Gruhler. A total of PhP3 Million was raised that was used to fund relief operations and a
Rehabilitation and Recovery Shelter for Yolanda Survivors Homestay Scheme Program at Purok
Kantamayon Brgy. Patao in Bantayan Cebu. There were 62 houses built and 31 more to be turned over;
while 43 partially damaged houses were also repaired.
SEC Form 17 A
As of 31 March 2014
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Business of Issuer

STI Holdings, being a holding company, derives its revenues from dividends declared by its subsidiaries. It
also derives income from business advisory services it provides to the subsidiaries. In the fiscal years ending
March 31, 2014 and 2013, it earned interest from funds received from the follow on offering, while these
funds were not yet deployed to its subsidiaries in accordance with the follow-on offering work program.

STI ESG and its subsidiaries, as educational institutions, derive its revenues from tuition and other school
fees from its owned schools and royalties and other fees for various educational services provided to
franchised schools. STI ESG has a total of 80 schools nationwide and is comprised of 64 STI branded colleges
and 16 STI branded education centers. Of these, 27 college campuses are wholly-owned, while 37 college
campuses are operated by franchisees, 12 educational centers are operated by franchisees, and 4 are wholly-
owned educational centers. STI ESG purchased STI Batangas from its franchisee in September 2013.

STI College Balanga, STI Ozamis, and STI College Tacloban have ceased operations this school year. STI
College Taclobans closure was brought about by super typhoon Yolanda which devastated the campus
and has displaced most of the students, faculty, and staff of the school. STI ESG has since opened other STI
schools nationwide to accommodate student transferees from STI College Tacloban providing them with
100% scholarship on tuition fees, free uniforms and books; likewise, faculty and staff members were given
priority in their job applications in STI.

Apart from the STI branded campuses, iACADEMY has one campus in the Central Business District of
Makati while DLS STI College has a campus adjacent to De Los Santos STI Medical Center.

STI ESGs college campuses offer associate/ baccalaureate degree and technical/vocational programs in ICT,
arts and sciences, business and management, education, engineering, hospitality and tourism management,
and healthcare. These programs are accredited by the Commission on Higher Education (CHED) and/or
Technical Education and Skills Development Authority (TESDA). The education centers of STI offer
technical/vocational diploma, certificate, and short-term courses for computer programming, computer
technology, software applications, and office administration, among others. The programs in the education
centers are also accredited by TESDA.

STI School Programs
BS in Computer Science
BS in Information Technology
BS in Information Technology major in Network Engineering
BS in Information Technology major in Digital Arts
BS in Accounting Technology
BS in Business Management major in Operations
BS in Office Administration
BS in Office Administration with Specialization in Customer Relations
BS in Real Estate Management
BS in Culinary Management
BS in Hotel and Restaurant Management
BS in Travel Management
BS in Tourism Management
BS in Computer Engineering
AB Communication
BS Nursing
Bachelor of Secondary Education major in Mathematics
Bachelor of Secondary Education major in Computer Education
3-yr. Hotel and Restaurant Administration
SEC Form 17 A
As of 31 March 2014
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2-yr. Information Technology Program
2-yr. Associate in Computer Technology
2-yr. Hospitality and Restaurant Services
2-yr. Tourism and Events Management
2-yr. Computer and Consumer Electronics Program with Broadband Technology
2-yr. Multimedia Arts Program
2-yr. Practical Nursing Program
BS in Computer Science
BS in Information Technology

iACADEMY School Programs
AB in Fashion Design
AB in Multimedia Arts and Design
BS in Animation
BS in Game Development
BS Business Administration major in Marketing and Advertising
BS Business Administration major in Operations Management
BS Business Administration with specialization in Financial Management
BS Computer Science major in Software Engineering
BS Information Technology major in Digital Arts
BS Information Technology major in Web Development

De Los Santos STI (DLS STI) College School Programs
BS Nursing
BS Physical Therapy
BS Radiologic Technology
BS Psychology
BS Hotel and Restaurant Management
BS Tourism Management
Caregiver
Commercial Cooking
Housekeeping
Bartending
Baking and Pastry
Food and Beverage

STI College Quezon Avenue School Programs
Bachelor of Science in Computer Science
Bachelor of Science in Information Technology
Bachelor of Science in Business Management Major in Operations
Bachelor of Science in Hotel & Restaurant Management
Associate in Computer Technology
Hospitality & Restaurant Services

West Negros University (WNU) School Programs
School of Professional Studies:
Bachelor of Science in Accountancy (BSA)
Bachelor of Science in Criminology (BS Crim)
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As of 31 March 2014
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Engineering Programs
Bachelor of Science in Civil Engineering (BSCE)
Bachelor of Science in Electrical Engineering (BSEE)
Bachelor of Science in Mechanical Engineering (BSME)
Bachelor of Science in Electronics Engineering (BS Elec. Eng.)
Bachelor of Science in Chemical Engineering (BS Chem. Eng.)

Education Programs
Bachelor of Elementary Education
o Major in
General Curriculum
Special Education
Pre-School Education
Bachelor of Secondary Education
o Major in
English
Filipino
Music, Arts & P.E. (MAPE)
Mathematics
Values Education (VAED)
Teachers Certificate Program (TCP)
Maritime Programs
Bachelor of Science in Marine Engineering (BS MArE)
Bachelor of Science in Marine Transportation (BSMT)

School of Arts and Sciences:
Bachelor of Arts in English (AB Engl.)
Bachelor of Science in Mathematics (BS Math)
Bachelor of Science in Psychology (BS Psyc)
Bachelor of Science in Information Technology (BSIT)
Bachelor of Science in Computer Science (BSCS)
Bachelor of Science in Hospitality Management (BSHM)
Bachelor of Science in Business Administration (BSBA)
o Major in
Marketing Management
Financial Management
School of Basic Education:
Nursery
Kinder (1 & 2)
Elementary
Secondary

School of Graduate Studies:
Doctor of Philosophy in Educational Management (Ph.D.)
Doctor in Public Administration (DPA)
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Master in Public Administration (MPAD- Thesis)
Master in Public Administration (MPAD- Non Thesis)
Master in Nursing (MN-Thesis)
Master in Nursing (MN-Non Thesis)
Master of Arts in Education (MAED)
o Major in
Administration and Supervision
Guidance and Psychology
Physical Education
Filipino
Mathematics
English
Values Education
Early Childhood Education

Philippine Association of Colleges and Universities Commission on Accreditation (PACUCOA)
Accreditation
Level III Accredited Status School of Arts and Sciences Business and Management (Bachelor of Science
in Business Administration major in: Business Economics, Human Resource Management, Operation
Management, Marketing Management and Financial Management). Re-accredited status for the period
February 2011-2014.
Level III Accredited Status School of Arts and Sciences Bachelor of Arts in English. Re-accredited
status for the period February 2011-2014.
Level I Accredited Status School of Arts and Sciences Bachelor of Science in Mathematics, Bachelor of
Science in Psychology.
Level III Accredited Status School of Professional Studies Education Courses -Bachelor of Elementary
Education, Bachelor of Secondary Education. Re-accredited status for the period February 2011-2014.
Level II (ongoing) School of Professional Studies Engineering Courses Bachelor of Science in Civil
Engineering, Bachelor of Science in Mechanical Engineering, Bachelor of Science in Electrical Engineering.
Level I Accredited Status School of Arts and Science Information and Communication Technology
Bachelor of Science in Information Technology
Level I Accredited Status School of Professional Studies Bachelor of Science in Nursing
Level II Accredited Status School of Graduate Studies Master in Public Administration, Master of Arts
in Educational Management
Level I Accredited Status School of Graduate Studies Doctor of Philosophy in Educational
Management
PROGRAM LEVEL DURATION
Liberal Arts Level III RA February 2011-2014
Business Administration Level III RA February 2011-2014
BEED Level III RA February 2011-2014
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BSED Level III RA February 2011-2014
MAED Level III RA March 2013-2015
MPA Level III RA March 2013-2015
PhD in Education Management Level I Formal October 2010-2013
Nursing Level I Formal October 2010-2013
B.S. Math Level I Formal October 2010-2013
B.S. Psych Level I Formal October 2010-2013
Criminology Candidate February 2011-2013
Electronics Engineering Candidate February 2011-2013
Civil Engineering Level I Formal January 2008-2011
Mechanical Engineering Level I Formal January 2008-2011
Electrical Engineering Level I Formal January 2008-2011
Marine Engineering ISO: 9001:2008 SY 2013-2014 to SY 2014-2015
Marine Transportation ISO: 9001:2008 SY 2013-2014 to SY 2014-2015
Pre-Elementary Re-certification FAPE SY 2013-2014 to SY 2015-2016
Elementary Re-certification FAPE SY 2013-2014 to SY 2015-2016
High School Re-certification FAPE SY 2013-2014 to SY 2015-2016

Employees

STI ESG has 1,362 employees, 869 of whom are faculty members, 295 non-teaching personnel, and 198
employees from the main office. STI provides employees with development programs that assist them in
effectively carrying out their jobs and prepare them for career advancement.

FUNCTION
NUMBER OF
EMPLOYEES
STI
Main Office
Senior Management 12
Managers 58
Staff 128
Total 198
STI Schools
Teaching personnel (wholly-owned schools) 869
Non-teaching personnel (wholly-owned schools) 295
Total 1,164
STI ESG GRAND TOTAL 1,362

iACADEMY

iAcademy has 138 employees, 86 of whom are faculty members and 52 non-teaching personnel. iAcademy
provides selected employees with development programs that assist them in effectively carrying out their
jobs and prepare them for career advancement.

DLS-STI College has 55 employees, 42 of whom are faculty members and 13 non-teaching personnel. As
such, 75% of the faculty members are MA or MBA holders on their respective field of expertise.

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WNU has employed 99 full-time and part-time non-teaching personnel assigned to various departments and
171 teaching personnel.

Item 2. PROPERTIES

STI ESG has an extensive list of properties that are either owned or under long-term lease which serve as sites
for campuses, warehouses, for rental, and investment. The following table sets forth information on the
properties which STI ESG owns.

LOCATION TYPE USE
AREA (IN SQ.M)
LOT FLOOR
Caloocan Land and Building School Campus 15,495.00 10,671.00
Cubao Land and Building School Campus 3,768.00 9,600.00
Cainta, Rizal Land and building
School Campus 39,880.00 9,031.00
Administration Building 4,951.00
Novaliches Land and building School Campus 4,983.00 7,160.71
Batangas Land and building School Campus 5,934.00 5,672.00
Lucena Building
School Campus; Land is
on long term lease
4,347.00 6,870.00**
Calamba Building School Campus 6,237.00 6,750.00
Naga*** Land and building School Campus 5,170.00 3,206.00
Carmona, Cavite Land and building School Campus 6,582.00 2,838.00
Lucban, Baguio Land and building School Campus 731.00 1,726.00
Kauswagan,
Cagayan de Oro
Land and building School Campus 17,563.00 3,540.00
Fort Bonifacio, Global
City
Building
School Campus; Land is
on long term lease
- 7,845.66
Fairview,
Quezon City***
Land and building
School Campus 1,208.00 3,905.00
Rented buildings C&D 1,460.00
Valencia, Bukidnon Land and building School Campus 300.00 1,166.12
Kalibo, Aklan Land School Campus 1,612.00 -
Las Pias Land School Campus 10,000.00 -
Sto. Tomas Baguio Land Investment Property 512.00 -
Almanza, Las Pinas
3 Condominium
units
(37.2sqm/unit)
Investment Property - 111.6
Ayala Avenue, Makati
City***
Condominium
building (4th, 5th
& 6th floors)
4th and 5
th
floors school
premises,
6
th
floor for rental
- 3,096.00
Caliraya Springs,
Cavinti Laguna
Land Investment Property 948.00 -
BF Homes, Las Pias
(HS)***
Land and building
GS
Warehouse 4,094.00 1,891.00
BF Homes, Las Pias
(GS)
Land and building
HS
Warehouse 3,091.00 1,851.00
Ternate, Cavite Townhouse Training Center 107.00 -
Cebu City * Land Investment Property 1,100.00 -
SEC Form 17 A
As of 31 March 2014
Page 33

33

* properties intended for sale

** proposed floor areas
***mortgaged to secure bank loans

Listed in the table below is the campus ownership of franchised schools as of SY 2013-14.

OWNED
LEASED
Alabang Alaminos La Union Rosario Zamboanga
Balagtas Angeles Lipa San Fernando
Balayan Bacolod College Maasin San Francisco
Dasmarias Bacolod EC Malolos San Jose
General Santos Bacoor Marikina Santiago

Iloilo Baliuag Muoz-EDSA Tagaytay

Koronadal Calbayog Ormoc Tagbilaran

San Carlos Cauayan Pagadian Tagum

Santa Rosa Cotabato Paraaque Tanauan

Sta. Maria Dipolog Pasay Tanay

Surigao Dumaguete Quezon Avenue Tarlac

Tacurong Ilagan Recto Vigan

Campus Expansion Projects

STI ESG invested in a number of expansion projects for its company-owned campuses. The eight-storey
building for STI College Novaliches which was inaugurated on June 29, 2012. On September 25, 2013, the
three-storey administration and seven-storey school buildings of STI College Ortigas-Cainta were
inaugurated. These buildings sit on a 39,880-square-meter property in Cainta, Rizal. In Caloocan, a ten-
storey building standing on 15,495-square-meter property was unveiled on February 7, 2014 for the transfer
of STI College Caloocan to its new home.

STI Malaybalays leased three-storey building opened on November 26, 2011 as part of its efforts to
upgrade from an education center to college. STI Valencia moved to its new four-storey building in June
2013.

Construction of the nine-storey building for STI College Cubao and the five-storey building for STI College
Calamba are in full swing to meet the target opening for school year 2014-2015. Also operational for the
same school year are the newly renovated school buildings for STI College Batangas that has recently
transferred to a 5,934-square-meter property.

With ongoing efforts for expansion is STI College Lucena that broke ground on a 6,387-square-meter
property on January 10, 2014. The construction works is scheduled to complete a five-storey building by
November of 2014.

Likewise, a number of franchised schools embarked on facilities expansion programs. STI College Tacurong
was granted college status by the CHED during the first year of SY 2010-11 and subsequently, inaugurated its
2,400-square-meter school building on August 15, 2012. In SY 2011-12, STI Vigan upgraded to a college,
followed by STI San Jose in SY 2012-13.

Two franchised schools embarked on facilities expansion programs this SY 2013-14. The 3,500-square-meter
property of STI CollegeMalolos located along McArthur Highway will be completed in time for the 1
st

semester of SY 2014-15. On the other hand, STI CollegeTanay broke ground on March 21, 2014 and will be
ready to start its classes on its new campus on the 2
nd
semester of SY 2014-15.

SEC Form 17 A
As of 31 March 2014
Page 34

34
All of the improved campuses house state-of-the-art facilities, with spacious classrooms, top-of-the-line
computer laboratories, and recreational facilities for high quality academic delivery. The expansion of these
campuses is part of STIs commitment to continuously improve the delivery of education to its students and,
at the same time, increase the total capacity of STI for further expansion in its enrollment base in the years
ahead.

iACADEMY

iACADEMY recently moved to a refurbished building along Senator Gil Puyat Avenue, the iACADEMY
Plaza. With eight floors to accommodate the schools growing population, the iACADEMY Plaza has an
auditorium which could house at least 450 people. The Multimedia Arts laboratories and Computer
laboratories have been improved for the better use of the students. All the other laboratories, such as Cintiq
and the iMAC were also developed to satisfy all the needs of the students. All laboratories are equipped with
high speed internet and latest software.

All the classrooms and lecture rooms are fully equipped with the latest teaching aids. The new foundation
rooms have adequate physical space for worktables and chairs. Studios have adequate physical space for
worktables and chairs. Students may use the computer laboratories to help support their studies.
iACADEMY is also properly equipped with top-of-the-line computer suites that provide the necessities of
education, available WI-FI internet access within the campus, and an extensive library holdings.

Another key improvement in iACADEMY facilities was the increased bandwidth of the schools internet,
with stabilized network.


DLS STI is undergoing major repairs brought about by Habagat in 2012. These improvements include the
provision of concrete fire exits at the skills laboratory, improvement of stairwell going to Anatomy and
physiological laboratory, enclosure of HRM compound, and the repair of the faculty room ceiling and
building faade.

The college has also installed its WI-FI access across the campus and upgraded computers in the laboratories.

As part also of the Institutions commitment to give excellent service to its clients, who happens to be the
students, Management replaced and made major repairs on all air-conditioning units in all laboratories and
classrooms, giving a much conducive place for students to study.
Major renovation on the faade area of the school were made by repainting the whole building both inside
and out.
Likewise, STI College Quezon Avenue had in the area, major repairs and improvements have been done to
the school which included painting of building faade, installation of lighting fixtures and granite tiles in the
walkway, installation of window and door cladding, one way mirror shade in the 2
nd
floor rooms, repainting
of all classrooms and minor repair of interior and plumbing works. This is to improve its visibility in the
area.

West Negros University is strategically located at the center of Bacolod City. The site is in close proximity to
the Burgos Public Market, the New Government Center, Corazon Locsin Montelibano Memorial Regional
Hospital (CLMMRH) and a number of commercial buildings mainly owned by Chinese businessmen.
The main campus houses the Maritime Building, Football Field, Engineering Building, Open Court, LNAM
Sports Centre (Gymnasium), Sports Office, Student Activity Center, five-storey Main Building, three-storey
IT Building and two-storey HM Building.
SEC Form 17 A
As of 31 March 2014
Page 35

35
Summary of the institutions properties are as follows:
Location Type Use/College Lot Area
(sq.m.)
Burgos and Malaspina Land and building Maritime 1,176
Burgos and Malaspina Land and building Engineering 4,839
Burgos and Malaspina Land and building Engineering 2,266
Burgos and Malaspina Land and building Football/Open
court
5,803
Burgos and Malaspina Cemented lot Parking lot 814
Burgos and Malaspina Land and building Gymnasium 1,512
Burgos and Malaspina Land and building Sports Office 494
Burgos and Malaspina Land and building Main building 139
Burgos and Malaspina Land and building Main building 364
Burgos and Malaspina Land and building Main building 6,097
Burgos and Malaspina Land 179
Hilado Land 1,044
Hilado Land 1,135
Hilado Land 733
Hilado Land 400
Hilado Land 1,292
Over-all Campus lot area 28,287

Item 3: LEGAL PROCEEDINGS

1. In the course of the Groups business, it is involved in legal proceedings both as plaintiff and
defendant, primarily against former employees as to matters of employment law. Currently, STI ESG is a
defendant in 12 labor cases still pending with various judicial and quasi-judicial bodies for illegal
dismissal/termination of former employees, involving claims in aggregate amount of approximately P4.9
Million. The Groups management believes that an adverse resolution in such cases will not materially
affect the financial position of the Group. The Group is not involved in any legal or arbitration
proceedings (including any such proceedings which are pending or threatened of which the Group is
aware) which it believes may have a material effect on the financial position of the Group.

2. STI ESG is also involved in certain tax proceedings. STI ESG filed a petition for review with the Court
of Tax Appeals (the CTA) in 2009 to contest the Final Decision on Disputed Assessment issued by the
Bureau of Internal Revenue (BIR) for alleged deficiencies on income tax, and expanded withholding tax
for the fiscal year ending 31 March 2003 amounting to P124.3 Million. On 20 February 2012, STI ESG
rested its case and its evidence has been admitted into the records. On 27 June 2012, the BIR rested its case
and has formally offered its evidence. On 17 April 2013, the CTA issued a Decision which granted STI
ESGs petition for review and ordered a cancellation of the aforementioned BIR assessment since the right
to issue an assessment for the alleged deficiency taxes had already prescribed. On May 16, 2013, STI ESG
received a copy of the Commissioner of Internal Revenues (CIR) Motion for Reconsideration dated May
8, 2013. STI ESG filed its Comment to CIRs Motion for Reconsideration on June 13, 2013. On August 22,
2013, the CIR filed its Petition for Review dated August 16, 2013, with the CTA en banc. On October 29,
2013, STI ESG filed its Comment to the CIRs Petition for Review. The CTA en banc deemed the case
submitted for decision on May 19, 2014, considering the CIRs failure to file its memorandum. As at July
9, 0214, the case is still for decision by the CTA en banc.

3. On April 21, 2014, West Negros University [WNU] filed a Petition for Certiorari with an application
for the issuance of temporary restraining order and preliminary injunction against the Commission on
Higher Education (CHED) with the Regional Trial Court of Quezon City. The Petition was filed in
SEC Form 17 A
As of 31 March 2014
Page 36

36
response to the Order dated January 6, 2014 issued by Atty. Julito Vitriolo, CHEDs Executive Director,
which affirmed/executed the Closure Order(s) dated July 19, 2011 and April 26, 2013 of WNUs Bachelor
of Science in Marine Transportation (BS MT) and Bachelor of Science in Maritime Engineering (BS
MarE) degrees. In the said Order , CHED resolved: 1) To allow WNUs existing students enrolled prior to
the issuance of the denial of its Motion for Reconsideration, Academic Year (AY) 2012-2013, to complete
and graduate their Bachelor of Science in Marine Transportation (BSMT) and Bachelor of Science in
Maritime Engineering (BS MarE) degrees in WNU; 2) WNU shall be directed to submit a complete list of
the students enrolled as of AY 2012-2013; and 3) Effective AY 2013-2014, WNU offering of maritime
programs shall be considered to have shifted to a rating school and shall be recognized as a pilot maritime
technical school in Western Visayas with 2-3 year non-officer maritime program and that students
admitted in the WNU maritime programs effective AY 2013-2014 shall not be considered to have enrolled
in degree program but only in a non-officer maritime program of WNU. The issues presented in the
Petition filed by WNU are as follows: (a.) The April 26, 2013 Order denying WNUs Motion for
Reconsideration of the July 11, 2011 Closure Order was issued despite full compliance by WNU on the
required areas for evaluation of WNUs Maritime Programs; (b.) The January 6, 2014 Order did not
resolve nor mention the status of the Verified Appeal filed on June 7, 2013; (c.) The January 6, 2014 Order
downgrading WNUs BS MT and BS MarE did not provide guidelines for its implementation; (d.) The
shifting of the enrollees/students for AY 2013-2014 from a rating/degree program to a pilot non officer
program/certification will cause grave and irreparable damage on the part of the affected students;(e.)
Under the Manual Of Regulations for Private Higher Education, the January 6, 2014 Order should effected
at the end of the academic year. On May 23, 2014, the Trial Court issued an Order dismissing the Petition
on the ground that (a) the period to file the petition for certiorari lapsed on July 28, 2013 or after the sixty
(60) day period from receipt of the April 26, 2013 Order of CHED and (b) the Court of Appeals has
jurisdiction over petition for certiorari against quasi- judicial agencies such as CHED. On June 11, 2014,
WNU filed a Motion for Reconsideration of the May 23, 2014 Order of the Trial Court. In the said Motion
for Reconsideration, WNU asserted that (a) the sixty (60) day period to file the petition for certiorari
should be counted from the time of the receipt of the assailed order, January 6, 2014 Order of CHEd and
(b) the Regional Trial Court of Quezon City has jurisdiction over the said case. WNU set the Motion for
Reconsideration for hearing on June 20, 2014. However, the presiding judge of the Trial Court was on
leave. The Trial Court instead informed the parties that it will issue a notice of the schedule of hearing of
WNUs Companys Motion for Reconsideration.

Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Except for matters taken up during the annual meeting of stockholders held on 4 October 2013, there was
no other matter submitted to a vote of security holders during the period covered by this report.

PART II OPERATIONAL AND FINANCIAL INFORMATION

Item 5: MARKET FOR ISSUERS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Market Price and Dividends of Registrants Common Equity and Related Stockholder Matters

(1) Market Information

The Companys common stock is traded on the PSE under the stock symbol STI. As of the date of this
Report, the Company has 9,904,806,924 shares outstanding.

SEC Form 17 A
As of 31 March 2014
Page 37

37
As of 31 March 2014, the high share price of the Company was P0.71 and the low share price was
P0.66.As of 30 June 2014, the high share price of the Company was P 0.80 and the low share price was
P0.79.

The Companys public float as of 31 March2014 is 3,555,405,214 shares equivalent to 35.90% of the total
issued and outstanding shares of the Company.

The following table sets forth the Companys high and low intra-day sales prices per share for the past
two (2) years and the first and second quarters of 2014:

High Low
2014
Second Quarter 0.87 0.69
First Quarter 0.72 0.65

2013
Fourth Quarter 0.74 0.59
Third Quarter 0.90 0.73

2012
Fourth Quarter 2.22 0.92
Third Quarter 3.00 1.50

(2) Holders

As of 31 March 2014, there were 1,245 shareholders of the Companys outstanding capital stock. The
Company only has common shares.

The following table sets forth the top 20 shareholders of the Companys common stock, the number of
shares held, and the percentage of total shares outstanding held by each as of 31 March 2014.

NAME OF STOCKHOLDER
NUMBER OF
SHARES
PERCENTAGE
OF OWNERSHIP
PCD NOMINEE CORPORATION (FILIPINO) 3,085,958,370
1
31.1561%
PRUDENT RESOURCES, INC. 1,614,264,964 16.2978%
PCD NOMINEE CORPORATION (NON-FILIPINO) 1,280,209,907 12.9251%
TANCO, EUSEBIO H. 1,157,913,875 11.6904%
RESCOM DEVELOPERS, INC. 794,343,934 8.0198%
EUJO PHILIPPINES, INC. 728,626,048 7.3563%
INSURANCE BUILDERS, INC. 428,723,003 4.3284%
STI EDUCATION SERVICES GROUP, INC. 397,908,895 4.0173%
CAPITAL MANAGERS AND ADVISORS. INC. 397,908,894 4.0173%
TANCO, ROSIE L. 13,000,000 0.1312%
HTG TECHNOLOGIES, INC. 1,000,000 0.0101%
EDAN CORPORATION 861,350 0.0087%

1
Eusebio H. Tanco is the beneficial owner of 284,100,000 shares. Eujo Philippines, Inc. is the beneficial owner of 35,247,082 shares.
STI Education Services Group, Inc. is the beneficial owner of 104,399,000 shares. Insurance Builders, Inc. is the beneficial owner of
150,952,989 shares. Joseph Augustin L. Tanco is the beneficial owner of 2,000,000 shares.
SEC Form 17 A
As of 31 March 2014
Page 38

38
LERIO CABALLERO CASTIGADOR AND/OR VICTORINA 399,000 0.0040%
HENRY SY SR. 350,000 0.0035%
QUALITY INVESTMENTS & SECURITIES CORPORATION 320,000 0.0032%
TACUB, PACIFICO B. 200,000 0.0020%
CRUZ, YOLANDA M. DELA 150,000 0.0015%
VICSAL SECURITIES & STOCK BROKERAGE, INC. 129,500 0.0013%
E. SANTAMARIA & CO., INC. 128,919 0.0010%
TOBIAS JOSEF BROWN 99,400 0.0010%
THE PHILIPPINE AMERICAN INVESTMENTS CORP. 88,508 0.0009%
ROSELLE DEL ROSARIO 84,427 0.0009%

(3) Cash Dividends

On 8 December 2011, cash dividends amounting to P 0.02 per share were paid to stockholders of record as
of 11 November 2011.

On 5 December 2012, cash dividends amounting to P0.01 per share were paid to stockholders of record as
of 19 December 2012.

On 4 September 2013, cash dividends amounting to P 0.015144 per share were paid to stockholders of
record as of 18 September 2013.

Dividends will be evaluated by the Board of Directors on an annual basis. It shall be the policy of the
Company to declare dividends whenever there are unrestricted retain earnings available. Such
declaration will take into consideration factors such as restrictions that may be imposed by current and
prospective financial covenants; projected levels of operating results, working capital needs and long-
term capital expenditures; and regulatory requirements on dividend payments, among others.

(4) Recent Sales of Unregistered or Exempt Securities

Private Placement

On 21 November 2011, the Board of Directors approved the issuance of 795,817,789 shares (the Private
Placement Shares) out of the Companys authorized and unissued capital stock at P 0.60 per share
through private placement investments in order to fund the Companys obligations to PWU and UNLAD
under the Joint Venture Agreement and Shareholders Agreement by and among PWU, UNLAD, Mr.
Benitez and the Company.

The Private Placement Shares were subscribed to by Capital Managers & Advisors, Inc. (CMA), an
existing shareholder of the Company) and STI Education Services Group, Inc., (STI ESG), a related
party in the following manner:

Subscriber Number of Shares Amount of Subscription
CMA 397,908,894 P238,745,336.40
STI ESG 397,908,895 238,745,337.00
Total 795,817,789 P477,490,673.40

The Subscription Agreements with CMA and STI ESG were executed on 24 November 2011.

On 25 November 2011, the Company filed SEC Form 10-1 with the SEC since the issuance of the Private
Placement Shares qualifies as an exempt transaction under Section 10.1(k) of the Securities Regulation
Code i.e., the sale of securities by an issuer to fewer than twenty (20) persons in the Philippines during
any twelve-month period.

SEC Form 17 A
As of 31 March 2014
Page 39

39
Since STI ESG and CMA are related parties, the Company complied with the Revised Listing Rules and
obtained: (a) shareholders approval for the listing of the Private Placement Shares; and (b) a waiver of the
requirement to conduct a rights or public offering in connection with the Private Placement Shares during
the special stockholders meeting on 10 August 2012.

The Philippine Stock Exchange (the PSE) issued a Notice of Approval in connection with the listing of
the Private Placement Shares on 28 September 2012, subject to the submission of: (a) a duly executed lock-
up agreement at least three days prior to the actual listing date of the Private Placement Shares; and (b) a
confirmation from the SEC that the mandatory tender offer rule does not apply to the subject private
placement transaction, or if a mandatory tender offer is required to be conducted, a confirmation from the
Company that the mandatory tender offer requirement and other related requirements of the SEC have
been complied with.

On 10 May 2013, the SEC granted the Companys request for exemptive relief from the requirements of
mandatory tender offer relative to the private placement transaction.

On 27 June 2013, the PSE advised the Company to submit a duly executed lock-up agreement in
compliance with Article V, Part A, Section 7 of the Revised Listing Rules and to facilitate the listing of the
Private Placement Shares.

On 25 July 2013, the Company, STI ESG, and CMA executed an Escrow Agreement with Unionbank of the
Philippines Trust & Investment Services Group as the Escrow Agent to implement the 180-day lock-up
requirement applicable to the Private Placement Shares reckoned from the listing date of the said shares.
The listing of the additional 795,817,789 common shares of the Company was approved on 19 August
2013. The lock-up period of the Private Placement shares expired on 18 February 2014 and said shares
became eligible for trading on the Exchange on 19 February 2014.

Share-for-Share Swap Transaction

On 28 August 2012, 31 August 2012 and 1 September 2012, the Company executed Share Swap
Agreements with the following stockholders of STI ESG: (a) Prudent Resources, Inc.; (b) Mr. Eusebio H.
Tanco; (c) Eujo Philippines, Inc.; (d) Rescom Developers, Inc.; and (e) Insurance Builders, Inc. (collectively
referred to as the STI Majority Shareholders) as well as with 90 other stockholders of STI ESG. The
aforementioned share swap transactions are based on an exchange ratio of 6.5 shares of the Company for
every 1 STI ESG share.

The share swap transactions sought to consolidate all of the education assets of the STI/Tanco Group of
Companies into one holding company. The share swap also provided an opportunity for the education
group of the STI/Tanco Group of Companies to raise funds through the capital markets for the expansion
and upgrading of its current facilities, the acquisition of educational entities and the improvement of the
quality of education being offered by these entities or institutions.

Pursuant to the aforementioned Share Swap Agreements, the Company issued a total of 5,901,806,924
common shares (the Share Swap Shares) in exchange for 907,970,294 STI ESG shares as follows:

Stockholders No. of STI ESG Shares No. of Company
Shares
STI Majority Shareholders 726,749,511 4,723,871,823
Other STI ESG Stockholders 181,220,783 1,177,935,101
TOTAL 907,970,294 5,901,806,924

To accommodate the issuance of the Share Swap Shares, the Company increased its authorized capital
stock from 1,103,000,000 shares with a par value of P 0.50 per share to a total of 10,000,000,000 shares with
a par value of Php 0.50 per share or an aggregate par value of P 5,000,000,000.00. Said increase was
approved by the Companys Board on 14 June 2012 and by the stockholders during the Special
Stockholders Meeting on 10 August 2012.
SEC Form 17 A
As of 31 March 2014
Page 40

40

On 14 September 2012, the Company filed an application for the increase in its authorized capital stock
with the SEC. The SEC approved the Companys application on 28 September 2012.

During the 14 June 2012 Board meeting and the Special Stockholders meeting on 10 August 2012, the
Board and the stockholders likewise approved the exchange ratio and the share swap transactions with
the STI Majority Shareholders and the other STI ESG stockholders. The Company also complied with the
Revised Listing Rules and obtained a waiver of the requirement to conduct a rights or public offering in
connection with the Share Swap Shares during the 10 August 2012 Special Stockholders Meeting.

On 7 September 2012, the Company filed an Amended SEC Form 10-1 with the SEC since the issuance of
the Share Swap Shares qualified as an exempt transaction under Section 10.1(i) of the Securities
Regulation Code i.e., subscriptions for shares of the capital stock of a corporation in pursuance of an
increase in its authorized capital stock under the Corporation Code when no expense is incurred or no
remuneration is paid in connection with the sale or disposition of such securities, and only when the
purpose for the giving or taking of such subscriptions is to comply with the requirements of such law as
to the percentage of the capital stock of a corporation which should be subscribed before its authorized
capital is increased.

On 26 September 2012, the PSE Board of Directors approved the application of STI Holdings to list an
additional 5,901,806,924 common shares (the Share Swap Shares) with a par value of P0.50 per share, to
cover the share-for-share swap transaction with various shareholders of STI ESG (the STI ESG
Shareholders). The 5,901,806,924 common shares were issued in exchange for 907,970,295 STI ESG
common shares held by the STI ESG Shareholders. The total swap value is P9,743,378,087.43, broken
down as follows: (1) 5,887,969,327 STI Holdings shares at a swap price of P1.65 per share for a
consideration of P9,715,149,389.55; and( 2) 13,837,597 STI Holdings shares at a swap price of P2.04 per
share for a consideration of P28,228,697.88.

In compliance with Article V, Part A, Section 7 of the Revised Listing Rules of the Exchange, STI
Holdings, Ms. Rosie L. Tanco, the STI Majority Shareholders and Union Bank of the Philippines executed
an Escrow Agreement on 22 October 2012 to implement the required lock-up requirement of their
respective Swap Shares reckoned from the listing date. A total of 4,736,871,823 common shares were
covered by the Escrow Agreement.

On 29 October 2012 (the Listing Date), 5,901,806,924 common shares of STI Holdings were listed in the
Exchange. Out of the 5,901,806,924 common shares, only 1,164,935,101 common shares were eligible for
trading on the Listing Date. The remaining 4,736,871,823 common shares held by Ms. Rosie L. Tanco and
the STI Majority Shareholders were placed in escrow for 180days counted from the Listing Date. The said
lock-up period lapsed on 27 April 2013.

On 9 May 2013, the 4,736,871,823 common shares held by Ms. Rosie L. Tanco and the STI Majority
Shareholders became eligible for trading on the Exchange.

Item 6: MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION

Managements Discussion and Analysis

This discussion summarizes the significant factors affecting the financial condition and operating results
of STI Education Systems Holdings, Inc. (STI Holdings) and its subsidiaries (hereafter collectively
referred to as the Group) for the fiscal years ended March 31, 2014 and 2013. The following discussion
should be read in conjunction with the attached audited consolidated financial statements of the
Company as of and for the year ended 31 March 2014 and for all the other periods presented.

SEC Form 17 A
As of 31 March 2014
Page 41

41
As a result of the adoption of Philippine Accounting Standards (PAS) 19, Employee Benefits, Revised, the
Group applied the amendments retroactively to the earliest period presented (Refer to Note 2 of the
Notes to Consolidated Financial Statements).

Financial Condition

March 31, 2014 vs. 2013

The Groups assets as at March 31, 2014 consisted mainly of its Property and Equipment, which at P4,421.3
million accounts for 53% of its total assets. This is in accordance with the Groups expansion plan. In the
past one and a half years since the Groups follow-on offering, total investment in Property and Equipment
has reached P2,470.2 million for the acquisition of land, construction of school facilities and purchase of
school furniture and equipment for STI Ortigas-Cainta, STI Caloocan, STI Cubao, STI Calamba, STI Batangas
and STI Lucena.

Total assets stood at P8,299.1 million as at March 31, 2014, slightly lower by 2% than last years figure, as
some investments reflected negative variances due to market conditions.

Cash and cash equivalents declined by 61% from P1,489.5 million last year due to the completion of building
construction and purchase of furniture and equipment for STI Ortigas-Cainta. STI Caloocan was completed
in February, 2014 while construction is ongoing in sites intended for STI Cubao, STI Batangas, STI Calamba
and STI Lucena.

Current receivables, on the other hand, increased by 19% to P297.4 million as receivables from students
increased in line with the 4% increase in the number of students of STI ESG and its subsidiaries. Receivables
from students of WNU contributed P34.6 million, net of allowance for doubtful accounts.

Inventories increased by P3.1 million or 9% as the schools increased their stocks of uniforms in preparation
for the start of the coming school year.

Prepaid expenses and other current assets rose by 186% to P107.0 million due to substantial increases in VAT
input taxes and creditable withholding taxes arising from the swap of the Groups land in Makati City in
exchange for units in the condominium building being constructed on the same property.

Property and equipment increased by 68% to P4,421.3 million due to the completion of the buildings for STI
Ortigas-Cainta and STI Caloocan and the purchase of the needed furniture and equipment to complete the
school facilities. The construction of the buildings for STI Cubao and STI Calamba are in full swing to meet
the target availability of the facilities for school year (SY) 2014-2015. Improvement of various facilities in
other owned schools were also undertaken. Renovations on buildings for STI Batangas is almost complete
and the school is likewise expected to be fully operational in time for SY 2014-15.

Investment properties increased slightly by 2%.

Value of Investments in and advances to associates and joint ventures decreased by 47% mainly due to
the decline in market value of investments in bonds and equities held by an associate and to losses
incurred by some associates.

Available-for-sale financial assets rose by 985% or P45.9 million due to reclassification of investments in
De Los Santos-STI Megaclinic, Inc. (Megaclinic) and De Los Santos General Hospital, Inc. (the Hospital)
from Investments in and advances to associates and joint ventures account as a result of the Investment
Agreement entered into with Metro Pacific Investments Corporation (MPIC) which was implemented in
June 2013. The infusion of equity in the Hospital by MPIC resulted to a dilution of the ownership of the
Group to 10%, thus the reclassification. The shareholdings of De Los Santos-STI College (DLS-STI
College) in Megaclinic were also swapped with shares in the Hospital. On August 15, 2013 STI
SEC Form 17 A
As of 31 March 2014
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42
Investments purchased 40,051 shares of Megaclinic from the Hospital. This represents 6% of the total
outstanding capital stock of Megaclinic.

Deferred tax assets rose by 289% or P24.6 million primarily due to deferred tax recognized on the swap of the
Groups land in Makati City in exchange for units in the condominium building being constructed on the
same property. Taxes paid on the transaction were paid by the Group. The related deferred tax asset will be
reversed upon completion of the condominium units swapped for the land.

Goodwill, intangible and other noncurrent assets slightly increased by P90.4 million or 14%. Goodwill on the
purchase of STI Batangas was computed at P2.6 million. The purchase of computer licenses for STI ESG and
iACADEMY amounted to P21.2 million. Balance of the increase was due to utility bill deposits for STI
Ortigas-Cainta, STI Caloocan and STI Cubao. STI ESG has also acquired a new school management system
and is in the process of implementing the same.

Accounts payable and other current liabilities rose by 61% or P196.7 million primarily due to bills for
construction of schools buildings unpaid as of balance sheet date.

Short term loans of P180.0 million were availed to finance short-term working capital requirements.

Nontrade payable of P151.5 million pertains to the amount withheld for payment to WNUs former
shareholders relative to the acquisition of WNU.
Current portion of long-term debt of P49.9 million is part of WNUs liabilities outstanding as of the time of
purchase of the university.

Current portion of obligations under finance lease increased by 16% due to new availments while the long-
term portion decreased by 14% due to payment of monthly amortizations.

Income tax payable grew by 18% reflecting the increase in taxable income.

Long-term debt, net of current portion, amounting to P58.5 million is part of WNUs liabilities absorbed by
the Group.

Pension liabilities increased by P38.5 million or 172% primarily from WNUs pension liability.

Deferred tax liability of P128.0 million represents the tax impact of acquisition-date fair value measurement
of WNUs net assets arising from business combination.

Unrealized mark-to-market gains or losses on available-for-sale financial assets, including the Groups share
in its associates unrealized mark-to-market gains on available-for-sale financial assets, decreased by net
amount of P1,477.4 million. This represents a decline in the gains earlier reported as of March 31, 2013 by an
associate as a result of: (1) the realization of gains on some of the AFS assets; and (2) decrease in market
values of bonds and equities held by an associate as of March 31, 2014.

Cumulative actuarial gains or losses, including the Groups share in its associates cumulative actuarial
losses, amounted to net gain of P3.0 million as of March 31, 2014, representing realization of the re-
measurement gains or losses resulting from the adoption of PAS 19R by the Group and its associates. This
represents a 14% decline from last years net gain of P14.4 million.

The increase in Unappropriated retained earnings of P1,338.7 million resulted from the years net income
earned less dividends declared and from the reclassification of P800.0 million appropriated retained
earnings.

March 31, 2013 vs. 2012

The Groups total assets as at March 31, 2013 amounted to P8,503.3 million, 85% higher than the amount
as at March 31, 2012. There was a recorded increase of P4,400.9 million in capital arising from (1) the
SEC Form 17 A
As of 31 March 2014
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43
share-for-share swap between the shareholders of STI ESG and STI Holdings at an exchange ratio of 6.5
shares of STI Holdings for every one (1) STI ESG share, thus increasing the capital by P2,950.9 million,
and (2) proceeds of the follow-on offering of STI Holdings on November 7, 2012 amounting to P2,610.0
million at an offer price of P0.90 per share for 2,900,000,000 shares. Paid-up capital increased by P1,450.0
million from the follow-on offering. Additional paid-in capital increased by P1,041.5 million due to the
excess over par value of the shares issued arising from the follow-on offering, net of transaction costs
related to the issuance of shares.

Cash and cash equivalents increased by P933.2 million or 168% due to receipt of proceeds of follow-on
offering by STI Holdings on November 7, 2012, net of transaction costs and actual use of the proceeds. It
can also be attributed to the increase in the number of students of STI ESG and its subsidiaries from
66,740 last year to 68,363 students this year.

Current receivables slightly decreased by 6% or P15.1 million mainly due to the conversion to equity of
the P41.6 million advances to STI Investments, Inc. (STI Investments), an associate, thus, the transfer to
Investments in Associates account. There is no change in the percentage of ownership in STI Investments
after the conversion as the other shareholders proportionately did the same.

Inventories dropped by 18% or P7.4 million, ending the year at P34.7 million. This can be attributed to the
increased demand for uniforms and educational materials resulting from the increased number of
students.

Prepaid expenses and other current assets rose by P12.8 million or 52% as VAT input taxes arising from
disbursements related to the follow-on offering were recognized. Advance payments were also made to
suppliers and other third parties for construction activities in various schools.

Property and equipment increased by 71% or P1,091.0 million due to the acquisition of land for STI
Ortigas-Cainta, STI Caloocan, STI Cubao and STI Las Pias, construction costs incurred for STI Academic
Center Novaliches, STI Ortigas-Cainta and STI Caloocan, and improvement of various facilities. Based on
past experience, enrollment increased in areas where STI ESG constructed campuses with better facilities.

Investment properties decreased by 17% or P7.8 million due to the disposal of STI ESGs idle property in
Manila, and the recognition of depreciation expenses.

Value of Investments in and advances to associates and joint ventures increased by P1,306.6 million
mainly from profitable operations of an associate, STI Investments. The recognition of the Companys
share in unrealized mark-to-market gain on investments of the same associate also contributed to the
increase.

Noncurrent receivables rose by P236.7 million or 104% due to the full release of loans to Unlad Resources
Development Corporation (Unlad) and the Philippine Womens University (PWU) in accordance with
existing agreements.

Available-for-sale financial assets slightly decreased by 6% due to decrease in fair market value of some
investments.

Deferred tax assets decreased by P2.5 million or 23% due to the tax impact of the adoption of PAS 19R.

Goodwill, intangible and other noncurrent assets rose 133% from P275.3 million to P642.0 million due to
the reclassification of land from Property and Equipment to Other Noncurrent Assets.

Accounts payable and other current liabilities slightly rose by 6% to P320.7 million mainly due to increase
in payables related to construction.

Short-term loans of P746.7 million were fully paid during the fiscal year, using the proceeds of the follow-
on offering and internally generated funds.
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Current portion of obligations under finance lease decreased by 34% due to payment of monthly
amortizations while the long term portion increased by 49% due to additional finance lease availments.
These pertain mostly to company vehicles and computer equipment purchased under finance lease
arrangements.

Income tax payable increased by 150% due to substantial increase in taxable income.

Pension liabilities declined by P32.4 million due to the impact of the adoption of PAS 19R.

Capital stock increased by P4,400.9 million due to the issuance by STI Holdings of 5,901.8 million shares
arising from the share-for-share swap between the shareholders of STI ESG and STI Holdings at an
exchange ratio of 6.5 shares of STI Holdings for every one (1) STI ESG share and the follow-on offering
where 2,900.0 million shares were issued last November 7, 2012.

Additional paid-in capital increased by P1,041.5 million due to the excess over par value of the shares
issued arising from the follow-offering, net of transaction costs related to the issuance of shares.

Unrealized mark-to-market gains or losses on available-for-sale financial assets, including the Groups
share in its associates unrealized mark-to-market gains on available-for-sale financial assets increased by
net amount of P865.2 million.

Retained earnings increased due to the substantial net income earned less dividends declared.

Results of Operations

Years ended March 31, 2014 vs. 2013

Total revenues improved by 15% or P247.7 million due to the increase in the number of students of STI ESG
and its subsidiaries from 68,363 to 71,195 students and the favorable enrollment mix resulting to higher
revenues from tuition and other school fees. WNUs revenues for the six-month period after acquisition
contributed P78.0 million to the increase.

Tuition and other school fees increased by P265.0 million or 20% from last years P1,357.3 million, mainly due
to the increase in the number of students and the 5,000 students of WNU. STI ESGs enrollment mix was also
more favorable in SY 2014 than in 2013, as enrollment leaned more towards STI Networks four-year
programs than the two-year programs. Ratio in 2014 was 76% four-year programs and 24% two-year
programs, as compared to 70% and 30%, respectively, in 2013. The four-year programs charge higher tuition
and bring in more revenue per student. STI ESGs subsidiary, iACADEMY, had a 25% increase in number of
students and more enrollees in programs with higher tuition fees. WNUs students accounted for P78.0
million of total tuition and other school fees.

Revenues from educational services also improved by 2% or P4.2 million. Sale of educational materials and
supplies likewise rose by 8%, following the trend of increased enrollment.

Royalty fees slightly increased by 3% reflective of the almost constant number of students in franchised
schools.

Other income went down by 40% or P26.0 million due to various one-time adjustments recognized last year
arising from the merger of schools with STI ESG.

Cost of educational services increased by 14% from P485.4 million last year to P553.0 million this year due to
higher faculty salaries and other direct expenses as a result of the increased number of students.
Depreciation expenses of the recently completed buildings in STI Ortigas-Cainta and STI Caloocan accounted
for P23.5 million of the P67.6 million cost increase.

SEC Form 17 A
As of 31 March 2014
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45
Cost of educational materials and supplies sold increased by 8%, mainly due to increased sale of uniforms.

General and administrative expenses rose by 13% or P93.2 million. Of this increase, WNUs administrative
expenses accounted for P26.8 million. STI ESGs security and janitorial expenses rose by P19.7 million as STI
Fairview, STI Novaliches, STI Ortigas-Cainta and STI Caloocan became fully operational. This also resulted
to P19.6 million increase in depreciation costs. Salaries and employee benefits likewise rose by P17.7 million
as vacant plantilla positions were filled up and performance-based increases were granted to deserving
employees.

Equity in net gains of associates and joint ventures decreased by P195.4 million as losses were incurred by
some associates.

Excess of fair values of net assets acquired over acquisition costs of P32.7 million relates to the acquisition of
WNU.

Loss on deemed sale amounting to P36.3 million represents the amount deemed lost due to the dilution of the
Groups ownership in the Hospital from 33% to 10%.

Loss on swap in the amount of P6.7 million pertains to the exchange of shares of Megaclinic with the shares
in the Hospital held by DLS-STI College.

Interest expense decreased from P18.8 million last year to only P10.9 million this year, with the cost incurred
this year mainly due to the long-term loan of WNU.

Rental income increased by P6.2 million mainly due to the rental income recognized from canteen
concessionaire, gym and auditorium.

Interest income went down by P22.5 million due to the discontinued imposition of interest on the loans to
PWU and Unlad.

Dividend income slightly increased by P0.07 million or 16% while gain on sale of Property and
equipment slightly decreased by P0.09 million or 11%.

As a result of unfavorable market conditions, the Groups unrealized mark-to-market losses on its AFS
investments slightly increased by 26% while its share in associates unrealized mark-to-market losses, net
of realized mark-to-market gains/losses recognized to profit or loss, also rose by 277%. Consequently,
the Groups total comprehensive income declined by 151%.

Years ended March 31, 2013 vs. 2012

The Group registered substantial improvements in its profitability as shown by the 173% increase in net
income from P291.5 million in 2012 to P794.4 million in 2013. Total comprehensive income increased by
41% to P1,665.4 million for 2013.

Increase in total revenues of P93.2 million or 6% from last year is due to the increase in the number of
students of STI ESG and its subsidiaries from 66,740 to 68,363 students resulting in higher revenues from
tuition and other school fees.

Tuition and other school fees increased by P84.6 million to P1,357.3 million from last years P1,272.7
million, reflective of the increased number of students. In addition, STI ESGs enrolment mix was more
favorable in 2013 than in 2012, as enrolment leaned more towards the STI Networks four-year programs
than the two-year programs. Ratio in 2013 was 70% four-year programs and 30% two-year programs, as
compared to 65% and 35%, respectively, in 2012. The four-year programs charge higher tuition and bring
in more revenue per student.

SEC Form 17 A
As of 31 March 2014
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46
Educational services followed suit with a P9.3 million or 6% increase to P177.9 million this year. Sale of
educational materials and supplies likewise rose by 6%.

Cost of educational services was slightly up by 0.7% to P485.4 million as a result of additional
depreciation cost due to the completion of the STI Academic Center Novaliches and the full year
recognition of depreciation of the new building in STI Fairview. This was partially offset by reduced
rental of school facilities from third parties. Economies of scale in terms of faculty costs and courseware
development also reduced the impact of the increased depreciation cost.

Cost of educational materials and supplies sold was 25% higher at P49.5 million. This is mainly due to the
higher cost of items sold and changes in product mix.

General and administrative expenses increased by P57.1 million or 8% from P688.3 million to P745.3
million, mainly due to the share swap and follow-on offering related expenses in 2013 amounting to P50.4
million. Taxes and licenses rose by P40.5 million as filing fees paid to the SEC and documentary stamp
taxes were incurred when both STI Holdings and STI ESG increased their respective authorized capital
stock. This also includes P13.1 million listing fee paid to the Philippine Stock Exchange (PSE) for the
follow-on offering. Professional fees related to the follow-on offering resulted to the P4.7 million increase
this year as compared to last year. Salaries and wages increased by P8.3 million from last years P215.9
million due to increases in retirement cost. Lower retirement cost was recorded last year due to actuarial
gains recognized in the merger of the schools with STI ESG. Utilities costs also increased by P5.9 million
due to increases in power rates, the increased utilization in STI Novaliches Academic Center and the full
use of the new building in STI Fairview. Outside services expenses increased by P7.0 million due to the
additional security and janitorial services for current and new facilities. However, this was partially offset
by the P8.8 million reduction in impairment provisions for receivables and goodwill.

Equity in net gains of associates and joint ventures increased by P465.8 million due to the increase in net
income of STI Investments, Inc., in which STI ESG has a 20% interest.

Interest expense in 2013 decreased by P15.0 million as STI ESG fully paid its short term loans during the
year.

Rental income decreased slightly by P0.7 million as facilities originally being leased out were utilized as
school premises.

Interest income increased by P18.5 million as funds from the follow-on offering were invested in time
deposits and special savings accounts.

Dividend income decreased by P2.4 million due to the disposal of available-for-sale financial assets which
generated dividend income in 2012.

Gain on sale of property and equipment was recognized in 2013 due to disposal of fully depreciated
transportation equipment.

Loss on disposal of investment property amounted to P2.3 million as STI ESGs idle property was sold.

Liquidity and Capital Resources

The following table shows the Groups consolidated cash flows for the years ended March 31, 2014, 2013 and
2012 as well as the consolidated capitalization and other consolidated selected financial data as at March 31,
2014 and 2013.

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As of 31 March 2014
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47

2014

2013

2012
(PHP millions)
Cash flows
Net cash provided by operating activities 454.4 460.2 900.9
Net cash provided by (used in) investing activities (1,327.4) (1,754.4) (515.2)
Capital expenditures 1,049.9 1,539.6 255.3
Net cash provided by (used in) financing activities (33.1) 2,227.4 (305.3)
Net increase (decrease) in cash and cash equivalents (906.1) 933.2 80.4

2014 2013
(PHP millions)
Capitalization
Interest-bearing financial liabilities
Long-term financial liabilities
Long-term debt 58.5 -
Obligations under finance lease 11.4 13.3
69.9 13.3
Current portion of interest-bearing financial liabilities
Long-term debt maturing within one year 229.9 -
Obligations under finance lease maturing within one year 7.4 6.4
237.3 6.4
Total interest-bearing financial liabilities 307.2 19.7
Total equity attributable to equity holders of STI Holdings 7,039.0 7,993.1
7,346.2 8,012.8

Other Selected Financial Data
Total assets 8,299.1 8,503.2
Property and equipment net 4,421.3 2,635.3
Cash and cash equivalents 583.3 1,489.5

The Groups cash and cash equivalents amounted to P583.3 million as at March 31, 2014, main sources of
which were cash flows from operating activities amounting to P698.5 million, proceeds from availments
of debt of P280.0 million, net collection of receivables of P12.3 million, dividends received amounting to
P8.1 million, and cash acquired through business combination of P7.7 million. These funds were mainly
used for capital outlays of P1,049.9 million, investments in subsidiaries and associates of P200.9 million,
net of cash acquired, debt principal and interest payments of P152.1 million, and dividend payments of
P153.2 million.

As at March 31, 2013, the Groups cash and cash equivalents amounted to P1,489.5 million. Sources were
primarily from operating activities amounting to P574.1 million, proceeds from the parent companys
follow-on offering of P2,476.0 million and from issuance of a subsidiarys shares of P608.8 million,
proceeds from loan availments of P539.0 million, dividends received of P14.4 million and interest
received of P10.6 million. The funds were used mainly for acquisition of property and equipment
amounting to P1,539.6 million, debt principal and interest payments of P1,311.1 million, and dividend
payments of P101.0 million.

