1. education
2. graduate school
3. college

COVER SHEET
1 7 4 6
S T I
ED U C A T I ON
H O L D I N G S,
S Y S T E MS
I N C.
(Company's Full Name)
7/ F
i A C A D E M Y
6 7 6 4
A Y A L A
B L D G. ,
A V E. ,
M A K A T I
C I T Y
1 2 2 6
(Business Address : No. Street City / Town / Province)
Elizabeth
ARSENIO
M. Guerrero/Katelyne
C. CABRERA,Ann
JR.Brooks
(6 3 2) 8 4 4 9 5 5 3
Contact Person
0 3
3 1
Month
Day
Company Telephone Number
SEC FORM 17-A For the Fiscal Year ended 31 March 2013
Last Friday of September
Month
FORM TYPE
Fiscal Year
Day
Annual Meeting
N A
Secondary License Type, If Applicable
C F D
N A
Amended Articles Number/Section
Dept. Requiring this Doc.
Total Amount of Borrowings
1
2
4
N A
3
Domestic
Total No. of Stocholders
To be accomplished by SEC Personnel concerned
File Number
LCU
Document I.D.
Cashier
STAMPS
N A
Foreign
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, 2013
2.
SEC Identification Number
1746
3.
BIR Tax Identification Number
000-126-853
4.
Exact name of registrant
as specified in its charter
STI EDUCATION SYSTEMS HOLDINGS, INC.
5.
Province, country or other
jurisdiction of incorporation
or organization
Metro Manila,
Philippines
6.
Industry Classification Code
(SEC Use Only)
7.
Address of Principal Office
7th Floor i-ACADEMY Building
6764 Ayala Avenue
1226 Makati City
8.
Registrant’s telephone
number (including area code)
(632) 844-9553
9.
Former name, former address,
former fiscal year, if changed
since last report
JTH DAVIES HOLDINGS, INC.
10.
Securities Registered pursuant to Sections 4 and 8 of the RSA.
Title of Each Class
----------------------------Common Stock
11.
Number of Shares of Common Stock Outstanding
and Amount of Debt Outstanding
-------------------------------------9,904,806,924 shares Issued and Outstanding
Are any or all of these securities listed on a Stock Exchange?
Yes [ / ]
Name of Stock Exchange: Philippine Stock Exchange
12.
No [ ]
Class of Securities: Common
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 [ / ]
(b)
No [ ]
has been subject to such filing requirements for the past 90 days.
Yes [ / ]
No [ ]
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 2
13.
State the aggregate market value of the voting stock held by non-affiliates of the registrant.
3,680,237,214 shares x Php1.00 per share = P3,680,237,214.00
Note:
14.
years.
As of the last trading date which was on 27 March 2013, the Company’s shares were traded at Php1.00
each.
The Company was not involved in any insolvency/suspension of payments proceedings in the last five (5)
DOCUMENTS INCORPORATED BY REFERENCE
15.
The March 31, 2013 Audited Consolidated Financial Statements is incorporated by reference in this SEC Form
17-A (Item 7)
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 3
TABLE OF CONTENTS
PART I – BUSINESS AND GENERAL INFORMATION
PAGES
Item 1 Description of Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
4
19
22
22
PART II – OPERATIONAL AND FINANCIAL INFORMATION
Item 5 Market for Issuer’s Common Equity and Related Stockholder Matters
Item 6 Management’s Discussion and Analysis of Financial Condition and
Results of Operation and Plan of Operation
Item 7 Financial Statements
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
22
26
33
33
PART III – CONTROL AND COMPENSATION INFORMATION
Item 9 Directors and Executive Officers of the Issuer
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial Owners and Management
Item 12 Certain Relationships and Related Transactions
34
40
41
44
PART IV – CORPORATE GOVERNANCE
Item 13 Corporate Governance
47
PART V – EXHIBITS AND SCHEDULES
Item 14 Exhibits and Reports on SEC Form 17-C
47
SIGNATURES
54
MARCH 31, 2013 AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY SCHEDULES
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 4
PART 1 - BUSINESS AND GENERAL INFORMATION
Item 1. DESCRIPTION OF BUSINESS
Group History and Structure
STI Education Systems Holdings, Inc.
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 7th 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
Women’s 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 making 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 Company’s authorized capital stock
from 1,103,000,000 shares with an aggregate par value of P 551 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.
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 ESG’s outstanding common shares (equivalent to
approximately 3.3% interest in STI ESG’s outstanding common shares prior to Share Swap) for a combined purchase
price of P80.8 million.
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 5
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 551.0 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 the STI Stockholders in
exchange for the shares of the 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. STI ESG continues to
hold 502,308,895 STI Holdings shares, comprising 7.2% of the outstanding capital stock of 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 99% as of 31 March 2013.
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 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 1990’s, 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 Bachelor’s 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
ESG’s strength beyond IT, by expanding the existing programs to bachelor’s 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 bachelor’s degree in Tourism in 2010, Accounting Technology in
2011, and Communication in 2012.
STI ESG embarked 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 whollyowned schools. In addition, STI ESG strengthened content development and upgraded teacher skills using modern
learning and content delivery methodologies. STI ESG introduced level comprehensive exams to assess student
progress and conducted regular faculty and staff development.
In August 2009, STI ESG subscribed to a 20.0% 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-
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 6
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
AsianLife Financial Assurance Corp.
Non-STI Branded Schools
In addition to the schools in the STI Network, STI ESG operates two schools that are not branded as STI schools:
iACADEMY, which specializes in course offerings in animation and multimedia and graphic arts and DLS STI College,
a health science and nursing school. These schools are designed to appeal to a higher-market segment than the STI
Network.
iACADEMY
iACADEMY started in 2002 with an initial class of 72 students. At the beginning of SY 2012-13, iACADEMY had 657
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 College (“DLS STI”)
The De Los Santos – 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 school’s 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.
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.
On 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.
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 7
Enrollment
STI ESG
STI ESG had an average total enrollment of 60,832 for the first and second semesters of School Year (SY) 2010-11,
posting a 7.26% increase from SY 2009-10. In SY 2011-12, the average combined enrollment for the first and second
semesters increased by 1.19%. By SY 2012-13, an increase of 3.04% in the average total enrollment for the first and
second semesters was obtained.
Freshmen enrollees in SY 2010-11 increased by 3.49% from SY 2009-10, but dipped 7.27% in SY 2010-11. In SY 2012-13,
the total freshmen enrollees of the network improved by 2.30%.
The average percentage of students retained in a semester for SY 2010-11 was at 95%, increased to 96% in SY 2011-12,
and reverted to 95% in SY 2012-13. While the average percentage of students who migrated to the succeeding semester
is at a high of 89% in SY 2010-11, and was then sustained at 87% in SY 2011-12 and SY 2012-13.
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 continued to improve from 59% versus 41% in SY 2010-11, 65% versus 35% in SY 201112, and 71% versus 29% in SY 2012-13.
In SY 2010-11, STI has generated 11,498 graduates for the first and second semesters. In SY 2011-12, there were 11,779
graduates, and in SY 2012-13, there were 12,301 graduates.
iACADEMY
iACADEMY had an average total enrollment of 399 for the first, second and third trimesters of SY 2010-11, posting a
22% increase from SY 2009-10. In SY 2011-12, the average combined enrollment for the first, second and third trimesters
increased by 31%. By SY 2012-13, an increase of 24% in the average total enrollment for the first, second and third
trimesters was obtained.
Freshmen enrollees in SY 2010-11 dipped by 24% from SY 2009-10, but increased by 31% in SY 2011-12. In SY 2012-13,
the total freshmen enrollees of the school improved by 19%.
The average percentage of students retained in a trimester for SY 2010-11 was at 92%, increased to 95% in SY 2011-12,
and reverted to 93% in SY 2012-13.
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 2010-11, iACADEMY has generated 31 graduates for the school. In SY 2011-12, there were 63 graduates, and in
SY 2012-13, there were 81 graduates.
DLS STI
DLS STI had an average total enrollment of 2,865 for the first and second semesters of SY 2004-05, 3,284 for SY 2005-06,
and 3,445 for SY 2006-07. These are the years when enrollees for the Nursing program is at its peak.
Due to the visa retrogression in the U.S.A. and the lowering demand of nurses in other countries, nursing colleges in
the Philippines experienced a continuing drop in their enrollees.
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 8
Tuition Fee Increases
STI ESG
For SY 2010-11, there was an average increase of 5% in tuition fees and other school fees due to the re-classification of
lab course fees, rationalization of the lecture course, and re-classification and rationalization of other school fees.
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.
iACADEMY
For SY 2010-11, there was no increase in the tuition fee and other school fees.
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 nonteaching personnel and school renovation. Other school fees did not increase this year.
For SY 2012-13, there was no increase in the tuition fees and other school fees.
DLS STI
For SY 2010-11, there was no increase in the tuition fee and other school fees.
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, there was no increase in the tuition fees and other school fees.
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 2010-11, STI ESG started to offer BS in Travel Management, BS in Tourism Management, and 2-Yr. Travel and
Tourism Services programs to its roster of program offerings. In SY 2011-12, the BS in Accounting Technology was
introduced, 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 2010-11,
six programs underwent program revisions, three programs in SY 2011-12, and 13 programs in SY 2012-13.
iACADEMY
iACADEMY is the pioneer in offering the BS Animation and BS Game Development programs in the Philippines.
Stemming from its strength to answer the changing imperatives of business and economy, courses in BS Fashion
Design and Technology and AB in Multimedia Arts and Design were introduced in SY 2011-12.
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 9
DLS STI
DLS STI conducts market research to determine what other courses are needed by the industry and the market as a
whole.
In SY 2010-11, DLS STI offered the Bachelor of Science in Radiologic Technology and Bachelor of Science in Tourism
Management.
The Bachelor of Science in Radiologic Technology is a four (4) year degree course that combines the technology which
enables us to view the structure and function of the human body with compassionate and capable patient care.
The Bachelor of Science in Tourism Management is also a four (4) year degree program that focuses on raising the
standard of tourism education by offering subjects in property management, food and beverage operations, events
management, tourism planning and sustainable development, tourism marketing, tourism entrepreneurship and
domestic and international tourism.
Likewise in SY 2011 – 2012, DLS STI was given by CHED the authority to operate its College of Psychology. The BS
Psychology is a four (4) year program that provides students with an understanding of human behavior and of
psychology as a scientific discipline. It promotes skills in scientific research and provides insights into the influence of
psychology on contemporary thoughts and industry practice.
STI ESG’s 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
with recent developments in target industries and the schools. In SY 2010-11, 25 new courseware in the general
education, ICT, engineering, business and management, and tourism and hospitality management courses were
developed. 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, 19 new courseware in the ICT,
engineering, business and management, and tourism and hospitality management programs were developed.
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.
Achievements
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 VII’s 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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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 10
TESDA Accreditation Centers
In SY 2010-11, two STI ESG campuses were certified by TESDA to be the sole TESDA assessment centers in their
provinces. STI San Francisco became the first TESDA-Accredited Computer Programming NC IV Assessment Center in
the entire province of Agusan del Sur. Meanwhile, STI Laoag became the first TESDA-Accredited Assessment Center
for 3D Animation NCIII and Computer Hardware Servicing NCII in the province of Ilocos Norte.
STI College – Digos, on the other hand, completed all the pre-requisites of TESDA and became the first TESDAAccredited Computer Programming NC IV Assessment Center in Davao del Sur in SY 2011-12.
Rotaract Club
Since SY 2010-11, the Rotaract Club of STI College – Makati has been consistently awarded annually as the Most
Outstanding School-Based Rotaract Club of Rotary International District 3810.
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.
Faculty Achievements
In SY 2010-11, STI College – Baguio faculty members were recognized in various capacities. Jennifer Madronio was
recognized as TESDA Assessor for Food and Beverages NCII and Commercial Cooking NCII, Arsenio Diego as TESDA
Assessor for Household Services NCII and Housekeeping NCII, and Vandolph B. Flora was elected as a member of the
Board of the Association of Technical Vocation Institution of the Cordillera Administrative Region (“CAR”). Jennifer
Lynne Felipe of STI Laoag was likewise recognized as a TESDA Assessor for 3D Animation NCIII and Engr. Ferdinand
Bunag of STI College – Bacoor received a Trainers Methodology Training Program certification.
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 Edaño 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 Board of Director of the Philippine e-Learning Society – Luzon
Chapter.
Student Achievements
STIers are common fixture in the Ten Outstanding Students of the Philippines (“TOSP”). In SY 2010-11, two students
were recognized as one of the TOSP in their respective regions: Myle Melody Daniels of STI College – Baguio and Ma.
Victoria Comon of STI Valencia.
Two students from STI College – Baguio were also given recognition: Jose Carlo Orcina as champion for the
Impromptu Speech competition in the Division G – Regional of the Toastmasters Club and Zaira Jane Ordillo as
Outstanding Rotaract Club President by the Rotary Club District 3790.
Venuz Oabel from STI College – Fairview was chosen as one of the delegates in the Japan-East Asia Network of
Exchange for Students and Youths (“JENESYS”) Program. JENESYS is a 10-day cultural immersion which aims to
deepen the delegates’ understanding of the different facets of the Japanese society and help promote mutual
understanding through youth exchange within the region thereby forming a strong solidarity among Asian countries.
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
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Three HRM students from STI College – Dasmariñas had their on-the-job training at the Grand Hotel in Mackinac
Island in Michigan: Andrea Garcia, Marinel Olpot, and Rhine Batiancila.
STI College – Global City won two awards in the 1st Philippine Culinary Cup (“PCC”) — the Highest Bronze Award
for the Filipino Cuisine category and the Silver Award in the Meat and Poultry Division. The PCC was organized by
the World Food Expo in partnership with the Pastry Alliance of the Philippines, Les Toques Blanches Philippines, and
the Premier Events Plus Group Philippines.
On the other hand, STI College – Cagayan de Oro was the overall champion in the Kumbira 2010, an annual culinary
festival featuring various food and beverage competitions. The school also received the Gold Plus Award for receiving
a perfect score of 100% for the Banana Floral Centerpiece.
STI Tacurong dominated the HRM competition held during 1st Tacurong City Business Week as the school won in
various categories: Table Skirting, Napkin Folding, Floral Arrangement, Fruit Carving, and Bartending.
For IT competitions, STI College – Legazpi won the First Bicol University Computer Programming Competition in 2010
while STI College – Calamba were declared winners in two programming competitions: the University of the
Philippines Los Baños Computer Science Society’s Code Wars and the 8th Philippine Society of IT Educators (“PSITE”)
IV Regional Programming Competition.
For SY 2011-12, 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 3rd 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 6th 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 1st 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 Kabalikat’s project dubbed as Hitong Buháy, Hitong Búhay, 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 Piñas, James Magallanes
won the plum in the Flash Banner Ad category of the 4 th Student Advertising Congress.
Diana Grace Dumaoang, a 4th 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 5th 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 Bank’s
International Essay Competition, with her entry titled Hello, Where Are You From.
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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.
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 5th 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 – Dasmariñas, 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 – Dasmariñas 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.
2nd year Information Technology student of STI Iligan Jay Dan Serojales championed the Association of Lanao
Technical Institutions, Inc. (ALTI) Olympics in Iligan.
iACADEMY
SY 2011-12 proved to be a fruitful year for iACADEMY as its students received accolades from various institutions.
iACADEMY’s Central Student Organization participated in JobStreet.com’s 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 iACADEMY’s 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 Microsoft’s Most
Valuable Professional. Krista Lozada was the first in Asia to perfect an international certification exam for IBM’s
Websphere Software while JR Parelejo won the 2004 International Marketing Competition and Aisaku Yokugawa was
named the Philippine Ambassador for Operation Smile International.
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DLS STI
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 SY 2009-10, one of its
graduates left a mark and proudly placed second among thousands of students nationwide who took the Philippine
Nursing Licensure Examination (“PNLE”) in June 2010. And in 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.
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 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.
Some CBT provided beginning SY 2010-11 include 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 STI’s corporate partners),
Discrete Math, Operating System, Mobile Applications Development, Data Structures, Software Engineering, Theory of
Computations, Web Applications Development, Robotics, and Quickbooks. From SY 2010-11, the CBT had 120
participants nationwide, and in SY 2011-12, 246 participants, and SY 2012-13, 290 participants.
STI ESG also administers a faculty competency certification program (“FCC”) which serves as the process of evaluating
a faculty member’s 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 2010-11 with 351 FCCs granted, SY 2011-12
with 936 FCCs granted, and in SY 2012-13 with 1601 FCCs granted.
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 extracurricular 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.
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In SY 2010-11, a total of 32,103 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 numbers of
attendees slightly increased to 32,789 in SY 2011-12 and General Santos City was added to the list of venues. The
number of student attendees continued to grow to 34, 394 in SY 2012-13 while the venues remained the same.
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 2010-11 saw a total number of 1,421 students nationwide who participated in the competitions while 1,450 students
nationwide competed in SY 2011-12. And in SY 2012-13, 863 students nationwide participated after reducing the total
number of competitions from 10 in SYs 2010-11 and 2011-12 to 8 in SY 2012-13.
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 2010-11, the Talent Search competitions have been held at the Enchanted Kingdom in Santa Rosa, Laguna. An
impressive number of 17,513 students witnessed the event in SY 2010-11 while 18,809 students came for the big event
in SY 2011-12. The numbers soared to 20,839 in SY 2012-13.
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.
In SY 2010-11, STI’s Women’s Billiards team won the championship title while Men’s Basketball and Track and Field
competitions finished second place.
On the other hand, SY 2011-12 showed remarkable improvements in sports. The Men’s 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 Women’s team and the Men’s team got the championship title. The Women’s Table
Tennis team also finished second whereas the Women’s 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 Men’s Junior Basketball team placed second in NAASCU while the Men’s Senior Basketball team
finished third. In Mindanao, STI Valencia won the championship title in the 3rd 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.
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
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support the tertiary education of deserving individuals. As such, STI ESG has established a partnership with the
Jollibee Foods Corporation’s 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 student’s 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 one’s 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 2010-11, the STI Foundation and its partners were able to support 190 scholars
nationwide, 155 scholars received financial support in SY 2011-12, and 109 scholars benefitted from the partnerships in
SY 2012-13.
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.icares.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 STI’s 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 2010-11, 94 partners utilized the ICARES system, the number was
retained in SY 2011-12, and slightly increased in SY 2012-13 to 96.
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 2010-11, 25 partners participated in STI job fairs, there were 26
partners who participated in SY 2011-12, and 28 partners who participated in SY 2012-13.
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 who’s 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 PRP’s panel of judges. iACADEMY provides its state-of-the-art fashion design
room as its official workspace.
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DLS STI 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
Children’s Hospital, National Center for Mental Health, Philippine Orthopedic Center, San Lazaro Hospital, PNP
General Hospital, and St. Camillus Medhaven.
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 Pediatric, Intensive Care Unit (“ICU”), Surgical, Delivery, Orthopedic,
Communicable Diseases, Neonatal ICU(NICU), and Geriatrics.
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
In SY 2010-11, the STI Foundation was awarded the Seal of Good Housekeeping by the Philippine Council of NGO
Certification. The 3-year accreditation seals the STI Foundation’s credibility as a Bureau of the Internal Revenue
(“BIR”) certified Donee Institution that has met the criteria of fiscal management and accountability in the service to
underprivileged Filipinos.
Underscoring the efforts to improve corporate governance practices, the STI Foundation was also granted a
registration certificate as an Auxiliary Social Welfare and Development Agency by the Department of Social Welfare
and Development (“DSWD”). This is in line with the Republic Act 4373 that requires NGOs utilizing social work
methods and interventions to secure a license from the DSWD before they can operate as a social work/social welfare
and development agency.
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 2010-11, more than PhP2 Million worth of prizes were awarded every year to the winners, their coaches, and
their respective schools. In SY 2010-11, 494 high schools from Luzon, Visayas, and Mindanao joined the competition.
The participating high schools then jumped to 676 in SY 2011-12 while 660 high schools participated in this nationwide
competition for SY 2012-13.
In SY 2012-13, VOTY joined the 4th 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 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 2010-11, the STI Mobile School has travelled to 815 sites and trained 91,469 participants nationwide. In SY
2012-13, a total of six mobile school buses started to travel across Luzon, Visayas, and Mindanao.
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Scholarship Programs
To provide educational opportunities to deserving individuals who have no means to pursue a post-secondary
education, STI, through the STI Foundation, strengthens its partnership with various TV programs from different TV
networks. There were 76 scholars registered from the TV programs in SY 2010-11. In SY 2011-12 there were 113
scholars, and in SY 2012-13, 63 scholars received support from STI and partner TV programs.
Run for Pasig
Since SY 2010-11, 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 connected to it.
14 STI Colleges in Metro Manila (Alabang, Caloocan, Cubao, Shaw, Fairview, Global City, Las Piñas, Makati, MuñozEDSA, Novaliches, Parañaque, Quezon Avenue, Recto, and Taft) mobilized 5,632 STIers in SY 2010-11
and 5,391 participants 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.
Halalan 2010
STI’s partnership with ABS-CBN started in 1998 and has now spanned for more than a decade which included five
national polls.
In SY 2010-11, STI worked with ABS-CBN once again in conducting parallel counts based on the election returns
gathered from all over the country. As the Philippines held its first ever national automated elections, thousands of
students, faculty members, and staff answered the call for volunteerism and remained vigilant throughout the national
and local elections.
Takbo Para sa Karunungan
In SY 2010-11, STI joined DZMM and DSWD in Takbo Para sa Karunungan which helped out 25 deserving young
scholars, who were affected by Typhoon Ondoy, with their day-to-day school expenses. STI was also awarded with the
Biggest School Contingent award in the 5k category. The partnership continued to SY 2011-12 with ABS-CBN
Integrated Public Service also joining the group. This time, STI also donated school supplies to the 75 beneficiaries from
Metro Manila, Cagayan de Oro, and Iligan City who were victims of Typhoons Ondoy and Sendong.
Business of Issuer
STI Holdings, being a holding company, derives its revenues from dividends declared by its subsidiaries. In the fiscal
year ending March 31, 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. STI ESG
is comprised of 65 STI branded colleges and 20 STI branded education centers, of these, 26 college campuses are
wholly-owned, while 39 college campuses are operated by franchisees, 16 educational centers are operated by
franchisees, and four are wholly-owned educational centers. STI ESG wholly-owns 30 of the 85 schools and the
remaining 55 are owned by franchisees. 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 ESG’s 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.
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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
 3-yr. Hotel and Restaurant Administration
 2-yr. Information Technology
 2-yr. Associate in Computer Technology
 2-yr. Hospitality and Restaurant Services
 2-yr. Travel and Tourism Services
 2-yr. Tourism and Events Management
 2-yr. Computer and Consumer Electronics with Broadband Technology
 2-yr. Multimedia Arts
 2-yr. Practical Nursing Program
 1-yr. Certificate in Office Administration
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
DLS STI 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
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STI ESG caters primarily to the broad C market (upper middle class, lower middle class, and lower class) of the
country’s population. On a national level, STI’s main competition is the AMA Colleges of the AMA Group of Schools
which similarly has a school network with multiple locations. It should be noted however, that each individual school
faces competition in the areas that they are located. These are mostly traditional colleges, universities, and vocational
schools, whose product offerings and pricing levels are also targeted towards the middle-income market. iACADEMY
and DLS STI are designed to appeal to a higher-market segment than the STI Network.
Employees
STI ESG has 1,392 employees, 822 of whom are faculty members, 389 non-teaching personnel, and 181 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.
NUMBER OF
EMPLOYEES
FUNCTION
STI
Main Office
Senior Management
9
Managers
53
Staff
119
Total
181
STI Schools
Teaching personnel (wholly-owned schools)
822
Non-teaching personnel (wholly-owned schools)
389
Total
1,211
STI ESG GRAND TOTAL
1,392
iACADEMY
iAcademy has 104 employees, 58 of whom are faculty members and 46 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
DLS-STI College has 55 employees, 42 of whom are faculty members and 13 non-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
School Campus
15,495.00
12,984.49
Cubao
Land
School Campus
3,768.00
9,107.00**
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Las Piñas
Land
Cainta, Rizal
Land and building
Novaliches
Land and building
School Campus
4,983.00
7,160.71
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
Kauswagan,
Cagayan de Oro
Fort Bonifacio, Global
City
Land and building
School Campus
731.00
1,726.00
Land and building
School Campus
17,563.00
3,540.00
-
7,845.66
1,208.00
3,905.00
Building
School Campus
10,000.00
9,482.20**
School Campus
39,880.00
9,164.75
Administration Building
School Campus; Land is
on long term lease
School Campus
5,017.39
Fairview,
Quezon City***
Land and building
Valencia, Bukidnon
Land and building
School Campus
300.00
1,166.12
Kalibo, Aklan
Land
School Campus
1,612.00
-
Sto. Tomas Baguio
Land
3 Condominium
units
(37.2sqm/unit)
Investment Property
512.00
-
Investment Property
-
111.6.00
Condominium
building (4th, 5th
& 6th floors)
4rth and 5th floors school
premises,
6th floor for rental
-
3,096.00
Land
Investment Property
948.00
-
Utilized as Warehouse
4,094.00
1,891.00
Utilized as Warehouse
3,091.00
1,851.00
107.00
-
Almanza, Las Pinas
Ayala Avenue, Makati
City***
Caliraya Springs,
Cavinti Laguna
BF Homes, Las Piñas
(HS)***
BF Homes, Las Piñas
(GS)
Ternate, Cavite
Land and building
GS
Land and building
HS
Townhouse
Rented buildings C&D
Training Center
1,460.00
Nasugbu, Batangas
Mt. Meadows Cagayan
de Oro
Cebu City *
Land
Investment Property
1,031.00
-
Land
Investment Property
600.00
-
Land
Investment Property
1,100.00
-
Buendia, Makati City*
Land
Other Asset
3,000.00
-
* properties intended for sale
** proposed floor areas
***mortgaged to secure bank loans
Listed in the table below is the campus ownership of franchise schools as of SY 2013-14.
OWNED
Alabang
LEASED
Alaminos
Ilagan
Quezon Avenue
Tanay
Balagtas
Angeles
La Union
Recto
Tarlac
Balayan
Bacolod College
Lipa
Rosario
Vigan
Dasmariñas
Bacolod EC
Maasin
San Fernando
Zamboanga
General Santos
Bacoor
Malolos
San Francisco
Iloilo
Balanga
Marikina
San Jose
Koronadal
Baliuag
Muñoz-EDSA
Santiago
San Carlos
Calbayog
Ormoc
Tacloban
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 21
Santa Rosa
Cauayan
Ozamis
Tagaytay
Sta. Maria
Cotabato
Pagadian
Tagbilaran
Surigao
Dipolog
Parañaque
Tagum
Tacurong
Dumaguete
Pasay
Tanauan
Campus Expansion Projects
STI ESG has invested in a number of expansion projects for company-owned campuses including a 5,000-square-meter
property at the heart of the Central Business District (BD) II of Naga City which was inaugurated on January 31, 2011.
By June 29, 2012, the 5,000-square-meter property in Novaliches, Quezon City was also inaugurated, housing an eightstorey campus. On August 15, 2012, the 39,880-square-meter property in Ortigas-Cainta broke ground to house the
new location of STI College – Ortigas-Cainta. Another notable expansion was the transfer of STI College – Dagupan to
a 1,000-square-meter property on June 10, 2010 and the inauguration of the 2,870-square-meter, four-storey building of
STI College – Fairview in February 14, 2011. STI Malaybalay has also inaugurated its leased three-storey building on
November 26, 2011 in preparation for its upgrade from education center to college.
Ongoing for expansion is STI College – Caloocan which stands on a 15,495-square-meter property and is set to be fully
operational before the end of 2013. Set to start construction are the buildings for STI Cubao and STI Las Piñas which
are both targeted to be completed before the end of March 2014. STI ESG further plans to construct new buildings for
five campuses located in Cagayan de Oro, Calamba, Cebu, Davao and Lucena.
The 3,768-square-meter property in Cubao broke ground on February 7, 2013, followed by the 10,000-square-meter
property in Las Piñas and 6,248-square-meter property in Calamba on March 15, 2013.
Likewise, a number of franchised schools embarked on facilities expansion programs and in SY 2010-11, STI College –
Koronadal transferred to its 2,400-square-meter campus at the heart of the city of Koronadal. STI College – Alabang
inaugurated its 2,800-square-meter building on February 18, 2011 while STI College – Surigao added a third building
measuring 1,500 square meters to its campus. STI College – Tacurong, on the other hand, 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. Franchised schools that added new buildings to its existing campus since SY 2010-11 include STI
College – Santa Rosa which added a 1,000-square-meter right wing and STI College – Dasmariñas which added a 900square-meter annex.
In SY 2011-12, STI Vigan upgraded to a college, followed by STI San Jose in SY 2012-13.
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
STI’s 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
The lecture rooms, laboratories and special classrooms have been completely refurbished recently. iACADEMY has
added two new Multimedia Arts Laboratories, totaling to a maximum capacity of 90 seats for the Multimedia Arts
Laboratories. In addition, iACADEMY has increased the number of seating capacity of the amphitheater to hold 100
students, which can be used for various events and activities. Other laboratories such as the Light Box Room, Drawing
Room, Cintiq, iMAC, IBM and Computer Laboratories have all been completely refurbished. All laboratories are
equipped with high speed Internet and up-to-date software.
All classrooms, lecture rooms, case rooms, and seminar rooms are fully equipped with the latest teaching aids. Studios
have adequate physical space for worktables and chairs. Students may use the computer labs 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.
21
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 22
DLS STI
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 façade.
The college has also installed its WI-FI access across the campus and upgraded computers in the laboratories.
Item 3: LEGAL PROCEEDINGS
In the course of the Group’s 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 13 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 P4.2 million. The Group’s 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.
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 ESG’s 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 16 May
2013, STI ESG received a copy of the Commissioner of Internal Revenue’s (“CIR”) Motion for Reconsideration dated 8
May 2013. STI ESG filed its Comment to CIR’s Motion for Reconsideration on 17 June 2013.
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Except for matters taken up during the annual meeting of stockholders held on 19 December 2012, 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 ISSUER’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Price and Dividends of Registrant’s Common Equity and Related Stockholder Matters
(1) Market Information
The Company’s 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.
As of 31 March 2013, the high share price of the Company was P 1.00 and the low share price was P0.98.
The Company’s public float as of 31 March 2013 is 3,680,237,214 shares equivalent to 37.16% of the total issued and
outstanding shares of the Company.
22
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 23
The following table sets forth the Company’s high and low intra-day sales prices per share for the past three years and
the first and second quarters of 2013:
High
2013
Second Quarter
First Quarter
2012
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2011
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2010
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Low
1.07
1.07
0.76
0.97
2.22
3.00
3.08
3.12
0.92
1.50
2.28
2.30
3.45
3.79
2.10
2.00
2.08
1.62
1.58
1.34
2.20
2.82
1.56
1.68
1.78
1.36
1.34
1.22
(2) Holders
As of 31 March 2013, there were 1,243 shareholders of the Company’s outstanding capital stock. The Company only
has common shares.
The following table sets forth the top 20 shareholders of the Company’s common stock, the number of shares held, and
the percentage of total shares outstanding held by each as of 31 March 2013.
NAME OF STOCKHOLDER
PCD NOMINEE CORPORATION (FILIPINO)
PRUDENT RESOURCES, INC.
TANCO, EUSEBIO H.
PCD NOMINEE CORPORATION (NON-FILIPINO)
RESCOM DEVELOPERS, INC.
EUJO PHILIPPINES, INC.
INSURANCE BUILDERS, INC.
STI EDUCATION SERVICES GROUP, INC.
CAPITAL MANAGERS AND ADVISORS. INC.
TANCO, ROSIE L.
HTG TECHNOLOGIES, INC.
EDAN CORPORATION
LERIO CABALLERO CASTIGADOR AND/OR
VICTORINA
HENRY SY SR.
CRUZ, YOLANDA M. DELA
VICSAL SECURITIES & STOCK BROKERAGE, INC.
