STI: Annual report

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S T I E D U C A T I O N S Y S T E M S

H OO L D I N G S, I N C.

7/ F i A C A D E M Y B L D G. ,

6 7 6 4 A Y A L A A V E. , M A K A T I C I T Y

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Elizabeth M. Guerrero/Katelyne Ann Brooks ARSENIO C. CABRERA, JR. (6 3 2) 8 4 4 9 5 5 3

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C F D N ADept. Requiring this Doc.

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To be accomplished by SEC Personnel concerned

Last Friday of September

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Annual Meeting

SEC FORM 17-A For the Fiscal Year ended 31 March 2014Month

Total Amount of Borrowings

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Document I.D.

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Month Day FORM TYPE

Fiscal Year

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COVER SHEET

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

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A ANNUAL REPORT PURSUANT TO SECTION 17

OF THE SECURITIES REGULATION CODE AND SECTION 141 OF CORPORATION CODE OF THE PHILIPPINES

1. For the fiscal year ended March 31, 2014 2. SEC Identification Number 1746 3. BIR Tax Identification Number 000-126-853 4. Exact name of registrant STI EDUCATION SYSTEMS HOLDINGS, INC. as specified in its charter 5. Province, country or other Metro Manila, jurisdiction of incorporation Philippines or organization 6. Industry Classification Code (SEC Use Only) 7. Address of Principal Office 7th Floor i-ACADEMY Building 6764 Ayala Avenue 1226 Makati City

8. Registrant’s telephone (632) 844-9553 number (including area code) 9. Former name, former address, JTH DAVIES HOLDINGS, INC. former fiscal year, if changed since last report 10. Securities Registered pursuant to Sections 4 and 8 of the RSA. Title of Each Class Number of Shares of Common Stock Outstanding and Amount of Debt Outstanding ----------------------------- -------------------------------------- Common Stock 9,904,806,924 shares Issued and Outstanding 11. Are any or all of these securities listed on a Stock Exchange? Yes [ / ] No [ ] Name of Stock Exchange: Philippine Stock Exchange Class of Securities: Common 12. Check whether the registrant:

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

Yes [ / ] No [ ]

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

STI Education Systems Holdings, Inc. SEC Form 17 – A As of 31 March 2014 Page 2

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Yes [ / ] No [ ] 13. State the aggregate market value of the voting stock held by non-affiliates of the registrant. 3,555,405,214shares x Php0.69 per share = P2,453,229,597.66

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

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

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


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TABLE OF CONTENTS

PART I – BUSINESS AND GENERAL INFORMATION

PAGES Item 1 Description of Business 4 Item 2 Properties 32 Item 3 Legal Proceedings 35 Item 4 Submission of Matters to a Vote of Security Holders 36 PART II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5 Market for Issuer’s Common Equity and Related Stockholder Matters 36 Item 6 Management’s Discussion and Analysis of Financial Condition and Results of Operation and Plan of Operation 40 Item 7 Financial Statements 51 Item 8 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 51 PART III – CONTROL AND COMPENSATION INFORMATION

Item 9 Directors and Executive Officers of the Issuer 52 Item 10 Executive Compensation 60 Item 11 Security Ownership of Certain Beneficial Owners and Management 61 Item 12 Certain Relationships and Related Transactions 65 PART IV – CORPORATE GOVERNANCE Item 13 Corporate Governance 68 PART V – EXHIBITS AND SCHEDULES Item 14 Exhibits and Reports on SEC Form 17-C 68 SIGNATURES 72 MARCH 31, 2014 AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES


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PART 1 - BUSINESS AND GENERAL INFORMATION

Item 1. DESCRIPTION OF BUSINESS

Group History and Structure

STI Education Systems Holdings, Inc.