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As of 31 March 2014
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48
Debt Financing and Covenants

The Group has various short term and long term loans with commercial banks secured by certain real estate
properties owned by companies in the Group.

On March 20, 2014, STI ESG signed a Credit Notes Facility Agreement with China Banking Corp. where the
latter is granting STI ESG a credit facility of P3 Billion. As of March 31, 2014, STI ESG has not drawn on this
Credit Notes Facility.

Key Performance Indicators (KPIs)

The top five key performance indicators of the Group include tests of profitability, liquidity and solvency.
Profitability refers to the Groups earning capacity and ability to earn income for its stockholders. This is
measured by profitability ratios analyzing margins and returns. Liquidity refers to the Groups ability to
pay its short-term liabilities as and when they fall due. Solvency refers to the Groups ability to pay all its
debts as and when they fall due, whether such liabilities are current or non-current.

EBITDA
margin

Net income excluding
depreciation and
amortization, equity in
net earnings (losses) of
associates and joint
ventures, interest
expense, interest income,
provision for income tax
and loss on deemed sale
and share swap of an
associate, excess of fair
values of net assets
acquired over acquisition
costs from a business
combination divided by
total revenues
36.0% 32.9% EBITDA margin
improved due to faster
increase in revenues
from tuition and other
school fees, the
Groups main source of
revenues, as compared
to direct and operating
costs.
Return on
equity
Net income attributable
to equity holders of the
Parent company divided
by average equity
attributable to equity
holders of the Parent
company
9.1% 13.8% Net income
attributable to equity
holders of the Parent
Company decreased by
12% or P96.3 million
from P777.4 million in
2013 to P681.1 million
in 2014. Meantime,
Equity attributable to
equity holders of the
parent company
increased by 33%.
Gross profit
margin
Gross profit divided by
total revenues
68.4% 68.0% Increase in gross profit
margin resulted mainly
from the increase in the
number of students of
STI ESG and its
subsidiaries from
SEC Form 17 A
As of 31 March 2014
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49
68,363 last year to
71,195 students this
year resulting to
increased revenues
from tuition and other
school fees.
Current
ratio
Current assets divided
by
Current liabilities
1.12:1.00 5.46:1.00 The substantial
decrease in current
ratio as of March 31,
2014 is due to the
payments made for
acquisition of property
and equipment in
accordance with the
expansion plan and
payments for the
acquisition of WNU.
Debt to
equity ratio
Total liabilities divided
by Total equity
0.16:1.00 0.05:1.00 Slight increase due to
payables to contractors
for building
construction and to
former shareholders
for WNU acquisition as
well as loans incurred
for short-term working
capital requirements.

Financial Risk Disclosure

The Groups present activities expose it to liquidity risk, credit risk, interest rate risk and equity price risk.

Liquidity risk Liquidity risk relates to the possibility that the Group might not be able to settle its
obligations/commitments as they fall due. To cover its financing requirements, the Group uses
internally-generated funds and avails of various bank loans. On November 7, 2012 the Company received
the proceeds from its follow on offering. The usage of funds is in line with the plan as approved by the
SEC and the PSE. There are unutilized funds as of the end of the fiscal year, which funds are invested in
short-term bank deposits that provide flexibility of withdrawing the funds anytime. The Group regularly
evaluates available financial products and monitors market conditions for opportunities to enhance
yields at acceptable risk levels.

Credit risk Credit risk is the risk that the Group will incur a loss arising from students, franchisees or
counterparties that fail to discharge their contractual obligations. The Group manages and controls credit
risk by setting limits on the amount of risk that the Group is willing to accept for each counterparty and
by monitoring expenses in relation to such limits.

It is STI ESGs policy to require students to pay all their tuition and other incidental fees before they can
get their report cards and other credentials. Receivable balances are monitored such that exposure to bad
debts is minimal.

STI Holdings loan exposure to Unlad and PWU are secured by real estate mortgages which minimize the
credit risk to these institutions.

SEC Form 17 A
As of 31 March 2014
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50
Agreements/Commitments and Contingencies/Other Matters

a. There are no changes in accounting estimates used in the preparation of the audited consolidated
financial statements for the current and prior financial periods.

b. Except for STI Holdings commitments under the JVA with PWU, Unlad and a private individual and
under the Shareholders Agreement governing the aforementioned parties relationship as
shareholders of the joint venture company, there are no material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), and other relationships of the company
with unconsolidated entities or other persons created during the reporting period.

c. On June 3, 2013, STI ESG executed a deed of pledge on all its shares in the Hospital in favor of
Neptune Stroika Holdings, Inc., a wholly owned subsidiary of MPIC, to cover the indemnity
obligations of STI ESG enumerated in the Investment Agreement with MPIC.

d. There are no material events and uncertainties known to management that would address the past
and would have an impact on future operations of the Group.

e. There are no known trends, demands, commitments, events of uncertainties that will have an impact
on the Groups liquidity except for the contingencies and commitments enumerated in Note 29 of the
Notes to Audited Consolidated Financial Statements attached as Annex A.

f. Except for the conditions set forth in the accession made by STI Holdings to the JVA and
Shareholders Agreement between PWU, Unlad, a private individual and Mr. Eusebio H. Tanco,
there are no other events that will trigger direct or contingent financial obligations that is material to
the Group, including any default or acceleration of an obligation.

g. Construction of school buildings and improvements for STI Batangas, STI Cubao, STI Calamba and
STI Lucena are ongoing as of March 31, 2014. Source of funds for the capital expenditures are
provided by financing and internally-generated funds.

h. The various loan agreements entered into by the Group provide certain restrictions and conditions
with respect to, among others, change in majority ownership and management and maintenance of
financial ratios. The Group is fully compliant with all the covenants of the loan agreements. Please
see notes 16 and 33 of the Notes to Audited Consolidated Financial Statements of the Company
attached as Annex A.

i. The education landscape in the Philippines has changed with the introduction of the K+ 12 program
which in summary adds two (2) years prior to tertiary education. For the schools in the Philippines
that offer tertiary education, similar to STI ESG, this will mean two (2) academic years with no
incoming college freshmen students.

This threat has been constructively converted into an opportunity for the STI ESG network of
campuses nationwide. STI ESG has decided to capitalize on its nationwide presence and ample
facilities to be able to implement the first-to-market approach of the Senior High School program.
Seventy three (73) STI Colleges and Education Center nationwide have applied for the advance
implementation of Senior High School for SY 2014-15 and six (6) STI campuses for SY 2015-16. The
Senior High School offering of STI ESG aims to minimize the impact of the expected reduction in
enrollment since there will be no incoming freshmen during the transition period from Senior High
School to College. Likewise, there is an opportunity for STI ESG to increase its student retention and
SEC Form 17 A
As of 31 March 2014
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51
migration when the students graduate in Senior High School and decide to pursue a Baccalaureate
degree.

j. There are no significant elements of income or loss that did not arise from the Groups continuing
operations.

k. The Groups business is linked to the academic cycle. The academic cycle which is one academic year
starts in the month of June and ends in the month of March. The core business and revenues of the
Group, which is mainly from tuition and other school fees, is recognized as income over the
corresponding academic year to which they pertain.

Item 7: FINANCIAL STATEMENTS

The March 31, 2014 Audited Consolidated Financial Statements and schedules listed in the accompanying
index to Supplementary Schedules are incorporated by reference to this SEC Form 17-A.

Item 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES

1. The accounting firm of Sycip Gorres Velayo & Co. (SGV) has been the Companys External
Auditors for the past years (2010 up to the present). They were reappointed in the Annual Stockholders
Meeting held on 04 October 2013, as external auditors for the ensuing fiscal year.

A representative of SGV is expected to be present at the Annual Meeting of the Stockholders and will
have the opportunity to make a statement if he or she so desires. The representative will also be available
to respond to appropriate questions from the stockholders.

Pursuant to SRC Rule 68 (3) (b) (iv), as amended (Rotation of External Auditors), the Company has
engaged Mr. Roel E. Lucas of SGV as the Partner-in-charge of the Company. This is his first year of
engagement for STI Holdings.

2. There has not been any disagreement between the Company and said accounting firm with regard to
any matter relating to accounting principles or practices, financial statement disclosures or auditing scope
or procedure.

As stated in the March 31, 2014 Statement of Management Responsibility for Financial Statements, SGV
is the appointed independent auditors of STI Holdings. They have examined the financial statements of
the Company in accordance with Philippine Standards on Auditing and have expressed their opinion on
the fairness of presentation upon completion of such examination, in its report to the Board of Directors
and stockholders.

The Companys Audit Committee reviews and approves the scope of audit work of the external auditor
and the amount of audit fees for a given year. With respect to services rendered by the external auditor
other than the audit of financial statements, the scope of and payment for the same are subject to review
and approval by the management.

Mr. Johnip G. Cua, Independent Director, is currently the Chairman of the Audit Committee while
Messrs. Martin K. Tanco, Paolo Martin O. Bautista and Ernest Lawrence Cu are its Members.

SEC Form 17 A
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52
The Company had engaged SGV for the annual audit covering the period from April 1, 2013 to March 31,
2014 for Php770,000.00. The engagement letter for the year-end audit was sent to the Company on 11
October 2013.

The following information pertains to their fees and charges over the last two fiscal years (amounts in
thousands):

2013-2014 2012-2013
Audit Fees P995 P500
Tax Fees 100 0
All Other Fees P2,300* P14,400**

*Represents professional fees paid relative to the acquisition of WNU
**Represents professional fees paid relative to the follow-on offering

PART III CONTROL AND COMPENSATION INFORMATION

Item 9: DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER

A) Directors and Executive Officers

1) Directors, Independent Directors and Executive Officers

The Companys Articles of Incorporation provides for eleven (11) members of the Board.

The term of office of the directors of the Company is one (1) year and they are to serve as such until
the election and qualification of their successors.

The following are the incumbent members of the Board of Directors:

(a) Eusebio H. Tanco
(b) Monico V. Jacob
(c) Joseph Augustin L. Tanco
(d) Ma. Vanessa Rose L. Tanco
(e) Martin K. Tanco
(f) Rainerio M. Borja
(g) Paolo Martin O. Bautista
(h) Maulik R. Parekh
(i) Johnip Cua
(j) Ernest Lawrence Cu
(k) Jesli A. Lapus

Messrs. Johnip Cua, Ernest Lawrence Cu and Jesli A. Lapus have been nominated as independent
directors by Capital Managers & Advisors, Inc. (CMA), a stockholder of the Company. CMA has
no business or professional relationship with Messrs. Cua, Cu and Lapus.

The Company has adopted and complied with Rule 38 of the Securities Regulation Code on the
nomination of independent directors and the required number of independent directors.

The corresponding ages, citizenships, business experiences and directorships held for the past five (5)
years of the incumbent directors who have been nominated to the Board for the ensuing year are set
forth below:

SEC Form 17 A
As of 31 March 2014
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53
Eusebio H. Tanco, 64, Filipino, Chairman of the Board

Mr. Tanco has been Chairman of STI Holdings since 17 March 2010. He is also the Chairman of the
Executive, Nominations and Compensation Committees of STI Holdings.

Mr. Tanco is the Chairman of the Executive Committee and Director of STI ESG and the Chairman of
Mactan Electric Company, Rescom Developers Inc., International Hardwood & Veneer Corp, Cement
Center Inc., Agatha Builders Corp, First Optima Realty Corp, Marbay Homes Inc., Insurance Builders,
Inc., Delos Santos-STI College, West Negros University, STI Investments, Inc. and Capital Managers and
Advisors, Inc. He is Vice-Chairman and President of Asian Terminals, Inc. and Vice-Chairman and
Director of Philippine Womens University.

Mr. Tanco is President of Philippines First Insurance Co. Inc., Optima Financing Corporation, Classic
Finance Inc., Venture Securities Inc., STMI Logistics, Inc., Total Consolidated Asset Management, Inc.,
Eujo Philippines, Inc., Global Resource for Outsourced Workers, Inc. and Prime Power Holdings
Corporation.

Mr. Tanco is also a director in Advent Capital & Finance Corp., PhilPlans First, Inc., Philippine Life
Financial Assurance Corp., J&P Coats Manila Bay, Manila Bay Spinning Mills, Inc., United Coconut
Chemicals, Inc., MB Paseo, Philippine Health Educators, Inc., i-ACADEMY, PhilhealthCare, Inc., Delos
Santos STI Medical Center, Delos Santos STI Megaclinic, Philippine Racing Club, Inc. and Leisure and
Resorts World Corporation.

Mr. Tanco is a director of the Philippine Stock Exchange. He is also Chairman of the Philippine-Thailand
Business Council and the Philippines-UAE Business Council. He likewise sits as a member of the Board
of Trustees of Philippines, Inc. and member of the Philippine Chamber of Commerce and Industry.

Mr. Tanco earned his Master of Science in Economics degree from the London School of Economics and
Political Science and his Bachelor of Science degree in Economics from the Ateneo de Manila University.
He was also awarded a Doctorate of Humanities degree, honoris causa, from the Palawan State
University.

Monico V. Jacob, 69, Filipino, Director

Mr. Jacob has been the President and CEO of STI Holdings since 17 March 2010. He is likewise a member
of the Executive, Compensation and Compliance Committees of STI Holdings.

Mr. Jacob is the President and CEO of STI Education Services Group, Inc. He also serves as the President
of West Negros University, Capital Managers and Advisors, Inc., STI Investments, Inc. and Insurance
Builders Inc.

Mr. Jacob is the Chairman of Philplans First, Inc., Philippine Life Financial Assurance Corporation, Total
Consolidated Asset Management, Inc., Global Resource for Outsourced Workers, Inc. Republic Surety &
Insurance Co., Inc., and Classic Finance, Inc.

Mr. Jacob serves as the Chairman of the Executive Committee of Philippine Womens University.

Mr. Jacob is also a Director in Advent Capital & Finance Corporation, Anvaya Cove Beach and Nature
Club, Asian Terminals, Inc., Ateneo De Naga University, Century Properties, Inc., Delos Santos STI
College, Delos Santos-STI Medical Center, Information and Communications Technology (i-ACADEMY),
Inc., Jollibee Foods, Inc., PhilhealthCare, Inc., Philippine Health Educators, Inc., Phoenix Petroleum
Philippines, Inc. and UNLAD Resources Development Corporation. He is also an Independent Director
of 2Go Group, Inc. and Negros Navigation Co., Inc.

Prior to his present positions, Mr. Jacob was the Chairman and CEO of Petron Corporation. As Chairman,
he presided over its privatization and implemented and led the partnership of the government with Saudi
SEC Form 17 A
As of 31 March 2014
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54
Aramco in Petron. He also presided over the Initial Public Offering (IPO) of Petron shares which has since
been hailed as one of the most successful IPO offerings in the country. He retired from Petron at the close
of the Ramos Presidency in July of 1998.

He was also Chairman and CEO of Philippine National Oil Company (PNOC) and all of its subsidiaries.
As Chairman of the PNOC, he presided over the privatization of the PNOC Dockyard and Engineering
Corporation.

Before Petron, Mr. Jacob was the General Manager of the National Housing Authority (NHA) where he
successfully introduced the joint venture approach to low cost and socialized housing. He was also Chief
Executive Officer of the Home Development Mutual Fund, popularly known as the PAG-IBIG Fund,
where he decentralized operations and established regional offices nationwide. He also introduced
various programs that brought back membership to the Fund.

He first joined government in 1986 as Associate Commissioner for the Securities and Exchange
Commission. He carried out needed reforms in the capital market and introduced the express lane
program.

Prior to government, he was a Partner of the law firm Jacob Acaban Corvera Valdez and Del Castillo and
was an active trial lawyer. Today, he is a partner in the law firm of Jacob & Jacob. His areas of
specialization are energy, corporate law, corporate recovery and rehabilitation work, including
receivership and restructuring advisory for companies.

As Rehabilitation Receiver, Mr. Jacob successfully implemented the financial rehabilitation of the Ramcar
Group of Companies, Atlantic Gulf & Pacific Co. of Manila (AG&P), and Negros Navigation Co., Inc. He
is currently wrapping up the termination of rehabilitation proceedings for Philippine Investment Two
(SPV-AMC), Inc. Currently, Mr. Jacob is the Receiver for Trust International Paper Corporation and is the
Court-appointed Assignee for Nasipit Lumber Company and Affiliates.

Mr. Jacob is a member of the Management Association of the Philippines (MAP) of which he was
President for 1998. He is also a member of the Integrated Bar of the Philippines.

Mr. Jacob finished his Bachelor of Arts degree with a Major in Liberal Arts from the Ateneo de Naga
University in 1966 and his Bachelor of Laws degree from the Ateneo de Manila University in 1971.

Joseph Augustin L. Tanco, 33, Filipino, Director

Mr. Tanco has been a Director of STI Holdings since 27 October 2010. He is likewise the Vice President for
Investor Relations as well as a member of the Compensation Committee of STI Holdings.

Mr. Tanco is the Chairman of the Board of PhilhealthCare, Inc. He is President and Chief Executive
Officer of Philippine Life Financial Assurance Corporation and Comm & Sense, Inc. He founded Comm
& Sense, Inc., an integrated marketing and communications agency offering comprehensive services in
the areas of creative design, event conceptualization and management, public relations and promotions,
in 2005. . Prior to founding Comm & Sense, Inc., Mr. Tanco had years of experience as the Channel
Manager for STI Headquarters and Chief Operating Officer of STI College Makati.
Mr. Tanco serves as a Director of STI Education Services Group, Inc., West Negros University, Philplans
First, Inc., Insurance Builders Inc., EujoPhils. Inc., Capital Managers and Advisors, Inc., STI Investments,
Inc., Prudent Resources, Inc. and Rescom Developers, Inc. He is also the Director and Chief Operating
Officer of UNLAD Resources Development Corporation.

Mr. Tanco is the 2013 National Chairman Nothing but Nets and Area Director for Individual for Metro
Area 2 of the Junior Chamber International Philippines and 2012 LO President of the Junior Chamber
International Philippines Ortigas Chapter. He is also an Entrepreneurship Mentor at the University of
Asia and the Pacific.

SEC Form 17 A
As of 31 March 2014
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55
Mr. Tanco is a graduate of the University of Asia and the Pacific with a Bachelor of Science degree in
Entrepreneurial Management. He obtained his Master in Business Administration from the Ateneo
Graduate School of Business.

Ma. Vanessa Rose L. Tanco, 36, Filipino, Director

Ms. Tanco has been a Director of STI Holdings since 27 October 2010. She is likewise a member of the
Nomination Committee of STI Holdings.

Ms. Tanco is currently the President and CEO of iAcademy, Chief Operating Officer of the Philippine
Womens University, and President of Makati Medical Center College.

Ms. Tanco is also a Director of West Negros University, All Asia Capital Managers, Inc., Classic Finance,
Inc., STI ESG, Philplans First, Inc., Banclife Insurance Co., Inc., PhilhealthCare, Inc., Insurance Builders
Inc., Prudent Resources, Inc. and Rescom Developers, Inc.

Ms. Tanco earned her Master in Business Administration Degree Major in Finance and Marketing from
the University of Southern California, Marshall School of Business and her Bachelor of Science degree in
Legal Management from the Ateneo de Manila University.

Martin K. Tanco, 48, Filipino, Director

Mr. Tanco has been a Director of STI Holdings since 19 December 2012. He is likewise a member of the
Executive and Audit Committees of STI Holdings.

Mr. Tanco is the Director for Investment of Philplans First, Inc. He is the President of the Philfirst
Condominium Association. Mr. Tanco is also a director of Diliman Realty Corp. and Coats Manila Bay.

Mr. Tanco earned his Bachelor of Science Degree in Electrical Engineering from the University of
Southern California. He obtained his Master of Science degree in Electrical Engineering and Master in
Business Administration from the University of Southern California.

Paolo Martin O. Bautista, 44, Filipino, Director

Mr. Bautista has been a Director of STI Holdings since 19 December 2012. He is likewise the Chief
Investment Officer, Head of Corporate Strategy and a member of the Audit and Compliance Committees
of STI Holdings.

Mr. Bautista is an advisor to the Investment Committees of Philplans, Philcare and PhilLife. He has over
15 years experience in the areas of corporate finance, mergers and acquisition, debt and equity capital
markets, credit risk management and securities law. Prior to joining STI Holdings, he was a director at
Citigroup Global Markets and a Vice President at Investment Banking Division of Credit Suisse.

Mr. Bautista obtained his Bachelor of Arts degree, Bachelor of Laws degree and Juris Doctor from the
Ateneo de Manila University and obtained a Master of Science degree in Management from the Arthur D.
Little School of Management, Cambridge, MA.

Rainerio M. Borja, 51, Filipino, Director

Mr. Borja has been a Director of STI Holdings since 19 December 2012. He is likewise a member of the
Executive and Nomination Committees of STI Holdings.

Mr. Borja serves as a Director of STI ESG, PhilPlans, Inc. and Total Consolidated Asset Management Inc.
He is also Chairman of the Board of Techzone Inc. and 88Gren Inc.

SEC Form 17 A
As of 31 March 2014
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56
Mr. Borja is also the Country Head and President of Expert Global Solutions, a holding company for two
global leaders in business process outsourcing, namely NCO Financial Systems and APAC Customer
Services. He oversees the overall operations of these companies and the integration of their processes in
the Philippines.

From 2000 to July 2012, Mr. Borja was President of Aegis PeopleSupport in the Philippines and
concurrently head of its Global Operations and Strategy. He also pioneered the setup of call center/BPO
in Cebu and Baguio and expansion to other places. He was also instrumental in the successful listing of
PeopleSupport in NASDAQ (symbol: PSPT) in 2004 and responsible for its global operations, global
strategy and corporate development.

Mr. Borja is credited by many in the Philippines as the man behind the success of the call center and BPO
industry in the country. His opinions and contributions are highly valued and sought by government
officials in the formulation of legislation and policies that will govern ICT and BPO in the future.

Mr. Borja founded and served as the Chairman of the Business Processing Association of the Philippines,
the umbrella organization of BPO, Contact Center and IT-enabled Service Companies in the country, for
five years. . He is also a director of the Contact Center Association of the Philippines. He is a member of
the US-Asean Business Council and the Makati Business Development Council.

Mr. Borja obtained his Bachelor of Science degree at De La Salle University and Masters of Science in
Economics units at the De La Salle Graduate School of Business and Economics.

Maulik Ramniklal Parekh, 44, Indian, Director

Mr. Parekh was elected as Director of STI Holdings on 10 December 2013.

Mr. Maulik R. Parekh serves as the President and Chief Executive Officer (November 2009 to present) of
SPi Global, Philippines, a leading Knowledge Process Outsourcing (KPO) and Customer Relationship
Management (CRM) service provider with more than 19,000 employees in 30 facilities in North
America, Latin America, Europe, Australia, and Asia. As such, Mr. Parekh is responsible for the
planning, execution, and management of the overall strategy and operations of the SPi Global Group of
Companies.

Mr. Parekh successfully consolidated all the BPO business of telecoms giant PLDT and integrated it with
other distinct outsourcing operations to create one of the most diversified BPO enterprises. He formed a
strong global leadership team responsible for Business Unit Operations and Corporate Support from its
Headquarters in the Philippines. He led the company to be recognized globally with major awards and
recognitions citing leadership and management capability, operational excellence, employee and
customer management practices and corporate social responsibility programs. He jumpstarted the
growth of the combined entities and sustained double-digit growth every year since 2010. He also led a
successful management buy-out amounting to more than $300 Million of the controlling interest in SPi
Global by partnering with CVC Capital Partners, a leading private equity firm.

From January 2006 to May 2009, Mr. Parekh was Executive Vice President and General Manager, Asia, of
TeleTech Holdings Inc., a $1 Billion, publicly traded company (NASDAQ: TTEC) delivering specialized
contact center solutions, including customer management, sales, technology solutions, collections and
BPO services. Key focuses included Financial Services, Insurance, Medical and Consumer Markets
Services, and Communications. Mr. Parekh was responsible for the largest region within TeleTech ,
representing over 30% of TeleTechs employees and over 70% of TeleTechs profit and had direct
operational responsibility for 14 centers in the Philippines, Hong Kong, Malaysia and Singapore with
13,000 seats and 23,000 professionals. He was a member of the Operating Committee which included the
CEO, CFO, CIO and EVP, Human Capital.

During his stint at Teletech, Mr. Parekh successfully orchestrated the largest and the fastest BPO
expansion in the Philippines growing from 6,000 employees in June 2006 to 23,000 employees in May
SEC Form 17 A
As of 31 March 2014
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57
2009. He won seven industry awards as a result of a well-choreographed and well-synchronized
communications strategy to brand TeleTech as the Employer of Choice. He led the due diligence process
for new call center locations in the Philippines and opened and staffed 8 new centers in three years. He
pioneered an award-winning Leadership Institute which inspired and trained high potential employees
for promotional opportunities to support the exponential growth. He consistently met and exceeded
operational goals through Six Sigma based and multi-layered process improvement initiatives. . He
helped design and launch Teletechs internal outsourcing arm Global Business Services to move
accounts payable, payroll, financial analysis, global quality, resource planning and forecasting to the
Philippines and other countries. He was recognized and promoted three times in three years Vice
President of Operations in January 2006 to General Manager, Asia in September 2006 to Senior Vice
President & General Manager, Asia in February 2008 to EVP & General Manager, Asia in January 2009.

From January 2003 to December 2005, Mr. Parekh was Director, Call Center Services & Special Projects of
Echostar Communications Corporation, a $7 Billion publicly traded company (NASDAQ: DISH) which
delivers Direct Broadcast Satellite television products and services to US customers and employs over
22,000 employees around the world. DISH currently serves over 14 Million customers. His previous
positions in the company were: from January 2001 to January 2003 - Special Projects Manager, Call Center
Operations; from January 1997 to July 1999 Regional Sales Director; and from January 1994 to December
1996 Project Manager.

Mr. Parekh earned his International MBA from Thunderbird, the American Graduate School of
International Management and his Bachelor of Engineering from Gujarat University, India. He pursued
his MS in Computer Science from Texas Tech University, Lubbock, Texas.

Ernest Lawrence Cu, 52, Filipino, Independent Director

Mr. Cu has been an Independent Director of STI Holdings since 19 December 2012. He is likewise a
member of the Audit and Nomination Committees of STI Holdings.

Mr. Cu is, at present, the President and Chief Executive Officer of Globe Telecom.

Mr. Cu is a Director of Asiacom Philippines, Prople BPO, Inc., Games Services Group, ConcettiGlobali Inc.
He also a Trustee of Ayala Foundation, Inc.

Mr. Cu earned his Master of Management degree, specializing in finance, accounting, and operations
management from the J.L. Kellogg Graduate School of Management at Northwestern University. He also
has a Bachelor of Science degree in Industrial Management Engineering and a Minor in Mechanical
Engineering from the De La Salle University.

JohnipCua, 57, Filipino, Independent Director

Mr. Cua has been an Independent Director of STI Holdings since 19 December 2012. He is likewise the
Chairman of the Audit Committee of STI Holdings.

Mr. Cua isanIndependent Director of Philplans First, Inc. and MacroAsia Corporation. He is also the
Chairman and President of Taibrews Corporation. Mr. Cua is also a director of BDO Private Bank,
MacroAsia Catering Services, MacroAsia Airport Services Corporation, Alpha Alleanza Manufacturing,
Inc., Allied Botanical Corporation, Century Pacific Food, Inc., Eton Properties Philippines, Inc., Interbake
Marketing Corporation, Lartizan Corporation, and Teambake Marketing Corporation.

Mr. Cua has served as the Chairman of the Board of Trustees of Xavier School, Inc. and P&Gers Fund, Inc.
He is also a member of the Board of Trustees of Xavier School Educational & Trust Fund.

Mr. Cua served as the first Filipino President and General Manager of Procter & Gamble Philippines, Inc.
from 1995 to 2006. He also held the position of Vice President, Marketing Function from 2003 to 2006 and
Vice President, Market and Customer Operations from 2000 to 2003 for ASEAN, Australasia and India.
SEC Form 17 A
As of 31 March 2014
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58

Mr. Cua has received the following citations: GK Bayani Nation Builder, Gawad Kalinga (2006); 100
Most Outstanding U.P. Alumni Engineers (2009); 2007 Most Distinguished Alumnus, U.P. Alumni
Engineers, College of Engineering, U.P. Diliman; Outstanding Achievement in Marketing Management
(1998 Agora Awards); Lifetime Capability Development Award, Procter& Gamble Philippines (2006);
Passionate Leadership Award, Procter & Gamble Global Marketing Organization (2006).

Mr. Cua earned his Bachelor of Science degree in Chemical Engineering from the University of the
Philippines.

Jesli A. Lapus, 64, Filipino, Independent Director

Mr. Lapus was elected as Director of STI Holdings on 21 March 2013. He was also elected as an
Independent Director of STI Holdings at the Annual Stockholders Meeting held on 4 October 2013.

Mr. Lapus is currently Independent Director of: Metropolitan Bank & Trust Company and Philippine Life
Financial Assurance Corporation. He is a Director of iACADEMY; Chairman of the Trust Banking of
Metropolitan Bank and Trust Company, STI Education Services Group, Inc., LBP Service Corporation,
Asian Institute of Management Center for Tourism and Honorary Chairman of Manila Tytana Colleges.
He is also a Member of the Investment Committee of Philplans First, Inc. and Advisory Board Member of
Radiowealth Finance Company, Inc.

A multi-awarded executive in the private sector (i.e. manufacturing, financial services and international
trade), Mr. Lapus has successfully managed and turned around firms and a universal bank in attaining
industry leaderships.

With a solid track record as a prominent professional executive in the private sector behind him, Mr.
Lapus has the distinction of having served in the cabinets of three (3) Philippine Presidents namely:
President Gloria Macapagal-Arroyo, President Fidel Ramos and President Corazon Aquino in the
following capacities: Secretary, Department of Trade and Industry (2010); Secretary, Department of
Education (2006-2010); President and CEO, The Land Bank of the Philippines (1992-1998); Undersecretary,
Department of Agrarian Reform.

He was elected member of the Philippine Congress for three (3) consecutive terms in 1998-2006. During
his stint in Congress, Mr. Lapus was Chairman of the House Committees on Ways and Means, Trade and
Industry, Suffrage and Electoral Reforms and Vice-Chairman of Appropriations.

Mr. Lapus was the former President of Southeast Asia Ministers of Education Organization; Executive
Board Member of UNESCO-Paris; Chairman of Board of Investments, Philippine Export Zone Authority,
Cabinet Committee on Tariff and Related Matters, Export Development Council, MSMED Council (Micro,
Small and Medium Enterprises), and National Development Corporation; Governor of Management
Association of the Philippines and Bankers Association of the Philippines; and Member of YPO, Finex,
PICPA, PCCI, GBAP, and Rotary Club of Manila.

Mr. Lapus earned his Doctor of Public Administration from Polythechnic University of the Philippines;
Master in Business Management from Asian Institute of Management; Investment Appraisal and
Management from Harvard University, USA; Management of Transfer of Technology from INSEAD,
France; and Project Management from BITS, Sweden.

Yolanda M. Bautista, 61, Filipino, Treasurer

Ms. Bautista has served as the Treasurer of STI Holdings since 17 March 2010. She is likewise a member
of the Executive, Compensation and Compliance Committees of STI Holdings. She resigned as director of
STI Holdings on 10 December 2013. Her resignation as Director of the Company was not due to any
disagreement with STI Holdings on any matter relating to its operations, policies or practices.

SEC Form 17 A
As of 31 March 2014
Page 59

59
Ms. Bautista is a Partner of Bautista Sagcal & Associates. She is Chairman and President of Unitrans
International Forwarders, Inc. and President of Corporate Reference, Inc., Oro Bueno, Inc., Lakeview
Realty, Inc. and Yellow Meadows Business Ventures, Inc.

Ms. Bautista serves as Director and Treasurer of Capital Managers and Advisors, Inc., Banclife Insurance
Co., Inc., Insurance Builders Inc., DLS-STI College, Inc., Philippine Womens University and Information
and Communications Technology Academy (iAcademy), Inc. She is also the Group Chief Financial
Officer of Philippine Life Financial Assurance Corporation and Philhealthcare, Inc. as well as the Chief
Financial Officer and Treasurer of STI ESG, West Negros University and UNLAD Resources
Development Corporation. Ms. Bautista is a Director of Philippine Healthcare Educators, Inc. and
Southern Textile Mills, Inc. She serves as Treasurer of STI Investments, Inc., Kusang Loob Foundation,
Inc., Lasik Surgery, Inc., Megaclinic Derma Laser Center, Inc. and P & O Management Services Phils., Inc.
She is also Assistant Treasurer of DLS-STI Megaclinic, Inc. and Total Consolidated Asset Management,
Inc.

Ms. Bautista is a Certified Public Accountant. She graduated Magna Cum Laude from the University of
Santo Tomas with a Bachelor of Science degree in Commerce, major in Accounting.

Arsenio C. Cabrera, Jr., 54, Filipino, Corporate Secretary

Atty. Arsenio C. Cabrera, Jr. was elected Corporate Secretary and Chairman of the Compliance
Committee of STI Holdings on 17 March 2010. He is also the current Corporate Information Officer of the
Company.

Atty. Cabrera is a Managing Partner of Herrera Teehankee& Cabrera Law Offices. He is currently
General Counsel of STI Education Services Group, Inc. He also serves as Corporate Secretary of BOIE
Drug, Inc., BOIE, Incorporated, BOIE Prime, Inc., Calatagan Bay Realty, Inc., Canlubang Golf and
Country Club, Inc., Capital Managers and Advisors, Inc., Classic Finance Corporation, Coinage, Inc.,
DLS-STI Colleges, Inc., Foundation for Filipinos, Inc., GEOGEN Corporation, GEOGRACE Resources
Philippines, Inc., Masbate13 Philippines, Inc., Mina Tierra Gracia, Inc., NiHAO Mineral Resources
International, Inc., Oregalore, Inc., Philippine American Drug Company, Philippine First Condominium
Corporation, Philippines First Insurance Co., Inc., Philippine Life Assurance Financial Corporation,
Philippine Womens University, Philhealthcare, Inc., Philplans First, Inc., Renaissance Condominium
Corporation, Rosehills Memorial Management Philippines, Inc. Sonak Holdings, Inc., STI Education
Systems Holdings, Inc., STI Investments, Inc., Total Consolidated Asset Management, Inc., Trend
Developers, Inc., Unlad Resources Development Corporation, Villa Development Corporation, West
Negros University Corp. and WVC Development Corporation.

Atty. Cabrera holds a Bachelor of Laws (Second Honors) and a Bachelor of Science in Legal Management
from the Ateneo De Manila University.

Ana Carmina S. Herrera, 39, Filipino, Assistant Corporate Secretary

Atty. Ana Carmina S. Herrera was elected Assistant Corporate Secretary of the Company on 17 March
2010.

A Senior Associate of Herrera Teehankee and Cabrera Law Offices, Atty. Herrera also performs the role
of Corporate Secretary of Dunes and Eagle Land Development Corporation, STI College Batangas, Inc.,
STI Dagupan, Inc. and STI Tuguegarao, Inc. She also serves as Assistant Corporate Secretary in a number
of other corporations: Amica Corporation, Banclife Insurance Co., Inc., Coastal Bay Chemicals, Inc., STI
Education Systems Holdings, Inc., Palisades Condominium Corporation, Philippine Life Assurance
Financial Corporation, Philhealthcare, Inc., Philippines First Insurance Co., Inc., Philippine First
Condominium Corporation, Philippine Life Financial Assurance Corporation, STI College of Kalookan,
Inc., STI College of Novaliches, Inc. and Venture Securities, Inc. She received her Bachelor of Laws
degree from the University of the Philippines in 2000.

SEC Form 17 A
As of 31 March 2014
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60

(2) Significant Employees

In general, the Company values its human resources. It expects the employees to do their share in
achieving the Companys set objectives. There is no person in the Company who is not an executive
officer but is expected to make significant contribution in the business of the Company.

(3) Family Relationships

Mr. Joseph Augustin L. Tanco is the son of Mr. Eusebio H. Tanco. Ms. Ma. Vanessa Rose Tanco is the
daughter of Mr. Eusebio H. Tanco.

Mr. Martin Tanco and Mr. Eusebio H. Tanco are cousins.

There are no other family relationships up to the 4
th
civil degree, either by consanguinity or affinity
among the current Directors other than those already disclosed in this report.

(d) Involvement in Certain Legal Proceedings

None of the above named directors and executive officers of the Company have been involved in
any of the following events for the past five (5) years and up to the date of this SEC Form 17-A:

(1) any bankruptcy petition filed by or against any business of which such person was a general
partner or executive officer either at the time of the bankruptcy or within two years prior to
that time;

(2) any conviction by final judgment;

(3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, domestic or foreign, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities, commodities or banking activities; and

(4) being found by a domestic or foreign court of competent jurisdiction (in a civil action), the
Commission or comparable foreign body, or a domestic or foreign Exchange or other
organized trading market or self-regulatory organization, to have violated a securities or
commodities law or regulation, and the judgment has not been reversed, suspended, or
vacated.

Item 10: EXECUTIVE COMPENSATION

(1) During the 28 June 2010 meeting of the Board of Directors, the Board approved a resolution
increasing the per diems of the directors from P10,000.00 to P15,000.00 per board meeting. The directors
are paid P5,000.00 per committee meeting attended by them. There is no arrangement for compensation of
directors.

For FY 2011-2012 and 2012-2013, the CEO and top four (4) executive officers as a group, did not receive
compensation from the Company. There is no employment contract between the Company and any of its
executive officers.

(2) The following table summarizes the aggregate compensation for the fiscal years ended 31 March 2011-
2012, 2012-2013 and 2013-2014. The amounts set forth in the table below have been prepared based on
SEC Form 17 A
As of 31 March 2014
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61
what the Company paid its directors and named executive officers as a group and other officers for the
fiscal years ended 31 March 2011-2012 and 2012-2013 and what the Company expects to pay for the year
ended 31 March 2013-2014.

The compensation for board members comprises per diems.

ANNUAL COMPENSATION

Name and principal
Position
Fiscal Year
Ended 31
March
Salary (PHP) Bonus
(PHP)
Other annual
compensation
(PHP)
All other Officers as a
Group
2012-2013 597,052.00 - -
2013-2014 1,551,053.28 - -
2014-2015 P3,800,000.00
1
- -
All Named Executive
Officers
2
and Board of
Directors as a Group
2011-2012 - 564,706.00
2012-2013 - - 1,005,882.00
2013-2014 - - 1,735,000.00

2014-2015 - - 1,735,000.00
1

Notes:
1
Figures are estimated amounts.
2
Named executives include: Eusebio H. Tanco (Chairman of the Board), Monico V. Jacob (President and
CEO), Joseph Augustin L. Tanco (Vice President, Investor Relations), Yolanda M. Bautista (Treasurer) and
Atty. Arsenio Cabrera, Jr. (Corporate Secretary).

(3) There are no actions to be taken with regard to any bonus, profit sharing, or other compensation plan,
contract or arrangement in which any director, nominee for election as a director, or executive officer of
the Company will participate.

(4) There are no actions to be taken with regard to any pension or retirement plan in which any such
person will participate.

(5) There are no actions to be taken with regard to the granting or extension to any such person of any
option, warrant or right to purchase any securities.

Item 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

(1) Security Ownership of Certain Record and Beneficial Owners and Management

(a) Security Ownership of Certain Record/Beneficial Owners as of 31 March 2014

As of 31 March2014, the following stockholders are the only owners of more than 5% of the
Companys voting capital stock, whether directly or indirectly, as record owner or beneficial
owner.

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As of 31 March 2014
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62

Title of
Class
Name, Address of
Record Owner and
Relationship with
Issuer
Name of Beneficial
Owner and
Relationship with
Record owner

Citizenship No. of Shares
Held
Percent
Common PCD Nominee
37/F Tower I, Enterprise
Center, 6766 Ayala
Avenue cor. Paseo de
Roxas, Makati City
Filipino 3,085,958,370
2
31.16%
Common Prudent Resources, Inc.
7/F iAcademy Building,
6764 Ayala Avenue,
Makati City
Mr. Eusebio H.
Tanco, the Chairman
of Prudent
Resources, Inc. is
authorized to vote its
shares in the
Company.
Filipino
(Direct)
1,614,264,964 16.30%
Common Mr. Eusebio H. Tanco
(Chairman of the Board)
(Direct and Indirect
shares through PCD
Nominee Corporation)
543 Fordham Street,
Wack-Wack Village,
Mandaluyong City
Mr. Eusebio H.
Tanco
Filipino
(Direct)

(Indirect)

Total
1,157,913,875

284,100,000
-------------------
1,442,013,875
===========
11.69%

2.87%
-----------
14.56%
======
Common PCD Nominee
37/F Tower I, Enterprise
Center, 6766 Ayala
Avenue cor. Paseo de
Roxas, Makati City
Non-Filipino 1,280,209,907
3
12.93%
Common Rescom Developers, Inc.
6764 Ayala Avenue,
Makati City
Mr. Eusebio H.
Tanco, the Chairman
of Rescom
Developers, Inc. is
shares in the
Company.
Filipino
(Direct)
794,343,934 8.02%
Common Eujo Philippines, Inc.
shares through PCD
6764 Ayala Avenue,
Makati City
Mr. Eusebio H.
Tanco, the Chairman
of Eujo Philippines,
Inc. is authorized to
vote its shares in the
Company.
Filipino
(Direct)

(Indirect)
728,626,048

35,247,082
------------------
763,873,130
==========
7.35%

0.36%
----------
7.71%
======

2
Eusebio H. Tanco is the beneficial owner of 284,100,000 shares. Eujo Philippines, Inc. is the beneficial owner of 35,247,082 shares.
STI Education Services Group, Inc. is the beneficial owner of 104,399,000 shares. Insurance Builders, Inc. is the beneficial owner of
150,952,989 shares.

3
Morgan Stanley Investment Management Company is the beneficial owner of 816,264,000 shares or 8.24%. Contact Person is Linyu
Qi; Address: Morgan Stanley, 16/F, Kerry Parkside, 1155 Fang Dian Road, Pudong New District, Shanghai, China

SEC Form 17 A
As of 31 March 2014
Page 63

63
Common Insurance Builders, Inc.
shares through PCD
6764 Ayala Avenue,
Makati City
Mr. Eusebio H.
Tanco, the Chairman
of Insurance
Builders, Inc. is
shares in the
Company.
Filipino
(Direct)

(Indirect)

Total
428, 723,003

150,952,989
------------------
579,675,992
===========
4.33%

1.52%
-----------
5.85%
======
Common STI Education Services
Group, Inc.
STI Academic Center,
University Parkway
Drive, Fort Bonifacio
Global City, Taguig City
Mr. Monico V. Jacob,
the President of STI,
is authorized to vote
the shares of STI ESG
in the Company
Filipino
(Direct)

(Indirect)

397,908,895

104,399,000
-----------------
502,307,895
===========
4.02%

1.05%
----------
5.07%
======

Note: PCD Nominee Corporation is a wholly-owned subsidiary of the Philippine Central Depository,
Inc. (PCD), and is the registered owner of the shares in the records of the Companys transfer agent. The
participants of the PCD (with respect to securities in the principal accounts) or the clients of such
participants (with respect to securities in the participants client accounts) are, as far as the PCD and PCD
Nominee Corporation are concerned, the presumed beneficial owners of such lodged shares. PCD
Nominee Corporation merely holds legal title (and not beneficial title) to the Companys lodged shares to
facilitate the book-entry trading and settlement of the Companys shares. Except as disclosed above, no
natural person or juridical entity whose shares are lodged in the name of PCD Nominee Corporation is
known to the Company to be directly or indirectly the record or beneficial owner of more than five
percent (5%) of the Companys voting securities.

(b) Security Ownership of Management as of 31 March 2014

The following table sets forth as of 31 March 2014, the beneficial ownership of each director and
executive officer of the Company:

Title of
Class
Name of Beneficial Owner

Amount & Nature of
Beneficial Ownership
Citizenship Percent
of Class
Common

Eusebio H. Tanco
(Director and Chairman of the Board)
1,157,913,875
284,100,000
------------------
1,442,013,875
==========
Direct
Indirect

Total
Filipino 11.69%
2.87%
-----------
14.56%
=======
Common

Monico V. Jacob
(Director, President and CEO)
1
33,784,056
---------------
33,784,057
========
Direct
Indirect

Total
Filipino

0.34%
Common Yolanda M. Bautista
(Treasurer)
1
5,000,000
---------------
5,000,001
========
Direct
Indirect

Total
Filipino

0.05%
Common Arsenio C. Cabrera, Jr.
(Corporate Secretary)
6,500,000 Indirect Filipino 0.06%
Common Joseph Augustin L. Tanco
(Director and VP for Investor
Relations)
1
2,000,000
----------------
2,000,001
==========
Direct
Indirect

Total
Filipino 0.00%
0.02%
--------------
0.02%
======
SEC Form 17 A
As of 31 March 2014
Page 64

64
Title of
Class
Name of Beneficial Owner

Amount & Nature of
Beneficial Ownership
Citizenship Percent
of Class
Common Paolo Martin Bautista
(Director and Chief Investment
Officer and Head of Corporate
Strategy)
Common

Vanessa Rose L. Tanco
(Director)
1 Direct Filipino 0.00%
Common

Martin K. Tanco
(Director)
Common

Rainerio M. Borja
(Director)
Common Maulik R. Parekh
(Independent Director)
1,000 Direct Filipino 0.00%
Common Jesli A. Lapus
Common Ernest Lawrence Cu
Common Johnip G. Cua
1,000 Indirect Filipino 0.00%
Common Directors and Officers as a Group 1,564,808,935 Direct and
Indirect
Filipino 15.80%

(c) Voting Trust Holders of 5% or More

As of 31 March 2014, no person holds at least 5% or more of a class under a voting trust or similar
agreement.

(d) Changes in Control

On 14 June 2012, the Company entered into a Memorandum of Agreement (the MOA) with the
following stockholders of STI ESG: (a) Prudent Resources, Inc.; (b) Mr. Eusebio H. Tanco; (c) Insurance
Builders, Inc.; (d) Eujo Philippines, Inc.; and (e) Rescom Developers, Inc. (collectively referred to as the
STI Majority Shareholders). The MOA relates to the share-for-share swap of the STI ESG shares held by
the STI Majority Shareholders with shares of the Company whereby each STI ESG share owned by the STI
Majority Shareholders will be exchanged for 6.5 Company shares. The same swap ratio was also offered
to other STI ESG shareholders.

To accommodate the issuance of shares to the STI Majority Shareholders and the other STI ESG
shareholders, the Company increased its authorized capital stock from P551,000,000.00 consisting of
1,103,000,000 shares with a par value of P0.50 per share to Php5,000,000,000.00 consisting of 10,000,000,000
shares with a par value of P0.50 per share. The aforementioned increase in authorized capital stock was
approved by the Companys Board on 14 June 2012 and by the Companys shareholders on 10 August
2012.

On 1 August 2012, CMA sold its STI ESG shares to Insurance Builders, Inc. Insurance Builders, Inc. was
substituted as a party to the MOA in lieu of CMA and assumed all of CMAs rights and obligations
thereunder.

On 14 June 2012, the Company filed an application for the increase in its authorized capital stock with the
Securities and Exchange Commission (SEC). The SEC approved the application of the Company on 28
September 2012.

SEC Form 17 A
As of 31 March 2014
Page 65

65
On 28 August 2012, 31 August 2012 and 1 September 2012, the Company and the STI Majority
Shareholders engaged in a series of share swaps that resulted in the STI Majority Shareholders gaining
control over the Company, equivalent to 67.44% of the Companys issued and outstanding capital stock.
On 26 September 2012, the PSE Board of Directors approved the application of STI Holdings to list an
additional 5,901,806,924 common shares (the Share Swap Shares) with a par value of P0.50 per share, to
cover the share-for-share swap transaction with various shareholders of STI ESG (the STI ESG
Shareholders). The Share Swap Shares were issued in exchange for 907,970,295 STI ESG common shares
held by the STI ESG shareholders. The total swap value is P9,743,378,087.43, broken down as follows:
(1)5,887,969,327 STI Holdings shares at a swap price of P1.65 per share for a consideration of
P9,715,149,389.55; and (2) 13,837,597 STI Holdings shares at a swap price of P2.04 per share for a
consideration of P28,228,697.88.

In compliance with Article V, Part A, Section 7 of the Revised Listing Rules of the Exchange, STI
Holdings, Ms. Rosie L. Tanco, the STI Majority Shareholders (Rescom Developers, Inc., Eujo Philippines,
Inc,, Insurance Builders, Inc., Prudent Resources, Inc. and Mr. Eusebio H. Tanco) executed an Escrow
Agreement dated 22 October 2012 with Union Bank of the Philippines to implement the required lock-up
requirement of their respective Swap Shares reckoned from the listing date. A total of 4,736,871,823
common shares were covered by the Escrow Agreement.

On 29 October 2012 (the Listing Date), 5,901,806,924 common shares of STI Holdings were listed in the
Exchange. Out of the 5,901,806,924 common shares, only 1,164,935,101 common shares were eligible for
trading on the Listing Date. The remaining 4,736,871,823 common shares held by Ms. Rosie L. Tanco and
the STI Majority Shareholders were placed in escrow for 180days counted from the Listing Date. The said
lock-up period lapsed on 27 April 2013.

On 9 May 2013, the 4,736,871,823 common shares held by Ms. Rosie L. Tanco and the STI Majority
Shareholders became eligible for trading on the Exchange.

Item 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has the following major transactions with related parties:

Joint Venture Agreement with Philippine Womens University (PWU), Unlad Resources
Development Corporation (UNLAD) and Mr. Alfredo Abelardo Benitez (Mr. Benitez)

On 21 November 2011, the Companys Board of Directors approved the following: (1) the assignment by
the Companys Chairman, Mr. Eusebio H. Tanco (Mr. Tanco) in favor of the Company of all of Mr.
Tancos rights, interests and obligations arising out of: (a) the 16 November 2011 Joint Venture Agreement
(the Joint Venture Agreement) entered into by PWU, UNLAD, Mr. Benitez and Mr. Tanco for the
formation of a strategic arrangement with regard to the efficient management and operation of PWU; and
(b) the 16 November 2011 Shareholders Agreement (the Shareholders Agreement) governing the
aforementioned parties relationship as shareholders of the joint venture company, UNLAD; and (2) the
accession by the Company to the Joint Venture Agreement and the Shareholders Agreement.

PWU is a private non-stock, non-profit educational institution which provides basic, secondary and
tertiary education while UNLAD is a real estate company controlled by the Benitez Family and has some
assets which are used to support PWUs educational thrust.

Pursuant to the assignment of Mr. Tancos rights under the Joint Venture Agreement, the Company
acquired from Banco De Oro Unibank, Inc. (BDO) on 28 November 2011 the debt of PWU together with
all of BDOs rights to the underlying collateral and security for the amount of Php 223.5 Million (the
Receivable from PWU), on a without recourse basis. The acquired loan is presented separately as
Noncurrent receivable account in the statement of financial position.

SEC Form 17 A
As of 31 March 2014
Page 66

66
Moreover, in accordance with the Joint Venture Agreement, the Company is obliged to extend: (1) a direct
loan to PWU in the amount of Php 26.5 Million (the Loan to PWU); and (2) a loan to UNLAD in the
amount of Php 198 Million (the Loan to UNLAD). The Receivable from PWU and the Loan to PWU in
the aggregate amount of Php 250 Million shall be secured by the PWU Indiana Property and the PWU
Taft Property. The Loan to UNLAD shall be secured by the PWU Quezon City Property, UNLAD Davao
Property and UNLAD Quezon City Property.

The Receivable from PWU and the Loan to PWU, inclusive of 5% interest per annum, shall be accrued and
paid by way of the assignment by PWU of its shares in UNLAD (which PWU will acquire through a
property-for-share swap transaction). Likewise, the Loan to UNLAD, inclusive of 5% interest per annum,
shall be paid by way of conversion of said loan into equity in UNLAD to enable the Company to acquire,
together with the shares assigned by PWU to the Company as payment for the Receivable from PWU and
Loan to PWU, a total of 40% equity in UNLAD.

On 17 May 2012, Mr. Benitez assigned his rights, title and interest in the Joint Venture Agreement and the
Shareholders Agreement to Attenborough Holdings Corporation (AHC). AHC thereby assumed Mr.
Benitezs obligation to grant a loan to UNLAD in the principal amount of P 224 Million (the AHC Loan
to UNLAD). Pursuant to the agreement, the Company and AHC (collectively referred to as the
Lenders) agreed to lend UNLAD a principal amount of P 422 Million consisting of the Companys Loan
to UNLAD and the AHC Loan to UNLAD.

Consequently, on 8 June 2012, the Company entered into an Omnibus Agreement with UNLAD and AHC
(the Omnibus Agreement) consisting of: (a) a prefatory agreement; (b) a loan agreement; and (c) a real
estate mortgage. Under the loan agreement, the Lenders will extend a loan to UNLAD which is payable
by way of conversion into equity in UNLAD. Said conversion into equity in UNLAD must enable: (a) the
Company to acquire, together with the shares acquired by it as payment of the Companys Loan to PWU,
40% of the issued and outstanding capital stock of UNLAD; and (b) AHC to acquire 20% of UNLADs
issued and outstanding capital stock.

In June 2012, the Company released the Loan to PWU in the amount of P 26.5 Million. In August 2012
and October 2012, the Company released the Loan to UNLAD amounting to P 166 Million and P 32
Million, respectively.

On 25 March 2013, the Joint Venture Agreement and Omnibus Agreement were amended to discontinue
the imposition of interest on the Loan to PWU, Loan to UNLAD and AHC Loan to UNLAD effective 1
January 2013.

As of March 31, 2014 and 2013, noncurrent receivables consist of loans of P 448.0 million and accrued
interest of P 16.0. Interest income in 2013 amounted to P=12.7 million.
As of March 31, 2014 and 2013, the equity interest in UNLAD has not been assigned to the Parent Company
in exchange for the receivables from PWU and the Loan to UNLAD. The said receivables from PWU and the
Loan to UNLAD are presented as Noncurrent receivables in the consolidated statements of financial
position.

The Company is working on the submission of all required documents to effect the conversion of these
receivables into equity. The Company has nominated its representatives as directors/trustees and officers
of PWU and UNLAD.

Land Held for Swap

On 21 March 2013, the Board of STI ESG approved the transfer of land to Techzone Philippines, Inc.
(Techzone), a company under common control with the Group, in exchange for condominium units.

SEC Form 17 A
As of 31 March 2014
Page 67

67
In April 2013, STI ESG and Techzone entered into a real estate mortgage amounting to P 800 Million with
STI ESGs land as collateral for Techzones loan, to obtain the funds needed for Techzone to develop the
property.
In August 2013, the Deed of Absolute Sale for the sale of the land was executed between STI ESG and
TechZone in accordance with the BOD approval. Title to the land has now been transferred in favor of
TechZone and consequently, the amount was reclassified, including other directly attributable costs, as
Condominium deposit. Development of the condominium project is likewise ongoing.

Advances to STI Investments, Inc.

As at 31 March 2012, the Company made short-term non-interest bearing advances to STI Investments,
Inc. (STI Investments) amounting to P 5.9 Million, which is presented under the Receivables account
in the statements of financial position. The Company and STI Investments are under common control.