NUMBER
OF
SHARES
3,411,986,6441
1,614,264,964
1,157,913,875
954,663,849
794,343,934
728,626,048
428,723,003
397,908,895
397,908,894
13,000,000
1,000,000
861,350
399,000
350,000
150,000
129,500
PERCENTAGE
OF
OWNERSHIP
34.4478%
16.2978%
11.6904%
9.6384%
8.0198%
7.3563%
4.3284%
4.0173%
4.0173%
0.1312%
0.0101%
0.0087%
0.0040%
0.0035%
0.0015%
0.0013%
23
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 24
E. SANTAMARIA & CO., INC.
TOBIAS JOSEF BROWN
THE PHILIPPINE AMERICAN INVESTMENTS CORP.
ROSELLE DEL ROSARIO
128,919
99,400
88,508
84,427
0.0010%
0.0010%
0.0009%
0.0009%
1Note:
Eusebio H. Tanco is the beneficial owner of 200,000,000 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.
(3) Cash Dividends
On 27 August 2010, cash dividends amounting to P 0.02 per share were paid to stockholders of record as of 2 August
2010.
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.
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 Company’s authorized and unissued capital stock at P 0.60 per share through private placement
investments in order to fund the Company’s 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
CMA
STI ESG
Total
Number of Shares
397,908,894
397,908,895
795,817,789
Amount of Subscription
P238,745,336.40
238,745,337.00
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.
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.
24
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 25
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 Company’s 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 to facilitate the listing of
the Private Placement Shares.
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
STI Majority Shareholders
Other STI ESG Stockholders
TOTAL
No. of STI ESG Shares
726,749,511
181,220,783
907,970,294
No. of Company
Shares
4,723,871,823
1,177,935,101
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 Company’s Board on 14
June 2012 and by the stockholders during the Special Stockholders’ Meeting on 10 August 2012.
On 14 September 2012, the Company filed an application for the increase in its authorized capital stock with the SEC.
The SEC approved the Company’s 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
25
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 26
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.
The PSE issued a Notice of Approval in connection with the listing of the Share Swap Shares on 10 October 2012.
Item 6: MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
1. Plan of Operation-Immediately after the follow on offering, the Company started implementing the work
program which called for the expansion of the network of wholly owned schools in 9 sites. The Ortigas-Cainta
campus has been completed and the planned transfer of the headquarters of STI ESG has been implemented. In
addition, the school campus is in operation.
The Caloocan campus is already in the 8th floor of the planned 11 floors and will be ready by end October of 2013.
STI Cubao and STI Las Piñas are starting construction and will be completed by March 31, 2014. Two more school
campuses in Calamba and Lucena are planned to be constructed and completed before the end of this year. Due
diligence audit is still on-going for the purchase of a university in the Visayas.
These expansion projects are funded by the proceeds of the follow on offering conducted in November 2012. Any
shortfall is expected to be satisfied by internally generated cash and bank loans.
The Company is still in search of sites to serve as campuses of three other owned schools identified to be expanded.
The Company is also on the look-out for possible mergers and/or acquisitions of existing tertiary schools.
With the increase in student capacity, the number of students is projected to multiply. The Company though is not
expecting a substantial increase in its manpower as the economies of scale is maximized.
2.
Management’s 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, 2013 and 2012. The April 1, 2011 Statement of Financial Position is
presented in accordance with the requirement of PAS 1 as discussed in note 3 of the audited financial statements.
The following discussion should be read in conjunction with the attached audited financial statements of the
Company as of and for the year ended 31 March 2013 and for all the other periods presented.
Financial Condition
2013 vs. 2012
The Group’s total assets as at March 31, 2013 amounted to P8,514.0 million, 86% 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 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 followon 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.
26
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 27
Current receivables slightly decreased by 6% or P15.1 million mainly due to the conversion of the P41.6 million
advances to STI Investments, Inc. (STI Investments), an associate, into equity, thus, the transfer to Investments in
Associates account.
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 byP12.8 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 ORCA, STI
Caloocan, STI Cubao and STI Las Piñas, construction costs incurred for STI Academic Center Novaliches, ORCA
and Caloocan, and improvement of various facilities. Based on past experience, enrollment increased in areas
where STI ESG constructed campuses with better facilities. Expansion of four schools are on-going and two others
are about to start, all of six are expected to be completed by March 31, 2014.
Investment properties decreased by 17% or P7.8 million due to the disposal of STI ESG’s idle property in Manila,
and the recognition of depreciation expenses.
Value of Investments in and advances to associates and joint ventures increased byP1,316.9 million mainly from
profitable operations of an associate, STI Investments. The recognition of the Company’s share in unrealized markto-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 Women’s University (PWU) in accordance with existing
agreements.
Available-for-sale financial assets slightly decreased by 7% due to decrease in fair market value of some
investments.
Deferred tax assets increased by P1.4 million or 15% due to recognition of deferred tax assets for expenses
deductible in future periods.
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.
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.
Accounts payable and other current liabilities slightly rose by 6% to P320.7 million mainly due to increase in
payables related to construction.
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 rose by P6.9 million as retirement costs were accrued.
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.
27
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 28
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 Group’s 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.
2012 vs. 2011
The Group’s total assets as of March 31, 2012 stood at P4,585.9 million, 22% higher than the balance as of April 1,
2011.
Cash and cash equivalents rose by P80.4 million mainly due to the Group’s profitable operations in 2012.
Receivables decreased by 62% or P440.3 million as advances to associates were collected.
On the other hand, Inventories increased by 22% due to the build-up of stocks of educational materials and
supplies in anticipation of the expected increase in the number of enrollees for the succeeding school year.
Current portion of Available-for-sale investments decreased 100% or by P51.1 million as the Group sold its
investment in listed equity shares.
Prepaid expenses and other current assets increased to P24.7 million primarily due to increase in creditable
withholding taxes.
Property and equipment rose by P123.0 million due to construction cost of STI Novaliches and STI Naga and
acquisition of computers and various school and office equipment.
Investment properties increased by P9.7 million due to reclassification of idle property from Property and
Equipment, reflecting the strategic direction to dispose of this property in the future.
Value of Investments in and advances to associates and joint ventures increased byP843.7 million mainly from
profitable operations of an associate, STI Investments. The recognition of unrealized mark-to-market gain on
investments of the same associate also contributed to the increase.
Non-current receivables amounting to P227.3 million as of March 31, 2012 arose from the acquisition of the loan of
Philippine Women’s University (PWU) from PWU’s creditor bank, together with all of the bank’s rights to the
underlying collateral and security.
The value of available-for-sale financial assets slightly increased by 7% due to favorable market conditions.
Deferred tax assets decreased by 29% primarily due to utilization of the tax benefit from previously recognized
expenses treated as temporary differences.
Increase of P25.3 million in the amount of Goodwill, intangible and other noncurrent assets was mainly due to the
cash bond made for the bid to acquire the Ortigas-Cainta property.
Short-term loans decreased by P167.0 million as loan repayments were made.
Obligations under finance lease, both current and noncurrent portion, increased by 78% and 35% respectively, due
to acquisition of transportation and computer equipment under finance lease.
Income tax payable decreased by P4.4 million due to the application of Net operating loss carry-over (NOLCO)
from previous years.
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 29
Pension liabilities slightly decreased by 6% due to attrition and increase in unrecognized net actuarial gains
resulting from the merger of the various schools.
Capital stock rose by P397.9 million due to the issuance of 795,817,788 shares of the Company via private
placement.
Additional paid-in capital of P77.6 million was recognized as of March 31, 2012 due to the excess over par value of
the shares issued arising from the private placement, net of transaction costs related to the issuance of shares.
Cost of shares held by a subsidiary amounting to P500.0 million was recorded in 2012 representing the cost of
Parent Company shares held by STI ESG.
Unrealized mark-to-market gains or losses on available-for-sale financial assets, including the Group’s share in its
associates’ unrealized mark-to-market gains on available-for-sale financial assets increased by net amount of P865.9
million.
Retained earnings increased due to the net income earned less dividends declared.
Results of Operations
Year 2013 vs. 2012
The Group registered substantial improvements in its profitability as shown by the 171% increase in net income
from P292.6 million in 2012 to P794.2 million in 2013. Total comprehensive income increased by 37% to P1,640.4
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 year’s P1,272.7 million,
reflective of the increased number of students. In addition, STI ESG’s enrolment mix was more favorable in 2013
than in 2012, as enrolment leaned more towards the STI Network’s four-year programs than the two-year
programs. Ratio in 2013 was 71% four-year programs and 29% 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.
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 from 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 P57.9 million or 8% from P688.1 million to P746.0 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 P9.1 million from last year’s P215.8 million due to increases in retirement cost. Lower retirement cost
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 30
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 P465.2 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 ESG’s idle property was sold.
Year 2012 vs. 2011
Net income more than tripled from P94.6 million in 2011 to P292.6 million in 2012. Total comprehensive income
substantially improved by 351% from P265.1 million in 2011 to P1,195.0 million in 2012.
Total revenues increased byP95.7 million or 6% from last year due to the increase in the number of students of STI
ESG and its subsidiaries from 65,592 to 66,740 students resulting in higher revenues from tuition and other school
fees.
The 8% increase in both tuition and other school fees and educational services resulted from the increase in the
number of students of STI ESG and its subsidiaries.
Other income went down by 17% due to reversal of interest expenses on intercompany accounts as a result of the
merger of schools to the parent company in 2011.
Cost of educational services went down by P6.5 million in 2012 as compared to 2011.This was due to the decreased
faculty salaries resulting from the decrease in the number of faculty members in the programs with declining
enrollment, notably the nursing program, in which faculty members would generally have high salaries. These
decreases were partially offset by the 26% increase in depreciation and amortization due to the acquisition and
completion of the new facilities.
Cost of educational materials and supplies sold was 17% lower in 2012. This is because the volume of educational
materials and supplies sold was significantly higher in 2011 due to the introduction of new school uniforms, which
were not changed in 2012.
General and administrative expenses increased by P23.6 million or 4% from P664.5 million to P688.1 million,
mainly due to increased salaries and cost of utilities resulting from the increase in the number of students. Taxes
and licenses also increased due to documentary stamp taxes on short term loans incurred in the early part of the
fiscal year.
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 31
Equity in net losses of associates and joint ventures decreased by P135.4 million, primarily due to the Group’s
equity in net losses in STI Investments, of which STI ESG has a 20.0% interest. When STI Investments acquired
PhilPlans First, Inc. (PhilPlans), which was then Philam Plans, Inc., in September 2009, STI Investments recognized
an accounting gain for the excess of the fair value of the net assets of PhilPlans over its acquisition cost. STI
Investments recognized PhilPlans’ net assets at the fair values at acquisition date, which are higher than the
carrying values recognized by PhilPlans on its separate statement of financial position. In 2011 and 2012, PhilPlans
began to dispose of those assets acquired at acquisition date, and STI Investments began to reverse a portion of the
realized gain on sale of AFS investments of PhilPlans as the cost basis for these AFS investments at STI Investments
consolidated level was higher when these were acquired by STI Investments. These reversals reduced STI
Investments’ share in the earnings of PhilPlans. The reversal was higher in 2011 than in 2012 as most of these assets
were disposed in 2011.
Interest expense increased by 27% in 2012 due to higher cost of money.
Rental income went down significantly by P4.2 million or 44% as premises originally being leased were used as
school premises.
Interest income meanwhile decreased by 2% or P0.4 million as cash was used for the construction of school
buildings and loan repayments in 2012.
Dividend income decreased by 26% as the equities were sold and the proceeds placed in time deposits and higher
earning accounts.
Disposal of various investments for strategic reasons resulted in gains or losses both this year and last year.
Share in associates’ unrealized mark-to-market gain on available-for-sale financial assets, net of realized mark-tomarket gain (loss) recognized to profit or loss, increased by 465% due to the huge upside in values of government
securities which were held byPhilPlans. Unrealized mark-to-market gain on available-for-sale financial assets of
P18.1 million in 2011 was reduced to unrealized mark-to-market loss of P2.7 million in 2012, as P4.7 million gain on
sale was realized and recognized as Other Income with the sale of the related equities.
Key Performance Indicators (KPIs)
The top five key performance indicators of the Group include tests of profitability, liquidity and solvency.
Profitability refers to the Group’s earning capacity and ability to earn income for its stockholders. This is measured
by profitability ratios analyzing margins and returns. Liquidity refers to the Group’s ability to pay its short-term
liabilities as and when they fall due. Solvency refers to the Group’s ability to pay all its debts as and when they fall
due, whether such liabilities are current or non-current.
KPI
Return
equity
Manner of Calculation
on
Gross profit
margin
Net income attributable to
equity holders of the Parent
company divided by
average equity attributable
to equity holders of the
Parent company
Gross profit divided by
total revenues
2013
2012
14%
10%
68%
67%
Discussion
Net income attributable
to equity holders of the
Parent Company
increased by 170% or
P489.1 million from
P288.1 million in 2012 to
P777.2 million in 2013.
Equity attributable to
equity holders of the
parent company
increased by a slower rate
of 143% only.
Increase in gross profit
margin resulted mainly
from the increase in the
number of students of STI
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 32
Current ratio
Quick ratio
Debt to
equity ratio
Current assets divided by
Current liabilities
Current assets less
inventories and
prepayments divided by
Current liabilities
Total liabilities divided by
Total equity
5.46:1.00
0.84:1.00
5.24:1.00
0.78:1.00
0.05:1.00
0.32:1.00
ESG and its subsidiaries
from 66,740 last year to
68,363 students this year
resulting to increased
revenues from tuition
and other school fees.
The substantial increase
in current ratio as of
March 31, 2013 is due to
the cash still on hand,
portion of the proceeds
from the follow-on
offering received in
November 2012 and the
full payment of all short
term loans.
Increase due to P933
million additional cash
balance arising from the
proceeds from the
Group’s follow-on
offering.
Substantial decrease due
to full payment of all
loans combined with
increase in paid-up
capital arising from the
follow-on offering and
the share-for-share swap
between the shareholders
of STI ESG and STI
Holdings.
Financial Risk Disclosure
The Group’s 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 internallygenerated 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 ESG’s 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.
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SEC Form 17 – A
As of 31 March 2013
Page 33
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.
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.
d. There are no known trends, demands, commitments, events of uncertainties that will have an impact on the
Group’s liquidity except for the contingencies and commitments enumerated in Note 29 of the Notes to
Consolidated Financial Statements attached as Annex “A”.
e.
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.
f.
As of March 31, 2013, STI ESG has purchased land in Ortigas-Cainta, Caloocan, Cubao and Las Piñas.
Construction of school facilities in Ortigas-Cainta and Caloocan commenced during the period. Source of
funds for the capital expenditures is the follow-on offering of STI Holdings.
g.
There are no known trends, events or uncertainties that have had or that are reasonably expected to have a
material favorable or unfavorable impact on net sales/revenues/income from continuing operations.
h. There are no significant elements of income or loss that did not arise from the Group’s continuing operations.
Item 7:
FINANCIAL STATEMENTS
The March 31, 2013 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 Company’s External Auditors for the
past years (2010 up to the present). They were reappointed in the Annual Stockholders’ Meeting held on 19
December 2012, 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 Ms.
Vivian Cruz-Ruiz of SGV as the Partner-in-charge of the Company. She has been the partner-in-charge for three
years and a quarter, inclusive of this fiscal year ending March 31, 2013 engagement.
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 34
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, 2013 “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 Company’s 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.
The Company had engaged SGV for the annual audit covering the period from April 1, 2012 to March 31, 2013 for
P500,000.00. The engagement letter for the year-end audit was sent to the Company on 19 April 2013.
The following information pertains to their fees and charges over the last two fiscal years (amounts in thousands):
2011-2012
2012-2013
Audit Fees
P500
P341
Tax Fees
0
69
All Other Fees
P14,400*
P100
*Represents professional fees paid relative to the follow-on offering
PART III – CONTROL AND COMPENSATION INFORMATION
Item 9: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A) Directors and Executive Officers
1) Directors, Independent Directors and Executive Officers
The Company’s 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)
(b)
(c)
(d)
(e)
(g)
(h)
(i)
(j)
(k)
(l)
Eusebio H. Tanco
Monico V. Jacob
Yolanda M. Bautista
Joseph Augustin L. Tanco
Ma. Vanessa Rose T. Cualoping
Martin K. Tanco
Rainerio M. Borja
Ernest Lawrence Cu
Johnip Cua
Paolo Martin O. Bautista
Jesli A. Lapus
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 35
Messrs. Ernest Lawrence Cu and Johnip Cua 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. Cu and Cua.
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:
Eusebio H. Tanco, 63, 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.
He is also the Chairman of the Executive Committee of STI ESG and the Chairman of Philplans First, Inc.,
Philhealthcare Inc., Philippine Life Financial Assurance Corporation, BancLife Insurance Co., Inc., Techzone
Philippines, Inc., Total Consolidated Asset Management, Inc., STI Investments, Inc., Capital Managers and Advisors,
Inc., Rescom Developers Inc. and Insurance Builders Inc. He is Vice-Chairman of Philippine Women’s University.
Mr. Tanco is President and/or Chief Executive Officer of Philippines First Insurance Co. Inc., Optima Financing
Corporation, Classic Finance Inc., Venture Securities Inc., Advent Capital & Finance Corporation, Southern Textile
Mills Inc., Asian Terminals Inc., Mactan Electric Company, Rescom Developers Inc., International Hardwood & Veneer
Corporation, Cement Centre Inc., Agatha Builders Corporation, First Optima Realty Corporation, Marbay Homes Inc.,
Prudent Resources, Inc. and Eujo Phils., Inc.
Mr. Tanco is also a director in i-ACADEMY, UNLAD Resources Development Corporation, Philippine Racing Club,
Inc., Leisure and Resorts Worlds, Inc., J&P Coats Manila Bay, Manila Bay Spinning Mills, Inc., United Coconut
Chemicals, Inc., Mindanao Energy Inc., and MB Paseo.
Mr. Tanco is a member of the Board of Governors 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 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, 68, Filipino, Director
Mr. Jacob has been the President and CEO of STI Holdings since March 17, 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 ESG, Philplans First, Inc., Philhealthcare, Inc. and Philippine Life Financial
Assurance Corporation and the President of BancLife Insurance Co., Inc., Total Consolidated Asset Management, Inc.,
Insurance Builders Inc., Capital Managers and Advisors, Inc. and STI Investments, Inc.
Mr. Jacob is currently the Chairman and Managing Partner of CEOs, Inc., a business and management consultancy
firm; Chairman of Global Resource for Outsourced Workers, Inc., a professional placement company for healthcare and
ICT workers, Advent Capital & Finance Corporation and Classic Finance Inc.
Mr. Jacob is also a Director in i-ACADEMY, UNLAD Resources Development Corporation, Philippine Women’s
University, Asian Terminals, Inc. and Independent Director of Jollibee Foods Corporation, Phoenix Petroleum
Philippines, Inc., 2Go Group, Inc., Century Properties, Inc. and DFNN, Inc.
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 36
Mr. Jacob is also a partner in the law firm of Jacob & Jacob. His areas of specialty are in energy, corporate law,
corporate recovery and rehabilitation work. Mr. Jacob also works as a consultant for the Manila Electric Company, the
largest electricity distributor in the Philippines.
Prior to holding the aforementioned positions, Mr. Jacob was the Chairman and Chief Executive Officer of Petron
Corporation (“Petron”). As the Chairman and Chief Executive Officer of Petron, he presided over the successful
privatization of Petron and its subsequent initial public offering, which is considered one of the most successful in the
history of the Philippines. Mr. Jacob was also the Chairman and Chief Executive Officer of Philippine National Oil
Company and all of its subsidiaries. Finally, Mr. Jacob was the General Manager of the National Housing Authority
and Chief Executive Officer of the Home Development Mutual Fund, also known as the PAG-IBIG Fund.
Mr. Jacob is a member of the Management Association of the Philippines, of which he was the President in 1998. He is
a former member of the Board of the Financial Executives Institute of the Philippines and a member of the Integrated
Bar of the Philippines.
Mr. Jacob earned his Bachelor of Laws degree from the Ateneo de Manila University in 1971 and his Bachelor of Arts
degree, Major in Liberal Arts, from the Ateneo de Naga University in 1966.
Yolanda M. Bautista, 60, Filipino, Director
Ms. Bautista has been the Treasurer of STI Holdings since 17 March 2010. She is likewise a member of the Executive,
Compensation and Compliance Committees of STI Holdings.
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.
She serves as Director and Treasurer of Capital Managers and Advisors, Inc., Banclife Insurance Co., Inc., Insurance
Builders Inc., DLS-STI College, Inc., Philippine Women’s University and Information and Communications Technology
Academy (iAcademy), Inc. She is 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 and UNLAD Resources
Development Corporation. She 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 from the University of Santo Tomas with a Bachelor of
Science degree in Commerce, majoring in Accounting.
Joseph Augustin L. Tanco, 32, Filipino, Director
Mr. Tanco has been a Director of STI Holdings since 27 October 2010. He is likewise the Vice President for Investor
Relations, a member of the Compensation Committee of STI Holdings.
Mr. Tanco is a Director, Executive Vice President and Chief Operations Officer of Philhealthcare, Inc. He also serves as
a Director and Treasurer of Philplans First, Inc., a Director of STI Education Services Group, Inc., Philippine Life
Financial Assurance Corporation, Insurance Builders Inc., Eujo Phils. Inc., Capital Managers and Advisors, Inc., STI
Investments, Inc., UNLAD Resources Development Corporation, Prudent Resources, Inc. and Rescom Developers, Inc.
He is also a Director and President of Reyes BBQ Total Corporation.
In 2005, Mr. Tanco 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. Mr. Tanco currently serves as President and CEO of Comm&Sense, Inc. Prior to finding Comm&Sense,
Inc., Mr. Tanco had years of experience as the Channel Manager for STI Headquarters and Chief Operating Officer of
STI College Makati. He is also an Entrepreneurship Mentor at the University of Asia and the Pacific.
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STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 37
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 T. Cualoping, 35, Filipino, Director
Ms. Cualoping has been a Director of STI Holdings since 27 October 2010. She is likewise a member of the Nomination
Committee of STI Holdings.
Ms. Cualoping is currently a Director, President and CEO of iAcademy. She is also a Director and Chief Operating
Officer of the Philippine Women’s University. She is also the co-founder of Sparkles De Cebu Industries, Inc.
Concurrently, Ms. Cualoping is also a Director of 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. Cualoping earned her Master in Business Administration degree from the University of Southern California 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.
Rainerio M. Borja, 50, 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 has also been a director of STI ESG since 2006. He is also the President of NCO/APAC where he is tasked to
take the lead in evolving the company’s corporate culture, and its relations with investors, employees, customers,
suppliers, regulators and the local community.
Mr. Borja was President of PeopleSupport Philippines, Inc., a wholly owned subsidiary of PeopleSupport, Inc., which
provides outsourced services to US clients. He is a member of the Board of Directors of the Business Processing
Association of the Philippines, the umbrella organisation and industry organisation of IT-enabled service providers
and partners in the Philippines. Mr. Borja is also Treasurer and Director of the Contact Center Association of the
Philippines.
Mr. Borja is a graduate of De La Salle University with a Bachelor of Science degree in Commerce. He also studied at
the De La Salle University Graduate School of Business and Economics for his Masters of Science in Economics.
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 also an Independent Director of STI ESG and Globe Telecom, Inc. He is President and Chief Executive
Officer of Globe Telecom. Mr. Cu is a director of Digital Media Exchange, Inc., ATR Kim Eng Capital Partners, Inc.,
ATR Kim Eng Financial Corporation, the related entities of SPi Technologies, Inc., the American Chamber of
Commerce and Makati Business Club. He was the former President and CEO of SPi Technologies, Inc.
37
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 38
Mr. Cu earned his Master of Management degree, with concentration in finance, accounting and operations
management from the J.L. Kellogg Graduate School of Management at Northwestern University. He earned a Bachelor
of Science Degree in Industrial Management Engineering and a minor in mechanical engineering from De La Salle
University.
Johnip Cua, 56, 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 is also an Independent Director of Philplans First, Inc. and MacroAsia Corporation. Mr. Cua has served as
the Chairman of the Board of Trustees of P&Gers Fund, Inc. Mr. Cua 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, Interbake Marketing
Corporation, Lartisan Corporation and Teambake Marketing Corporation.
Mr. Cua served as the President and General Manager of Proctor & Gamble Philippines, Inc. and Vice-President,
Marketing Function, ASEAN, Australasia and India from 2003 to 2006.
Mr. Cua is a member of the Board of Trustees of Xavier School and Xavier School Educational & Trust Fund.
Mr. Cua earned his Bachelor of Science degree in Chemical Engineering from the University of the Philippines.
Paolo Martin O. Bautista, 43, 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.
He is also 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 has obtained his Bachelor of Arts degree, Bachelor of Laws degree and Juris Doctor at the Ateneo de
Manila University and obtained a Master of Science degree in Management from the Arthur D. Little School of
Management, Cambridge, MA.
Jesli A. Lapus, 63, Filipino, Director
Mr. Lapus has been elected as Director of STI Holdings on March 21, 2013.
He is currently a Director of: Philippine Life Financial Assurance Corporation and iACADEMY; Independent Director,
and Chairman of the Trust Committee of Metropolitan Bank and Trust Company; Trustee, and Chairman of AIM-ALT
Center for Tourism of Asian Institute of Management; Chairman of LBP Service Corporation; Board Advisor of
Radiowealth Finance Co., Inc.; and Senior Advisor to the Chairman of Alliance Global Group, Inc.
He was also a former director of Manila Electric Company, Union Bank of the Philippines, Philippine Airlines and
former Chairman of Manila Tytana Colleges, Inc.
A multi-awarded executive in the private sector (i.e. Manufacturing, financial services and international trade), he 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, Honorable Lapus has
the distinction of having served in the cabinets of three (3) Philippine Presidents namely: President Gloria Macapagal-
38
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 39
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. Congressman Lapus
was Chairman of the House Committees on Ways and Means, Trade and Industry, Suffrage and Electoral Reforms and
Vice-Chairman of Appropriations.
He 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; Project Management from BITS,
Sweden; Personal Financial Planning from UCLA, USA; and Spanish Language and Culture from Universidad de
Salamanca, Spain.
Arsenio C. Cabrera, Jr., 53, 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.
Mr. Cabrera is a Senior 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 Amina, Inc., Philippine Life Financial
Assurance Corp., Banclife Insurance Co., Inc., Bountiful Geomines, Inc. Calatagan Bay Realty, Inc., Canlubang Golf and
Country Club, Inc., Capital Managers and Advisors, Inc., Classic Finance, Inc., Coinage, Inc., Comm & Sense, Inc., DLSSTI College, Inc., De Los Santos – STI College Quezon Avenue, DLS-STI Megaclinic, Inc., Driade Properties, Durban
Realty Corporation, Foundation for Filipinos, Inc., Garlex Holdings, Inc., GEOGEN Corporation, GEOGRACE
Resources Philippines, Inc., GIA Realty Holdings, Inc., Lasik Surgery, Inc., Lorenzo Shipping Corporation, Marpao
Properties, Inc. Masbate 13 Philippines, Inc., Mina Tierra Gracia, Inc., NiHAO Mineral Resources International, Inc.,
Palisades Condominium Corporation, Philhealthcare, Inc., PhilPlans First, Inc., Philippine Women’s University,
Philippines First Condominium Corporation, Philippines First Insurance Co., Inc. Q Holdings, Inc., Renaissance
Condominium Corporation, Sonak Holdings, Inc., STI Investments, Inc., TechZone Philippines, Inc., Trend Developers,
Inc., Total Consolidated Asset Management, Inc., Unlad Resources Development Corporation, Venture Securities, Inc.,
Villa Development Corporation, and WVC Development Corporation.
Mr. Cabrera graduated from the Ateneo De Manila University with a Bachelor of Laws degree.
Ana Carmina S. Herrera, 38, Filipino, Assistant Corporate Secretary
Atty. Ana Carmina S. Herrera was elected Assistant Corporate Secretary of the Company on 17 March 2010.
Ms. Herrera is a Senior Associate of Herrera Teehankee & Cabrera Law Offices. She is Assistant Corporate Secretary
for Coastal Bay Chemicals, Inc., Lorenzo Shipping Corporation, Palisades Condominium Corporation, Philhealthcare,
Inc., and Banclife Insurance Co., Inc.
Ms. Herrera graduated from the University of the Philippines in 2000 with a Bachelor of Laws degree.
(2) Significant Employees
In general, the Company values its human resources. It expects the employees to do their share in achieving the
Company’s 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.
39
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 40
(3) Family Relationships
Mr. Joseph Augustin L. Tanco is the son of Mr. Eusebio H. Tanco. Ms. Ma. Vanessa Rose Tanco Cualoping 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 selfregulatory 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 27 October 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, 20122013 and 2013-2014. The amounts set forth in the table below have been prepared based on 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
All other Officers as a
Group
Fiscal Year
Ended 31
March
2011-2012
2012-2013
2013-2014
Salary (PHP)
Bonus
(PHP)
Other annual
compensation
(PHP)
527,052.00
-
-
597,052.00
982,052.001
-
-
40
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 41
All Named Executive
Officers2 and Board of
Directors as a Group
2011-2012
2012-2013
2013-2014
-
-
564,706.00
-
1,005,882.00
1,105,882.001
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 2013
As of 31 March 2013, the following stockholders are the only owners of more than 5% of the Company’s voting
capital stock, whether directly or indirectly, as record owner or beneficial owner.
Title of
Class
Name, Address of
Record Owner and
Relationship with
Issuer
Common
PCD Nominee
37/F Tower I,
Enterprise Center,
6766 Ayala Avenue
cor. Paseo de Roxas,
Makati City
Prudent Resources,
Inc.
7/F iAcademy
Building, 6764 Ayala
Avenue, Makati City
Common
Name of Beneficial
Owner and
Relationship with
Record owner
Mr. Eusebio H.
Tanco, the Chairman
of Prudent Resources,
Inc. is authorized to
vote its shares in the
Company.
Citizens
hip
No. of Shares
Held
Percent
Filipino
3,411,986,6442
34.45%
Filipino
(Direct)
1,614,264,964
16.30%
41
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 42
Common
Common
Common
Common
Common
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
PCD Nominee
37/F Tower I,
Enterprise Center,
6766 Ayala Avenue
cor. Paseo de Roxas,
Makati City
Rescom Developers,
Inc.
7/F iAcademy
Building, 6764 Ayala
Avenue, Makati City
Eujo Philippines,
Inc. (Direct and
Indirect shares
through PCD
Nominee
Corporation)
7/F iAcademy
Building, 6764 Ayala
Avenue, Makati City
Insurance Builders,
Inc. (Direct and
Indirect shares
through PCD
Nominee
Corporation)
7/F iAcademy
Building, 6764 Ayala
Avenue, Makati City
STI Education
Services Group, Inc.
STI Academic
Center, University
Parkway Drive, Fort
Bonifacio Global
City, Taguig City
Mr. Eusebio H. Tanco
Filipino
(Direct)
1,157,913,875
11.69%
200,000,000
------------------1,357,913,875
===========
=
2.02%
----------13.71%
=======
NonFilipino
954,663,8493
9.64%
Mr. Eusebio H.
Tanco, the Chairman
of Rescom
Developers, Inc. is
authorized to vote its
shares in the
Company.
Mr. Eusebio H.
Tanco, the Chairman
of Eujo Philippines,
Inc. is authorized to
vote its shares in the
Company.
Filipino
(Direct)
794,343,934
8.02%
Filipino
(Direct)
728,626,048
7.35%
35,247,082
-----------------763,873,130
==========
0.36%
---------7.71%
======
Mr. Eusebio H.
Tanco, the Chairman
of Insurance Builders,
Inc. is authorized to
vote its shares in the
Company.