STI 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 extending loans to PWU and UNLAD that shall be repaid by the conversion of the loans into a 40.0% interest in the total issued and outstanding capital stock of UNLAD. As a result, the Group nominates its representatives as members and trustees of PWU, the board of directors of UNLAD and certain key officers of PWU and UNLAD. STI Holdings has submitted all the required documents to effect the conversion of this loan to equity. On 14 June 2012 and 10 August 2012, the Board of Directors and stockholders of the Company, respectively, approved the following: (a) a change in the corporate name from JTH Davies Holdings, Inc. to STI Education Systems Holdings, Inc.; (b) the share-for-share swap transaction (the “Share Swap”) with the shareholders of STI Education Services Group, Inc. (“STI ESG Shareholders”); and (c) the corresponding increase in the Company’s authorized capital stock from 1,103,000,000 shares with an aggregate par value of P 551.5 Million to 10,000,000,000 shares with an aggregate par value of P 5 Billion. The change in the corporate name was approved by the Securities and Exchange Commission (“SEC”) on 10 September 2012 while the Share Swap and increase in authorized capital stock were approved by the SEC on 28 September 2012. On 28 August 2012, the Board of Directors of STI Holdings approved the offering and issuance by way of a follow-on offering of up to a maximum 3 Billion common shares (the “Offer Shares”) at an offer price to be determined based on a bookbuilding process and from discussions between STI Holdings and the International Lead Manager and Domestic Lead Manager. The Offer comprised the following: (a) up to 2,627,000,000 common shares offered to the public on a primary basis (“Primary Offering”); (b) up to 105,209,527 common shares offered to the public on a secondary basis by Korea Merchant Banking Corporation (“Secondary Offering”); and (c) over-allotment option to purchase up to 273,000,000 common shares (“Over-Allotment Option”) granted to UBS AG in its role as Stabilizing Agent and on the same terms and conditions as the Primary Offering and Secondary Offering. The offer price was set at P 0.90 per share on 22 October 2012. The Primary Offering and Secondary Offering were completed on 7 November 2012 while the Over-Allotment Option was exercised on 28 November 2012.


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Consolidation of STI Education Services Group, Inc. (“STI ESG”) into STI Holdings On 20 December 2011, STI Holdings acquired a 4.4% interest in STI 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. On 10 August 2012, STI Holdings’ shareholders approved an increase in share capital from 1,103,000,000 shares with an aggregate par value of P 551.5 million to 10,000,000,000 shares with an aggregate par value of P 5 Billion and a share swap agreement with the stockholders of STI ESG (the “STI Stockholders”) and completed the consolidation of the two companies. Pursuant to the share swap transaction, STI Holdings issued new shares to STI Stockholders in exchange for shares of STI Stockholders in STI ESG at an exchange ratio of 6.5 Shares of STI Holdings for every 1 STI ESG share. Since STI Holdings and the majority of STI Stockholders are related parties, STI Holdings obtained a waiver from the majority of its minority shareholders of the requirement to conduct a rights or public offering during the STI Holdings Special Stockholders’ Meeting held on 10 August 2012. On 28 September 2012, the SEC approved the increase in share capital of STI Holdings. In view of the increase in its authorized capital stock and pursuant to the Share Swap, STI Holdings issued 5,901,806,924 shares to STI ESG Shareholders in exchange for 907,970,294 common shares of STI ESG (exclusive of the 32,324,618 STI ESG shares acquired in December 2011). As a result, immediately after the Share Swap, the STI ESG Shareholders who joined the Share Swap owned approximately 84% interest in STI Holdings while STI Holdings increased its shareholdings to 96.0% of the total issued and outstanding capital stock of STI ESG. As of 31 March 2014, STI ESG holds 502,307,895 shares of STI Holdings equivalent to 5.07% ownership in the Company. In November and December 2012, STI Holdings subscribed to 2.1 Billion STI ESG shares at a consideration price equal to its par value of P 2,100.00 Million. As a result, STI Holdings’ ownership interest in STI ESG increased to approximately 98.71% as of 31 March 2013. STI Holdings’ ownership in STI ESG is at 98.66% as of 31 March 2014.

Acquisition of West Negros University On October 1, 2013, STI Holdings acquired 99.45% of the issued and outstanding common shares and 99.93% of the issued and outstanding preferred shares of West Negros University Corp. (“WNU”), a leading university in the City of Bacolod in Negros Occidental. WNU offers a wide variety of programs and complements the courses offered by the Company’s other subsidiary, STI ESG. The acquisition is part of the planned expansion of the Company. It not only widened its course offerings at the tertiary level but the acquisition also provided STI Holdings another entry into basic education which is the focus of the government’s K+12 program, and into the graduate school level which is vital in updating the development of human capital in the country.