This advance was fully settled by STI Investments on 14 June 2012.

Short-term cash placement in a financing institution with a common shareholder

As at 31 March 2011, the Company has outstanding short-term cash placement in a financing institution
which is owned by a common shareholder amounting to P 101.5 Million. The short-term cash placement
was terminated on 8 April 2011.

Interest income earned on the short-term cash placement amounted to P 0.1 Million and the years ended
31 March 2012 and 2011, respectively.

Receivable from Philippine Racing Club, Inc. (PRCI)

The Company has outstanding receivables of P 10.2 Million from PRCI arising from the assignment of a
local tax credit certificate originally issued in favor of the Company by the local government of Makati.
PRCI was the Companys parent company until 18 March 2010.

PRCI made a partial payment of P 2 Million as of 30 June 2013 and full payment of P 8.2 Million as of 27
December 2013.

Agreement with Comm & Sense

On 15 January 2013, the Company entered into an agreement with Comm & Sense owned by Mr. Joseph
Augustin L. Tanco, Director and Vice President for Investor Relations of STI Holdings, on the overall
management for PR consultation and planning of activities and execution strategies, management of all
media interview, development of campaign messaging and media monitoring. Comm & Sense is in
charge of the Press Releases for the Corporation, development of story angles, writing and editing of
articles, media relations and the Corporate Social Responsibility projects of the Corporation.

Consultancy Agreement with STI ESG

The Company entered into an agreement with STI ESG on the rendering of advisory services starting 01
January 2013.

To date, there are no complaints received by the Company regarding related-party transactions.

Transactions with Promoters

There are no transactions with promoters within the past five (5) years.

SEC Form 17 A
As of 31 March 2014
Page 68

68
PART IV CORPORATE GOVERNANCE

Item 13. CORPORATE GOVERNANCE

In accordance with SEC Memorandum Circular No. 5, Series of 2013, the Corporate Governanceitem in
the Annual Report (SEC Form 17-A) shall be deleted. The Company submitted the Annual Corporate
Governance Report to the Securities and Exchange Commission on 28 June 2013.

PART V EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17 C

(a) Exhibits and Schedules

Statement of Managements Responsibility for Financial Statements
Report of Independent Auditors
Audited Financial Statements and Notes for the fiscal year ended 31 March 2014
Schedule A. Financial Assets in Equity Securities
Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Parties
Schedule C. Amounts Receivable/Payables from and to Related Parties which are eliminated
during the Consolidation of Financial Statements
Schedule D. Intangible Assets Other Assets
Schedule E. Long term debt
Schedule F. Indebtedness to Related Parties (Long Term Loans from Related Companies)
Schedule G. Guarantees of Securities of Other Issuers
Schedule H. Capital Stock
Schedule I. Reconciliation of Retained Earnings Available for Dividend Declaration
Schedule J. Map of the Relationships of the Companies within the Group
Schedule K. Schedule of All the Effective Standards and Interpretations as of March 31, 2013
Schedule L. Financial Ratios

(b) Reports on SEC Form 17 C (for the last six [6] months of the fiscal year)
1. Item 9 filed with SEC on 03 October 2013
Item 9 -Other Events

The Company executed a Deed of Absolute Sale dated 1 October 2013 with Anthony Carlo A.
Agustin, Suzette Lilian A. Agustin, V-2 G. Agustin, Vincent Paul A. Agustin, Tisha Angeli A. Sy,
Hananaiah Construction & Manpower Resources, Inc. and V. S. Heirlooms Pacifica, Inc.
(collectively, the Sellers). Pursuant to the Deed of Sale, the Company acquired the shares of the
Sellers in West Negros University Corp (WNU Corp.) constituting 99.45% of the issued and
outstanding common stock and 99.93% of the issued and outstanding preferred stock of WNU
Corp. WNU Corp. owns and operates West Negros University in Bacolod City.

2. Certifications of Independent Director (for Messrs. Jesli A. Lapus, Johnip G. Cua and Ernest
Lawrence Cu ) filed with the SEC on 4 October 2013

SEC Form 17 A
As of 31 March 2014
Page 69

69
3. Item 4 filed with the SEC on 7 October 2013

At the Annual Stockholders Meeting of the Company held on 4 October 2013, the following
Directors of the Company were elected by the stockholders to serve as such for the ensuing year
and until the election and qualification of their successors:

Item 4 Election of Directors and Officers

Directors

Eusebio H. Tanco
Monico V. Jacob
Yolanda M. Bautista
Joseph Augustin L. Tanco
Vanessa Rose L. Tanco
Martin K. Tanco
Rainerio M. Borja
Paolo Martin O. Bautista
Jesli A. Lapus Independent Director
Johnip G. Cua Independent Director
Ernest Lawrence Cu - Independent Director

At the Organizational Meeting of the Board of Directors immediately held after the annual
stockholders meeting of the Company, the following were duly elected as Officers and
Committee Members:

Officers:

Chairman of the Board - Eusebio H. Tanco
President & Chief Executive Officer - Monico V. Jacob
Vice President for Investor Relations - Joseph Augustin L. Tanco
Treasurer& Chief Finance Officer - Yolanda M. Bautista
Vice President and Chief Investment Officer - Paolo Martin O. Bautista
Corporate Secretary & Compliance Officer - Arsenio C. Cabrera, Jr.
Assistant Corporate Secretary - Ana Carmina S. Herrera

Executive Committee
Chairman - Eusebio H. Tanco
Members - Monico V. Jacob
Yolanda M. Bautista
Martin K. Tanco
Rainerio M. Borja

Audit Committee
Chairman - Johnip G. Cua
Members - Martin K. Tanco
Ernest Lawrence Cu

Nomination Committee
Members - Ernest Lawrence Cu
Ma. Vanessa Rose L. Tanco
Rainerio M. Borja

Compensation Committee
SEC Form 17 A
As of 31 March 2014
Page 70

70
Yolanda M. Bautista
Joseph Augustin L. Tanco

Compliance Committee
Chairman &
Corporate Information Officer - Arsenio C. Cabrera, Jr.
- Yolanda M. Bautista
Member & Alternate
Corporate Information Officer - Elizabeth M. Guerrero

4. Audit Committee Charter Self-Assessment Worksheet filed with SEC on 7 October 2013

5. Item 4 filed with the SEC on 06 December 2013

Item 4 -Resignation, Removal or Election of Registrants Directors or Officers

At the meeting of the Board of Directors of STI Education Services Group, Inc. (STI ESG), Mr.
Martin K. Tanco and Ms. Marie Ampeloquio were elected as the new Directors of STI ESG. STI
ESG is 99% owned by STI Education Systems Holdings, Inc.

6. Item 4 filed with the SEC on 11 December 2013

Item 4 - Resignation, Removal or Election of Registrants Directors or Officers

At the meeting of the Board of Directors of STI Education Systems Holdings, Inc. (STI ESH), the
Board accepted the resignation of Ms. Yolanda M. Bautista as Director and elected Mr. Maulik R.
Parekh as Director for the unexpired portion of the term of Ms. Bautista. The resignation of Ms.
Bautista as Director was not due to any disagreement with STI ESH on any matter relating to its
operations, policies or practices.

7. Item 9 filed with SEC on 22 January 2014

Item 9 Other Events

STI Academic Center Lucena breaks ground (Press Release)

8. Letter dated 24 January 2014 re Attendance of Board of Directors during board meetings for the
period from 1 January 2013 to 31 December 2013 filed with the SEC on 27 January 2014.

9. Item 9 filed with SEC on 10 February 2014

Item 9 Other Events

Half-billion-peso STI Academic Center Caloocan opens for students (Press Release)

10. Item 9 filed with SEC on 19 February 2014

Item 9 Other Events

Quality Enrollments push STI Holdings revenues to P1.4B (Press Release)

SEC Form 17 A
As of 31 March 2014
Page 71

71
11. Item 9 filed with SEC on 20 March 2014

Item 9 Other Events

STI Education Services Group, Inc. (STI ESG) entered into a Corporate Notes Facility
Agreement (the Agreement) with China Banking Corporation (the Issue Manager and
Noteholder. Pursuant to the Agreement, the Issue Manager and Noteholder granted a Notes
Facility to STI ESG in the aggregate principal amount of up to P3 Billion.
The net proceeds from the issuance of the Notes shall be used by the Issuer for capital
expenditures and other general corporate purposes.

12. Amended Letter dated 04 April 2014 re Attendance of Board of Directors during board meetings
for the period 1 January 2013 to 31 December 2013 filed with the SEC on 04 April 2014.

13. Item 9 filed with SEC on 19 May 2014

Item 9 Other Events

STI to open three (3) new colleges for the coming school year- STI Holdings (Press Release)