Filipino
(Direct)
428, 723,003
4.33%
150,952,989
-----------------579,675,992
===========
1.52%
----------5.85%
=======
Mr. Monico V. Jacob,
the President of STI,
is authorized to vote
the shares of STI ESG
in the Company
Filipino
(Direct)
397,908,895
4.02%
104,399,000
----------------502,307,895
===========
1.05%
---------5.07%
======
(Indirect)
Total
(Indirect)
(Indirect)
Total
(Indirect)
42
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 43
Common
Morgan Stanley
Contact Person:
Non816,264,000
8.24%
Investment
Linyu Qi
Filipino
Management
Address: Morgan
(Indirect)
Company
Stanley, 16/F, Kerry
16-01 Capital
Parkside, 1155 Fang
Square, 23 Church
Dian Road, Pudong
Street, Singapore
New District,
049481
Shanghai, China
2Note: Eusebio H. Tanco is the beneficial owner of 200,000,000 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.
3Note:
Morgan Stanley Investment Management Company is the beneficial owner of 816,264,000 shares.
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 book of the Company’s 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 Company’s lodged shares to facilitate the book-entry trading and settlement of the Company’s 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 Company’s voting securities.
(b) Security Ownership of Management as of 31 March 2013
The following table sets forth as of 31 March 2013, the beneficial ownership of each director and executive
officer of the Company:
Title of
Class
Common
Common
Common
Common
Common
Common
Name of Beneficial Owner
Eusebio H. Tanco
(Director and Chairman of the Board)
Monico V. Jacob
(Director, President and CEO)
Yolanda M. Bautista
(Director and Treasurer)
Arsenio C. Cabrera, Jr.
(Corporate Secretary)
Joseph Augustin L. Tanco
(Director and VP for Investor Relations)
Paolo Martin Bautista
(Director and Chief Investment
Officer and Head of Corporate
Strategy)
Amount & Nature of
Beneficial Ownership
Citizenship
Percent
of Class
Filipino
11.69%
2.02%
----------13.71%
=======
1,157,913,875
200,000,000
-----------------1,357,913,875
==========
==
33,784,057
Direct
Indirect
Indirect
Filipino
0.34%
13,000,001
Indirect
Filipino
0.13%
6,500,000
Indirect
Filipino
0.06%
1
2,000,000
---------------2,000,001
==========
Direct
Indirect
Filipino
3,250,000
Indirect
0.00%
0.02%
------------0.02%
======
0.03%
Total
Total
Filipino
43
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 44
Title of
Class
Common
Common
Common
Common
Common
Common
Common
Name of Beneficial Owner
Vanessa Tanco Cualoping
(Director)
Martin K. Tanco
(Director)
Rainerio M. Borja
(Director)
Jesli A. Lapus
(Director)
Ernest Lawrence Cu
(Independent Director)
Johnip G. Cua
(Independent Director)
Directors and Officers as a Group
Amount & Nature of
Beneficial Ownership
Citizenship
1
Direct
Filipino
0.00%
34,060,000
Indirect
Filipino
0.34%
6,300,000
Indirect
Filipino
0.06%
6,500,000
Indirect
Filipino
0.06%
26,000,000
Indirect
Filipino
0.26%
1,000
Indirect
Filipino
0.00%
Direct and
Indirect
Filipino
15.01%
1,489,308,935
Percent
of Class
(c) Voting Trust Holders of 5% or More
As of 31 March 2013, 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 shall also be 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 P 551,000,000.00 consisting of 1,103,000,000 shares with a par
value of P 0.50 per share to Php 5,000,000,000.00 consisting of 10,000,000,000 shares with a par value of P 0.50 per share.
The aforementioned increase in authorized capital stock was approved by the Company’s Board on 14 June 2012 and
by the Company’s 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 CMA’s 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.
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 Company’s issued and outstanding capital stock.
Item 12:
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has the following major transactions with related parties:
Joint Venture Agreement with Philippine Women’s University (“PWU”), Unlad Resources Development
Corporation (“UNLAD”) and Mr. Alfredo Abelardo Benitez (“Mr. Benitez”)
44
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 45
On 21 November 2011, the Company’s Board of Directors approved the following: (1) the assignment by the
Company’s Chairman, Mr. Eusebio H. Tanco (“Mr. Tanco”) in favor of the Company of all of Mr. Tanco’s 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 PWU’s educational thrust.
Pursuant to the assignment of Mr. Tanco’s 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 BDO’s 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.
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. Benitez’s
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 Company’s 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 Company’s Loan to PWU, 40% of the issued and outstanding capital stock of
UNLAD; and (b) AHC to acquire 20% of UNLAD’s 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 Php 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 31 March 2013 and 2012, noncurrent receivables from PWU and UNLAD consist of loans of P 448 Million and
Php 223.5 Million, respectively; accrued interest of P 16 Million and P 3.7 Million, respectively; and other charges of nil
and P 0.5 Million, respectively. Interest income in 2013 and 2012 amounted to P 12.7 Million and P 3.7 Million,
respectively.
45
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 46
As of 31 March 2013 and 2012, 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 consolidated statements of financial position.
The Company has submitted 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.
In April 2013, STI ESG and Techzone entered into a real estate mortgage amounting to P 800 Million with STI ESG’s
land as collateral for Techzone’s loan, to obtain the funds needed for Techzone to develop the property.
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 Company’s
parent company until 18 March 2010.
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 January 1, 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.
46
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 47
PART IV – CORPORATE GOVERNANCE
Item 13.
CORPORATE GOVERNANCE
In accordance with SEC Memorandum Circular No. 5, Series of 2013, the Corporate Governance item 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 Management’s Responsibility for Financial Statements
Report of Independent Auditors
Audited Financial Statements and Notes for the fiscal year ended 31 March 2013
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 04 October 2012
Item 9 - Other Events
The Company adopted the Audit Committee Charter and came up with a plan to comply with the Guidelines
for the Assessment of the Performance of Audit Committees of Companies listed on the Exchange pursuant to
SEC Memorandum Circular No. 4, Series of 2012.
2.
Item 9 filed with SEC on 15 October 2012
Item 9 - Other Events
The Annual Stockholders’ Meeting of the Company was set on 7 December 2012 at 3:00 o’clock in the afternoon
at the 7th Floor, iAcademy Building, 6764 Ayala Avenue, Makati City. 31 October 2012 was set as the record
date.
3.
Item 9 filed with SEC on 23 October 2011
Item 9 - Other Events
47
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 48
Follow–On Offering
- The offer price for the follow-on offering (the “Offer”) of the Company was set at
Ninety Centavos (Php 0.90) per share. The Offer is comprised of the following:
(1) Primary Offering: Up to 2,627,000,000 common shares will be offered to the public on a primary basis;
(2) Secondary Offering: Up to 105,209,527 common shares will be offered to the public on a secondary basis
by Korea Merchant Banking Corporation; and
(3) Over-Allotment Option of up to 273,000,000 common shares. The Company has granted UBS AG, in its
role as the Stabilizing Agent, an option exercisable in whole or in part, to purchase up to an additional
273,000,000 Optional Shares at the Offer Price, on the same terms and conditions as the Firm Shares set
forth in the Prospectus, solely to cover over-allotments, if any. The Over-Allotment Option is exercisable
from and including 30 days after the Listing Date.
4.
Item 9 filed with SEC on 05 November 2012
Item 9 - Other Events
The Annual Stockholders’ Meeting of STI Education Systems Holdings, Inc. was re-scheduled from 7
December 2012 to 19 December 2012 at 3:00 o’clock in the afternoon. 16 November 2012 was set as the new
record date.
5.
Item 9 filed with SEC on 05 November 2012
Item 9 - Other Events
At the Company’s Nomination Committee Meeting held on 31 October 2012, the following nominees were prescreened and determined to possess the qualifications required and none of the disqualifications provided for
by law, relevant rules and regulations and the Company’s Manual on Corporate Governance to become
members of the Company’s Board of Directors for 2012:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Eusebio H. Tanco
Monico V. Jacob
Yolanda M. Bautista
Martin Tanco
Rainerio M. Borja
Vanessa Rose Tanco-Cualoping
Joseph Augustin L. Tanco
Paolo Martin O. Bautista
Arsenio C. Cabrera, Jr.
Independent Directors:
10. Johnip G. Cua
11. Ernest Lawrence Cu
6.
Item 9 filed with SEC on 20 November 2012
Item 9 – Other Events
At the meeting of the Board of Directors held on 14 November 2012, the Board approved the subscription by
the Company to 1.020 Billion authorized but unissued shares of STI ESG with an aggregate par value of Php
1.020 Billion.
The Company currently owns 940,294,912 STI ESG shares equivalent to 95.95% of STI ESG’s issued and
outstanding capital stock. After the payment of the subscription for the Shares, the Company shall own
1,960,294,912 shares or 98% of the issued and outstanding stock of STI ESG.
48
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 49
During the same meeting of the Board of Directors on 14 November 2012, the Board likewise approved the
subscription by the Company to an additional 1.080 Billion shares of STI ESG (the “Additional Shares”) with
an aggregate par value of Php 1.080 Billion. The Additional Shares shall be issued from the increase in STI
ESG’s authorized capital stock to Php 5 Billion.
The proceeds from the subscription to the Shares and the Additional Shares totaling Php 2.1 Billion shall be
used to finance, in part, the capital expenditures of STI ESG in 2013 and 2014. These capital expenditures
include the completion of the construction of two new campuses in Caloocan and Ortigas-Cainta, as well as the
acquisition of land for new schools in Las Piñas, Cubao, Davao and Cagayan De Oro.
STI ESG also expects to use a portion of the proceeds from the subscription to the Shares and the Additional
Shares for its working capital requirements.
7.
Item 9 filed with SEC on 22 November 2012
Item 9 – Other Events
At the meeting of the Board of Directors of STI ESG held on 21 November 2012, the Board declared cash
dividends in the amount of Php 100 Million (the “STI ESG Cash Dividends”) from the unrestricted retained
earnings of STI ESG as of 31 March 2012. The STI ESG Cash Dividends are payable to STI ESG stockholders of
record as of 21 November 2012 and shall be payable on or before 25 November 2012.
As owner of 98% of the issued and outstanding capital stock of STI ESG, the Company is entitled to receive
98% of the STI ESG Cash Dividends or Php 98 Million.
8.
Item 9 filed with SEC on 27 November 2012
Item 9 – Other Events
UBS AG, the Sole Coordinator, Sole International Bookrunner and Lead Manager for the follow-on offering of
the Company, irrevocably exercised its Over-Allotment Option contained in subclause 1.1 (c) of the
International Underwriting Agreement dated 22 October 2012 in respect of 273,000,000 Options Shares (as
defined in the International Underwriting Agreement). Payment for and delivery of the Option Shares shall
take place on 28 November 2012.
9.
Item 9 filed with the SEC on 4 December 2012
Item 9 – Other Events
On 29 November 2012, Metro Pacific Investment Corporation (“MPIC”) signed an Investment Agreement with
all shareholders of De Los Santos General Hospital, Inc. (“DLSGHI”), the corporate owner and operator of De
Los Santos Medical Center (“DLSMC”) which would allow MPIC to participate in a Php 250 Million capital
raising exercise for DLSGHI and give MPIC a 51% equity ownership in the expanded company.
The investment of MPIC in DLSGHI is subject to the fulfillment of Closing Conditions.
STI ESG, a subsidiary of the Company, beneficially owns 20% of DLSGHI. Upon subscription of MPIC in
DLSGHI, the beneficial ownership of STI ESG would be reduced to approximately 5%.
The Company and STI ESG believe that MPIC, with its experience in running hospitals, will be a good partner
in DLSGHI. The investment of MPIC in DLSGHI will provide DLSMC with further hospital experience and
enable the Company and STI ESG to focus on the STI Network, PWU, Jose Abad Santos Memorial School,
iAcademy and De Los Santos-STI College.
10.
Item 9 filed with the SEC on 06 December 2012
49
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 50
Item 9 – Other Events
11.
At the meeting of the Board of Directors held on 5 December 2012, the Board declared cash dividends
amounting to Php 0.01 per share or an aggregate amount of Php 99,048,069.00 from the unrestricted retained
earnings of the Company as of 30 November 2012. The cash dividends are payable to stockholders of record as
of 19 December 2012 and shall be payable on or before 28 December 2012.
Item 9 filed with the SEC on 17 December 2012
Item 9 – Other Events
Press Release on the Cash Dividends declared by the Company with an aggregate amount of Php9
99,048,069.00 which will be payable to all qualified stockholders by the yearend and the construction of the
new STI Academic Center in a sprawling four-hectare property in Ortigas-Cainta, housing a new campus for
5,000 students and a new head office for STI ESG.
12.
Items 4 and 9 filed with the SEC on 20 December 2012
At the Annual Stockholders’ Meeting of the Company held on 19 December 2012, 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 Tanco-Cualoping
Martin K. Tanco
Rainerio M. Borja
Paolo Martin O. Bautista
Arsenio C. Cabrera
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
President
& CEO
Vice President for Investor Relations
Treasurer
Vice President for Corporate Information/
Corporate Secretary & Compliance Officer
Assistant Corporate Secretary
-
Eusebio H. Tanco
Monico V. Jacob
Joseph Augustin L. Tanco
Yolanda M. Bautista
-
Arsenio C. Cabrera, Jr.
Anna Carmina S. Herrera
Executive Committee
Chairman
Members
-
Eusebio H. Tanco
Monico V. Jacob
Yolanda M. Bautista
Martin K. Tanco
50
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 51
Rainerio M. Borja
Audit Committee
Chairman
Members
-
Johnip G. Cua
Martin K. Tanco
Paolo Martin O. Bautista
Ernest Lawrence Cu
Nomination Committee
Chairman
Members
-
Eusebio H. Tanco
Ernest Lawrence Cu
Ma. Vanessa Rose T. Cualoping
Rainerio M. Borja
Compensation Committee
Chairman
Members
-
Eusebio H. Tanco
Monico V. Jacob
Yolanda M. Bautista
Joseph Augustin L. Tanco
-
Arsenio C. Cabrera, Jr.
Monico V. Jacob
Yolanda M. Bautista
Paolo Martin O. Bautista
-
Elizabeth M. Guerrero
Compliance Committee
Chairman &
Corporate Information Officer
Members
Member & Alternate
Corporate Information Officer
Item 9 – Other Events
The stockholders also appointed Sycip Gorres Velayo & Co. as the Corporation’s external auditor for the fiscal
year April 1, 2012-March 31, 2013.
13.
Certifications of Independent Director (for Messrs. Johnip G. Cua and Ernest Lawrence Cu ) filed with the SEC
on 20 December 2012
14.
Item 9 filed with the SEC on 26 December 2012
Item 9 – Other Events
STI Holdings sees Banner Year in 2013 (Press Release)
15.
Certification that STI Holdings has substantially adopted all the provisions of the Manual on Corporate
Governance filed with the SEC on 02 January 2013
16.
Certification on Board Meeting Attendance filed with the SEC on 02 January 2013
17.
Item 9 filed with the SEC on 03 January 2013
Item 9 – Other Events
STI Education Services Group, Inc., Nozomi Partner for Education (Press Release)
18.
Item 9 filed with the SEC on 11 February 2013
51
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 52
Item 9 – Other Events
Tie-up between PhilPlans First, Inc. and Philippine Life Financial Assurance Corporation re: SureHealth
19.
Item 9 filed with the SEC on 18 February 2013
Item 9 – Other Events
Announcement of of new website address of STI Holdings.
20.
Item 9 filed with the SEC on 20 February 2013
Item 9 – Other Events
PhilPlans First, Inc. re: Prospects for 2013 (Press Release)
21.
Item 9 filed with the SEC on 08 March 2013
Item 9 – Other Events
STI College – Cubao Upgrades to Academic Center (Press Release)
22.
Item 9 filed with the SEC on 11 March 2013
Item 9 – Other Events
Continuous increase in enrollments and investments contribute to STI Holdings gains in 2012 (Press Release)
23.
Item 9 filed with the SEC on 20 March 2013
Item 9 – Other Events
STI Welcomes Two New Academic Centers (Press Release)
24.
Items 4 and 9 filed with the SEC on 25 March 2013
Item 4 - Resignation, Removal or Election of Registrant’s Directors of Officers
Resignation of Atty. Cabrera as Director and Election of Mr. Jesli A. Lapus as Director for the unexpired
portion of the term of Atty. Cabrera.
Item 9 – Other Events
The Board approved the allotment of P 390 Million from the proceeds of the Company’s follow-on offering for
the acquisition of an existing school and the corresponding revision of the Company’s work program to reflect
the allotment.
25.
Item 9 filed with the SEC on 16 April 2013
Item 9 – Other Events
The Company executed a Memorandum of Agreement with the Agustin Family for the acquisition of a
controlling stake in West Negros University Corp. (“WNU Corp.”). The acquisition is expected to be
completed after the completion of legal, academic, financial and tax due diligence by the Company.
52
STI Education Systems Holdings, Inc.
SEC Form 17 – A
As of 31 March 2013
Page 53
WNU Corp. owns and operates West Negros University (the “University”) in Bacolod City. The University
offers pre-elementary, elementary and secondary education as well as tertiary education courses and graduate
courses.
26.
Item 9 filed with the SEC on 08 May 2013
Item 9 – Other Events
Pursuant to Section 7 of Article V of the Revised Listing Rules of the Philippine Stock Exchange (the “PSE”) on
the lock-up of subscribed shares by related parties, Rescom Developers, Inc., Eujo Philippines, Inc., Insurance
Builders, Inc., Prudent Resources, Inc., Mr. Eusebio H. Tanco and Ms. Rosie L. Tanco (collectively referred to as
the “Stockholders”) entered into an Escrow Agreement dated 22 October 2012 with Unionbank of the
Philippines (the “Escrow Agent”) in connection with the deposit into escrow of 4,736,871,823 shares in the
Company (the “Share Swap Shares”). The Stockholders agreed not to sell, assign or in any other manner
dispose of their respective Share Swap Shares for a period of 180 days counted from the Listing Date of the
Share Swap Shares (the “Lock-up Period”). The Listing Date of the Share Swap Shares was on 7 November
2012.
The Lock-up Period expired on 6 May 2013. The Share Swap Shares may be withdrawn from the Escrow
Agent on 6 May 2013, provided that the Escrow Agent has obtained prior written confirmation from the PSE.
27.
Item 9 filed with the SEC on 29 May 2013
Item 9 – Other Events
Results of the Annual Stockholders’ Meeting and Organizational Meeting of the Board of Directors of PhilPlans
First, Inc.
53
COVER SHEET
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
N C .
( F o r m e r l y
J T H
,
I n c . )
A N D
H O L D I N G S ,
D a v i e s
I
H o l d i n g s
S U B S I D I A R I E S
(Company’s Full Name)
7 / F
i A c a d e m y
A v e n u e ,
B u i l d i n g ,
M a k a t i
6 7 6 4
A y a l a
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
Month
Day
1 7 - A
(Form Type)
1 2
1 9
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
1,243
Total No. of Stockholders
N/A
N/A
Domestic
Foreign
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
*SGVFS002680*
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Phone: (632) 891 0307
Fax:
(632) 819 0872
www.sgv.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
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors
STI Education Systems Holdings, Inc.
6764 Ayala Avenue
Makati City
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, 2013 and 2012 and April 1, 2011, 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, 2013, and a summary of
significant accounting policies and other explanatory information.
Management’s 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 auditor’s 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 entity’s 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 entity’s 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.
*SGVFS002680*
A member firm of Ernst & Young Global Limited
-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, 2013
and 2012 and April 1, 2011, and their financial performance and their cash flows for each of the three
years in the period ended March 31, 2013 in accordance with accounting principles generally accepted
in the Philippines as described in Note 2 to the consolidated financial statements.
SYCIP GORRES VELAYO & CO.
Maria Vivian C. Ruiz
Partner
CPA Certificate No. 83687
SEC Accreditation No. 0073-AR-3 (Group A),
January 18, 2013, valid until January 17, 2016
Tax Identification No. 102-084-744
BIR Accreditation No. 08-001998-47-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 3670018, January 2, 2013, Makati City
July 8, 2013
*SGVFS002680*
STI EDUCATION SYSTEMS HOLDINGS, INC.
(Formerly JTH Davies Holdings, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
March 31,
2012
(As restated Note 3)
April 1,
2011
(As restated Note 3)
P
=1,489,451,909
250,773,204
34,740,103
P556,282,842
=
265,915,000
42,143,148
P475,899,842
=
706,261,278
34,410,617
–
37,467,793
1,812,433,009
–
24,660,884
889,001,874
51,065,768
15,098,006
1,282,735,511
2,635,275,971
39,325,291
1,544,229,394
47,107,290
1,421,183,468
37,414,080
2,905,319,376
463,978,935
4,663,478
11,007,878
1,588,440,147
227,254,574
4,987,638
9,565,437
744,764,844
–
4,643,710
13,421,163
March 31,
2013
ASSETS
Current Assets
Cash and cash equivalents (Notes 6, 30 and 31)
Receivables (Notes 7, 12, 27, 30 and 31)
Inventories (Note 8)
Current portion of available-for-sale financial assets
(see Notes 14, 30 and 31)
Prepaid expenses and other current assets (Notes 9, 25, 30 and 31)
Total Current Assets
Noncurrent Assets
Property and equipment (Notes 10, 11 15, 16 and 25)
Investment properties (Notes 10, 11 and 16)
Investments in and advances to associates
and joint ventures (Notes 12, 27, 30 and 31)
Noncurrent receivables (Notes 27, 30 and 31)
Available-for-sale financial assets (Notes 14, 30 and 31)
Deferred tax assets - net (Note 26)
Goodwill, intangible and other noncurrent assets
(Notes 15, 25, 30, 31 and 33)
Total Noncurrent Assets
275,286,521
250,004,195
642,000,576
6,701,571,505 3,696,871,001 2,471,431,460
P4,585,872,875 =
P3,754,166,971
P
=8,514,004,514 =
LIABILITIES AND EQUITY
Current Liabilities
Short-term loans (Notes 16, 27, 30 and 31)
=746,687,336
P
=913,687,336
P
P
=–
Accounts payable and other current liabilities (Notes 17, 18, 30 and 31)
301,720,294
310,044,618
320,685,820
Current portion of obligations under finance lease (Note 25)
9,741,235
5,483,198
6,419,251
Income tax payable
2,015,617
6,415,050
5,030,213
Total Current Liabilities
332,135,284 1,060,164,482 1,235,630,202
Noncurrent Liabilities
Obligations under finance lease - net of current portion (Note 25)
8,956,367
6,626,629
13,339,807
Pension liabilities (Note 24)
40,535,074
43,281,101
47,443,154
Total Noncurrent Liabilities
49,491,441
49,907,730
60,782,961
Total Liabilities
392,918,245 1,109,655,923 1,285,537,932
Equity Attributable to Equity Holders of the Parent Company
Capital stock (Note 18)
551,500,000
153,591,106
4,952,403,462
Additional paid-in capital (Note 18)
77,592,234
–
1,119,079,467
Cost of shares held by a subsidiary (Note 18)
(500,009,337)
–
(500,009,337)
Unrealized mark-to-market gain (loss) on available-for-sale financial
assets (Notes 3, 14 and 18)
207,684
7,283,059
(121,773)
Share in associates’ unrealized mark-to-market gain on available-forsale financial assets (Notes 3, 12 and 18)
166,823,517
1,905,291,022 1,039,792,823
Other equity reserve (Notes 3 and 18)
648,667,134
727,367,827
(1,649,448,394)
Retained earnings (Note 18):
Appropriated
800,000,000
–
800,000,000
Unappropriated
668,670,934 1,186,716,570
1,351,854,503
Total Equity Attributable to Equity Holders
of the Parent Company
7,979,048,950 3,286,421,472 2,241,782,079
189,795,480
226,846,960
Equity Attributable to Non-controlling Interests
142,037,319
Total Equity
8,121,086,269 3,476,216,952 2,468,629,039
P4,585,872,875 =
P3,754,166,971
P
=8,514,004,514 =
See accompanying Notes to Consolidated Financial Statements.
*SGVFS002680*
STI EDUCATION SYSTEMS HOLDINGS, INC.
(Formerly JTH Davies Holdings, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended March 31
2012
2011
(As restated - (As restated Note 3)
Note 3)
2013
REVENUES
Sale of services:
Tuition and other school fees
Educational services
Royalty fees
Others
Sale of goods Sale of educational materials and supplies
COSTS AND EXPENSES
Cost of educational services (Notes 10, 20, 23, 24 and 25)
Cost of educational materials and supplies sold (Note 21)
General and administrative expenses
(Notes 10, 11, 22, 23, 24, 25 and 27)
INCOME BEFORE OTHER INCOME AND INCOME TAX
OTHER INCOME (EXPENSES)
Equity in net earnings (losses) of associates and joint ventures
(Note 12)
Interest expense (Notes 16, 19 and 25)
Interest income (Notes 6, 15, 19 and 27)
Rental income (Notes 11, 25 and 27)
Gain (loss) on sale of:
Investment properties
Property and equipment
Investment in associate
Available-for-sale financial assets
Dividend and other income (Note 14)
INCOME BEFORE INCOME TAX
PROVISION FOR (BENEFIT FROM) INCOME TAX
Current
Deferred
NET INCOME (Carried Forward)
P1,272,721,163 =
P1,175,957,848
= 1,357,315,423 =
P
168,612,940
155,689,844
177,944,697
16,032,509
16,178,754
15,840,267
68,687,863
82,410,933
64,894,222
53,943,516
1,669,938,125
50,732,590
1,576,787,065
50,818,204
1,481,055,583
485,410,056
49,489,639
481,856,696
39,537,202
488,393,855
47,611,308
745,950,827
1,280,850,522
688,097,535
1,209,491,433
664,544,086
1,200,549,249
389,087,603
367,295,632
280,506,334
428,600,839
(18,831,366)
34,723,888
4,610,690
(36,607,327)
(33,865,444)
16,198,233
5,363,360
(172,045,001)
(26,563,894)
16,586,381
9,609,182
(2,306,813)
795,160
–
–
440,507
448,032,905
–
–
(1,124,356)
4,679,557
2,877,933
(42,478,044)
3,160,012
38,240
–
7,265,288
3,915,363
(158,034,429)
837,120,508
324,817,588
122,471,905
44,333,135
(1,442,441)
42,890,694
794,229,814
28,388,053
3,855,726
32,243,779
32,091,061
(4,231,100)
27,859,961
292,573,809
94,611,944
*SGVFS002680*
-2-
Years Ended March 31
2012
2011
(As restated - (As restated Note 3)
Note 3)
2013
NET INCOME (Brought Forward)
OTHER COMPREHENSIVE INCOME (LOSS)
Share in associates’ unrealized mark-to-market gain on availablefor-sale financial assets, net of realized mark-to-market gain
recognized to profit or loss (Notes 3 and 12)
Unrealized mark-to-market gain (loss) on available-for-sale
financial assets (Notes 3 and 14)
Realized mark-to-market gain on available-for-sale financial assets
recognized to profit or loss (Notes 3 and 14)
TOTAL COMPREHENSIVE INCOME
Net Income Attributable To
Equity holders of the Parent Company
Non-controlling interests
Total Comprehensive Income Attributable To
Equity holders of the Parent Company
Non-controlling interests
Basic/Diluted Earnings Per Share on Net Income Attributable
to Equity Holders of the Parent Company
(Note 28)
= 794,229,814
P
=292,573,809
P
=94,611,944
P
846,474,380
909,831,490
160,993,820
(324,160)
(2,708,605)
–
(324,160)
846,150,220
(4,679,557)
(7,388,162)
902,443,328
18,109,528
(8,606,388)
9,503,140
170,496,960
=1,195,017,137
= 1,640,380,034 P
P
=265,108,904
P
P
=288,098,008
4,475,801
P
=292,573,809
P
=87,865,911
6,746,033
P
=94,611,944
=1,153,991,939
= 1,605,499,571 P
P
41,025,198
34,880,463
=1,195,017,137
= 1,640,380,034 P
P
P
=251,464,199
13,644,705
P
=265,108,904
=0.044
P
=0.014
P
= 777,207,615
P
17,022,199
= 794,229,814
P
= 0.096
P
*SGVFS002680*
STI EDUCATION SYSTEMS HOLDINGS, INC.
(Formerly JTH Davies Holdings, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED MARCH 31, 2013, 2012 AND 2011
Equity Attributable to Equity Holders of the Parent Company
Share in
Associates’
Unrealized
Unrealized
Mark-toMark-toMarket
Market
Gain (Loss) on
Gain on
AvailableAvailableCost of Shares
for-Sale
for-Sale
Additional
Held by
Financial
Other Equity
Retained Earnings
Financial
Capital Stock Paid-in Capital
a Subsidiary
Assets
Assets
Reserve
Appropriated Unappropriated
= 551,500,000
P
=
P77,592,234
=–
P
=
P436,628
=–
P
=–
P
=–
P
P
= 17,022,982
Balance at April 1, 2012
Restatement arising from business combination
under common control (see Note 3)
–
–
Balance at April 1, 2012, as restated
551,500,000
77,592,234
Issuance of shares through Share Swap
(Notes 1, 3 and 18)
2,950,903,462
–
Issuance of shares through offering
(Notes 1 and 18)
1,450,000,000 1,041,487,233
Net income
–
–
Other comprehensive income (loss)
–
–
Total comprehensive income (loss)
–
–
Dividend declaration (Note 18)
–
–
Acquisition of non-controlling interests (Note 3)
–
–
Share of non-controlling interest on dividends
declared by a subsidiary
–
–
Balance at March 31, 2013
P4,952,403,462 =
=
P1,119,079,467
Balance at April 1, 2011
Restatement arising from business combination
under common control (see Note 3)
Balance at April 1, 2011, as restated
Issuance of shares
Subscription of the Company's shares by a
subsidiary
(500,009,337)
(500,009,337)
–
–
–
–
–
–
–
–
(P
=500,009,337)
(228,944) 1,039,792,823
207,684 1,039,792,823
–
–
–
(306,875)
(306,875)
–
(22,582)
–
–
–
828,598,831
828,598,831
–
36,899,368
648,667,134
648,667,134
(2,367,194,841)
Total
= 646,551,844
P
Equity
Attributable
to NonControlling
Interests
=–
P
Total Equity
=
P646,551,844
800,000,000
800,000,000
651,647,952
668,670,934
2,639,869,628
3,286,421,472
189,795,480
189,795,480
2,829,665,108
3,476,216,952
–
–
583,708,621
25,302,729
609,011,350
2,491,487,233
777,207,615
828,291,956
1,605,499,571
(94,024,046)
105,956,099
–
17,022,199
17,858,264
34,880,463
–
(105,956,099)
2,491,487,233
794,229,814
846,150,220
1,640,380,034
(94,024,046)
–
–
–
–
–
–
–
–
69,079,313
–
–
–
–
–
–
(P
=121,773) P
= 1,905,291,022 (P
=(1,649,448,394) P
= 800,000,000
–
777,207,615
–
777,207,615
(94,024,046)
–
–
–
=
P1,351,854,503 P
= 7,979,048,950
(1,985,254)
(1,985,254)
= 142,037,319 =
P
P8,121,086,269
=153,591,106
P
=–
P
=–
P
=
P104,628
=–
P
=–
P
=–
P
P
=20,940,352
=
P174,636,086
P
=–
=
P174,636,086
–
153,591,106
397,908,894
–
–
77,592,234
–
–
–
7,178,431
7,283,059
–
166,823,517
166,823,517
–
727,367,827
727,367,827
–
–
–
–
1,165,776,218
1,186,716,570
–
2,067,145,993
2,241,782,079
475,501,128
226,846,960
226,846,960
–
2,293,992,953
2,468,629,039
475,501,128
–
–
–
–
–
–
–
(500,009,337)
(500,009,337)
–
(500,009,337)
(Forward)
*SGVFS002680*
-2-
Net income
Other comprehensive income (loss)
Total comprehensive income (loss)
Dividend declaration
Appropriation of retained earnings
Movement in equity adjustment
Transaction with non-controlling interest through:
Subscription of shares of a subsidiary
Redemption of treasury shares by
a subsidiary
Share of non-controlling interest on dividends
declared by a subsidiary
Balance at March 31, 2012, as restated
Balance at April 1, 2010
Restatement arising from business combination
under common control (see Note 3)
Balance at April 1, 2010, as restated
Net income
Other comprehensive income
Total comprehensive income
Dividend declaration
Acquisition of treasury shares by a subsidiary
Share of non-controlling interest on dividends
declared by a subsidiary
Balance at March 31, 2011
Additional
Capital Stock Paid-in Capital
=–
P
=–
P
–
–
–
–
–
–
–
–
–
–
Equity Attributable to Equity Holders of the Parent Company
Share in
Associates’
Unrealized
Unrealized
Mark-toMark-to-Market
Market
Gain (Loss) on
Gain on
AvailableAvailableCost of Shares
for-Sale
for-Sale
Held by
Financial
Financial
Other Equity
Retained Earnings
a Subsidiary
Assets
Assets
Reserve Appropriated Unappropriated
=–
P
=–
P
P
=–
=–
P
P
=–
=
P288,098,008
–
(7,075,375)
872,969,306
–
–
–
–
(7,075,375)
872,969,306
–
–
288,098,008
–
–
–
–
–
(6,143,644)
–
–
–
–
800,000,000
(800,000,000)
–
–
–
(80,811,543)
–
–
Total
P
=288,098,008
865,893,931
1,153,991,939
(6,143,644)
–
(80,811,543)
Equity
Attributable
to NonControlling
Interests
P
=4,475,801
36,549,397
41,025,198
–
–
–
–
–
–
–
–
2,110,850
–
–
2,110,850
(2,110,850)
–
–
–
–
–
–
–
–
–
(3,965,828)
–
=551,500,000
P
–
P
=77,592,234
–
(P
=500,009,337)
–
–
=
P207,684 P
=1,039,792,823
–
=
P648,667,134
–
P
=800,000,000
=153,591,106
P
=–
P
=–
P
P
=–
=–
P
P
=–
P
=24,004,083
P
=177,714,661
–
153,591,106
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,963,609)
(1,844,137)
12,352,425
12,352,425
9,127,196
9,127,196
–
–
154,471,092
154,471,092
–
–
727,367,827
727,367,827
–
–
–
–
–
–
1,080,990,220
1,104,994,303
87,865,911
–
87,865,911
(6,143,644)
–
1,818,746,863
1,996,461,524
87,865,911
163,598,288
251,464,199
(6,143,644)
–
–
=153,591,106
P
–
P–
=
–
P–
=
–
=
P7,283,059
–
P
=166,823,517
P
=119,472
–
–
–
–
–
=
P727,367,827
–
P
=–
–
–
=
P668,670,934 P
=3,286,421,472
–
–
=
P1,186,716,570 P
=2,241,782,079
Total Equity
P
=292,573,809
902,443,328
1,195,017,137
(6,143,644)
–
(80,811,543)
–
(3,965,828)
(72,000,000)
(72,000,000)
P
=189,795,480 P
=3,476,216,952
P
=–
223,625,491
223,625,491
6,746,033
6,898,672
13,644,705
–
(343,236)
P
=177,714,661
2,042,372,354
2,220,087,015
94,611,944
170,496,960
265,108,904
(6,143,644)
(343,236)
(10,080,000)
(10,080,000)
P
=226,846,960 P
=2,468,629,039
See accompanying Notes to Consolidated Financial Statements
*SGVFS002680*
STI EDUCATION SYSTEMS HOLDINGS, INC.