Business Development STI ESG was founded on August 21, 1983 to address the IT education needs of the Philippines. The first courses that it offered were in modular forms that covered basic programming concepts and the COBOL and Basic programming languages. These short courses were patterned to satisfy the demand of college graduates and working professionals who wanted to learn more about the emerging computer technology. Shortly after the establishment of its first wholly-owned training center, STI ESG began granting franchises for other locations within Metro Manila. In 1985, STI ESG established its first provincial school with a wholly-owned campus in Baguio City. In l986, expansion moved to the southern part of the Philippines with a


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wholly-owned school in Cebu. In 1988, STI ESG established its first campus in Mindanao, with a wholly-owned school in Davao City. In the mid 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. In August 2013, STI ESG has also officially applied for the initial offering of the Senior High School program (Grades 11 and 12) beginning SY 2014-15. STI ESG continued to embark on expansion and capital improvement projects as it encouraged schools to move from rented space into school-owned stand-alone campuses. STI ESG also acquired certain franchises and converted them into wholly-owned schools. In addition, STI ESG has centralized its focus into academic quality and started investing on trainings on awareness, documentation, and internal quality audit to achieve ISO 9001:2008 certification for its core academic processes — the courseware development process, the faculty certification process, and the faculty training process. In August 2009, STI ESG subscribed to a 20% interest in a newly created holding company, STI Investments, Inc. (“STI Investments”). STI Investments subsequently acquired a 100.0% interest in PhilPlans First, Inc., an existing pre-need investment company as well as a 99.74% interest in Philhealthcare, Inc., a health maintenance organization company. In May 2012, STI Investments acquired 70% of Philippine Life Financial Assurance Corp., formerly Asian Life Financial Assurance Corp.

The Shift in the Education Landscape in the Philippines: The Senior High School Program The education landscape in the Philippines has changed with the signing of Republic Act (“RA”) 10533 on May 15, 2013, also known as the Enhanced Basic Education Act of 2013. The emphasis of RA 10533 is the introduction of the K+12 program which in summary adds two (2) years prior to tertiary education. For the schools in the Philippines that offer tertiary education, similar to STI ESG, this will mean two (2) academic years with no incoming college freshmen students. This threat has been constructively converted into an opportunity for the STI ESG network of campuses nationwide. STI ESG has decided to capitalize on its nationwide presence and ample facilities to be able to implement the first-to-market approach of the Senior High School program. In August 2013, STI ESG has filed its application for the Senior High School modeling program in support of the K+12 program that is regulated by the Department of Education (“DepEd”). However, by the first quarter of 2014, the DepEd has decided to stop the Senior High School modeling program. It is due to this that the 73 STI Colleges and Education centers nationwide decided to apply for the advance implementation of Senior High School for SY 2014-15 and six (6) STI campuses for SY 2015-16. The two program tracks that the STI ESG has applied for are the Academic and Technical-Vocational-Livelihood tracks.


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Academic Track

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

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

Non-STI Branded Schools In addition to the schools in the STI Network, STI ESG operates three schools that are not branded as STI schools: iACADEMY, which specializes in course offerings in animation and multimedia and graphic arts; De Los Santos STI (“DLS STI”) College, a health science and nursing school and its wholly-owned subsidiary, STI College Quezon Avenue; and West Negros University (“WNU”) which is a subsidiary of STI Holdings that focuses on the widening of the course offerings in the tertiary level and likewise serve as an entry to the basic education and graduate school level. iACADEMY iACADEMY started in 2002 with an initial class of 72 students. At the beginning of SY 2013-2014, iACADEMY had 823 students enrolled. The school is located in the Makati Business District. The faculty is comprised of both experienced academics and industry practitioners. Highlights of the iACADEMY programs are that it is the first and only Wacom Authorized training partner in the Philippines, the first college appointed as an IBM Center of Excellence in the ASEAN region. iACADEMY prides itself in being one of the pioneers in industry-partnered education. Aside from bringing in industry professionals to teach at iACADEMY, it has instituted an internship program, which is one of the most intensive in the country today. Under the program, iACADEMY student interns work full-time in partner companies for at least 960 hours. To date, this model has resulted in a 98% job placement success rate within the first six months after graduation. De Los Santos STI (“DLS STI”) College De Los Santos STI College was established and recognized by the Department of Education Culture and Sports (“DECS”) in 1975 as part of the expanding services of the De Los Santos Medical Center to the Filipino community. The school opened its College of Nursing with only 65 students. In the 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.