*SGVFS008027*
INDEPENDENT AUDITORS REPORT
The Stockholders and the Board of Directors
We have audited the accompanying consolidated financial statements of STI Education Systems
Holdings, Inc. (formerly JTH Davies Holdings, Inc.) and Subsidiaries, which comprise the
consolidated statements of financial position as at March 31, 2014 and 2013, and the consolidated
statements of comprehensive income, statements of changes in equity and statements of cash flows for
each of the three years in the period ended March 31, 2014, and a summary of significant accounting
policies and other explanatory information.
Managements Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the Philippines as described
in Note 2 to the consolidated financial statements, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditors judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entitys preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entitys internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Tel: (632) 891 0307
Fax: (632) 819 0872
ey.com/ph
BOA/PRC Reg. No. 0001,
December 28, 2012, valid until December 31, 2015
SEC Accreditation No. 0012-FR-3 (Group A),
November 15, 2012, valid until November 16, 2015
A member firm of Ernst & Young Global Limited
*SGVFS008027*
- 2 -
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of STI Education Systems Holdings, Inc. and its subsidiaries as at March 31, 2014
and 2013, and their financial performance and their cash flows for each of the three years in the period
ended March 31, 2014 in accordance with accounting principles generally accepted in the Philippines
as described in Note 2 to the consolidated financial statements.
SYCIP GORRES VELAYO & CO.
Roel E. Lucas
Partner
CPA Certificate No. 98200
SEC Accreditation No. 1079-AR-1 (Group A),
March 4, 2014, valid until March 3, 2017
Tax Identification No. 191-180-015
BIR Accreditation No. 08-001998-95-2014,
January 22, 2014, valid until January 21, 2017
PTR No. 4225185, January 2, 2014, Makati City
July 9, 2014
A member firm of Ernst & Young Global Limited
*SGVFS008027*
STI EDUCATION SYSTEMS HOLDINGS, INC.
(Formerly JTH Davies Holdings, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
March 31 April 1
2013 2012
2014 (As restated - Note 2)
ASSETS
Current Assets
Cash and cash equivalents (Notes 6, 30 and 31) P=583,302,563 P=1,489,451,909 P=556,282,842
Receivables (Notes 7, 12, 27, 30 and 31) 297,350,741 250,773,204 265,915,000
Inventories (Note 8) 37,833,467 34,740,103 42,143,148
Prepaid expenses and other current assets
(Notes 9, 24, 25, 30 and 31) 107,001,375 37,467,793 24,660,884
Total Current Assets 1,025,488,146 1,812,433,009 889,001,874
Noncurrent Assets
Property and equipment (Notes 10, 11 15, 16 and 25) 4,421,253,356 2,635,275,971 1,544,229,394
Investment properties (Notes 11 and 16) 40,197,895 39,325,291 47,107,290
Investments in and advances to associates and joint ventures
(Notes 12, 27, 30 and 31) 1,532,051,587 2,897,068,557 1,590,477,010
Noncurrent receivables (Notes 27, 30 and 31) 463,978,935 463,978,935 227,254,574
Available-for-sale financial assets (Notes 14, 30 and 31) 50,599,940 4,663,478 4,987,638
Deferred tax assets - net (Note 26) 33,103,977 8,505,574 10,989,343
Goodwill, intangible and other noncurrent assets
(Notes 15, 25, 30 and 31) 732,429,451 642,000,576 275,286,520
Total Noncurrent Assets 7,273,615,141 6,690,818,382 3,700,331,769
P=8,299,103,287 P=8,503,251,391 P=4,589,333,643
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and other current liabilities
(Notes 17, 18, 30 and 31) P=517,430,492 P=320,685,821 P=301,720,294
Short-term loans (Notes 16, 30 and 31) 180,000,000 746,687,336
Nontrade payable (Note 3) 151,470,221
Current portion of long-term debt (Note 16) 49,940,706
Current portion of obligations under finance lease (Note 25) 7,435,444 6,419,251 9,741,235
Income tax payable 5,917,572 5,030,213 2,015,617
Total Current Liabilities 912,194,435 332,135,285 1,060,164,482
Noncurrent Liabilities
Long-term debt - net of current portion (Note 16) 58,465,494
Obligations under finance lease - net of current portion
(Note 25) 11,430,653 13,339,807 8,956,367
Pension liabilities (Note 24) 60,875,268 22,420,108 54,774,132
Deferred tax liability (Notes 3 and 26) 127,967,442
Total Noncurrent Liabilities 258,738,857 35,759,915 63,730,499
Total Liabilities (Carried Forward) 1,170,933,292 367,895,200 1,123,894,981
*SGVFS008027*
- 2 -
March 31 April 1
2013 2012
Total Liabilities (Brought Forward) P=1,170,933,292 P=367,895,200 P=1,123,894,981
Equity Attributable to Equity Holders of the Parent
Company (Note 18)
Capital stock 4,952,403,462 4,952,403,462 551,500,000
Additional paid-in capital 1,119,079,467 1,119,079,467 77,592,234
Cost of shares held by a subsidiary (500,009,337) (500,009,337) (500,009,337)
Unrealized mark-to-market gain (loss) on available-for-sale
financial assets (Note 14) (525,048) (121,773) 207,684
Share in associates unrealized mark-to-market gain on
available-for-sale financial assets (Note 12) 428,253,571 1,905,291,022 1,039,792,823
Cumulative actuarial gain (loss) 18,014,452 21,253,817 (12,708,006)
Share in associates cumulative actuarial gain (loss) (Note 12) (15,003,756) (6,845,516) 2,882,164
Other equity reserve (Note 3) (1,653,497,803) (1,649,448,394) 648,667,134
Retained earnings:
Appropriated 800,000,000 800,000,000
Unappropriated 2,690,263,952 1,351,532,167 668,155,173
Total Equity Attributable to Equity Holders
of the Parent Company 7,038,978,960 7,993,134,915 3,276,079,869
Equity Attributable to Non-controlling Interests 89,191,035 142,221,276 189,358,793
Total Equity 7,128,169,995 8,135,356,191 3,465,438,662
P=8,299,103,287 P=8,503,251,391 P=4,589,333,643
See accompanying Notes to Consolidated Financial Statements.
*SGVFS008027*
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended March 31
2013 2012
REVENUES
Sale of services:
Tuition and other school fees P=1,622,310,418 P=1,357,315,423 P=1,272,721,163
Educational services 182,182,989 177,944,697 168,612,940
Royalty fees 16,294,660 15,840,267 16,032,509
Others 38,857,459 64,894,222 68,687,863
Sale of goods -
Sale of educational materials and supplies 58,001,750 53,943,516 50,732,590
1,917,647,276 1,669,938,125 1,576,787,065
COSTS AND EXPENSES
Cost of educational services (Note 20) 553,019,985 485,410,056 481,856,696
Cost of educational materials and supplies sold
(Note 21) 53,341,680 49,489,639 39,537,202
General and administrative expenses (Note 22) 838,510,401 745,328,724 688,262,078
1,444,872,066 1,280,228,419 1,209,655,976
INCOME BEFORE OTHER INCOME
AND INCOME TAX 472,775,210 389,709,706 367,131,089
OTHER INCOME (EXPENSES)
Equity in net earnings (losses) of associates and joint
ventures (Note 12) 232,818,520 428,251,940 (37,574,331)
Loss on deemed sale and share swap of an associate
(Note 14) (43,000,287)
Excess of fair values of net assets acquired over
acquisition cost from a business combination
(Note 3) 32,681,078
Interest income (Note 19) 12,199,579 34,723,888 16,198,233
Interest expense (Note 19) (10,926,797) (18,831,366) (33,865,444)
Rental income (Notes 11, 25 and 27) 10,792,540 4,610,690 5,363,360
Gain (loss) on sale of:
Property and equipment 706,578 795,160
Investment properties (2,306,813)
Investment in an associate (1,124,356)
Available-for-sale financial assets (Note 14) 4,679,557
Dividend and other income 510,329 440,507 2,877,934
235,781,540 447,684,006 (43,445,047)
INCOME BEFORE INCOME TAX
(Carried Forward) 708,556,750 837,393,712 323,686,042
*SGVFS008027*
- 2 -
2013 2012
INCOME BEFORE INCOME TAX
(Brought Forward) P=708,556,750 P=837,393,712 P=323,686,042
PROVISION FOR (BENEFIT FROM) INCOME
TAX (Note 26)
Current 70,633,909 44,333,135 28,388,054
Deferred (17,275,026) (1,380,231) 3,839,271
53,358,883 42,952,904 32,227,325
NET INCOME 655,197,867 794,440,808 291,458,717
OTHER COMPREHENSIVE INCOME (LOSS)
Items to be reclassified to profit or loss in subsequent
years:
Share in associates unrealized mark-to-market gain
(loss) on available-for-sale financial assets, net of
realized mark-to-market gain recognized to profit
or loss (Note 12) (1,496,110,186) 846,474,380 909,831,490
Unrealized mark-to-market loss on available-for-sale
financial assets (Note 14) (409,190) (324,160) (2,708,603)
Realized mark-to-market gain on available-for-sale
financial assets recognized to profit or loss
(Note 14) (4,679,557)
(1,496,519,376) 846,150,220 902,443,330
Items not to be reclassified to profit or loss in subsequent
years:
Share in associates remeasurement gain (loss) on
pension liability (Notes 2 and 12) (8,272,379) (9,938,783) 3,003,867
Remeasurement gain (loss) on pension liability
(Notes 2 and 24) (3,732,410) 38,640,001 (14,716,241)
Income tax effect (Note 2) 411,355 (3,864,000) 1,471,624
(11,593,434) 24,837,218 (10,240,750)
TOTAL COMPREHENSIVE INCOME (LOSS) (P =852,914,943) P=1,665,428,246 P=1,183,661,297
Net Income Attributable To
Equity holders of the Parent Company P=681,123,230 P=777,415,889 P=287,028,095
Non-controlling interests (25,925,363) 17,024,919 4,430,622
P=655,197,867 P=794,440,808 P=291,458,717
Total Comprehensive Income Attributable To
Equity holders of the Parent Company (P =807,556,959) P=1,630,224,880 P=1,143,096,185
Non-controlling interests (45,357,984) 35,203,366 40,565,112
(P =852,914,943) P=1,665,428,246 P=1,183,661,297
Basic/Diluted Earnings Per Share on Net Income
Attributable to Equity Holders of the Parent
Company (Note 28) P=0.069 P=0.096 P=0.044
See accompanying Notes to Consolidated Financial Statements.
*SGVFS008027*
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED MARCH 31, 2014, 2013 AND 2012
Equity Attributable to Equity Holders of the Parent Company
Additional
Cost of Shares
Held by
Unrealized
Mark-to-Market
Gain (Loss) on
Available-
for-Sale Financial
Share in
Associates
Unrealized
Mark-to-Market
Gain on
Available-
for-Sale
Financial
Cumulative
Actuarial
Share in
Associates
Cumulative
Actuarial Other Equity Retained Earnings
Equity
Attributable
to Non-
Controlling
Capital Stock Paid-in Capital a Subsidiary Assets Assets Gain (Loss) Gain (Loss) Reserve Appropriated Unappropriated Total Interests Total Equity
Balance at April 1, 2013 P =4,952,403,462 P =1,119,079,467 (P =500,009,337) (P =121,773) P =1,905,291,022 P = P = (P =1,649,448,394) P =800,000,000 P =1,351,854,503 P =7,979,048,950 P =142,037,319 P =8,121,086,269
Effect of change in accounting policy on employee
benefits (see Note 3) 21,253,817 (6,845,516) (322,336) 14,085,965 183,957 14,269,922
Balance at April 1, 2013, as restated 4,952,403,462 1,119,079,467 (500,009,337) (121,773) 1,905,291,022 21,253,817 (6,845,516) (1,649,448,394) 800,000,000 1,351,532,167 7,993,134,915 142,221,276 8,135,356,191
Net income 681,123,230 681,123,230 (25,925,363) 655,197,867
Other comprehensive loss (403,884) (1,476,876,802) (3,232,884) (8,166,619) (1,488,680,189) (19,432,621) (1,508,112,810)
Total comprehensive income (loss) (403,884) (1,476,876,802) (3,232,884) (8,166,619) 681,123,230 P(807,556,959) (45,357,984) (852,914,943)
Reversal of appropriation of retained earnings (Note
18) (800,000,000) 800,000,000
Dividend declaration (Note 18) (142,391,445) (142,391,445) (142,391,445)
Reallocation of non-controlling interests (Note 3) 609 (160,649) (6,481) 8,379 (4,049,409) (4,207,551) 3,354,426 (853,125)
Share of non-controlling interest on dividends declared
by a subsidiary (Note 18) (11,026,683) (11,026,683)
Balance at March 31, 2014 P =4,952,403,462 P =1,119,079,467 (P =500,009,337) (P =525,048) P =428,253,571 P =18,014,452 (P =15,003,756) (P =1,653,497,803) P = P =2,690,263,952 P =7,038,978,960 P =89,191,035 P =7,128,169,995
Balance at April 1, 2012 P=551,500,000 P=77,592,234 (P=500,009,337) P=207,684 P=1,039,792,823 P = P = P=648,667,134 P=800,000,000 P=668,670,934 P=3,286,421,472 P=189,795,480 P=3,476,216,952
Effect of change in accounting policy on employee
benefits (see Note 3) (12,708,006) 2,882,164 (515,761) (10,341,603) (436,687) (10,778,290)
Balance at April 1, 2012, as restated 551,500,000 77,592,234 (500,009,337) 207,684 1,039,792,823 (12,708,006) 2,882,164 648,667,134 800,000,000 668,155,173 3,276,079,869 189,358,793 3,465,438,662
Issuance of shares through Share Swap
(Notes 1, 3 and 18) 2,950,903,462 (2,367,194,841) 583,708,621 25,302,729 609,011,350
Issuance of shares through offering (Notes 1 and 18) 1,450,000,000 1,041,487,233 2,491,487,233 2,491,487,233
Net income 777,415,889 777,415,889 17,024,919 794,440,808
Other comprehensive income (loss) (306,875) 828,598,831 34,327,694 (9,810,659) 852,808,991 18,178,447 870,987,438
Total comprehensive income (loss) (306,875) 828,598,831 34,327,694 (9,810,659) 777,415,889 1,630,224,880 35,203,366 1,665,428,246
Acquisition of non-controlling interests (Note 3) (22,582) 36,899,368 (365,871) 82,979 69,079,313 (14,849) 105,658,358 (105,658,358)
Balance at March 31, 2013 P=4,952,403,462 P=1,119,079,467 (P=500,009,337) (P=121,773) P=1,905,291,022 P=21,253,817 (P=6,845,516) (P=1,649,448,394) P=800,000,000 P=1,351,532,167 P=7,993,134,915 P=142,221,276 P=8,135,356,191
*SGVFS008027*
- 2 -
Equity Attributable to Equity Holders of the Parent Company
Additional
Cost of Shares
Held by
Unrealized
Mark-to-Market
Gain (Loss) on
Available-
for-Sale Financial
Share in
Associates
Unrealized
Mark-to-Market
Gain on
Available-
for-Sale
Financial
Cumulative
Actuarial
Share in
Associates
Cumulative
Actuarial Other Equity Retained Earnings
Equity
Attributable
to Non-
Controlling
Capital Stock Paid-in Capital a Subsidiary Assets Assets Gain Gain Reserve Appropriated Unappropriated Total Interests Total Equity
Balance at April 1, 2011 P=153,591,106 P = P = P=7,283,059 P=166,823,516 P = P = P=727,367,827 P= P=1,186,716,570 P=2,241,782,078 P=226,846,960 P=2,468,629,038
Restatement arising from business combination under
common control (see Note 3) 554,152 554,152 23,399 577,551
Balance at April 1, 2011, as restated 153,591,106 7,283,059 166,823,516 727,367,827 1,187,270,722 2,242,336,230 226,870,359 2,469,206,589
Issuance of shares 397,908,894 77,592,234 475,501,128 475,501,128
Subscription of the Parent Company's shares by a
subsidiary (500,009,337) (500,009,337) (500,009,337)
Net income 287,028,095 287,028,095 4,430,622 291,458,717
Other comprehensive income (loss) (7,075,375) 872,969,307 (12,708,006) 2,882,164 856,068,090 36,134,490 892,202,580
Total comprehensive income (loss) (7,075,375) 872,969,307 (12,708,006) 2,882,164 287,028,095 1,143,096,185 40,565,112 1,183,661,297
Appropriation of retained earnings (Note 18) 800,000,000 (800,000,000)
Movement in equity adjustment (80,811,543) (80,811,543) (80,811,543)
Transaction with non-controlling interest through:
Subscription of shares of a subsidiary 2,110,850 2,110,850 (2,110,850)
Redemption of treasury shares by a subsidiary (3,965,828) (3,965,828)
Balance at March 31, 2012, as restated P=551,500,000 P=77,592,234 (P=500,009,337) P=207,684 P=1,039,792,823 (P=12,708,006) P=2,882,164 P=648,667,134 P=800,000,000 P=668,155,173 P=3,276,079,869 P=189,358,793 P=3,465,438,662
See accompanying Notes to Consolidated Financial Statements
*SGVFS008027*
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
2013 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax P=708,556,750 P=837,393,712 P=323,686,042
Adjustments for:
Equity in net losses (earnings) of associates and joint ventures
(Note 12) (232,818,520) (428,251,940) 37,574,331
Depreciation and amortization (Notes 10, 11 and 15) 205,551,974 156,430,779 144,450,351
Loss on deemed sale and share swap of an associate
(Note 14) 43,000,287
Excess of fair values of net assets acquired over acquisition
costs (Note 3) (32,681,078)
Interest income (Notes 19) (12,199,579) (34,723,888) (16,198,233)
Interest expense (Note 19) 10,926,797 18,831,366 33,865,444
Pension expense (Note 24) 10,133,891 19,256,755 5,151,804
Provision for (reversal of) impairment losses on:
Investment in and advances to an associate (719,873) 4,120,636 3,047,124
Goodwill 3,383,556
Loss (gain) on sale of:
Property and equipment (706,578) (795,160)
Available-for-sale financial assets (4,679,557)
Investment in an associate 1,124,356
Investment properties 2,306,813
Dividend income (510,329) (440,507) (2,835,783)
Operating income before working capital changes 698,533,742 574,128,566 528,569,435
Decrease (increase) in:
Receivables 12,319,381 (39,846,971) 437,716,452
Inventories (2,949,649) 7,403,045 (7,732,531)
Prepaid expenses and other current assets (4,452,498) (14,759,440) (11,392,828)
Decrease in accounts payable and other current liabilities (103,970,320) (27,126,618) (21,432,295)
Contributions to plan assets (20,244,897) (12,970,779) (7,733,288)
Net cash generated from operations 579,235,759 486,827,803 917,994,945
Income and other taxes paid (134,479,338) (37,928,948) (24,562,000)
Interest received 9,613,127 11,258,718 7,437,611
Net cash flows provided by operating activities 454,369,548 460,157,573 900,870,556
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Property and equipment (Note 10) (1,049,885,679) (1,539,623,771) (255,301,730)
Subsidiary, net of cash acquired (200,913,272)
Intangible assets (24,577,384)
Available-for-sale financial assets (19,519,759) (80,811,545)
Investment properties (3,981,559) (3,096,000)
Available-for-sale financial assets
Decrease (increase) in:
Goodwill, intangible and other noncurrent assets (65,656,047) (7,951,224) (34,447,337)
Investments in and advances to associates and joint ventures 24,346,108 (13,244,087) 21,089,801
Noncurrent receivables (223,998,027) (223,979,084)
(Forward)
*SGVFS008027*
- 2 -
2013 2012
Dividends received P=8,117,279 P=14,371,696 P=4,787,881
Interest received 2,812,228 10,599,965 6,237,344
Proceeds from sale of:
Property and equipment 1,798,746 1,967,660
Available-for-sale financial assets 48,013,237
Investment in an associate 2,335,480
Investment properties 3,500,000
Proceeds from deposit for future stock subscription of non-
controlling interests 39,475
Net cash flows used in investing activities (1,327,419,864) (1,754,377,788) (515,171,953)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from availments of long-term debts 280,000,000
Dividends paid (153,170,255) (101,017,657) (6,105,785)
Payments of:
Short-term loans (100,000,000) (1,285,687,336) (913,000,000)
Long-term debts (40,677,196)
Obligations under finance lease (8,291,192) (6,572,944) (1,016,625)
Dividends to non-controlling interest (7,869,976) (72,000,000)
Interest (3,090,411) (18,831,366) (30,719,156)
Proceeds from:
Issuance of capital stock 2,475,977,202 475,501,128
Issuance of subsidiarys shares 608,807,586
Availments of short-term loans (Note 16) 539,000,000 746,000,000
Sale of treasury shares by a subsidiary 15,713,797
Acquisition of the Parent Companys shares by STI ESG (500,009,337)
Redemption of treasury shares by a subsidiary (3,965,828)
Net cash flows provided by (used in) financing activities (33,099,030) 2,227,389,282 (305,315,603)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (906,149,346) 933,169,067 80,383,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 1,489,451,909 556,282,842 475,899,842
CASH AND CASH EQUIVALENTS
AT END OF YEAR (Note 6) P=583,302,563 P=1,489,451,909 P=556,282,842
See accompanying Notes to Consolidated Financial Statements..
*SGVFS008027*
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
a. General
STI Education Systems Holdings, Inc. (formerly JTH Davies Holdings, Inc., STI Holdings
or the Parent Company) and its subsidiaries (hereafter collectively referred to as the
Group) are all incorporated in the Philippines and registered with the Philippine Securities
and Exchange Commission (SEC). STI Holdings was originally established in 1928 as the
Philippine branch office of Theo H. Davies & Co., a Hawaiian corporation. It was
reincorporated as a Philippine corporation and registered with the SEC on June 28, 1946. STI
Holdings shares were listed on the Philippine Stock Exchange (PSE) on October 12, 1976.
On June 25, 1996, the SEC approved the extension of the Parent Companys corporate life for
another 50 years. The primary purpose of the Parent Company is to invest in, purchase or
otherwise acquire and own, hold, use, sell, assign, transfer, lease, mortgage, pledge, exchange,
or otherwise dispose of real properties as well as personal and movable property of any kind
and description, including shares of stock, bonds, debentures, notes, evidence of indebtedness
and other securities or obligations of any corporation or corporations, association or
associations, domestic or foreign and to possess and exercise in respect thereof all the rights,
powers and privileges of ownership, including all voting powers of any stock so owned, but
not to act as dealer in securities and to invest in and manage any company or institution. STI
Holdings aims to focus on education and education-related activities and investments.
STI Holdings registered office address, which is also its principal place of business, is at 7/F,
iAcademy Building, 6764 Ayala Avenue, Makati City.
b. Change in ownership of STI Holdings
i) STI Education Services Group, Inc. (STI ESG) and Capital Managers and Advisors,
Inc. (CMA) owns 45.54% and 45.50%, respectively, of STI Holdings shares as of
March 31, 2012 (see Note 18).
On June 14, 2012 and August 10, 2012, the Board of Directors (BOD) and stockholders
of STI Holdings, respectively, approved the following: (i) change in its corporate name to
STI Education Systems Holdings, Inc., (ii) the share-for-share swap agreement (Share
Swap) with the shareholders of STI ESG (STI ESG Stockholders) and (iii) the
corresponding increase in its authorized capital stock from 1,103,000,000 shares with an
aggregate par value of P=551.5 million to 10,000,000,000 shares with an aggregate par
value of P =5,000.0 million (see Notes 3 and 18). The change in corporate name was
approved by the SEC on September 10, 2012 while the Share Swap agreement and
increase in the authorized capital stock were approved on September 28, 2012.
In view of the increase in its authorized capital stock and pursuant to the Share Swap, STI
Holdings issued 5,901,806,924 shares to STI ESG Stockholders in exchange for
907,970,294 STI ESG shares. As a result, immediately after the Share Swap, the STI
ESG Stockholders who joined the Share Swap owned approximately 84% interest in STI
Holdings while STI Holdings owned 96% of STI ESG (see Notes 3 and 18).
- 2 -
*SGVFS008027*
ii) On August 28, 2012, the BOD approved the offering and issuance by way of a follow-on
offering of up to a maximum 3,000,000,000 common shares (the Offer) at an offer price
to be determined based on a bookbuilding process and from discussion between STI
Holdings and the International Lead Manager and Domestic Lead Manager. The Offer
comprised of the following: (i) up to 2,627,000,000 common shares offered to the public
on a primary basis (Primary Offering); (ii) up to 105,209,527 common shares offered to
the public on a secondary basis by Korea Merchant Banking Corporation (Secondary
Offering); and (iii) over-allotment option to purchase up to 273,000,000 common shares
(Over-allotment Option), granted to UBS AG, in its role as Stabilizing Agent, on the
same terms and conditions as the Primary Offering and Secondary Offering. The offer
price was set at P =0.90 per share on October 22, 2012. The Primary Offering and
Secondary Offering were completed on November 7, 2012 while the Over-allotment
Option was exercised on November 28, 2012 (see Note 18).
iii) In November and December 2012, STI Holdings subscribed to 2,100,000,000 STI ESG
shares at a consideration price equal to its par value of P=2,100.0 million. In July 2013,
STI Holdings acquired additional 328,125 STI ESG shares. As a result, STI Holdings
ownership interest in STI ESG is approximately 99% as of March 31, 2014 and 2013.
c. STI Education Services Group, Inc. and Subsidiaries (collectively referred to as STI ESG)
The Group has investments in several entities which own and operate STI ESG schools. STI
ESG is involved in establishing, maintaining, and operating educational institutions to provide
pre-elementary, elementary, secondary, and tertiary as well as post-graduate courses, post-
secondary and lower tertiary non-degree programs. STI ESG also develops, adopts and/or
acquires, entirely or in part, such curricula or academic services as may be necessary in the
pursuance of its main activities, relating but not limited to information technology services,
information technology-enabled services, nursing, education, hotel and restaurant
management, engineering, business studies and care-giving. Other activities of STI ESG
include computer services, such as, but not limited to, programming, systems design and
analysis, feasibility studies, installation support, job processing, consultancy, and other related
activities.
d. West Negros University Corp. (WNU)
WNU owns and operates West Negros University in Bacolod City. It offers pre-elementary,
elementary, secondary and tertiary education and graduate courses. On October 1, 2013, the
Parent Company acquired 99.45% of the issued and outstanding common shares and 99.93%
of the issued and outstanding preferred shares of WNU. As a result, WNU became a
subsidiary of STI Holdings as of March 31, 2014 (see Note 3).
On July 9, 2014, WNUs BOD approved WNUs change of its corporate name to STI West
Negros University. The said amendment is to be submitted for approval of WNUs
stockholders during its Annual Stockholders Meeting on July 25, 2014.
The accompanying consolidated financial statements were approved and authorized by the BOD
of STI Holdings on July 9, 2014.
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2. Basis of Preparation, Basis of Consolidation, Changes to the Groups Accounting Policies
and Summary of Significant Accounting Policies
Basis of Preparation
The accompanying consolidated financial statements have been prepared on a historical cost basis,
except for certain available-for-sale (AFS) financial assets which have been measured at fair
value. The consolidated financial statements are presented in Philippine peso, which is the Parent
Companys functional and presentation currency, and all values are rounded to the nearest peso,
except when otherwise indicated.
Statement of Compliance
The accompanying consolidated financial statements of the Group have been prepared in
accordance with accounting principles generally accepted in the Philippines, which includes all
applicable Philippine Financial Reporting Standards (PFRS). PFRS also include Philippine
Accounting Standards (PAS) and Philippine Interpretations based on equivalent interpretations
from the International Financial Reporting Interpretations Committee (IFRIC) adopted by the
Philippine Financial Reporting Standards Council (FRSC), and the accounting standards set forth
in the Pre-Need Rule 31, As Amended: Accounting Standards for Pre-Need Plans and Pre-Need
Uniform Chart of Accounts (PNUCA) as required by the SEC for PhilPlans First, Inc. (PhilPlans).
PhilPlans is a wholly owned subsidiary of STI Investments, Inc. (STI Investments), an associate.
Consequently, the consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the Philippines.
Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Parent Company
and its subsidiaries as at March 31, 2014 and 2013. Control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee.
Specifically, the Parent Company controls an investee, if and only if, the Parent Company has:
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee)
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect its returns
When the Parent Company has less than a majority of the voting or similar rights of an investee,
the Parent Company considers all relevant facts and circumstances in assessing whether it has
power over an investee, including:
The contractual arrangement with the other vote holders of the investee
Rights arising from other contractual arrangements
The Parent Companys voting rights and potential voting rights
The consolidated financial statements include the accounts of STI College Kalookan, Inc.
(STI-Kalookan) and STI College of Novaliches, Inc. (STI-Novaliches), which are both non-stock
corporations wherein the Parent Company has control by virtue of management contracts.
The Parent Company re-assesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control. Consolidation of a
subsidiary begins when the Parent Company obtains control over the subsidiary and ceases when
the Parent Company loses control of the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated statement of
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comprehensive income from the date the Parent Company gains control until the date the Parent
Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the
equity holders of the Parent Company and to the non-controlling interests, even if this results in
the non-controlling interests having a deficit balance. When necessary, adjustments are made to
the financial statements of subsidiaries to bring their accounting policies into line with the Groups
accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction. If the Parent Company loses control over a subsidiary, it:
Derecognizes the assets (including goodwill) and liabilities of the subsidiary;
Derecognizes the carrying amount of any non-controlling interest;
Derecognizes the unrealized other comprehensive income deferred in equity;
Recognizes the fair value of the consideration received;
Recognizes the fair value of any investment retained;
Recognizes any surplus or deficit in profit or loss; and
Reclassifies the Parent Companys share of components previously recognized in other
comprehensive income to profit or loss or retained earnings, as appropriate.
As at March 31, 2014 and 2013, subsidiaries of STI Holdings include:
Effective Percentage of Ownership
2014 2013
Subsidiary Principal Activities Direct Indirect Direct Indirect
STI ESG Educational Institution 99 99
WNU
(a)
Educational Institution 99
Information and Communications Technology
Academy, Inc. (iAcademy) Educational Institution 100 100
STI College Tuguegarao, Inc. (STI-Tuguegarao) Educational Institution 100 100
STI-Kalookan
(b)
Educational Institution 100 100
STI-Novaliches
(b)
STI College of Batangas, Inc. (STI-Batangas)
(c)
Educational Institution 100
STI Dagupan, Inc. (STI-Dagupan) Educational Institution 77 77
STI College Taft, Inc. (STI-Taft) Educational Institution 75 75
De Los Santos - STI College Educational Institution 52 52
STI College Quezon Avenue, Inc. (STI-QA)
(d)
(a)
Became a subsidiary of the Parent Company in October 2013
(b)
A subsidiary of STI ESG through a management contract
(c)
Became a subsidiary of STI ESG in June 2013
(d)
A wholly owned subsidiary of De Los Santos - STI College
On December 9, 2010, STI ESGs stockholders approved the following mergers:
Phase 1: The merger of three (3) majority owned schools and fourteen (14) wholly owned
schools with STI ESG, with STI ESG as the surviving entity. The Phase 1 merger was
approved by the Commission on Higher Education (CHED) and the SEC on March 15, 2011
and May 6, 2011, respectively.
Phase 2: The merger of one (1) majority owned school and eight (8) wholly owned pre-
operating schools with STI ESG, with STI ESG as the surviving entity. The Phase 2 merger
was approved by the CHED and the SEC on July 18, 2011 and August 31, 2011, respectively.
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As at July 9, 2014, STI ESGs request for confirmatory ruling on the tax-free merger from the BIR
is still pending.
On September 25, 2013, STI ESGs BOD approved the Phase 3 merger whereby STI-Taft and
STI-Dagupan will be merged with STI ESG, with STI ESG as the surviving entity. As at July 9,
2014, STI ESG has not filed for approval from the CHED and the SEC.
On the same date, STI ESGs BOD approved an amendment to the Phase 1 and 2 mergers
whereby STI ESG would issue shares at par value, to the stockholders of the non-controlling
interests. As at July 9, 2014, the amendment is pending approval by the SEC. In 2014, STI ESG
issued additional shares at par value to the stockholders of one of the merged schools (see Note 3).
Accounting Policies of Subsidiaries. The financial statements of subsidiaries are prepared using
uniform accounting policies for like transactions and other events in similar circumstances.
The consolidated financial statements include the accounts of the Parent Company and its
subsidiaries as at March 31 of each year, except for the accounts of STI-Dagupan,
STI-Tuguegarao, STI-Kalookan and STI-Novaliches whose financial reporting date ends on
December 31. Adjustments are made for the effects of significant transactions or events that occur
between the financial reporting date of the above-mentioned subsidiaries and the financial
reporting date of the Groups consolidated financial statements.
Non-Controlling Interests. Non-controlling interests represent the portion of profit or loss and net
assets in the subsidiaries not held by the Parent Company and are presented in the profit or loss
and within equity in the consolidated statement of financial position, separately from equity
attributable to equity holders of the Parent Company.
On transactions with non-controlling interests without loss of control, the difference between the
fair value of the consideration and the book value of the share in the net assets acquired or
disposed is treated as an equity transaction and is presented as part of Other equity reserve
within equity section in the consolidated statement of financial position.
Changes in Accounting Policies, Disclosures and Presentation
The accounting policies adopted are consistent with those of the previous financial year, except for
the adoption of the new and amended PFRS that became effective beginning on or after April 1,
2012. The changes introduced by such new standards and amendments are as follows:
PAS 19, Employee Benefits (Revised)
For defined benefit plans, the Revised PAS 19 requires all actuarial gains and losses to be
recognized in OCI and unvested past service costs previously recognized over the average
vesting period to be recognized immediately in profit or loss when incurred.
Prior to the adoption of the Revised PAS 19, the Group recognized actuarial gains and losses
as income or expense when the net cumulative unrecognized gains and losses for each
individual plan at the end of the previous period exceeded 10% of the higher of the defined
benefit obligation and the fair value of the plan assets and recognized unvested past service
costs as an expense on a straight-line basis over the average vesting period until the benefits
become vested. Upon adoption of the Revised PAS 19, the Group changed its accounting
policy to recognize all actuarial gains and losses in OCI and all past service costs in profit or
loss in the period they occur.
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The Revised PAS 19 replaced the interest cost and expected return on plan assets with the
concept of net interest on defined benefit liability or asset which is calculated by multiplying
the net balance sheet defined benefit liability or asset by the discount rate used to measure the
employee benefit obligation, each as at the beginning of the annual period.
The Revised PAS 19 also amended the definition of short-term employee benefits and requires
employee benefits to be classified as short-term based on expected timing of settlement rather
than the employees entitlement to the benefits. In addition, the Revised PAS 19 modifies the
timing of recognition for termination benefits. The modification requires the termination
benefits to be recognized at the earlier of when the offer cannot be withdrawn or when the
related restructuring costs are recognized.
Changes to the definition of short-term employee benefits and timing of recognition for
termination benefits do not have any impact to the Groups financial position and financial
performance.
The changes in accounting policies have been applied retrospectively. The effects of adoption
on the consolidated financial statements are as follows:
March 31,
2014
March 31,
2013
April 1,
2012
Increase (Decrease)
Consolidated Statements of
Financial Position
Investments in and advances to associates
and joint ventures (P=16,763,469) (P=8,250,819) P=2,036,863
Deferred tax asset (1,063,180) (2,502,305) 1,423,906
Pension liabilities (11,012,937) (25,023,046) 14,239,059
Cumulative actuarial gain 18,014,444 21,253,817 (12,708,006)
Share in associates cumulative actuarial
gain (15,003,756) (6,845,516) 2,882,164
Retained earnings (9,685,354) (322,336) (515,761)
Equity attributable to non-controlling
interests (139,046) 183,957 (436,687)
For the Years Ended March 31
2014 2013 2012
Increase (Decrease)
Consolidated Statements of
Comprehensive Income
Pension expense P=10,277,699 (P =622,103) P=164,541
Equity in net earnings of associates and
joint ventures (240,271) (348,899) (967,004)
Provision for deferred income tax (1,027,769) 62,210 (16,454)
Net income (9,490,200) 210,994 (1,115,091)
Other comprehensive income:
Share in associates remeasurement
gain (loss) on pension liability (8,272,379) (9,938,783) 3,003,867
Remeasurement gain (loss) on
pension liability (3,732,410) 38,640,001 (14,716,241)
Income tax effect 411,355 (3,864,000) 1,471,624
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The adoption did not have any significant impact on the consolidated statements of cash
flows.
Philippine Interpretations Committee (PIC) Q&A No. 2013-03, PAS 19, Accounting for
Employee Benefits under a Defined Contribution Plan subject to Requirements of RA No.
7641, The Philippine Retirement Law.
This PIC Q&A seeks to provide guidance in accounting for post-employment benefits for an
entity which has opted to provide a defined contribution plan as its only post-employment
benefit plan despite the minimum retirement benefits required to be provided to employees
under RA No. 7641. The benefits mandated under RA No. 7641 are considered as a minimum
benefit guarantee for qualified private sector employees in the Philippines. Hence, an entitys
obligation for post-employment benefits is not limited to the amount it agrees to contribute to
the fund. Therefore, the entitys retirement plan shall be accounted for as a defined benefit
plan. The relevant disclosure requirements of PAS 19 for a defined benefit plan should be
complied with. In addition, the accounting policy describing the accounting treatment for
such a plan should also be disclosed in the notes to financial statements. The defined
contribution liability shall be recognized, and if there is an excess of the projected defined
benefit obligation over the projected defined contribution obligation, the entity should apply
the projected unit credit method on such excess to determine the additional liability. The PIC
Q&A is effective for annual financial statements beginning on or after January 1, 2013 and
requires retrospective application.
Certain subsidiaries of the Group maintain a defined contribution plan that covers all regular
full time employees under which they pay fixed contributions based on the employees
monthly salaries. These entities, however, are covered under RA 7641, which provides a
defined benefit minimum guarantee.
The Group obtained the services of an external actuary to compute the impact on the
consolidated financial statements upon adoption of the accounting interpretation and has
determined that it did not have a significant impact on the consolidated financial statements.
PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and Financial
Liabilities (Amendments)
These amendments require an entity to disclose information about rights of set-off and related
arrangements (such as collateral agreements). The new disclosures are required for all
recognized financial instruments that are set off in accordance with PAS 32. These disclosures
also apply to recognized financial instruments that are subject to an enforceable master netting
arrangement or similar agreement, irrespective of whether they are set-off in accordance
with PAS 32. The amendments require entities to disclose, in a tabular format unless another
format is more appropriate, the following minimum quantitative information. This is presented
separately for financial assets and financial liabilities recognized at the end of the reporting
period:
a) The gross amounts of those recognized financial assets and recognized financial liabilities;
b) The amounts that are set off in accordance with the criteria in PAS 32 when determining
the net amounts presented in the consolidated statement of financial position;
c) The net amounts presented in the consolidated statement of financial position;
d) The amounts subject to an enforceable master netting arrangement or similar agreement
that are not otherwise included in (b) above, including:
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*SGVFS008027*
i. Amounts related to recognized financial instruments that do not meet some or all of
the offsetting criteria in PAS 32; and
ii. Amounts related to financial collateral (including cash collateral); and
e) The net amount after deducting the amounts in (d) from the amounts in (c) above.
The amendments to PFRS 7 are to be retrospectively applied. The amendments have no
impact on the Groups financial position or performance.
PFRS 10, Consolidated Financial Statements
PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements,
that addresses the accounting for consolidated financial statements. It also includes the issues
raised in SIC 12, Consolidation - Special Purpose Entities. PFRS 10 establishes a single
control model that applies to all entities including special purpose entities. The changes
introduced by PFRS 10 required management to exercise significant judgment to determine
which entities are controlled, and therefore, are required to be consolidated by a parent,
compared with the requirements that were in PAS 27.
A reassessment of control was performed by the Group on all its subsidiaries and associates in
accordance with the provisions of PFRS 10. Following the reassessment and based on the
new definition of control under PFRS 10, the Group determined that the adoption of this
standard does not change its relationship over its subsidiaries and associates, therefore, has no
impact on the Groups financial position or performance.
PFRS 11, Joint Arrangements
PFRS 11 replaces PAS 31, Interests in Joint Ventures, and SIC 13, Jointly Controlled Entities
- Non-Monetary Contributions by Venturers. PFRS 11 removes the option to account for
jointly controlled entities using proportionate consolidation. Instead, jointly controlled entities
that meet the definition of a joint venture must be accounted for using the equity method.
There is no impact on the Groups financial position or performance since its investments in
joint ventures are accounted for under equity method in its consolidated financial statements.
PFRS 12, Disclosure of Involvement with Other Entities
PFRS 12 includes all of the disclosures related to consolidated financial statements that were
previously in PAS 27, as well as all the disclosures that were previously included in PAS 31
and PAS 28, Investments in Associates. These disclosures relate to an entitys interests in
subsidiaries, joint arrangements, associates and structured entities. A number of new
disclosures are also required. The adoption of PFRS 12 will affect disclosures only and have
no impact on the Groups financial position or performance.
PFRS 13, Fair Value Measurement
PFRS 13 establishes a single source of guidance under PFRSs for all fair value measurements.
PFRS 13 does not change when an entity is required to use fair value, but rather provides
guidance on how to measure fair value under PFRS when fair value is required or permitted.
This standard should be applied prospectively as of the beginning of the annual period in
which it is initially applied. Its disclosure requirements need not be applied in comparative
information provided for periods before initial application of PFRS 13. Additional disclosures
were provided in Notes 11 and 31.
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PAS 1, Presentation of Financial Statements - Presentation of Items of Other Comprehensive
Income or OCI (Amendments)
The amendments to PAS 1 change the grouping of items presented in OCI. Items that can be
reclassified (or recycled) to profit or loss at a future point in time (for example, upon
derecognition or settlement) will be presented separately from items that will never be
recycled. The amendments affected presentation only and had no impact on the Groups
financial position or performance.
PAS 27, Separate Financial Statements (as revised in 2011)
As a consequence of the issuance of the new PFRS 10 and PFRS 12, what remains of PAS 27
is limited to accounting for subsidiaries, jointly controlled entities, and associates in the
separate financial statements. The adoption of the amended PAS 27 had no a significant
impact on the separate financial statements of the entities in the Group.
PAS 28, Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the issuance of the new PFRS 11 and PFRS 12, PAS 28 has been
renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application
of the equity method to investments in joint ventures in addition to associates. The adoption
of the revised standard did not have a significant impact on the consolidated financial
statements.
Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine
This interpretation applies to waste removal (stripping) costs incurred in surface mining
activity, during the production phase of the mine. The interpretation addresses the accounting
for the benefit from the stripping activity. This new interpretation is not relevant to the Group.
PFRS 1, First-time Adoption of International Financial Reporting Standards Government
Loans (Amendments)
The amendments to PFRS 1 require first-time adopters to apply the requirements of PAS 20,
Accounting for Government Grants and Disclosure of Government Assistance, prospectively
to government loans existing at the date of transition to PFRS. However, entities may choose
to apply the requirements of PAS 39, Financial Instruments: Recognition and Measurement,
and PAS 20 to government loans retrospectively if the information needed to do so had been
obtained at the time of initially accounting for those loans. These amendments are not
relevant to the Group.
Annual Improvements to PFRS (2009-2011 cycle). The Annual Improvements to PFRSs (2009-
2011 cycle) contain non-urgent but necessary amendments to PFRSs. The Group adopted these
amendments for the current year.
PFRS 1, First-time Adoption of PFRS Borrowing Costs - The amendment clarifies that, upon
adoption of PFRS, an entity that capitalized borrowing costs in accordance with its previous
generally accepted accounting principles, may carry forward, without any adjustment, the
amount previously capitalized in its opening statement of financial position at the date of
transition. Subsequent to the adoption of PFRS, borrowing costs are recognized in accordance
with PAS 23, Borrowing Costs. The amendment does not apply to the Group as it is not a
first-time adopter of PFRS.
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PAS 1, Presentation of Financial Statements Clarification of the requirements for
comparative information - These amendments clarify the requirements for comparative
information that are disclosed voluntarily and those that are mandatory due to retrospective
application of an accounting policy, or retrospective restatement or reclassification of items in
the financial statements. An entity must include comparative information in the related notes
to the financial statements when it voluntarily provides comparative information beyond the
minimum required comparative period. The additional comparative period does not need to
contain a complete set of financial statements. On the other hand, supporting notes for the
third statement of financial position (mandatory when there is a retrospective application of an
accounting policy, or retrospective restatement or reclassification of items in the financial
statements) are not required. As a result of this clarification, except for employee defined
benefit plan, the Group has not included comparative information in respect of the opening
statement of financial position as at April 1, 2013. The amendments affect disclosures only
and have no impact on the Groups financial position or performance.
PAS 16, Property, Plant and Equipment Classification of servicing equipment - The
amendment clarifies that spare parts, stand-by equipment and servicing equipment should be
recognized as property, plant and equipment when they meet the definition of property, plant
and equipment and should be recognized as inventory if otherwise. The amendment did not
have any impact on the Groups financial position or performance.
PAS 32, Financial Instruments: Presentation Tax effect of distribution to holders of equity
instruments - The amendment clarifies that income taxes relating to distributions to equity
holders and to transaction costs of an equity transaction are accounted for in accordance with
PAS 12, Income Taxes. The amendment did not have any significant impact on the Groups
PAS 34, Interim Financial Reporting Interim financial reporting and segment information
for total assets and liabilities - The amendment clarifies that the total assets and liabilities for
a particular reportable segment need to be disclosed only when the amounts are regularly
provided to the chief operating decision maker and there has been a material change from the
amount disclosed in the entitys previous annual financial statements for that reportable
segment. The amendment had no significant impact on the consolidated financial statements.
New Accounting Standards, Interpretations and Amendments to Existing Standards
Effective Subsequent to March 31, 2014
The Group will adopt the following revised standards, interpretations and amendments to existing
standards enumerated below when these become effective. Except as otherwise indicated, the
Group does not expect the adoption of these revised standards, interpretations and amendments to
PFRS to have a significant impact on the consolidated financial statements.
Effective in 2014
PAS 36, Impairment of Assets Recoverable Amount Disclosures for Non-Financial Assets
(Amendments) - These amendments remove the unintended consequences of PFRS 13 on the
disclosures required under PAS 36, Impairment of Assets. In addition, these amendments
require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs)
for which impairment loss has been recognized or reversed during the period. These
amendments are effective retrospectively for annual periods beginning on or after
January 1, 2014 with earlier application permitted, provided PFRS 13 is also applied.
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Investment Entities (Amendments to PFRS 10, PFRS 12 and PAS 27) - These amendments
are effective for annual periods beginning on or after January 1, 2014. They provide an
exception to the consolidation requirement for entities that meet the definition of an
investment entity under PFRS 10. The exception to consolidation requires investment entities
to account for subsidiaries at fair value through profit or loss (FVPL).
Philippine Interpretation IFRIC 21, Levies - IFRIC 21 clarifies that an entity recognizes a
liability for a levy when the activity that triggers payment, as identified by the relevant
legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the
interpretation clarifies that no liability should be anticipated before the specified minimum
threshold is reached. IFRIC 21 is effective for annual periods beginning on or after
January 1, 2014.
PAS 39, Financial Instruments: Recognition and Measurement Novation of Derivatives and
Continuation of Hedge Accounting (Amendments) - These amendments provide relief from
discontinuing hedge accounting when novation of a derivative designated as a hedging
instrument meets certain criteria. These amendments are effective for annual periods
beginning on or after January 1, 2014.
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial
The amendments clarify the meaning of currently has a legally enforceable right to set-off
and also clarify the application of the PAS 32 offsetting criteria to settlement systems (such as
central clearing house systems) which apply gross settlement mechanisms that are not
simultaneous. The amendments affect presentation only and have no impact on the Groups
Effective in 2015
PFRS 9, Financial Instruments: Classification and Measurement
PFRS 9, as issued, reflects the first phase on the replacement of PAS 39 and applies to the
classification and measurement of financial assets and liabilities as defined in PAS 39,
Financial Instruments: Recognition and Measurement. Work on impairment of financial
instruments and hedge accounting is still ongoing, with a view to replacing PAS 39 in its
entirety. PFRS 9 requires all financial assets to be measured at fair value at initial recognition.
A debt financial asset may, if the fair value option (FVO) is not invoked, be subsequently
measured at amortized cost if it is held within a business model that has the objective to hold
the assets to collect the contractual cash flows and its contractual terms give rise, on specified
dates, to cash flows that are solely payments of principal and interest on the principal
outstanding. All other debt instruments are subsequently measured at fair value through profit
or loss. All equity financial assets are measured at fair value either through OCI or profit or
loss. Equity financial assets held for trading must be measured at fair value through profit or
loss. For FVO liabilities, the amount of change in the fair value of a liability that is
attributable to changes in credit risk must be presented in OCI. The remainder of the change
in fair value is presented in profit or loss, unless presentation of the fair value change in
respect of the liabilitys credit risk in OCI would create or enlarge an accounting mismatch in
profit or loss. All other PAS 39 classification and measurement requirements for financial
liabilities have been carried forward into PFRS 9, including the embedded derivative
separation rules and the criteria for using the FVO. The adoption of the first phase of PFRS 9
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will have an effect on the classification and measurement of the Groups financial assets, but
will potentially have no impact on the classification and measurement of financial liabilities.
Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate
This interpretation covers accounting for revenue and associated expenses by entities that
undertake the construction of real estate directly or through subcontractors. The interpretation
requires that revenue on construction of real estate be recognized only upon completion,
except when such contract qualifies as construction contract to be accounted for under
PAS 11, Construction Contracts, or involves rendering of services in which case revenue is
recognized based on stage of completion. Contracts involving provision of services with the
construction materials and where the risks and reward of ownership are transferred to the
buyer on a continuous basis will also be accounted for based on stage of completion. The
Philippine SEC and the FRSC have deferred the effectivity of this interpretation until the final
Revenue standard is issued by the International Accounting Standards Board (IASB) and an
evaluation of the requirements of the final Revenue standard against the practices of the
Philippine real estate industry is completed. This interpretation is not relevant to the Group,
thus, will not have any impact on Groups financial position or performance.
Annual Improvements to PFRSs (2010-2012 cycle). The Annual Improvements to PFRSs (2010-
2012 cycle) contain non-urgent but necessary amendments to the following standards:
PFRS 2, Share-based Payment Definition of Vesting Condition - The amendment revised the
definitions of vesting condition and market condition and added the definitions of
performance condition and service condition to clarify various issues. This amendment shall
be prospectively applied to share-based payment transactions for which the grant date is on or
after July 1, 2014.
PFRS 3, Business Combinations Accounting for Contingent Consideration in a Business
Combination - The amendment clarifies that a contingent consideration that meets the
definition of a financial instrument should be classified as a financial liability or as equity in
accordance with PAS 32. Contingent consideration that is not classified as equity is
subsequently measured at fair value through profit or loss whether or not it falls within the
scope of PAS 39, Financial Instruments: Recognition and Measurement. The amendment
shall be prospectively applied to business combinations for which the acquisition date is on or
after July 1, 2014.
PFRS 8, Operating Segments Aggregation of Operating Segments and Reconciliation of the
Total of the Reportable Segments Assets to the Entitys Assets - The amendments require
entities to disclose the judgment made by management in aggregating two or more operating
segments. This disclosure should include a brief description of the operating segments that
have been aggregated in this way and the economic indicators that have been assessed in
determining that the aggregated operating segments share similar economic characteristics.
The amendments also clarify that an entity shall provide reconciliations of the total of the
reportable segments assets to the entitys assets if such amounts are regularly provided to the
chief operating decision maker. These amendments are effective for annual periods beginning
on or after July 1, 2014 and are applied retrospectively.
PFRS 13, Fair Value Measurement Short-term Receivables and Payables - The amendment
clarifies that short-term receivables and payables with no stated interest rates can be held at
invoice amounts when the effect of discounting is immaterial.
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PAS 16, Property, Plant and Equipment Revaluation Method Proportionate Restatement
of Accumulated Depreciation - The amendment clarifies that, upon revaluation of an item of
property, plant and equipment, the carrying amount of the asset shall be adjusted to the
revalued amount, and the asset shall be treated in one of the following ways:
The gross carrying amount is adjusted in a manner that is consistent with the revaluation
of the carrying amount of the asset. The accumulated depreciation at the date of
revaluation is adjusted to equal the difference between the gross carrying amount and the
carrying amount of the asset after taking into account any accumulated impairment losses.
The accumulated depreciation is eliminated against the gross carrying amount of the asset.
The amendment is effective for annual periods beginning on or after July 1, 2014. The
amendment shall apply to all revaluations recognized in annual periods beginning on or after
the date of initial application of this amendment and in the immediately preceding annual
period.
PAS 24, Related Party Disclosures Key Management Personnel - The amendments clarify
that an entity is a related party of the reporting entity if the said entity, or any member of a
group for which it is a part of, provides key management personnel services to the reporting
entity or to the parent company of the reporting entity. The amendments also clarify that a
reporting entity that obtains management personnel services from another entity (also referred
to as management entity) is not required to disclose the compensation paid or payable by the
management entity to its employees or directors. The reporting entity is required to disclose
the amounts incurred for the key management personnel services provided by a separate
management entity. The amendments are effective for annual periods beginning on or after
July 1, 2014 and are applied retrospectively.
PAS 38, Intangible Assets Revaluation Method Proportionate Restatement of Accumulated
Amortization - The amendments clarify that, upon revaluation of an intangible asset, the
carrying amount of the asset shall be adjusted to the revalued amount, and the asset shall be
treated in one of the following ways:
The gross carrying amount is adjusted in a manner that is consistent with the revaluation
of the carrying amount of the asset. The accumulated amortization at the date of
revaluation is adjusted to equal the difference between the gross carrying amount and the
carrying amount of the asset after taking into account any accumulated impairment losses.
The accumulated amortization is eliminated against the gross carrying amount of the asset.
The amendments also clarify that the amount of the adjustment of the accumulated
amortization should form part of the increase or decrease in the carrying amount accounted for
in accordance with the standard.
The amendments are effective for annual periods beginning on or after July 1, 2014. The
amendments shall apply to all revaluations recognized in annual periods beginning on or after
period.
Annual Improvements to PFRSs (2011-2013 cycle). The Annual Improvements to PFRSs (2011-
2013 cycle) contain non-urgent but necessary amendments to the following standards:
PFRS 1, First-time Adoption of Philippine Financial Reporting Standards Meaning of
Effective PFRSs - The amendment clarifies that an entity may choose to apply either a
current standard or a new standard that is not yet mandatory, but that permits early
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application, provided either standard is applied consistently throughout the periods presented
in the entitys first PFRS financial statements.
PFRS 3, Business Combinations Scope Exceptions for Joint Arrangements - The amendment
clarifies that PFRS 3 does not apply to the accounting for the formation of a joint arrangement
in the financial statements of the joint arrangement itself. The amendment is effective for
annual periods beginning on or after July 1, 2014 and is applied prospectively.
PFRS 13, Fair Value Measurement Portfolio Exception - The amendment clarifies that the
portfolio exception in PFRS 13 can be applied to financial assets, financial liabilities and other
contracts. The amendment is effective for annual periods beginning on or after July 1, 2014
and is applied prospectively.
PAS 40, Investment Property - The amendment clarifies the interrelationship between PFRS 3
and PAS 40 when classifying property as investment property or owner-occupied property.
The amendment stated that judgment is needed when determining whether the acquisition of
investment property is the acquisition of an asset or a group of assets or a business
combination within the scope of PFRS 3. This judgment is based on the guidance of PFRS 3.
This amendment is effective for annual periods beginning on or after July 1, 2014 and is
applied prospectively.
The Group has not early adopted the above standards. The Group continues to assess the impact
of the above new, amended and improved accounting standards and interpretations effective
subsequent to March 31, 2014 on its consolidated financial statements in the period of initial
application. Additional disclosures required by these amendments will be included in the
consolidated financial statements when these amendments are adopted.
Summary of Significant Accounting Policies
Business Combination Involving Entities under Common Control
Where there are business combinations in which all the combining entities within the Group are
ultimately controlled by the same ultimate parent before and after the business combination and
that the control is not transitory (business combinations under common control), the Group may
account such business combinations under the acquisition method of accounting or pooling of
interests method, if the transaction was deemed to have substance from the perspective of the
reporting entity. In determining whether the business combination has substance, factors such as
the underlying purpose of the business combination and the involvement of parties other than the
combining entities such as the noncontrolling interest, shall be considered.
In cases where the business combination has no substance, the Group shall account for the
transaction similar to a pooling of interests. The assets and liabilities of the acquired entities and
that of the Group are reflected at their carrying values. The difference in the amount recognized
and the fair value of the consideration given, is accounted for as an equity transaction, i.e., as
either a contribution or distribution of equity. Further, when a subsidiary is disposed in a common
control transaction, the difference in the amount recognized and the fair value of the consideration
received, is also accounted for as an equity transaction. The Group records the difference as
excess of consideration over carrying amount of disposed subsidiary and presents as separate
component of equity in the combined consolidated statement of financial position.
Comparatives shall be restated to include balances and transactions of the entities had been
acquired at the beginning of the earliest period presented as if the companies had always been
combined.
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Business Combination and Goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition
is measured as the aggregate of the consideration transferred measured at acquisition date fair
value and the amount of any non-controlling interests in the acquiree. For each business
combination, the Group elects whether to measure the non-controlling interests in the acquiree at
fair value or at the proportionate share of the acquirees identifiable net assets. Acquisition-related
costs are expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, any previously held equity interest is re-
measured at its acquisition date fair value and any resulting gain or loss is recognized in profit or
loss. It is then considered in the determination of goodwill. Any contingent consideration to be
transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent
consideration classified as an asset or liability that is a financial instrument and within the scope of
PAS 39 is measured at fair value with changes in fair value recognized either in either profit or
loss or as a change to OCI. If the contingent consideration is not within the scope of PAS 39, it is
measured in accordance with the appropriate PFRS. Contingent consideration that is classified as
equity is not re-measured and subsequent settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred and the amount recognized for non-controlling interests, and any previous interest
held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net
assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses
whether it has correctly identified all of the assets acquired and all of the liabilities assumed and
reviews the procedures used to measure the amounts to be recognized at the acquisition date. If
the re-assessment still results in an excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Groups cash-generating units that are expected to benefit
from the combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that
unit is disposed of, the goodwill associated with the disposed operation is included in the carrying
amount of the operation when determining the gain or loss on disposal. Goodwill disposed in
these circumstances is measured based on the relative values of the disposed operation and the
portion of the cash-generating unit retained.
Current versus Noncurrent Classification
The Group presents assets and liabilities in the consolidated statement of financial position based
on current/non-current classification. An asset is current when:
It is expected to be realized or intended to be sold or consumed in the normal operating cycle
It is held primarily for the purpose of trading
It is expected to be realized within twelve months after the reporting period, or
It is cash or cash equivalent unless restricted from being exchanged or used to settle a liability
for at least twelve months after the reporting period
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All other assets are classified as noncurrent. A liability is current when:
It is expected to be settled in the normal operating cycle
It is held primarily for the purpose of trading
It is due to be settled within twelve months after the reporting period, or
There is no unconditional right to defer the settlement of the liability for at least twelve
months after the reporting period
The Group classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities, respectively.
Fair Value Measurement
The Group measures financial instruments such as AFS financial assets at fair value at each
reporting date. Also, fair values of financial instruments measured at amortized cost and
investment properties are disclosed in the notes to the consolidated financial statements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible to by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest. A fair value measurement of a non-financial asset takes into account a
market participant's ability to generate economic benefits by using the asset in its highest and best
use or by selling it to another market participant that would use the asset in its highest and best
use.
The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial
statements are categorized within the fair value hierarchy, described as follows, based on the
lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable
value measurement is unobservable
For assets and liabilities that are recognized in the consolidated financial statements on a recurring
basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-
assessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
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Management determines the policies and procedures for both recurring fair value measurement
and non-recurring measurement.
External valuers are involved for valuation of significant assets, such as investment property.
Involvement of external valuers is decided upon annually. Selection criteria include market
knowledge, reputation, independence and whether professional standards are maintained.
Management decides, after discussions with the external valuers, which valuation techniques and
inputs to use for each case.