(Formerly JTH Davies Holdings, Inc.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31
2012
2011
(As restated - (As restated Note 3)
Note 3)
2013
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Equity in net losses (earnings) of associates and joint ventures
Depreciation and amortization (Notes 10 and 11)
Interest expense (Notes 16, 19 and 25)
Interest income (Notes 6, 15, 19 and 27)
Provision for impairment losses on:
Goodwill
Investment in and advances to an associate
Pension expense (Note 24)
Dividend income
Loss (gain) on sale of:
Property and equipment
Available-for-sale financial assets
Investment in an associate
Investment properties
Operating income before working capital changes
Decrease (increase) in:
Receivables
Inventories
Prepaid expenses and other current assets
Increase (decrease) in accounts payable and other current liabilities
Contributions to plan assets
Net cash generated from (used for) operations
Income and other taxes paid
Interest received
Net cash flows provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Property and equipment (Note 10)
Available-for-sale financial assets
Investment properties
Increase (decrease) in:
Noncurrent receivables
Investments in and advances to associates and joint ventures
Goodwill, intangible and other noncurrent assets
Proceeds from sale of:
Available-for-sale financial assets
Investment in an associate
Property and equipment
Investment property
Interest received
Dividends received
Cash acquired through business combination
Net cash flows used in investing activities
= 837,120,508
P
P
=324,817,588
P
=122,471,905
(428,600,839)
156,430,779
18,831,366
(34,723,888)
36,607,327
144,450,351
33,865,444
(16,198,233)
172,045,001
127,063,971
26,563,894
(16,586,381)
–
4,120,636
19,878,858
(440,507)
3,383,556
3,047,124
4,987,261
(2,835,782)
–
–
14,422,725
(3,919,960)
(795,160)
–
–
2,306,813
574,128,566
–
(4,679,557)
1,124,356
–
528,569,435
(38,240)
(7,265,288)
–
(3,160,012)
431,597,615
(39,846,971)
7,403,045
(22,109,364)
(27,126,618)
(5,620,855)
486,827,803
(37,928,948)
11,258,718
460,157,573
437,716,452
(7,732,531)
(14,152,925)
(21,432,295)
(4,973,191)
917,994,945
(24,562,000)
7,437,611
900,870,556
(465,814,460)
(2,222,813)
(1,010,498)
21,646,865
(6,825,680)
(22,628,971)
(42,891,758)
13,096,979
(52,423,750)
(1,539,623,771)
–
–
(255,301,730)
(80,811,545)
(3,096,000)
(699,638,426)
–
–
(223,998,027)
(13,244,087)
(7,951,224)
(223,979,084)
21,089,801
(34,447,337)
–
(9,943,494)
19,609,829
–
–
1,967,660
3,500,000
10,599,965
14,371,696
–
(1,754,377,788)
48,013,237
2,335,480
–
–
6,237,344
4,787,881
–
(515,171,953)
103,814,408
–
3,292,071
9,980,000
2,939,362
13,140,023
1,530,450
(555,275,777)
(Forward)
*SGVFS002680*
-2-
Years Ended March 31
2012
2011
(As restated - (As restated Note 3)
Note 3)
2013
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of subsidiary’s shares
Acquisition of STI Holdings’ shares by STI ESG
Proceeds from issuance of capital stock
Proceeds from availments of short-term loans (Note 16)
Interest paid
Proceeds from sale of treasury shares by a subsidiary
Dividends paid to non-controlling interest
Dividends paid
Redemption of treasury shares by a subsidiary
Payments of:
Obligations under finance lease
Short-term loans
Net cash flows provided by (used in) financing activities
= 608,807,586
P
–
2,475,977,202
539,000,000
(18,831,366)
15,713,797
–
(101,017,657)
–
(6,572,944)
(1,285,687,336)
2,227,389,282
=–
P
=–
P
(500,009,337)
–
475,501,128
–
746,000,000 1,318,000,000
(30,719,156)
(26,563,894)
–
–
(72,000,000)
(10,080,000)
(6,105,785)
(6,195,043)
(3,965,828)
–
(1,016,625)
(913,000,000)
(305,315,603)
(8,484,088)
(628,866,107)
637,810,868
NET INCREASE IN CASH AND CASH EQUIVALENTS
933,169,067
80,383,000
30,111,341
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
556,282,842
475,899,842
445,788,501
CASH AND CASH EQUIVALENTS
AT END OF YEAR (Note 6)
= 1,489,451,909
P
=556,282,842
P
=475,899,842
P
See accompanying Notes to Consolidated Financial Statements..
*SGVFS002680*
STI EDUCATION SYSTEMS HOLDINGS, INC.
(Formerly JTH Davies Holdings, Inc.)
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 on October 12, 1976. On
June 25, 1996, the SEC approved the extension of the Company’s corporate life for another 50
years. The primary purpose of the Company is to invest in, acquire, use, transfer, lease,
mortgage, exchange or otherwise dispose of personal and movable property, including shares
of stock, evidence of indebtedness and other securities or obligations of any entity and
exercise all the rights, powers and privilege of ownership, but not to act as dealer in securities.
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 =
P5,000.0 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).
*SGVFS002680*
-2-
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. As a result, STI
Holdings’ ownership interest in STI ESG increased to approximately 99% as of March 31,
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, postsecondary 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.
The accompanying consolidated financial statements were approved and authorized by the BOD
of STI Holdings on July 8, 2013.
2. Basis of Preparation and Changes to the Group’s 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
Company’s 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
*SGVFS002680*
-3-
forth in the Pre-Need Rule 31, As Amended: Accounting Standards for Pre-Need Plans and PreNeed 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.
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 adoption of the following amendments and interpretations did not have any significant
effect on the accounting policies, financial position or performance of the Group, except for
additional disclosures:
§
PFRS 7, Financial Instruments: Disclosures – Transfer of Financial Assets
The amendments require additional disclosure about financial assets that have been transferred
but not derecognized to enable the user of the Company’s financial statements to understand
the relationship between the assets that have not been derecognized and their associated
liabilities. In addition, the amendments require disclosures about continuing involvement in
derecognized assets to enable the user to evaluate the nature of, and risks associated with, the
entity’s continuing involvement in those derecognized assets. The amendments have no
impact on the Group’s financial position or performance.
§
PAS 12, Income Taxes – Deferred Income Tax: Recovery of Underlying Assets
The amendments clarified the determination of deferred income tax on investment property
measured at fair value. The amendments introduced a rebuttable presumption that deferred
income tax on investment property measured using the fair value model in PAS 40, Investment
Property, should be determined on the basis that its carrying amount will be recovered
through sale. Furthermore, the amendment introduces the requirement that deferred income
tax on depreciable assets measured using the revaluation model in PAS 16, Property, Plant
and Equipment, always be measured on a sale basis of the asset. The adoption of these
amendments did not have any impact on the Group’s financial position or performance.
New Accounting Standards, Interpretations and Amendments to Existing Standards
Effective Subsequent to March 31, 2013
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 2013
§
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
*SGVFS002680*
-4-
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 statement of financial position;
c) The net amounts presented in the 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 Group’s 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 will 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 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 Group’s 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 Group’s 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 entity’s 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 Group’s financial position or performance.
*SGVFS002680*
-5§
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. The Group does not
anticipate that the adoption of this standard will have a significant impact on its financial
position and performance.
§
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 affect presentation only and have no impact on the Group’s
financial position or performance. The amendment becomes effective for annual periods
beginning on or after July 1, 2012. The amendments will be applied retrospectively and will
result to the modification of the presentation of items of OCI.
§
PAS 19, Employee Benefits (Revised)
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
rewording. The revised standard also requires new disclosures such as, among others, a
sensitivity analysis for each significant actuarial assumption, information on asset-liability
matching strategies, duration of the defined benefit obligation, and disaggregation of plan
assets by nature and risk. Once effective, the Group has to apply the amendments
retroactively to the earliest period presented.
The Group reviewed its existing employee benefits and determined that the amended standard
has significant impact on its accounting for retirement benefits. The Group obtained the
services of an external actuary to compute the impact to its financial statements upon adoption
of the standard.
The effects are detailed below:
March 31,
2013
Consolidated Statements of
Financial Position
Net pension liability
Deferred tax asset
Other comprehensive income (loss)
Retained earnings
March 31,
2012
Increase (Decrease)
(P
=39,262,104)
(3,926,210)
38,640,001
(622,103)
=14,880,782
P
1,488,078
(14,716,241)
164,541
April 1,
2011
(P
=641,724)
(64,172)
–
641,724
*SGVFS002680*
-6-
For the Years Ended March 31
2013
2012
Increase (Decrease)
Consolidated Statements of Income
Net pension income
Provision for deferred income tax
Net income
Other comprehensive income (loss)
§
(P
=622,103)
(3,926,210)
(4,548,313)
(14,716,241)
=164,541
P
1,488,078
1,652,619
23,923,760
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 will not have 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.
§
Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine
This interpretation applies to waste removal costs (“stripping costs”) that are incurred in
surface mining activity during the production phase of the mine (“production stripping costs”).
If the benefit from the stripping activity will be realized in the current period, an entity is
required to account for the stripping activity costs as part of the cost of inventory. When the
benefit is the improved access to ore, the entity should recognize these costs as a non-current
asset, only if certain criteria are met (“stripping activity asset”). The stripping activity asset is
accounted for as an addition to, or as an enhancement of, an existing asset. After initial
recognition, the stripping activity asset is carried at its cost or revalued amount less
depreciation or amortization and less impairment losses, in the same way as the existing asset
of which it is a part. This interpretation is not relevant to the Group, thus, will not have any
impact on Group’s financial position or performance.
Effective in 2014
§
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial
Liabilities (Amendments)
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 Group’s
financial position or performance.
*SGVFS002680*
-7-
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 liability’s 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
will have an effect on the classification and measurement of the Group’s 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 Group’s financial position or performance.
Improvements to PFRSs
These sets of improvements are effective for annual periods beginning on or after January 1, 2013.
Management expects the adoption of these improvements will not have an impact on the Group:
§
PFRS 1, First-time Adoption of PFRS - Borrowing Costs
This improvement clarifies that an entity that stopped applying PFRS in the past and chooses,
or is required, to apply PFRS, has the option to re-apply PFRS 1. If PFRS 1 is not re-applied,
an entity must retrospectively restate its financial statements as if it had never stopped
applying PFRS.
*SGVFS002680*
-8§
PAS 1, Presentation of Financial Statements - Clarification of the requirements for
comparative information
This improvement clarifies the difference between voluntary additional comparative
information and the minimum required comparative information. Generally, the minimum
required comparative information is the previous period.
§
PAS 16, Property, Plant and Equipment - Classification of servicing equipment
This improvement clarifies that major spare parts and servicing equipment that meet the
definition of property, plant and equipment are not inventory.
§
PAS 32, Financial Instruments: Presentation - Tax effect of distribution to holders of equity
instruments
This improvement clarifies that income taxes arising from distributions to equity holders are
accounted for in accordance with PAS 12, Income Taxes.
§
PAS 34, Interim Financial Reporting - Interim financial reporting and segment information
for total assets and liabilities
The amendment aligns the disclosure requirements for total segment assets with total segment
liabilities in interim financial statements. T his clarification also ensures that interim
disclosures are aligned with annual disclosures.
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, 2013 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 consideration
received, is also accounted for as an equity transaction. The Group recorded the difference as
excess of consideration over carrying amount of disposed subsidiary and presented as separate
component of equity in the combined balance sheets.
*SGVFS002680*
-9-
Comparatives shall be restated to include balances and transactions as if the entities had been
acquired at the beginning of the earliest period presented as if the companies had always been
combined.
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 interest in the acquiree. For each business
combination, the acquirer measures the non-controlling interest in the acquiree either at fair value
or at the proportionate share in the acquiree’s identifiable net assets.
Acquisition costs incurred are expensed 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, the fair value of the acquirer’s previously held
equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or
loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair
value at the acquisition date. Subsequent changes to the fair value of the contingent consideration
which is deemed to be an asset or liability, will be recognized in accordance with PAS 39 either in
profit or loss or as a change to other comprehensive income. If the contingent consideration is
classified as equity, it should not be remeasured until it is finally settled within equity.
Basis of Consolidation
The consolidated financial statements include the financial statements of STI Holdings, STI ESG
and its subsidiaries as of March 31, 2013 and 2012 and April 1, 2011. In assessing control, the
existence and effect of potential voting rights that are currently exercisable or convertible are
taken into account. Control is also achieved when the Parent Company has the power to govern
the financial and operating policies of an entity so as to obtain benefits from its activities. The
financial statements of subsidiaries are consolidated from the date on which the Parent Company
obtains control, and continue to be consolidated until the date such control ceases.
Control over the operations and assets and liabilities of entity may exist even in cases where the
Parent Company owns little or none of the entity’s equity, such as when the substance of the
relationship between the Parent Company and that entity indicates that the entity is controlled by
the parent company. 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 but wherein STI ESG has control by virtue of management contracts.
Losses within a subsidiary are attributed to the non-controlling interest even if that results in a
deficit balance. 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;
*SGVFS002680*
- 10 §
§
§
Recognizes the fair value of any investment retained;
Recognizes any surplus or deficit in profit or loss; and
Reclassifies the Parent Company’s share of components previously recognized in other
comprehensive income to profit or loss or retained earnings, as appropriate.
As at March 31, 2013 and 2012, subsidiaries of STI Holdings include:
STI ESG
iAcademy
STI College Tuguegarao, Inc. (STI-Tuguegarao)
STI-Kalookan(a)
STI-Novaliches(a)
STI College of Dagupan, Inc. (STI-Dagupan)
STI College Taft, Inc. (STI-Taft)
De Los Santos - STI College
STI College Quezon Avenue, Inc. (STI-QA)(b)
(a)
(b)
Principal Activities
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Effective Percentage
of Ownership
Direct
Indirect
99
–
–
100
–
100
–
100
–
100
–
77
–
75
–
52
–
52
A subsidiary of STI ESG through a management contract
A wholly owned subsidiary of De Los Santos - STI College
As at April 1, 2011, the subsidiaries of STI Holdings include:
STI ESG
iAcademy
STI-Academy Las Piñas(a)
STI-Luzon(a)
STI-Fairview(a)
STI-Mindanao(a)
STI-Baguio(a)
STI-Cebu(a)
STI-Southwoods(a)
STI-Kalibo(a)
STI-Global City(a)
STI-Ilocos Norte(b)
STI-Naga(a)
STI-Cubao(a)
STI-Legaspi(a)
STI-Tuguegarao (see Note 3)
STI-Kalookan(g) (see Note 3)
STI-Novaliches(g) (see Note 3)
STI Universal Worker, Inc. (STI-UWI)(a)
STI-Edsa Crossing(a)
STI-Orca(a)
STI College Meycauayan, Inc.
(STI-Meycauayan)(a)
STI-Lucena(a)
STI-Las Piñas(b)
STI-Dagupan (see Note 3)
STI-Taft
Effective Percentage
of Ownership
Principal Activities
Direct
Indirect
Educational Institution
99
–
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Educational Institution
–
100
Consultancy and Review Center
–
100
Educational Institution
–
99
Educational Institution
–
97
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
–
–
–
–
–
97
93
83
77
75
*SGVFS002680*
- 11 -
De Los Santos - STI College
STI Iligan, Inc.(b/c)
STI Malaybalay, Inc.(b/c)
STI Valencia, Inc.(b/c)
STI Davao, Inc.(b/c)
STI San Pablo, Inc.(b/d)
STI Sta. Cruz, Inc.(b/d)
STI Puerto Princesa, Inc.(b/e)
STI-QA(f)
Principal Activities
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Educational Institution
Effective Percentage
of Ownership
Direct
Indirect
–
52
–
100
–
100
–
100
–
100
–
100
–
100
–
100
–
52
(a)
Merged with the Parent Company in May 2011
Merged with the Parent Company in August 2011
(c)
A wholly owned subsidiary of STI-Mindanao
(d)
A wholly owned subsidiary of STI-Southwoods
(e)
A wholly owned subsidiary of STI-Luzon
(f)
A wholly owned subsidiary of De Los Santos - STI College
(g)
A subsidiary through a management contract
(b)
On December 9, 2010, STI ESG’s 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 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 preoperating 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.
As at July 8, 2013, STI ESG’s request for confirmatory ruling on the tax-free merger from the BIR
is still pending.
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-Meycauayan, STI-Kalookan, STI-Novaliches and STI UWI (STIMeycauayan and STI-UWI were merged with STI ESG in May 2011) 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 Group’s consolidated financial statements.
Transactions and Balances Eliminated on Consolidation. All significant intra-group balances,
transactions, income and expenses and profits and losses resulting from intra-group transactions
are eliminated in full.
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.
*SGVFS002680*
- 12 -
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.
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).
Determination of Fair Value. The fair value for financial instruments traded in an active market at
the financial reporting date is based on their quoted market price or dealer price quotations (bid
price for long positions and ask price for short positions), without any deduction for transaction
costs. When current bid and asking prices are not available, the price of the most recent
transaction is used since it provides evidence of current fair value as long as there has not been a
significant change in economic circumstances since the time of the transaction.
For all other financial instruments not listed in an active market, the fair value is determined by
using appropriate valuation techniques. Valuation techniques include net present value
techniques, comparison to similar instruments for which observable prices exist, options pricing
models, and other relevant valuation models.
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.
*SGVFS002680*
- 13 -
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 Group’s
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.
a. Financial Assets or Financial Liabilities at FVPL
Financial assets or financial liabilities at FVPL includes financial assets and liabilities held for
trading, financial assets and liabilities designated upon initial recognition as at FVPL, and
derivative instruments unless they are designated as effective hedges under hedge accounting.
Financial assets and financial liabilities are classified as held for trading if they are acquired
for the purpose of selling and repurchasing in the near term or if upon initial recognition, it is
designated by management as at FVPL. Financial assets or financial liabilities may be
designated at initial recognition as at FVPL if the following criteria are met:
§
the designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the assets or liabilities or recognizing gains or losses on
them on a different basis; or
§
the assets and liabilities are part of a group of financial assets, financial liabilities or both
which are managed and their performance evaluated on a fair value basis, in accordance
with a documented risk management or investment strategy; or
§
the financial instrument contains an embedded derivative, unless the embedded derivative
does not significantly modify the cash flows or it is clear, with little or no analysis, that it
would not be separately recorded.
Financial assets or liabilities classified under this category are carried at fair value in the
consolidated statement of financial position. Changes in the fair value of such assets and
liabilities are accounted for immediately in profit or loss.
The Group has no financial assets or financial liabilities at FVPL as at March 31, 2013 and
2012 and April 1, 2011.
*SGVFS002680*
- 14 -
b. HTM Investments
HTM investments are quoted nonderivative financial assets with fixed or determinable
payments and fixed maturity and the Group has the positive intention and ability to hold to
maturity. Investments intended to be held for an undefined period are not included in this
classification. Other long-term investments that are intended to be HTM, such as bonds, are
subsequently measured at amortized cost. This cost is computed as the amount initially
recognized minus principal repayments, plus or minus the cumulative amortization using the
effective interest rate method of any difference between the initially recognized amount and
the maturity amount. This calculation includes all fees and points paid or received between
parties to the contract that are an integral part of the effective interest rate, transaction costs
and all other premiums and discounts. For investments carried at amortized cost, gains and
losses are recognized in profit or loss when the investments are derecognized or impaired, as
well as through the amortization process.
The Group has no HTM investments as at March 31, 2013 and 2012 and April 1, 2011.
c. 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 Group’s 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).
d. 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 recorded in profit or loss. Interest earned on the investments is
reported as interest income using the effective interest rate method. Dividends earned on
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investments are recognized in profit or loss when the right to receive payment has been
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 Group’s 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.
e. 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 instruments are classified as current if they are expected to be
realized 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) and short-term loans (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.
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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 asset’s 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 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 asset’s 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-tomarket 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 asset’s 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 Group’s 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 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 or 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.
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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 “Prepaid expenses and
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 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
“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
Office and school equipment
Office furniture and fixtures
Leasehold improvements
Transportation equipment
Computer equipment and peripherals
Library holdings
20–25 years
5 years
5 years
5 years or terms of the lease agreement,
whichever is shorter
5 years or terms of the lease agreement,
whichever is shorter
3 years
3–5 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.
*SGVFS002680*
- 19 -
Investment Properties
Investment properties include land and buildings held by the Parent Company 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.
Depreciation of buildings is computed on a straight-line basis over 20–25 years. The asset’s
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, 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
Investments in associates in which the Group exercises significant influence and which are neither
a subsidiary nor a joint venture of the Group are accounted for under the equity method in the
consolidated financial statements. Under the equity method, the cost of investments in associates
is carried at cost plus post-acquisition changes in the Group’s share in the net assets of the
associate (including share in other comprehensive income) less any dividend declared and
impairment in value.
Goodwill relating to an associate is included in the carrying amount of the investment and is not
amortized.
The Group’s share in its associate’s post-acquisition profit or loss is recognized in profit or loss.
This is the profit or loss attributable to equity holders of the associate and is therefore profit or loss
after tax and non-controlling interest in the subsidiaries of the associate. When the Group’s share
of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognize further losses, unless it has incurred
obligations or made payments on behalf of the associate. Where there has been a change
recognized directly in the equity of the associate, the Group recognizes its share of any changes
and discloses this, when applicable, in the consolidated statement of changes in equity.
Unrealized gains and losses arising from transactions with the associate are eliminated to the
extent of the Group’s interest in the associate.
*SGVFS002680*
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The financial reporting dates of the associates 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’
accounting policies conform to those used by the Group for like transactions and events in similar
circumstances. Adjustments are made for the Group’s share in the effects of significant
transactions or events that occur between the financial reporting date of the above-mentioned
associates and the financial reporting date of the Group’s consolidated financial statements.
After application of the equity method, the Group determines whether it is necessary to recognize
any impairment loss on its investment in associates. The Group determines at each financial
reporting date whether there is any objective evidence that the investment in associate is impaired.
If this is the case, the Group calculates the amount of impairment as the difference between the
recoverable amount of the associate and its carrying value and recognizes the amount in profit or
loss.
Upon loss of significant influence over the associate, the Group measures and recognizes any
retained investment at its fair value. Any difference between the carrying amount of the associate
upon loss of significant influence 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 ESG’s effective interest in the following entities as at March 31, 2013 and 2012 and April 1,
2011:
Accent Healthcare, Inc./STI-Banawe,
Inc. (STI-Accent)**
STI College Alabang, Inc.
(STI-Alabang)
Synergia**
Principal Activities
Hospital
Effective Percentage of Ownership
2012
2011
2013
Direct Indirect
Direct Indirect
Direct Indirect
49
–
49
–
49
–
40
–
40
–
40
–
30
24
20
–
–
–
30
24
20
–
–
–
30
24
20
–
–
–
20
13*
20
13*
20
13*
17
–
17
–
17
–
–
30*
–
30*
–
30*
Educational Institution
Management Consulting
Services
Educational Institution
Holding Company
Hospital
STI-Marikina
STI Investments
De Los Santos General Hospital, Inc.
(De Los Santos General Hospital)
Global Resource for Outsourced
Recruitment Agency
Workers, Inc. (GROW)
De Los Santos - STI Megaclinic, Inc.
Health and Wellness
(De Los Santos - STI Megaclinic)
Clinic
** Through De Los Santos - STI College
** Dormant entities
Accounting policies of the associates conform to those used by the Parent Company for like
transactions and events in similar circumstances.
Interests in Joint Ventures
The Group has interests in Philippine Healthcare Educators, Inc. (PHEI) and STI-PHNS
Outsourcing Corporation (STI-PHNS), both jointly-controlled entities. A joint venture is a
contractual arrangement whereby two or more parties undertake an economic activity that is
subject to joint control, and a jointly controlled entity is a joint venture that involves the
establishment of a separate entity in which each venturer has an interest.
*SGVFS002680*
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The Group’s interests in jointly- controlled entities are accounted for under the equity method of
accounting in the consolidated financial statements. Under the equity method, the interest in a
joint venture is carried at cost plus post-acquisition changes in the Group’s share in the net assets
of the joint venture (including share in other comprehensive income) less any dividend declared
and impairment in value. The financial statements of the joint venture are prepared for the same
reporting year as that of the Group, using consistent accounting policies.
Adjustments are made in the consolidated financial statements to eliminate the Group’s share of
unrealized gains and losses on transactions between the Group and the jointly-controlled entity.
The joint venture is carried at equity method until the date on which the Group ceases to have joint
control over the jointly-controlled entity.
The Group measures and recognizes the remaining investment at fair value upon loss of control
and provided the jointly controlled entity does not become a subsidiary or associate. Any
difference between the carrying amount of the jointly controlled entity upon loss of joint control,
and the aggregate of the fair value of the remaining investment and proceeds from disposal, is
recognized in profit or loss. When the remaining investment constitutes significant influence, it is
accounted for as an investment in an associate.
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 interest in the acquiree. For each business
combination, the acquirer measures the non-controlling interest in the acquiree either at fair value
or at the proportionate share in the acquiree’s identifiable net assets.
Acquisition costs incurred are expensed 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, the fair value of the acquirer’s previously held
equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or
loss. Any contingent consideration to be transferred by the acquirer will be recognized at fair
value at the acquisition date. Subsequent changes to the fair value of the contingent consideration
which is deemed to be an asset or liability, will be recognized in accordance with PAS 39 either in
profit or loss or as a change to other comprehensive income. If the contingent consideration is
classified as equity, it should not be remeasured until it is finally settled within equity.
Goodwill acquired in a business combination is initially measured at cost being the excess of the
cost of business combination over the interest in the net fair value of the acquiree’s identifiable
assets, liabilities and contingent liabilities measured at acquisition date. If the cost of acquisition
is less than the fair value of the net assets of the acquiree, the difference is recognized directly in
profit or loss. If the initial accounting for business combination can be determined only
provisionally by the end of the period by which the combination is effected because either the fair
value to be assigned to the acquiree’s identifiable assets, liabilities or contingent liabilities or the
cost of the combination can be determined only provisionally, the Group accounts for the
combination using provisional values. Adjustment to these provisional values as a result of
completing the initial accounting shall be made within 12 months from the acquisition date. The
carrying amount of an identifiable asset, liability, or contingent liability that is recognized from
that date and goodwill or any gain recognized shall be adjusted from the acquisition date by the
*SGVFS002680*
- 22 -
amount equal to the adjustment to the fair value at the acquisition date of the identifiable asset,
liability or contingent liability being recognized or adjusted.
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 Group’s 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 forms part of a cash-generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation when determining the gain or loss on disposal of the operation. Goodwill
disposed of in this circumstance is measured based on the relative values of the operation disposed
of and the portion of the cash-generating unit retained.
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
asset’s (or cash-generating unit’s) 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
*SGVFS002680*
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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.
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 asset’s 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 asset’s 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.
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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
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 Group’s
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 Company’s
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.
*SGVFS002680*
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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 Company’s
shares issued for the Share Swap were presumed to be issued at the beginning of the earliest
period presented, i.e. April 1, 2011.
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).
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 Group’s 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.
*SGVFS002680*
- 26 -
Pension Costs
The Group has the following pension plans (Plan) covering substantially all of its regular and
permanent employees:
STI ESG
Type of Plan
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
The cost of providing benefits under the defined benefit plans is actuarially determined separately
for each plan using the projected unit credit method. Projected unit credit method reflects services
rendered by employees to the date of valuation and incorporates assumptions concerning
employees’ projected salaries. Pension costs include current service cost plus amortization of past
service cost, experience adjustments and changes in actuarial assumptions. Past service cost is
recognized as an expense on a straight-line basis over the average period until the benefits become
vested. Actuarial gains and losses are recognized as income or expense when the cumulative
unrecognized actuarial gains and losses at the end of the previous reporting period exceeded
10.00% of the higher of the defined benefit obligation and the fair value of the plan assets at that
date. These gains and losses are recognized over the expected average remaining lives of the
employees participating in the Plan.
The amount recognized as defined benefit liability is the aggregate of the present value of the
defined benefit obligation at the financial reporting date, and any actuarial gains and losses not
recognized reduced by past service cost not yet recognized and the fair value at the financial
reporting date of plan assets out of which the obligations are to be settled directly. If such
aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate of
cumulative unrecognized net actuarial losses and past service cost and the present value of any
economic benefits availed in the form of refund from the Plan or reductions in the future
contributions to the Plan.