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In the next decade, the De Los Santos College has added to its line, the College of Physical Therapy, which received DECS authority to operate in June 1993. In September 2002, the merger with STI ESG was established. This merger was a strategic move on both parties to be globally competitive as the leading ICT Enhanced Healthcare learning institution. Thus, the name De Los Santos-STI College of Health Professions, Inc. (DLS STI) was established. To this date, DLS STI as a learning institution is continuously creating and providing an educational environment responsive to the national goals in order to achieve the best for its students and the community it serves. STI ESG has a 52.0% interest in DLS STI, which is a CHED licensed college specializing in health science education. Approximately 80% of the students are enrolled in health sciences. In addition, it offers programs in hotel and restaurant management, and tourism. The school is adjacent to De Los Santos Medical Center, and benefits from its proximity to the prestigious medical establishment.

DLS STI’s wholly-owned subsidiary, STI College Quezon Avenue, Inc., is incorporated in the Philippines and registered with the Philippine Securities and Exchange Commission (SEC) on March 20, 2007. Its registered office address is 133 Quezon Avenue, Quezon City. STI College Quezon Avenue, Inc. was established as an Educational Center in San Juan (1993-1995), then transferred to Sta. Mesa (1996-2000). It was upgraded to College status in 2001 offering bachelor degree programs. STI College Quezon Avenue, Inc. was formerly situated at 1050 CDC Bldg. Quezon Avenue, Quezon City near Pantranco until second quarter of 2009. In June 2009, it moved to its present location in a four-storey building with mezzanine floor conducive for a campus setting. West Negros University (“WNU”)

West Negros University was founded on February 14, 1948 by three Baptist women leaders, Luciana Aritao, Teresa Padilla, and Rosario Remetio.

The school, then West Negros College, first operated as a sectarian educational institution in an old rented Valentine Memorial Hall at corner Rosario and San Juan Streets, offering six undergraduate programs that attracted 710 students handled by 33 faculty members.

In 1951, the school was re-established as a non-sectarian school on its present location along Burgos Street, utilizing a three-storey wooden building that housed classrooms and administrative offices. A separate building was also built for elementary and high school pupils.

It has since gone through years of providing education responsive to the needs of the community as seen in the continued increase in enrolment. Taking the challenge, then President Leodegario N. Agustin initiated the construction of a P2.2 million concrete five-storey building. The building accommodated all academic departments and administrative offices, laboratories, clinic, library, and classrooms. To enrich the college life of students, a gymnasium was constructed in 1968 for the school's extra-curricular and sports activities. It also hosted convocations, cultural presentations and graduation activities, and extended its services to the community by accommodating, among others, basketball games, boxing tournaments, social gatherings, and concerts. The following year, the school's enrolment rose to 6,843 students, with a pool of 200 faculty members. The increase brought about further expansion; hence in 1972 the construction of a concrete three-storey building for the high school and elementary department was initiated. In 1980, responding to the changing times with the advent of computers, the college put up its own Computer Center and expanded its curricular offerings by opening computer courses and short-term or technical programs. It was then considered among the biggest and was recognized among the pioneers of computer schools in WesternVisayas.


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On October 1, 2007, as initiated by then President, Dr. Suzette Lilian A. Agustin, an application for University status was submitted at the CHED Central Office, Manila. CHED Central Office sent a Special Team on November 22-23, 2007 to evaluate and verify compliance of WNC to the university standards. The school’s readiness for a final CHED visit to inspect and evaluate WNC’s level of compliance was conveyed on January 25, 2008 to the Commission en banc and to the Office of Programs and Standards of the Commission on Higher Education, which resulted to the conduct of the detailed and rigorous process of verification by the CHED Commissioners on February 5, 2008. On February 11, 2008, the Commission on Higher Education has found West Negros College in full compliance of CHED requirements, and granted West Negros College the UNIVERSITY STATUS, per Resolution No. 78, s. 2008. The WNC Board of Trustees then unanimously approved the change of the school’s name from West Negros College to WEST NEGROS UNIVERSITY, per Board Resolution No. 007-02-26-08 dated February 26, 2008. On June 10, 2008, West Negros University received the official confirmation through a Certificate of University Status from CHED, by virtue of Resolution No. 290, s. 2008, dated June 2, 2008.

On October 1, 2013, WNU was turned-over to STI Education System Holdings, Inc.