At each reporting date, the management analyzes the movements in the values of assets and
liabilities which are required to be re-measured or re-assessed as per accounting policies. For this
analysis, the management verifies the major inputs applied in the latest valuation by agreeing the
information in the valuation computation to contracts and other relevant documents.
Management, in conjunction with the Groups external valuers, also compares each change in the
fair value of each asset and liability with relevant external sources to determine whether the
change is reasonable.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities
on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair
value hierarchy as explained above.
Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash with original maturities of up to
three months or less from date of acquisition and are subject to an insignificant risk of change in
value.
Financial Instruments - Initial Recognition and Subsequent Measurement
Date of Recognition. The Group recognizes a financial asset or a financial liability in the
consolidated statement of financial position when it becomes a party to the contractual provisions
of the instrument. All regular way purchases and sales of financial assets are recognized on the
trade date, which is the date that the Group commits to purchase the asset. Regular way purchases
or sales are purchases or sales of financial assets that require delivery of assets within the period
generally established by regulation or convention in the market place.
Initial Recognition of Financial Instruments. Financial instruments are recognized initially at fair
value. Transaction costs are included in the initial measurement of all financial assets and
liabilities, except for financial instruments measured at fair value through profit or loss (FVPL).
Day 1 Difference. Where the transaction price in a non-active market is different from the fair
value from other observable current market transactions of the same instrument or based on a
valuation technique whose variables include only data from an observable market, the Group
recognizes the difference between the transaction price and fair value (a Day 1 difference) in the
profit or loss unless it qualifies for recognition as some other type of asset. In cases where use is
made of data which is not observable, the difference between the transaction price and model
value is only recognized in the profit or loss when the inputs become observable or when the
instrument is derecognized. For each transaction, the Group determines the appropriate method of
recognizing the Day 1 difference amount.
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Classification of Financial Instruments. A financial instrument is classified as liability if it
provided for a contractual obligation to: (a) deliver cash or another financial asset to another
entity; or (b) exchange financial assets or financial liabilities with another entity under conditions
that are potentially unfavorable to the Group; or (c) satisfy the obligation other than by the
exchange of a fixed amount of cash or another financial asset for a fixed number of the Groups
own shares. If the Group does not have the unconditional right to avoid delivering cash or another
financial asset to settle its contractual obligation, the obligation meets the definition of a financial
liability.
Financial assets are categorized as either financial assets at FVPL, held-to-maturity (HTM)
investments, loans and receivables or AFS financial assets. Financial liabilities, on the other hand,
are categorized as financial liabilities at FVPL and other financial liabilities. The Group
determines the classification at initial recognition and re-evaluates this designation at every
reporting date, where appropriate. The Group has no financial instruments at FVPL and HTM
investments.
a. Loans and Receivables
Loans and receivables are nonderivative financial assets with fixed or determinable payments
that are not quoted in an active market.
After initial measurement, loans and receivables are measured at amortized cost using the
effective interest rate method less allowance for impairment. Amortized cost is calculated by
taking into account any discount or premium on acquisition and fees and costs that are an
integral part of the effective interest rate. The amortization is included in the interest income
in profit or loss. Losses arising from impairment are recognized as provision for impairment
loss on receivables in profit or loss.
Loans and receivables are included in current assets when the Group expects to realize or
collect the assets within 12 months from the financial reporting date. Otherwise, these are
classified as noncurrent assets.
The Groups cash and cash equivalents, receivables (including noncurrent receivables),
advances to associates and joint ventures (included under the Investments in and advances to
associates and joint ventures account) and deposits (included under the Prepaid expenses
and other current assets and Goodwill, intangible and other noncurrent assets accounts) are
classified in this category (see Note 31).
b. AFS Financial Assets
AFS financial assets are those nonderivative financial assets that are not classified as at FVPL,
loans and receivables or HTM investments. They are purchased and held indefinitely, and
maybe sold in response to liquidity requirements or changes in market conditions.
After initial measurement, AFS financial assets are subsequently measured at fair value with
unrealized gains or losses being recognized under Unrealized mark-to-market gain (loss) on
available-for-sale financial assets account in other comprehensive income until these are
derecognized. When the investment is disposed of, the cumulative gain or loss previously
recorded under Unrealized mark-to-market gain on available-for-sale financial assets
account under equity is recycled to profit or loss. Interest earned on the investments is
reported as interest income using the effective interest rate method. Dividends earned on
investments are recognized in profit or loss when the right to receive payment has been
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*SGVFS008027*
established. AFS financial assets are classified as noncurrent assets unless the intention is to
dispose such assets within 12 months from financial reporting date.
The fair value of AFS financial assets consisting of any investments that are actively traded in
organized financial markets is determined by reference to quoted market bid prices at the close
of business on the financial reporting date.
The Groups investments in club and ordinary shares are classified in this category (see Note
31).
Unlisted investments in shares of stock for which no quoted market prices and no other
reliable sources of their fair values are available, are carried at cost.
c. Other Financial Liabilities
Other financial liabilities at amortized cost pertain to issued financial instruments or their
components that are not classified or designated at FVPL and contain contractual obligations
to deliver cash or another financial asset to the holder as to settle the obligation other than by
the exchange of a fixed amount of cash or another financial asset for a fixed number of own
equity shares. The financial instruments are classified as current if they are expected to be
settled or disposed of within 12 months from financial reporting date. Otherwise, these are
classified as noncurrent.
These include liabilities arising from operations such as accounts payable and other current
liabilities (excluding unearned tuition and school fees, government and other statutory
liabilities), short-term loans, long-term debt and nontrade payable (see Note 31).
Impairment of Financial Assets
The Group assesses at each reporting date whether a financial asset or group of financial assets is
impaired. A financial asset or a group of financial assets is deemed to be impaired if there is
objective evidence of impairment as a result of one or more events that has occurred after the
initial recognition of the asset (an incurred loss event) and that loss event has an impact on the
estimated future cash flows of the financial asset or the group of financial assets that can be
reliably estimated. Objective evidence of impairment may include indications that the debtors or a
group of debtors is experiencing significant financial difficulty, default or delinquency in interest
or principal payments, the probability that they will enter bankruptcy or other financial
reorganization and where observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.
Financial Assets Carried at Amortized Cost. The Group first assesses whether an objective
evidence of impairment exists individually for financial assets that are individually significant, or
collectively for financial assets that are not individually significant. If it is determined that no
objective evidence of impairment exists for an individually assessed financial asset, whether
significant or not, the asset is included in a group of financial assets with similar credit risk
characteristics and that group of financial assets is collectively assessed for impairment. Assets
that are individually assessed for impairment and for which an impairment loss is or continues to
be recognized are not included in a collective assessment of impairment.
If there is an objective evidence that an impairment loss has been incurred, the amount of the loss
is measured as the difference between the assets carrying amount and the present value of the
estimated future cash flows (excluding future credit losses that have not been incurred). The
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carrying amount of the asset is reduced through use of an allowance account and the amount of
loss is charged to profit or loss. Interest income continues to be recognized based on the original
effective interest rate of the asset. Loans and receivables, together with the associated allowance
accounts, are written off when there is no realistic prospect of future recovery and all collateral, if
any, have been realized. If, in a subsequent year, the amount of the estimated impairment loss
decreases because of an event occurring after the impairment was recognized, the previously
recognized impairment loss is reduced by adjusting the allowance account. If a future write-off is
later recovered, any amounts formerly charged are credited to profit or loss.
The present value of the estimated future cash flows is discounted at the financial assets original
effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any
impairment loss is the current effective interest rate, adjusted for the original credit risk premium.
The calculation of the present value of the estimated future cash flows of a collateralized financial
asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling
the collateral, whether or not foreclosure is probable.
For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis
of such credit risk characteristics as industry, collateral type and past due status.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are
estimated on the basis of historical loss for assets with credit risk characteristics similar to those in
the group. Historical loss is adjusted on the basis of current observable data to reflect the effects
of current conditions that did not affect the period on which the historical loss is based and to
remove the effects of conditions in the historical period that do not exist currently. Estimates of
changes in future cash flows reflect, and are directionally consistent with changes in related
observable data from period to period (such changes in unemployment rates, property prices,
commodity prices, payment status, or other factors that are indicative of incurred losses in the
Group and their magnitude). The methodology and assumptions used for estimating future cash
flows are reviewed regularly by the Group to reduce any difference between loss estimates and
actual loss experience.
Quoted AFS Financial Assets. In the case of equity investments classified as AFS financial assets,
an objective evidence of impairment would include a significant or prolonged decline in the fair
value of the investments below its cost. Significant is to be evaluated against the original cost
of the investment and prolonged against the period in which the fair value has been below its
original cost. When there is evidence of impairment, the cumulative loss which is measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognized in other comprehensive income under Unrealized mark-to-
market gain on available-for-sale financial assets account, is removed from equity and recognized
in profit or loss. Impairment losses on equity investments are not reversed in profit or loss;
increases in fair value after impairment are recognized directly in other comprehensive income.
Unquoted AFS Financial Assets. If there is objective evidence that an impairment loss has been
incurred in an unquoted equity instrument that is not carried at fair value because its fair value
cannot be reliably measured, or on a derivative asset that is linked to and must be settled by
delivery of such an unquoted equity instrument, the amount of loss is measured as the difference
between the assets carrying amount and the present value of estimated future cash flows
discounted at the current market rate of return for a similar financial asset.
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Derecognition of Financial Assets and Liabilities
Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part of a
group of similar financial assets) is derecognized when:
a. the rights to receive cash flows from the asset have expired;
b. the Group retains the right to receive cash flows from the asset, but has assumed an obligation
to pay them in full without material delay to a third party under a pass-through arrangement;
or
c. the Group has transferred its right to receive cash flows from the asset and either
(a) has transferred substantially all the risks and rewards of the asset, or (b) has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Group has transferred its right to receive cash flows from an asset and has neither
transferred nor retained substantially all the risks and rewards of the asset nor transferred control
of the asset, the asset is recognized to the extent of the Groups continuing involvement in the
asset.
Financial Liabilities. A financial liability is derecognized when the obligation under the liability
is discharged or cancelled or has expired.
When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognized in profit or loss.
Offsetting of Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the consolidated
statement of financial position if, and only if, there is a currently enforceable legal right to offset
the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and
settle the liability simultaneously. This is not generally the case with master netting agreements,
and the related assets and liabilities are presented at gross amounts in the consolidated statement
of financial position.
Inventories
Inventories are valued at the lower of cost and net realizable value. Cost is determined using the
weighted average method. Net realizable value of educational materials is the selling price in the
ordinary course of business, less estimated costs necessary to make the sale. Net realizable value
of promotional and school materials and supplies is the current replacement cost.
Prepaid Expenses
Prepaid expenses are carried at cost and are amortized on a straight-line basis over the period of
expected usage, which is equal to or less than 12 months or within the normal operating cycle.
Input Value-added Taxes (VAT)
Input VAT represents VAT imposed on the Group by its suppliers for the acquisition of goods and
services required under Philippine taxation laws and regulations. The portion of excess input
VAT over output VAT is presented as part of Prepaid taxes under the Prepaid expenses and
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other current assets account in the consolidated statement of financial position. Input VAT is
stated at its estimated net realizable value (NRV).
Creditable Withholding Taxes (CWT)
CWT represents the amount of tax withheld by counterparties from the Group. These are
recognized upon collection and are utilized as tax credits against income tax due as allowed by the
Philippine taxation laws and regulations. CWT is presented as part of Prepaid taxes under the
Prepaid expenses and other current assets account in the consolidated statement of financial
position. CWT is stated at its estimated NRV.
Property and Equipment
Property and equipment, except land, are stated at cost less accumulated depreciation,
amortization and any impairment in value, excluding the costs of day-to-day servicing. Such cost
includes the cost of replacing part of such property and equipment when that cost is incurred and
the recognition criteria are met. Land is stated at cost less any impairment in value.
An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount of
the asset) is included in profit or loss in the year the asset is derecognized.
Depreciation and amortization are computed using the straight-line method over the following
estimated useful lives:
Buildings 2025 years
Office and school equipment 5 years
Office furniture and fixtures 5 years
Leasehold improvements 5 years or terms of the lease agreement,
whichever is shorter
Transportation equipment 5 years or terms of the lease agreement,
whichever is shorter
Computer equipment and peripherals 3 years
Library holdings 35 years
The estimated useful lives and the depreciation and amortization method are reviewed periodically
to ensure that the periods and depreciation and amortization method are consistent with the
expected pattern of economic benefits from items of property and equipment.
Fully depreciated assets are retained in the accounts until they are no longer in use and no further
depreciation and amortization is charged to current operations.
Construction in progress represents structures under construction and is stated at cost less any
impairment in value. This includes cost of construction and other direct costs, including any
interest on borrowed funds during the construction period. Construction in progress is not
depreciated until the relevant assets are completed and become available for operational use.
Investment Properties
Investment properties include land and buildings held by the Group for capital appreciation and
rental purposes. Buildings are carried at cost less accumulated depreciation and any impairment in
value, while land is carried at cost less any impairment in value. The carrying amount includes the
cost of constructing a significant portion of an existing investment property if the recognition
criteria are met; and excludes the costs of day-to-day servicing of an investment property.
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Depreciation of buildings is computed on a straight-line basis over 2025 years. The assets
useful life and method of depreciation are reviewed and adjusted, if appropriate, at each financial
year-end.
Investment properties are derecognized when either they have been disposed of or when the
investment property is permanently withdrawn from use and no future economic benefit is
expected from its disposal. Any gains or losses on the retirement or disposal of an investment
property are recognized in profit or loss in the year of retirement or disposal.
Transfers are made to investment property when, and only when, there is a change in use,
evidenced by ending of owner-occupation or commencement of an operating lease to another
party. Transfers are made from investment property when there is a change in use, evidenced by
commencement of owner-occupation or commencement of development with a view to sell.
For a transfer from investment property to owner-occupied property or inventories, the cost of
property for subsequent accounting is its carrying value at the date of change in use. If the
property occupied by the Group as an owner-occupied property becomes an investment property,
the Group accounts for such property in accordance with the policy stated under property and
equipment up to the date of change in use.
Investments in Associates and Joint Ventures
An associate is an entity over which the Group has significant influence. Significant influence is
the power to participate in the financial and operating policy decisions of the investee, but is not
control or joint control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually
agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those
necessary to determine control over subsidiaries. The Groups investments in its associate and
joint venture are accounted for using the equity method. Under the equity method, the investment
in an associate or a joint venture is initially recognized at cost. The carrying amount of the
investment is adjusted to recognize changes in the Groups share of net assets of the associate or
joint venture since the acquisition date. Goodwill relating to the associate or joint venture is
included in the carrying amount of the investment and is neither amortized nor individually tested
for impairment.
The consolidated statement of comprehensive income reflects the Groups share of the results of
operations of the associate or joint venture. Any change in OCI of those investees is presented as
part of the Groups OCI. In addition, when there has been a change recognized directly in the
equity of the associate or joint venture, the Group recognizes its share of any changes, when
applicable, in the consolidated statement of changes in equity. Unrealized gains and losses
resulting from transactions between the Group and the associate or joint venture are eliminated to
the extent of the interest in the associate or joint venture.
The aggregate of the Groups share of profit or loss of an associate and a joint venture is shown on
the face of the consolidated statement of comprehensive income outside operating profit and
represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate
or joint venture.
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The financial statements of the associate or joint venture are prepared for the same reporting
period as the Group. When necessary, adjustments are made to bring the accounting policies in
line with those of the Group.
The financial reporting dates of the associates, joint ventures and the Parent Company are
identical, except for the accounts of STI College Marikina, Inc. (STI-Marikina) and Synergia
Human Capital Solutions, Inc. (Synergia) whose financial reporting date ends in December, and
the associates and joint ventures accounting policies conform to those used by the Group for like
transactions and events in similar circumstances. Adjustments are made for the Groups share in
the effects of significant transactions or events that occur between the financial reporting date of
the above-mentioned associates and joint ventures and the financial reporting date of the Groups
consolidated financial statements.
After application of the equity method, the Group determines whether it is necessary to recognize
an impairment loss on its investment in its associate or joint venture. At each reporting date, the
Group determines whether there is objective evidence that the investment in the associate or joint
venture is impaired. If there is such evidence, the Group calculates the amount of impairment as
the difference between the recoverable amount of the associate or joint venture and its carrying
value, then recognizes the loss as Share of profit of an associate and a joint venture in the
consolidated statement of comprehensive income.
Upon loss of significant influence over the associate or joint control over the joint venture, the
Group measures and recognizes any retained investment at its fair value. Any difference between
the carrying amount of the associate or joint venture upon loss of significant influence or joint
control and the fair value of the retained investment and proceeds from disposal is recognized in
profit or loss.
The following are the associates of STI ESG (which are all incorporated in the Philippines) and
STI ESGs effective interest in the following entities as at March 31, 2014 and 2013:
Effective Percentage of Ownership
2014 2013
Associate Principal Activities Direct Indirect Direct Indirect
Accent/STI Banawe, Inc. (STI-Accent)
(see Note 11)
(a)
Hospital
49 49
STI College Alabang, Inc. (STI-Alabang) Educational Institution 40 40
Synergia
(a)
Management Consulting
Services 30 30
STI-Marikina Educational Institution 24 24
STI Investments Holding Company 20 20
De Los Santos General Hospital, Inc.
(De Los Santos General Hospital)
(b)
Hospital
5 5 20 13
Global Resource for Outsourced Workers,
Inc. (GROW)
Recruitment Agency
17 17
De Los Santos - STI Megaclinic, Inc.
(De Los Santos - STI Megaclinic)
(b)(c)
Health and Wellness
Clinic 9 30
(a) Dormant entities
(b) Through De Los Santos - STI College; subsequently diluted and ceased to be an associate in 2014 (see Note 13)
(c) Through De Los Santos General Hospital
The Group has interests in Philippine Healthcare Educators, Inc. (PHEI) and STI-PHNS
Outsourcing Corporation (STI-PHNS), both jointly-controlled entities.
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Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortization in the case of
intangible assets with finite lives, and any accumulated impairment losses.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets
with finite lives are amortized over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortization period
and the amortization method for an intangible asset with a finite useful life are reviewed at least at
each financial year-end. Changes in the expected useful life or the expected pattern of
consumption of future economic benefits embodied in the asset is accounted for by changing the
amortization period or method, as appropriate, and are treated as changes in accounting estimates.
The amortization expense on intangible assets with finite lives is recognized in the consolidated
statement of comprehensive income in the expense category consistent with the function of the
intangible asset.
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment
annually, either individually or at the cash generating unit level. The assessment of indefinite life
is reviewed annually to determine whether the indefinite life continues to be supportable. If not,
the change in useful life from indefinite to finite is made on a prospective basis.
The Group has assessed the intangible assets as having a finite useful life, which is the shorter of
its contractual term or economic life. Amortization is on a straight-line basis over the estimated
useful lives of 3 years.
Gains or losses arising from derecognition of an intangible asset are measured as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognized in
profit or loss when the asset is derecognized.
Impairment of Nonfinancial Assets
The carrying values of investments in associates and joint ventures, property and equipment,
investment properties, land and intangible assets are reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not be recoverable. When an
indicator of impairment exists or when an annual impairment testing for an asset is required, the
Group makes a formal estimate of recoverable amount. Recoverable amount is the higher of an
assets (or cash-generating units) fair value less costs to sell and its value in use and is determined
for an individual asset, unless the asset does not generate cash inflows that are largely independent
of those from other assets or groups of assets, in which case the recoverable amount is assessed as
part of the cash generating unit to which it belongs. Where the carrying amount of an asset (or
cash generating unit) exceeds its recoverable amount, the asset (or cash generating unit) is
considered impaired and is written down to its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset
(or cash generating unit). In determining fair value less costs to sell, an appropriate valuation
model is used. These calculations are corroborated by valuation multiples, quoted share prices for
publicly traded securities or other available fair value indicators.
Impairment losses are recognized in the consolidated statement of comprehensive income in those
expense categories consistent with the function of the impaired asset, except for assets previously
revalued where the revaluation was taken to equity. In this case, the impairment is also
recognized in equity up to the amount of any previous revaluation.
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For nonfinancial assets, excluding goodwill, an assessment is made at each reporting date as to
whether there is any indication that previously recognized impairment losses may no longer exist
or may have decreased. If such indication exists, the recoverable amount is estimated. A
previously recognized impairment loss is reversed only if there has been a change in the estimates
used to determine the assets recoverable amount since the last impairment loss was recognized.
If that is the case, the carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been determined, net of
depreciation and amortization, had no impairment loss been recognized for the asset in prior years.
Such reversal is recognized in profit or loss unless the asset is carried at a revalued amount, in
which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation
and amortization expense is adjusted in future years to allocate the assets revised carrying
amount, less any residual value, on a systematic basis over its remaining life.
Goodwill. Goodwill is reviewed for impairment, annually or more frequently if events or changes
in circumstances indicate that the carrying value may be impaired. Impairment is determined for
goodwill by assessing the recoverable amount of the cash-generating units, to which goodwill
relates. Where the recoverable amount of the cash-generating unit (or group of cash-generating
units) is less than the carrying amount of the cash-generating unit (or group of cash generating
units) to which the goodwill has been allocated, an impairment loss is recognized in the
consolidated statement of comprehensive income. Impairment losses relating to goodwill cannot
be reversed for subsequent increases in its recoverable amount in future periods. The Group
performs its annual impairment test of goodwill as at March 31 of each year.
Borrowing Costs
Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or
production of a qualifying asset. Qualifying assets are assets that necessarily take a substantial
period of time to get ready for its intended use or sale. To the extent that funds are borrowed
specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible
for capitalization on that asset shall be determined as the actual borrowing costs incurred on that
borrowing during the year less any investment income on the temporary investment of those
borrowings. To the extent that funds are borrowed generally and used for the purpose of obtaining
a qualifying asset, the amount of borrowing costs eligible for capitalization shall be determined by
applying a capitalizable rate to the expenditures on that asset. The capitalization rate shall be the
weighted average of the borrowing costs applicable to our borrowings that are outstanding during
the year, other than borrowings made specifically for the purpose of obtaining a qualifying asset.
The amount of borrowing costs capitalized during the year shall not exceed the amount of
borrowing costs incurred during that year.
Capitalization of borrowing costs commences when the activities necessary to prepare the asset for
intended use are in progress and expenditures and borrowing costs are being incurred. Borrowing
costs are capitalized until the asset is available for their intended use. If the resulting carrying
amount of the asset exceeds its recoverable amount, an impairment loss is recognized. Borrowing
costs include interest charges and other costs incurred in connection with the borrowing of funds,
as well as exchange differences arising from foreign currency borrowings used to finance these
projects, to the extent that they are regarded as an adjustment to interest costs.
All other borrowing costs are expensed as incurred in the year in which they occur.
Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate can be made of the amount of the
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*SGVFS008027*
obligation. When the Group expects a provision to be reimbursed, such as under an insurance
contract, the reimbursement is recognized as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented in profit or loss, net of any
reimbursement. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flow at a pre-tax rate that reflects current market assessments
of the time value of money and, where appropriate, the risks specific to the liability. When
discounting is used, the increase in the provision due to the passage of time is recognized as
interest expense.
Capital Stock and Additional Paid-in Capital
Common stock is measured at par value for all shares issued. Incremental costs incurred directly
attributable to the issuance of new shares are shown in equity as a deduction from proceeds, net of
tax. Proceeds and/or fair value of consideration received in excess of par value are recognized as
additional paid-in capital.
Cost of Shares Held by a Subsidiary
Cost of shares held by a subsidiary is accounted for similar to treasury shares which are recorded
at cost. Own equity instruments which are reacquired are deducted from equity. No gain or loss
is recognized in profit or loss on the purchase, sale, issuance or the cancellation of the Groups
own equity instruments.
Retained Earnings and Dividend on Common Stock of the Parent Company
The amount included in retained earnings includes profit attributable to the Parent Companys
equity holders and reduced by dividends on capital stocks. Dividends on capital stocks are
recognized as liability and deducted from equity when approved by the shareholders of the Parent
Company and its subsidiaries. Dividends for the year that are approved after the financial
reporting date are dealt with as an event after the financial reporting period.
Earnings Per Share (EPS) Attributable to the Equity Holders of the Parent Company
EPS is computed by dividing income attributed to equity holders of the Parent Company for the
year by the weighted average number of shares issued and outstanding after giving retroactive
effect to any stock split and stock dividend declaration, if any.
Diluted EPS is calculated by dividing the net income attributable to equity holders of the Parent
Company by the weighted average number of common shares outstanding during the year adjusted
for the effects of any dilutive convertible common shares.
Basic and diluted EPS for all periods presented are also adjusted for the effects of business
combination accounted for using the pooling of interests method, thus, the Parent Companys
shares issued for the Share Swap were presumed to be issued at the beginning of the earliest
period presented, i.e. April 1, 2012.
Revenue
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Group and the amount of the revenue can be measured reliably. The Group assesses whether it is
acting as a principal or an agent in every revenue arrangements. It is acting as a principal when it
has the primary responsibility for providing the goods or services. The Group also acts as a
principal when it has the discretion in establishing the prices and bears inventory and credit risk.
Revenue is measured at the fair value of the consideration received, excluding discounts, rebates
and value-added tax (VAT).
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The following specific recognition criteria must also be met before revenue is recognized:
Tuition and Other School Fees. Revenue from tuition and other school fees is recognized as
income over the corresponding school term to which they pertain. Fees received pertaining to the
school year commencing after the financial reporting date are recorded as unearned tuition and
other school fees shown under Accounts payable and other current liabilities account in the
consolidated statement of financial position.
Educational Services. Revenue is recognized as services are rendered.
Royalty Fees. Revenue from royalty fees is recognized on an accrual basis in accordance with the
terms of the licensing agreements.
Management Fees. Revenue is recognized when services are rendered (included as part of Other
revenues account in the consolidated statement of comprehensive income).
Sale of Educational Materials and Supplies. Revenue is recognized at the time of sale when
significant risks and rewards of ownership have been transferred.
Interest Income. Interest income is recognized as the interest accrues considering the effective
yield on the asset.
Rental Income. Rental income is recognized on a straight-line basis over the term of the lease
agreement.
Dividend Income. Revenue is recognized when the Groups right to receive the payment is
established.
Costs and Expenses
Costs and expenses are decreases in economic benefits during the accounting period in the form of
outflows or decrease of assets or incurrence of liabilities that result in decreases in equity, other
than those relating to distributions to equity participants. Costs and expenses are recognized in
profit or loss in the year these are incurred.
Pension Costs
The Group has the following pension plans (Plan) covering substantially all of its regular and
permanent employees:
Type of Plan
STI ESG Funded and unfunded, noncontributory defined
benefit plan
Indirect Subsidiaries (except De Los Santos -
STI College and STI-QA)
Unfunded, noncontributory defined benefit plan
De Los Santos - STI College and STI-QA Funded, noncontributory defined contribution plan
Defined Benefit Plan. The net defined benefit liability or asset is the aggregate of the present
value of the defined benefit obligation at the end of the reporting period reduced by the fair value
of plan assets (if any), adjusted for any effect of limiting a net defined benefit asset to the asset
ceiling. The asset ceiling is the present value of any economic benefits available in the form of
refunds from the plan or reductions in future contributions to the plan.
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*SGVFS008027*
The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method.
Defined benefit costs comprise the following:
- Service cost
- Net interest on the net defined benefit liability or asset
- Remeasurements of net defined benefit liability or asset
Service costs which include current service costs, past service costs and gains or losses on non-
routine settlements are recognized as expense in profit or loss. Past service costs are recognized
when plan amendment or curtailment occurs. These amounts are calculated periodically by
independent qualified actuaries.
Net interest on the net defined benefit liability or asset is the change during the period in the net
defined benefit liability or asset that arises from the passage of time which is determined by
applying the discount rate based on government bonds to the net defined benefit liability or asset.
Net interest on the net defined benefit liability or asset is recognized as expense or income in
profit or loss.
Remeasurements comprising actuarial gains and losses, return on plan assets and any change in
the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized
immediately in other comprehensive income in the period in which they arise. Remeasurements
are not reclassified to profit or loss in subsequent periods.
Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance
policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to
the Group. Fair value of plan assets is based on market price information. When no market price
is available, the fair value of plan assets is estimated by discounting expected future cash flows
using a discount rate that reflects both the risk associated with the plan assets and the maturity or
expected disposal date of those assets (or, if they have no maturity, the expected period until the
settlement of the related obligations).
The Groups right to be reimbursed of some or all of the expenditure required to settle a defined
benefit obligation is recognized as a separate asset at fair value when and only when
reimbursement is virtually certain.
Defined Contribution Plan. De Los Santos - STI College and STI-QA are members of the
Catholic Educational Association of the Philippines Retirement Plan (CEAP). CEAP is a funded,
defined contribution plan covering De Los Santos - STI Colleges and STI-QAs qualified
employees. Pension costs consist of future service costs and past service costs. Future service
costs are determined in accordance with PAS 19 while past service cost is computed based on a
certain percentage of an employees average monthly salary for the 12-month period, immediately
preceding the date of acceptance of the Group in the CEAP Plan, multiplied by the number of
months of the employees past service amortized over 10 years.
De Los Santos - STI College and STI-QA, however, are covered under RA 7641, The Philippine
Retirement Law, which provides for its qualified employees a defined benefit (DB) minimum
guarantee. The DB minimum guarantee is equivalent to a certain percentage of the monthly salary
payable to an employee at normal retirement age with the required credited years of service based
on the provisions of RA 7641.
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Accordingly, De Los Santos - STI College and STI-QA accounts for its retirement obligation
under the higher of the DB obligation relating to the minimum guarantee and the obligation arising
from the defined contribution (DC) plan. For the DB minimum guarantee plan, the liability is
determined based on the present value of the excess of the projected DB obligation over the
projected DC obligation at the end of the reporting period. The DB obligation is calculated
annually by a qualified independent actuary using the projected unit credit method. De Los Santos
STI College and STI-QA determines the net interest expense (income) on the net DB liability
(asset) for the period by applying the discount rate used to measure the DB obligation at the
beginning of the annual period to the then net DB liability (asset), taking into account any changes
in the net DB liability (asset) during the period as a result of contributions and benefit payments.
Net interest expense and other expenses related to the DB plan are recognized in profit or loss.
The DC liability, on the other hand, is measured at the fair value of the DC assets upon which the
DC benefits depend, with an adjustment for margin on asset returns, if any, where this is reflected
in the DC benefits. Remeasurements of the net DB liability, which comprise actuarial gains and
losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any,
excluding interest), are recognized immediately in other comprehensive income.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit
that relates to past service or the gain or loss on curtailment is recognized immediately in profit or
loss. De Los Santos - STI College and STI-QA recognizes gains or losses on the settlement of a
DB plan when the settlement occurs.
Leases
The determination whether an arrangement is, or contains, a lease is based on the substance of the
arrangement at the inception date of whether the fulfillment of the arrangement is dependent on
the use of a specific asset or the arrangement conveys a right to use the asset.
Group as a Lessee. Finance leases, which transfer to the Group substantially all the risks and
benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at
the fair value of the leased property or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are charged directly against profit or loss.
Capitalized leased assets are depreciated over the useful life of the asset. However, if there is no
reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the asset and the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the assets
are classified as operating leases. Operating lease payments are recognized as expense in profit or
loss on a straight-line basis over the lease term.
Group as a Lessor. Leases where the Group retains substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating
an operating lease are added to the carrying amount of the leased asset and recognized over the
lease term on the same basis as rental income.
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Taxes
Current Tax. Current tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantially enacted at the
financial reporting date.
Deferred Tax. Deferred tax is provided using the liability method on temporary differences at the
financial reporting date between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary
differences, except:
when the deferred tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting income nor taxable income or loss;
in respect of taxable temporary differences associated with investments in subsidiaries and
associates and interests in joint ventures, when the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse
in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences and carryforward
benefit of net operating loss carryover (NOLCO), unused tax credits from excess minimum
corporate income tax (MCIT) over regular corporate income tax (RCIT), and to the extent that it is
probable that taxable income will be available against which the deductible temporary differences
and carryforward benefits NOLCO and MCIT can be utilized, except:
when the deferred tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting income nor taxable income or
loss;
in respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred tax assets are recognized only to the extent
that it is probable that the temporary differences will reverse in the foreseeable future and
taxable income will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each financial reporting date and
reduced to the extent that it is no longer probable that sufficient future taxable profit will be
available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax
assets are reassessed at each financial reporting date and are recognized to the extent that it has
become probable that future taxable income will allow the deferred tax assets to be recovered.
Deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to
apply in the year when the asset is realized or the liability is settled, based on tax rates and tax
laws that have been enacted or substantially enacted at the financial reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.
Deferred tax items are recognized in correlation to the underlying transactions either in other
comprehensive income or directly in equity.
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Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to
offset current tax assets against current tax liabilities and the deferred taxes relate to the same
taxable entity and the same taxation authority.
Value-Added Tax (VAT). Revenue, expenses and assets are recognized net of the amount of VAT,
except:
when the VAT incurred on a purchase of assets or services is not recoverable from the
taxation authority, in which case the VAT is recognized as part of the cost of acquisition of the
asset or as part of the expense item as applicable; or
receivables and payables that are stated with the amount of VAT included.
The net amount of VAT recoverable from, or payable to, the taxation authority is included as part
of Prepaid expenses and other current assets or Accounts payable and other current liabilities
accounts in the consolidated statement of financial position.
Operating Segment
For management purposes, the Group is organized into business units based on the geographical
location of the students and assets. Financial information about operating segments are presented
in Note 4.
Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. These are
disclosed in the notes to consolidated financial statements unless the possibility of an outflow of
resources embodying economic benefits is remote. A contingent asset is not recognized in the
consolidated financial statements but disclosed in the notes to consolidated financial statements
when an inflow of economic benefits is probable.
Events after the Reporting Period
Post year-end events that provide additional information about the Groups financial position at
the financial reporting date (adjusting events) are reflected in the consolidated financial
statements. Post year-end events that are not adjusting events are disclosed in the notes to
consolidated financial statements when material.
3. Business Combinations
a. Acquisition of WNU
As discussed in Note 1, on October 1, 2013, STI Holdings acquired 99.45% of the issued and
outstanding common shares and 99.93% of the issued and outstanding preferred shares of
WNU for a total purchase price of P=400.0 million, including contingent consideration. The
said purchase price was reduced to P=397.0 million, including contingent consideration of
P=151.5 million as of March 31, 2014.
In November 2013, the BOD approved the reclassification of the preferred shares into
common shares, awaiting the SEC approval for WNUs increase in its authorized capital
stock. As at July 9, 2014, the SEC approval on WNUs application is still pending.
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The acquisition of WNU is accounted for as a business combination using acquisition method.
The Parent Company elected not to account for the noncontrolling interests in WNU as it is
considered not material to the Group.
The fair values of the identifiable assets and liabilities of WNU at acquisition date and the
corresponding carrying amounts immediately before the acquisition were as follows:
Fair Value
Recognized on
Acquisition
Cash and cash equivalents P=7,703,105
Trade and other receivables 40,960,059
Inventories 143,715
Prepaid expenses and other current assets 677,019
Property and equipment 750,813,061
Investment property 48,972,000
Deferred tax asset 7,299,317
Other noncurrent assets 660,870
Trade and other payables (104,300,607)
Short-term loan (7,026,780)
Deferred tax liability (128,354,737)
Other current liabilities (999,322)
Loans payable (140,601,746)
Other noncurrent liabilities (46,243,536)
Net assets acquired 429,702,418
Excess of fair values of net assets acquired over acquisition cost from a
business combination (32,681,078)
Consideration* P=397,021,340
*Includes contingent consideration amounting to P =151.5 million with the corresponding liability presented as Nontrade
payable in the consolidated statement of financial position as of March 31, 2014.
b. Business Combination Involving Entities under Common Control
As discussed in Note 1, as a result of the Share Swap, the original shareholders of STI ESG
owned approximately 84% of STI Holdings while STI Holdings owned approximately 96% of
STI ESG (including its 3% shareholding in STI ESG prior to Share Swap) immediately after
the Share Swap.
Management of the Group assessed that this transaction is a business combination involving
entities under common control since STI Holdings and STI ESG are under common control of
a shareholder (the Controlling Shareholder). Business combinations involving entities
under common control are excluded from the scope of PFRS 3, Business Combinations.
Management has elected to adopt the pooling of interests method when preparing the
consolidated financial information in accordance with the guidance provided by the Philippine
Interpretations Committee on its Q&A No. 2011-02 PFRS 3.2 - Common Control Business
Combinations.
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Under the pooling of interests method:
The assets and liabilities of the combining entities are reflected at their carrying amounts;
No adjustments are made to reflect fair values, or recognize any new assets or liabilities at
the date of the combination. The only adjustments would be to harmonize accounting
policies between the combining entities;
No new goodwill is recognized as a result of the combination;
Any difference between the consideration transferred and the net assets acquired is
reflected within equity under Other equity reserve;
The income statement in the year of acquisition reflects the results of the combining
entities for the full year, irrespective of when the combination took place; and
Comparatives are presented as if the entities had always been combined only for the
period that the entities were under common control.
Common control transactions are viewed from the perspective of the ultimate parent or the
Controlling Shareholder. Since STI Holdings and STI ESG were not under common control
from the start, a predecessor entity should be identified. In this case, despite the legal form of
the transaction (i.e. STI Holdings acquires STI ESG common shares through Share Swap), the
predecessor entity is STI ESG since it was controlled by the Controlling Shareholder prior to
STI Holdings. The Controlling Shareholder only acquired STI Holdings in March 2010.
In the parent company financial statements, STI Holdings used the cost method of accounting
for its investment in STI ESG. Thus, at initial recognition of its investment in STI ESG, the
Parent Company measured its investment using the fair value of the shares it has given up in
exchange for the STI ESG shares (i.e. quoted price of STI Holdings shares as of September
28, 2012). The difference between the quoted price and par value of the shares was
recognized as additional paid-in capital (APIC) in the parent company statement of financial
position. In the application of pooling of interests method in the consolidated financial
statements, the acquisition-date carrying values of STI Holdings and STI ESG are the amounts
used since the entities are combined at historical cost. Thus, the APIC created in the parent
company financial statements is not reflected in the consolidated financial statements since
effectively, the capital stock issued pursuant to the Share Swap are carried at cost under the
pooling of interests method.
c. Movement in Non-controlling Interests
In July 2013, the Parent Company acquired additional 328,125 STI ESG shares from various
shareholders further increasing its ownership interest in STI ESG by 0.01% immediately after
the acquisition.
In 2014, STI ESG issued additional shares at par value to the stockholders of one of the
merged schools, which resulted to dilution of the Parent Companys interest in STI ESG by
0.06%.
For the year ended March 31, 2014, the Parent Company recognized a net increase in the non-
controlling interests amounting to P =3.4 million and reattributed the non-controlling interests
share in other comprehensive income to the equity holders of the Parent Company amounting
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to P =158,142 with the difference, amounting to P =4.1 million, charged to Other equity reserve
account (see Note 18).
In November 2012, the Parent Company subscribed to 1,020,000,000 STI ESG shares at P =1.00
per share. In December 2012, the Parent Company advanced P =1,080.0 million to STI ESG for
future subscription of STI ESG shares, while waiting for the SECs approval of the increase in
authorized capital stock. On March 8, 2013, STI ESG issued 1,080,000,000 shares to STI
Holdings upon SECs approval of its application. As a result, STI Holdings ownership
interest in STI ESG increased to approximately 99% as of March 31, 2013.
For the year ended March 31, 2013, the Parent Company recognized a reduction in the non-
controlling interests amounting to P =105.7 million and reattributed the non-controlling
interests share in other comprehensive income to the equity holders of the Parent Company
amounting to P=36.6 million with the difference, amounting to P =69.1 million, charged to
Other equity reserve account (see Note 18).
d. Acquisition of STI-Batangas
On June 30, 2013, the stockholders of STI-Batangas and STI ESG executed a deed of sale for
the transfer of 100.00% of the outstanding shares of STI-Batangas to STI ESG with an
acquisition cost amounting to P =4.0 million. Effective that date, STI ESG gained control over
the financial and reporting policies of STI-Batangas.
STI-Batangas is a franchisee of STI ESG and is engaged in the operation of educational
institutions offering tertiary formal education, post-secondary certificate courses and short-
term courses. STI-Batangas was acquired to expand the Groups controlled network of
schools and be able to improve its operations.
The purchase price consideration has been allocated, provisionally, to the assets and liabilities
based on the fair values at the date of acquisition resulting to goodwill of P =2.6 million.
The carrying values of the financial assets and liabilities and other assets recognized at the
date of acquisition approximate their fair values due to the short-term nature of the
transactions.
4. Segment Information
For management purposes, the Group is organized into business units based on the geographical
location of the students and assets, and has five reportable segments as follows:
a. Metro Manila
b. Northern Luzon
c. Southern Luzon
d. Visayas
e. Mindanao
Management monitors operating results of its business segments separately for the purpose of
making decisions about resource allocation and performance assessment. Segment performance is
evaluated based on operating profit or loss and is measured consistently with profit and loss in the
consolidated financial statements.
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On consolidated basis, the Groups performance is evaluated based on net income for the year and
EBITDA defined as earnings before provision for income tax, interest expense, interest income,
depreciation and amortization, equity in net earnings/losses of associates and nonrecurring
gains/losses (excess of fair values of net assets acquired over acquisition cost and loss on deemed
sale and share swap of an associate).
The following table shows the reconciliation of the consolidated net income to consolidated
EBITDA for the years ended March 31, 2014, 2013 and 2012:
2014 2013 2012
Consolidated net income P=655,197,867 P=794,440,808 P=291,458,717
Equity in net losses (earnings) of
associates and joint ventures (232,818,520) (428,251,940) 37,574,331
Depreciation and amortization 205,551,974 156,430,779 144,450,351
Provision for income tax 53,358,883 42,952,904 32,227,325
Loss on deemed sale and share swap
of an associate 43,000,287
Excess of fair values of net assets
acquired over acquisition cost
from a business combination (32,681,078)
Interest income (12,199,579) (34,723,888) (16,198,233)
Interest expense 10,926,797 18,831,366 33,865,444
Consolidated EBITDA P=690,336,631 P=549,680,029 P=523,377,935
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The following tables present revenue and income information regarding geographical segments for the years ended March 31, 2014, 2013 and 2012:
March 31, 2014
Metro Manila Northern Luzon Southern Luzon Visayas Mindanao Total
Eliminations/
Adjustments Consolidated
Revenues
External revenue P=1,326,510,858 P=98,553,335 P=291,013,140 P=122,597,660 P=78,972,283 P=1,917,647,276 P = P=1,917,647,276
Intersegment revenue 265,360,474 265,360,474 (265,360,474)
Total Revenues P=1,591,871,332 P=98,553,335 P=291,013,140 P=122,597,660 P=78,972,283 P=2,183,007,750 (P=265,360,474) P=1,917,647,276
Results
Income before other income and income tax P=275,282,351 P=22,893,182 P=82,463,620 P=21,582,488 P=18,024,519 P=420,246,160 P=52,529,050 472,775,210
Equity in net earnings of associates and joint ventures 232,818,520 232,818,520
Interest income 11,723,181 113,239 185,071 149,380 28,708 12,199,579 12,199,579
Interest expense (5,272,839) 865,014 (117) (6,518,855) (10,926,797) (10,926,797)
Other income 317,046,248 188,599 144,353 1,310,978 414,327 319,104,505 (317,414,267) 1,690,238
Provision for income tax (44,428,429) 94,764 (1,280,365) (45,614,030) (7,744,853) (53,358,883)
Net Income P=554,350,512 P=24,060,034 P=82,887,691 P=15,243,626 P=18,467,554 P=695,009,417 (P=39,811,550) P=655,197,867
EBITDA P=690,336,631
March 31, 2013
Eliminations/
Revenues
External revenue P=1,208,089,762 P =83,916,512 P =260,328,160 P =44,593,451 P =73,010,240 P=1,669,938,125 P = P=1,669,938,125
Total Revenues P=1,396,948,293 P =83,916,512 P =260,328,160 P =44,593,451 P =73,010,240 P=1,858,796,656 (P =188,858,531) P=1,669,938,125
Results
Income before other income and income tax P =187,741,026 P =18,229,373 P =76,496,819 P=8,726,225 P=8,218,233 P =299,411,676 P =90,298,030 P =389,709,706
Equity in net earnings of associates and joint ventures 428,251,940 428,251,940
Interest income 34,373,420 186,445 99,869 27,165 36,989 34,723,888 34,723,888
Interest expense (18,814,558) (13,729) (3,079) (18,831,366) (18,831,366)
Other income 161,316,030 59,269 161,375,299 (157,835,755) 3,539,544
Provision for income tax (27,878,099) (27,878,099) (15,074,805) (42,952,904)
Net Income P =336,737,819 P =18,402,089 P =76,655,957 P=8,753,390 P=8,252,143 P =448,801,398 P =345,639,410 P =794,440,808
EBITDA P =549,680,029
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March 31, 2012
(As restated - see Note 2)
Eliminations/
Revenues
External revenue P = 1,123,478,215 P =98,414,257 P =224,546,316 P =45,417,519 P =84,930,758 P=1,576,787,065 P = P=1,576,787,065
Total Revenues P=1,332,343,160 P =98,414,257 P =224,546,316 P =45,417,519 P =84,930,758 P=1,785,652,010 (P =208,862,902) P=1,576,787,065
Results
Income before other income and income tax P =99,177,135 P =27,249,774 P =45,422,923 P=5,871,809 P= 13,006,153 P =190,727,794 P =176,403,295 P =367,131,089
Equity in net losses of associates and joint ventures (37,574,331) (37,574,331)
Interest income 26,527,234 200,924 405,493 38,661 58,851 27,231,163 (11,032,930) 16,198,233
Interest expense (37,610,943) (1,243,365) (33,000) (28,953) (38,916,261) 5,050,817 (33,865,444)
Other income 121,968,535 121,968,535 (110,172,040) 11,796,495
Benefit from (provision for) income tax (30,378,684) 28,303 3,471 46,229 146,944 (30,153,737) (2,073,588) (32,227,325)
Net Income P =179,683,277 P =26,235,636 P =45,798,887 P=5,956,699 P =13,182,995 P =270,857,494 P =20,601,223 P =291,458,717
EBITDA P =523,377,935
The following tables present certain assets and liabilities information regarding geographical segments as of March 31, 2014 and 2013:
March 31, 2014
Eliminations/
Assets and Liabilities
Segment assets
(a)
P=5,202,405,725 P=53,145,292 P=228,706,052 P=443,971,443 P=88,531,959 P=6,016,760,471 P=514,343,507 P=6,531,103,978
Investments in and advances to associates and joint ventures 16,734,825,149 12,500,000 16,747,325,149 (15,215,273,562) 1,532,051,587
Goodwill 202,843,745 202,843,745
Deferred tax assets 22,677,630 259,189 1,313,080 7,347,603 1,506,475 33,103,977 33,103,977
Total Assets P=21,959,908,504 P=53,404,481 P=242,519,132 P=451,319,046 P=90,038,434 P=22,797,189,597 (P=14,498,086,310) P=8,299,103,287
Segment liabilities
(b)
P=348,157,859 P=6,787,713 (P=31,315,814) 168,937,809 P=6,956,942 499,524,509 411,667,418 911,191,927
Loans payable 180,000,000 180,000,000 180,000,000
Pension liabilities 14,885,926 2,852,352 14,595,697 38,843,393 4,713,387 75,890,755 (15,015,487) 60,875,268
Obligations under finance lease 18,866,097 18,866,097 18,866,097
Total Liabilities P=561,909,882 P=9,640,065 (P=16,720,117) P=207,781,202 P=11,670,329 P=774,281,361 P=396,651,931 P=1,170,933,292
Other Segment Information
Capital expenditure -
Property and equipment P=1,185,736,216
Depreciation and amortization 205,551,974
Noncash expenses other than depreciation and amortization 74,057,903
(a)
Segment assets exclude goodwill, investments in and advances to associates and joint ventures and deferred tax assets.
(b)
Segment liabilities exclude short-term loans, pension liabilities and obligations under finance lease.
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March 31, 2013
Eliminations/
Assets and Liabilities
Segment assets
(a)
P =20,721,112,617 P =53,378,214 P =254,742,544 P =51,950,808 P =85,465,639 P =21,166,649,822 (P =15,769,230,815) P=5,397,419,007
Goodwill 200,258,253 200,258,253
Investments in and advances to associates and joint ventures 871,217,782 871,217,782 2,025,850,775 2,897,068,557
Deferred tax assets 6,808,554 259,189 1,313,080 124,751 8,505,574 8,505,574
Total Assets P =21,599,138,953 P =53,637,403 P =256,055,624 P =52,075,559 P =85,465,639 P =22,046,373,178 (P =13,543,121,787) P=8,503,251,391
Segment liabilities
(b)
P =327,910,280 P =25,442,403 P =66,682,255 P=3,174,829 P =20,537,146 P =443,746,913 (P =118,030,879) P =325,716,034
Pension liabilities 10,958,661 1,464,070 6,822,139 799,207 2,376,031 22,420,108 22,420,108
Obligations under finance lease 19,759,058 19,759,058 19,759,058
Total Liabilities P =358,627,999 P =26,906,473 P =73,504,394 P=3,974,036 P =22,913,177 P =485,926,079 (P =118,030,879) P =367,895,200
Other Segment Information
Capital expenditure -
Property and equipment P=1,634,537,504
Depreciation and amortization 156,430,779
Noncash expenses other than depreciation and amortization 58,779,699
(a)
Segment assets exclude goodwill, investments in and advances to associates and joint ventures and deferred tax assets.
(b)
Segment liabilities exclude short-term loans, pension liabilities and obligations under finance lease.
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5. Significant Accounting Judgments, Estimates and Assumptions
The preparation of the consolidated financial statements requires management to make judgments,
estimates and assumptions that affect the amounts reported in the consolidated financial
statements and related notes. The estimates used are based upon managements evaluation of
relevant facts and circumstances as at the date of the consolidated financial statements, giving due
consideration to materiality. Actual results could differ from such estimates.
The Group believes the following represents a summary of these significant judgments, estimates
and assumptions and related impact and associated risks in its consolidated financial statements.
Judgments
In the process of applying the Groups accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on the
amounts recognized in the consolidated financial statements.
Operating Lease Commitments - Group as Lessee. The Group has entered into various operating
lease agreements and has determined, based on evaluation of the terms and conditions of the
arrangements, that it has not acquired significant risks and rewards of ownership of the leased
properties because the lease agreements do not transfer to the Group the ownership over the leased
assets at the end of the lease term and do not provide with a bargain purchase option over the
leased assets and accounts for these arrangements as operating leases.
Rental expense amounted to P =136.6 million, P =143.3 million and P =145.2 million in 2014, 2013 and
2012, respectively (see Notes 20, 22 and 25).
Operating Lease Commitments - Group as Lessor. The Group has entered into lease of various
investment properties and has determined, that it retains all the significant risks and rewards of
ownership of the leased properties because the lease agreements do not transfer ownership of the
leased assets to the lessee at the end of the lease term and do not give the lessee a bargain purchase
option over the leased assets and accounts for these agreements as operating leases.
Rental income amounted to P=10.8 million, P=4.6 million and P=5.4 million in 2014, 2013 and 2012,
respectively (see Notes 11, 25 and 27).
Finance Lease Commitments - Group as Lessee. The Group has entered into finance lease
agreements covering its computer equipment and peripherals and transportation equipment and
has determined, that it bears substantially all the risks and benefits incidental to ownership of the
said properties which are on finance lease agreements.
The carrying value of the obligations under finance lease amounted to P=18.9 million and
P=19.8 million as at March 31, 2014 and 2013, respectively. Interest incurred amounted to
P =1.3 million, P =1.5 million and P =1.3 million in 2014, 2013 and 2012, respectively (see Notes 19
and 25).
Transfers of Investment Properties. The Group has made transfers to investment properties after
determining that there is a change in use, evidenced by ending of owner-occupation,
commencement of an operating lease to another party or ending of construction or development.
Transfers are also made from investment properties when there is a change in use, evidenced by
commencement of owner-occupation or commencement of development with a view to sale.
These transfers are recorded using the carrying amount of the investment properties at the date of
change in use.
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There were no transfers to (from) investment properties in 2014 and 2013. Transfers to (from)
investment properties amounted to P=24.9 million and (P=16.3 million) in 2012.
Determination of Control Arising from a Management Contract. The Group has existing
management contracts with STI-Kalookan and STI-Novaliches. Management has concluded that the
Group in substance has the control over the financial and operating policies and has the means to
obtain majority of the benefits of STI-Kalookan and STI-Novaliches, both non-stock corporations,
through the management contract. Thus, management has assessed that it has control over
STI-Kalookan and STI-Novaliches and accordingly, consolidates the two entities effective from the
date control was obtained.
Classification of Interests in Joint Ventures. Under PFRS 11, the Group classified its interest in joint
arrangements as either joint operations or joint ventures depending on its rights to the assets and
obligations for the liabilities of the arrangements. When making this assessment, management
considers the structure of the arrangements, the legal form of any separate vehicles, the contractual
terms of the arrangements and other facts and circumstances. Management re-evaluated its