If the asset is measured at the aggregate of cumulative unrecognized net actuarial losses and past
service cost and the present value of any economic benefits available in the form of refunds from
the plan or reductions in the future contributions to the Plan, net actuarial losses of the current
period and past service cost of the current period are recognized immediately to the extent that
they exceed any reduction in the present value of those economic benefits. If there is no change or
an increase in the present value of the economic benefits, the entire net actuarial losses of the
current period and past service cost of the current period are recognized immediately. Similarly,
net actuarial gains of the current period after the deduction of past service cost of the current
period exceeding any increase in the present value of the economic benefits stated above are
recognized immediately if the asset is measured at the aggregate of cumulative unrecognized net
actuarial losses and past service cost and the present value of any economic benefits available in
the form of refunds from the plan or reductions in the future contributions to the plan. If there is
no change or a decrease in the present value of the economic benefits, the entire net actuarial gains
of the current period after the deduction of past service cost of the current period are recognized
immediately.
*SGVFS002680*
- 27 -
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, noncontributory, defined
contribution plan covering De Los Santos - STI College’s and STI-QA’s 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 employee’s average monthly salary for the 12-month period, immediately
preceding the date of acceptance of the Group in CEAP Plan, multiplied by the number of months
of the employees past service amortized over 10 years.
When an employee has rendered service to De Los Santos - STI College and STI-QA during a
period, De Los Santos - STI College and STI-QA shall recognize the contribution payable to
CEAP in exchange for that service (1) as a liability (accrued expense), after deducting any
contribution already paid. If the contribution already paid exceeds the contribution due for service
before the end of the reporting period, De Los Santos - STI College and STI-QA shall recognize
that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction
in future payments or a cash refund; and (2) as an expense, unless another standard requires or
permits the inclusion of the contribution in the cost of an asset.
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.
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.
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.
*SGVFS002680*
- 28 -
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 NOLCO 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.
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.
*SGVFS002680*
- 29 -
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.
Segment Reporting
For management purposes, the Group is organized into business units based on the geographical
location of the students and assets. Financial information on segment reporting is 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 Group’s 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.
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”.
*SGVFS002680*
- 30 -
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, the Parent Company 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.
The business combination resulted in certain changes to the STI Holdings’ previously reported
financial statements. The comparative figures for the March 31, 2012 and April 1, 2011
consolidated financial statements were adjusted (or “restated”) to present the comparative
figures as if the entities had always been combined only for the period that the entities were
under common control.
The April 1, 2011 statement of financial position was presented in accordance with the
requirement of PAS 1.
*SGVFS002680*
- 31 -
Consolidated assets, liabilities and equity of the Group as of March 31, 2012 is presented as
follows:
ASSETS
Current Assets
Cash and cash equivalents
Receivables
Inventories
Prepaid expenses and other current assets
Total Current Assets
Noncurrent Assets
Property and equipment
Investment properties
Investments in and advances to associates and
joint ventures
Noncurrent receivables
Available-for-sale financial assets
Deferred tax assets - net
Goodwill, intangible and other noncurrent assets
Total Noncurrent Assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Current Liabilities
Short-term loans
Accounts payable and other current liabilities
Current portion of obligations
under finance lease
Income tax payable
Total Current Liabilities
Noncurrent Liabilities
Obligations under finance lease net of current portion
Pension liabilities
Total Noncurrent Liabilities
Total Liabilities
Equity
Equity attributable to equity holders of STI
Holdings
Capital stock
Additional paid-in capital
Treasury stock
Unrealized mark-to-market gain (loss) on
available-for-sale financial assets
Share in associates’ unrealized mark-tomarket gain on available-for-sale
financial assets
Cost of shares held by a subsidiary
Other equity reserve
Retained earnings:
Appropriated
Unappropriated
Equity attributable to non-controlling interests
Total Equity
LIABILITIES AND EQUITY
Eliminations/
Adjustments
Consolidated
Balances
STI Holdings
STI ESG
=330,503,037
P
16,240,140
–
3,644,219
350,387,396
=
P225,779,805
249,674,860
42,143,148
21,016,665
538,614,478
=–
P
–
–
–
–
P
=556,282,842
265,915,000
42,143,148
24,660,884
889,001,874
63,013
–
1,544,166,381
47,107,290
–
–
1,544,229,394
47,107,290
–
227,254,574
81,612,640
–
–
308,930,227
=659,317,623
P
2,089,593,855
–
4,186,543
9,565,437
275,286,521
3,969,906,027
P
=4,508,520,505
=–
P
12,765,779
=
P746,687,336
288,954,515
=–
P
–
=
P746,687,336
301,720,294
–
–
12,765,779
9,741,235
2,015,617
1,047,398,703
–
–
–
9,741,235
2,015,617
1,060,164,482
–
–
–
12,765,779
8,956,367
40,535,074
49,491,441
1,096,890,144
–
–
–
–
8,956,367
40,535,074
49,491,441
1,109,655,923
551,500,000
77,592,234
–
742,184,535
2,177,718
(8,946,345)
436,628
(363,129)
–
–
–
1,083,699,330
–
(27,278)
–
17,022,982
646,551,844
–
646,551,844
=659,317,623
P
800,000,000
739,155,918
3,357,880,749
53,749,612
3,411,630,361
P
=4,508,520,505
(501,153,708)
–
(80,811,545)
–
–
(581,965,253)
(P
=581,965,253)
(742,184,535)
(2,177,718)
8,946,345
134,185
(43,906,507)
(500,009,337)
648,694,412
–
(87,507,966)
(718,011,121)
136,045,868
(581,965,253)
(P
=581,965,253)
1,588,440,147
227,254,574
4,987,638
9,565,437
275,286,521
3,696,871,001
=4,585,872,875
P
551,500,000
77,592,234
–
207,684
1,039,792,823
(500,009,337)
648,667,134
800,000,000
668,670,934
3,286,421,472
189,795,480
3,476,216,952
=4,585,872,875
P
*SGVFS002680*
- 32 -
Consolidated assets, liabilities and equity of the Group as of April 1, 2011 is presented as
follows:
ASSETS
Current Assets
Cash and cash equivalents
Receivables
Inventories
Current portion of available-for-sale
financial assets
Prepaid expenses and other current assets
Total Current Assets
Noncurrent Assets
Property and equipment
Investment properties
Investments in and advances to associates
and joint ventures
Available-for-sale financial assets
Deferred tax assets - net
Goodwill, intangible and other noncurrent assets
Total Noncurrent Assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Current Liabilities
Short-term loans
Accounts payable and other current liabilities
Current portion of obligations
under finance lease
Income tax payable
Total Current Liabilities
Noncurrent Liabilities
Obligations under finance lease net of current portion
Pension liabilities
Total Noncurrent Liabilities
Total Liabilities
Equity
Capital stock
Additional paid-in capital
Unrealized mark-to-market gain on
available-for-sale financial assets
Share in associates’ unrealized mark-tomarket gain on available-for-sale
financial assets
Cost of shares held by a subsidiary
Other equity reserve
Retained earnings - unappropriated
Equity attributable to non-controlling interests
Total Equity
LIABILITIES AND EQUITY
STI Holdings
STI ESG
Eliminations/
Adjustments
Consolidated
Balances
=170,965,296
P
12,645,809
–
=
P304,934,546
693,615,469
34,410,617
=–
P
–
–
P
=475,899,842
706,261,278
34,410,617
–
2,510,885
186,121,990
51,065,768
12,587,121
1,096,613,521
–
–
–
51,065,768
15,098,006
1,282,735,511
116,650
–
1,421,066,818
37,414,080
–
–
1,421,183,468
37,414,080
–
469,095
–
–
585,745
=186,707,735
P
744,764,844
4,174,615
13,421,163
250,004,195
2,470,845,715
P
=3,567,459,236
–
–
–
–
P
=–
744,764,844
4,643,710
13,421,163
250,004,195
2,471,431,460
P
=3,754,166,971
=–
P
12,071,649
=
P913,687,336
297,972,969
=–
P
–
P
=913,687,336
310,044,618
–
–
12,071,649
5,483,198
6,415,050
1,223,558,553
–
–
–
5,483,198
6,415,050
1,235,630,202
–
–
–
12,071,649
6,626,629
43,281,101
49,907,730
1,273,466,283
–
6,626,629
43,281,101
49,907,730
1,285,537,932
153,591,106
–
741,496,710
1,425,850
(741,496,710)
(1,425,850)
153,591,106
–
104,628
7,357,032
(178,601)
7,283,059
(7,044,324)
8,946,345
728,155,395
(74,243,993)
(87,287,738)
87,287,738
–
=–
P
166,823,517
–
727,367,827
1,186,716,570
2,241,782,079
226,846,960
2,468,629,039
P
=3,754,166,971
–
–
–
20,940,352
174,636,086
–
174,636,086
=186,707,735
P
173,867,841
(8,946,345)
(787,568)
1,240,020,211
2,154,433,731
139,559,222
2,293,992,953
P
=3,567,459,236
–
–
*SGVFS002680*
- 33 -
Consolidated statement of comprehensive income balances of the Group for the years ended
March 31, 2012 and 2011 is presented as follows:
Revenues and other income
Cost and expenses
Net income attributable to Equity Holders of the
Parent Company
Total comprehensive income attributable to
Equity Holders of the Parent Company
Revenues and other income
Cost and expenses
Net income attributable to Equity Holders of the
Parent Company
Total comprehensive income attributable to
Equity Holders of the Parent Company
2012
Eliminations/
Adjustments
=–
P
1,144,371
Consolidated
Balances
=
P1,605,906,148
1,281,088,560
STI Holdings
=
P8,698,575
6,396,892
STI ESG
P
=1,597,207,573
1,273,547,297
2,226,274
299,135,707
(13,263,973)
288,098,008
2,558,274
1,201,247,037
(49,813,372)
1,153,991,939
2011
Eliminations/
Adjustments
=–
P
–
Consolidated
Balances
=
P1,521,630,049
1,399,158,144
STI Holdings
=
P7,307,534
4,227,621
STI ESG
P
=1,514,322,515
1,394,930,523
3,079,913
88,366,189
(3,580,191)
87,865,911
3,304,013
258,639,049
(10,478,863)
251,464,199
b. Acquisition of non-controlling interests
In November 2012, the Company subscribed to 1,020,000,000 STI ESG shares at =
P1.00 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 SEC’s approval of the increase in
authorized capital stock. On March 8, 2013, STI ESG issued 1,080,000,000 shares to STI
Holdings upon SEC’s approval of its application.
As a result, STI Holdings’ ownership interest in STI ESG increased to approximately 99% as
of March 31, 2013.
The Parent Company recognized a reduction in the non-controlling interests amounting to
=106.0 million and reattributed the non-controlling interest’s share in other comprehensive
P
income to the equity holders of the Parent Company amounting to =
P36.9 million
(P
=36.9 million to share in unrealized mark-to-market gain and =
P22,582 to unrealized
mark-to-market loss) with the difference, amounting to P
=69.1 million, charged to “Other
equity reserve” account (see Note 18).
c. Business Combinations at STI ESG level
STI-Tuguegarao. In February 2011, the stockholders of STI-Tuguegarao and STI ESG
executed deeds of assignment for the transfer of 100.00% of the outstanding shares of
STI-Tuguegarao to STI ESG with an acquisition cost amounting to P
=5.1 million through
conversion of its receivables to equity. Effective that date, STI ESG gained control over the
financial and reporting policies of STI-Tuguegarao.
STI-Tuguegarao is a franchisee of STI ESG and is engaged in the operation of educational
institutions offering tertiary formal education, post-secondary certificate courses and shortterm courses.
*SGVFS002680*
- 34 -
STI-Dagupan. In November 2010, certain stockholders of STI-Dagupan and STI ESG
executed deeds of assignment for the transfer of 77.00% of the outstanding shares of
STI-Dagupan to STI ESG with an acquisition cost amounting to =
P5.1 million through
conversion of its receivables to equity. Effective that date, STI ESG gained control over the
financial and reporting policies of STI-Dagupan.
STI-Dagupan is a franchisee of STI ESG and is engaged in the operation of educational
institutions offering tertiary formal education, post-secondary certificate courses and shortterm courses.
The purchase price allocation, which was determined provisionally in 2011, was finalized
in 2012. There was no change in the fair value of identifiable assets and liabilities of
STI-Tuguegarao and STI-Dagupan at acquisition dates.
The purchase price considerations have been allocated to the assets and liabilities based on the
fair values at the dates of acquisition as follows:
Assets:
Cash on hand and in banks
Receivables
Inventories
Prepaid expenses and other current assets
Property and equipment (see Note 10)
Other noncurrent assets
Liabilities:
Accounts payable and other current liabilities
Loans payable
Deferred tax liability
Net liabilities acquired
Total consideration transferred
Goodwill arising from acquisitions (see Note 15)
Net cash inflow from acquisitions:
STI-Tuguegarao
STI-Dagupan
STI-Tuguegarao
STI-Dagupan
=816,911
P
349,894
45,282
652,077
364,902
655,694
2,884,760
=713,539
P
199,780
69,455
5,750
1,781,024
1,023,540
3,793,088
10,545,866
434,547
420,283
11,400,696
8,515,936
5,122,424
=13,638,360
P
5,548,903
–
–
5,548,903
1,755,815
5,080,003
=6,835,818
P
=816,911
P
713,539
=1,530,450
P
There were no significant transactions or events that occur between December 31 (financial
reporting date of the schools) and March 31 (financial reporting date of the Group’s
consolidated financial statements.
*SGVFS002680*
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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.
b.
c.
d.
e.
Metro Manila
Northern Luzon
Southern Luzon
Visayas
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.
On consolidated basis, the Group’s performance is evaluated based on net income for the year and
earnings before interest, taxes and depreciation and amortization (EBITDA). The following table
shows the reconciliation of the consolidated EBITDA to consolidated net income for the years
ended March 31, 2013, 2012 and 2011:
Consolidated EBITDA
Depreciation and amortization
Interest expense
Provision for income tax
2013
=1,012,382,653
P
(156,430,779)
(18,831,366)
(42,890,694)
=794,229,814
P
2012
P
=503,133,383
(144,450,351)
(33,865,444)
(32,243,779)
P
=292,573,809
2011
P
=276,099,770
(127,063,971)
(26,563,894)
(27,859,961)
P
=94,611,944
*SGVFS002680*
- 36 -
The following tables present revenue and income information regarding geographical segments for the years ended March 31, 2013, 2012 and 2011:
March 31, 2013
Revenues
External revenue
Intersegment revenue
Total Revenues
Results
Income before other income and income tax
Equity in net gains of associates and interests in joint ventures
Interest income
Interest expense
Other income
Provision for income tax
Net Income
Metro Manila
Northern Luzon
Southern Luzon
Visayas
Mindanao
Total
= 1,208,089,762
P
189,903,465
= 1,397,993,227
P
= 83,916,512
P
–
= 83,916,512
P
= 260,328,160
P
–
= 260,328,160
P
= 44,593,451
P
–
= 44,593,451
P
= 73,010,240
P
–
= 73,010,240
P
= 1,669,938,125
P
189,903,465
= 1,859,841,590
P
= 18,229,373
P
–
186,445
(13,729)
–
–
= 18,402,089
P
= 76,496,819
P
–
99,869
–
59,269
–
= 76,655,957
P
= 8,726,225
P
–
27,165
–
–
–
= 8,753,390
P
= 211,822,365
P
–
34,373,420
(18,814,558)
161,316,030
(27,815,889)
= 360,881,368
P
= 8,218,233
P
–
36,989
(3,079)
–
–
= 8,252,143
P
323,493,015
–
34,723,888
(18,831,366)
161,375,299
(27,815,889)
= 472,944,947
P
Eliminations/
Adjustments
=–
P
(189,903,465)
(P
=189,903,465)
65,594,588
428,600,839
–
–
(157,835,755)
(15,074,805)
= 321,284,867
P
EBITDA
Consolidated
= 1,669,938,125
P
–
= 1,669,938,125
P
= 389,087,603
P
428,600,839
34,723,888
(18,831,366)
3,539,544
(42,890,694)
= 794,229,814
P
= 1,012,382,653
P
March 31, 2012
(As restated - see Note 3)
Revenues
External revenue
Intersegment revenue
Total Revenues
Results
Income before other income and income tax
Equity in net losses of associates and interests in joint ventures
Interest income
Interest expense
Other income
Benefit from (provision for) income tax
Net Income
EBITDA
Metro Manila
Northern Luzon
Southern Luzon
Visayas
Mindanao
Total
= 1,123,478,215
P
208,864,945
=1,332,343,160
P
=98,414,257
P
–
=98,414,257
P
=224,546,316
P
–
=224,546,316
P
=45,417,519
P
–
=45,417,519
P
=84,930,758
P
–
=84,930,758
P
=1,576,787,065
P
208,864,945
=1,785,652,010
P
=5,871,809
P
–
38,661
–
–
46,229
=5,956,699
P
= 13,006,153
P
–
58,851
(28,953)
–
146,944
=13,182,995
P
=99,341,678
P
–
26,527,234
(37,610,943)
121,968,534
(30,395,138)
=179,831,366
P
=27,249,774
P
–
200,924
(1,243,365)
–
28,303
=26,235,636
P
=45,422,923
P
–
405,493
(33,000)
–
3,471
=45,798,887
P
=190,892,337
P
–
27,231,163
(38,916,261)
121,968,534
(30,170,191)
=271,038,583
P
Eliminations/
Adjustments
=–
P
(208,864,945)
(P
=208,862,902)
=
P176,403,295
(36,607,327)
(11,032,930)
5,050,817
(110,172,040)
(2,073,588)
21,568,227
Consolidated
=1,576,787,065
P
–
=1,576,787,065
P
=367,295,632
P
(36,607,327)
16,198,233
(33,865,444)
11,796,494
(32,243,779)
292,573,809
=503,133,383
P
*SGVFS002680*
- 37 -
March 31, 2011
(As restated - see Note 3)
Revenues
External revenue
Intersegment revenue
Total Revenues
Results
Income (loss) before other income (expenses) and income tax
Equity in net losses of associates and interests in joint ventures
Interest income
Interest expense
Other income
Benefit from (provision for) income tax
Net Income
Metro Manila
Northern Luzon
Southern Luzon
Visayas
Mindanao
Total
=1,050,204,035
P
106,620,203
=1,156,824,238
P
=51,167,821
P
–
=51,167,821
P
=252,534,295
P
–
=252,534,295
P
=28,345,541
P
–
=28,345,541
P
=98,803,891
P
–
=98,803,891
P
=1,481,055,583
P
106,620,203
=1,587,675,786
P
=119,409,173
P
–
41,091,892
(43,552,570)
68,769,699
(26,250,760)
=159,467,436
P
=12,737,672
P
–
42,951
(1,602,669)
–
26,941
=11,204,895
P
=31,831,105
P
–
240,922
(55,705)
56,000
(636,015)
=31,436,307
P
=2,839,176
P
–
65,519
(120,850)
15,500
(226,492)
=2,572,853
P
=18,612,516
P
–
82,769
(36,889)
–
(773,635)
=17,884,761
P
=185,429,642
P
–
41,524,053
(45,368,683)
68,841,199
(27,859,961)
=222,566,252
P
Eliminations/
Adjustments
=–
P
(106,620,203)
(106,620,203)
=95,076,692
P
(172,045,001)
(24,937,672)
18,804,789
(44,853,114)
–
(P
=127,954,306)
Consolidated
=1,481,055,583
P
–
=1,481,055,583
P
P280,506,334
=
(172,045,001)
16,586,381
(26,563,894)
23,988,085
(27,859,961)
=94,611,944
P
=276,099,770
P
EBITDA
The following tables present certain assets and liabilities information regarding geographical segments as of March 31, 2013 and 2012 and April 1, 2011:
March 31, 2013
Assets and Liabilities
Segment assets(a)
Investments in and advances to associates and joint ventures
Goodwill
Deferred tax assets
Total Assets
Segment liabilities(b)
Pension liabilities
Obligations under finance lease
Total Liabilities
Metro Manila
Northern Luzon
Southern Luzon
Visayas
Mindanao
= 20,721,112,618
P
879,468,601
–
9,310,858
= 21,609,892,077
P
= 53,378,214
P
–
–
259,189
= 53,637,403
P
= 254,742,544
P
–
–
1,313,080
= 256,055,624
P
= 51,950,808
P
–
–
124,751
= 52,075,559
P
= 85,465,639
P
–
–
–
= 85,465,639
P
= 327,910,278
P
23,189,603
19,759,058
= 370,858,939
P
= 25,442,403
P
3,098,117
–
= 28,540,520
P
= 66,682,255
P
14,436,318
–
= 81,118,573
P
= 3,174,829
P
1,691,200
–
= 4,866,029
P
= 20,537,146
P
5,027,916
–
= 25,565,062
P
Other Segment Information
Capital expenditure Property and equipment
Depreciation and amortization
Noncash expenses other than depreciation and amortization
(a)
(b)
Total
Eliminations/
Adjustments
= 21,166,649,823 (P
P
= 15,769,230,816)
879,468,601
2,025,850,775
–
200,258,253
11,007,878
–
= 22,057,126,302 (P
P
=13,543,121,788)
= 443,746,911
P
47,443,154
19,759,058
= 510,949,123
P
(P
=118,030,878)
–
–
(P
=118,030,878)
Consolidated
= 5,397,419,007
P
2,905,319,376
200,258,253
11,007,878
= 8,514,004,514
P
= 325,716,033
P
47,443,154
19,759,058
= 392,918,245
P
= 1,539,623,771
P
156,430,778
58,779,699
Segment assets exclude goodwill, investments in and advances to associates and joint ventures and deferred tax assets.
Segment liabilities exclude short-term loans, pension liabilities and obligations under finance lease.
*SGVFS002680*
- 38 March 31, 2012
(As restated - see Note 3)
Eliminations/
Adjustments
Metro Manila
Northern Luzon
Southern Luzon
Visayas
Mindanao
Total
Assets and Liabilities
Segment assets(a)
Investments in and advances to associates and joint ventures
Goodwill
Deferred tax assets
Total Assets
=3,230,740,666
P
872,179,011
–
7,868,418
=4,110,788,095
P
=53,853,403
P
–
–
259,189
=54,112,592
P
=269,133,520
P
–
–
1,313,080
=270,446,600
P
=58,928,432
P
–
–
124,751
=59,053,183
P
=101,677,844
P
–
–
–
=101,677,844
P
=3,714,333,865
P
872,179,011
–
9,565,438
=4,596,078,314
P
(P
=926,724,828)
716,261,136
200,258,253
–
(P
=10,205,439)
P2,787,609,037
=
1,588,440,147
200,258,253
9,565,438
=4,585,872,875
P
Segment liabilities(b)
Short-term loans
Pension liabilities
Obligations under finance lease
Total Liabilities
= 574,181,239
P
746,687,336
18,412,041
18,125,425
=1,357,406,041
P
=43,679,964
P
–
3,074,844
572,177
=47,326,985
P
=158,446,695
P
–
12,543,661
–
=170,990,356
P
=18,563,425
P
–
2,036,320
–
=20,599,745
P
=45,280,042
P
–
4,468,208
–
=49,748,250
P
P840,151,365
=
746,687,336
40,535,074
18,697,602
=1,646,071,377
P
(P
=536,415,454)
–
–
–
(P
=536,415,454)
P303,735,911
=
746,687,336
40,535,074
18,697,602
=1,109,655,923
P
Other Segment Information
Capital expenditures:
Property and equipment
Investment properties
Intangible assets
Depreciation and amortization
Noncash expenses other than depreciation and amortization
Consolidated
=255,301,730
P
3,096,000
952,000
144,450,351
52,853,403
April 1, 2011
(As restated - see Note 3)
Eliminations/
Adjustments
Metro Manila
Northern Luzon
Southern Luzon
Visayas
Mindanao
Total
Assets and Liabilities
Segment assets(a)
Investments in and advances to associates and joint ventures
Goodwill
Deferred tax assets
Total Assets
P2,600,899,300
=
1,128,883,432
3,261,786
11,488,723
=3,744,533,241
P
=18,517,892
P
9,967,698
–
230,886
=28,716,476
P
=209,220,500
P
8,917,744
–
1,209,392
=219,347,636
P
=40,637,822
P
5,026,780
–
78,522
=45,743,124
P
=48,616,535
P
984,678
–
1,136,379
=50,737,592
P
P2,917,892,049
=
1,153,780,332
3,261,786
14,143,902
=4,089,078,069
P
(P
=125,552,894)
(409,015,488)
200,380,023
(722,739)
(P
=334,911,098)
=2,792,339,155
P
744,764,844
203,641,809
13,421,163
=3,754,166,971
P
Segment liabilities(b)
Short-term loans
Pension liabilities
Obligations under finance lease
Total Liabilities
P666,147,489
=
913,687,336
22,596,106
11,430,607
=1,613,861,538
P
=28,065,961
P
–
2,224,000
–
=30,289,961
P
=171,727,408
P
–
13,018,725
–
184,746,133
=11,906,562
P
–
1,363,342
–
=13,269,904
P
=24,968,044
P
–
4,078,928
679,220
=29,726,192
P
P902,815,464
=
913,687,336
43,281,101
12,109,827
=1,871,893,728
P
(P
=586,355,796)
–
–
–
(586,355,796)
P316,459,668
=
913,687,336
43,281,101
12,109,827
=1,285,537,932
P
Other Segment Information
Capital expenditures:
Property and equipment
Intangible assets
Depreciation and amortization
Noncash expenses other than depreciation and amortization
(a)
(b)
Consolidated
=699,638,426
P
6,569,312
127,063,971
56,387,063
Segment assets exclude goodwill, investments in and advances to associates and joint ventures and deferred tax assets.
Segment liabilities exclude short-term loans, pension liabilities and obligations under finance lease.
*SGVFS002680*
- 39 -
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 management’s 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 Group’s 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 =
P143.3 million, =
P145.2 million and =
P155.2 million in 2013, 2012 and
2011, 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
=4.6 million, P
=5.4 million and P
=9.6 million in 2013, 2012 and 2011,
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 =
P19.8 million,
=18.7 million and =
P
P12.1 million as at March 31, 2013 and 2012 and April 1, 2011, respectively.
Interest incurred amounted to =
P1.5 million, =
P1.3 million and =
P1.2 million in 2013, 2012 and 2011,
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.
*SGVFS002680*
- 40 -
There were no transfers to (from) investment properties in 2013 and 2011. Transfers to
(from) investment properties amounted to P
=24.9 million and (P
=16.3 million) in 2012
(see Notes 10 and 11).
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. PAS 31 provides that a joint venture is a contractual
arrangement whereby two or more parties undertake an economic activity that is subject to joint
control and the control shall be contractually agreed. Management has assessed that it has joint
control over the joint venture agreements with PHEI and STI-PHNS. The joint venture agreements
are accounted for as jointly-controlled entities (see Note 13).
Contingencies. The Group is currently a defendant to a number of cases involving claims and
disputes mainly related to labor. The Group’s 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.
The fair values of financial instruments as at March 31, 2013 and 2012 and April 1, 2011 are
disclosed in Note 31.
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.
*SGVFS002680*
- 41 -
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 =
P714.8 million, =
P493.2 million and =
P706.3 million as at March 31, 2013 and 2012
and April 1, 2011, respectively. Provision for impairment loss on receivables (net of reversals)
recognized amounted to P
=34.5 million, P
=41.0 million and P
=37.8 million in 2013, 2012 and 2011,
respectively (see Notes 7 and 22).
Advances to associates and joint ventures, net of allowance for impairment loss, amounted to
=45.5 million, P
P
=35.4 million and P
=59.5 million as at March 31, 2013 and 2012 and April 1, 2011,
respectively. Provision for impairment in value of advances recognized amounted to =
P4.1 million,
=3.0 million and nil in 2013, 2012 and 2011, respectively (see Notes 12 and 22).
P
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 =
P34.7 million, =
P42.1 million and =
P34.4 million as
at March 31, 2013 and 2012 and April 1, 2011, respectively. Provision for inventory obsolescence
in the form of excess of cost over net realizable value of inventories amounted to =
P0.2 million,
=0.7 million and =
P
P4.1 million in 2013, 2012 and 2011, 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 2013, 2012 and
2011. The carrying values of AFS financial assets amounted to =
P4.7 million, =
P5.0 million and
=55.7 million as at March 31, 2013 and 2012 and April 1, 2011, respectively (see Note 14).
P
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. Management’s 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
*SGVFS002680*
- 42 -
are less than the previously estimated useful lives. 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 Group’s property and equipment,
investment properties and intangible assets in 2013, 2012 and 2011.
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 investee’s 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:
Property and equipment (see Note 10)
Investment properties (see Note 11)
Investments in associates and joint ventures
(see Note 12)
Land (see Note 15)
Intangible assets (see Note 15)
March 31,
2013
P
=2,635,275,971
39,325,291
March 31,
2012
(As restated see Note 3)
=1,544,229,394
P
47,107,290
April 1,
2011
As Restated see Note 3)
P
=1,421,183,468
37,414,080
2,859,797,392
387,862,833
7,711,712
1,553,086,547
–
7,521,312
685,274,320
–
6,569,312
No impairment loss was recognized in 2013, 2012 and 2011 (see Notes 10, 11, 12 and 15).
*SGVFS002680*
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Goodwill. Acquisition method requires extensive use of accounting estimates and judgments to
allocate the purchase price to the fair market values of the acquiree’s 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 acquiree’s identifiable
assets, liabilities and contingent liabilities. The Group’s 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, 2013 and 2012 and April 1, 2011. The Group’s
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 impairment loss was recognized in 2013 and 2011. Total impairment loss recognized
amounted to =
P3.4 million in 2012. Goodwill, net of allowance for impairment loss, amounted to
=200.3 million as at March 31, 2013 and 2012 and P
P
=203.6 million as at April 1, 2011
(see Notes 15 and 22).
Realizability of Deferred Tax Assets. Deferred tax assets are recognized for all NOLCO and
temporary differences to the extent that it is probable that taxable profit will be available against
which the NOLCO and temporary differences 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
=111.5 million, =
P74.9 million and =
P122.2 million as at
March 31, 2013 and 2012 and April 1, 2011, respectively. Deferred tax assets recognized
amounted to =
P11.1 million, =
P9.6 million and =
P14.1 million as at March 31, 2013 and 2012 and
April 1, 2011, respectively (see Note 26).
*SGVFS002680*
- 44 -
Present Value of Pension Liabilities. The determination of the obligation and cost of pension
benefits is dependent on the selection of certain assumptions used by the Group’s actuaries in
calculating such amounts. Those assumptions were described in Note 24 and included among
others, discount rate, expected rate of return on plan assets and future salary increases. Actual
results that differ from the Group’s assumptions are accumulated and amortized over future
periods and therefore, generally affect the recognized expense and recorded liabilities in such
future periods. While it is believed that the Group’s assumptions are reasonable and appropriate,
significant differences in actual experience or significant changes in assumptions may materially
affect the Group’s pension liabilities.
Pension liabilities recognized amounted to =
P47.4 million, =
P40.5 million and =
P43.3 million as at
March 31, 2013 and 2012 and April 1, 2011, respectively. Unrecognized net actuarial (loss) gain
amounted to (P
=24.3 million), P
=12.8 million and (P
=4.9 million) as at March 31, 2013 and 2012 and
April 1, 2011, respectively (see Note 24).
6. Cash and Cash Equivalents
This account consists of the following:
Cash on hand and in banks
Cash equivalents
March 31,
2013
=209,549,974
P
1,279,901,935
=1,489,451,909
P
March 31,
2012
(As restated see Note 3)
=172,222,094
P
384,060,748
=556,282,842
P
April 1,
2011
(As restated see Note 3)
=123,046,879
P
352,852,963
=475,899,842
P
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 =
P19.4 million, =
P9.8 million
and P
=12.4 million for the years ended March 31, 2013 and 2012 and April 1, 2011, respectively
(see Note 19).
7. Receivables
This account consists of:
Tuition and other school fees
Educational services
Current portion of advances to
associates, joint ventures and
other related parties
(see Note 12)
March 31,
2013
=159,127,235
P
48,276,130
11,419,489
March 31,
2012
(As restated see Note 3)
=130,496,709
P
36,165,675
70,118,179
April 1,
2011
(As restated see Note 3)
=100,567,889
P
83,390,400
475,753,046
(Forward)
*SGVFS002680*
- 45 -
March 31,
2012
(As restated see Note 3)
April 1,
2011
(As restated see Note 3)
=22,592,828
P
=16,518,016
P
P
=8,974,965
12,970,554
54,202,769
308,589,005
57,815,801
=250,773,204
P
9,896,970
55,778,519
318,974,068
53,059,068
=265,915,000
P
20,873,954
78,583,451
768,143,705
61,882,427
=706,261,278
P
March 31,
2013
Advances to officers and employees
(see Note 27)
Rent and other related receivables
(see Note 27)
Others
Less allowance for doubtful accounts
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. Receivables from educational services include the current portion of restructured
receivables from franchisees amounting to =
P14.0 million as at April 1, 2011. Restructured
receivables are interest-bearing and covered by post-dated checks, payable within one to four
years. The noncurrent portion of restructured receivables from franchisees is included as part
of the “Goodwill, intangible and other noncurrent assets” account in the consolidated
statements of financial position which amounted to =
P0.4 million as at April 1, 2011
(see Note 15).
c. Advances to associates, joint ventures and other related parties as at March 31, 2012 include
advances to STI Investments, an indirect associate, amounting to =
P41.6 million. These
advances were then converted into equity shares in STI Investments in 2013. Also, advances
as at April 1, 2011 mainly pertains to advances to PhilPlans, a subsidiary of STI Investments.
These advances were fully collected in 2012 (see Notes 12 and 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, 2013
Balance at beginning of year
Provisions (see Note 22)
Write-off
Balance at end of year
Tuition
and Other
School Fees
=41,435,131
P
34,534,038
(29,777,305)
=46,191,864
P
Educational
Services
=–
P
–
–
=–
P
Others
=11,623,937
P
–
–
=11,623,937
P
Total
P53,059,068
=
34,534,038
(29,777,305)
=57,815,801
P
*SGVFS002680*
- 46 -
March 31, 2012
(As restated - see Note 3)
Balance at beginning of year
Provisions (see Note 22)
Reversals (see Note 22)
Write-off
Balance at end of year
Tuition
and Other
School Fees
=
P27,435,835
33,980,178
–
(19,980,882)
=
P41,435,131
Educational
Services
=
P29,539,808
–
(2,027,633)
(27,512,175)
=
P–
Others
=
P4,906,784
10,500,000
(1,458,135)
(2,324,712)
=
P11,623,937
Total
=
P61,882,427
44,480,178
(3,485,768)
(49,817,769)
=
P53,059,068
April 1, 2011
(As restated - see Note 3)
Balance at beginning of year
Provisions (see Note 22)
Write-off
Balance at end of year
Tuition
and Other
School Fees
=
P20,149,214
29,450,970
(22,164,349)
=
P27,435,835
Educational
Services
=
P23,203,532
8,386,204
(2,049,928)
=
P29,539,808
Others
=
P4,906,784
–
–
=
P4,906,784
Total
=
P48,259,530
37,837,174
(24,214,277)
=
P61,882,427
As at March 31, 2013 and 2012 and April 1, 2011, allowance for doubtful accounts amounting to
=
P11.6 million, =
P11.6 million and =
P34.4 million, respectively, relates to individually significant
accounts that were assessed as impaired. The remaining balance of P
=46.2 million, =
P41.4 million
and =
P27.5 million as at March 31, 2013 and 2012 and April 1, 2011, respectively, relates to
accounts that were collectively assessed as impaired.
8. Inventories
This account consists of:
March 31,
2013
At net realizable value:
Educational materials
Promotional materials
School materials and supplies
P
=29,618,188
4,494,601
627,314
P
=34,740,103
March 31,
2012
(As restated see Note 3)
April 1,
2011
(As restated see Note 3)
=35,434,340
P
5,668,720
1,040,088
=42,143,148
P
=29,671,766
P
4,391,721
347,130
=34,410,617
P
The cost of inventories carried at net realizable value amounted to =
P42.7 million, =
P52.6 million
and =
P44.8 million as at March 31, 2013 and 2012 and April 1, 2011, respectively. Provision for
inventory obsolescence in the form of excess of cost over net realizable value of inventories
amounted to P
=0.2 million, P
=0.7 million and P
=4.1 million in 2013, 2012 and 2011, respectively
(see Note 22).
Inventories charged to cost of educational materials and supplies sold for the years ended
March 31, 2013, 2012 and 2011 amounted to P
=49.5 million, P
=39.5 million and P
=47.6 million,
respectively (see Note 21).
*SGVFS002680*
- 47 -
9. Prepaid Expenses and Other Current Assets
This account consists of:
Prepaid taxes
Prepaid rent (see Note 25)
Excess contributions to CEAP
(see Note 24)
Prepaid license
Deposits
Others
March 31,
2013
P
=18,426,069
7,260,566
March 31,
2012
(As restated see Note 3)
=13,934,235
P
2,188,687
April 1,
2011
(As restated see Note 3)
=5,078,823
P
2,188,687
3,645,974
1,767,813
1,379,769
4,987,602
P
=37,467,793
1,575,506
1,343,034
1,986,804
3,632,618
=24,660,884
P
–
803,301
3,993,039
3,034,156
=15,098,006
P
Prepaid taxes represent prior years’ excess creditable withholding tax which may be applied
against future income tax, and other internal revenue taxes.
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 either because they did not meet the required tenure of ten years
or they did not reach the retirement age of sixty when they left the service or when De Los
Santos - STI College has already advanced the benefits of qualified employees (see Note 24).
Prepaid license represents software license costs which are amortized over one year.
Deposits pertain to security deposits made for warehouse and office space rentals to be applied
against future lease payments in accordance with the respective lease agreements.
*SGVFS002680*
- 48 -
10. Property and Equipment
The rollforward analysis of this account follows:
March 31, 2013
Land
Buildings
Office
and School
Equipment
= 648,949,537
P
1,035,636,448
= 489,952,915
P
113,903,997
= 84,054,171
P
5,571,344
= 26,551,149
P
16,164,912
= 90,149,525
P
36,937,557
–
132,120,932
–
–
–
–
–
–
–
–
–
–
Cost, Net of Accumulated Depreciation and
Amortization
Balance at beginning of year
Additions
Reclassification to other noncurrent assets
(see Note 15)
Reclassifications
Disposal
Depreciation and amortization
(see Notes 20 and 22)
Balance at end of year
–
= 1,296,723,152
P
(39,247,572)
= 696,730,272
P
At March 31, 2013:
Cost
Accumulated depreciation and amortization
Net carrying amount
= 1,296,723,152
P
–
= 1,296,723,152
P
= 927,986,992
P
231,256,720
= 696,730,272
P
(387,862,833)
–
–
(28,104,988)
P61,520,527
=
= 262,656,033
P
201,135,506
= 61,520,527
P
Office
Furniture
and Fixtures
Leasehold
Improvements
(11,704,053)
P31,012,008
=
= 122,600,237
P
91,588,229
= 31,012,008
P
(33,595,611)
P93,491,471
=
Transportation
Equipment
(see Note 25)
= 20,830,918
P
13,156,923
–
–
(1,172,501)
Library
Holdings
Construction
In Progress
Total
= 35,817,767
P
17,829,902
= 15,802,480
P
20,660,316
= 132,120,932
P
374,676,105
= 1,544,229,394
P
1,634,537,504
–
–
–
–
–
–
(387,862,833)
–
(1,172,501)
–
= 374,676,105
P
(154,455,593)
= 2,635,275,971
P
= 308,398,041
P
279,517,930
= 28,880,111
P
= 82,171,080
P
52,166,939
= 30,004,141
P
= 374,676,105
P
–
= 374,676,105
P
= 3,778,503,901
P
1,143,227,930
= 2,635,275,971
P
Transportation
Equipment
(see Note 25)
Computer
Equipment
and
Peripherals
Library
Holdings
Construction
In Progress
Total
P74,845,582
=
31,615,494
16,461,634
P20,762,297
=
10,306,090
–
P46,339,792
=
11,703,080
5,244,901
=14,845,244
P
6,811,535
–
–
–
–
–
= 65,416,128
P
43,177,944
= 22,238,184
P
(24,767,558)
P28,880,111
=
–
(132,120,932)
–
(6,458,655)
= 30,004,141
P
= 337,876,133
P
244,384,662
= 93,491,471
P
(10,577,156)
P22,238,184
=
Computer
Equipment
and
Peripherals
March 31, 2012
(As restated - see Note 3)
Cost, Net of Accumulated Depreciation and
Amortization
Balance at beginning of year
Additions
Reclassifications
Reclassifications from (to) investment properties
(see Note 11)
Depreciation and amortization
(see Notes 20 and 22)
Balance at end of year
At March 31, 2012:
Cost
Accumulated depreciation and amortization
Net carrying amount
Land
Buildings
=673,863,581
P
–
–
=419,218,101
P
20,817,730
65,051,808
(24,914,044)
16,341,648
–
=648,949,537
P
(31,476,372)
=489,952,915
P
=648,949,537
P
–
=648,949,537
P
P681,696,044
=
191,743,129
=489,952,915
P
Office
and School
Equipment
Office
Furniture
and Fixtures
P61,808,991
=
52,079,595
(4,801,933)
=30,498,410
P
6,127,059
(442,968)
–
(25,032,482)
P84,054,171
=
P257,296,137
=
173,241,966
=84,054,171
P
–
(9,631,352)
=26,551,149
P
=107,049,918
P
80,498,769
=26,551,149
P
Leasehold
Improvements
(32,773,185)
P90,149,525
=
P309,199,360
=
219,049,835
=90,149,525
P
(10,237,469)
P20,830,918
=
P57,361,255
=
36,530,337
=20,830,918
P
(27,470,006)
P35,817,767
=
P297,081,454
=
261,263,687
=35,817,767
P
P79,001,470
=
134,632,904
(81,513,442)
=1,421,183,468
P
274,093,487
–
–
(8,572,396)
(5,854,299)
=15,802,480
P
–
=132,120,932
P
(142,475,165)
=1,544,229,394
P
P61,504,491
=
45,702,011
=15,802,480
P
=132,120,932
P
–
=132,120,932
P
P2,552,259,128
=
1,008,029,734
=1,544,229,394
P
*SGVFS002680*
- 49 -
April 1, 2011
(As restated - see Note 3)
Cost, Net of Accumulated Depreciation and
Amortization
Balance at beginning of year
Additions
Reclassifications
Disposals
Depreciation and amortization
(see Notes 20 and 22)
Additions arising from business combination
(see Note 3)
Balance at end of year
At April 1, 2011:
Cost
Accumulated depreciation and amortization
Net carrying amount
Land
Buildings
P199,684,282
=
474,179,299
–
–
=344,373,119
P
12,543,371
92,442,779
–
–
(30,141,168)
Office
and School
Equipment
Office
Furniture
and Fixtures
P57,753,258
=
23,334,197
(431,259)
(87,438)
P23,738,204
=
16,047,953
(29,761)
(5,255)
(20,905,693)
(9,252,731)
Leasehold
Improvements
P58,539,839
=
34,395,482
8,241,036
–
(26,330,775)
Transportation
Equipment
(see Note 25)
Computer
Equipment
and
Peripherals
=24,742,705
P
5,930,157
–
–
P43,091,715
=
30,136,602
70,429
(3,179,858)
P3,166,048
=
14,852,727
390,591
–
(23,779,096)
(3,564,122)
(9,910,565)
Library
Holdings
Construction
In Progress
P67,868,715
=
111,816,570
(100,683,815)
–
–
Total
P822,957,885
=
723,236,358
–
(3,272,551)
(123,884,150)
–
=673,863,581
P
–
=419,218,101
P
2,145,926
=61,808,991
P
–
=30,498,410
P
–
=74,845,582
P
–
=20,762,297
P
–
=46,339,792
P
–
=14,845,244
P
–
=79,001,470
P
2,145,926
=1,421,183,468
P
=673,863,581
P
–
=673,863,581
P
P595,942,627
=
176,724,526
=419,218,101
P
P205,818,611
=
144,009,620
=61,808,991
P
=102,035,875
P
71,537,465
=30,498,410
P
P243,496,627
=
168,651,045
=74,845,582
P
P56,465,588
=
35,703,291
=20,762,297
P
P269,879,464
=
223,539,672
=46,339,792
P
P60,352,318
=
45,507,074
=14,845,244
P
=79,001,470
P
–
=79,001,470
P
=2,286,856,161
P
865,672,693
=1,421,183,468
P
*SGVFS002680*
- 50 In 2013, the Group acquired land located in Cainta, Rizal, Las Piñas 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.
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 =
P1,057.2 million, inclusive of materials, cost of
labor and overhead and all other costs necessary for the proper execution of the works in 2013.
The construction of these school buildings are expected to be completed in 2013.
As at March 31, 2012, the construction in progress account includes costs incurred for the
construction of the school building located in Novaliches, Quezon City. The related construction
contract amounted to =
P203.9 million, inclusive of materials, cost of labor and overhead and all
other costs necessary for the proper execution of the works in 2012. The construction of this
building was completed in June 2012.
As at March 31, 2011, the construction in progress account mainly pertains to costs incurred for
the construction of the school building located in Fairview. Construction contracts with various
contractors related to the above-mentioned projects amounted to =
P72.8 million, inclusive of
materials, cost of labor and overhead and all other costs necessary for the proper execution of the
works in 2011. As at March 31, 2012, the construction of this building has been completed.
Total borrowing costs capitalized as part of property and equipment amounted to =
P19.7 million as
at March 31, 2013. Average interest capitalization rates are at 3.3% in 2013. There were no
borrowing costs capitalized in 2012 and 2011.
As at March 31, 2012 and 2011, property and equipment with a carrying value amounting to
=166.6 million and P
P
=33.9 million, respectively, are pledged as security to the short-term loans of
the Group. The security interests on these pledged properties were released as result of the full
payment of the related short-term loans in December 2012 (see Note 16).
Certain transportation equipments were acquired under finance lease agreements. The net book
value of this equipment amounted to =
P15.9 million, =
P15.1 million and =
P12.4 million as at
March 31, 2013 and 2012 and April 1, 2011, respectively (see Note 25).
The cost of fully depreciated assets still being used by the Group amounted to =
P557.7 million,
=443.2 million and P
P
=328.7 million as at March 31, 2013 and 2012 and April 1, 2011, respectively.
11. Investment Properties
The rollforward analysis of this account follows:
Cost:
Balance at beginning of year
Disposal
Balance at end of year (Carried Forward)
Land
March 31, 2013
Buildings
Total
P
=28,521,424
(4,535,000)
23,986,424
P
=36,723,893
(3,965,000)
32,758,893
P
=65,245,317
(8,500,000)
56,745,317
*SGVFS002680*
- 51 -
Balance at end of year (Brought Forward)
Accumulated depreciation:
Balance at beginning of year
Depreciation (see Note 22)
Disposal
Balance at end of year
Net book value
Land
P
=23,986,424
March 31, 2013
Buildings
P
=32,758,893
Total
P
=56,745,317
–
–
–
–
P
=23,986,424
18,138,027
1,975,186
(2,693,187)
17,420,026
P
=15,338,867
18,138,027
1,975,186
(2,693,187)
17,420,026
P
=39,325,291
March 31, 2012
(As restated - see Note 3)
Land
Buildings
Cost:
Balance at beginning of year
Additions
Reclassifications from (to) property
and equipment (see Note 10)
Balance at end of year
Accumulated depreciation:
Balance at beginning of year
Depreciation (see Note 22)
Reclassification to property and equipment
(see Note 10)
Balance at end of year
Net book value
=3,607,380
P
–
P
=64,191,959
3,096,000
P
=67,799,339
3,096,000
24,914,044
28,521,424
(30,564,066)
36,723,893
(5,650,022)
65,245,317
–
–
30,385,259
1,975,186
30,385,259
1,975,186
–
–
=28,521,424
P
(14,222,418)
18,138,027
P
=18,585,866
April 1, 2011
(As restated - see Note 3)
Land
Buildings
Cost:
Balance at beginning of year
Disposal
Balance at end of year
Accumulated depreciation:
Balance at beginning of year
Depreciation (see Note 22)
Balance at end of year
Net book value
Total
(14,222,418)
18,138,027
P
=47,107,290
Total
P10,427,368
=
(6,819,988)
3,607,380
P
=64,191,959
–
64,191,959
P74,619,327
=
(6,819,988)
67,799,339
–
–
–
=3,607,380
P
27,205,438
3,179,821
30,385,259
P
=33,806,700
27,205,438
3,179,821
30,385,259
P
=37,414,080
As at March 31, 2013, the Group did not engage an independent appraiser to determine the fair
value of its investment properties, since management believes that there is no significant
movement in the fair value of its investment properties based on the appraisal valuation report as
at March 31, 2012. The aggregate fair value of certain investment properties amounted to
=111.1 million as at March 31, 2012, which was determined based on valuations performed by an
P
independent professional qualified appraiser in accordance with Philippine Valuation Standards.
The fair value represents the amount at which the assets could be exchanged between a
knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction at
the date of valuation. The Group was also unable to disclose the fair value for certain land and the
construction in progress as at March 31, 2013 and 2012. Management believes, however, that the
fair value is not lower than the cost of these investment properties as most of these properties are
recently acquired and constructed.
*SGVFS002680*
- 52 -
As at April 1, 2011, the Group also did not engage an independent appraiser to determine the fair
value of its investment properties, since management believes that there is no significant
movement in the fair value of its investment properties based on the appraisal valuation report as
at March 31, 2010. The fair value of investment properties as at March 31, 2010 amounted to
=111.8 million.
P
In conducting the appraisal, the accredited independent appraiser used the Market Data or
Comparative Approach. Under this approach, the value of the property is based on sales and
listings of comparable property registered within the vicinity. This approach requires the
establishment of a comparable property by reducing comparative sales and listings to a common
denominator with the subject. This is done by adjusting the differences between the subject
property and those actual sales and listings regarded as comparables. The properties used are
either situated within the immediate vicinity or at different floor levels of the same building,
whichever is most appropriate to the property being valued. Comparison was premised on the
factors of location, size and physical attributes, selling terms, facilities offered and time element.
Rental income earned from investment properties amounted to =
P4.6 million, =
P5.4 million and
=9.6 million in 2013, 2012 and 2011, respectively (see Notes 25 and 27). Property operations and
P
maintenance cost arising from investment properties amounted to P
=0.7 million, P
=0.3 million and
=0.5 million in 2013, 2012 and 2011, respectively (see Note 22).
P
As at March 31, 2012 and April 1, 2011, investment properties with a carrying value amounting to
=17.6 million and =
P
P32.7 million, respectively, are pledged as security to the short-term loans of
the Group. The security interests on these pledged properties were released as result of the full
payment of the related short-term loans in December 2012 (see Note 16).
12. Investments in and Advances to Associates and Joint Ventures
The details and movements in this account follow:
Investments in associates and joint ventures:
Acquisition cost:
Balance at beginning of year
Conversion of advances (see Note 7)
Disposal
Balance at end of year
Accumulated equity in net earnings:
Balance at beginning of year
Equity in net gains (losses)
Disposal
Dividends received
Balance at end of year
Share in associates’ unrealized
mark-to-market (MTM)
gain on AFS financial assets:
Balance at beginning of year
Unrealized MTM gain
Balance at end of year (Notes 3 and 18)
Advances to associates and joint ventures
Less allowance for impairment loss
March 31,
2013
March 31,
2012
(As restated see Note 3)
April 1,
2011
(As restated see Note 3)
= 207,664,874
P
41,587,726
–
249,252,600
=208,375,212
P
–
(710,338)
207,664,874
=
P208,375,212
–
–
208,375,212
303,031,267
(36,607,327)
(2,749,498)
(1,952,100)
261,722,342
484,296,331
(172,045,001)
–
(9,220,063)
303,031,267
261,722,342
428,600,839
–
(9,952,100)
680,371,081
1,083,699,331
846,474,380
1,930,173,711
2,859,797,392
52,689,744
7,167,760
45,521,984
= 2,905,319,376
P
173,867,841
909,831,490
1,083,699,331
1,553,086,547
38,400,724
3,047,124
35,353,600
=1,588,440,147
P
12,874,021
160,993,820
173,867,841
685,274,320
59,490,524
–
59,490,524
=
P744,764,844
*SGVFS002680*
- 53 -
The detailed carrying values of the Group’s investments in and advances to associates and joint
ventures are as follows:
Investments
Associates:
STI Investments
De Los Santos - General Hospital
STI-Accent
De Los Santos - STI Megaclinic
STI-Alabang
GROW
STI-Marikina
Synergia
Joint ventures:
PHEI
STI-PHNS
Allowance for impairment loss
P
=2,768,240,741
59,440,352
(20,166,002)
18,352,722
14,326,499
10,529,778
1,042,897
46,969
6,999,009
984,427
2,859,797,392
–
P
=2,859,797,392
2013
Advances
Total
P
=–
–
27,333,762
24,396,410
216,000
143,572
–
–
P
=2,768,240,741
59,440,352
7,167,760
42,749,132
14,542,499
10,673,350
1,042,897
46,969
600,000
–
52,689,744
7,167,760
P
=45,521,984
7,599,009
984,427
2,912,487,136
7,167,760
P
=2,905,319,376
2012
(As restated - see Note 3)
Investments
Advances
Associates:
STI Investments
De Los Santos - General Hospital
De Los Santos - STI Megaclinic
STI-Alabang
STI-Accent
GROW
STI-Marikina
Synergia
Joint ventures:
PHEI
STI-PHNS
Allowance for impairment loss
Total
=
P1,441,394,245
63,016,447
14,179,525
14,400,818
(13,920,818)
12,283,916
2,364,837
65,859
P–
=
–
20,073,210
1,216,000
16,967,942
143,572
–
–
=
P1,441,394,245
63,016,447
34,252,735
15,616,818
3,047,124
12,427,488
2,364,837
65,859
16,222,175
3,079,543
1,553,086,547
–
=1,553,086,547
P
–
–
38,400,724
3,047,124
P
=35,353,600
16,222,175
3,079,543
1,591,487,271
3,047,124
P
=1,588,440,147
2011
(As restated - see Note 3)
Investments
Advances
Associates:
STI Investments
De Los Santos - General Hospital
De Los Santos - STI Megaclinic
STI-Accent
STI-Alabang
GROW
STI-Parañaque
STI-Marikina
Synergia
Joint ventures:
PHEI
STI-PHNS
Total
=
P562,933,108
74,001,302
15,654,795
(13,920,818)
12,731,974
11,578,934
3,459,836
1,660,903
65,859
=–
P
3,137,650
40,298,340
13,920,818
1,990,145
143,571
–
–
–
P
=562,933,108
77,138,952
55,953,135
–
14,722,119
11,722,505
3,459,836
1,660,903
65,859
13,993,237
3,115,190
=685,274,320
P
–
–
P
=59,490,524
13,993,237
3,115,190
P
=744,764,844
*SGVFS002680*
- 54 -
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 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. STI
Investments’ acquisition of PhilPlans and PhilCare in 2010 resulted to an excess of fair values of
net assets acquired over acquisition costs amounting to =
P2.3 billion.
In 2013, 2012 and 2011, the Group’s share in net earnings (losses) of STI Investments amounted
to =
P438.8 million, (P
=31.7 million) and (P
=177.9 million), respectively. While the subsidiaries of
STI Investments reported net income in 2012 and 2011 in their separate financial statements, STI
Investments and subsidiaries reported consolidated net losses in 2012 and 2011 which were
primarily due to reversal of the portion of the realized gain on sale or disposal of AFS financial
assets recognized by the subsidiaries as the cost basis for these AFS financial assets at STI
Investments’ consolidated level was higher when these were acquired by STI Investments in 2010.
These reversals reduced the equity in net earnings by P
=278.8 million and P
=415.8 million in 2012
and 2011, respectively.
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
(see Note 33).
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 (see Note 33).
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
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 =
P6.2 million as at March 31, 2012. Also, the Group provided
full allowance for impairment loss on its investments in STI-Accent and related advances
amounting to =
P7.2 million, P
=3.0 million and nil in 2013, 2012 and 2011, respectively.
*SGVFS002680*
- 55 -
The condensed financial information of associates is shown below:
Period
Total Assets
Total
Liabilities
Equity (Capital
Deficiency)
Net Revenue
Net Income
(Loss)
STI Investments
2013
2012
2011
P
= 51,220,643,071
43,246,802,491
39,298,809,000
=
P37,220,341,151
36,038,446,064
36,483,114,813
=
P15,197,335,484
7,208,356,427
2,815,694,187
=
P8,393,171,350
5,892,254,734
6,967,529,005
=
P2,222,239,659
(156,851,769)
(888,229,331)
De Los Santos-General
Hospital
2013
2012
2011
188,555,069
204,321,023
34,216,699
167,748,996
137,482,867
13,631,531
20,806,073
66,838,156
20,585,168
305,992,982
337,290,658
328,413,617
(10,836,647)
6,701,639
30,745,681
De Los Santos-STI
Megaclinic
2013
2012
2011
132,768,034
152,109,170
159,688,203
92,707,357
128,928,185
122,220,475
40,060,677
23,180,985
37,467,728
86,799,627
93,743,090
86,271,070
13,017,192
5,301,530
6,156,163
GROW
2013
2012
2011
72,313,089
35,727,490
89,891,281
66,269,564
8,931,415
59,505,680
6,043,525
26,796,075
30,385,601
77,089,464
77,089,464
76,415,336
(24,342,076)
(3,589,525)
(5,516,715)
STI-Alabang
2013
2012
2011
9,095,552
7,474,115
9,590,302
11,326,695
11,887,032
9,516,259
(2,231,143)
(4,412,917)
74,043
29,129,216
26,721,337
26,717,316
(185,797)
(673,012)
(358,163)
STI-Accent
2013
2012
2011
29,945,266
34,526,126
34,457,016
97,451,844
112,402,511
90,328,468
(67,506,578)
(77,876,385)
(55,871,452)
20,928,703
73,090,283
76,397,095
(17,816,595)
(18,963,893)
(25,963,805)
STI-Marikina
2013
2012
2011
17,917,339
22,566,867
19,246,573
9,987,861
708,848
97,152
7,929,478
21,858,019
19,149,421
34,339,065
39,688,052
36,193,934
2,625,669
11,066,807
9,430,914
Others
2013
2012
2011
215,457
350,000
402,739
1,737,444
2,382,585
1,176,103
(1,521,987)
(2,032,585)
(773,364)
–
–
1,934,150
(62,968)
–
(784,863)
For terms and conditions relating to advances to associates and joint ventures, refer to Note 27.
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.
*SGVFS002680*
- 56 -
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.
The following are the summarized financial information of the joint ventures as at March 31, 2013
and 2012 and April 1, 2011 and revenue and expenses for the years then ended follow:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net assets
PHEI
P
=25,445,109
5,592,350
(11,776,611)
(1,860,792)
P
=17,400,056
March 31, 2013
STI-PHNS
P
=243,626
9,864,000
(324,224)
–
P
=9,783,402
Total
P
=25,688,735
15,456,350
(12,100,835)
(1,860,792)
P
=27,183,458
Revenues
Expenses
Loss from operations
Benefit from income tax
Net loss
P
=23,976,670
(28,660,095)
(4,683,425)
1,625,509
(P
= 3,057,916)
P
=–
(186,844)
(186,844)
–
(P
= 186,844)
P
=23,976,670
(28,846,939)
(4,870,269)
1,625,509
(P
= 3,244,760)
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net assets
March 31, 2012
(As restated - see Note 3)
PHEI
STI-PHNS
=48,769,083
P
=430,470
P
5,229,548
9,864,000
(11,774,533)
(324,224)
(1,668,660)
–
=40,555,438
P
P
=9,970,246
Total
P
=49,199,553
15,093,548
(12,098,757)
(1,668,660)
=50,525,684
P
Revenues
Expenses
Income (loss) from operations
Provision for income tax
Net income (loss)
P40,174,333
=
(32,460,685)
7,713,648
(2,001,685)
=5,711,963
P
P40,174,333
=
(32,633,197)
7,541,136
(2,001,685)
=5,539,451
P
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net assets
April 1, 2011
(As restated - see Note 3)
PHEI
STI-PHNS
=40,458,590
P
=441,332
P
7,867,640
9,864,000
(11,900,345)
(162,572)
(1,442,795)
–
=34,983,090
P
P
=10,142,760
Total
P
=40,899,922
17,731,640
(12,062,917)
(1,442,795)
P
=45,125,850
Revenues
Expenses
Income (loss) from operations
Provision for income tax
Net income (loss)
P55,697,948
=
(44,651,598)
11,046,350
(2,925,523)
=8,120,827
P
=
P55,698,382
(44,837,612)
10,860,770
(2,925,523)
=7,935,247
P
=–
P
(172,512)
(172,512)
–
(P
=172,512)
=434
P
(186,014)
(185,580)
–
(P
=185,580)
For terms and conditions relating to advances to associates and joint ventures, refer to Note 27.
*SGVFS002680*
- 57 -
14. Available-for-Sale Financial Assets
This account consists of:
Quoted equity shares at fair value
Unquoted equity shares - at cost
Less current portion
March 31,
2013
March 31,
2012
(As restated see Note 3)
April 1,
2011
(As restated see Note 3)
P
=3,716,495
946,983
4,663,478
–
P
=4,663,478
=4,040,655
P
946,983
4,987,638
–
=4,987,638
P
P
=54,744,535
964,943
=55,709,478
P
51,065,768
=4,643,710
P
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.
On April 19, 2010, the Group entered into three (3) Option Agreements (Agreements) to sell
all or any of the AFS common shares which the Group acquired on February 5, 2010. As
stated in the Agreements, the option to sell the shares is exercisable within 3 years. However,
for each exercise year, 1/3 of the subject shares will expire. Consequently, all of the subject
shares are exercisable during the first year, only 2/3 during the second year and only 1/3
during the third year. The exercise price per share for each exercise year ranges from =
P5.67 to
=6.76. The Agreements also provide for adjustments in the exercise price if cash or stock
P
dividends are received on the subject shares. As at April 1, 2011, the MTM valuation of the
Agreements is not material.
In April 2010, the Group sold 6,862,800 AFS common shares with a cost of =
P5.10 per share
for =
P5.35 per share. In March 2011, the Group sold 4,248,400 AFS common shares with a
cost of P
=5.10 per share for =
P5.67 per share and 7,820,000 AFS common shares (which the
Group acquired separately on February 28, 2010) with a cost of =
P5.10 per share for P
=5.50 per
share. These transactions resulted to a total gain from sale of P
=7.3 million (included as part of
“Gain on sale of available-for-sale financial assets” account in the 2011 consolidated
statement of comprehensive income).
On March 24, 2011, the Group received a written commitment from its counterparty to
exercise the option on all the remaining shares under the Agreements. The counterparty
subsequently exercised the option on the remaining shares on April 13, 2011. On April 13,
2011, the sale of the remaining 12,745,200 AFS common shares for =
P5.47 per share resulted
to a net gain of =
P4.7 million.
*SGVFS002680*
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The rollforward analysis of the “Unrealized mark-to-market gain (loss) on available-for-sale
financial assets” follows:
Balance at beginning of year
Unrealized MTM gain (loss) on
AFS financial assets
Realized MTM gain on AFS
financial assets recognized to
profit or loss
Balance at end of year
(see Notes 3 and 18)
March 31,
2013
P
=192,971
(324,160)
–
(P
=131,189)
March 31,
2012
(As restated see Note 3)
=7,581,133
P
April 1,
2011
(As restated see Note 3)
(P
=1,922,007)
(2,708,605)
18,109,528
(4,679,557)
(8,606,388)
=192,971
P
P
=7,581,133
Dividend income earned from AFS financial assets amounted to P
=0.4 million, =
P2.8 million
and P
=3.0 million in 2013, 2012 and 2011, respectively.
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 of these unquoted equity shares cannot be
reliably determined and are carried at cost less accumulated impairment, if any.