involvement in its joint arrangements and assessed that it has joint control over PHEI and STIPHNS
and accounted for such entities as joint ventures (see Note 13).
Contingencies. The Group is currently a defendant to a number of cases involving claims and
disputes mainly related to labor. The Groups estimate of the probable costs for the resolution of
these claims has been developed in consultation with outside legal counsels handling defense in
these matters and is based upon an analysis of potential results. Management and its legal
counsels believe that the Group has substantial legal and factual bases for its position and are of
the opinion that losses arising from these legal actions, if any, will not have a material adverse
impact on the consolidated financial statements. It is possible, however, that future results of
operations could be materially affected by changes in the estimates or in the effectiveness of
strategies relating to these proceedings (see Note 29).
Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the
financial reporting date that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
Fair Value of Financial Instruments. The Group discloses for each class of financial instruments
the fair value of that class of assets and liabilities in a way that permits it to be compared with the
corresponding carrying amount in the consolidated statements of financial position, which requires
the use of accounting judgment and estimates. Significant components of fair value measurement
are determined using verifiable objective evidence (i.e., interest rates, volatility rates), and timing
and amount of changes in fair value would differ with the valuation methodology used.
Estimating Allowance for Impairment Loss on Financial Assets. The Group reviews its
receivables and advances to associates and joint ventures and other related parties at each
reporting date to assess whether an allowance for doubtful accounts should be recorded in the
consolidated statement of financial position. In particular, judgment by management is required in
the estimation of the amount and timing of future cash flows when determining the level of
allowance required. Such estimates are based on assumptions about a number of factors and
actual results may differ, resulting in future changes to the allowance.
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In addition to specific allowance against individually significant receivables and advances, the
Group also makes a collective impairment allowance against exposures which, although not
specifically identified as requiring a specific allowance, have a greater risk of default than when
originally granted. This collective allowance is based on any deterioration in the internal rating of
the receivables and advances since it was granted or acquired. These internal ratings take into
consideration factors such as any deterioration in industry, as well as identified structural
weaknesses or deterioration in cash flows.
Total receivables (including noncurrent receivables), net of allowance for doubtful accounts
amounted to P =761.3 million and P =714.8 million as at March 31, 2014 and 2013, respectively.
Provision for impairment loss on receivables (net of reversals) recognized amounted to P=57.6
million, P =34.5 million and P =41.0 million in 2014, 2013 and 2012, respectively (see Notes 7 and
22).
Advances to associates and joint ventures, net of allowance for impairment loss, amounted to
P=21.2 million and P =45.5 million as at March 31, 2014 and 2013, respectively. Provision for
(reversal of ) impairment in value of advances recognized amounted to (P =0.7 million), P =4.1
million and P =3.0 million in 2014, 2013 and 2012, respectively (see Notes 12 and 22).
Estimating Allowance for Inventory Obsolescence. The allowance for obsolescence relating to
inventories consists of provision based on the aging of inventories and other factors that may
affect recoverability of these assets. The allowance is established by charges to income in the
form of excess of cost over net realizable value of inventories.
Inventories at net realizable value amounted to P =37.8 million and P =34.7 million as at March 31,
2014 and 2013, respectively. Provision for inventory obsolescence in the form of excess of cost
over net realizable value of inventories amounted to P =2.4 million, P =0.2 million and P =0.7 million in
2014, 2013 and 2012, respectively (see Notes 8 and 22).
Impairment of AFS Financial Assets. The Group treats AFS financial assets as impaired when
there has been a significant or prolonged decline in the fair value below its cost or where other
objective evidence of impairment exists. The determination of what is significant or
prolonged requires judgment. The Group treats significant generally as 20.00% or more of
the original cost of investment, and prolonged, greater than six months. In addition, the Group
evaluates other factors, including normal volatility in share price for quoted equities and the future
cash flows and the discount factors for unquoted equities.
No impairment loss for AFS financial assets was recognized in profit or loss in 2014, 2013 and
2012. The carrying values of AFS financial assets amounted to P =50.6 million, P=4.7 million and
P=5.0 million as at March 31, 2014 and 2013 and April 1, 2012, respectively (see Note 14).
Estimating Useful Lives of Nonfinancial Assets. Management determines the estimated useful
lives and the related depreciation and amortization charges for its property and equipment,
investment properties, excluding land, and intangible assets based on the period over which the
property and equipment, investment properties and intangible assets are expected to provide
economic benefits. Managements estimation of the useful lives of property and equipment,
investment properties and intangible assets is based on a collective assessment of industry
practice, internal technical evaluation, and experience with similar assets while for intangible
assets with a finite life, estimated useful life is based on the contractual term of the intangible
assets. These estimations are reviewed periodically and could change significantly due to physical
wear and tear, technical or commercial obsolescence and legal or other limits on the use of the
assets. Management will increase the depreciation and amortization charges where useful lives
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*SGVFS008027*
are less than previously estimated. A reduction in the estimated useful lives of property and
equipment, investment properties and intangible assets would increase recorded expenses and
decrease noncurrent assets.
There were no changes in the estimated useful lives of the Groups property and equipment,
investment properties and intangible assets in 2014, 2013 and 2012.
Impairment of Nonfinancial Assets. An impairment review is performed whenever events or changes
in circumstances indicate that the carrying amount of a nonfinancial asset may not be recoverable or
that the previously recognized impairment loss may no longer exist or may have decreased. The
factors that the Group considers important which could trigger an impairment review include the
following:
significant underperformance relative to expected historical or projected future operating results;
significant changes in the manner of use of the acquired assets or the strategy for overall business;
significant negative industry or economic trends;
the dividend exceeds the total comprehensive income of the associate in the period the dividend is
declared; or
the carrying amount of the investment in an associate in the parent company financial statements
exceeds the carrying amount in the consolidated financial statements of the investees net assets,
including associated goodwill.
At each financial reporting date, the Group assesses whether there are any indicators of impairment.
Only if indicators of impairment are present will the Group perform the impairment testing.
The Group recognizes an impairment loss whenever the carrying amount of an asset exceeds its
recoverable amount. The recoverable amount is computed using the value in use approach.
Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash
generating unit to which the asset belongs.
While it is believed that the assumptions used in the estimation of fair values reflected in the
consolidated financial statements are appropriate and reasonable, significant changes in these
assumptions may materially affect the assessment of recoverable value and any resulting impairment
loss would have a material adverse impact on the results of operations.
Nonfinancial assets that are subjected to impairment testing when impairment indicators are present
are as follows:
March 31,
2014
March 31,
2013
Property and equipment (see Note 10) 4,421,253,356 P=2,635,275,971
Investment properties (see Note 11) 40,197,895 39,325,291
Investments in associates and joint ventures (see Note 12) 1,510,875,712 2,851,546,573
Condominium deposit (see Note 15) 397,262,833
Intangible assets (see Note 15) 29,898,142 7,711,712
Advances to suppliers (see Note 15) 15,786,333 5,314,902
Land (see Note 15) 387,862,833
No impairment loss was recognized in 2014, 2013 and 2012.
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*SGVFS008027*
Goodwill. Acquisition method requires extensive use of accounting estimates and judgments to
allocate the purchase price to the fair market values of the acquirees identifiable assets, liabilities
and contingent liabilities at the acquisition date. It also requires the acquirer to recognize any
goodwill as the excess of the acquisition cost over the fair value of the acquirees identifiable
assets, liabilities and contingent liabilities. The Groups business acquisitions have resulted in
goodwill which is subject to an annual impairment testing. This requires an estimation of the
value in use of the cash-generating units to which the goodwill is allocated. Estimating the value
in use requires the Group to make an estimate of the expected future cash flows from the
cash-generating unit and also to choose a suitable discount rate in order to calculate the present
value of those cash flows.
The recoverable amounts of cash generating units have been determined based on value in use
calculations using cash flow projections covering a five-year period based on long-range plans
approved by management.
Management used an appropriate discount rate for cash flows equal to the prevailing rates of
return for a Group having substantially the same risks and characteristics. Management used the
weighted average cost of capital wherein the source of the costs of equity and debt financing are
weighted. The weighted average cost of capital is the overall required return on the Group. A
discount rate of 12.00% was used as at March 31, 2014 and 2013 and April 1, 2012. The Groups
growth rates in extrapolating its cash flows beyond the period covered by its recent budgets ranged
from 8.00% to 10.00%.
Other assumptions used in the calculations for impairment testing of goodwill are projection rates
of new students, retention rates of old students, tuition fee increase rates and inflation rates.
Current and historical transactions have been used as indicators of future transactions.
Management believes that any reasonable change in any of the above key assumptions on which
the recoverable amount is based on would not cause the carrying value of the goodwill to
materially exceed its recoverable amount.
No provision for impairment loss was recognized in 2014 and 2013. Impairment loss recognized
in 2012 amounted to P=3.4 million. Goodwill, net of allowance for impairment loss, amounted to
P=202.8 million and P =200.3 million as at March 31, 2014 and 2013, respectively (see Notes 15
and 22).
Realizability of Deferred Tax Assets. Deferred tax assets are recognized for all deductible
temporary differences and carryforward benefits of NOLCO and MCIT to the extent that it is
probable that taxable profit will be available against which the deductible temporary differences
and carryforward benefits of NOLCO and MCIT can be utilized. Significant management
judgment is required to determine the amount of deferred tax assets that can be recognized, based
upon the likely timing and level of future taxable profits together with future tax planning
strategies.
Deductible temporary differences and unused NOLCO and MCIT for which no deferred tax assets
were recognized by the Group amounted to P=122.2 million and P =111.5 million as at March 31,
2014 and 2013, respectively. Deferred tax assets recognized amounted to P =33.1 million and
P=8.6 million as at March 31, 2014 and 2013, respectively (see Note 26).
Present Value of Pension Liabilities. The cost of the defined benefit pension plan as well as the
present value of the pension obligation are determined using actuarial valuations. The actuarial
valuation involves making various assumptions. These include the determination of the discount
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*SGVFS008027*
rates, future salary increases, mortality rates and future pension increases. Due to the complexity
of the valuation, the underlying assumptions and its long-term nature, defined benefit obligations
are highly sensitive to changes in these assumptions. All assumptions are reviewed at each
reporting date.
In determining the appropriate discount rate, management considers the interest rates of
government bonds that are denominated in the currency in which the benefits will be paid, with
extrapolated maturities corresponding to the expected duration of the defined benefit obligation.
Future salary increases and pension increases are based on expected future inflation rates for the
specific country.
Pension liabilities recognized amounted to P=60.9 million and P =22.4 million as at March 31, 2014
and 2013, respectively (see Note 24).
6. Cash and Cash Equivalents
This account consists of the following:
March 31,
2014
March 31,
2013
Cash on hand and in banks P=397,988,727 P=209,549,974
Cash equivalents 185,313,836 1,279,901,935
P=583,302,563 P=1,489,451,909
Cash in banks earn interest at their respective bank deposit rates. Cash equivalents are short-term
investments which are made for varying periods of up to three months, depending on the
immediate cash requirements of the Group, and earn interest at their respective short-term
investment rates.
Interest earned from cash in banks and cash equivalents amounted to P=11.0 million, P =19.0 million
and P =9.8 million for the years ended March 31, 2014, 2013 and 2012, respectively (see Note 19).
7. Receivables
This account consists of:
March 31,
2014
March 31,
2013
Tuition and other school fees P=276,546,802 P=159,127,235
Educational services 56,155,911 48,276,130
Advances to officers and employees (see Note 27) 25,024,703 22,592,828
Current portion of advances to associates, joint
ventures and other related parties (see Note 27) 12,356,218 11,419,489
Rent and other related receivables (see Note 27) 7,575,384 12,970,554
Others 25,321,407 54,202,769
402,980,425 308,589,005
Less allowance for doubtful accounts 105,629,684 57,815,801
P=297,350,741 P=250,773,204
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The terms and conditions of the above receivables are as follows:
a. Tuition and other school fees receivables are noninterest-bearing and are normally collected
on or before the date of major examinations.
b. Educational services receivables pertain to receivables from franchisees arising from
educational services, royalty fees and other charges. These receivables are generally
noninterest-bearing and are normally collected within 40 days. Interest is charged on past-due
accounts.
Interest earned from past due accounts amounted to P=0.3 million, P =0.4 million and P =31,951
for the years ended March 31, 2014, 2013 and 2012, respectively (see Note 19).
c. For terms and conditions relating to advances to associates, joint ventures and other related
parties, refer to Note 27.
d. Advances to officers and employees are normally liquidated within one month.
e. Rent and other related receivables are normally collected within the next financial year.
f. Other receivables include receivable from CEAP and other miscellaneous receivables, and are
expected to be collected within the next financial year.
The movements in the allowance for doubtful accounts as a result of individual and collective
assessments are as follows:
March 31, 2014
Tuition
and Other
School Fees
Educational
Services Others Total
Balance at beginning of year P=46,191,864 P= P=11,623,937 P=57,815,801
Effect of business combination (see
Note 3) 33,711,471 1,510,778 35,222,249
Provisions (see Note 22) 57,648,376 57,648,376
Reclassification to advances to
associates and joint ventures
(see Note 12) (8,500,000) (8,500,000)
Write-off (36,556,742) (36,556,742)
Balance at end of year P=100,994,969 P= P=4,634,715 P=105,629,684
March 31, 2013
Tuition
and Other
School Fees
Educational
Services Others Total
Balance at beginning of year P=41,435,131 P= P=11,623,937 P=53,059,068
Write-off (29,777,305) (29,777,305)
Balance at end of year P=46,191,864 P= P=11,623,937 P=57,815,801
As at March 31, 2014 and 2013, allowance for doubtful accounts amounting to P =4.6 million and
P =11.6 million, respectively, relates to individually significant accounts that were assessed as
impaired. The remaining balance of P =101.0 million and P =46.2 million as at March 31, 2014 and
2013, respectively, relates to accounts that were collectively assessed as impaired.
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8. Inventories
March 31,
2014
March 31,
2013
At net realizable value:
Educational materials P=31,440,575 P=29,618,188
Promotional materials 5,539,944 4,494,601
School materials and supplies 852,948 627,314
P=37,833,467 P=34,740,103
The cost of inventories carried at net realizable value amounted to P=48.0 million and P =42.7 million
as at March 31, 2014 and 2013, respectively. Provision for inventory obsolescence in the form of
excess of cost over net realizable value of inventories amounted to P=2.4 million, P=0.2 million and
P =0.7 million in 2014, 2013 and 2012, respectively (see Note 22).
Inventories charged to cost of educational materials and supplies sold for the years ended
March 31, 2014, 2013 and 2012 amounted to P=53.3 million, P=49.5 million and P =39.5 million,
respectively (see Note 21).
9. Prepaid Expenses and Other Current Assets
March 31,
2014
March 31,
2013
Prepaid taxes P=85,698,938 P=18,426,069
Prepaid rent (see Note 25) 10,609,722 7,260,566
Excess contributions to CEAP (see Note 24) 3,233,030 3,645,974
Deposits 1,831,769 1,379,769
Prepaid license and insurance 589,772 1,767,813
Others 5,038,144 4,987,602
P=107,001,375 P=37,467,793
Prepaid taxes represent excess creditable withholding tax which may be applied against future
income tax, and other internal revenue taxes, which mainly arose from the acquisition of office
condominium units from TechZone (see Notes 15 and 27).
Prepaid rent represents advance rent paid for the lease of land and building, which shall be applied
to the monthly rental in accordance with the lease agreements (see Note 25).
Excess contributions to CEAP pertains to contributions made by De Los Santos - STI College to
CEAP which are already considered forfeited pension benefits of those employees who can no
longer avail their pension benefits or when De Los Santos - STI College has already advanced the
benefits of qualified employees (see Note 24). These will be recognized as expense depending on
the required future contributions to the fund.
Prepaid license represents software license costs which are amortized over one year.
Deposits pertain to security deposits made for warehouse and office space rentals, which expire
within one year, to be applied against future lease payments in accordance with the respective
lease agreements (see Note 25).
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10. Property and Equipment
The rollforward analysis of this account follows:
March 31, 2014
Land Buildings
Office
and School
Equipment
Office
Furniture
and Fixtures
Leasehold
Improvements
Transportation
Equipment
(see Note 25)
Computer
Equipment
and
Peripherals
Library
Holdings
Construction
In Progress Total
Cost, Net of Accumulated Depreciation and
Amortization
Balance at beginning of year P=1,296,723,152 P=696,730,272 P=61,520,527 P=31,012,008 P=93,491,471 P=22,238,184 P=28,880,111 P=30,004,141 P=374,676,105 P=2,635,275,971
Additions 60,098,428 147,410,908 76,706,514 40,061,020 20,098,796 13,402,650 27,651,209 226,895 800,079,796 1,185,736,216
Effect of business combination (see Note 3) 494,887,999 248,256,609 4,906,441 509,284 64,163 1,886,415 1,902,490 752,413,401
Reclassifications 48,972,001 921,159,367 (5,599) 5,599 3,332,693 (118,473) (924,373,587) 48,972,001
Disposal (69,857) (17,314) (10,128) (994,104) (765) (1,092,168)
Depreciation and amortization
(see Notes 20 and 22) (75,428,552) (32,842,432) (16,267,375) (35,815,307) (9,615,292) (22,091,737) (7,991,370) (200,052,065)
Balance at end of year P=1,900,681,580 P=1,938,128,604 P=110,215,594 P=55,303,222 P=81,161,688 P=25,031,438 P=36,325,998 P=24,022,918 P=250,382,314 P=4,421,253,356
At March 31, 2014:
Cost P=1,900,681,580 P=2,355,082,628 P=357,709,729 P=165,672,192 P=346,890,623 P=68,986,903 P=369,693,500 P=165,972,882 P=250,382,314 P=5,981,072,351
Accumulated depreciation and amortization 416,954,024 247,494,135 110,368,970 265,728,935 43,955,465 333,367,502 141,949,964 1,559,818,995
Net carrying amount P=1,900,681,580 P=1,938,128,604 P=110,215,594 P=55,303,222 P=81,161,688 P=25,031,438 P=36,325,998 P=24,022,918 P=250,382,314 P=4,421,253,356
March 31, 2013
Land Buildings
Office
and School
Equipment
Office
Furniture
and Fixtures
Leasehold
Improvements
Transportation
Equipment
(see Note 25)
Computer
Equipment
and
Peripherals
Library
Holdings
Construction
In Progress Total
Cost, Net of Accumulated Depreciation and
Amortization
Balance at beginning of year P =648,949,537 P =489,952,915 P =84,054,171 P =26,551,149 P =90,149,525 P =20,830,918 P =35,817,767 P =15,802,480 P =132,120,932 P=1,544,229,394
Additions 1,035,636,448 113,903,997 5,571,344 16,164,912 36,937,557 13,156,923 17,829,902 20,660,316 374,676,105 1,634,537,504
Reclassification to other noncurrent assets
(see Note 15) (387,862,833) (387,862,833)
Reclassifications 132,120,932 (132,120,932)
Disposal (1,172,501) (1,172,501)
(see Notes 20 and 22) (39,247,572) (28,104,988) (11,704,053) (33,595,611) (10,577,156) (24,767,558) (6,458,655) (154,455,593)
Balance at end of year P=1,296,723,152 P =696,730,272 P =61,520,527 P =31,012,008 P =93,491,471 P =22,238,184 P =28,880,111 P =30,004,141 P =374,676,105 P=2,635,275,971
At March 31, 2013:
Cost P=1,296,723,152 P =927,986,992 P =262,656,033 P =122,600,237 P =337,876,133 P =65,416,128 P =308,398,041 P =82,171,080 P =374,676,105 P=3,778,503,901
Accumulated depreciation and amortization 231,256,720 201,135,506 91,588,229 244,384,662 43,177,944 279,517,930 52,166,939 1,143,227,930
Net carrying amount P=1,296,723,152 P =696,730,272 P =61,520,527 P =31,012,008 P =93,491,471 P =22,238,184 P =28,880,111 P =30,004,141 P =374,676,105 P=2,635,275,971
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Additions
Acquisitions. In 2014, the Group acquired land and a building located in Batangan, Batangas
amounting to P=122.5 million. These properties will be the new site of STI-Batangas.
In 2013, the Group acquired land located in Cainta, Rizal, Las Pias City, Quezon City, Valencia
and Caloocan City, aggregating to P =1,035.6 million. These properties will be the new sites of the
schools of the Group in the area mentioned.
Property and Equipment under Construction. As at March 31, 2014, the construction in-progress
account includes costs incurred for the construction of the school buildings and improvements
located in Batangas, Calamba, Quezon City and Lucena. The related construction contracts
amounted to P =1,248.8 million, inclusive of materials, cost of labor and overhead and all other
costs necessary for the proper execution of the works in the next fiscal year.
As at March 31, 2013, the construction in progress account includes costs incurred for the
construction of the school buildings and improvements located in Cainta, Rizal and Caloocan City.
The related construction contracts amounted to P=1,057.2 million, inclusive of materials, cost of
labor and overhead and all other costs necessary for the proper execution of the works in the next
two years. These were completed and reclassified as part of the Buildings account in 2014.
Capitalized Borrowing Costs. Total borrowing costs capitalized as part of property and equipment
amounted to nil and P =19.7 million as at March 31, 2014 and 2013, respectively. Average interest
capitalization rate is at 3.3% in 2013 which is the effective rate of the general borrowing.
Finance Leases
Certain transportation equipments were acquired under finance lease agreements. The net book
value of this equipment amounted to P =16.4 million and P =15.9 million as at March 31, 2014 and
2013, respectively (see Note 25).
Collaterals
As at March 31, 2014, property and equipment with a carrying value amounting to
P =27.9 million are pledged as security to the short-term loan of the Group (see Note 16), while
transportation equipment, which were acquired under finance lease, are pledged as security for the
related finance lease liabilities as at March 31, 2014 and 2013.
11. Investment Properties
The rollforward analysis of this account follows:
March 31, 2014
Land
Condominium
units Total
Cost:
Balance at beginning of year P=23,986,424 P=32,758,893 P=56,745,317
Additions 3,981,559 3,981,559
Balance at end of year 23,986,424 36,740,452 60,726,876
Accumulated depreciation:
Balance at beginning of year 17,420,026 17,420,026
Depreciation (see Note 22) 3,108,955 3,108,955
Balance at end of year 20,528,981 20,528,981
Net book value P=23,986,424 P=16,211,471 P=40,197,895
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*SGVFS008027*
March 31, 2013
Land
Condominium
units Total
Cost:
Disposal (4,535,000) (3,965,000) (8,500,000)
Accumulated depreciation:
Depreciation (see Note 22) 1,975,186 1,975,186
Disposal (2,693,187) (2,693,187)
Net book value P=23,986,424 P=15,338,867 P=39,325,291
Land
Level 3 fair value of land had been derived using the sales comparison approach. The sales
comparison approach is a comparative approach to value that considers the sales of similar or
substitute properties and related market data and establishes a value estimate by process involving
comparison. Listings and offerings may also be considered. Sales prices of comparable land in
close proximity (external factor) are adjusted for differences in key attributes (internal factors)
such as location and size.
The following table shows the valuation technique used in measuring the fair value of the land, as
well as the significant unobservable inputs used:
Fair value at March 31, 2014 P=37,070,000
Valuation technique Sales comparison approach
Unobservable input Net price per square meter
Relationship of unobservable inputs to
fair value
The higher the price per square
meter, the higher the fair value
The highest and best use of the land is commercial utility.
Condominium Units
Level 3 fair values of buildings have also been derived using the sales comparison approach.
The following table shows the valuation technique used in measuring the fair value of the
building, as well as the significant unobservable inputs used:
Fair value at March 31, 2014 P=86,435,200
Valuation technique Sales comparison approach
Unobservable input Net price per square meter
Relationship of unobservable inputs to
fair value
The higher the price per square
meter, the higher the fair value
The highest and best use of the condominium units is commercial utility (commercial/office
condominium building).
Collateral
As at March 31, 2014, investment properties with a carrying value amounting to P =13.9 million are
pledged as security to the short-term loans of the Group (see Note 16).
Rental income earned from investment properties amounted to P=10.8 million, P =4.6 million and
P=5.4 million in 2014, 2013 and 2012, respectively (see Notes 25 and 27). Direct operating
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*SGVFS008027*
expenses, including repairs and maintenance, arising from investment properties amounted to
P =0.4 million, P =0.7 million and P =0.3 million in 2014, 2013 and 2012, respectively.
12. Investments in and Advances to Associates and Joint Ventures
The details and movements in this account follow:
March 31,
2014
March 31,
2013
(As restated -
see Note 2)
April 1,
2012
(As restated -
see Note 2)
Investments in associates and joint
ventures:
Acquisition cost:
Conversion of advances 41,587,726
Disposal (76,000,000) (710,338)
Accumulated equity in net earnings:
Balance at beginning of year,
as previously reported 680,371,081 261,722,342 303,031,267
Effect of adoption of PAS 19R
(see Note 2) (1,315,903) (967,004)
Balance at beginning of year, as
restated 679,055,178 260,755,338 303,031,267
Equity in net earnings (losses) 232,818,520 428,251,940 (37,574,331)
Disposal (2,749,498)
Dividends received (9,952,100) (1,952,100)
Reclassification (see Note 14) 6,893,184
Share in associates other
comprehensive income:
Balance at beginning of year, as
previously reported 1,930,173,711 1,083,699,331 173,867,841
Effect of adoption of PAS 19R
(see Note 2) (6,934,916) 3,003,867
Balance at beginning of year,
as restated 1,923,238,795 1,086,703,198 173,867,841
Unrealized MTM gain (loss) (1,496,110,186) 846,474,380 909,831,490
Remeasurement gain (loss) on
pension liability (8,272,379) (9,938,783) 3,003,867
Balance at end of year
(Notes 3 and 18) 418,856,230 1,923,238,795 1,086,703,198
1,510,875,712 2,851,546,573 1,555,123,410
Advances (see Note 27) 36,123,762 52,689,744 38,400,724
Less allowance for impairment loss 14,947,887 7,167,760 3,047,124
21,175,875 45,521,984 35,353,600
P=1,532,051,587 P=2,897,068,557 P=1,590,477,010
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The detailed carrying values of the Groups investments in and advances to associates and joint
ventures are as follows:
2014
Investments Advances Total
Associates:
STI Investments P=1,500,471,108 P= P=1,500,471,108
STI-Alabang 14,326,499 14,326,499
GROW 10,597,308 10,597,308
STI-Accent (20,166,002) 35,923,762 15,757,760
STI-Marikina 1,650,967 1,650,967
Synergia 46,969 46,969
Joint ventures:
PHEI (see Note 13) 3,948,863 200,000 4,148,863
1,510,875,712 36,123,762 1,546,999,474
Allowance for impairment loss
Reclassification from
receivables (see Note 7) 8,500,000 8,500,000
Reversal (see Note 22) (719,873) (719,873)
P=1,510,875,712 P=21,175,875 P=1,532,051,587
2013
Investments Advances Total
Associates:
STI Investments P=2,759,989,922 P= P=2,759,989,922
De Los Santos - General Hospital 59,440,352 59,440,352
STI-Accent (20,166,002) 27,333,762 7,167,760
De Los Santos - STI Megaclinic 18,352,722 24,396,410 42,749,132
STI-Alabang 14,326,499 216,000 14,542,499
GROW 10,529,778 143,572 10,673,350
STI-Marikina 1,042,897 1,042,897
Synergia 46,969 46,969
Joint ventures:
PHEI 6,999,009 600,000 7,599,009
STI-PHNS 984,427 984,427
2,851,546,573 52,689,744 2,904,236,317
Allowance for impairment loss
P=2,851,546,573 P=45,521,984 P=2,897,068,557
Information about and major transactions of significant indirect associates are discussed below:
STI Investments. STI Investments is a holding company that holds investments in PhilPlans,
PhilHealth Care, Inc. (PhilCare) and Banclife Insurance Co., Inc. (Banclife). PhilPlans is a
leading pre-need company, providing innovative pension, education and life plans while PhilCare
provides a multi-service healthcare program that makes available to its clients a comprehensive
healthcare benefits package that provides quality healthcare services at a cost-efficient price.
Banclife is engaged in life insurance business in the Philippines. In October 2013, PhilPlans
acquired 65% of Rosehills Memorial Management Philippines, Inc. (RMMI). RMMI is presently
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*SGVFS008027*
engaged in the operation and management of a memorial park, memorial and internet services and
sale of memorial products. In 2013, STI Investments acquired 70% equity interest in Philippine
Life Financial Assurance Corporation (PhilLife, formerly AsianLife and General Assurance
Corporation). PhilLife is engaged in the business of life insurance and, in particular, to grant or
effect assurances of all kinds of the payments of money by way of single payment or by several
payments, or by way of immediate or deferred annuities upon the death of or upon attaining a
given age by any person or persons.
Condensed financial information for STI Investments is as follows:
2014 2013
Current assets P=17,648,121,501 P=4,817,840,974
Noncurrent assets 27,722,263,499 46,402,910,790
Current liabilities 37,547,030,692 36,917,889,979
Noncurrent liabilities 82,847,336 344,253,638
Total equity 7,740,506,972 13,958,608,147
Less equity attributable to equity holders of non-
controlling interests 238,151,432 158,658,537
Equity attributable to equity holders of the parent
company 7,502,355,540 13,799,949,610
Proportion of the Groups ownership 20% 20%
Carrying amount of the investment P=1,500,471,108 P=2,759,989,922
Revenues P=7,161,375,046 P=8,393,171,350
Net income 1,252,149,077 2,220,567,110
Other comprehensive income (loss) (7,524,711,486) 4,182,128,852
Total comprehensive income (6,272,562,409) 6,402,695,962
Less total comprehensive income attributable to
equity holders of non-controlling interests 25,031,656 27,840,525
Total comprehensive income attributable to equity
holders of the parent company (6,297,594,065) 6,374,855,437
Proportion of the Groups ownership 20% 20%
Share in total comprehensive income (P=1,259,518,813) P=1,274,971,087
De Los Santos - General Hospital. De Los Santos General Hospital is primarily engaged in the
operation, managing and maintenance of hospitals, clinics, medical and chemical laboratories.
De Los Santos - STI Megaclinic. De Los Santos - STI Megaclinic was organized primarily to
establish, maintain, adopt and engage in the business of offering, providing and promoting
medical services to the general public through accessible, economical and private clinics, health
and treatment centers, together with the professional management of the services rendered by
licensed and competent physicians, surgeons, medical specialists within the said clinics, health and
treatment centers.
As a result of the Share Swap transaction discussed in Note 14, the Groups investments in De Los
Santos - General Hospital and De Los Santos - STI Megaclinic were diluted and reclassified to
AFS financial assets.
STI-Accent. STI-Accent is engaged in providing medical and other related services. In 2012, the
contract of usufruct between STI-Accent and Dr. Fe Del Mundo Medical Center Foundation Phil.,
Inc. to operate the hospital and its related healthcare service businesses for an initial term of
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*SGVFS008027*
twenty years starting July 2007 was rescinded. Thus, the Group ceased the recognition of its share
in the losses of STI-Accent. In 2013, the Group recognized its previously unrecognized equity in
losses of STI-Accent amounting to P =6.2 million as at March 31, 2012. As at March 31, 2014 and
2013, the Group provided allowance for impairment loss on its investments in STI-Accent and
related advances amounting to P =14.9 million and P =7.2 million, respectively.
Interest income earned from the Groups advances to its associates and joint ventures amounted to
P =0.9 million, P =2.6 million and P =2.0 million in 2014, 2013 and 2012, respectively (see Notes 19
and 27).
The Groups share in the net earnings (losses) of its associates, which are individually immaterial,
amounted to P =0.1 million, (P=7.5 million) and P=0.1 million in 2014, 2013 and 2012, respectively.
For terms and conditions relating to advances to associates and joint ventures, refer to Note 27.
The associates had no contingent liabilities and capital commitments as at March 31, 2014 and
2013.
13. Interests in Joint Ventures
PHEI
On March 19, 2004, STI ESG, together with University of Makati (UMak) and another
shareholder, incorporated PHEI. STI ESG and UMak each owns 40.00% of the equity of PHEI
with the balance owned by the other shareholder. PHEI is envisioned as the College of Nursing of
UMak. The following are certain key terms under the Joint Venture Agreement (JVA) dated
May 2, 2003 signed by STI ESG and UMak:
a. STI ESG shall be primarily responsible for the design of the curriculum for the Bachelors
Degree in Nursing (BSN) and Masters Degree in Nursing Informatics, with such curriculum
duly approved by the University Council of UMak;
b. UMak will allow the use of its premises as a campus of BSN while the premises of iAcademy
will be the campus of the post graduate degree; and
c. STI ESG will recruit the nursing faculty while UMak will provide the faculty for basic courses
that are non-technical in nature.
STI-PHNS
On September 16, 2005, GROW and PHNS International Holdings, Inc., a company incorporated
in Dallas, Texas, USA, entered into a JVA. Under the JVA, the parties have agreed to incorporate
a joint venture company in the Philippines and set certain terms with regards to capitalization,
organization, conduct of business and the extent of their participation in the management of affairs
of the joint venture company for the primary purpose of engaging, directly or indirectly, in the
business of medical transcription and other related business in the Philippines. In relation to the
incorporation of a joint venture company, the parties incorporated STI-PHNS. The parties each
have a 50.00% ownership of the outstanding capital stock of STI-PHNS.
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A Deed of Assignment between GROW and STI ESG was executed on May 5, 2006 to transfer all
the rights of GROW in the JVA to the latter.
STI-PHNS has already ceased operations in 2014.
The Groups share in the net earnings of its joint ventures amounted to P=4.0 million, P =3.3 million
and P =12.0 million in 2014, 2013 and 2012, respectively. The unrecognized share in the net losses
of the joint ventures amounted to P=4.1 million and nil as at March 31, 2014 and 2013,
respectively.
For terms and conditions relating to advances to associates and joint ventures, refer to Note 27.
The joint ventures had no contingent liabilities or capital commitments as at March 31, 2014 and
2013.
14. Available-for-Sale Financial Assets
March 31,
2014
March 31,
2013
Quoted equity shares - at fair value P=3,757,345 P=3,716,495
Unquoted equity shares - at cost 46,842,595 946,983
P=50,599,940 P=4,663,478
a. Quoted Equity Shares
The quoted equity shares above are traded in the PSE. These are carried at fair value with
cumulative changes in fair values presented as a separate component in equity under the
Unrealized mark-to-market gain (loss) on available-for-sale financial assets account in the
consolidated statements of financial position. The fair values of these shares are based on the
quoted market price as at financial reporting date.
The rollforward analysis of the Unrealized mark-to-market gain (loss) on available-for-sale
financial assets, gross of non-controlling interests, follows:
March 31,
2014
March 31,
2013
Balance at beginning of year (P=131,189) P=192,971
Unrealized MTM loss on AFS financial assets (409,190) (324,160)
Balance at end of year (see Note 18) (P=540,379) (P =131,189)
Dividend income earned from AFS financial assets amounted to P =0.5 million, P=0.4 million
and P =2.8 million in 2014, 2013 and 2012, respectively.
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b. Unquoted Equity Shares
Unquoted equity shares pertain to unlisted shares of stocks which the Group will continue to
carry as part of its investment. The fair value if these unquoted equity shares is not reasonably
determinable due to the unpredictable nature of future cash flows and the lack of suitable
method of arriving at a reliable fair value, hence, these are carried at cost less impairment, if
any.
c. Share Swap Transactions with Metro Pacific Investments Corporation (MPIC)
On December 21, 2012, De Los Santos - STI College, De Los Santos General Hospital, STI
ESG, the Delos Santos family (a shareholder in De Los Santos - STI College, De Los Santos
General Hospital and De Los Santos - STI Megaclinic) and MPIC entered into an investment
agreement, wherein MPIC shall invest in De Los Santos General Hospital by subscribing to
401,942 new common shares or equivalent to 51% equity interest in General Hospital, subject
to certain terms and conditions. The terms and conditions include De Los Santos - STI
Colleges sale of its 42% ownership in De Los Santos - STI Megaclinic to De Los Santos
General Hospital, in exchange for De Los Santos - STI Colleges additional subscription of
29,399 new common shares or equivalent to 4% equity interest in De Los Santos General
Hospital.
On February 6, 2013, STI ESG executed a Deed of Assignment with De Los Santos General
Hospital wherein the latter would open for subscription to STI ESG 40,000 common shares
with an aggregate par value of P =4.0 million. On the same date, De Los Santos - STI College
also executed a Deed of Assignment with the De Los General Hospital wherein the latter
would likewise open for subscription to De Los Santos - STI College 50,000 common shares
with an aggregate par value of P=5.0 million.
On June 3, 2013, STI ESG executed a deed of pledge on all of its De Los Santos General
Hospital shares in favor of Neptune Stroika Holdings, Inc., a wholly owned subsidiary of
MPIC, to cover the indemnity obligations of ESG enumerated in its investment agreement
with MPIC. The completion of MPICs subscription transpired in June 2013, following the
fulfillment of the conditions specified in the agreement. As a result, De Los Santos - STI
Megaclinic and De Los Santos General Hospital ceased to be associates of the Group effective
June 2013. Consequently, the Groups effective percentage ownership in De Los Santos
General Hospital was diluted and such was reclassified to AFS financial assets. The Group
then recognized a loss arising from the dilution amounting to P =43.0 million presented as Loss
on deemed sale and share swap of an associate in the consolidated statement of
comprehensive income.
On August 15, 2013, STI Investments purchased 40,051 shares of De Los Santos - STI
Megaclinic representing 6.06% of the total outstanding capital stock of the latter from De Los
Santos General Hospital. The Group, through De Los Santos STI College also made an
additional investment to De Los Santos General Hospital amounting to P=11.8 million. Out of
the total amount, P =5.8 million remain unpaid as at March 31, 2014, which was included as part
of Other payables under the Accounts payable and other current liabilities account.
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15. Goodwill, Intangible and Other Noncurrent Assets
March 31,
2014
March 31,
2013
Condominium deposit P=397,262,833 P=
Goodwill 202,843,745 200,258,253
Deposits (see Note 25) 38,755,552 31,962,268
Intangible assets 29,898,142 7,711,712
Deposit for future purchase of net assets 20,000,000
Advances to suppliers 15,786,333 5,314,902
Land (see Note 10) 387,862,833
Others 27,882,846 8,890,608
P=732,429,451 P=642,000,576
Land and Condominium Deposit
On March 21, 2013, STI ESGs BOD approved the transfer of a parcel of land to TechZone
Philippines, Inc. (TechZone), an entity under common control with the Group (see Note 27), in
exchange for condominium units to be developed by TechZone.
In April 2013, STI ESG and TechZone, entered into a real estate mortgage for TechZones loan
amounting to P=800.0 million. STI ESGs land was used as collateral for TechZones loan, the
proceeds of which were used by TechZone to develop the property.
In August 2013, the Deed of Absolute Sale for the sale of the land was executed between STI ESG
and TechZone in accordance with the BOD approval. Title to the land has now been transferred in
favor of TechZone and consequently, the amount was reclassified, including other directly
attributable costs, as Condominium deposit. Development of the condominium project is
likewise ongoing.
Goodwill
The rollforward analyses of this account follow:
March 31,
2014
March 31,
2013
Balance at beginning of year P=200,258,253 P=200,258,253
Additions due to business combinations (see Note 3) 2,585,492
Balance at end of year P=202,843,745 P=200,258,253
Goodwill acquired through business combinations have been allocated to the following entities
which are considered as separate CGUs:
March 31,
2014
March 31,
2013
STI-Kalookan P=64,147,877 P=64,147,877
STI-Novaliches 21,803,322 21,803,322
STI-Taft 19,030,844 19,030,844
STI-Tuguegarao (see Note 3) 13,638,360 13,638,360
STI-Dagupan (see Note 3) 6,835,818 6,835,818
(Forward)
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*SGVFS008027*
March 31,
2014
March 31,
2013
STI-Batangas P=2,585,492 P=
Merged entities:
STI-Cubao 28,327,670 28,327,670
STI-Global City 11,360,085 11,360,085
STI-Edsa Crossing 11,213,342 11,213,342
STI-Ortigas-Cainta 7,476,448 7,476,448
STI-Meycauayan 5,460,587 5,460,587
STI-Makati 3,261,786 3,261,786
STI-Las Pias 2,922,530 2,922,530
STI-Kalibo 2,474,216 2,474,216
STI-Naga 2,305,368 2,305,368
P=202,843,745 P=200,258,253
Deposits
This account includes security deposits made for utility companies and warehouse and
office space rentals to be applied against future lease payments in accordance with the respective
lease agreements.
Intangible Assets
Intangible assets represent STI ESGs new accounting software, which was implemented and
started to be amortized in June 2013. In 2014, the Group is in the process of implementing its new
school management software.
The rollforward analyses of this account follow:
March 31,
2014
March 31,
2013
Additions 24,577,384
Reclassification 190,400
Amortization (see Note 22) (2,390,954)
2014 2013
Cost P=32,289,096 P=7,711,712
Accumulated amortization 2,390,954
Net carrying amount P=29,898,142 P=7,711,712
Deposit for Future Purchase of Net Assets
On February 21, 2014, WNUs BOD approved the acquisition of net assets of Bacolod
Educational Service and Technology Center, Inc. (formerly STI College Bacolod, Inc.), which is
owned by a franchisee of STI ESG. In March 2014, WNU made an initial deposit for the purchase
amounting to P=20 million. In May 2014, the sale was consummated and the deed of absolute sale
was executed with agreed total purchase price of P=24 million.
Advances to Suppliers
Advances to suppliers pertain to advance payments made in relation to the acquisition of property
and equipment. These will be reclassified to the Property and equipment account when the
goods are received or the services are rendered.
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*SGVFS008027*
16. Short-term Loans and Long-term Debt
Short-term Loans
In 2014, STI ESG availed of short-term loans from Security Bank Corporation (Security Bank)
amounting to P =280.0 million with an interest rate of 3.75% and maturing on September 2014. The
proceeds from these short-term loans will be used for working capital purposes. STI ESG settled
P=100.0 million in November 2013. Outstanding short-term loan as of March 31, 2014 amounted
to P =180.0 million.
STI ESG availed of unsecured, interest-bearing loans from Metropolitan Bank and Trust Company
(Metrobank), Security Bank, Bank of the Philippine Islands (BPI), UnionBank of the Philippines
and Classic Finance, Inc. (an entity under common control) aggregating to P =539.0 million. These
loans bear interest rates ranging from 5.00% to 6.00%. The proceeds from these loan availments
and proceeds from issuances of STI ESG shares were used for the payment of its outstanding
loans, acquisition of various properties and construction of new school buildings. These loans
were fully settled in December 2012.
The loan agreements provide certain restrictions and requirements with respect to, among others,
change in majority ownership and management, merger or consolidation with other corporation
resulting to loss of control over the overall resulting entity and sale, lease, transfer or otherwise
disposal of all or substantially all of its assets. The Group has complied with the notice
requirement under the loan agreements with the creditor banks.
As discussed in Notes 10 and 11, as at March 31, 2014, property and equipment and investment
properties with a carrying value amounting toP=27.9 million and P=13.9 million are pledged as
security to the short-term loans of the Group.
Long-term Debt
As at March 31, 2014, long-term debt consists of:
Bank loans - China Banking Corporation (Chinabank) P=88,811,174
Loan fromWNUs former stockholders 19,485,271
Mortgage payable 109,755
108,406,200
Less current portion 49,940,706
P=58,465,494
The loan from Chinabank is secured by certain land of the Group and WNUs former owners.
These loans have maturities of 5 years or less with interest rates ranging from 4.75% to 13.60% in
2014.
The loan agreements provide certain restrictions and requirements with respect to, among others,
change in majority ownership and management, merger or consolidation with other corporation
resulting to loss of control over the overall resulting entity and sale, lease, transfer or otherwise
disposal of all or substantially all of its assets. As at March 31, 2014, WNU has complied with
these covenants. WNU has also complied with the notice requirement under the loan agreements
with the creditor banks.
As at July 9, 2014, the loan from WNUs former stockholders were already paid in full.
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*SGVFS008027*
Corporate Notes Facility
On March 20, 2014, STI ESG entered into a Corporate Notes Facility Agreement (Credit Facility
Agreement) with China Banking Corp. (Chinabank) granting STI ESG a credit facility amounting
to P =3.0 billion with a term of either 5 or 7 years. The net proceeds from the issuance of the notes
shall be used for capital expenditures and other general corporate purposes.
The interest rate shall either be floating or fixed and the term can either be 5 or 7 years depending
on the election made by STI ESG on the first drawdown date. The interest rate is benchmarked on
the Philippine Dealing System Treasury - Fixing (PDST-F) rate plus a margin of 2% or 2.5% per
annum, depending on the term, but in no case be lower than the Bangko Sentral ng Pilipinas
overnight rate plus a margin of 0.75% per annum.
The Credit Facility Agreement provides certain restrictions and requirements with respect to,
among others, change in majority ownership and management, merger or consolidation with other
corporation resulting to loss of control over the overall resulting entity and sale, lease, transfer or
otherwise disposal of all or substantially all of its assets. As at March 31, 2014, STI ESG has
complied with these covenants. STI ESG has also complied with the notice requirement under the
loan agreements with the creditor banks. The Credit Facility Agreement also contains, among
others, covenants regarding incurring additional debt and declaration of dividends, to the extent
that such will result in a breach of the required debt-to-equity and debt service coverage ratios. As
at March 31, 2014, STI ESG has complied with the above covenants. STI ESG has also complied
with the notice requirement under the loan agreements with the other creditor banks.
As of March 31, 2014, STI ESG has not drawn on the credit facility.
Interest
Interest incurred from short-term loans amounted to P =3.1 million, P =17.3 million and P=32.5 million
in 2014, 2013 and 2012, respectively (see Note 19).
17. Accounts Payable and Other Current Liabilities
March 31,
2014
March 31,
2013
Accounts payable P=310,531,279 P=174,408,815
Accrued expenses:
Rent 29,850,740 47,913,702
School-related expenses 22,151,354 18,514,400
Salaries, wages and benefits 13,257,284 9,283,290
Advertising and promotion 13,277,589 7,131,086
Contracted services 28,036,409 4,259,353
Utilities 3,766,903 4,187,980
Others 7,873,563 12,189,508
Dividends payable (see Note 18) 12,745,604 11,840,316
Unearned tuition and other school fees 9,621,664 5,342,406
Withholding taxes payable 11,504,184 8,115,060
Others 54,813,919 17,499,905
P=517,430,492 P=320,685,821
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*SGVFS008027*
The terms and conditions of the above liabilities are as follows:
a. Accounts payable are noninterest-bearing and are normally settled within a 30 to 60-day term.
b. Accrued expenses and withholding taxes payable are expected to be settled within the next
financial year.
c. Unearned tuition and other school fees are amortized over the related school term.
d. Other payables primarily include costs related to the demolition of the existing building on a
recently purchased property and equipment and nontrade payables related to purchase of
certain property. These are expected to be settled within the next financial year.
e. For terms and conditions with related parties, refer to Note 27.
18. Equity
Common Stock and Additional Paid-in Capital
Details and movement in common stock follow:
March 31, 2014 March 31, 2013
Shares Amount Shares Amount
Common Stock - P=0.50 par value
per share
Authorized 10,000,000,000 P=5,000,000,000 10,000,000,000 P=5,000,000,000
Issued and outstanding:
Balance at beginning of year 9,904,806,924 P=4,952,403,462 1,103,000,000 P=551,500,000
Issuances (see Note 1) 8,801,806,924 4,400,903,462
Balance at end of year 9,904,806,924 P=4,952,403,462 9,904,806,924 P=4,952,403,462
In December 2011, the Parent Company issued 397,908,895 and 397,908,894 of its unissued
common shares to STI ESG and CMA, respectively, via a private placement for an aggregate
subscription amount of P =477.5 million. Documentary stamp taxes paid relative to the issuances of
shares amounting to P=2.0 million is presented as deduction from additional paid-in capital.
The 795,817,789 private placement shares were approved for listing with the PSE on September
28, 2012 subject to the fulfillment of certain conditions. On May 10, 2013, the SEC granted the
Parent Companys request for exemptive relief from the requirements of the mandatory tender
offer relative to the private placement transaction. On June 27, 2013, the PSE advised the Parent
Company to submit duly executed lock-up agreements to facilitate the listing of private placement
shares. The lock-up agreements were executed on August 5, 2013 and were submitted to the PSE
on August 7, 2013. The lock-up period expired on February 18, 2014.
On September 28, 2012, the Parent Company issued 5,901,806,924 shares to STI ESG
stockholders in exchange for 907,970,294 STI ESG shares pursuant to the Share Swap transaction
resulting to recognition of common stock of P=2,950.9 million, decrease in other equity reserve of
P =2,367.2 million and increase in non-controlling interests of P =25.3 million (see Notes 1 and 3).
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*SGVFS008027*
On November 7, 2012, the Parent Company issued 2,627,000,000 new shares relative to the
Primary Offering at P =0.90 per share following its listing in the PSE. The transaction resulted to
increases in common stock and APIC of P=1,313.5 million and P =1,050.8 million, respectively.
On November 28, 2012, the Parent Company issued the 273,000,000 Over-allotment Option
shares to UBS AG (see Note 1) resulting to recognition of common stock and APIC of
P =136.5 million and P =109.2 million, respectively.
Transaction costs incurred in connection with the issuance of shares, charged against APIC,
amounted to P =118.5 million.
Set out below is the Parent Companys track record of registration of its securities:
Date of Approval
Number of Shares Issue/
Offer Price Authorized Issued
December 4, 2007* 1,103,000,000 307,182,211 P=0.50
November 25, 2011** 1,103,000,000 795,817,789 0.60
September 28, 2012*** 10,000,000,000 5,901,806,924 2.22
November 7, 2012 10,000,000,000 2,627,000,000 0.90
November 28, 2012 10,000,000,000 273,000,000 0.90
*** Date when the registration statement covering such securities was rendered effective by the SEC.
*** Date when the Parent Company filed SEC form 10-1(k) (Notice of Exempt Transaction) with the SEC in accordance with the Securities Regulation Code and its
Implementing Rules and Regulations
*** Date when the SEC approved the increase in authorized capital stock.
As of March 31, 2014 and 2013, the Parent Company has a total number of shareholders on record
of 1,245 and 1,243, respectively.
Cost of Shares Held by a Subsidiary
This account includes 502,308,895 STI Holdings shares owned by STI ESG as of March 31, 2014
and 2013 amounting to P =500.0 million which is treated as treasury shares in the consolidated
statements of financial position. Dividends related to these shares, amounting to P=7.6 million and
P =5.0 million, were offset against the dividends declared in 2014 and 2013, as shown in the
consolidated statement of changes in equity.
Other Comprehensive Income (Loss)
March 31, 2014
Attributable to
Equity Holders
of the Parent
Company
Non-controlling
interests Total
Unrealized MTM loss on AFS financial assets
(Notes 3 and 14) (P=525,048) (P=15,331) (P=540,379)
Share in associates unrealized MTM gain on AFS
financial assets (Notes 3 and 12) 428,253,571 5,809,954 434,063,525
Cumulative actuarial gain 18,014,452 195,877 18,210,329
Share in associates cumulative actuarial loss (15,003,756) (203,540) (15,207,296)
P=430,739,219 P=5,786,960 P=436,526,179
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*SGVFS008027*
March 31, 2013
Attributable to
Equity Holders
of the Parent
Company
Non-controlling
interests Total
Unrealized MTM loss on AFS financial assets
(Notes 3 and 14) P = (121,773) P= (9,416) P=(131,189)
financial assets (Notes 3 and 12) 1,905,291,022 24,882,689 1,930,173,711
Cumulative actuarial gain 21,253,817 277,567 21,531,384
Share in associates cumulative actuarial loss (6,845,516) (89,400) (6,934,916)
P=1,919,577,550 P=25,061,440 P =1,944,638,990
April 1, 2012
Attributable to
Equity Holders
of the Parent
Company
Non-controlling
interests Total
Unrealized MTM gain (loss) on AFS financial
assets (Note 14) P=207,684 P= (14,713) P=192,971
financial assets (Note 12) 1,039,792,823 43,906,508 1,083,699,331
Cumulative actuarial loss (12,708,006) (536,611) (13,244,617)
Share in associates cumulative actuarial gain 2,882,164 121,703 3,003,867
P=1,030,174,665 P=43,476,887 P =1,073,651,552
Other Equity Reserve
i. Equity adjustment resulting from the Share Swap transaction (see Notes 1 and 3).
The table below summarizes the impact at acquisition date of the Share Swap:
Accounts affected Amount
Issuance of STI Holdings shares at par Capital stock P=2,950,903,462
Recognition of non-controlling interests (NCI) Non-controlling interests 173,954,704
Elimination of STI ESG common shares Capital stock (980,000,000)
Elimination of STI ESG additional paid in capital Additional paid-in capital (379,937,290)
Elimination of retained earnings of STI Holdings
prior to being under common control Retained earnings (24,004,083)
Elimination of other comprehensive income of STI
Holdings prior to being under common control Other comprehensive income 119,472
Transfer from STI ESGs retained earnings to NCI
relative to amount attributed to minority
shareholders Retained earnings (74,108,762)
Transfer from STI ESGs other comprehensive
income to NCI relative to amount attributed to
minority shareholders Other comprehensive income (44,748,649)
Elimination of investment of STI Holdings to STI
ESG prior to the Share Swap Available-for-sale financial assets 80,811,545
Reclassification of STI ESGs investment in STI
Holdings and elimination of STI ESGs share in
net income of STI Holdings
Investments in and advances to
associates and joint ventures 501,153,708
Cost of shares held by a subsidiary (500,009,337)
Retained earnings (1,144,371)
Stock issue cost relative to the Share Swap 15,510,031
P=1,718,500,430
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*SGVFS008027*
ii. Parent Companys equity adjustment for the excess of acquisition cost over the carrying
value of non-controlling interests in STI ESG, after reattribution of non-controlling
interests share in other comprehensive income to the equity holders of the Parent
Company, amounting to P=65.0 million P =69.1 million as of March 31, 2014 and 2013,
Retained Earnings
Consolidated retained earnings represent STI ESGs retained earnings, net of amount attributable
to NCI, and STI Holdings accumulated earnings, net of dividends declared from April 1, 2010,
after the Controlling Shareholders acquisition of STI Holdings (see Note 3).
Consolidated retained earnings include undeclared retained earnings of subsidiaries and associates
amounting to P=2,511.1 million and P =1,443.0 million as at March 31, 2014 and 2013, respectively.
The Parent Companys retained earnings available for dividend declaration, computed based on
the guidelines provided in the SEC Memorandum Circular No. 11, amounted to P=106.4 million
and P =11.2 million as at March 31, 2014 and 2013, respectively.
STI ESGs BOD approved the appropriation amounting to P =800.0 million out of its
unappropriated retained earnings balance on December 7, 2011 for the Groups future expansion
of nine schools within the next two years. On August 29, 2013, STI ESGs BOD approved the
reversal of the amount to unappropriated retained earnings.
On September 4, 2013, cash dividends amounting to P=0.015144 per share or the aggregate amount
of P=150.0 million were declared by the Parent Companys BOD in favor of all stockholders on
record as at September 18, 2013, payable on October 14, 2013.
On December 5, 2012, cash dividends amounting to P=0.01 per share or the aggregate amount of
P =99.0 million were declared by the Parent Companys BOD in favor of all stockholders on record
as of December 19, 2012, payable on December 28, 2012.
On October 13, 2011, cash dividends amounting to P=0.02 per share or the aggregate amount of
P =6.1 million were declared by the Parent Companys BOD in favor of all stockholders on record
as of November 11, 2011, payable on December 8, 2011.
As of March 31, 2014 and 2013, long outstanding unclaimed dividends amounting to
P =11.8 million pertains to dividend declarations from 1998 to 2006.
Dividends Declared by Noncontrolling Interest
Dividends declared by subsidiaries to non-controlling interest owners amounted to P=11.0 million,
P =2.0 million and P =72.0 million for the year ended March 31, 2014, 2013 and 2012, respectively.
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19. Interest Income and Interest Expense
Interest income is derived from the following sources:
2014 2013 2012
Cash and cash equivalents (see Note 6) P=10,997,206 P=18,975,999 P=9,750,825
Advances to associates and joint ventures
(see Note 27) 925,114 2,608,782 2,020,625
Past due accounts receivables (see Note 7) 277,259 412,772 31,951
Noncurrent receivables (see Note 27) 12,726,335 3,725,489
Restructured receivables 560,995
Accretion of discount on refundable deposits
(see Note 15) 108,348
P=12,199,579 P=34,723,888 P=16,198,233
Interest expenses are incurred from the following sources:
2014 2013 2012
Long-term debts (see Note 16) P=6,518,855 P= P=
Short-term loans (see Note 16) 3,090,411 17,320,345 32,533,323
Obligations under finance lease (see Note 25) 1,317,531 1,511,021 1,332,121
P=10,926,797 P=18,831,366 P=33,865,444
20. Cost of Educational Services
2014 2013 2012
Faculty salaries and benefits
(see Notes 23 and 24) P=238,054,539 P=190,101,113 P=192,126,640
Cost of student activities 92,718,562 101,543,377 91,731,260
Rental (see Note 25) 87,691,656 95,083,498 97,054,973
(see Note 10) 110,553,121 87,088,146 79,229,573
Courseware development 6,444,628 1,525,885 3,205,510
Others 17,557,479 10,068,037 18,508,740
P=553,019,985 P=485,410,056 P=481,856,696
21. Cost of Educational Materials and Supplies Sold
2014 2013 2012
Educational materials P=32,565,707 P=25,659,453 P=18,467,803
Promotional materials 11,837,412 13,076,515 11,384,345
School materials and supplies 7,557,627 9,105,552 8,675,101
Others 1,380,934 1,648,119 1,009,953
P=53,341,680 P=49,489,639 P=39,537,202
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22. General and Administrative Expenses
2013 2012
2014 (As restated - see Note 2)
Salaries, wages and benefits
(see Notes 23, 24 and 27) P=242,730,816 P=224,270,503 P=215,934,947
Light and water 99,131,497 93,622,687 87,728,365
(see Notes 10 and 11) 94,998,853 69,342,633 65,220,778
Taxes and licenses 34,939,382 68,800,958 28,325,491
Rental (see Note 25) 48,869,422 48,232,708 48,161,313
Professional fees 48,854,457 39,097,439 34,396,335
Provision for (reversal of) impairment loss on:
Receivables (see Note 7) 57,648,376 34,534,038 40,994,410
Investments in and advances to associates
and joint ventures (see Note 12) (719,873) 4,120,636 3,047,124
Goodwill (see Note 15) 3,383,556
Outside services 58,037,324 34,263,759 27,277,269
Advertising and promotions 23,092,713 21,168,920 18,466,455
Transportation 25,204,879 21,158,560 21,079,158
Meetings and conferences 15,874,352 13,438,035 14,129,561
Entertainment, amusement and recreation 14,997,531 12,078,133 9,980,928
Office supplies 13,029,334 10,235,845 8,637,864
Repairs and maintenance 11,786,754 9,430,056 9,745,033
Communication 9,812,693 7,565,325 7,410,537
Purchased services and utilities 6,049,955 6,099,640 7,438,820
Insurance 5,450,574 4,515,053 4,234,335
Excess of cost over net realizable value of
inventories (see Note 8) 2,420,456 246,168 679,052
Others 26,300,906 23,107,628 31,990,747
P=838,510,401 P=745,328,724 P=688,262,078
Share Swap and follow-on offering expenses in 2013, included as part of General and
administrative expenses, amounted to P=50.4 million.
23. Personnel Costs
2013 2012
Salaries and wages P=414,814,263 P=344,045,511 P=348,679,602
Pension expense (see Note 24) 10,133,891 19,256,756 5,151,804
Other employee benefits (see Note 27) 55,837,201 51,069,349 54,230,181
P=480,785,355 P=414,371,616 P=408,061,587
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24. Pension Liabilities
Defined Benefit Plans
The Group (except De Los Santos - STI College and STI-QA) has separate, noncontributory,
defined benefit retirement plans covering substantially all of its faculty and regular employees.
The benefits are based on the faculties and employees salaries and length of service.
Under the existing regulatory framework, RA No. 7641 requires a provision for retirement pay to
qualified private sector employees in the absence of any retirement plan in the entity, provided
however that the employees retirement benefits under any collective bargaining and other
agreements shall not be less than those provided under the law. The law does not require
minimum funding of the plan.
Retirement benefits are payable in the event of termination of employment due to: (i) early,
normal, or late retirement; (ii) physical disability; (iii) voluntary resignation; or (iv) involuntary
separation from service. For plan members retiring under normal, early or late terms, retirement
benefit is equal to a percentage of final monthly salary for every year of credited service.
In case of involuntary separation from service, benefit is determined in accordance with the
Termination Pay provision under the Philippine Labor Code or similar legislation on involuntary
termination.
The funds are administered by a trustee bank under the supervision of the Board of Trustees of the
plan. The Board of Trustees is responsible for investment of the assets. It defines the investment
strategy as often as necessary, at least annually, especially in the case of significant market
developments or changes to the structure of the plan participants. When defining the investment
strategy, it takes account of the plans objectives, benefit obligations and risk capacity. The
investment strategy is defined in the form of a long-term target structure (Investment policy). The
Board of Trustees delegates the implementation of the Investment policy in accordance with the
investment strategy as well as various principles and objectives to an Investment Committee,
which also consists of members of the Board of Trustees, a Director and the Chief Finance Officer
(CFO). The CFO oversees the entire investment process.
The following tables summarize the components of the Groups net pension costs recognized in
profit or loss and amounts recognized in the consolidated statements of financial position:
2014
2013
(As restated -
see Note 2)
Pension expense (recognized under the Salaries,
wages and benefits account):
Current service cost P=10,382,377 P=10,972,534
Net interest cost (627,573) 934,297
P=9,754,804 P=11,906,831
Pension liabilities (recognized in the consolidated
statements of financial position):
Present value of defined benefit obligations P=137,381,189 P=107,466,613
Fair value of plan assets (76,505,921) (85,046,505)
P=60,875,268 P=22,420,108
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2014
2013
(As restated -
see Note 2)
Changes in the present value of defined benefit
obligations:
Effect of business combination (see Note 3) 46,399,488
Current service cost 10,382,377 10,972,534
Interest cost 2,031,669 4,592,186
Benefits paid (7,590,094) (20,928,160)
Actuarial loss (gain) on obligations (21,308,864) 28,682,448
Changes in the fair value of plan assets:
Effect of business combination (see Note 3) 1,565,732
Contributions 19,865,810 5,620,855
Return on plan assets 2,659,242 3,657,889
Benefits paid (7,590,094) (20,928,160)
Actuarial gain (loss) on plan assets (25,041,274) 67,322,449
Actual return (loss) on plan assets (P=20,850,191) P=71,192,302
The principal assumptions used in determining pension liabilities are shown below:
April 1, 2013 April 1, 2012 April 1, 2011
Discount rate 3.047.90% 3.008.00% 5.0011.00%
Future salary increases 5.008.00% 5.008.00% 6.008.00%
The maximum economic benefit available is a combination of expected refunds from the plan and
reductions in future contributions.
The major categories of the Groups total plan assets as a percentage of the fair value of the total
plan assets are as follows:
2014 2013
Cash 30% 14%
Investment in debt securities 5% 4%
Investments in equity securities 65% 82%
100% 100%
The plan assets of the Group are maintained by Union Bank of the Philippines, United Coconut
Planters Bank and Rizal Commercial Banking Corporation.