15. Goodwill, Intangible and Other Noncurrent Assets
This account consists of:
Land (see Notes 10 and 33)
Goodwill
Deposits (see Note 25)
Intangible assets
Advances to suppliers
Others (see Note 6)
March 31,
2013
P
=387,862,833
200,258,253
31,962,268
7,711,712
5,314,902
8,890,608
P
=642,000,576
March 31,
2012
(As restated see Note 3)
=–
P
200,258,253
52,542,751
7,521,312
3,192,642
11,771,563
=275,286,521
P
April 1,
2011
(As restated see Note 3)
=–
P
203,641,809
18,958,875
6,569,312
4,049,507
16,784,692
=250,004,195
P
Land
On March 21, 2013, STI ESG’s BOD approved the transfer of the land to TechZone Philippines,
Inc. (TechZone), a related party (see Note 27), in exchange for condominium units to be
developed by TechZone. In April 2013, the said property was used as collateral for the loan of the
said related party. As of July 8, 2013, the ownership of the land has not yet been transferred.
*SGVFS002680*
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Goodwill
The rollforward analyses of this account follow:
Balance at beginning of year
Provision for impairment loss
(see Note 22)
Additions due to business
combinations (see Note 3)
Balance at end of year
March 31,
2013
P
=200,258,253
March 31,
2012
(As restated see Note 3)
=203,641,809
P
–
(3,383,556)
–
P
=200,258,253
–
=200,258,253
P
April 1,
2011
(As restated see Note 3)
=183,167,631
P
–
20,474,178
=203,641,809
P
Goodwill acquired through business combinations have been allocated to the following entities
which are considered as separate CGUs:
STI-Kalookan
STI-Cubao(a)
STI-Novaliches
STI-Taft
STI-Tuguegarao (see Note 3)
STI-Global City(a)
STI-Edsa Crossing(a)
STI-Orca(a)
STI-Dagupan (see Note 3)
STI-Meycauayan(a)
STI-UWI(a)
STI-Makati(a)
STI-Las Piñas(a)
STI-Kalibo(a)
STI-Naga(a)
STI-Pre-school Parañaque(b)
Less accumulated impairment
loss
March 31,
2013
P
=64,147,877
28,327,670
21,803,322
19,030,844
13,638,360
11,360,085
11,213,342
7,476,448
6,835,818
5,460,587
3,383,556
3,261,786
2,922,530
2,474,216
2,305,368
–
203,641,809
March 31,
2012
(As restated see Note 3)
=64,147,877
P
28,327,670
21,803,322
19,030,844
13,638,360
11,360,085
11,213,342
7,476,448
6,835,818
5,460,587
3,383,556
3,261,786
2,922,530
2,474,216
2,305,368
1,027,272
204,669,081
April 1,
2011
(As restated see Note 3)
=64,147,877
P
28,327,670
21,803,322
19,030,844
13,638,360
11,360,085
11,213,342
7,476,448
6,835,818
5,460,587
3,383,556
3,261,786
2,922,530
2,474,216
2,305,368
1,027,272
204,669,081
3,383,556
P
=200,258,253
4,410,828
=200,258,253
P
1,027,272
=203,641,809
P
(a)
Merged with STI ESG in 2012
Disposed in 2012
(b)
In 2012, STI-UWI has already ceased its operations. Thus, STI ESG impaired the related
goodwill amounting to =
P3.4 million (see Note 22).
*SGVFS002680*
- 60 -
Deposits
Deposits as at March 31, 2012 include STI ESG’s cash bond to enter into a bid to purchase a
certain land to be used for the construction of a school building, amounting to =
P29.1 million.
The said land was subsequently purchased in April 2012 for a total amount of P
=291 million.
This account also 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. Interest earned from accretion of discount on these refundable deposits
amounted to nil, =
P0.1 million and P
=0.2 million in 2013, 2012 and 2011, respectively (see Note 19).
Intangible Assets
Intangible assets represents STI ESG’s new accounting software, which will be ready for use and
will be amortized based on its estimated useful life starting June 2013.
The rollforward analyses of this account follow:
Balance at beginning of year
Additions
Reclassification
Balance at end of year
March 31,
2013
P
=7,521,312
–
190,400
P
=7,711,712
March 31,
2012
(As restated see Note 3)
=6,569,312
P
952,000
–
=7,521,312
P
April 1,
2011
(As restated see Note 3)
=–
P
6,569,312
–
=6,569,312
P
16. Short-term Loans
As at March 31, 2012 and April 1, 2011, this account consists of:
Secured
Metropolitan Bank and Trust Company (Metrobank)
Security Bank Corporation (Security Bank)
Bank of the Philippine Islands (BPI)
Unsecured
Rescom Developers, Inc. (RDI)
First Metro Investment Corporation (FMIC)
Metrobank
March 31,
2012
(As restated see Note 3)
April 1,
2011
(As restated see Note 3)
=321,000,000
P
250,000,000
175,000,000
746,000,000
=–
P
228,000,000
100,000,000
328,000,000
687,336
–
–
687,336
=746,687,336
P
687,336
485,000,000
100,000,000
585,687,336
=913,687,336
P
As at March 31, 2012 and 2011, the loans from Security Bank, BPI and Metrobank are secured by
certain property and equipment and investment properties of STI ESG (see Notes 10 and 11). The
loans from BPI and Metrobank are further secured by the joint and several signature of a major
shareholder. These loans have maturities of one year or less with interest rates ranging from
5.25% to 12.00% in 2012 and 2011.
*SGVFS002680*
- 61 -
Based on the agreement with FMIC, STI ESG may, at its option, prepay the loan in part or in full,
together with accrued interest thereon without penalty. On July 28, 2011, outstanding short-term
loans to FMIC have been reduced to =
P388.0 million. The amount of =
P388.0 million have been
converted into a secured long-term loan which will be paid over a period of 5 years at an annual
fixed interest rate of 6.92%, with a grace period of one (1) year on principal. On December 23,
2011, STI ESG prepaid the entire amount of this secured long-term loan.
Also, the loan from RDI, a shareholder, represents an interest-bearing loan, which was obtained
for working capital purposes. The loans have no collateral and are payable on demand.
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, 2012 and April 1, 2011, the Group
has complied with these covenants. The Group has complied with the notice requirement under
the loan agreements with the creditor banks.
For the year ended March 31, 2013, the Group availed of unsecured, interest-bearing short-term
loans from Metrobank, Security Bank, BPI, UnionBank of the Philippines and Classic Finance
(an entity under common control of a majority Shareholder) aggregating to =
P539.0 million. These
loans bear interest rates ranging from 5% to 6%. The proceeds from these new loan availments
and proceeds from issuances of 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.
Interest incurred from short-term loans amounted to =
P17.3 million, =
P32.5 million and
=25.3 million for the years ended March 31, 2013 and 2012 and April 1, 2011, respectively
P
(see Note 19).
17. Accounts Payable and Other Current Liabilities
This account consists of:
Accounts payable
Accrued expenses:
Rent
School-related expenses
Salaries, wages and benefits
Advertising and promotion
Contracted services
Utilities
Others
Dividends payable (see Note 18)
Unearned tuition and other
school fees
Withholding taxes payable
Others
March 31,
2012
(As restated see Note 3)
=97,613,162
P
April 1,
2011
(As restated see Note 3)
=70,859,661
P
47,913,702
18,514,400
9,283,290
7,131,086
4,259,353
4,187,980
12,189,508
11,840,316
50,824,669
20,485,318
19,683,014
17,763,120
7,645,095
2,347,060
12,554,893
11,824,650
49,629,634
23,119,722
14,346,645
19,365,117
6,588,126
2,714,098
33,990,943
12,667,756
5,342,406
8,115,060
17,499,904
P
=320,685,820
17,012,691
8,292,159
35,674,463
=301,720,294
P
20,909,469
5,529,659
50,323,788
=310,044,618
P
March 31,
2013
P
=174,408,815
*SGVFS002680*
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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 school fees are amortized over the related school term.
d. Other payables are expected to be settled within the next financial year.
18. Equity
a. Common Stock
Details and movement in common stock follow:
Common Stock - P
=0.50 par value
per share
Authorized
Issued and outstanding:
Balance at beginning of year
Issuances (see Note 1)
Balance at end of year
Shares
March 31, 2013
Amount
Shares
March 31, 2012
Amount
Shares
April 1, 2011
Amount
10,000,000,000
=
P5,000,000,000
1,103,000,000
P
=551,500,000
1,103,000,000
P
=551,500,000
1,103,000,000
8,801,806,924
9,904,806,924
=
P551,500,000
4,400,903,462
=
P4,952,403,462
307,182,211
795,817,789
1,103,000,000
P
=153,591,106
397,908,894
P
=551,500,000
307,182,211
–
307,182,211
P
=153,591,106
–
P
=153,591,106
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 =
P477.5 million. Documentary stamp taxes paid relative to the
issuances of shares amounting to P
=2.0 million is presented as deduction from additional paidin capital.
On September 26, 2012, the PSE approved the Parent Company’s listing of the private
placement shares subject to the submission of (i) a duly executed lock-up agreement
at least three days prior to the actual listing date of the private placement shares; and
(ii) a confirmation from the SEC that the mandatory tender offer rule does not apply to the
subject private placement transaction, or, if a mandatory offer is required to be conducted, a
confirmation from the Parent Company that the mandatory offer requirement and other related
requirements of the SEC have been complied with (see Note 33).
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
(see Notes 1 and 3).
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 =
P1,050.8 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, charged against APIC,
amounted to =
P118.5 million.
*SGVFS002680*
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Set out below is the Company’s track record of registration of its securities:
Date of Approval
December 4, 2007*
November 25, 2011**
September 28, 2012***
November 7, 2012
November 28, 2012
Number of Shares
Authorized
Issued
1,103,000,000
307,182,211
1,103,000,000
795,817,789
10,000,000,000
5,901,806,924
10,000,000,000
2,627,000,000
10,000,000,000
273,000,000
Issue/
Offer Price
=0.50
P
0.60
2.22
0.90
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 of March 31, 2013 and 2012, the Company has a total number of shareholders on record of
1,243 and 1,235, respectively.
b. Cost of Shares Held by a Subsidiary
“Cost of shares held by a subsidiary” account includes 502,308,895 STI Holdings shares
owned by STI ESG as of March 31, 2013 amounting to =
P500.0 million which is treated as
treasury shares in the consolidated statements of financial position. Dividends related to these
shares, amounting to =
P5.0 million, was offset against the dividends declared in 2013 as shown
in the statement of changes in equity.
c. Unrealized Mark-to-market Gain (Loss) on Available-for-sale Financial Assets
March 31, 2013
Share in associates’ unrealized MTM gain on AFS
financial assets (Notes 3 and 12)
Unrealized MTM loss on AFSfinancial assets
(Notes 3 and 14)
Attributable to
Equity Holders
of the Parent
Company
Non-controlling
interests
Total
= 1,905,291,022
P
=
P24,882,689
=
P1,930,173,711
(121,773)
= 1,905,169,249
P
(9,416)
=
P24,873,273
(131,189)
=
P1,930,042,522
March 31, 2012
(As restated - see Note 3)
Attributable to
Equity Holders
of the Parent
Non-controlling
Company
interests
Share in associates’ unrealized MTM gain on AFS
financial assets (Note 12)
Unrealized MTM gain (loss) on AFS financial assets
(Note 14)
=1,039,792,823
P
=
P43,906,508
P
=1,083,699,331
207,684
=1,040,000,507
P
(14,713)
=
P43,891,795
192,971
P
=1,083,892,302
April 1, 2011
(As restated - see Note 3)
Attributable to
Equity Holders
of the Parent
Non-controlling
Company
interests
Share in associates’ unrealized MTM gain on AFS
financial assets (Note 12)
Unrealized MTM gain on AFS financial assets (Note 14)
Total
=166,823,517
P
7,283,059
=174,106,576
P
P
=7,044,324
298,074
P
=7,342,398
Total
=
P173,867,841
7,581,133
=
P181,448,974
*SGVFS002680*
- 64 -
d. Other Equity Reserve
“Other equity reserve” account consists of:
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
Issuance of STI Holdings shares at par
Capital stock
Recognition of non-controlling interests (NCI)
Non-controlling interests
Elimination of STI ESG common shares
Capital stock
Elimination of STI ESG additional paid in capital Additional paid-in capital
Elimination of retained earnings of STI Holdings
prior to being under common control
Retained earnings
Elimination of other comprehensive income of STI
Holdings prior to being under common control Other comprehensive income
Transfer from STI ESG’s retained earnings to NCI
relative to amount attributed to minority
shareholders
Retained earnings
Transfer from STI ESG’s other comprehensive
income to NCI relative to amount attributed to
minority shareholders
Other comprehensive income
Elimination of investment of STI Holdings to STI
Available-for-sale financial assets
ESG prior to the Share Swap
Reclassification of STI ESG’s investment in STI
Holdings and elimination of STI ESG’s share Investments in and advances to
in net income of STI Holdings
associates and joint ventures
Cost of shares held by a subsidiary
Retained earnings
Stock issue cost relative to the Share Swap
Amount
=2,950,903,462
P
173,954,704
(980,000,000)
(379,937,290)
(24,004,083)
119,472
(74,108,762)
(44,748,649)
80,811,545
501,153,708
(500,009,337)
(1,144,371)
15,510,031
=1,718,500,430
P
ii. Parent Company’s 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 =
P69.1 million (see Note 3).
iii. STI ESG’s other equity adjustment for the excess of acquisition cost over the carrying
value of its remaining non-controlling interests amounting to =
P27,278.
e. Retained Earnings
Consolidated retained earnings represent STI ESG’s retained earnings, net of amount
attributable to NCI, and STI Holdings’ accumulated earnings, net of dividends declared from
April 1, 2010, after the Controlling Shareholder’s acquisition of STI Holdings (see Note 3).
Consolidated retained earnings include undeclared retained earnings of subsidiaries and
associates amounting to =
P1,443.0 million and P
=711.2 million as at March 31, 2013 and 2012,
respectively. The Parent Company’s retained earnings available for dividend declaration,
computed based on the guidelines provided in the SEC Memorandum Circular No. 11,
amounted to =
P11.2 million and =
P17.0 million as at March 31, 2013 and 2012, respectively.
*SGVFS002680*
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On December 7, 2011, the BOD approved the appropriation of P
=800.0 million out of its
unappropriated retained earnings balance, as reconfirmed in the July 8, 2013 STI ESG’s BOD
meeting, for the Group’s future expansion of nine schools within the next two years.
On December 5, 2012, cash dividends amounting to P
=0.01 per share or the aggregate amount
of =
P99.0 million were declared by the Parent Company’s 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 =
P0.02 per share or the aggregate amount of
=6.1 million were declared by the Parent Company’s BOD in favor of all stockholders on
P
record as of November 11, 2011, payable on December 8, 2011.
As of March 31, 2013 and 2012, long outstanding unclaimed dividends amounting to
=11.8 million pertains to dividend declarations from 1998 to 2006.
P
19. Interest Income and Interest Expense
Interest income is derived from the following sources:
Cash and cash equivalents (see Note 6)
Advances to associates and joint ventures
(see Note 27)
Noncurrent receivables (see Note 27)
Restructured receivables
Accretion of discount on refundable
deposits (see Note 15)
2013
P
=19,388,771
2012
2011
(As restated - (As restated see Note 3)
see Note 3)
=9,782,776
P
=12,410,738
P
2,608,782
12,726,335
–
2,020,625
3,725,489
560,995
–
P
=34,723,888
108,348
=16,198,233
P
3,370,977
–
560,995
243,671
=16,586,381
P
Interest expenses are incurred from the following sources:
Short-term loans (see Note 16)
Obligations under finance lease
(see Note 25)
2013
P
=17,320,345
1,511,021
P
=18,831,366
2012
2011
(As restated - (As restated see Note 3)
see Note 3)
=32,533,323 P
P
=25,340,373
1,332,121
=33,865,444
P
1,223,521
=26,563,894
P
*SGVFS002680*
- 66 -
20. Cost of Educational Services
This account consists of:
2013
Faculty salaries and benefits
(see Notes 23 and 24)
Cost of student activities
Rental (see Note 25)
Depreciation and amortization
(see Note 10)
Courseware development
Others
2012
2011
(As restated - (As restated see Note 3)
see Note 3)
P192,126,640 P
=214,641,721
P
=190,101,113 =
91,731,260
80,372,625
101,543,377
97,054,973
98,000,786
95,083,498
79,229,573
63,021,803
87,088,146
3,205,510
1,088,995
1,525,885
18,508,740
31,267,925
10,068,037
=481,856,696 P
=488,393,855
P
=485,410,056 P
21. Cost of Educational Materials and Supplies Sold
This account consists of:
Educational materials
Promotional materials
School materials and supplies
Others
2013
P
=25,659,453
13,076,515
9,105,552
1,648,119
P
=49,489,639
2012
2011
(As restated - (As restated see Note 3)
see Note 3)
=18,467,803 P
P
=30,036,708
11,384,345
10,137,218
8,675,101
6,671,576
1,009,953
765,806
=39,537,202 P
P
=47,611,308
22. General and Administrative Expenses
This account consists of:
2012
2011
(As restated - (As restated see Note 3)
see Note 3)
2013
Salaries, wages and benefits
(see Notes 23, 24 and 27)
Light and water
Depreciation and amortization
(see Notes 10 and 11)
Taxes and licenses
Rental (see Note 25)
Professional fees
P
=224,892,605
93,622,687
=215,770,404
P
87,728,365
=211,213,272
P
77,130,421
69,342,633
68,800,958
48,232,708
39,097,439
65,220,778
28,325,491
48,161,313
34,396,335
64,042,168
23,841,414
57,182,266
38,199,799
(Forward)
*SGVFS002680*
- 67 -
2012
2011
(As restated - (As restated see Note 3)
see Note 3)
2013
Provision for impairment loss on:
Receivables (see Note 7)
=40,994,410 P
=37,837,174
P
=34,534,038 P
Investments in and advances to
associates and joint ventures
(see Note 12)
3,047,124
–
4,120,636
Goodwill (see Note 15)
3,383,556
–
–
Outside services
27,277,269
24,872,464
34,263,759
Advertising and promotions
18,466,455
18,037,538
21,168,920
Transportation
21,079,158
23,335,747
21,158,560
Meetings and conferences
14,129,561
12,140,828
13,438,035
Entertainment, amusement and recreation
9,980,928
7,450,965
12,078,133
Office supplies
8,637,864
8,708,836
10,235,845
Repairs and maintenance
9,745,033
9,617,356
9,430,056
Communication
7,410,537
7,958,878
7,565,325
Purchased services and utilities
7,438,820
5,281,112
6,099,640
Insurance
4,234,335
3,887,425
4,515,053
Excess of cost over net realizable value
of inventories (see Note 8)
679,052
4,127,164
246,168
Others
31,990,747
29,679,259
23,107,629
P688,097,535 =
P664,544,086
P
=745,950,827 =
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
This account consists of:
Salaries and wages
Pension expense (see Note 24)
Other employee benefits (see Note 27)
2013
P
=344,045,511
19,878,858
51,069,349
P
=414,993,718
2012
2011
(As restated - (As restated see Note 3)
see Note 3)
=348,679,602 P
P
=353,925,709
4,987,261
14,422,725
54,230,181
57,506,559
=407,897,044 P
P
=425,854,993
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 regular employees. The benefits
are based on employees’ salaries and length of service.
*SGVFS002680*
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The following tables summarize the components of the Group’s net pension costs recognized in
profit or loss and amounts recognized in the consolidated statements of financial position:
2012
(As restated see Note 3)
2011
(As restated see Note 3)
P9,415,358
=
4,592,186
P
=7,642,349
5,278,974
P
=7,340,051
4,630,652
202,919
(1,681,528)
=12,528,935
P
(8,080,511)
(2,613,648)
P
=2,227,164
276,223
(1,489,183)
P
=10,757,743
=108,390,992
P
(85,258,469)
23,132,523
24,310,631
47,443,154
P82,703,113
=
(29,373,472)
53,329,641
(12,794,567)
P
=40,535,074
=
P71,216,511
(32,839,941)
38,376,570
4,904,531
P
=43,281,101
Changes in the present value of defined
benefit obligations:
Balance at beginning of year
Current service cost
Interest cost
Benefits paid
Actuarial loss (gain) on obligations
Balance at end of year
=82,703,113
P
9,415,358
4,592,186
(20,928,160)
32,608,495
=108,390,992
P
P
=71,216,511
7,642,349
5,278,974
(738,294)
(696,427)
P
=82,703,113
P
=57,136,386
7,340,051
4,630,652
(4,941,895)
7,051,317
P
=71,216,511
Changes in fair value of plan assets:
Balance at beginning of year
Contributions
Expected return on plan assets
Benefits paid
Actuarial gain (loss) on plan assets
Balance at end of year
=29,373,472
P
5,620,855
1,681,528
(20,928,160)
69,510,774
=85,258,469
P
P
=32,839,941
4,973,191
2,613,648
(738,294)
(10,315,014)
P
=29,373,472
P
=19,306,252
6,825,680
1,489,183
(1,329,209)
6,548,035
P
=32,839,941
Actual return (loss) on plan assets
=71,192,302
P
(P
=7,701,366)
=8,037,218
P
2013
Pension expense (recognized in “Salaries,
wages and benefits” account):
Current service cost
Interest cost
Actuarial loss (gain) recognized
during the year
Expected return on plan assets
Pension liabilities (recognized in the
consolidated statements of financial
position):
Present value of defined benefit
obligations
Fair value of plan assets
Unrecognized net actuarial loss (gain)
The principal assumptions used in determining pension liabilities are shown below:
Discount rate
Expected rate of return on plan assets
Future salary increases
April 1, 2012
3-8%
5.00–8.00%
5.00–8.00%
April 1, 2011
5.00–11.00%
5.00–8.00%
6.00–8.00%
April 1, 2010
5.00–11.00%
5.00–8.00%
5.00–8.00%
*SGVFS002680*
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The major categories of the Group’s total plan assets as a percentage of the fair value of the total
plan assets are as follows:
2012
42%
–
58%
100%
2013
15%
3%
82%
100%
Cash
Investment in debt securities
Investments in equity securities
2011
4%
–
98%
100%
The plan assets of the STI ESG are maintained by Union Bank of the Philippines.
Details of STI ESG’s net assets available for plan benefits and their related market values as of
March 31, 2013 are as follows:
Short-term fixed income
Investment in government securities
Investment in equity securities
=12,329,338
P
3,043,165
69,885,966
=85,258,469
P
Short-term Fixed Income. Short-term fixed income investment includes time deposits and special
savings deposits.
Investment 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.
Investment in Equity Securities. Investments in equity securities pertain to STI ESG’s investment
in shares of the Parent Company which has a fair value of P1.00 per share as at March 31, 2013.
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 expected contribution of the Group in 2014 is =
P18.9 million.
The amounts for the current and previous four periods are as follows:
2013
Present value of pension
liabilities
Fair value of plan assets
Excess of present value of
pension liabilities over
fair value of plan assets
Experience adjustments on:
Pension liabilities
Plan assets
2012
2011
2010
2009
P
=108,390,992
(85,258,469)
P82,703,113
=
(29,373,472)
=
P71,216,511
(32,839,941)
=
P57,136,386
(19,306,252)
=
P49,567,300
(17,716,219)
P
=23,132,523
=53,329,641
P
=
P38,376,570
=
P37,830,134
=
P31,851,081
(P
= 32,608,496)
69,510,774
=696,427
P
(10,315,014)
(P
=7,051,317)
6,548,035
P233,973
=
375,493
=
P11,943,946
(1,408,212)
*SGVFS002680*
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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
employee’s contribution is optional.
De Los Santos - STI College and STI-QA’s contributions consist of future service cost and past
service cost. Future service cost is equal to 4.00% of employee’s 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-QA’s 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-QA’s 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 employee’s contribution based on the
latter’s years of tenure.
As at March 31, 2013 and 2012 and April 1, 2011, De Los Santos -STI College and STI-QA have
excess contributions to CEAP amounting to P
=3.6 million, P
=1.6 million and nil, respectively
(see Note 9). These excess contributions are classified as prepaid expense and will be offset
against De Los Santos -STI College and STI-QA’s future required contributions to CEAP.
The CEAP Statements of Participant’s Equities show that total contributions amounted to
=2.1 million, P
P
=1.3 million and =
P1.0 million as at March 31, 2013 and 2012 and April 1, 2011,
respectively, and total income amounted to P
=0.6 million, =
P0.7 million and P
=0.8 million in 2013,
2012 and 2011, respectively.
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 2013, 2012 and 2011,
shown as part of “Cost of educational services” and “General and administrative expenses”
accounts, amounted to P
=7.3 million, P
=2.8 million and P
=3.7 million, respectively.
Total pension expense recognized in profit or loss follows:
Defined benefit plans
Defined contribution plans
2013
P
=12,528,935
7,349,923
P
=19,878,858
2012
2011
(As restated - (As restated see Note 3)
see Note 3)
=2,227,164 P
P
=10,757,743
2,760,097
3,664,982
=4,987,261 P
P
=14,422,725
*SGVFS002680*
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25. Leases
a. Finance Lease
The Group acquired various transportation equipments 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:
Within one year
After one year but not more than five years
Total minimum lease payments
Less amount representing interest
Present value of lease payments
Less current portion of obligations under
finance lease
Noncurrent portion of obligations under
finance lease
2013
P8,216,385
=
14,205,559
22,421,944
2,662,886
19,759,058
2012
(As restated see Note 3)
P
=8,521,931
16,273,590
24,795,521
6,097,919
18,697,602
2011
(As restated see Note 3)
P
=5,020,721
8,812,971
13,833,692
1,723,865
12,109,827
6,419,251
9,741,235
5,483,198
=13,339,807
P
=8,956,367
P
=
P6,626,629
Interest incurred from finance lease amounted to =
P1.5 million, =
P1.3 million and =
P1.2 million
in 2013, 2012 and 2011, 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
=4.6 million, P
=5.4 million and
=9.6 million in 2013, 2012 and 2011, respectively (see Notes 11 and 27).
P
Future minimum rental receivable for the remaining lease terms as at financial reporting date
follow:
Within one year
After one year but not more
than five years
Total
2013
P
=1,195,760
4,248,000
P
=5,443,760
2012
2011
(As restated - (As restated see Note 3)
see Note 3)
=467,692
P
=14,288,594
P
18,303,132
=18,770,824
P
21,473,865
=35,762,459
P
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
are subject to annual repricing based on a pre-agreed rate. Total rental expense charged to
operations amounted to P
=143.3 million, =
P145.2 million and =
P155.2 million for the years ended
March 31, 2013 and 2012 and April 1, 2011, respectively (see Notes 20 and 22).
*SGVFS002680*
- 72 -
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:
Within one year
After one year but not more than five years
After five years and onwards
Total
2013
P99,988,542
=
291,361,404
133,723,061
=525,073,007
P
2012
(As restated see Note 3)
P
=54,895,288
97,999,009
141,389,342
P
=294,283,639
2011
(As restated see Note 3)
P
=58,946,274
108,884,911
132,740,496
P
=300,571,681
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:
Deferred tax assets:
Pension liabilities
Allowance for doubtful accounts
Excess of:
Rental under operating lease
computed on a straight-line
basis
Cost over net realizable value
of inventories
Unamortized past service cost
Unearned tuition and school fees
NOLCO
MCIT
Deferred tax liabilities:
Accrued rent
Excess of fair values over carrying
values of net assets acquired in
business combination
March 31,
2013
March 31,
2012
(As restated see Note 3)
April 1,
2011
(As restated see Note 3)
P4,530,677
=
4,251,262
P
=3,699,739
3,308,866
P
=2,487,903
5,599,828
879,814
1,333,986
2,240,933
783,695
202,559
482,108
–
–
11,130,115
759,078
405,120
58,648
–
–
9,565,437
890,332
607,679
420,486
1,693,525
203,216
14,143,902
122,237
–
16,700
–
122,237
=11,007,878
P
–
–
P
=9,565,437
706,039
722,739
P
=13,421,163
*SGVFS002680*
- 73 -
Certain deferred tax assets of subsidiaries were not recognized as at March 31, 2013 and 2012 and
April 1, 2011 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:
NOLCO
Allowance for doubtful accounts
Pension liabilities
Excess of:
Rental under operating lease computed
on a straight-line basis
Cost over net realizable value
of inventories
MCIT
Unrealized foreign exchange losses
Provision for impairment loss
Others
2013
P76,012,347
=
30,019,589
1,947,714
2012
(As restated see Note 3)
P
=52,067,934
12,902,776
3,537,685
2011
(As restated see Note 3)
P
=70,623,533
13,604,515
20,268,716
1,356,488
2,325,252
10,719,253
194,274
454,137
2,541
–
1,555,807
=111,542,897
P
194,274
112,243
2,849
1,709,044
2,078,213
P
=74,930,270
1,599,698
206,134
4,597
5,211,598
–
P
=122,238,044
As at March 31, 2013 and 2012, 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 =
P1.1 million and =
P0.6 million, respectively, because management does not expect
to generate enough capital gains against which these capital losses can be offset.
The details of the Group’s NOLCO, which can be claimed as deduction from future taxable
income, are as follows:
Year Incurred
March 31, 2009
December 31, 2009
March 31, 2010
December 31, 2010
March 31, 2011
December 31, 2011
March 31, 2012
December 31, 2012
March 31, 2013
Expiry Dates
March 31, 2012
December 31, 2012
March 31, 2013
December 31, 2013
March 31, 2014
December 31, 2014
March 31, 2015
December 31, 2015
March 31, 2016
Beginning
=21,396,043
P
610,088
6,233,904
13,987,456
10,001,279
2,613,791
17,323,404
–
–
=72,165,965
P
Addition
=–
P
–
–
–
–
–
–
3,747,181
28,339,236
=62,956,622
P
Applied/
Expired
P
=21,396,043
610,088
6,233,904
–
–
–
–
–
–
P
=28,240,035
End
=–
P
–
–
13,987,456
10,001,279
2,613,791
17,323,404
3,747,181
28,339,236
P
=76,012,347
In 2013, NOLCO amounting to =
P8.1 million and excess MCIT over RCIT amounting to P
=36,833
expired. In 2012, the total amount of NOLCO, which includes NOLCO of merged entities,
amounting to P
=76.9 million and excess MCIT over RCIT amounting to =
P0.4 million expired.
*SGVFS002680*
- 74 -
The details of the Group’s excess MCIT over RCIT, which can be claimed as deduction from
future tax payable, are as follows:
Year Incurred
March 31, 2011
March 31, 2012
March 31, 2013
Expiry Date
March 31, 2014
March 31, 2015
March 31, 2016
Beginning
=18,628
P
56,782
–
=75,410
P
Addition
(Applied/
Expired)
=–
P
–
378,727
=378,727
P
End
=18,628
P
56,782
378,727
=454,137
P
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:
2012
(As restated see Note 3)
2011
(As restated see Note 3)
P
=251,136,152
=97,125,895
P
P
=33,560,977
(128,580,252)
8,069,513
10,982,199
7,585,677
51,613,500
10,171,679
7,708,055
(6,904,590)
(5,861,531)
2,479,434
(132,153)
–
(85,023,934)
P
=42,890,694
(10,740,786)
(5,919,027)
(3,823,412)
3,732,722
(850,734)
(1,512,015)
(64,336,740)
=32,243,779
P
(243,108)
(5,634,054)
(4,168,623)
393,900
(1,175,988)
(938,400)
(55,719,922)
P
=27,859,961
2013
Provision for income tax at statutory
income tax rate
Income tax effects of:
Equity in net losses (gains) of associates
and joint ventures
Nondeductible expenses
Change in unrecognized deferred
tax assets and others
Royalty income
Interest income already subjected to final tax
Expired NOLCO and MCIT
Dividend income
Gain on sale of investment in associate
Difference in 10% and 30% tax rate
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.
*SGVFS002680*
- 75 -
The following are the Group’s transactions with its related parties:
`
Category
Associates
STI Investments
Advances for working
capital requirements
GROW
Advances for various
expenses and working
capital
Rental and related charges
De Los Santos - STI
Megaclinic
Advances for various
expenses and working
capital
Interest income
De Los Santos – General
Hospital
Advances for various
expenses and working
capital
Interest
STI-Alabang
Advances for various
expenses and working
capital
STI-Accent
Advances for various
expenses and working
capital
Joint Venture
PHEI
Management fees
Affiliates
Philippine Women’s University
(PWU)*
Principal
Interest
UNLAD Resources
Development Corporation
(UNLAD)*
Principal
Interest
CMA**
Advances for various
expenses and working
capital (Notes 7 and 12)
Amount/Volume
March 31,
March 31,
2012
2011
March 31, (As restated - (As restated see
Note
3)
see
Note
3)
2013
Outstanding Balance
Receivable (Payable)
March 31,
April 1,
2012
2011
March 31, (As restated - (As restated see
Note
3)
see
Note
3) Terms
2013
=41,587,726 30 days upon receipt
P
of billings;
Noninterestbearing
Conditions
=–
P
=5,946,690
P
=41,587,726
P
=–
P
=47,534,416
P
–
–
–
143,572
143,572
–
–
1,611,884
8,093,538
8,107,259
–
–
–
34,743,437
42,656,973
2,608,782
2,020,625
–
–
–
–
–
–
–
–
–
–
3,370,977
–
–
–
–
–
216,000
1,216,000
1,990,145 30 days upon receipt
of billings;
Noninterestbearing
10,365,820
3,047,124
4,416,829
27,333,762
16,967,942
13,920,818 30 days upon receipt
of billings but no
intention to
collect within
one year;
Noninterestbearing
3,025,815
3,475,103
629,412
600,000
–
– 30 days upon receipt
of billings;
Noninterestbearing
Unsecured;
no impairment
26,470,915
223,529,085
–
250,000,000
223,529,085
Secured;
no impairment
9,189,946
3,725,489
–
12,651,546
3,725,489
– 30 days upon receipt
of billings;
Interest-bearing
–
198,000,000
–
–
198,000,000
–
Secured;
no impairment
3,536,389
–
–
3,327,389
–
– 30 days upon receipt
of billings;
Interest-bearing
–
–
–
–
58,830
58,830
62,548 30 days upon receipt
of billings;
Noninterestbearing
Unsecured;
no impairment
143,572 30 days upon receipt
of billings but no
intention to
collect within
one year;
Noninterestbearing
8,922,725 30 days upon receipt
of billings but no
intention to
collect within
one year;
Noninterestbearing
Unsecured;
no impairment
Unsecured;
no impairment
Unsecured;
no impairment
8,913 Payable in 5 years;
bears 6.50%
interest
–
Unsecured;
no impairment
43,427,077 Payable in 5 years;
bears 6.50%
interest
–
Unsecured;
no impairment
Unsecured;
no impairment
Unsecured;
with impairment
(Forward)
*SGVFS002680*
- 76 -
`
Category
Comm & Sense, Inc**.
Rentals and related
charges
Outstanding Balance
Receivable (Payable)
March 31,
April 1,
2012
2011
March 31, (As restated - (As restated see Note 3)
see Note 3) Terms
2013
Amount/Volume
March 31,
March 31,
2012
2011
March 31, (As restated - (As restated see Note 3)
see Note 3)
2013
Conditions
= 138,466
P
=57,764
P
=440,318
P
=147,607
P
=108,335
P
=1,308,411 30 days upon receipt
P
of billings;
Noninterestbearing
Unsecured;
no impairment
80,704
–
475,987
6,074
6,074
63,118 30 days upon receipt
of billings;
Noninterestbearing
Unsecured;
no impairment
–
–
90,631
185,651
233,456
Unsecured;
no impairment
Employee benefits
6,716,054
3,484,752
3,439,201
(407,670)
(477,154)
192,143 30 days upon receipt
of billings;
Noninterestbearing
(1,658,232) 30 days upon receipt
of billings;
Noninterestbearing
PhilCare**
Rentals and related
charges
1,314,992
902,776
906,225
259,885
14,956
7,278,847
4,350,433
–
–
–
–
–
434,165,319
–
–
593,863
967,511
934,117
113,521
71,805
359,863
243,975
35,952
179,911
141,849
142,660
113,600
–
–
–
–
–
–
36,465
36,465
160,000,000
–
–
–
–
–
2,442,736
–
–
–
–
–
38,694,691
36,492,764
11,714,899
22,592,828
16,518,016
= 558,282,346
P
=360,593,368
P
Phil First Condominium,
Inc. **
Rentals and related
charges
Phil First Insurance Co.,
Inc. **
Rentals and related
charges
Employee benefits
PhilPlans**
Advances for various
expenses and working
capital
Rentals and related
charges
Banclife**
Rentals and related
charges
Employee benefits
Ventures Securities**
Internet charges
Classic Finance**
Availment of short-term
loan
Interest expense
Officers and employees
Advances for various
expenses
122,490 30 days upon receipt
of billings;
Noninterestbearing
–
434,165,319 30 days upon receipt
of billings but no
intention to
collect within one
year;
Noninterestbearing
77,752 30 days upon receipt
of billings;
Noninterestbearing
8,329 30 days upon receipt
of billings;
Noninterestbearing
–
30 days upon receipt
of billings;
Noninterestbearing
8,974,965 Liquidated within one
month;
Noninterestbearing
=553,317,819
P
Unsecured
Unsecured; no
impairment
Unsecured;
with impairment
Unsecured; no
impairment
Unsecured;
no impairment
Unsecured; no
impairment
Unsecured;
no impairment
*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,
2012
(As restated see Note 3)
April 1,
2011
(As restated see Note 3)
P
=11,419,489
22,592,828
8,009,020
P70,118,179
=
16,518,016
8,779,029
P
=475,753,046
8,974,965
10,757,517
52,689,744
463,978,935
(407,670)
P
=558,282,346
38,400,724
227,254,574
(477,154)
=360,593,368
P
59,490,524
–
(1,658,233)
P
=553,317,819
March 31,
2013
Current portion of advances to associates, joint
ventures and other related parties (see Note 7)
Advances to officers and employees (see Note 7)
Rent and other related receivables (see Note 7)
Advances to associates and joint ventures
(see Note 12)
Noncurrent receivable
Accounts payable (see Note 17)
*SGVFS002680*
- 77 -
Other information on major transactions with related parties follows:
a.
Agreements with Philippine Women’s University (“PWU”), UNLAD Resources Development
Corporation (“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 PWU’s debt (the “Receivable from PWU”)
from PWU’s creditor bank, together with all of the bank’s 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 =
P26.5 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 =
P250.0 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
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’s 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 Individual’s 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 Company’s
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.
*SGVFS002680*
- 78 -
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 UNLAD’s issued and outstanding capital
stock.
In June 2012, the Company extended the direct loan to PWU amounting to =
P26.5 million in
accordance with the Agreement, while in August and October 2012, the Company granted the
Loan to UNLAD amounting to =
P166.0 million and =
P32.0 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, 2013 and 2012, noncurrent receivables consist of loans of =
P448.0 million and
=223.5 million, respectively; and accrued interest of P
P
=16.0 million and P
=3.7 million,
respectively. Interest income in 2013 and 2012 amounted to =
P12.7 million and =
P3.7 million,
respectively (see Note 19).
As of March 31, 2013 and 2012, 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
consolidated 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.
Land held for Swap
As discussed in Note 15, STI ESG’s BOD approved on March 21, 2013 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. In April 2013, STI ESG and TechZone,
entered into a real estate mortgage for TechZone’s loan amounting to =
P800.0 million. STI
ESG’s land was used as collateral for TechZone’s loan, the proceeds of which will be used by
TechZone to develop the property (see Note 33).
Compensation and Benefits of Key Management Personnel of the Group
Short-term employee benefits
Post-employment benefits
2013
=22,191,822
P
1,809,718
=24,001,540
P
2012
(As restated see Note 3)
P
=21,444,985
1,048,982
P
=22,493,967
2011
(As restated see Note 3)
P
=19,878,865
1,430,865
P
=21,309,730
*SGVFS002680*
- 79 -
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, 2013
and 2012:
2012
(As restated see Note 3)
2011
(As restated see Note 3)
= 777,207,615
P
=288,098,008
P
P
=87,865,911
7,004,806,924
6,208,989,135
307,182,211
–
–
5,901,806,924
–
276,900,984
–
1,039,252,747
–
–
92,250,000
8,136,309,671
–
6,485,890,119
–
6,208,989,135
P
=0.096
=0.044
P
=
P0.014
2013
Net income attributable to equity holders
of STI Holdings
Common shares outstanding
at beginning of period
Weighted average number of:
5,901,806,924 shares issued - Share Swap
(see Note 2)
795,817,789 shares issued
on November 24, 2011
2,627,000,000 shares issued on
November 7, 2012
273,000,000 shares issued on
November 28, 2012
Weighted average number of common shares
Basic and diluted earnings per share on net income
attributed to equity holders of STI Holdings
The basic and diluted earnings per share are the same for the years ended March 31, 2013, 2012
and 2011 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 fiscal
year ended March 31, 2003 amounting to P
=124.3 million. On February 20, 2012, STI ESG
rested 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 ESG’s petition for review and ordered a cancellation of the said
BIR’s 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 Revenue’s (CIR) Motion for Reconsideration dated May 8, 2013. STI ESG filed its
Comment to CIR’s Motion for Reconsideration on June 17, 2013.
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.
*SGVFS002680*
- 80 -
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 the STI ESG’s 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 the 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 the company 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 the STI ESG’s
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
attorney’s fees. As of July 8, 2013, 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.
Commitments
a. Financial Commitments
STI ESG has a =
P65.0 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.
b. Capital Commitments
The Group has contractual commitments and obligations for the construction of the school
buildings and improvements in STI-Kalookan and STI-ORCA aggregating =
P1,057.2 million as
at March 31, 2013.
*SGVFS002680*
- 81 -
c. Others
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 1998–2000,” 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.
30. Financial Risk Management Objectives and Policies
The principal financial instruments of the Group comprise cash and cash equivalents and shortterm loans. The main purpose of these financial instruments is to raise working capital and major
capital investment financing for the Group’s 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 Group’s 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 Group’s 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.
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 Group’s 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 Group’s 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, 2013 and 2012 and April 1, 2011, the Group’s current assets amounted to
=1,812.4 million, =
P
P889.0 million and =
P1,282.7 million, respectively, while current liabilities
amounted to =
P332.1 million, =
P1,060.2 million and =
P1,235.6 million, respectively.
*SGVFS002680*
- 82 -
The table below summarizes the maturity profile of the Group’s financial assets held for liquidity
purposes and other financial liabilities as at financial reporting date based on undiscounted
contractual payments.
March 31, 2013
Due and
Demandable
Financial Assets
Loans and receivables:
Cash and cash equivalents
P1,489,451,909
=
Receivables (current and noncurrent)*
240,539,396
Advances to associates and joint ventures
(included as part of “Investments in
and advances to associates and joint
ventures” account)
52,689,744
Deposits (included as part of “Prepaid
expenses and other current assets”
and “Goodwill, intangible and other
noncurrent assets” accounts)
–
AFS financial assets
–
= 1,782,681,049
P
Financial Liabilities
Other financial liabilitiesAccounts payable and other current
liabilities**
P80,417,708
=
= 80,417,708
P
Less than
2 Months
2 to 3 Months 3 to 12 Months
=–
P
17,918,138
=–
P
3,939,716
=–
P
10,944,280
–
–
–
–
–
= 17,918,138
P
–
–
= 3,939,716
P
–
–
= 10,944,280
P
P219,860,121
=
= 219,860,121
P
P1,110,063
=
= 1,110,063
P
P3,746,413
=
= 3,746,413
P
More than
1 Year
Total
=– =
P
P1,489,451,909
476,633,582
749,975,112
–
52,689,744
16,670,495
16,670,495
4,663,478
4,663,478
= 497,967,555 P
P
= 2,313,450,738
P552,956
=
= 552,956
P
P305,687,261
=
= 305,687,261
P
March 31, 2012
(As restated - see Note 3)
Financial Assets
Loans and receivables:
Cash and cash equivalents
Receivables (current and noncurrent)*
Advances to associates and joint ventures
(included as part of “Investments in
and advances to associates and joint
ventures” account)
Deposits (included as part of “Prepaid
expenses and other current assets”
and “Goodwill, intangible and other
noncurrent assets” accounts)
AFS financial assets
Financial Liabilities
Other financial liabilities:
Short-term loans (including future
interest payments)
Accounts payable and other current
liabilities**
Due and
Demandable
Less than
2 Months
2 to 3 Months
3 to 12 Months
More than
1 Year
Total
P556,282,842
=
228,762,540
=–
P
2,567,071
=–
P
2,262,022
=–
P
68,864,419
=–
P
227,254,574
P556,282,842
=
529,710,626
38,400,724
–
–
–
–
38,400,724
–
–
=823,446,106
P
–
–
=2,567,071
P
–
–
=2,262,022
P
–
–
=68,864,419
P
=687,336
P
=176,677,083
P
=–
P
=598,360,417
P
=–
P
82,331,820
P83,019,156
=
137,932,259
P314,609,342
=
–
P–
=
51,042,918
=649,403,335
P
–
271,306,997
P– P
=
=1,047,031,833
25,013,993
25,013,993
4,987,638
4,987,638
=257,256,205 P
P
=1,154,395,823
=775,724,836
P
April 1, 2011
(As restated - see Note 3)
Financial Assets
Loans and receivables:
Cash and cash equivalents
Receivables (current and noncurrent)*
Advances to associates and joint ventures
(included as part of “Investments in
and advances to associates and joint
ventures” account)
Deposits (included as part of “Prepaid
expenses and other current assets”
and “Goodwill, intangible and other
noncurrent assets” accounts)
AFS financial assets
Due and
Demandable
Less than
2 Months
2 to 3 Months
3 to 12 Months
More than
1 Year
Total
P475,899,842
=
275,749,163
=–
P
292,652,150
=–
P
190,767,427
=–
P
427,915
P–
=
–
P475,899,842
=
759,596,655
59,490,524
–
–
–
–
59,490,524
–
51,065,768
=862,205,297
P
–
–
=292,652,150
P
–
–
=190,767,427
P
–
–
=427,915
P
18,958,875
18,958,875
4,643,710
55,709,478
=23,602,585 P
P
=1,369,655,374
*SGVFS002680*
- 83 -
April 1, 2011
(As restated - see Note 3)
Financial Liabilities
Other financial liabilities:
Short-term loans (including future
interest payments)
Accounts payable and other current
liabilities**
Due and
Demandable
Less than
2 Months
2 to 3 Months
3 to 12 Months
More than
1 Year
Total
=3,105,669
P
=6,609,742
P
=406,420,813
P
=516,307,607
P
=–
P
=932,443,831
P
216,372,871
P219,478,540
=
21,923,888
P28,533,630
=
4,559,427
=410,980,240
P
33,876,799
=550,184,406
P
–
276,732,985
P– P
=
=1,209,176,816
** Excluding advances to officers and employees amounting to =
P 22,592,828, =
P16,518,016 and =
P 8,974,965 as at March 31, 2013 and 2012 and April 1, 2011, respectively.
** Excluding taxes payable, unearned tuition and school fees, subscriptions payable, SSS, Philhealth and Pag-ibig benefits payable amounting to P
=14,998,559, =
P 30,413,296 and
=
P33,311,633 as at March 31, 2013 and 2012 and April 1, 2011, respectively.
As at March 31, 2013 and 2012 and April 1, 2011, the Company’s current ratios are as follows:
Current assets
Current liabilities
Current ratios
March 31,
2013
=1,812,433,009
P
332,135,284
5.457:1.000
March 31,
2012
(As restated see Note 3)
=
P889,001,874
1,060,164,482
0.839:1.000
April 1,
2011
(As restated see Note 3)
=
P1,282,735,511
1,235,630,202
1.038:1.000
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 Group’s 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 Group’s 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 Group’s 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, 2013
Net
Gross
Maximum
Maximum
Exposure(1)
Exposure(2)
Financial Assets
Loans and receivables:
Cash and cash equivalents (excluding cash on hand)
Receivables (current and noncurrent)*
Advances to associates and joint ventures (included as part of
“Investments in and advances to associates and joint
ventures” account)
Deposits (included as part of “Prepaid expenses and other current
assets” and “Goodwill, intangible and other noncurrent
assets” accounts)
AFS financial assets
P
=1,488,848,927
692,159,311
P
=1,481,845,131
228,180,376
52,689,744
52,689,744
16,670,495
4,663,478
P
=2,255,031,955
16,670,495
4,663,478
P
=1,784,049,224
*SGVFS002680*
- 84 -
March 31, 2012
(As restated - see Note 3)
Gross
Net
Maximum
Maximum
Exposure(1)
Exposure(2)
Financial Assets
Loans and receivables:
Cash and cash equivalents (excluding cash on hand)
Receivables (current and noncurrent)*
Advances to associates and joint ventures (included as part of
“Investments in and advances to associates and joint
ventures” account)
Deposits (included as part of “Prepaid expenses and other current
assets” and “Goodwill, intangible and other noncurrent
assets” accounts)
AFS financial assets
=555,683,784
P
477,101,557
=548,183,784
P
249,396,984
38,400,724
38,400,724
25,013,993
4,987,638
=1,101,187,696
P
25,013,993
4,987,638
P
=865,983,123
April 1, 2011
(As restated - see Note 3)
Gross
Net
Maximum
Maximum
Exposure(1)
Exposure(2)
Financial Assets
Loans and receivables:
Cash and cash equivalents (excluding cash on hand)
Receivables (current and noncurrent)*
Advances to associates and joint ventures (included as part of
“Investments in and advances to associates and joint
ventures” account)
Deposits (included as part of “Prepaid expenses and other current
assets” and “Goodwill, intangible and other noncurrent
assets” accounts)
AFS financial assets
P472,996,467
=
759,596,655
P
=469,098,226
759,596,655
59,490,524
59,590,524
18,958,875
55,709,478
=1,366,751,999
P
18,958,875
55,709,478
P
=1,362,953,758
* Excluding advances to officers and employees amounting to =
P 22,592,828, =
P 16,518,016 and =
P 8,974,965 as at March 31, 2013 and 2012 and
April 1, 2011, respectively.
(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.
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:
Class A(1)
Financial Assets
Loans and receivables:
Cash and cash equivalents (excluding cash on
hand)
P
=1,488,848,927
Receivables (current and noncurrent)*
63,498,628
Advances to associates and joint ventures (included
as part of “Investments in and advances to
associates and joint ventures” account)
45,521,984
Deposits (included as part of “Prepaid expenses and
other current assets” and “Goodwill,
intangible and other noncurrent assets”
accounts)
16,670,495
AFS financial assets
4,663,478
P
=1,619,203,512
March 31, 2013
Class B(2)
Total
P
=–
–
P
=1,488,848,927
63,498,628
–
45,521,984
–
–
P
=–
16,670,495
4,663,478
P
=1,619,203,512
*SGVFS002680*
- 85 -
Class A(1)
Financial Assets
Loans and receivables:
Cash and cash equivalents (excluding cash on hand)
Receivables (current and noncurrent)*
Advances to associates and joint ventures (included as
part of “Investments in and advances to associates
and joint ventures” account)
Deposits (included as part of “Prepaid expenses and other
current assets” and “Goodwill, intangible and other
noncurrent assets” accounts)
AFS financial assets
Total
=
P555,683,784
159,463,332
=
P–
=555,683,784
P
159,463,332
35,353,600
–
35,353,600
25,013,993
4,987,638
=780,502,347
P
=–
P
25,013,993
4,987,638
P
=780,502,347
Class A(1)
Financial Assets
Loans and receivables:
Cash and cash equivalents (excluding cash on hand)
Receivables (current and noncurrent)*
Advances to associates and joint ventures (included as
part of “Investments in and advances to associates
and joint ventures” account)
Deposits (included as part of “Prepaid expenses and other
current assets” and “Goodwill, intangible and other
noncurrent assets” accounts)
AFS financial assets
March 31, 2012
(As restated - see Note 3)
Class B(2)
April 1, 2011
(As restated - see Note 3)
Class B(2)
Total
=
P472,996,467
204,115,339
=–
P
–
P
=472,996,467
204,115,339
59,490,524
–
59,490,524
18,958,875
55,709,478
=811,270,683
P
–
–
=–
P
18,958,875
55,709,478
P
=811,270,683
* Excluding advances to officers and employees.
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.
(1)
The table below shows the aging analysis of financial assets that are past due but not impaired as
at financial reporting date:
March 31, 2013
Neither
Past Due
Nor Impaired
Financial Assets
Loans and receivables:
Cash and cash equivalents
(excluding cash on hand)
Receivables (current and
noncurrent)*
Advances to associates and joint
ventures (included as part of
“Investments in and
advances to associates and
joint ventures” account)
Deposits (included as part of
“Prepaid expenses and other
current assets” and
“Goodwill, intangible and
other noncurrent assets”
accounts)
AFS financial assets
Past Due but not Impaired
31 to 60 Days
61 to 90 Days
Over 90 days
Impaired
Total
= 1,488,848,927
P
=
P-
=
P-
=
P-
=
P-
1,488,848,927
63,498,628
15,871,279
151,653,229
461,136,175
57,815,801
749,975,112
45,521,984
-
-
-
7,167,760
52,689,744
16,670,495
4,663,478
= 1,619,303,512
P
= 15,871,279
P
= 151,653,229
P
= 461,136,175
P
= 64,983,559
P
16,670,495
4,663,478
= 2,312,847,756
P
*SGVFS002680*
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March 31, 2012
(As restated - see Note 3)
Neither
Past Due
Nor Impaired
Financial Assets
Loans and receivables:
Cash and cash equivalents
(excluding cash on hand)
Receivables (current and
noncurrent)*
Advances to associates and joint
ventures (included as part of
“Investments in and
advances to associates and
joint ventures” account)
Deposits (included as part of
“Prepaid expenses and other
current assets” and
“Goodwill, intangible and
other noncurrent assets”
accounts)
AFS financial assets
Past Due but not Impaired
31 to 60 Days
61 to 90 Days
Over 90 days
Impaired
Total
=
P555,683,784
=
P-
=
P-
=
P-
=
P-
=555,683,784
P
159,463,332
2,567,071
71,126,441
243,494,714
53,059,068
529,710,626
35,353,600
-
-
-
3,047,124
38,400,724
25,013,993
4,987,638
=780,502,347
P
=2,567,071
P
=71,126,441
P
=243,494,714
P
=56,106,192
P
25,013,993
4,987,638
=1,153,796,765
P
April 1, 2011
(As restated - see Note 3)
Neither
Past Due
Nor Impaired
Financial Assets
Loans and receivables:
Cash and cash equivalents
(excluding cash on hand)
Receivables (current and
noncurrent)*
Advances to associates and joint
ventures (included as part of
“Investments in and
advances to associates and
joint ventures” account)
Deposits (included as part of
“Prepaid expenses and other
current assets” and
“Goodwill, intangible and
other noncurrent assets”
accounts)
AFS financial assets
Past Due but not Impaired
31 to 60 Days
61 to 90 Days
Over 90 days
Impaired
Total
=
P472,996,467
=
P-
=
P-
=
P-
=
P-
=472,996,467
P
204,115,339
292,652,150
190,767,427
10,179,312
61,882,427
759,596,655
59,490,524
-
-
-
-
59,490,524
18,958,875
18,958,875
55,709,478
55,709,478
=811,270,683
P
=292,652,150
P
=190,767,427
P
=10,179,312
P
=61,882,427 P
P
=1,366,751,999
* Excluding advances to officers and employees amounting to =
P 22,592,828, P
=16,518,016 and =
P 8,974,965 as at March 31, 2013 and 2012 and April 1,
2011, respectively.
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 counterparty’s 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.
*SGVFS002680*
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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
Group’s 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 ESG’s 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.
Capital stock
Additional paid-in capital
Treasury stock
Retained earnings
March 31,
April 1,
2012
2011
(As restated (As restated March 31,
see Note 3)
see Note 3)
2013
=551,500,000
P
=153,591,106
P
P
=4,952,403,462
77,592,234
–
1,119,079,467
(500,009,337)
–
(500,009,337)
1,468,670,934
1,186,716,570
2,151,854,503
=1,597,753,831 =
P1,340,307,676
P
=7,723,328,095 P
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.
*SGVFS002680*
- 88 -
As at March 31, 2013 and 2012 and April 1, 2011, the Group’s debt-to-equity ratios are as
follows:
March 31,
2013
P
=392,918,245
8,121,086,269
0.048:1.000
Total liabilities
Total equity
Debt-to-equity ratio
March 31,
April 1,
2012
2011
(As restated (As restated see Note 3)
see Note 3)
=1,109,655,923 =
P
P1,285,537,932
3,476,216,952
2,468,629,039
0.319:1.000
0.521:1.000
Another approach used by the Company is the asset-to-equity ratios shown below:
March 31,
2013
P
=8,514,004,514
8,121,086,269
1.048:1.000
Total assets
Total equity
Asset-to-equity ratio
March 31,
2012
(As restated see Note 3)
=4,585,872,875
P
3,476,216,952
1.319:1.000
April 1,
2011
(As restated see Note 3)
=3,754,166,971
P
2,468,629,039
1.521:1.000
No changes were made in the objectives, policies or processes in 2013, 2012 and 2011.
31. Financial Instruments
Set out below is a comparison by category of carrying amounts and fair values of all of the
Group’s financial instruments.
March 31, 2013
Carrying
Amount
Fair Value
March 31, 2012
(As restated - see Note 3)
Carrying
Amount
Fair Value
April 1, 2011
(As restated - see Note 3)
Carrying
Amount
Fair Value
Financial Assets
Loans and receivables:
Cash and cash equivalents
=556,282,842
P
=
P556,282,842
=
P475,899,842
=
P475,899,842
P1,489,451,909 =
=
P1,489,451,909
Receivables*
477,101,558
477,101,558
697,714,228
697,714,228
692,164,311
692,164,311
Advances to associates and joint ventures
(included as part of “Investments in
and advances to associates and joint
59,490,524
48,265,509
ventures” account)
35,353,600
24,128,584
45,521,984
34,781,402
Deposits (included as part of “Prepaid
expenses and other current assets”
and “Goodwill, intangible and other
noncurrent assets” accounts)
25,013,993
23,427,597
18,958,875
17,390,949
16,670,495
12,869,384
AFS financial assets
4,987,638
4,987,638
55,709,478
55,709,478
4,663,478
4,663,478
P1,098,739,631 =
P1,085,928,219 =
P1,307,772,947 =
P1,294,980,006
= 2,248,472,177 =
P
P2,233,930,484 =
Financial Liabilities
Other financial liabilities:
Short-term loans
Accounts payable and other current
liabilities**
=–
P
305,687,261
= 305,687,261
P
=–
P
=746,687,336
P
=
P746,687,336
=
P913,687,336
=
P913,687,336
271,306,997
271,306,997
276,732,985
276,732,985
305,687,261
=1,017,994,333 =
P1,017,994,333 =
P1,190,420,321 =
P1,190,420,321
P
= 305,687,261 P
**Excluding advances to officers and employees amounting to =
P 22,592,128, =
P16,518,016 and =
P8,974,965 as of March 31, 2013 and 2012 and April 1, 2011, respectively.
** Excluding taxes payable, unearned tuition and school fees, subscriptions payable, SSS, Philhealth and Pag-ibig benefits payable amounting to =
P 14,998,559, =
P 30,413,296 and
=
P33,311,633 as at March 31, 2013 and 2012 and April 1, 2011, respectively.
*SGVFS002680*
- 89 -
Fair Value of Financial Instruments
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
Cash and Cash Equivalents, Receivables, Short-term Loans, Accounts Payable and Other Current
Liabilities. Due to the short-term nature of transactions, the fair values of these instruments,
except for noncurrent receivables, approximate the carrying value as of financial reporting date.
The carrying value of noncurrent receivable represents its fair value as the receivable earns
interest until settled.
Advances to Associates and Joint Ventures and Deposits. The fair value of these instruments is
estimated as the present value of all future cash flows using the applicable rates for similar type of
the instruments.
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.
Fair Value Hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial
instruments by valuation technique:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair
value are observable, either directly or indirectly.
Level 3: Techniques which use inputs which have a significant effect on the recorded fair value
that are not based on observable market data.
As of March 31, 2013 and 2012, there were no other financial assets and liabilities other than AFS
financial assets which are measured at fair value determined in reference with quoted prices in
active market (Level 1 Hierarchy).
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
=2,950.9 million (see Notes 1, 3 and 18).
P
b. Acquisitions of property and equipment under finance lease recorded under the “Property and
equipment” account amounting to P
=7.6 million, P
=7.6 million and P
=8.8 million as at March 31,
2013 and 2012 and April 1, 2011, respectively (see Note 10).
*SGVFS002680*
- 90 -
c. Unpaid progress billing for construction in progress amounting to =
P46.2 million,
=11.2 million and P
P
=9.6 million as at March 31, 2013 and 2012 and April 1, 2011, respectively
(see Note 10).
d. Acquisition of non-controlling interests through issuances of shares by the Parent Company
amounting to =
P1.4 million as at March 31, 2012.
e. Conversion of advances to related parties amounting to =
P41.6 million into equity investment
(see Notes 7 and 12).
f.
Reclassification of land amounting to P
=387.9 million from “Property and equipment” account
to “Other noncurrent assets” account in 2013 (see Note 15).
g. 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.
h. Unpaid additions to property and equipment amounting to P
=5.1 million as at April 1, 2011
(Note 10).
i.
Conversion of advances to directors and stockholders into treasury stock amounting to
=8.6 million in 2011.
P
33. Events after the Reporting Date
a. 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
College’s sale of its 42% ownership in De Los Santos - STI Megaclinic to De Los Santos
General Hospital, in exchange for De Los Santos - STI College’s additional subscription of
29,399 new common shares or equivalent to 4% equity interest in De Los Santos General
Hospital.
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 STI ESG enumerated in its investment agreement
with MPIC. The completion of MPIC’s 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 would cease to be associates of the Group
effective June 2013. The Group’s effective percentage ownership in De Los Santos General
Hospital will be diluted to 10% and accordingly, such investment will be classified as an AFS
financial asset.
*SGVFS002680*
- 91 -
b. Land held for Swap
In April 2013, STI ESG and Techzone, a company under common control with the Group,
entered into a real estate mortgage for Techzone’s loan amounting to P
=800.0 million. STI
ESG’s land was used as collateral for Techzone’s loan, the proceeds of which will be used by
TechZone to develop the property.
c. Listing of Private Placement Shares
On May 10, 2013, the SEC granted the Parent Company’s request for exemptive relief from
the requirements of mandatory tender offer relative to the private placement transaction
(see Note 18). On June 27, 2013, the PSE advised the Parent Company to submit a duly
executed lock-up agreement to facilitate the listing of private placement shares.
*SGVFS002680*
SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Phone: (632) 891 0307
Fax:
(632) 819 0872
www.sgv.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
INDEPENDENT AUDITORS’ REPORT
ON SUPPLEMENTARY SCHEDULES
The Stockholders and the Board of Directors
STI Education Systems Holdings, Inc.
7/F iAcademy Building
6764 Ayala Avenue
Makati City
We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of STI Education Systems Holdings, Inc. (formerly JTH Davies Holdings, Inc.) and
subsidiaries as at March 31, 2013 and 2012 and April 1, 2011 and for each of the three years in the
period ended March 31, 2013, included in this Form 17-A, and have issued our report thereon dated
July 8, 2013. Our audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the Index to Consolidated Financial Statements
and Supplementary Schedules are the responsibility of the Company’s management. These schedules
are not part of the basic financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion, fairly states, in all
material respects, the information required to be set forth therein in relation to the basic financial
statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Maria Vivian C. Ruiz
Partner
CPA Certificate No. 83687
SEC Accreditation No. 0073-AR-3 (Group A),
January 18, 2013, valid until January 17, 2016
Tax Identification No. 102-084-744
BIR Accreditation No. 08-001998-47-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 3670018, January 2, 2013, Makati City
July 8, 2013
*SGVFS002680*
A member firm of Ernst & Young Global Limited