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Details of STI ESGs net assets available for plan benefits and their related market values are as
follows:
2014 2013
Cash P=10,858,828 P=
Short-termfixed income 14,736,492 12,329,338
Investments in government securities 4,716,657 3,043,165
Investments in equity securities 46,178,969 69,674,002
Others 14,975
P=76,505,921 P=85,046,505
Short-term Fixed Income. Short-term fixed income investment includes time deposits and special
savings deposits.
Medium and Long-term Fixed Income. Investments in medium and long-term fixed income which
include Philippine peso-denominated bonds, such as government securities whose maturities range
from 1 to 25 years with interest rates ranging from 2.75% to 6.38%.
Investments in Government Securities. Investments in government securities include treasury bills
and fixed-term treasury notes with maturities ranging from one to thirteen years and bear interest
rates ranging from 5.9% to 9.0%. These securities are fully guaranteed by government of the
Republic of the Philippines.
The overall expected rate of return on plan assets is determined based on the market prices
prevailing on that date, applicable to the period over which the obligation is expected to be settled.
The plan may expose the Group to a concentration of equity market risk since the Groups plan
assets are primarily composed of investments in listed equity securities.
The management performed an Asset-Liability Matching Study (ALM) annually. The overall
investment policy and strategy of the Groups defined benefit plans is guided by the objective of
achieving an investment return which, together with contributions, ensures that there will be
sufficient assets to pay pension benefits as they fall due while also mitigating the various risk of
the plans. The Groups current strategic investment strategy consists of 65% of equity
instruments, 5% of debt instruments and 30% cash.
The average duration of the defined benefit obligation at the end of the period is 22 years.
Shown below is the maturity analysis of the undiscounted benefit payments:
Amount
Less than one year P=20,324,738
More than one year to five years 24,330,827
More than five years to 10 years 49,580,356
More than 10 years to 15 years 105,040,687
More than 15 years to 20 years 144,729,170
The expected contribution of the Group in 2015 is P =10.9 million.
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The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the defined benefit obligation (DBO) as of the end of the reporting
period, assuming all other assumptions were held constant:
Increase
(decrease)
Present Value of
DBO
Discount rates 1.00% (P =15,030,045)
(1.00%) 15,233,234
Future salary increases 1.00% 15,233,234
(1.00%) (15,030,045)
Employee turnover 10.00% (2,123,774)
(10.00%) 2,123,774
Defined Contribution Plans
De Los Santos - STI College and STI-QA have funded, noncontributory defined contribution plan
(De Los Santos Plan) covering all regular and permanent employees and is a participating
employer in CEAP Retirement Plan. The De Los Santos Plan has a defined contribution format
wherein the obligation is limited to specified contributions to the De Los Santos Plan and the
employees contribution is optional.
De Los Santos - STI College and STI-QAs contributions consist of future service cost and past
service cost. Future service cost is equal to 4.00% of employees monthly salary from the date an
employee becomes a member in CEAP. Past service cost is equal to 5.00% of the employees
average monthly salary for a 12 month period, immediately preceding the date of De Los Santos -
STI College and STI-QAs participation in CEAP, multiplied by the number of years of past
service amortized over 10 years. Future service refers to the periods of covered employment on or
after the date of De Los Santos - STI College and STI-QAs participation in CEAP. Past service
refers to the continuous service of an employee from the date employee met the requirements for
membership in the retirement plan to the date of acceptance of De Los Santos - STI College and
STI-QA as a Participating Employer in CEAP Retirement Plan. In addition, De Los Santos - STI
College and STI-QA give the employee an option to make a personal contribution to the fund at an
amount not to exceed 4.00% of his monthly salary. De Los Santos - STI College and STI-QA
then provide an additional contribution of 1.00% of the employees contribution based on the
latters years of tenure. Although the De Los Santos Plan has a defined contribution format, the
Group regularly monitors compliance with RA 7641. As at March 31, 2014 and 2013, the Group
is in compliance with the requirements of RA 7641.
As at March 31, 2014 and 2013, De Los Santos -STI College and STI-QA have excess
contributions to CEAP amounting to P =3.2 million and P =3.6 million, respectively (see Note 9).
These excess contributions are classified as prepaid expense and will be offset against De Los
Santos -STI College and STI-QAs future required contributions to CEAP.
In 2012, De Los Santos - STI College offered an early retirement program to its employees even
when the required tenure of ten years or retirement age of sixty has not been reached. As a result,
several employees availed of the early retirement program and De Los Santos - STI College
recognized the payments as part of pension expense amounting to P =1.6 million in 2012.
Pension expense recognized by De Los Santos - STI College and STI-QA in 2014, 2013 and 2012,
shown as part of Cost of educational services and General and administrative expenses
accounts, amounted to P=0.4 million, P=7.3 million and P=2.8 million, respectively.
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*SGVFS008027*
Total pension expense recognized in profit or loss follows:
2013 2012
Defined benefit plans P=9,754,804 P=11,906,831 P=2,391,707
Defined contribution plans 379,087 7,349,924 2,760,097
P=10,133,891 P=19,256,755 P=5,151,804
25. Leases
a. Finance Lease
The Group acquired various transportation equipment under various finance lease
arrangements. These are included as part of transportation equipment under the Property and
equipment account in the consolidated statements of financial position.
Future annual minimum lease payments under the lease agreements, together with the present
value of the minimum lease payments as at financial reporting date follow:
2014 2013 2012
Within one year P=8,617,060 P=8,216,385 P=8,521,931
After one year but not more than five years 14,466,643 14,205,559 16,273,590
Total minimum lease payments 23,083,703 22,421,944 24,795,521
Less amount representing interest 4,217,606 2,662,886 6,097,919
Present value of lease payments 18,866,097 19,759,058 18,697,602
Less current portion of obligations under
finance lease 7,435,444 6,419,251 9,741,235
Noncurrent portion of obligations under
finance lease P=11,430,653 P=13,339,807 P=8,956,367
Interest incurred from finance lease amounted to P =1.3 million, P =1.5 million and P =1.3 million
in 2014, 2013 and 2012, respectively (see Note 19).
b. Operating Lease
As Lessor
The Group entered into several lease agreements, as lessors, on their buildings under operating
lease agreements with varying terms and periods. All leases are subject to annual repricing
based on a pre-agreed rate. Total rental income amounted to P =10.8 million, P =4.6 million and
P=5.4 million in 2014, 2013 and 2012, respectively (see Notes 11 and 27).
Future minimum rental receivable for the remaining lease terms as at financial reporting date
follow:
2014 2013 2012
Within one year P=3,888,786 P=1,195,760 P=467,692
Total P=6,603,160 P=5,443,760 P=18,770,824
As Lessee
The Group lease land and building spaces, where the corporate office, schools, and warehouse
are located, under operating lease agreements with varying terms and periods. The lease rates
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*SGVFS008027*
are subject to annual repricing based on a pre-agreed rate. Total rental expense charged to
operations amounted to P=136.6 million, P=143.3 million and P =145.2 million for the years ended
March 31, 2014 and 2013 and April 1, 2012, respectively (see Notes 20 and 22).
Certain subsidiaries also paid its lessors refundable deposits equivalent to several months of
rental payments as security for its observance and faithful compliance with the terms and
conditions of the agreement (see Notes 9 and 15).
Future minimum rental payables under the lease agreements as at financial reporting date
follow:
2014 2013 2012
Within one year P=184,313,624 P=99,988,542 P=54,895,288
After five years and onwards 345,719,361 133,723,061 141,389,342
Total P=965,984,394 P=525,073,007 P=294,283,639
26. Income Tax
Except for STI-UWI, all domestic subsidiaries qualifying as private educational institutions are
subject to tax under RA No. 8424, An Act Amending the National Internal Revenue Code, as
amended, and For Other Purposes which was passed into law effective January 1, 1998. Title II
Chapter IV - Tax on Corporation - Sec 27(B) of the said Act defines and provides that: a
Proprietary Educational Institution is any private school maintained and administered by private
individuals or groups with an issued permit to operate from DepEd, or CHED, or TESDA, as the
case may be, in accordance with the existing laws and regulations and shall pay a tax of ten
percent (10.00%) on its taxable income.
The components of recognized deferred tax assets and liabilities are as follows:
March 31,
2014
March 31,
2013
(As restated -
see Note 2)
Net deferred tax assets:
Gain on constructive sale of land held for swap P=17,213,717 P=
Allowance for doubtful accounts 7,453,869 4,251,262
Pension liabilities 5,812,161 2,230,932
Excess of:
Cost over net realizable value of inventories 1,025,741 783,695
Rental under operating lease computed on a
straight-line basis 734,310 879,814
Unearned tuition and other school fees 853,351 482,108
Others 10,828
33,103,977 8,627,811
Accrued rent (122,237)
33,103,977 8,505,574
Deferred tax liability -
Excess of fair values over carrying values of net
assets acquired in business combination 127,967,442
(P=94,863,465) P=8,505,574
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*SGVFS008027*
Certain deferred tax assets of subsidiaries were not recognized as at March 31, 2014 and 2013 as it
is not probable that future taxable profits will be sufficient against which these can be utilized.
The following are the deductible temporary differences and unused NOLCO and MCIT for which
no deferred tax assets were recognized:
2014 2013 2012
NOLCO P=80,683,803 P=76,012,347 P=52,067,934
Allowance for doubtful accounts 31,090,994 30,019,589 12,902,776
Pension liabilities 2,753,658 1,947,714 3,537,685
Acquisition-related expenses 4,773,584
Unearned tuition and other school fees 1,088,154 521,326
MCIT 740,309 454,137 112,243
Excess of:
Cost over net realizable value
of inventories 194,274 194,274 194,274
Rental under operating lease computed
on a straight-line basis 1,356,488 2,325,252
Unrealized foreign exchange losses 145,604 2,541 2,849
Provision for impairment loss 1,709,044
Others 273,900 1,034,481 2,078,213
P=121,744,280 P=111,542,897 P=74,930,270
As at March 31, 2014, the Group also did not recognize any deferred tax assets on the provision
for impairment losses on investment in and advances to an associate and goodwill aggregating to
P =4.1 and P =1.0 million, respectively, because management does not expect to generate enough
capital gains against which these capital losses can be offset.
The details of the Groups NOLCO, which can be claimed as deduction from future taxable
income, are as follows:
Year Incurred Expiry Dates Beginning Addition
Applied/
Expired End
December 31, 2010 December 31, 2013 P=13,987,456 P= P =13,987,456 P =
March 31, 2011 March 31, 2014 10,001,279 10,001,279
December 31, 2011 December 31, 2014 2,613,791 2,613,791
March 31, 2012 March 31, 2015 17,323,404 17,323,404
March 31, 2013 March 31, 2016 28,339,236 28,339,236
March 31, 2014 March 31, 2017 27,278,109 27,278,109
P=76,012,347 P=28,660,191 P=23,988,735 P=80,683,803
The details of the Groups excess MCIT over RCIT, which can be claimed as deduction from
future tax payable, are as follows:
Year Incurred Expiry Date Beginning
Addition
(Applied/
Expired) End
March 31, 2011 March 31, 2014 P=18,628 (P=18,628) P=
March 31, 2012 March 31, 2015 56,782 56,782
March 31, 2013 March 31, 2016 378,727 378,727
March 31, 2014 March 31, 2017 304,800 304,800
P=454,137 P=286,172 P=740,309
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The reconciliation of the provision for income tax on income before income tax computed at the
effect of the applicable statutory income tax rate to the provision for income tax as shown in the
consolidated statements of comprehensive income is summarized as follows:
2013 2012
Provision for income tax at statutory
income tax rate P=212,567,025 P=251,218,114 P=97,105,813
Income tax effects of:
Equity in net losses (earnings) of
associates and joint ventures (69,845,555) (128,475,582) 11,272,299
Nondeductible expenses 17,906,494 8,069,513 7,585,677
Loss on deemed sale of an investment in
an associate 12,900,087
Excess of fair values of net assets
acquired over acquisition costs (9,804,323)
Gain on sale of investment in associate (1,512,015)
Others (4,131,908) (2,710,785) (17,601,237)
Difference in 10% and 30% tax rate (106,232,937) (85,148,356) (64,623,212)
P=53,358,883 P=42,952,904 P=32,227,325
Others pertain to the income tax effects of income subject to final tax, change in unrecognized
deferred tax assets, expired NOLCO and MCIT and other items.
27. Related Party Transactions
Parties are considered to be related if one party has the ability to control the other party or exercise
significant influence over the other party in making financial and operating decisions. This
includes: (a) enterprises or individuals owning, directly or indirectly through one or more
intermediaries, control or are controlled by, or under common control; (b) associates; and
(c) enterprises or individuals owning, directly or indirectly, an interest in the voting power of the
company that gives them significant influence over the company, key management personnel,
including directors and officers of the Group and close members of the family of any such
enterprise or individual.
The following are the Groups transactions with its related parties:
Amount/Volume
Outstanding
Balance
Receivable
(Payable)
Category
March 31,
2014
March 31,
2013
March 31,
2012
March 31,
2014
March 31,
2013 Terms Conditions
Associates
STI Investments
Advances for working
capital requirements
P = P = P=5,946,690 P = P = 30 days upon receipt of billings;
Noninterest-bearing
Unsecured;
no impairment
GROW
Advances for various
expenses
3,933,836 4,077,408 143,572 30 days upon receipt of billings
but no intention to collect
within one year; Noninterest-
bearing
Unsecured;
no impairment
Rental and related charges 2,834,199 43,936 5,259,339 8,093,538 30 days upon receipt of billings
bearing
Unsecured;
no impairment
(Forward)
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*SGVFS008027*
Amount/Volume
Outstanding
Balance
Receivable
(Payable)
Category
March 31,
2014
March 31,
2013
March 31,
2012
March 31,
2014
March 31,
De Los Santos - STI
Megaclinic
expenses and working
capital
P=31,061,257 P = P = P=3,682,180 P =34,743,437 Payable in 5 years; bears 6.50%
interest
Unsecured;
no impairment
Interest income 2,608,782 2,020,625
STI-Alabang
expenses and working
capital
216,000 216,000 30 days upon receipt of billings;
Noninterest-bearing
Unsecured;
no impairment
STI-Accent
expenses and other
charges
8,590,000 10,365,820 3,047,124 35,923,762 27,333,762 30 days upon receipt of billings
bearing
Unsecured;
with
impairment
Others
expenses
4,596,630 4,596,630 30 days upon receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
Joint Venture
PHEI
Management fees 600,000 3,025,815 3,475,103 200,000 600,000 30 days upon receipt of billings;
Noninterest-bearing
Unsecured;
no impairment
Affiliates
Philippine Womens
University (PWU)*
Principal 26,470,915 223,529,085 250,000,000 250,000,000 To be settled by way of
assignment of investments in
shares
Secured;
no impairment
Interest 9,189,946 3,725,489 12,651,546 12,651,546
UNLAD*
Principal 198,000,000 198,000,000 198,000,000 To be settled by way of equity
conversion
Secured;
no impairment
Interest 3,536,389 3,327,389 3,327,389
CMA**
Rentals and related
charges
58,830 58,830 30 days upon receipt of billings;
Noninterest-bearing
Unsecured;
no impairment
Comm & Sense, Inc**.
Rentals and related
charges
134,590 138,466 57,764 282,197 147,607 30 days upon receipt of billings;
Noninterest-bearing
Unsecured;
no impairment
Phil First Condominium, Inc. **
Rentals and related
charges
12,447,228 80,704 (1,023,915) 6,074 30 days upon receipt of billings;
Noninterest-bearing
Unsecured;
no impairment
Phil First Insurance Co.,
Inc. **
Rentals and related
charges
16,729 168,922 185,651 30 days upon receipt of billings;
Noninterest-bearing
Unsecured;
no impairment
Employee benefits 6,716,054 3,484,752 (407,670) 30 days upon receipt of billings;
Noninterest-bearing
Unsecured
PhilCare**
Rentals and related
charges
49,959 1,314,992 902,776 309,844 259,885 30 days upon receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
Employee benefits 4,808 7,278,847 4,350,433
PhilPlans**
Rentals and related
charges
593,863 967,511 113,521 113,521 30 days upon receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
Banclife**
Rentals and related
charges
163,985 359,863 243,975 15,926 179,911 30 days upon receipt of billings;
Noninterest-bearing
Unsecured;
no impairment
Employee benefits 142,660 113,600
(Forward)
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*SGVFS008027*
Amount/Volume
Outstanding
Balance
Receivable
(Payable)
Category
March 31,
2014
March 31,
2013
March 31,
2012
March 31,
2014
March 31,
Ventures Securities**
Rentals and related
charges
P = P = P = P=36,465 P =36,465 30 days upon receipt of billings;
Noninterest-bearing
Unsecured; no
impairment
Classic Finance**
Availment of short-term
loan
160,000,000 1 year; interest-bearing Unsecured
Interest expense 2,442,736
Officers and employees
expenses
7,269,928 38,694,691 36,492,764 25,024,703 22,592,828 Liquidated within one month;
Noninterest-bearing
Unsecured;
no impairment
P=542,704,747P =558,282,346
*Entities under common management
**Entities under common control
Outstanding receivables, before any allowance for impairment, and payables arising from these
transactions are summarized below:
March 31,
2014
March 31,
2013
Noncurrent receivables P=463,978,935 P=463,978,935
Advances to associates and joint ventures (see Note 12) 36,123,762 52,689,744
Advances to officers and employees (see Note 7) 25,024,703 22,592,828
Current portion of advances to associates, joint ventures and other
related parties (see Note 7) 12,356,218 11,419,489
Rent and other related receivables (see Note 7) 6,245,044 8,009,020
Accounts payable (see Note 17) (1,023,915) (407,670)
P=542,704,747 P=558,282,346
Other information on major transactions with related parties follows:
a. Agreements with Philippine Womens University (PWU), UNLAD Resources Development
Corporation (UNLAD) and an unrelated individual (Individual)
In November 2011, the Parent Company acceded to a joint venture agreement and a
shareholders agreement by and amongst PWU, UNLAD, an Individual and Mr. Eusebio H.
Tanco, STI Holdings BOD Chairman, for the formation of a strategic arrangement with
regard to the efficient management and operation of PWU.
PWU is a private non-stock, non-profit educational institution, which provides basic,
secondary and tertiary education to its students while UNLAD is a real estate company
controlled by the Benitez Family and has some assets which are used to support the
educational thrust of PWU.
Pursuant to the Agreement, the Parent Company acquired PWUs debt (the Receivable from
PWU) from PWUs creditor bank, together with all of the banks rights to the underlying
collateral and security, for the amount of P =223.5 million, on a without recourse basis, in
November 2011. Likewise in accordance with the Agreement, the Parent Company is obliged
to extend: (a) a direct loan to PWU in the amount of P =26.5 million (the Loan to PWU) and
(b) a loan to UNLAD in the amount of P =198.0 million (the Loan to UNLAD). The
Receivable from PWU and the Loan to PWU aggregating to P =250.0 million shall be secured
by the PWU Indiana Property and PWU Taft Property while the Loan to UNLAD shall be
secured by the PWU Quezon City Property, UNLAD Davao Property and UNLAD Quezon
City Property.
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*SGVFS008027*
The Receivable from PWU and Loan to PWU, inclusive of 5% interest per annum, shall be
accrued and paid by way of the assignment by PWU of its shares in UNLAD (which PWU
will acquire through a Property-for-Share Swap Transaction). Likewise, the Loan to UNLAD,
inclusive of 5% interest per annum, shall be paid by way of conversion of said loan into equity
in UNLAD to enable the Parent Company to acquire, together with the shares assigned by
PWU to the Parent Company as payment for the Receivable from PWU and Loan to PWU, a
total of forty percent (40%) equity in UNLAD.
On May 17, 2012, the Individual, whos a party to the Agreement with the Parent Company,
PWU and UNLAD, assigned his rights, title and interest in the Agreement to Attenborough
Holdings Corporation (AHC). AHC thereby assumed the Individuals obligation to grant a
loan to UNLAD in the principal amount of P=224.0 million (the AHC Loan to UNLAD).
Pursuant to the agreement, the Parent Company and AHC (collectively referred to as the
Lenders) agreed to lend UNLAD a principal amount of P=422.0 million consisting of the
Parent Companys loan to UNLAD (Loan to UNLAD) and the AHC Loan to UNLAD.
Accordingly, on June 8, 2012, the Parent Company entered into an Omnibus Agreement with
UNLAD and AHC (Omnibus Agreement) which consisted of: (1) a prefatory agreement; (2)
a loan agreement; and (3) a real estate mortgage.
Under said loan agreement, the Lenders will extend a loan to UNLAD which is payable by
way of conversion into equity in UNLAD. Said conversion into equity in UNLAD must
enable: (a) the Parent Company to acquire, together with the shares acquired by it as payment
of the Parent Company's Loan to PWU, 40.0% of the issued and outstanding capital stock of
UNLAD, as discussed above; and (b) AHC to acquire 20.0% of UNLADs issued and
outstanding capital stock.
In June 2012, the Parent Company extended the direct loan to PWU amounting to
P=26.5 million in accordance with the Agreement, while in August and October 2012, the
Parent Company granted the Loan to UNLAD amounting to P=166.0 million and P=32.0 million,
respectively.
On March 25, 2013, the joint venture agreement and Omnibus Agreement have been amended
to discontinue imposition of interest on the Loan to PWU, Loan to UNLAD and AHC Loan to
UNLAD effective January 1, 2013.
As of March 31, 2014 and 2013, noncurrent receivables consist of loans of P =448.0 million and
accrued interest of P=16.0. Interest income in 2013 amounted to P=12.7 million (see Note 19).
As of March 31, 2014 and 2013, the equity interest in UNLAD has not been assigned to the
Parent Company in exchange for the receivables from PWU and the Loan to UNLAD. The said
receivables from PWU and the Loan to UNLAD are presented as Noncurrent receivables in the
consolidated statements of financial position.
Currently, the Parent Company is working on the submission of all required documents to
effect the conversion of these receivables into equity. The Parent Company has nominated its
representatives as directors/trustees and officers of PWU and UNLAD.
b. Land held for Swap
As discussed in Note 15, STI ESGs BOD approved the transfer of the land to TechZone, a
company under common control with the Group, in exchange for condominium units to be
developed by TechZone. Subsequent to the transfer, the land was reclassified as Deposit for
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*SGVFS008027*
condominium units under the Goodwill and other noncurrent assets account in the
consolidated statements of financial position.
Compensation and Benefits of Key Management Personnel of the Group
2013 2012
Short-term employee benefits P=28,970,705 P=22,191,822 P=21,444,985
Post-employment benefits 1,436,336 1,809,718 1,048,982
P=30,407,041 P=24,001,540 P=22,493,967
28. Basic and Diluted Earnings Per Share on Net Income Attributed to Equity Holders
of STI Holdings
The table below shows the summary of net income and weighted average number of common
shares outstanding used in the calculation of earnings per share for the year ended March 31, 2014
and 2013:
2013 2012
Net income attributable to equity holders
of STI Holdings P=681,123,230 P=777,415,889 P=287,028,095
Common shares outstanding at
beginning of period 9,904,806,924 7,004,806,924 307,182,211
Weighted average number of:
5,901,806,924 shares issued -
Share Swap (see Note 2) 5,901,806,924
795,817,789 shares issued
on November 24, 2011 276,900,984
2,627,000,000 shares issued on
November 7, 2012 1,039,252,747
273,000,000 shares issued on
November 28, 2012 92,250,000
Weighted average number of common shares 9,904,806,924 8,136,309,671 6,485,890,119
Basic and diluted earnings per share on net
income attributed to equity holders of
STI Holdings P=0.069 P=0.096 P=0.044
The basic and diluted earnings per share are the same for the years ended March 31, 2014, 2013
and 2012 as there are no dilutive potential common shares.
29. Contingencies and Commitments
Contingencies
a. STI ESG filed a petition for review with the Court of Tax Appeals (CTA) on October 12,
2009. This is to contest the Final Decision on Disputed Assessment issued by the BIR
assessing STI ESG for deficiencies on income tax, and expanded withholding tax for the year
ended March 31, 2003 amounting to P =124.3 million. On February 20, 2012, STI ESG rested
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its case and its evidence has been admitted into the records. On June 27, 2012, the BIR rested
its case and has formally offered its evidence. On April 17, 2013, the CTA issued a Decision
which granted STI ESGs petition for review and ordered a cancellation of the said BIRs
assessment since the right to issue an assessment for the alleged deficiency taxes had already
prescribed. On May 16, 2013, STI ESG received a copy of the Commissioner of Internal
Revenues (CIR) Motion for Reconsideration dated May 8, 2013. STI ESG filed its Comment
to CIRs Motion for Reconsideration on June 13, 2013. On August 22, 2013, the CIR filed its
Petition for Review dated August 16, 2013, with the CTA en banc. On October 29, 2013, STI
ESG filed its Comment to the CIRs Petition for Review. The CTA en banc deemed the case
submitted for decision on May 19, 2014, considering the CIRs failure to file its
memorandum. As at July 9, 2014, the case is still for decision by the CTA en banc.
b. A case for illegal dismissal, previously filed by a group of former employees of a school
owned by STI ESG, was terminated in favor of STI ESG with the finality of the decision of
the Supreme Court dated April 16, 2010 denying the claimants Petition for Review on
Certiorari. Said Petition for Review sought, among others, to assail the decisions of both the
Court of Appeals and National Labor Relations Commission (NLRC) finding that no illegal
dismissal was committed by STI ESG upon said former employees.
Also, STI ESG is waiting for the resolution of the Supreme Court of a Petition for Review on
Certiorari filed by a former employee for constructive dismissal. The former employee filed
said Petition with the Supreme Court after both the Court of Appeals and NLRC denied her
claims and rendered prior decisions in favor of STI ESG.
c. Due to the nature of STI ESGs business, it is involved in various legal proceedings, both as
plaintiff and defendant, from time to time. The majority of outstanding litigation involves
illegal dismissal cases under which faculty members have brought claims against STI ESG by
reason of their faculty contract. Except as discussed in (d), STI ESG is not engaged in any
legal or arbitration proceedings (either as plaintiff or defendant), including those which are
pending or known to be contemplated and its BOD has no knowledge of any proceedings
pending or threatened against STI ESG or its franchises or any facts likely to give rise to any
litigation, claims or proceedings which might materially affect its financial position or
business. Management and its legal counsels believe that STI ESG has substantial legal and
factual bases for its position and is of the opinion that losses arising from these legal actions
and proceedings, if any, will not have a material adverse impact on STI ESGs consolidated
financial position and results of operations.
d. STI ESG is likewise contingently liable for lawsuits or claims filed by third parties, including
labor-related cases, which are pending decision by the courts, the outcome of which are not
presently determinable.
e. Other subsidiaries also stand as defendant of various lawsuits and claims filed by their former
employees. The complainants are seeking payment of damages such as backwages and
attorneys fees. As at July 9, 2014, the cases are pending before the Labor Arbiter.
Management and their legal counsels believe that the outcome of these cases will not have a
significant impact on the consolidated financial statements.
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Commitments
a. Financial Commitments
STI ESG has a P =50.0 million domestic bills purchase line from a local bank specifically for
the purchase of local and regional clearing checks. Interest on drawdown from such facility is
waived except when drawn against returned checks, to which the interest shall be the
prevailing lending rate of such local bank. The terms of such facility include, among others,
the continuing suretyship of the major shareholder.
As at March 31, 2014, the Group has P=3.0 billion of undrawn committed borrowing facilities
related to its Credit Facility Agreement with Chinabank (see Note 16).
b. Capital Commitments
The Group has contractual commitments and obligations for the construction of the school
buildings and improvements in Batangas, Calamba, Quezon City and Lucena aggregating to
P=1,057.2 million as at March 31, 2014.
The Group has contractual commitments and obligations for the construction of the school
buildings and improvements in STI-Kalookan and STI-Ortigas-Cainta aggregating
P=1,057.2 million as at March 31, 2013.
c. Other Matters
i) The Group, as an educational institution, is subject to CHED Memorandum Order No. 13,
Series of 1998, otherwise known as the Guidelines on the Procedure to be Followed by
Higher Education Institutions (HEIs) Intending to Increase Their Tuition Fees, Effective
School Year 19982000, which states that 70.00% of the proceeds derived from the
tuition fee increase for the current school year should be used for the payment of increase
in salaries and wages, allowances and other benefits of its teaching and non-teaching
personnel and other staff, except those who are principal stockholders of the HEIs.
On April 21, 2014, WNU filed a Petition for Certiorari with an application for the
issuance of temporary restraining order and preliminary injunction against the CHED with
the Regional Trial Court of Quezon City.
The Petition was filed in response to the Order dated January 6, 2014 issued by Atty.
Julito Vitriolo, CHEDs Executive Director, which affirmed/executed the Closure
Order(s) dated July 19, 2011 and April 26, 2013 of WNUs Bachelor of Science in Marine
Transportation (BS MT) and Bachelor of Science in Maritime Engineering (BS
MarE) degrees.
In the said Order , CHED resolved: (1) to allow WNUs existing students enrolled prior to
the issuance of the denial of its Motion for Reconsideration, Academic Year (AY) 2012-
2013, to complete and graduate their Bachelor of Science in Marine Transportation
(BSMT) and Bachelor of Science in Maritime Engineering (BS MarE) degrees in WNU;
(2) WNU shall be directed to submit a complete list of the students enrolled as of AY
2012-2013; and (3) effective AY 2013-2014, WNU offering of maritime programs shall
be considered to have shifted to a rating school and shall be recognized as a pilot maritime
technical school in Western Visayas with 2-3 year non-officer maritime program and
that students admitted in WNUs maritime programs effective AY 2013-2014 shall not be
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considered to have enrolled in degree program but only in a non-officer maritime
program of WNU.
The issues presented in the Petition filed by WNU are as follows: (a) the April 26, 2013
Order denying WNUs Motion for Reconsideration of the July 11, 2011 Closure Order
was issued despite full compliance by WNU on the required areas for evaluation of
WNUs Maritime Programs; (b) the January 6, 2014 Order did not resolve nor mention the
status of the Verified Appeal filed on June 7, 2013; (c) the January 6, 2014 Order
downgrading WNUs BS MT and BS MarE did not provide guidelines for its
implementation; (d) the shifting of the enrollees/students for AY 2013-2014 from a
rating/degree program to a pilot non officer program/certification will cause grave and
irreparable damage on the part of the affected students; (e) under the Manual of
Regulations for Private Higher Education, the January 6, 2014 Order should be effected at
the end of the academic year.
On May 23, 2014, the Trial Court issued an Order dismissing the case on the ground that
(a) the period to file the petition for certiorari lapsed on July 28, 2013 or after the sixty
(60) day period from receipt of the April 26, 2013 Order of CHED and (b) the Court of
Appeals has jurisdiction over petition for certiorari against quasi- judicial agencies such as
CHED.
On June 11, 2014, WNU filed a Motion for Reconsideration of the May 23, 2014 Order of
the Trial Court. In the said Motion for Reconsideration, WNU asserted that (a) the sixty
(60) day period to file the petition for certiorari should be counted from the time of the
receipt of the assailed order, January 6, 2014 Order of CHED and (b) the Regional Trial
Court of Quezon City has jurisdiction over the said case.
WNU set the Motion for Reconsideration for hearing on June 20, 2014. However, the
presiding judge of the Trial Court was on leave. The Trial Court instead informed the
parties that it will issue a notice of the schedule of hearing of the WNUs Motion for
Reconsideration.
30. Financial Risk Management Objectives and Policies
The principal financial instruments of the Group comprise cash and cash equivalents and short-
term loans. The main purpose of these financial instruments is to raise working capital and major
capital investment financing for the Groups school operations. The Group has various other
financial assets and liabilities such as receivables and accounts payable and other current
liabilities, which arise directly from its operations.
The main risks arising from the Groups financial instruments are liquidity risk and credit risk.
The BOD and management reviews and agrees on the policies for managing each of these risks as
summarized below.
Liquidity Risk
The Groups liquidity profile is managed to be able to finance its operations and capital
expenditures and other financial obligations. To cover its financing requirements, the Group uses
internally-generated funds. As part of its liquidity risk management program, the Group regularly
evaluates the projected and actual cash flow information and continuously assesses conditions in
the financial markets for opportunities to pursue fund-raising initiatives.
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Any excess funds are primarily invested in short-dated and principal-protected bank products that
provide flexibility of withdrawing the funds anytime. The Group regularly evaluates available
financial products and monitors market conditions for opportunities to enhance yields at
acceptable risk levels.
The Groups current liabilities are mostly made up of trade liabilities with 30 to 60-day payment
terms. On the other hand, the biggest components of the Groups current assets are cash,
receivables from students and franchisees and advances to associates and joint ventures with credit
terms of 30 days and AFS financial assets.
As at March 31, 2014 and 2013 and April 1, 2012, the Groups current assets amounted to
P=1,025.5 million, P =1,812.4 million and P =889.0 million, respectively, while current liabilities
amounted to P =912.2 million, P =332.1 million and P =1,060.2 million, respectively.
The table below summarizes the maturity profile of the Groups financial assets held for liquidity
purposes and other financial liabilities as at financial reporting date based on undiscounted
contractual payments.
March 31, 2014
Due and
Demandable
Less than
2 Months 2 to 3 Months 3 to 12 Months
More than
1 Year Total
Financial Assets
Loans and receivables:
Cash and cash equivalents P=583,302,563 P = P = P = P = P=583,302,563
Receivables (current and noncurrent)* 26,653,074 65,764,225 14,548,895 165,359,844 463,978,935 736,304,973
(included as part of Investments in
and advances to associates and joint
ventures account) 36,123,762 36,123,762
Deposits (included as part of Prepaid
expenses and other current assets
and Goodwill, intangible and other
noncurrent assets accounts) 1,831,769 38,755,552 40,587,321
AFS financial assets 50,599,940 50,599,940
P=646,079,399 P=65,764,225 P=14,548,895 P=167,191,613 P=553,334,427 P=1,446,918,559
Financial Liabilities
Other financial liabilities-
Accounts payable and other current
liabilities** P=211,421,740 P=27,744,853 P=10,947,443 P=244,293,427 P = P=494,407,463
Nontrade payable 151,470,221 151,470,221
Short-term loan:
Principal 180,000,000 180,000,000
Interest 1,706,250 1,650,000 3,356,250
Long-term debt:
Principal 49,940,706 58,465,494 108,406,200
P=362,891,961 P=27,744,853 P=12,653,693 P=475,884,133 P=58,465,494 P=937,640,134
March 31, 2013
Due and
Demandable
Less than
2 Months 2 to 3 Months 3 to 12 Months
More than
1 Year Total
Financial Assets
Cash and cash equivalents P=1,489,451,909 P = P = P = P = P=1,489,451,909
(included as part of Investments in
and advances to associates and joint
ventures account) 52,689,744 52,689,744
Deposits (included as part of Prepaid
expenses and other current assets
and Goodwill, intangible and other
noncurrent assets accounts) 33,342,037 33,342,037
P=1,782,681,049 P =17,918,138 P=3,939,716 P =10,944,280 P =456,823,296 P=2,272,306,479
Other financial liabilities-
Accounts payable and other current
liabilities** P =80,417,708 P =219,860,121 P=1,110,063 P=3,746,413 P =552,956 P =305,687,261
* Excluding advances to officers and employees amounting to P=25,024,073 and P =22,592,828 as at March 31, 2014 and 2013, respectively.
** Excluding taxes payable, unearned tuition and school fees, subscriptions payable, SSS, Philhealth and Pag-ibig benefits payable amounting to P=23,023,029 and P =14,998,560 as
at March 31, 2014 and 2013, respectively.
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As at March 31, 2014 and 2013, the Groups current ratios are as follows:
March 31,
2014
March 31,
2013
Current assets P=1,025,488,146 P=1,812,433,009
Current liabilities 912,194,435 332,135,285
Current ratios 1.124:1.000 5.457:1.000
Credit Risk
Credit risk is the risk that the Group will incur a loss arising from students, franchisees or other
counterparties that fail to discharge their contractual obligations. The Group manages and
controls credit risk by setting limits on the amount of risk that the Group is willing to accept for
individual counterparties and by monitoring expenses in relation to such limits.
It is the Groups policy to require the students to pay all their tuition and other school fees before
they can get their report cards and other credentials. In addition, receivable balances are
monitored on an ongoing basis with the result that the Groups exposure to bad debts is not
significant.
With respect to credit risk arising from the other financial assets of the Group, which comprise
cash and cash equivalents and AFS financial assets, the Groups exposure to credit risk arises from
default of the counterparty, with a maximum exposure equal to the carrying amount of these
instruments. At financial reporting date, there is no significant concentration of credit risk.
Credit Risk Exposures. The table below shows the maximum exposure to credit risk for the
components of the consolidated statements of financial position as at financial reporting date:
March 31, 2014
Gross
Maximum
Exposure
(1)
Net
Maximum
Exposure
(2)
Financial Assets
Cash and cash equivalents (excluding cash on hand) P=581,840,338 P=575,340,337
Receivables (current and noncurrent)* 736,304,973 272,326,038
Advances to associates and joint ventures** 21,175,875 21,175,875
Deposits*** 40,587,321 40,587,321
P=1,430,508,447 P=960,029,511
March 31, 2013
Gross
Maximum
Exposure
(1)
Net
Maximum
Exposure
(2)
Financial Assets
Cash and cash equivalents (excluding cash on hand) P=1,488,848,927 P=1,481,845,131
Advances to associates and joint ventures** 52,689,744 52,689,744
Deposits*** 33,342,037 33,342,037
P=2,271,703,497 P=1,800,720,766
* Excluding advances to officers and employees amounting to P =25,024,703 and P =22,592,828 as at March 31, 2014 and 2013,
respectively.
**Included as part of Investments in and advances to associates and joint ventures account
***Included as part of Prepaid expenses and other current assets and Goodwill, intangible and other noncurrent assets account
(1)
Gross financial assets before taking into account any collateral held or other credit enhancements or offsetting arrangements.
(2)
Gross financial assets after taking into account any collateral held or other credit enhancements or offsetting arrangements or
insurance in case of bank deposits.
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The credit quality of financial assets is managed by the Group using its internal credit ratings. The
table below shows the credit quality by class of financial assets that are neither past due nor
impaired as at financial reporting date:
March 31, 2014
Class A
(1)
Class B
(2)
Total
Financial Assets
Cash and cash equivalents (excluding cash on hand) P=581,840,338 P= P=581,840,338
Advances to associates and joint ventures 21,175,875 21,175,875
Deposits 40,587,321 40,587,321
P=772,925,846 P= P=772,925,846
March 31, 2013
Class A
(1)
Class B
(2)
Total
Financial Assets
Cash and cash equivalents (excluding cash on hand) P=1,488,848,927 P = P=1,488,848,927
Advances to associates and joint ventures 45,521,984 45,521,984
Deposits 33,342,037 33,342,037
P=1,635,875,054 P = P=1,635,875,054
* Excluding advances to officers and employees amounting to P =25,024,703 and P =22,592,828 as at March 31, 2014 and 2013, respectively..
(1)
This includes low risk and good paying customer accounts with no history of account treatment for a defined period and no overdue accounts
as at report date and deposits or placements to counterparties with good credit rating or bank standing financial review.
(2)
This includes medium risk and average paying customer account with no overdue accounts as at report date and new customer accounts for
which sufficient credit history has not been established and deposits or placements to counterparties not classified as Class A.
The table below shows the aging analysis of financial assets that are past due but not impaired as
at financial reporting date:
March 31, 2014
Neither
Past Due Past Due but not Impaired
Nor Impaired 31 to 60 Days 61 to 90 Days Over 90 days Impaired Total
Financial Assets
Cash and cash equivalents (excluding
cash on hand) P=581,840,338 P = P = P = P = P=581,840,338
Advances to associates and joint
ventures 21,175,875 14,947,887 36,123,762
Deposits 40,587,321 40,587,321
P=772,925,846 P=61,586,694 P=132,016,972 P=463,978,935 P=120,577,571 P=1,551,086,018
March 31, 2013
Neither
Past Due Past Due but not Impaired
Nor Impaired 31 to 60 Days 61 to 90 Days Over 90 days Impaired Total
Financial Assets
Cash and cash equivalents (excluding
cash on hand) P=1,488,848,927 P =- P =- P =- P =- P=1,488,848,927
Advances to associates and joint
ventures 45,521,984 - - - 7,167,760 52,689,744
Deposits 33,342,037 - - - - 33,342,037
AFS financial assets 4,663,478 - - - - 4,663,478
P=1,635,875,054 P =15,871,279 P =151,653,229 P =461,136,175 P =64,983,561 P=2,329,519,298
* Excluding advances to officers and employees amounting to P =25,024,703 and P =22,592,828 as at March 31, 2014 and 2013, respectively.
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*SGVFS008027*
Impairment Assessment
The main consideration for the impairment assessment include whether any payments of principal
or interest are overdue by more than 90 days or there are any known difficulties in the cash flows
of counterparties or infringement of the original terms of the contract.
Individually Assessed Allowances. The Group determines the allowance appropriate for each
individually significant account balance on an individual basis. Items considered when
determining allowance amounts include the sustainability of the counterpartys business plan, its
ability to improve performance once a financial difficulty has arisen, projected receipts and the
expected dividend payout should bankruptcy ensue, the availability of other financial support, the
realizable value of collateral, if any, and the timing of the expected cash flows. The impairment
losses are evaluated at each reporting date, unless unforeseen circumstances require more careful
attention.
Collectively Assessed Allowances. Allowances are assessed collectively for losses on account
balances that are not individually significant and for individually significant loans and advances
where there is no objective evidence of individual impairment. Allowances are evaluated on each
reporting date with each portfolio receiving a separate review.
The collective assessment takes account of impairment that is likely to be present in the portfolio
even though there is no objective evidence of the impairment in an individual assessment.
Impairment losses are estimated by taking into consideration the following information; historical
losses on the portfolio, current economic conditions, the approximate delay between the time a
loss is likely to have been incurred and the time it will be identified as requiring an individually
assessed impairment allowance and expected receipts and recoveries once impaired. The
impairment allowance is then reviewed by credit management to ensure alignment with the
Groups policy.
Capital Risk Management Policy
Parent Company. The Parent Company aims to achieve an optimal capital structure in pursuit of
its business objectives which include maintaining healthy capital ratios and strong credit ratings,
and maximizing shareholder value.
STI ESG. STI ESGs objectives when managing capital are to safeguard its ability to continue as a
going concern in order to provide returns for stockholders and benefits for other stakeholders and
to maintain an optimal capital structure to reduce the cost of capital.
The Group manages its capital structure and makes adjustments to it in light of changes in
economic conditions. The Group is not subject to externally imposed capital requirements.
The Group considers its equity contributed by stockholders as capital.
March 31,
2014
March 31,
2013
Capital stock P=4,952,403,462 P=4,952,403,462
Additional paid-in capital 1,119,079,467 1,119,079,467
Treasury stock (500,009,337) (500,009,337)
Retained earnings 2,690,263,952 2,151,532,167
P=8,261,737,544 P=7,723,005,759
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The Group monitors capital on the basis of the debt-to-equity ratio which is calculated as total
debt divided by total equity. The Group includes all liabilities within debt. The Group defines
total equity as common stock, additional paid-in capital, unrealized mark-to-market gain (loss) on
investments in equity securities and retained earnings.
As at March 31, 2014 and 2013, the Groups debt-to-equity ratios are as follows:
March 31,
2014
March 31,
2013
Total liabilities P=1,170,933,292 P=367,895,200
Total equity 7,128,169,995 8,135,356,191
Debt-to-equity ratio 0.164:1.000 0.045:1.000
Another approach used by the Group is the asset-to-equity ratios shown below:
March 31,
2014
March 31,
2013
Total assets P=8,299,103,287 P=8,503,251,391
Total equity 7,128,169,995 8,135,356,191
Asset-to-equity ratio 1.164:1.000 1.045:1.000
No changes were made in the objectives, policies or processes in 2014, 2013 and 2012.
31. Financial Instruments
The Groups financial instruments consist of cash and cash equivalents, receivables, advances to
associates and joint ventures, deposits, loans payable, accounts payable and other current
liabilities. The primary purpose of these financial instruments is to finance the Groups
operations.
There are no material unrecognized financial assets and liabilities as at March 31, 2014 and 2013.
Fair Value Information
Due to the short-term nature of cash and cash equivalents, receivables, short-term loans, accounts
payable and other current liabilities, current portion of long-term debt, their carrying values
reasonably approximate their fair values at year end.
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate such value.
Advances to Associates and Joint Ventures and Deposits. The fair value of these instruments are
computed by discounting the face amount using PDSTF-R2 at reporting date.
The fair value of advances to associates and joint ventures, classified under Level 2, amounted to
P=36.5 million and P =34.8 million as at March 31, 2014 and 2013, respectively.
The fair value of rental deposits, classified under Level 2, amounted to P =37.9 million and
P=30.6 million as at March 31, 2014 and 2013, respectively.
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*SGVFS008027*
AFS Financial Assets. The fair values of publicly-traded instruments are determined by reference
to market bid quotes as of financial reporting date. Investments in unquoted equity securities for
which no reliable basis for fair value measurement is available are carried at cost, net of
impairment.
As of March 31, 2014 and 2013, there were no other financial assets and liabilities other than
quoted AFS financial assets which are measured at fair value determined in reference with quoted
prices in active market (Level 1 Hierarchy).
Noncurrent receivables. The fair value of noncurrent receivables from unlisted entities to be
settled by common shares does not materially differ from its fair value.
Long-term debt. The carrying value approximates fair value because of recent and regular
repricing based on market conditions. Variable rate loans are repriced on a quarterly/ semi-annual
basis (see Note 16).
The carrying value of long-term debt, classified under Level 2, amounted to P =58.5 million as at
March 31, 2014.
For the years ended March 31, 2013 and 2012, there were no transfers between Level 1 and 2 fair
value measurements, and no transfers into and out of Level 3 fair value measurements.
32. Note to Consolidated Statements of Cash Flows
Non-cash investing and financing activities pertain to the following:
a. Share Swap between the Parent Company and STI ESG in September 2012 amounting to
P=2,950.9 million (see Notes 1, 3 and 18).
b. Acquisitions of property and equipment under finance lease recorded under the Property and
equipment account amounted to P =6.1 and P=7.6 million as at March 31, 2014 and 2013,
c. Unpaid progress billing for construction in progress amounting to P=129.6 million and
P=46.2 million as at March 31, 2014 and 2013, respectively (see Note 10).
d. Conversion of advances to related parties amounting to P=41.6 million into equity investment
(see Note 12).
e. Reclassification of land amounting to P=387.9 million from Property and equipment account
to Other noncurrent assets account in 2013 (see Note 10).
f. Application of the cash bond amounting to P =21.9 million to purchase a certain land to be used
for the construction of a school building in 2013.
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*SGVFS008027*
33. Events after the Reporting Date
The Group entered into the following transactions after March 31, 2014:
a. Deposit for Future Stock Subscription in AHC
In May 2014, the Parent Company made a deposit for future subscription to 40% of
outstanding common stock of AHC.
b. Chinabank Credit Facility
On May 9, 2014, the first drawdown date, STI ESG elected to have a 7 year term loan with
floating interest based on the 1-year PDST-F plus a margin of two percent (2.00%) per annum,
which interest rate shall in no case be lower than the BSP overnight rate plus a margin of
three-fourth percent (0.75%) per annum. Said interest rate shall be repriced and determined
on the relevant interest rate repricing date, and thereafter, such repriced interest rate shall be
the applicable interest rate for the immediately succeeding two (2) interest periods. The
amounts of P =200.0 million and P =100.0 million were drawn from the facility in May 2014,
subject to 4.34% and 4.43% interest rates, respectively. These loans are unsecured and are
due in July 2021.
c. Land Acquisition
Subsequent to March 31, 2014, STI ESG made various payments to acquire a parcel of land in
San Jose del Monte, Bulacan with a total purchase price amounting to P =154.4 million.
SCHEDULE G - GUARANTEES OF SECURITIES OF OTHER ISSUERS
March 31, 2014
(Amount in Pesos)
6764 Ayala Avenue,
Makati City
Name of Issuing Entity of
Securities Guaranteed by
the Company
Title of Issue of
Each Class of
Securities
Guaranteed
Total Amount
Guaranteed and
Outstanding
Amount Owed
by Person for
which Statement
is Filed
Nature of
Guarantee
Not applicable
SCHEDULE A FINANCIAL ASSETS
March 31, 2014
(Amount in Pesos)
6764 Ayala Avenue,
Makati City
Name of Issuing Entity and
Description of Each Issue
Number of Shares
or Principal
Amount of Bonds
and Notes
Amount Shown in the
Balance Sheet
Value Based on
Market Quotations at
Balance Sheet Date
Income
Received and
Accrued
The Group has no financial assets at FVPL
as of March 31, 2014
SCHEDULE B AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS, EMPLOYEES,
RELATED PARTIES, AND PRINCIPAL STOCKHOLDERS (Other than Related Parties)
March 31, 2014
(Amount in Pesos)
6764 Ayala Avenue,
Makati City
Name and Designation of Debtor
Balance at
beginning of year
Additions
Collections /
Liquidations
Balance at end
of year
Andaya, Mitch VP - Academics 196,693 13,070 209,763 -
Aporo , Kathy Deputy School Administrator 448,393 - 448,393 -
Basilio, Rowena School Administrator 305,902 - 305,902 -
Bautista, Teodoro VP Academics - 356,288 129,418 226,870
Bundoc, Restituto O. VP - School Operations 156,632 318,781 102,520 372,893
Cualoping, Vanessa Director 239,312 - 239,312 -
De Guzman, Engelbert L VP Communications 635,322 1,304,075 1,731,666 207,731
Fabro, Ferdinand AVP - Campus Development - 326,992 86,210 240,782
Fernandez, Peter EVP and COO 884,989 5,120 643,284 246,825
Jacob, Monico V. President 2,537,308 427,411 1,292,018 1,672,701
Jamandre, Jay Joseph C. AVP HROD 219,545 1,662 221,207 -
Joson, Harry Alfonso AVP ARA/CCD/MIS - 308,043 121,154 186,889
Magano, Shiela AVP - School Management - 511,285 296,358 214,927
Ortega, Ferdie Creative Manager - 502,061 262,459 239,602
Pebenito, Vanessa Special Assistant to the COO - 289,430 112,615 176,815
Rabaya, Colbert Senior School Administrator 240,013 1,391 120,855 120,549
Sangalang, Amiel VP Comptrollership 292,790 40,905 116,149 217,546
Tabije, Karen Precious Brand Manager - 420,524 188,012 232,512
Tan, Suzette R. AVP - Comptrollership 224,398 - 224,398 -
Tubongbanua, John VP CIS 266,178 - 266,178 -
6,647,475 4,827,038 7,117,871 4,356,642
The above schedule of advances to officers and employees of the Group with balances above P100,000 as
of March 31, 2014 pertain to car plan agreements. Such advances are non-interest bearing and are liquidated
on a semi-monthly basis. There were no amounts written off during the year.
SCHEDULE C AMOUNTS RECEIVABLE FROM/PAYABLE TO RELATED PARTIES WHICH ARE
ELIMINATED DURING THE CONSOLIDATION OF THE FINANCIAL STATEMENTS
March 31, 2014
(Amount in Pesos)
6764 Ayala Avenue,
Makati City
Name and
Designation of
Debtor
Balance at
beginning
of year
Additions Collections/
Liquidations
Balance at
end of year
Description Terms
Receivable of
STI
Education
Systems
Holdings,
Inc. (STI
Holdings)
from STI
Education
Services
Group, Inc.
(STI ESG)
Receivable of
STI ESG
from STI
Holdings
Receivable of
West Negros
University
from STI
Holdings
Receivable of
STI ESG
from West
Negros
University
5,100,000
-
-
-
-
13,539,911
7,321,342
22,515,669
5,100,000
3,290,996
-
-
-
10,248,915
7,321,342
22,515,669
Business
advisory fees
Reimbursement
Assignment of
liability
Advances
Non-interest
bearing and
to be settled
within the
year
Non-interest
bearing and
to be settled
within the
year
Non-interest
bearing and
to be settled
within the
year
Non-interest
bearing and
to be settled
within the
year
The above-mentioned receivables are current and to be settled within the year.
SCHEDULE D INTANGIBLE ASSETS OTHER ASSETS
March 31, 2014
(Amount in Pesos)
6764 Ayala Avenue,
Makati City
Description Beginning
balance
Additions at cost Reclassifications Charged to cost
and expenses
Ending balance
Condominium
deposit
Goodwill
-
200,258,253
397,262,833
2,585,492
-
-
-
-
397,262,833
202,843,745
Deposits 31,962,268 6,793,284 - - 38,755,552
Deposit for
future purchase
of net assets
- 20,000,000 - - 20,000,000
Computer
Software
Land
7,711,712
387,862,833
24,577,384
-
-
387,862,833
2,390,954
-
29,898,142
-
Other non
current asset
14,205,510 29,463,669 43,669,179
642,000,576 480,682,662 387,862,833 2,390,954 732,429,451
SCHEDULE E LONG TERM DEBT
March 31, 2014
(Amount in Pesos)
6764 Ayala Avenue,
Makati City
Title of issue and
type of obligation
Amount
authorized by
indenture
Amount shown under
caption Current
portion of long-term
debt in related
balance sheet
Amount shown
under caption
Long-Term Debt
in related balance
sheet
China Banking
Corporation
(Chinabank) -
Bank loans:
Maturity Date /
Interest Rate
09.25.14 / 6% 20,279,160
05.16.18 / 4.75% 2,901,479
05.16.18 / 4.75% 8,218,765
09.29.15 / 6% 1,428,590
09.29.15 / 6% 250,000
09.29.15 / 6% 325,000
04.20.18 / 6% 18,500,000
12.16.15 / 6% 6,562,500
88,811,174 30,345,680 58,465,494
Loan from WNUs
former
stockholders
19,485,271 19,485,271
Mortgage payable 109,755 109,755
108,406,200 49,940,706 58,465,494
SCHEDULE F INDEBTEDNESS TO RELATED PARTIES
(LONG-TERM LOANS FROM RELATED COMPANIES)
March 31, 2014
(Amount in Pesos)
6764 Ayala Avenue,
Makati City
Name of Related Party Beginning balance Additions at cost Ending balance
The Group has no long-
term loans from related
parties as of March 31,
2014
SCHEDULE H CAPITAL STOCK
March 31, 2014
(Amount in Pesos)
6764 Ayala Avenue,
Makati City
Number of Shares Held By
Title of
Issue
Number of
Shares
Authorized
Number of
Shares Issued
Stock
Dividends
declared
Number of
Shares
Outstanding
Number
of
Treasury
Shares
Number of
Shares
Reserved for
Options
Warrants,
Conversions,
and Other
Rights
Related Parties
Directors,
Officers and
Employees
Others
Common
Stock
10,000,000,000 9,904,806,924 - 9,904,806,924 None None 4,652,374,809* 1,564,809,935** 3,687,622,180
*Related Parties
Prudent Resources, Inc. 1,614,264,964
Rescom Developers, Inc. 794,343,934
Eujo Philippines, Inc. 763,873,130
Insurance Builders, Inc. 579,675,992
Capital Managers and Advisors, Inc. 397,908,894
STI Education Services Group, Inc. 502,307,895
T O T A L 4,652,374,809
**Directors/Officers:
Eusebio H.Tanco 1,442,013,875
Monico V. Jacob 33,784,057
Vanessa Rose L. Tanco 1
Joseph Augustin L. Tanco 2,000,001
Martin K. Tanco 36,560,000
Paolo Martin O. Bautista 3,250,000
Rainerio M. Borja 3,200,000
Maulik R. Parekh 1,000
Jesli A. Lapus 6,500,000
Ernest Lawrence Cu 26,000,000
Johnip G. Cua 1,000
Yolanda M. Bautista 5,000,001
Arsenio C. Cabrera, Jr. 6,500,000
T O T A L
1,564,809,935
SCHEDULE I USE OF PROCEEDS
March 31, 2014
(Amount in Pesos)
6764 Ayala Avenue,
Makati City
No. of Offer Shares: 2,900,000,000
Offer Price: P 0.90
Gross Proceeds: P 2,610,000,000
USE OF PROCEEDS AS OF MARCH 31, 2014
Disbursements Amount
Subscription to 2.1 billion STI Education Services Group, Inc.(STI
ESG) shares (Refer to Annex A below)
P2,100,000,000.00
Underwriting fees 90,432,409.01
Professional fees and other expenses 23,643,137.50
Documentary stamp taxes paid 7,250,000.00
Acquisition of West Negros University (WNU) 242,970,428.04
Equity contribution to WNU 145,704,025.45
TOTAL P2,610,000,000.00
ANNEX A
USE OF PROCEEDS by STI ESG
Disbursements Amount
Acquisition of land Cubao and Las Pias P 434,921,286.54
Acquisition of land, buildings and renovation of buildings STI
Batangas 141,251,067.29
Construction of school buildings Ortigas-Cainta, Caloocan, Cubao,
Calamba and Las Pias 792,931,285.82
Purchase of equipment for Ortigas-Cainta, Caloocan and Cubao 32,806,153.33
Purchase of furniture for Ortigas-Cainta and Caloocan 21,250,068.13
Payment of loans incurred for the purchase of land in Ortigas- Cainta,
Caloocan and Cubao 591,388,300.00
Payment of loans incurred for working capital requirements 85,451,838.89
TOTAL P2,100,000,000.00
RETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATION
MARCH 31, 2014
Unappropriated retained earnings, beginning P=11,232,418
Adjustments:
Unappropriated retained earnings as adjusted, beginning 11,232,418
Net income based on the face of the AFS 245,120,656
Less: Non-actual/unrealized income net of tax
Equity in net income of associate/joint venture
Unrealized foreign exchange gain - net (except those attributable to
Cash and Cash equivalents) Unrealized actuarial gain
Fair Value adjustment (M2M gains)
Fair Value adjustment of Investment Property resulting to gain
Adjustment due to deviation from PFRS/GAAP-gain
Other unrealized gains or adjustments to the retained earnings
as a result of certain transactions accounted for under the PFRS
Add: Non-actual losses
Depreciation on revaluation increment (after tax)
Adjustments due to deviation from PFRS/GAAP-loss
Loss on fair value adjustment of Investment property (after tax)
Net income actual/realized 256,353,074
Add (Less):
Dividend declarations during the period (149,998,396)
Appropriation of Retained Earnings during the period
Reversals of appropriations
Effects of prior period adjustments
Treasury shares
TOTAL RETAINED EARNINGS
AVAILABLE FOR DIVIDEND, MARCH 31, 2014 P=106,354,678
MAP OF RELATIONSHIPS BETWEEN AND AMONG THE COMPANY AND ITS ULTIMATE
PARENT COMPANY, MIDDLE PARENT, SUBSIDIARIES OR CO-SUBSIDIARIES, AND
ASSOCIATES
MARCH 31, 2014
*STI Education Services Group, Inc. owns 5% equity interest in STI Holdings as at March 31, 2014.
**A dormant company accounted for as an associate for accounting purposes and the carrying value has been
reduced to zero.
SUBSIDIARIES
99%
STI EDUCATION SYSTEMS
HOLDINGS, INC.*
STI EDUCATION
SERVICES GROUP, INC.*
iAcademy
100%
STI College
Tuguegarao,
Inc.
100%
STI College
of Batangas,
Inc.
100%
STI College
of Dagupan,
Inc.
77%
De Los
Santos STI
College
52%
STI College
Alabang, Inc.
40%
STI
Marikina,
Inc.
24%
STI
Investments,
Inc.
20%
Global Resource
for Outsourced
Workers, Inc.
17%
ASSOCIATES
Accent
Healthcare, Inc.
/ STI-Banawe,
Inc.
49%**
WEST NEGROS
UNIVERSITY CORP.
STI College
Taft, Inc.
75%
99%
DLS-STI
College Quezon
Avenue, Inc.
100%
STI EDUCATION SYSTEM HOLDINGS, INC.
SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS
March 31, 2014
PHILIPPINE FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS
Effective as at March 31, 2014 Adopted
Not
Adopted
Not
Applicable
Not
Early
Adopted
Framework for the Preparation and Presentation of Financial
Statements
Conceptual Framework Phase A: Objectives and qualitative characteristics
PFRSs Practice Statement Management Commentary
Philippine Financial Reporting Standards
PFRS 1
(Revised)
First-time Adoption of Philippine Financial Reporting
Standards
Amendments to PFRS 1 and PAS 27: Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or
Associate
Amendments to PFRS 1: Additional Exemptions for
First-time Adopters
Amendment to PFRS 1: Limited Exemption from
Comparative PFRS 7 Disclosures for First-time Adopters
Amendments to PFRS 1: Severe Hyperinflation and
Removal of Fixed Date for First-time Adopters
Amendments to PFRS 1: Government Loans
PFRS 2 Share-based Payment
Amendments to PFRS 2: Vesting Conditions and
Cancellations
Amendments to PFRS 2: Group Cash-settled Share-
based Payment Transactions
PFRS 3
(Revised)
Business Combinations
PFRS 4 Insurance Contracts
Amendments to PAS 39 and PFRS 4: Financial
Guarantee Contracts
PFRS 5 Non-current Assets Held for Sale and Discontinued
Operations
PFRS 6 Exploration for and Evaluation of Mineral Resources
PFRS 7 Financial Instruments: Disclosures
Amendments to PAS 39 and PFRS 7: Reclassification of
Financial Assets
Financial Assets - Effective Date and Transition
AND INTERPRETATIONS
Not
Adopted
Not
Applicable
Not
Early
Adopted
Amendments to PFRS 7: Improving Disclosures about
Financial Instruments
Amendments to PFRS 7: Disclosures - Transfers of
Financial Assets
Amendments to PFRS 7: Disclosures Offsetting
Financial Assets and Financial Liabilities
Amendments to PFRS 7: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
PFRS 8 Operating Segments
PFRS 9* Financial Instruments
Amendments to PFRS 9: Mandatory Effective Date of
PFRS 9 and Transition Disclosures
Financial Instruments New hedge accounting
requirements
PFRS 10* Consolidated Financial Statements
PFRS 11* Joint Arrangements
PFRS 12* Disclosure of Interests in Other Entities
PFRS 13* Fair Value Measurement
Investment entities (amendments to PFRS 10, PFRS 12 and PAS 27)
Philippine Accounting Standards
PAS 1
(Revised)
Presentation of Financial Statements
Amendment to PAS 1: Capital Disclosures
Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation
Amendments to PAS 1: Presentation of Items of Other
PAS 2 Inventories
PAS 7 Statement of Cash Flows
PAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors
PAS 10 Events after the Reporting Period
PAS 11 Construction Contracts
PAS 12 Income Taxes
Amendment to PAS 12 - Deferred Tax: Recovery of
Underlying Assets
PAS 16 Property, Plant and Equipment
AND INTERPRETATIONS
Not
Adopted
Not
Applicable
Not
Early
Adopted
PAS 17 Leases
PAS 18 Revenue
PAS 19 Amendments to PAS 19: Actuarial Gains and Losses,
Group Plans and Disclosures
Employee Benefits (Amended)
Employee Benefits - Defined Benefit Plans: Employee
Contributions (Amendments)
PAS 20 Accounting for Government Grants and Disclosure of
Government Assistance
PAS 21 The Effects of Changes in Foreign Exchange Rates
Amendment: Net Investment in a Foreign Operation
PAS 23
(Revised)
Borrowing Costs
PAS 24
(Revised)
Related Party Disclosures
PAS 26 Accounting and Reporting by Retirement Benefit Plans
PAS 27
(Amended)*
Separate Financial Statements
PAS 28
(Amended)*
Investments in Associates and Joint Ventures
PAS 29 Financial Reporting in Hyperinflationary Economies
PAS 31 Interests in Joint Ventures
PAS 32 Financial Instruments: Disclosure and Presentation
Amendments to PAS 32 and PAS 1: Puttable Financial
Instruments and Obligations Arising on Liquidation
Amendment to PAS 32: Classification of Rights Issues
Amendments to PAS 32: Offsetting Financial Assets and
PAS 33 Earnings per Share
PAS 34 Interim Financial Reporting
PAS 36 Impairment of Assets
Impairment of Assets - Recoverable Amount Disclosures
for Non-Financial Assets (Amendments)
PAS 37 Provisions, Contingent Liabilities and Contingent Assets
PAS 38 Intangible Assets
PAS 39 Financial Instruments: Recognition and Measurement
AND INTERPRETATIONS
Not
Adopted
Not
Applicable
Not
Early
Adopted
Amendments to PAS 39: Transition and Initial
Recognition of Financial Assets and Financial Liabilities
Amendments to PAS 39: Cash Flow Hedge Accounting
of Forecast Intragroup Transactions
Amendments to PAS 39: The Fair Value Option
Amendments to PAS 39 and PFRS 4: Financial
Guarantee Contracts
Financial Assets
Financial Assets Effective Date and Transition
Amendments to Philippine Interpretation IFRIC9 and
PAS 39: Embedded Derivatives
Amendment to PAS 39: Eligible Hedged Items
Financial Instruments: Recognition and Measurement -
Novation of Derivatives and Continuation of Hedge
Accounting (Amendments)
PAS 40 Investment Property
PAS 41 Agriculture
Philippine Interpretations
IFRIC 1 Changes in Existing Decommissioning, Restoration and
Similar Liabilities
IFRIC 2 Members' Share in Co-operative Entities and Similar
Instruments
IFRIC 4 Determining Whether an Arrangement Contains a Lease
IFRIC 5 Rights to Interests arising from Decommissioning,
Restoration and Environmental Rehabilitation Funds
IFRIC 6 Liabilities arising from Participating in a Specific Market
- Waste Electrical and Electronic Equipment
IFRIC 7 Applying the Restatement Approach under PAS 29
Financial Reporting in Hyperinflationary Economies
IFRIC 8 Scope of PFRS 2
IFRIC 9 Reassessment of Embedded Derivatives
Amendments to Philippine Interpretation IFRIC9 and
PAS 39: Embedded Derivatives
IFRIC 10 Interim Financial Reporting and Impairment
IFRIC 11 PFRS 2- Group and Treasury Share Transactions
IFRIC 12 Service Concession Arrangements
AND INTERPRETATIONS
Not
Adopted
Not
Applicable
Not
Early
Adopted
IFRIC 13 Customer Loyalty Programmes
IFRIC 14 The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction
Amendments to Philippine Interpretations IFRIC- 14,
Prepayments of a Minimum Funding Requirement
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 18 Transfers of Assets from Customers
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
IFRIC 20 Stripping Costs in the Production Phase of a Surface
Mine
IFRIC 21 Levies
SIC-7 Introduction of the Euro
SIC-10 Government Assistance - No Specific Relation to
Operating Activities
SIC-12 Consolidation - Special Purpose Entities
Amendment to SIC - 12: Scope of SIC 12
SIC-13 Jointly Controlled Entities - Non-Monetary
Contributions by Venturers
SIC-15 Operating Leases Incentives
SIC-25 Income Taxes - Changes in the Tax Status of an Entity or
its Shareholders
SIC-27 Evaluating the Substance of Transactions Involving the
Legal Form of a Lease
SIC-29 Service Concession Arrangements: Disclosures.
SIC-31 Revenue - Barter Transactions Involving Advertising
Services
SIC-32 Intangible Assets - Web Site Costs
Annual improvements to PFRSs 2009 2011 cycle
Annual improvements to PFRSs 2010 2012 Cycle
Annual improvements to PFRSs 2011 2013 Cycle

*SGVFS008028*

1 7 4 6
SEC Registration Number

S T I E D U C A T I O N S Y S T E M S H O L D I N G S , I

N C . ( F o r m e r l y J T H D a v i e s H o l d i n g s

, I n c . )

(Companys Full Name)

7 / F i A c a d e m y B u i l d i n g , 6 7 6 4 A y a l a

A v e n u e , M a k a t i C i t y

(Business Address: No. Street City/Town/Province)

Ms. Vette Alvarez 841-0629
(Contact Person) (Company Telephone Number)

0 3 3 1 A A P F S 1 0 0 4
Month Day (Form Type) Month Day
(Fiscal Year) (Annual Meeting)

(Secondary License Type, If Applicable)

N/A
Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings
1,245 N/A N/A
Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S
Remarks: Please use BLACK ink for scanning purposes.

COVER SHEET

- 2 -
*SGVFS008028*
Holdings and the International Lead Manager and Domestic Lead Manager. The Offer
comprised of the following: (i) up to 2,627,000,000 common shares offered to the public
on a primary basis (Primary Offering); (ii) up to 105,209,527 common shares offered to
the public on a secondary basis by Korea Merchant Banking Corporation (Secondary
Offering); and (iii) over-allotment option to purchase up to 273,000,000 common shares
(Over-allotment Option), granted to UBS AG, in its role as Stabilizing Agent, on the
same terms and conditions as the Primary Offering and Secondary Offering. The offer
price was set at P =0.90 per share on October 22, 2012. The Primary Offering and
Secondary Offering were completed on November 7, 2012 while the Over-allotment
Option was exercised on November 28, 2012 (see Note 12).
iii) In November and December 2012, STI Holdings subscribed to 2.1 billion STI ESG shares
at a consideration price equal to its par value of P=2,100.0 million. In July 2013, The
Company acquired additional 328,125 STI ESG shares for P =853,125. As of March 31,
2014 and 2013, STI Holdings ownership interest in STI ESG is approximately 99%
(see Note 7).
c. Acquisition of West Negros University Corp. (WNU)
On October 1, 2013, STI Holdings executed a Deed of Absolute Sale to acquire the shares in
WNU constituting 99.45% of the issued and outstanding common stock and 99.93% of the
issued and outstanding preferred stock of WNU for an aggregate purchase price P=400.0
million, including contingent consideration (see Note 7).
WNU owns and operates West Negros University in Bacolod City. It offers pre-elementary,
elementary, secondary and tertiary education and graduate courses.
The parent company financial statements have been approved and authorized for issuance by the
BOD on July 9, 2014.
2. Summary of Significant Accounting Policies and Disclosures
Basis of Preparation
The financial statements have been prepared under the historical cost basis, except for available-
for-sale (AFS) financial assets that have been measured at fair values.
The financial statements are presented in Philippine Peso, the Companys functional and
presentation currency, and all values are rounded to the nearest peso, except when otherwise
indicated.
Statement of Compliance
The Companys financial statements have been prepared in accordance with Philippine Financial
Reporting Standards (PFRS) as issued by the Philippine Financial Reporting Standards Council
(FRSC) and adopted by the Philippine SEC. PFRS also includes Philippine Accounting Standards
(PAS) and Philippine Interpretations based on equivalent interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC) adopted by the FRSC.
The Company also prepares and issues consolidated financial statements for the same period as
the parent company financial statements which have been prepared in compliance with PFRS.
These may be obtained at 7/F, iAcademy Building, 6764 Ayala Avenue, Makati City.
- 3 -
*SGVFS008028*
Changes in Accounting Policies, Disclosures and Presentation
The accounting policies adopted are consistent with those of the previous financial year, except for
the adoption of the new and amended PFRS that became effective beginning on or after April 1,
2013. The adoption of the following amendments and interpretations did not have any significant
effect on the accounting policies, financial position or performance of the Company:
PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and Financial
These amendments require an entity to disclose information about rights of set-off and related
arrangements (such as collateral agreements). The new disclosures are required for all
recognized financial instruments that are set off in accordance with PAS 32. These disclosures
also apply to recognized financial instruments that are subject to an enforceable master netting
arrangement or similar agreement, irrespective of whether they are set-off in accordance
with PAS 32. The amendments require entities to disclose, in a tabular format unless another
format is more appropriate, the following minimum quantitative information. This is presented
separately for financial assets and financial liabilities recognized at the end of the reporting
period:
a) The gross amounts of those recognized financial assets and recognized financial liabilities;
b) The amounts that are set off in accordance with the criteria in PAS 32 when determining
the net amounts presented in the parent company statement of financial position;
c) The net amounts presented in the parent company statement of financial position;
d) The amounts subject to an enforceable master netting arrangement or similar agreement
that are not otherwise included in (b) above, including:
i. Amounts related to recognized financial instruments that do not meet some or all of
the offsetting criteria in PAS 32; and
ii. Amounts related to financial collateral (including cash collateral); and
e) The net amount after deducting the amounts in (d) from the amounts in (c) above.
The amendments to PFRS 7 are to be retrospectively applied. The amendments have no
impact on the Companys financial statements.
PFRS 10, Consolidated Financial Statements
PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements,
which addresses the accounting for consolidated financial statements. It also includes the
issues raised in Standing Interpretation Committee, or SIC, 12, Consolidation Special
Purpose Entities. PFRS 10 establishes a single control model that applies to all entities
including special purpose entities. The changes introduced by PFRS 10 require management
to exercise significant judgment to determine which entities are controlled, and therefore, are
required to be consolidated by a parent, compared with the requirements that were in PAS 27.
A reassessment of control was performed by the Company on all its subsidiaries in accordance
with the provisions of PFRS 10. Following the reassessment and based on the new definition
of control under PFRS 10, the Company determined that the adoption of this standard does not
change its relationship over its subsidiaries, therefore, has no impact on the Companys
- 4 -
*SGVFS008028*
PFRS 11, Joint Arrangements
PFRS 11 superseded PAS 31, Interests in Joint Ventures, and SIC 13, Jointly Controlled
Entities Non-Monetary Contributions by Venturers. PFRS 11 removes the option to account
for jointly controlled entities, or JCEs, using proportionate consolidation. Instead, JCEs that
meet the definition of a joint venture must be accounted for using the equity method. The
adoption of this standard has no impact on the Companys financial position or performance.
PFRS 12, Disclosure of Interest in Other Entities
PFRS 12 includes all of the disclosures that were previously in PAS 27 related to consolidated
financial statements, as well as all of the disclosures that were previously included in PAS 31
and PAS 28, Investments in Associates. These disclosures relate to an entitys interests in
subsidiaries, joint arrangements, associates and structured entities. A number of new
disclosures are also required. The adoption of the revised standard has no significant impact
on the Companys financial statements.
PFRS 13, Fair Value Measurement
PFRS 13 establishes a single source of guidance under PFRS for all fair value measurements.
PFRS 13 does not change when an entity is required to use fair value, but rather provides
guidance on how to measure fair value under PFRS. PFRS 13 defines fair value as an exit
price. As a result of the guidance in PFRS 13, the Company reassessed its policies for
measuring fair values. The Company assessed that the application of PFRS 13 has no material
impact on its fair value measurements.
Amendments to PAS 1, Financial Statement Presentation Presentation of Items of Other
The amendments to PAS 1 change the grouping of items presented in other comprehensive
income. Items that could be reclassified (or recycled) to profit or loss at a future point in
time (for example, upon derecognition or settlement) would be presented separately from
items that may not be reclassified at any point in time. The amendment solely affects
presentation and therefore has no impact on the Companys financial position or performance.
Revised PAS 19, Employee Benefits
Amendments to PAS 19 range from fundamental changes such as removing the corridor
mechanism and the concept of expected returns on plan assets to simple clarifications and re-
wording.
The Revised PAS 19 amended the definition of short-term employee benefits and requires
employee benefits to be classified as short-term based on expected timing of settlement rather
than the employees entitlement to the benefits. In addition, the Revised PAS 19 modified the
timing of recognition for termination benefits. The modification requires the termination
benefits to be recognized at the earlier of when the offer cannot be withdrawn or when the
related restructuring costs are recognized.
As the Company has only four employees, the adoption of this standard will not have a
significant impact on its financial statements.
- 5 -
*SGVFS008028*
Revised PAS 27, Separate Financial Statements
As a consequence of the new PFRS 10 and PFRS 12, PAS 27 is now limited to accounting for
investments in subsidiaries, joint ventures and associates when an entity elects, or is required
by local regulations, to present separate financial statements. This revised standard has no
impact on the Companys financial position or performance.
Revised PAS 28, Investments in Associates and Joint Ventures
Superseding PAS 28, Investments in Associates, is PAS 28, Investments in Associates and
Joint Ventures, which prescribes the accounting for investments in associates and sets out the
requirements for the application of the equity method when accounting for investments in
associates and joint ventures. This revised standard has no impact on the Companys financial
position or performance.
Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine
This interpretation applies to waste removal (stripping) costs incurred in surface mining
activity, during the production phase of the mine. The interpretation addresses the accounting
for the benefit from the stripping activity. This new interpretation is not relevant to the
Company.
PFRS 1, First-time Adoption of International Financial Reporting Standards Government
Loans (Amendments)
The amendments to PFRS 1 require first-time adopters to apply the requirements of PAS 20,
Accounting for Government Grants and Disclosure of Government Assistance, prospectively
to government loans existing at the date of transition to PFRS. However, entities may choose
to apply the requirements of PAS 39, Financial Instruments: Recognition and Measurement,
and PAS 20 to government loans retrospectively if the information needed to do so had been
obtained at the time of initially accounting for those loans. These amendments are not
relevant to the Company.
Improvements to PFRSs
The annual improvements to PFRS contain non-urgent but necessary amendments to PFRS. The
amendments are effective for annual periods beginning on or after April 1, 2013 and to be applied
retrospectively.
PFRS 1, First-time Adoption of Philippine Financial Reporting Standards
The amendments clarify that an entity that has stopped applying PFRS may choose to either:
(a) re-apply PFRS 1, even if the entity applied PFRS 1 in a previous reporting period; or
(b) apply PFRS retrospectively in accordance with PAS 8, Accounting Policies, Changes in
Accounting Estimates and Errors, in order to resume reporting under PFRS. It also clarifies
that upon adoption of PFRS, an entity that capitalized borrowing costs in accordance with its
previous generally accepted accounting principles may carryforward, without adjustment, the
amount previously capitalized in its opening statement of financial position at the date of
transition. Such borrowing costs are then recognized in accordance with PAS 23, Borrowing
Costs. The amendment has no impact on the Companys financial position or performance, as
the Company is not a first-time adopter of PFRS.
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PAS 1, Presentation of Financial Statements Clarification of the Requirements for
Comparative Information
The amendment requires an entity to present a: (a) comparative information in the related
notes to the financial statements when it voluntarily provides comparative information beyond
the minimum required comparative period; and (b) opening statement of financial position
when an entity changes its accounting policies, makes retrospective restatements or makes
reclassifications, and that change has a material effect on the statement of financial position.
The opening statement will be at the beginning of the preceding period.
The amendment has no impact on the Companys financial statements.
PAS 16, Property, Plant and Equipment Classification of Servicing Equipment
The amendment clarifies that major spare parts and servicing equipment that meet the
definition of property and equipment are not inventory. The amendment has no impact on the
Companys financial position or performance.
PAS 32, Financial Instruments: Presentation Tax Effect of Distribution to Holders of
Equity Instruments
The amendment removes existing income tax requirements from PAS 32 and requires entities
to apply requirements in PAS 12, Income Taxes, to any income tax arising from distributions
to equity holders. The amendment has no impact on the Companys financial position or
performance.
PAS 34, Interim Financial Reporting and Segment Information for Total Assets and
Liabilities
The amendment clarifies the requirements in PAS 34 relating to segment information for total
assets and liabilities for each reportable segment to enhance consistency with the requirement
in PFRS 8, Operating Segments. The amendment has no impact on the Companys financial
position or performance.
New Accounting Standards, Interpretations and Amendments to Existing Standards
Effective Subsequent to March 31, 2014
The Company will adopt the following revised standards, interpretations and amendments to
existing standards when these become effective. Except as otherwise indicated, the Company
does not expect the adoption of these revised standards interpretations and amendments to PFRS
to have a significant impact on the parent company financial statements.
Effective in 2014
Amendments to PAS 19, Employee Benefits Defined Benefit Plans: Employee
Contributions
The amendments apply to contributions from employees or third parties to defined benefit
plans. Contributions that are set out in the formal terms of the plan shall be accounted for as
reductions to current service costs if they are linked to service or as part of the
remeasurements of the net defined benefit asset or liability if they are not linked to service.
Contributions that are discretionary shall be accounted for as reductions of current service cost
upon payment of these contributions to the plans. The amendments to PAS 19 are to be
retrospectively applied for annual periods beginning on or after July 1, 2014. The
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amendments do not apply to the Company since its employees are not required to make
contributions to the Plan.
Standard with No Mandatory Effective Date
PFRS 9, Financial Instruments: Classification and Measurement
PFRS 9, as issued, reflects the first and third phases of the project to replace PAS 39 and
applies to the classification and measurement of financial assets and financial liabilities and
hedge accounting, respectively. Work on the second phase, which relate to impairment of
financial instruments, and the limited amendments to the classification and measurement
model is still on-going, with a view to replace PAS 39 in its entirety. PFRS 9 requires all
financial assets to be measured at fair value at initial recognition. A debt financial asset may,
if the fair value option, or FVO, is not invoked, be subsequently measured at amortized cost if
it is held within a business model that has the objective to hold the assets to collect the
contractual cash flows and its contractual terms give rise, on specified dates, to cash flows that
are solely payments of principal and interest on the principal outstanding. All other debt
instruments are subsequently measured at fair value through profit or loss. All equity
financial assets are measured at fair value either through other comprehensive income or profit
or loss. Equity financial assets held-for-trading must be measured at fair value through profit
or loss. For liabilities designated as at fair value through profit or loss using the FVO, the
amount of change in the fair value of a financial liability that is attributable to changes in
credit risk must be presented in other comprehensive income. The remainder of the change in
fair value is presented in profit or loss, unless presentation of the fair value change relating to
the entitys own credit risk in other comprehensive income would create or enlarge an
accounting mismatch in profit or loss. All other PAS 39 classification and measurement
requirements for financial liabilities have been carried forward to PFRS 9, including the
embedded derivative bifurcation rules and the criteria for using the FVO. The adoption of the
first phase of PFRS 9 will have an effect on the classification and measurement of the
Companys financial assets, but will potentially have no impact on the classification and
measurement of financial liabilities.
PFRS 9 currently has no mandatory effective date. PFRS 9 may be applied before the
completion of the limited amendments to the classification and measurement model and
impairment methodology. The Company will not adopt the standard before the completion of
the limited amendments and the second phase of the project.
Interpretation whose Effective Date was Deferred
Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate
This interpretation covers accounting for revenue and associated expenses by entities that
undertake the construction of real estate directly or through subcontractors. The Philippine
SEC and the FRSC have deferred the effectivity of this interpretation until the final Revenue
Standard is issued by the International Accounting Standards Board and an evaluation of the
requirements of the final Revenue Standard against the practices of the Philippine real estate
industry is completed. Adoption of the interpretation when it becomes effective will not have
any impact on the Companys financial statements.
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Improvement to PFRS
The Annual Improvements to PFRSs (2010-2012 Cycle) contain non-urgent but necessary
amendments to the following standards:
PFRS 2, Share-based Payment Definition of Vesting Condition
The amendment revised the definitions of vesting condition and market condition and added
the definitions of performance condition and service condition to clarify various issues. This
amendment shall be prospectively applied to share-based payment transactions for which the
grant date is on or after July 1, 2014. This amendment does not apply to the Company as it
has no share-based payments.
PFRS 3, Business Combinations Accounting for Contingent Consideration in a Business
Combination
The amendment clarifies that a contingent consideration that meets the definition of a
financial instrument should be classified as a financial liability or as equity in accordance with
PAS 32. Contingent consideration that is not classified as equity is subsequently measured at
fair value through profit or loss whether or not it falls within the scope of PFRS 9 (or PAS 39,
if PFRS 9 is not yet adopted). The amendment shall be prospectively applied to business
combinations for which the acquisition date is on or after July 1, 2014. The Company shall
consider this amendment for future business combinations.
PFRS 8, Operating Segments Aggregation of Operating Segments and Reconciliation of
the Total of the Reportable Segments Assets to the Entitys Assets
The amendments require entities to disclose the judgment made by management in
aggregating two or more operating segments. This disclosure should include a brief
description of the operating segments that have been aggregated in this way and the economic
indicators that have been assessed in determining that the aggregated operating segments share
similar economic characteristics. The amendments also clarify that an entity shall provide
reconciliations of the total of the reportable segments assets to the entitys assets if such
amounts are regularly provided to the chief operating decision maker. These amendments are
effective for annual periods beginning on or after July 1, 2014 and are applied retrospectively.
The Company will consider the amendments in its segment reporting disclosure.
PFRS 13, Fair Value Measurement Short-term Receivables and Payables
The amendment clarifies that short-term receivables and payables with no stated interest rates
can be held at invoice amounts when the effect of discounting is immaterial.
PAS 16, Property, Plant and Equipment Revaluation Method Proportionate Restatement
of Accumulated Depreciation
The amendment clarifies that, upon revaluation of an item property, plant and equipment, the
carrying amount of the asset shall be adjusted to the revalued amount, and the asset shall be
treated in one of the following ways: (a) the gross carrying amount is adjusted in a manner
that is consistent with the revaluation of the carrying amount of the asset. The accumulated
depreciation at the date of revaluation is adjusted to equal the difference between the gross
carrying amount and the carrying amount of the asset after taking into account any
accumulated impairment losses; and (b) the accumulated depreciation is eliminated against the
gross carrying amount of the asset.
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The amendment is effective for annual periods beginning on or after July 1, 2014. The
amendment shall apply to all revaluations recognized in annual periods beginning on or after
period. The amendment has no impact on the Companys financial position or performance.
PAS 24, Related Party Disclosures Key Management Personnel
The amendments clarify that an entity is a related party of the reporting entity if the said
entity, or any member of a group for which it is a part of, provides key management personnel
services to the reporting entity or to the parent company of the reporting entity. The
amendments also clarify that a reporting entity that obtains management personnel services
from another entity (also referred to as management entity) is not required to disclose the
compensation paid or payable by the management to its employees or directors. The reporting
entity is required to disclose the amounts incurred for the key management personnel services
provided by a separate management entity. The amendments are effective for annual periods
beginning on or after July 1, 2014 and are applied retrospectively. The amendments affect
disclosures only and have no impact on the Companys financial position or performance.
PAS 38, Intangible Assets Revaluation Method Proportionate Restatement of
Accumulated Amortization
The amendments clarify that, upon revaluation of an intangible asset, the carrying amount of
the asset shall be adjusted to the revalued amount, and the asset shall be treated in one of the
following ways: (a) the gross carrying amount is adjusted in a manner that is consistent with
the revaluation of the carrying amount of the asset. The accumulated amortization at the date
of revaluation is adjusted to equal the difference between the gross carrying amount and the
carrying amount of the asset after taking into account any accumulated impairment losses; and
(b) the accumulated amortization is eliminated against the gross carrying amount of the asset.
The amendments also clarify that the amount of the adjustment of the accumulated
amortization should form part of the increase or decrease in the carrying amount accounted for
in accordance with the standard.
The amendments are effective for annual periods beginning on or after July 1, 2014. The
amendments shall apply to all revaluations recognized in annual periods beginning on or after
period. The amendments have no impact on the Companys financial position or
performance.
The Annual Improvements to PFRS (2011-2013 Cycle) contain non-urgent but necessary
amendments to the following standards:
PFRS 1, First-time Adoption of Philippine Financial Reporting Standards Meaning of
Effective PFRSs
The amendment clarifies that an entity may choose to apply either a current standard or a new
standard that is not yet mandatory, but that permits early application, provided either standard
is applied consistently throughout the periods presented in the entitys first PFRS financial
statements. This amendment is not applicable to the Company as it is not a first-time adopter
of PFRS.
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PFRS 3, Business Combinations Scope Exceptions for Joint Arrangements
The amendment clarifies that PFRS 3 does not apply to the accounting for the formation of a
joint arrangement in the financial statements of the joint arrangement itself. The amendment
is effective for annual periods beginning on or after July 1, 2014 and is applied prospectively.
The amendment is expected to have no impact on the Company.
PFRS 13, Fair Value Measurement Portfolio Exception
The amendment clarifies that the portfolio exception in PFRS 13 can be applied to financial
assets, financial liabilities and other contracts. The amendment is effective for annual periods
beginning on or after July 1, 2014 and is applied prospectively. The amendment has no
significant impact on the Companys financial position and performance.
PAS 40, Investment Property
The amendment clarifies the inter-relationship between PFRS 3 and PAS 40 when classifying
property as investment property or owner-occupied property. The amendment stated that
judgment is needed when determining whether the acquisition of investment property is the
acquisition of an asset or a group of assets or a business combination within the scope of
PFRS 3. This judgment is based on the guidance of PFRS 3. This amendment is effective for
annual periods beginning on or after July 1, 2014 and is applied prospectively. The
amendment has no significant impact on the Companys financial position or performance.
The Company has not early adopted the above standards. The Company continues to assess the
impact of the above new, amended and improved accounting standards and interpretations
effective subsequent to March 31, 2014 on its parent company financial statements in the period of
initial application. Additional disclosures required by these amendments will be included in the
parent company financial statements when these amendments are adopted.
Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash with maturities of up to three
months or less from date of acquisition and are subject to an insignificant risk of change in value.
Financial Instruments - Initial Recognition and Subsequent Measurement
Date of Recognition. The Company recognizes a financial asset or a financial liability in the
parent company statement of financial position when it becomes a party to the contractual
provisions of the instrument. All regular way purchases and sales of financial assets are
recognized on the trade date. Regular way purchases or sales are purchases or sales of financial
assets that require delivery of assets within the period generally established by regulation or
convention in the market place.
Initial Recognition. Financial instruments are recognized initially at fair value. Transaction costs
are included in the initial measurement of all financial assets and liabilities, except for financial
instruments measured at fair value through profit or loss (FVPL).
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Fair Value Measurement. The Company measures financial instruments, such as, AFS financial
assets, at fair value at every financial reporting date. The Company also discloses the fair values
of financial instruments measured at amortized cost.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible to by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest. A fair value measurement of a non-financial asset takes into account a
market participant's ability to generate economic benefits by using the asset in its highest and best
use or by selling it to another market participant that would use the asset in its highest and best
use.
The Company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements
are categorized within the fair value hierarchy, described as follows, based on the lowest level
input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
value measurement is directly or indirectly observable
value measurement is unobservable
For assets and liabilities that are recognized in the parent company financial statements on a
recurring basis, the Company determines whether transfers have occurred between levels in the
hierarchy by re-assessing categorization (based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each reporting period.
Management determines the policies and procedures for both recurring fair value measurement
and non-recurring measurement.
External valuers are involved for valuation of significant assets, such as investment property.
Involvement of external valuers is decided upon annually. Selection criteria include market
knowledge, reputation, independence and whether professional standards are maintained.
Management decides, after discussions with the external valuers, which valuation techniques and
inputs to use for each case.
At each reporting date, the management analyzes the movements in the values of assets and
liabilities which are required to be re-measured or re-assessed as per accounting policies. For this
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analysis, the management verifies the major inputs applied in the latest valuation by agreeing the
information in the valuation computation to contracts and other relevant documents.
Management, in conjunction with the Companys external valuers, also compares each change in
the fair value of each asset and liability with relevant external sources to determine whether the
change is reasonable.
For the purpose of fair value disclosures, the Company has determined classes of assets and
liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level
of the fair value hierarchy as explained above.
Day 1 Difference. Where the transaction price in a non-active market is different from the fair
value from other observable current market transactions of the same instrument or based on a
valuation technique whose variables include only data from an observable market, the Company
recognizes the difference between the transaction price and fair value (a Day 1 difference) in the
profit or loss unless it qualifies for recognition as some other type of asset or liability. In cases
where use is made of data which is not observable, the difference between the transaction price
and model value is only recognized in the parent company statement of comprehensive income
when the inputs become observable or when the instrument is derecognized. For each transaction,
the Company determines the appropriate method of recognizing the Day 1 difference amount.
Classification. A financial instrument is classified as liability if it provides for a contractual
obligation to: (a) deliver cash or another financial asset to another entity; (b) exchange financial
assets or financial liabilities with another entity under conditions that are potentially unfavorable
to the Company; or (c) satisfy the obligation other than by the exchange of a fixed amount of cash
or another financial asset for a fixed number of the Companys own shares. If the Company does
not have the unconditional right to avoid delivering cash or another financial asset to settle its
contractual obligation, the obligation meets the definition of a financial liability.
Financial assets are categorized as either financial assets at FVPL, held-to-maturity (HTM)
investments, loans and receivables or AFS financial assets. Financial liabilities, on the other hand,
are categorized either as financial liabilities at FVPL and other financial liabilities. The Company
determines the classification at initial recognition and re-evaluates this designation at every
reporting date, where appropriate.
The Company has no financial assets or financial liabilities at FVPL and HTM investments as at
March 31, 2014 and 2013.
a. Loans and Receivables
Loans and receivables are nonderivative financial assets with fixed or determinable payments
that are not quoted in an active market.
After initial recognition, loans and receivables are measured at amortized cost using the
effective interest method less allowance for impairment. Amortized cost is calculated by
taking into account any discount or premium on acquisition, and fees and costs that are an
integral part of the effective interest rate. The amortization is recognized in the parent
company statement of comprehensive income under the Interest income account. Losses
arising from impairment are recognized as provision for doubtful accounts in the parent
company statement of comprehensive income.
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Loans and receivables are included in current assets when the Company expects to realize or
collect the assets within 12 months from the reporting date. Otherwise, these are classified as
noncurrent assets.
The Companys cash and cash equivalents and receivables are included in this category.
b. AFS Financial Assets
AFS financial assets are those nonderivative financial assets that are not classified as at FVPL,
loans and receivables or HTM investments. These are purchased and held indefinitely, and
maybe sold in response to liquidity requirements or changes in market conditions.
After initial recognition, AFS financial assets are subsequently measured at fair value with
unrealized gains or losses being recognized under Unrealized mark-to-market gain on
available-for-sale financial assets account in other comprehensive income until these are
derecognized or determined to be impaired at which time the cumulative gain or loss
previously recognized under Unrealized mark-to-market gain on available-for-sale financial
assets account in other comprehensive income is recorded in profit or loss. Interest earned on
the investments is reported as interest income using the effective interest method. Dividends
earned on investments are recognized in the parent company statement of comprehensive
income when the right to receive payment has been established. AFS financial assets are
classified as noncurrent assets unless the intention is to dispose of such assets within
12 months from reporting date.
The fair value of AFS financial assets consisting of investments that are actively traded in
organized financial markets is determined by reference to quoted market bid prices at the close
of business on the reporting date.
When the fair value of AFS financial assets cannot be measured reliably because of lack of
reliable estimates of future cash flows and discount rates necessary to calculate the fair value
of unquoted equity instruments, these investments are carried at cost.
The Companys investments in quoted equity securities are included in this category.
c. Other Financial Liabilities
Other financial liabilities at amortized cost pertain to issued financial instruments or their
components that are not classified or designated at FVPL and contain contractual obligations
to deliver cash or another financial asset to the holder as to settle the obligation other than by
the exchange of a fixed amount of cash or another financial asset for a fixed number of own
equity shares. Financial liabilities are classified as current if they are expected to be settled or
disposed of within 12 months from reporting date. Otherwise, these are classified as
noncurrent.
Other financial liabilities are initially recognized at fair value of the consideration received,
less directly attributable transaction costs. After initial recognition, other financial liabilities
are subsequently measured at amortized cost using the effective interest method. Amortized
cost is calculated by taking into account any related issue costs and discount or premium.
Gains and losses are recognized in the parent company statement of income when the
liabilities are derecognized, as well as through the amortization process.
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These include liabilities arising from operations such as accounts payable and other current
liabilities, dividends payable and nontrade payable.
Impairment of Financial Assets
The Company assesses at each reporting date whether a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if
there is objective evidence of impairment as a result of one or more events that has occurred after
the initial recognition of the asset (an incurred loss event) and that loss event has an impact on the
estimated future cash flows of the financial asset or the group of financial assets that can be
reliably estimated. Objective evidence of impairment may include indications that the debtors or a
group of debtors is experiencing significant financial difficulty, default or delinquency in interest
or principal payments, the probability that they will enter bankruptcy or other financial
reorganization and where observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.
Financial Assets Carried at Amortized Cost. The Company first assesses whether an objective
evidence of impairment exists individually for financial assets that are individually significant, or
collectively for financial assets that are not individually significant. If it is determined that no
objective evidence of impairment exists for an individually assessed financial asset, whether
significant or not, the asset is included in a group of financial assets with similar credit risk
characteristics and that group of financial assets is collectively assessed for impairment. Assets
that are individually assessed for impairment and for which an impairment loss is or continues to
be recognized are not included in a collective assessment of impairment.
If there is an objective evidence that an impairment loss has been incurred, the amount of the loss
is measured as the difference between the assets carrying amount and the present value of the
estimated future cash flows (excluding future credit losses that have not been incurred). The
carrying amount of the asset is reduced through use of an allowance account and the amount of
loss is charged to the parent company statement of comprehensive income. Interest income
continues to be recognized based on the original effective interest rate of the asset. Loans and
receivables, together with the associated allowance accounts, are written off when there is no
realistic prospect of future recovery and all collateral, if any, have been realized.
If, in a subsequent year, the amount of the estimated impairment loss decreases because of an
event occurring after the impairment was recognized, the previously recognized impairment loss is
reduced by adjusting the allowance account. If a future write-off is later recovered, any amounts
formerly charged are credited to income.
Assets Carried at Cost. If there is objective evidence that an impairment loss had been incurred
on an unquoted equity instrument that is not carried at fair value because its fair value cannot be
reliably measured, the amount of the loss is measured as the difference between the assets
carrying amount and the present value of estimated future cash flows discounted at the current
market rate of return for a similar financial asset.
The carrying amount of the asset is reduced through the use of an allowance account and the
amount of the loss is recognized in the parent company statement of comprehensive income. The
asset together with the associated allowance are written off when there is no realistic prospect of
future recovery and all collateral has been realized or has been transferred to the Company.
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AFS Financial Assets. For AFS financial assets, the Company assesses at each reporting date
when there has been a significant or prolonged decline in the fair value below its cost or
where other objective evidence of impairment exists. Significant is to be evaluated against the
original cost of the investment and prolonged against the period in which the fair value has been
below its original cost. If an AFS financial asset is impaired, an amount comprising the difference
between its cost (net of any principal payment and amortization) and its current fair value, less any
impairment loss previously recognized in the parent company statement of comprehensive
income, is transferred from equity to the parent company statement of comprehensive income.
Reversals in respect of equity instruments classified as AFS financial assets are not recognized in
the profit or loss but are recognized directly in other comprehensive income.
Derecognition of Financial Assets and Liabilities
Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part of a
group of similar financial assets) is derecognized when:
the rights to receive cash flows from the asset have expired;
the Company retains the right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third party under a pass-through
arrangement; or
the Company has transferred its right to receive cash flows from the asset and either
(a) has transferred substantially all the risks and rewards of the asset, or (b) has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Company has transferred its right to receive cash flows from an asset and has neither
transferred nor retained substantially all the risks and rewards of the asset nor transferred control
of the asset, the asset is recognized to the extent of the Companys continuing involvement in the
asset. In that case, the Company also recognizes an associated liability. The transferred asset and
the associated liability are measured on a basis that reflects the rights and obligations that the
Company has retained.
Financial Liabilities. A financial liability is derecognized when the obligation under the liability
is discharged or cancelled or has expired.
When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognized in the parent company
statement of comprehensive income.
Offsetting of Financial Instruments
Financial assets and liabilities are offset and the net amount reported in the parent company
statement of financial position if there is a currently enforceable legal right to offset the
recognized amounts and there is an intention to settle on a net basis, or to realize the asset and
settle the liability simultaneously. This is not generally the case with master netting agreements,
and the related assets and liabilities are presented at gross amounts in the parent company
statement of financial position.
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Input Value-added Taxes (VAT)
Input VAT represents VAT imposed on the Company by its suppliers for the acquisition of goods
and services required under Philippine taxation laws and regulations. The portion of excess input
VAT over output VAT is presented as part of Prepaid taxes under the Other current assets
account in the parent company statement of financial position. Input VAT is stated at its estimated
net realizable value (NRV).
Creditable Withholding Taxes (CWT)
CWT represents the amount withheld from advances made by the Company. These are
recognized upon collection and are utilized as tax credits against income tax due as allowed by the
Philippine taxation laws and regulations. CWT is presented as part of Prepaid taxes under the
Other current assets account in the parent company statement of financial position. CWT is
stated at its estimated NRV.
Investment in Subsidiaries
The Companys investment in subsidiaries (entity which the Company controls) is carried in the
parent company statement of financial position at cost less any accumulated impairment in value.
Property and Equipment
Property and equipment is stated at cost, excluding the costs of day-to-day servicing, less
accumulated depreciation and amortization and any impairment in value.
The initial cost of property and equipment consists of its purchase price, including import duties,
taxes, and any directly attributable costs of bringing the property and equipment to its working
condition and location for its intended use. Expenditures incurred after the property and
equipment have been put into operation, such as repairs and maintenance, are normally charged to
the parent company statement of comprehensive income in the period such costs are incurred. In
situations where it can be clearly demonstrated that the expenditures have resulted in an increase
in the future economic benefits expected to be obtained from the use of an item of property and
equipment beyond its original assessed standard of performance, the expenditures are capitalized
as an additional costs of property and equipment.
Depreciation and amortization are computed using the straight-line method over the following
estimated useful lives of property and equipment:
Office equipment 2 years
Leasehold improvements 5 years or term of the lease, whichever is shorter
Furniture and fixtures 2 years
The estimated useful lives and depreciation and amortization method are reviewed periodically to
ensure that the periods and method of depreciation and amortization are consistent with the
expected pattern of economic benefits from items of property and equipment. The useful lives of
property and equipment are estimated based on the period over which property and equipment are
expected to be available for use and on collective assessment of industry practice, internal
technical evaluation and experience with similar assets. The estimated useful lives of the property
and equipment are updated if expectations differ from previous estimates due to wear and tear,
technical or commercial obsolescence and legal or other limits on the use of the property and
equipment. However, it is possible that future financial performance could be materially affected
by changes in the estimates brought about by changes in factors mentioned above. The amounts
and timing of recorded expenses for any period would be affected by changes in these factors and
circumstances.
- 17 -
*SGVFS008028*
An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising from derecognition of the
asset (calculated as the difference between the net disposal proceeds and carrying amount of the
asset) is included in the parent company statement of comprehensive income in the year the asset
is derecognized.
Property under construction is stated at cost less any impairment in value. This includes cost of
construction, equipment and other direct costs associated to construction of leasehold
improvements. Property under construction is not depreciated until such time that the relevant
assets are completed and available for its intended use.
Property under construction is transferred to leasehold improvements when the construction or
installation and related activities necessary to prepare the leasehold improvements for their
intended use have been completed, and the leasehold improvements are ready for commercial
service.
Investments in Subsidiaries and Property and Equipment. The Company assesses at each
reporting date whether there is an indication that an asset may be impaired. If any such indication
exists, the Company makes an estimate of the assets recoverable amount. The recoverable
amount of the asset is the greater of fair value less cost to sell and value in use. The fair value is
the amount obtainable from the sale of an asset in arms length transaction between
knowledgeable, willing parties, less cost of disposal. In assessing value in use, the estimated
future cash flows are discounted to their presented value using a pre-tax discount rate that reflects
current market assessment of the time value of money and the risks specific to the asset. For an
asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs. Any impairment loss is
charged to the parent company statement of comprehensive income.
An assessment is made at each reporting date as to whether there is any indication that previously
recognized impairment losses may no longer exist or may have decreased. If such indication
exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed
only if there has been a change in the estimates used to determine the assets recoverable amount
since the last impairment loss was recognized. If that is the case, the carrying amount of the assets
is increased to its recoverable amount. That increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation and amortization, had no impairment loss
been recognized for the asset in the prior years. Such reversal is recognized in the parent company
statement of comprehensive income. After such reversal, the depreciation and amortization
charges are adjusted in future periods to allocate the assets revised carrying amount, less any
residual value, on a systematic basis over its remaining useful life.
Equity
Common stock is measured at par value for all shares issued. Incremental costs incurred directly
attributable to the issuance of new shares are shown in equity as a deduction of proceeds, net of
tax. Proceeds and/or fair value of considerations received in excess of par value are recognized as
additional paid-in capital.
Retained earnings represent the Companys net accumulated earnings less cumulative dividends
declared.
- 18 -
*SGVFS008028*
Issuance of Common Stock for Noncash Assets
In case of issuance of common stock for noncash assets and services, the cost is equivalent to the
fair market value of the (i) consideration given up (i.e., fair market value of the common stock) or
(ii) consideration received (i.e., fair market value of services, noncash assets), whichever is more
readily determinable. The Company recognized its investment in STI ESG at the fair market
value of the Companys common stock given up in exchange for STI ESG shares.
Revenue Recognition
The Company recognizes revenue when the amount of revenue can be reliably measured, it is
possible that future economic benefits will flow into the entity and specific criteria have been met
for each of the Companys activities described below. The amount of revenue is not considered to
be reliably measured until all contingencies relating to the sale have been resolved. The Company
bases its estimates on historical results, taking into consideration the type of customer, the type of
transaction and the specifics of each arrangement.
The following specific recognition criteria must also be met before revenue is recognized:
Interest Income. Interest income is recognized as it accrues on a time proportion basis taking into
account the principal amount outstanding and the effective interest rate. Interest income
represents interest earned from receivables and cash and cash equivalents.
Dividend Income. Dividend income is recognized when the right to receive has been established.
Advisory Fee. Advisory fee is recognized when the service is rendered.
Other Income. Other income is recognized when earned.
General and Administrative Expenses
General and administrative expenses are recognized in the parent company statement of
comprehensive income in the period these are incurred.
Provisions
Provisions are recognized when the Company has present obligations, legal or constructive, as a
result of past events, when it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the amount
of the obligation. Where the Company expects some or all of a provision to be reimbursed, the
reimbursement is recognized as a separate asset but only when the reimbursement is virtually
certain. The expense relating to any provision is presented in the parent company statement of
comprehensive income, net of any reimbursements. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the
risks specific to the liability. Where discounting is used, the increase in the provision due to
passage of time is recognized as interest expense.
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of
the arrangement at the inception date of whether the fulfillment of the arrangement is dependent
on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if
that right is not explicitly specified in an arrangement. A reassessment is made after the inception
of the lease only if one of the following applies: (a) there is a change in contractual terms, other
than a renewal or extension of the agreement; (b) a renewal option is exercised or extension
granted, unless the term of the renewal or extension was initially included in the lease term;
- 19 -
*SGVFS008028*
(c) there is a change in the determination of whether the fulfillment is dependent on a specified
asset; or (d) there is a substantial change to the asset.
Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) and the date of
renewal or extension period for scenario (b).
As a lessee. Leases where the lessor retains substantially all the risks and benefits of ownership of
the assets are classified as operating leases. Operating lease payments are recognized as expense
in the parent company statement of comprehensive income on a straight-line basis over the lease
term.
Taxes
Current tax. Current tax assets and liabilities for the current and prior years are measured at the
amount expected to be recovered from or paid to the taxation authority. The tax rates and tax laws
used to compute the amount are those that are enacted or substantively enacted as at reporting
date.
Deferred tax. Deferred tax is provided, using the liability method, on all temporary differences at
the reporting date between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences except when the
deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
Deferred tax assets are recognized for all deductible temporary differences, carryforward benefit
of unused tax credits from excess minimum corporate income tax (MCIT) over regular corporate
income tax (RCIT) and unused net operating loss carry-over (NOLCO) to the extent that it is
probable that taxable profit will be available against which the deductible temporary differences
and the carry-forward benefit of unused tax credits and unused tax losses can be utilized except
when the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit or loss.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient future taxable profit will be available to allow all
or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at
each reporting date and are recognized to the extent that it has become probable that sufficient
future taxable profit will allow the deferred tax asset, to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized directly in equity is also included in equity and not in
profit or loss of the parent company statement of comprehensive income.
- 20 -
*SGVFS008028*
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to
offset current tax assets against current tax liabilities and the deferred taxes relate to the same
taxable entity and the same taxation authority.
Contingencies
Contingent liabilities are not recognized in the parent company financial statements but are
disclosed in the notes to the parent company financial statements, unless the possibility of an
outflow of resources embodying economic benefits is remote. Contingent assets are not
recognized in the parent company financial statements but are disclosed in the notes to parent
company financial statements when an inflow of economic benefits is probable.
Events After the Reporting Date
Post year-end events that provide additional information about the parent companys financial
position at reporting date (adjusting events) are reflected in the parent company financial
statements. Post year-end events that are not adjusting events, if any, are disclosed in the notes to
parent company financial statements, when material.
Earnings Per Share
The Company presents basic and diluted earnings per share rate for its common shares. Basic
Earnings Per Share (EPS) is calculated by dividing net income for the period attributable to
common equity shareholders by the weighted average number of common shares outstanding
during the period after giving retroactive effect to any stock dividend declarations.
Diluted EPS is calculated in the same manner, adjusted for the dilutive effect of any potential
common shares. As the Company has no dilutive common shares outstanding, basic and diluted
earnings per share are stated at the same amount.
Segment Reporting
A segment is a distinguishable component of the Company that is engaged either in providing
products or services within a particular economic environment, which is subject to risks and
rewards that are different from those of other segments. Such business segment is the base upon
which the Company reports its operating segment information. The Company operates in one
geographical area where it derives its revenue. The Company did not present segment information
in the parent company financial statements as the Company has only one reportable segment.
However, the Company presents segment information in the consolidated financial statements as
the Companys subsidiary is organized into business units based on geographical location of
students and assets.
3. Managements Use of Judgments, Estimates and Assumptions
The preparation of the parent company financial statements in conformity with PFRS requires the
Company to make judgments, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities and disclosure of contingent liabilities at the reporting
date. The uncertainties inherent in these assumptions and estimates could result in outcomes that
could require a material adjustment to the carrying amount of the assets or liabilities affected in
the future years.
Judgments. In the process of applying the Companys accounting policies, management has made the
following judgments apart from those including estimations and assumptions, which have the most
significant effect on the amounts recognized in the parent company financial statements.
- 21 -
*SGVFS008028*
Impairment of Investments in Equity Securities
The Company follows the guidance of PAS 39 to determine when an investments in equity
securities is impaired. This determination requires significant judgment. In making this
judgment, the Company evaluates, among other factors, the duration and extent to which the fair
value of an investment is less than its cost; and the financial health of and near-term business
outlook for the investee, including factors such as industry and sector performance, changes in
technology and operational and financing cash flow.
An AFS financial asset is considered to be impaired when there has been a significant or
prolonged decline in the fair value below its cost or where other objective evidence of impairment
exists. The determination of what is significant or prolonged requires judgment. The
Company treats significant, generally as 20% or more decline in the original cost of investment;
and prolonged, as a period of greater than six months. In addition, the Company evaluates other
factors, including normal volatility in share price for quoted equities and the future cash flows and
the discount factors for unquoted equities.
No impairment loss for investments in equity securities was recognized for the years ended
March 31, 2014 and 2013.
Available-for-sale financial assets amounted to P=0.8 million as at March 31, 2014 and 2013
(see Note 8).
An impairment review is performed whenever events or changes in circumstances indicate that the
carrying amount of a nonfinancial asset may not be recoverable or that the previously recognized
impairment loss may no longer exist or may have decreased. The factors that the Company
considers important which could trigger an impairment review include the following:
significant under performance relative to expected historical or projected future operating
results;
significant changes in the manner of use of the acquired assets or the strategy for overall
business;
significant negative industry or economic trends;
the dividend exceeds the total comprehensive income of the associate in the period the
dividend is declared; or
the carrying amount of the investment in an associate in the parent company financial
statements exceeds the carrying amount in the financial statements of the investees net assets,
including associated goodwill.
At each financial reporting date, the Company assesses whether there are any indicators of
impairment. Only if indicators of impairment are present will the Company perform the
impairment testing.
The Company recognizes an impairment loss whenever the carrying amount of an asset exceeds
its recoverable amount. The recoverable amount is computed using the value in use approach.
Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-
generating unit to which the asset belongs.
- 22 -
*SGVFS008028*
While it is believed that the assumptions used in the estimation of fair values reflected in the
parent company financial statements are appropriate and reasonable, significant changes in these
assumptions may materially affect the assessment of recoverable value and any resulting
impairment loss would have a material adverse impact on the results of operations.
Noncurrent nonfinancial assets that are subject for impairment testing as at March 31, 2014 and
2013 are as follows:
2014 2013
Investments in and advances to subsidiaries
(see Note 7) P=15,830,847,317 P=15,282,822,916
Property and equipment (see Note 9) 12,758,936 11,528,450
No impairment loss was recognized for the years ended March 31, 2014 and 2013.
Evaluating Lease Commitments
The evaluation of whether an arrangement contains a lease is based on its substance. An arrangement
is, or contains a lease when the fulfillment of the arrangement depends on a specific asset or assets
and the arrangement conveys a right to use the asset, even if that right is not explicitly specified in the
arrangement.
The Company has entered into various operating lease agreements as a lessee. The Company has
determined, based on an evaluation of the terms and conditions of the arrangements, that the lessor
retains all the significant risks and rewards of ownership of these properties because the lease
agreements do not transfer to the Company the ownership over the assets at the end of the lease term
and do not provide the Company with a bargain purchase option over the leased assets and so
accounts for the contracts as operating leases. Rent expense amounted to P =2.4 million and
P=1.1 million for the years ended March 31, 2014 and 2013, respectively.
Estimates and Assumptions. The key estimates and assumptions concerning the future and other key
sources of estimation uncertainty at reporting date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities recognized in the parent company financial
statements within the next financial year are discussed as follows:
Estimating Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts at a level considered adequate to
provide for potential uncollectible receivables. The level of allowance is evaluated by the
Company on the basis of factors that affect the collectability of the accounts. The review is
accomplished using a combination of specific and collective assessment. The factors considered
in specific impairment assessment are the length of the Companys relationship with customers,
customers current credit status based on known factors, age of the accounts and other available
information that will indicate objective evidence that the customers may be unable to meet their
financial obligations. The collective impairment assessment is based on historical loss experience
and deterioration in the market in which the customers operate. The amounts and timing of
recorded provision for doubtful accounts for any period will differ if the Company made different
assumptions or utilized different estimates.
There were no provisions for doubtful accounts recognized for the years ended March 31, 2014
and 2013. Receivables, including noncurrent receivables, amounted to P=464.3 million and
P=479.8 million as at March 31, 2014 and 2013, respectively (see Notes 5 and 11).
- 23 -
*SGVFS008028*
Recognition of Deferred Tax Assets
The Company reviews the carrying amounts of deferred tax assets at each reporting date and
reduced these to the extent that it is no longer probable that sufficient taxable income will be
available to allow all or part of the deferred tax assets to be utilized.
Since the Company is a holding company, management assessed that no sufficient future taxable
income will be generated to allow all or part of its deferred tax assets to be utilized as the
Companys income mainly pertains to passive income which are not subject to income tax.
Deductible temporary differences and unused NOLCO and MCIT for which no deferred tax assets
were recognized amounted to P =5.6 million and P =6.7 million as at March 31, 2014 and 2013,
4. Cash and Cash Equivalents
2014 2013
Cash on hand P=5,000 P=5,000
Cash in banks 22,682,932 5,453,761
Cash equivalents 153,962,880 458,412,600
P=176,650,812 P=463,871,361
Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are short-term
placements which are made for varying periods of up to three months depending on the immediate
cash requirements of the Company and earn interest at the prevailing short-term investment rates.
Interest income earned from cash in banks and short-term cash placements for the years ended
March 31, 2014 and 2013 amounted to P =2.6 million and P =10.7 million, respectively.
5. Receivables
2014 2013
Accrued interest P=17,232 P=243,008
Receivable from Philippine Racing Club, Inc. (PRCI) 10,179,312
Receivable from STI ESG (see Note 11) 5,100,000
Others 270,909 274,831
P=288,141 P=15,797,151
a. Accrued interest pertains to accrued interest from short-term cash placements which are normally
collectible within one year.
b. Receivable from PRCI
On July 7, 2008, the Company and PRCI (the Companys major shareholder up to March
2010) executed a Deed of Transfer with Subscription Agreement pursuant to the resolution of
the BOD and Shareholders to approve a property-for-share swap transaction involving a
property owned by PRCI. The Company paid local transfer taxes to the City Treasurer of
Makati amounting to P=10.2 million, in relation to the property-for-share swap transaction.
However, on August 22, 2008, the Company agreed with PRCI to disengage effective
immediately from the agreement.
- 24 -
*SGVFS008028*
In 2009, the Company received a tax credit certificate (TCC), amounting to P =10.2 million,
covering the local transfer taxes and the said TCC was subsequently assigned to PRCI.
As of March 31, 2014, PRCI fully settled their liability to the Company.
c. Other receivables are collectible within one year.
6. Other Current Assets
2014 2013
Prepaid taxes P=12,271,042 P=10,592,104
Others 170,524 110,313
P=12,441,566 P=10,702,417
Prepaid taxes primarily include input VAT and creditable withholding taxes.
7. Investments in and Advances to Subsidiaries
2014 2013
Investments in shares of stock P=15,651,120,967 P=15,282,822,916
Deposit for future stock subscription 179,726,350
P=15,830,847,317 P=15,282,822,916
The Company carries its investments in shares of stock of the following subsidiaries under the cost
method:
Principal Place
Percentage of
Ownership Cost
of Business 2014 2013 2014 2013
STI ESG Cainta, Rizal 99% 99% P=15,283,676,041 P=15,282,822,916
WNU Bacolod City, Negros
Occidental 99% 367,444,926
P=15,651,120,967 P=15,282,822,916
Movements in the investment cost are as follows:
2014 2013
Balance at beginning of year P=15,282,822,916 P=
Additions 368,298,051 15,282,822,916
Balance at end of year P=15,651,120,967 P=15,282,822,916
- 25 -
*SGVFS008028*
STI ESG
The movements in the Companys investment in STI ESG for the year ended March 31, 2014 and
2013 are as follows:
2014 2013
Balance at beginning of year P=15,282,822,916 P=
Additions 853,125
Share swap (see Notes 1, 11 and 12) 13,102,011,371
Subscriptions (see Notes 1, 11 and 12) 2,100,000,000
Reclassification fromavailable-for-sale financial
assets (Note 8) 80,811,545
Balance at end of year P=15,283,676,041 P=15,282,822,916
On September 28, 2012, pursuant to the Share Swap discussed in Notes 1 and 11, the Company
issued 5,901,806,924 shares to STI ESG Stockholders at a quoted price of P =2.22 per share (STI
Holdings quoted price as of September 28, 2012) in exchange for 907,970,294 STI ESG shares
(see Note 12).
In November 2012, the Company subscribed to 1,020,000,000 STI ESG shares at P=1.00 per share.
In December 2012, the Company advanced P=1,080.0 million to STI ESG for future subscription of
STI ESG shares, while waiting for the SECs approval of the increase in authorized capital stock.
On March 8, 2013, STI ESG issued 1,080,000,000 shares to STI Holdings upon SECs approval of
its application.
In July 2013, the Company acquired additional 328,215 STI ESG shares from various
shareholders for a cash consideration of P=853,125.
On August 30, 2013 and November 23, 2012, the Company received cash dividends from STI
ESG amounting to P =246.8 million or P=0.08116883 per STI ESG share and P =98.0 million or P=0.05
per STI ESG share, respectively.
WNU
Investments in and advances to WNU consists of:
Amount
Investment in shares of stock P=367,444,926
Deposit for future stock subscription 179,726,350
P=547,171,276
On September 11, 2013, STI Holdings executed a Share Purchase Agreement with the former
shareholders of WNU. WNU owns and operates West Negros University in Bacolod City. It
offers pre-elementary, elementary, secondary and tertiary education and graduate courses.
On October 1, 2013, STI Holdings executed a Deed of Absolute Sale to acquire the shares in
WNU constituting 99.45% of the issued and outstanding common stock and 99.93% of the issued
and outstanding preferred stock of WNU for an aggregate purchase price of P=400.0 million,
including contingent consideration. As of March 31, 2014, the acquisition cost was recorded at
P=397.0 million broken down as follows: (a) cash payment of P =238.2 million, including advances
amounting to P =34.4 million; (b) contingent consideration amounting to P=151.5 million and
(c) payable to WNU on behalf of WNUs previous shareholders amounting to P =7.3 million
(see Note 10).
- 26 -
*SGVFS008028*
Certain acquisition-related expenses amounting to P=4.7 million were capitalized as part of the cost
of acquiring WNU.
In November 2013, the BOD and the stockholders of WNU approved the reclassification of the
preferred shares into common shares and the increase in its authorized capital stock. As at July 9,
2014, the SEC approval on WNUs application is still pending.
As of March 31, 2014, the Company has made a deposit for future stock subscription in WNU for
an aggregate amount of P=179.7 million, including advances converted into deposit for future stock
subscription of P =34.4 million.
8. Available-for-sale Financial Assets
This account represents the Companys investment in quoted equity securities amounting to
P=850,065 and P=844,255 as of March 31, 2014 and 2013, respectively.
Movement in unrealized mark-to-market gain on available-for-sale financial assets follows:
2014 2013
Balance at beginning of year P=479,788 P=436,628
Unrealized mark-to-market gain 5,810 43,160
Balance at end of year P=485,598 P=479,788
In December 2011, the Company acquired 32,324,618 STI ESG shares, approximating 4.4% of
ownership interest in STI ESG, from various shareholders for a total consideration of
P =80.8 million. The Company accounted such investment as AFS financial assets in the March 31,
2012 parent company statement of financial position.
After the Share Swap in September 2012 (see Notes 1 and 7), the Company gained control over
STI ESG. Thus, the Company reclassified its investment in STI ESG to Investments in and
advances to subsidiaries account immediately after the Share Swap.
9. Property and Equipment
The rollforward analyses of this account follows:
2014
Office
Equipment
Leasehold
Improvements
Furniture
and Fixtures
Property
under
Construction Total
Cost
Balance at beginning of year P=292,677 P=12,108,761 P=95,774 P=492,114 P=12,989,326
Additions 209,618 3,553,913 205,193 3,968,724
Reclassification 492,114 (492,114)
Balance at end of year 502,295 16,154,788 300,967 16,958,050
Accumulated Depreciation
and Amortization
Balance at beginning of year 292,677 1,131,236 36,963 1,460,876
Depreciation and amortization 34,233 2,647,385 56,620 2,738,238
Net Book Value P=175,385 P=12,376,167 P=207,384 P= P=12,758,936
- 27 -
*SGVFS008028*
2013
Office
Equipment
Leasehold
Improvements
Furniture
and Fixtures
Property
under
Construction Total
Cost
Balance at beginning of year P=292,677 P=133,279 P=36,964 P = P=462,920
Additions 11,975,482 58,810 492,114 12,526,406
Balance at end of year 292,677 12,108,761 95,774 492,114 12,989,326
Accumulated Depreciation
and Amortization
Balance at beginning of year 242,045 133,279 24,583 399,907
Depreciation and amortization 50,632 997,957 12,380 1,060,969
Net Book Value P = P=10,977,525 P=58,811 P=492,114 P=11,528,450
Total fully depreciated property and equipment that are still in use is not material.
10. Accounts Payable and Other Current Liabilities
2014 2013
Payable to STI ESG (see Note 11) P=10,248,915 P=13,412,540
Payable to WNU (see Note 11) 7,321,342
Accrued expenses 2,631,263 2,604,760
Accounts payable 698,107 2,780,558
Others 110,202 114,298
P=21,009,829 P=18,912,156
a. Payable to STI ESG primarily pertains to expenses incurred for the Companys leasehold
improvements paid by STI ESG on behalf of the Company.
b. Payable to WNU represents the amount due to WNU arising from the sale of WNUs investment
in joint venture to an entity owned by the previous shareholders. Based on the agreement
between the Company and the previous shareholders, such amount will be settled by the
Company on behalf of the previous shareholders and will form part of the cost of acquiring WNU
(see Notes 7 and 11).
c. As of March 31, 2013, accounts payable and accrued expenses primarily pertain to unpaid billing
for printing of offering prospectus and accrued professional fees. These are normally settled
within one year.
11. Related Party Transactions
Enterprises and individuals that directly, or indirectly through one or more intermediaries, control,
or are controlled by, or under common control with the Company, including holding companies,
and fellow subsidiaries are related entities of the Company. Associates and individuals owning,
directly or indirectly, an interest in the voting power of the Company that gives them significant
influence over the enterprise, key management personnel, including directors and officers of the
Company and close members of the family of these individuals and companies associated with
these individuals also constitute related entities.
- 28 -
*SGVFS008028*
The Company, in the normal course of business, has the following transactions with related
parties:
Amount/Volume
Outstanding
Receivable (Payable)
Category 2014 2013 2014 2013 Terms Conditions
Affiliates
Philippine Womens
University (PWU)*
Principal P = P =26,470,915 P=250,000,000 P =250,000,000 To be settled by way of
assignment of investment
in shares
Secured;
no impairment
Interest 9,189,946 12,651,546 12,651,546
UNLAD Resources
Development Corporation
(UNLAD)*
Principal 198,000,000 198,000,000 198,000,000 To be settled by way of
equity conversion
Secured;
no impairment
Interest 3,536,389 3,327,389 3,327,389
Subsidiary
STI ESG
Reimbursement (see Note 10) `5,838,668 13,412,540 (10,248,915) (13,412,540) 30 days upon receipt
of billings;
Noninterest-bearing
Unsecured
Advisory fee (see Note 5) 14,400,00 6,000,000 5,100,000 30 days upon receipt
of billings;
Noninterest-bearing
Unsecured;
no impairment
WNU
Deposit for future stock
subscription
179,726,350 179,726,350 30 days upon receipt
of billings;
Noninterest-bearing
Unsecured
Assignment of liability 7,321,342 (7,321,342) 30 days upon receipt
of billings;
Noninterest-bearing
Unsecured
P=626,135,028 P =455,666,395
**Entities under common management
Other information on major transactions with related parties follows:
a. Agreements with PWU, UNLAD and an unrelated individual (Individual)
In November 2011, the Company acceded to a joint venture agreement and a shareholders
agreement by and amongst PWU, UNLAD, an Individual and Mr. Eusebio H. Tanco, STI
Holdings BOD Chairman, for the formation of a strategic arrangement with regard to the
efficient management and operation of PWU.
PWU is a private non-stock, non-profit educational institution, which provides basic,
secondary and tertiary education to its students while UNLAD is a real estate company
controlled by the Benitez Family and has some assets which are used to support the
educational thrust of PWU.
Pursuant to the Agreement, the Company acquired PWUs debt (the Receivable from PWU)
from PWUs creditor bank, together with all of the banks rights to the underlying collateral
and security, for the amount of P =223.5 million, on a without recourse basis, in November
2011. Likewise in accordance with the Agreement, the Company is obliged to extend: (a) a
direct loan to PWU in the amount of P=26.5 million (the Loan to PWU) and (b) a loan to
UNLAD in the amount of P=198.0 million (the Loan to UNLAD). The Receivable from
PWU and the Loan to PWU aggregating to P =250.0 million shall be secured by the PWU
Indiana Property and PWU Taft Property while the Loan to UNLAD shall be secured by the
PWU Quezon City Property, UNLAD Davao Property and UNLAD Quezon City Property.
The Receivable from PWU and Loan to PWU, inclusive of 5% interest per annum, shall be
accrued and paid by way of the assignment by PWU of its shares in UNLAD (which PWU
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*SGVFS008028*
will acquire through a Property-for-Share Swap Transaction). Likewise, the Loan to UNLAD,
inclusive of 5% interest per annum, shall be paid by way of conversion of said loan into equity
in UNLAD to enable the Company to acquire, together with the shares assigned by PWU to
the Company as payment for the Receivable from PWU and Loan to PWU, a total of forty
percent (40%) equity in UNLAD.
On May 17, 2012, the Individual, who is a party to the Agreement with the Company, PWU
and UNLAD, assigned his rights, title and interest in the Agreement to Attenborough
Holdings Corporation (AHC). AHC thereby assumed the Individuals obligation to grant a
loan to UNLAD in the principal amount of P=224.0 million (the AHC Loan to UNLAD).
Pursuant to the agreement, the Company and AHC (collectively referred to as the Lenders)
agreed to lend UNLAD a principal amount of P=422.0 million consisting of the Companys
loan to UNLAD (Loan to UNLAD) and the AHC Loan to UNLAD. Accordingly, on
June 8, 2012, the Company entered into an Omnibus Agreement with UNLAD and AHC
(Omnibus Agreement) which consisted of: (1) a prefatory agreement; (2) a loan agreement;
and (3) a real estate mortgage.
Under said loan agreement, the Lenders will extend a loan to UNLAD which is payable by
way of conversion into equity in UNLAD. Said conversion into equity in UNLAD must
enable: (a) the Company to acquire, together with the shares acquired by it as payment of the
Company's Loan to PWU, 40.0% of the issued and outstanding capital stock of UNLAD, as
discussed above; and (b) AHC to acquire 20.0% of UNLADs issued and outstanding capital
stock.
In June 2012, the Company released the Loan to PWU amounting to P =26.5 million. In August
and October 2012, the Company granted the Loan to UNLAD amounting to P=166.0 million and
P =32.0 million, respectively.
On March 25, 2013, the joint venture agreement and Omnibus Agreement have been amended to
discontinue imposition of interest on the Loan to PWU, Loan to UNLAD and AHC Loan to
UNLAD effective January 1, 2013.
As of March 31, 2014 and 2013, noncurrent receivables consist of loan principal of P=448.0
million and accrued interest of P =16.0 million. Interest income for the year ended
March 31, 2013 amounted to P =12.7 million.
As of March 31, 2014 and 2013, the equity interest in UNLAD has not been assigned to the
Company in exchange for the receivables from PWU and the Loan to UNLAD. The said
receivables from PWU and the Loan to UNLAD are presented as Noncurrent receivables in the
parent company statements of financial position.
Currently, the Company is working on the submission of all required documents to effect the
conversion of these receivables into equity. The Company has nominated its representatives as
directors/trustees and officers of PWU and UNLAD.
b. Share-for-share swap agreement with STI ESG Stockholders
As discussed in Note 1, on June 14, 2012 and August 10, 2012, the BOD and stockholders of STI
Holdings, respectively, approved the Companys Share Swap with the STI ESG Stockholders and
the increase in the Companys authorized capital stock from 1,103,000,000 shares with an
aggregate par value of P=551.5 million to 10,000,000,000 shares with an aggregate par value of
5,000.0 million. On September 28, 2012, the Company issued 5,901,806,924 shares to STI ESG
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*SGVFS008028*
Stockholders in exchange for 907,970,294 STI ESG shares following the SECs approval of the
increase in its authorized capital stock (see Notes 7 and 12).
The Company and STI ESG were under common control.
c. Business advisory agreement with STI ESG
In November 2012, the Company and STI ESG entered into an agreement for the Company to act
as an adviser for the latter with monthly fee of P =1.2 million.
Advisory fee earned for the years ended March 31, 2014 and 2013 amounted to P =14.4 million
and P =6.0 million, respectively.
d. Compensation and benefits of key management personnel
Since the Company is a holding company and its key officers are the same with that of STI ESG,
the Company has four and one employee as of March 31, 2014 and 2013, respectively.
Key management compensation for the years ended March 31, 2014 and 2013 amounted to
P =1.7 million and P =1.0 million, respectively.
12. Equity
a. Common Stock
Details and movement in common stock follows:
2014 2013
Shares Amount Shares Amount
Common stock - P=0.50 par value per share
Authorized 10,000,000,000 P=5,000,000,000 10,000,000,000 P=5,000,000,000
Issued and outstanding:
Balance at beginning of period 9,904,806,924 P=4,952,403,462 1,103,000,000 P =551,500,000
Issuances 8,801,806,924 4,400,903,462
9,904,806,924 P=4,952,403,462 9,904,806,924 P =4,952,403,462
In December 2011, the Company issued 397,908,895 and 397,908,894 of its unissued
common shares to STI ESG and CMA (the Private Placement Shares), respectively, via a
private placement for an aggregate subscription amount of P =477.5 million (see Note 11). The
excess of the subscription amount over the par value of the shares (net of documentary stamp
taxes paid relative to the issuances of shares amounting to P =2.0 million) is recognized as
additional paid-in capital (APIC).
The 795,817,789 private placement shares were approved for listing with the PSE on
September 28, 2012 subject to the fulfillment of certain conditions. On May 10, 2013, the
SEC granted the Companys request for exemptive relief from the requirements of the
mandatory tender offer relative to the private placement transaction. On June 27, 2013, the
PSE advised the Company to submit duly executed lock-up agreements to facilitate the listing
of private placement shares. The lock-up agreements were executed on August 5, 2013 and
were submitted to the PSE on August 7, 2013. The lock-up period expired on February 18,
2014.
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*SGVFS008028*
On September 28, 2012, the Company issued 5,901,806,924 shares to STI ESG stockholders
in exchange for 907,970,294 STI ESG shares pursuant to the Share Swap transaction
discussed in Notes 1 and 11. The transaction resulted to the recognition of common stock and
APIC of P =2,950.9 million and P =10,151.1 million, respectively.
On November 7, 2012, the Company issued 2,627,000,000 new shares relative to the Primary
Offering at P =0.90 per share following its listing in the PSE. The transaction resulted to
increases in common stock and APIC of P=1,313.5 million and P =1,050.8 million, respectively.
On November 28, 2012, the Company issued the 273,000,000 Over-allotment Option shares to
UBS AG (see Note 1) resulting to recognition of common stock and APIC of P=136.5 million
and P=109.2 million, respectively.
Transaction costs incurred in connection with the issuance of shares for the year ended
March 31, 2013 amounting to P=134.0 million were offset against APIC.
Set out below is the Companys track record of registration of its securities:
Number of Shares
Issue/
Offer Price
Date of Approval Authorized Issued
December 4, 2007* 1,103,000,000 307,182,211 P=0.50
November 25, 2011** 1,103,000,000 795,817,789 0.60
September 28, 2012*** 10,000,000,000 5,901,806,924 2.22
November 7, 2012 10,000,000,000 2,627,000,000 0.90
November 28, 2012 10,000,000,000 273,000,000 0.90
*** Date when the registration statement covering such securities was rendered effective by the SEC.
*** Date when the Company filed SEC form 10-1(k) (Notice of Exempt Transaction) with the SEC in accordance with the
Securities Regulation Code and its Implementing Rules and Regulations
*** Date when the SEC approved the increase in authorized capital stock.
As at March 31, 2014 and 2013, the Company has a total number of shareholders on record of
1,245 and 1,243, respectively.
b. Retained Earnings
On September 4, 2013, cash dividends amounting to P=0.015144 per share or the aggregate
amount of P=150.0 million were declared by the Companys BOD in favor of all stockholders
on record as at September 18, 2013, payable on September 30, 2013.
On December 5, 2012, cash dividends amounting to P=0.01 per share or the aggregate amount
of P=99.0 million were declared by the Companys BOD in favor of all stockholders on record
as of December 19, 2012, payable on December 28, 2012.
As at March 31, 2014 and 2013, long outstanding unclaimed dividends amounting to
P=11.9 million pertain to dividend declarations from 1998 to 2006.
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13. Basic/Diluted Earnings Per Share
The table below shows the summary of net income and weighted average number of common
shares outstanding used in the calculation of earnings per share:
2014 2013
Net income P=245,120,656 P=93,257,505
Common shares at beginning of year 9,904,806,924 1,103,000,000
Weighted average of:
5,901,806,924 shares issued on September 28, 2012 2,983,330,973
2,627,000,000 shares issued on November 7, 2012 1,039,252,747
273,000,000 shares issued on November 28, 2012 92,250,000
Weighted average number of common shares 9,904,806,924 5,217,833,720
P=0.025 P=0.018
The basic and diluted earnings per share are the same as at March 31, 2014 and 2013 as there are
no dilutive potential common shares.
14. Income Taxes
The Companys provision for current income tax for the years ended March 31, 2014 and 2013
pertains to MCIT.
The reconciliation between the provision for income tax at the applicable statutory tax rate and the
provision for current income tax as shown in the statements of comprehensive income are as
follows:
2014 2013
Provision for income tax at statutory tax rate P=73,627,637 P=28,090,870
Tax effects of:
Dividend income (74,043,884) (29,404,424)
Expired NOLCO 1,516,194 389,404
Income subjected to final tax (775,936) (3,221,651)
Change in unrecognized deferred tax assets (132,518) 317,262
Nondeductible expenses 94,679 4,170,433
Expired MCIT 18,628 36,833
Provision for current income tax P=304,800 P=378,727
As at March 31, 2014 and 2013, the Company did not recognize the deferred tax assets on the
following NOLCO, MCIT and unrealized foreign exchange losses as management believes that
future taxable income will not be available to allow all or part of NOLCO, MCIT and unrealized
foreign exchange losses to be utilized as the Companys income mainly pertains to passive income
which are not subject to income tax:
2014 2013
NOLCO P=4,731,498 P=6,270,193
MCIT 740,309 454,137
Unrealized foreign exchange losses 145,604 2,541
P=5,617,411 P=6,726,871
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*SGVFS008028*
As at March 31, 2014, the Company has available NOLCO and MCIT as follows:
Year Incurred Expiry Date NOLCO MCIT
2014 2017 P=3,515,286 P=304,800
2013 2016 1,216,212 378,727
2012 2015 56,782
P=4,731,498 P=740,309
NOLCO amounting to P =5,053,981 and P =1,298,012 expired in 2014 and 2013, respectively, while
MCIT amounting to P=18,628 and P=36,833 expired in 2014 and 2013, respectively.
15. Financial Risk Management Objectives and Policies
The Companys principal financial instruments comprise cash and cash equivalents. The main
purpose of these financial assets is to support the Companys operations. The Company has
various other financial assets and liabilities such as receivables, available-for-sale financial assets,
accounts payable and other current liabilities and dividends payable which arise directly from its
operations.
The main risks arising from the Companys financial instruments are credit risk and liquidity risk.
The Companys BOD reviews and approves policies for managing each of these risks and they are
summarized below.
Credit Risk. Credit risk is the risk that the Company will incur a loss arising from its debtors or
counterparties that fail to discharge their contractual obligations. Credit risk arises from deposits
and short-term placements with banks as well as credit exposure on receivables from its debtors.
Cash transactions are limited to high credit quality financial institutions. Cash in banks and short-
term cash placements are maintained with universal banks. On the other hand, management
believes that the debtors have a strong financial position and ability to settle its payable to the
Company upon maturity.
As at March 31, 2014 and 2013, the Companys receivables are classified as high grade. The
Companys financial assets are all neither past due nor impaired.
With respect to credit risk arising from cash in banks and short-term cash placements, the
exposure to credit risk arises from default of the counterparty, with a maximum exposure to the
carrying amount of these financial instruments.
The table below shows the maximum exposure to credit risk for the components of the statements
of financial position as at March 31:
Gross Maximum Exposure Net Maximum Exposure
(1)
2014 2013 2014 2013
Cash and cash equivalents:
Cash in banks P=22,682,932 P=5,453,761 P=21,682,932 P=4,453,761
Cash equivalents 153,962,880 458,412,600 153,462,880 457,408,804
Receivables 464,267,076 479,776,086 288,141 15,797,151
AFS financial assets 850,065 844,255 850,065 844,255
Total P=641,762,953 P=944,486,702 P=176,284,018 P=478,503,971
(1)
Net financial assets after taking into account insurance on bank deposits and the fair value of the collateral on noncurrent
receivables held by the Company
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*SGVFS008028*
Liquidity Risk. Liquidity risk relates to the failure of the Company to settle its
obligations/commitments as they fall due. The Company observes prudent liquidity risk
management through the maintenance of sufficient cash funds and short-term cash placements,
and availability of funding in the form of adequate credit lines.
The tables below summarize the maturity profile of the Companys financial assets held for
liquidity purposes and liabilities based on contractual undiscounted payments:
2014
Due within
3 Months
Due from
3 to 6 Months
More than
6 Months Total
Financial assets:
Cash and cash equivalents P=176,650,812 P= P= P=176,650,812
Receivables 288,141 463,978,935 464,267,076
AFS financial assets 850,065 850,065
P=176,938,953 P= P=464,829,000 P=641,767,953
Financial liabilities:
Dividends payable P=11,864,639 P= P= P=11,864,639
Accounts payable 698,107 698,107
Payable to STI ESG 10,248,915 10,248,915
Payable to WNU 7,321,342 7,321,342
Nontrade payable 151,470,221 151,470,221
P=184,234,487 P= P= P=184,234,487
2013
Due within
3 Months
Due from
3 to 6 Months
More than
6 Months Total
Financial assets:
Cash and cash equivalents P=463,871,361 P= P= P=463,871,361
Receivables 15,797,151 463,978,935 479,776,086
AFS financial assets 844,255 844,255
P=479,668,512 P= P=464,823,190 P=944,491,702
Financial liabilities:
Dividends payable P=11,840,316 P= P= P=11,840,316
Accounts payable 2,780,558 2,780,558
Payable to STI ESG 13,412,540 13,412,540
P=30,638,174 P= P= P=30,638,174
Correspondingly, the financial assets that can be used by the Company to manage its liquidity risk
as at March 31, 2014 and 2013 consist of cash and cash equivalent and receivables.
As at March 31, 2014 and 2013, the Companys current ratios are as follows:
2014 2013
Current assets P=189,380,519 P=490,370,929
Current liabilities 184,344,689 30,752,472
Current ratios 1.027:1.000 15.946:1.000
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*SGVFS008028*
Capital Risk Management
The Companys objectives when managing capital are to safeguard the Companys ability to
continue as a going concern so that it can provide returns to shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
Management is looking into several business proposals which the Company may venture into in
the near future. In order to maintain or adjust the capital structure, the Company adjusted the
amount of dividends paid to shareholders, returned capital to shareholders and issued stock
dividends.
The Company monitors capital on the basis of the debt-to-equity ratio which is calculated as total
debt divided by total equity. The Company includes all liabilities within debt. The Company
defines total equity as common stock, additional paid-in capital, unrealized mark-to-market gain
(loss) on investments in equity securities and retained earnings.
As at March 31, 2014 and 2013, the Companys debt-to-equity ratios are as follows:
2014 2013
Total liabilities P=184,344,689 P=30,752,472
Total equity 16,313,921,083 16,218,793,013
Debt-to-equity ratio 0.011:1.000 0.002:1.000
Another approach used by the Company is the asset-to-equity ratios shown below:
2014 2013
Total assets P=16,498,265,772 P=16,249,545,485
Total equity 16,313,921,083 16,218,793,013
Asset-to-equity ratio 1.011:1.000 1.002:1.000
There were no changes in the Companys approach to capital risk management during the year.
16. Fair Value Information of Financial Instruments
The carrying values of the Companys financial assets and liabilities, except available-for-sale
financial assets, approximate their fair values as at March 31, 2014 and 2013 due to short-term
nature and/or maturities of these financial instruments. The carrying value of noncurrent
receivables does not materially differ from its fair value.
As at March 31, 2014 and 2013, the fair value of the Companys available-for-sale financial assets
are based on quoted market prices (Level 1).
During the year, there were no transfers among levels 1, 2 and 3 fair value measurements.
There were no financial instruments subject to an enforceable master netting arrangement that
were not set-off in the parent company statements of financial position.
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*SGVFS008028*
17. Notes to Parent Company Statements of Cash Flows
The Companys non-cash investing and financing activities for the year ended March 31, 2014 and
2013 consists of:
a. Acquisition of WNU in October 2013 resulting to recognition of nontrade payable of
P =151.5 million and payable to WNU amounting to P =7.3 million (see Notes 7 and 11).
b. The Companys issuance of 5,901,806,924 shares to STI ESG Stockholders in exchange for
907,970,294 STI ESG shares resulting to recognition of (i) investment in a subsidiary of
P =13,102.0 million, (ii) common stock of P =2,950.9 million and (iii) APIC of P =10,151.1 million
(see Notes 7, 11 and 12).
c. Expenses incurred for the Companys leasehold improvements paid by STI ESG on behalf of
the Company amounted to P =12.0 million as of March 31, 2013 (see Note 10).
18. Events after the Reporting Date
In May 2014, the Company made a deposit for future stock subscription to 40% of outstanding
common stock of AHC.
19. Supplementary Information Required by RR No. 15-2010
In compliance with the requirements set forth by RR 15-2010, hereunder are the information on
taxes, duties and license fees paid or accrued during the taxable year ended March 31, 2014:
Value-added Tax (VAT)
Output VAT declared for the year ended March 31, 2014 and the receipts upon which the same
was based consist of:
Gross amount Output VAT
Advisory services P=20,400,000 P=2,448,000
Others 1,050,000 126,000
Total P=21,450,000 P=2,574,000
The amount of sales of services is based on gross receipts of the Company. Hence, these may not
be the same as the amount of gross revenues accrued in the parent company statement of
comprehensive income. The Company has no VAT-exempt or VAT zero-rated sales during the
year ended March 31, 2014.
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*SGVFS008028*
VAT arising from domestic purchases of goods and services for the year ended March 31, 2014
are detailed as follows:
Amount
Input VAT
Beginning of year P=6,091,353
Current years domestic purchases / payments for:
Goods for resale / manufacture or further processing
Goods other than for resale or manufacture 88,975
Capital goods subject for amortization 392,903
Capital goods not subject for amortization
Services lodged under other accounts 1,874,610
8,447,841
Claimed against output VAT and other adjustments (2,953,806)
Balance at the end of year P=5,494,035
Withholding Taxes
The amount of withholding taxes paid/accrued for the year ended March 31, 2014 is as follows:
Amount
Final withholding taxes on dividends P=7,295,065
Expanded withholding taxes 724,227
Withholding taxes on compensation 242,847
P=8,262,139
Documentary Stamp Tax (DST)
Documentary stamp taxes paid for the year ended March 31, 2014 are as follows:
Amount
Acquisition of shares* P=291,540
Advances* 48,631
Others 67,100
P=407,271
*Expenses related to acquisition of WNU capitalized as part of investment cost
Other Taxes and Licenses
The breakdown of other taxes and licenses recognized as part of Taxes and licenses account for
the year ended March 31, 2014 are as follows:
Amount
Annual listing maintenance fee P=641,908
License and permit fees 579,564
BIR annual registration fee 500
P=1,221,972
Status of Tax Assessment and Court Cases
The Company has no outstanding final assessment notice from the BIR as of March 31, 2014.
There were also no outstanding tax cases nor litigation and/or prosecution in courts or bodies
outside the BIR as of March 31, 2014.

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