On its 66th Foundation Anniversary, a groundbreaking ceremony of the five-storey Integrated School Building was held and lauded by members of the local government units, Department of Education, Commission on Higher Education and other stakeholders. With various renovations taking place in the campus under the leadership of its new President, Atty. Monico V. Jacob, the community’s awareness of the school’s existence along with its vision and mission of providing excellent education has again made noise and underscored.

Enrollment STI ESG STI ESG had an average total enrollment of 61,553 for the first and second semesters of School Year (SY) 2011-12, posting a 1.19% increase from SY 2010-11. By SY 2012-13, an increase of 3.04% in the average total enrollment for the first and second semesters was obtained. For SY 2013-14, STI ESG had an average total enrollment of 66,259 for the first and second semesters, posting a 4.47% increase from SY 2012-13. Freshmen enrollees in SY 2011-12 dipped 7.27%. In SY 2012-13, the total freshmen enrollees of the network improved by 2.30%. There was no significant increase in the freshmen enrollees of SY 2013-14. The average percentage of students retained in a semester for SY 2011-12 was at 96%, and was at 95% in SY 2012-13. The average percentage of students retained in a semester for SY 2013-14 increased at 96%. While the average percentage of students who migrated to the succeeding semester is at 87% in SY 2011-12 and SY 2012-13. The average percentage of students who migrated to the succeeding semester in SY 2013-14 is at a high of 91%. In the past three years, significant increases in the enrollment are more evident in the degree programs of STI compared to its technical/vocational programs. The ratio of associate and baccalaureate degree programs to technical/vocational programs improved from 65% versus 35% in SY 2011-12, to 71% versus 29% in SY 2012-13. The ratio of associate and baccalaureate degree programs to technical/vocational programs continued to improve in SY 2012-13 with a ratio of 76% versus 24% in SY 2013-14. In SY 2011-12, there were 11,779 graduates, and in SY 2012-13, there were 12,301 graduates. In SY 2013-14, STI has generated 13,647 graduates for the first and second semesters.


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iACADEMY iACADEMY had an average total enrollment of 523 for the first, second and third trimesters of SY 2011-12, posting a 31% increase from SY 2010-11. By SY 2012-13, an increase of 24% in the average total enrollment for the first, second, and third trimesters was obtained. By SY 2013-14, the average enrollment for the first, second, and third trimesters improved by 23%. Freshmen enrollees in SY 2011-12 increased by 31%. In SY 2012-13, the total freshmen enrollees of the school improved by 19%. There was a 39% growth in the total number of freshmen students by SY 2013-14. The average percentage of students retained in a trimester for SY 2011-12 was at 95%, and was at 93% in SY 2012-13 and for SY 2013-14, the retention rate was 90%. In the past three years, a significant proportion of the student population are enrolled in the School of Design, with 49% of the student population in SY 2011-2012, increased to 58% in SY 2012-2013 and this year with 63% of the student population. In SY 2011-12, iACADEMY has generated 63 graduates for the school. In SY 2012-13, there were 81 graduates. For SY 2013-14, the number of graduates increased to 90. De Los Santos STI (“DLS STI”) College and STI College Quezon Avenue For the past three school years (SY 2011-12, SY 2012-13, and SY 2013-14), DLS STI and STI College Quezon Avenue had a total average enrollment of 1,106 students per semester. West Negros University (“WNU”) For SY 2011-12, enrollment for WNU is at 5,359 and increased to 5,527 in SY 2012-13. Enrollment dipped to 5,000 in SY 2013-14. Majority of the enrollment went to BS Education and Integrated School averaging 14% and 15% respectively. BS Engineering is on a steady trend; Maritime Studies, Criminology, and Graduate Studies have erratic trends, while the rest of the programs have a declining trend.

Tuition Fee Increases STI ESG For SY 2011-12, there was no tuition fee increase but the other school fees had an average increase of 3% due to the new Students Services fee and other items in the other school fees. For SY 2012-13, there was no increase in the tuition fees and other school fees. For SY 2013-14, there was an average increase of 5% in the tuition fees. iACADEMY For SY 2011-12, there was an average increase in tuition fee of 21.88% due to the increase in the salaries of teaching and non-teaching personnel and school renovation. Other school fees did not increase this year. For SY 2012-13, there was no increase in the tuition fees and other school fees. For SY 2013-14, there was no increase in the tuition fees and other school fees.


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De Los Santos STI (“DLS STI”) College For SY 2011-12, there was no tuition fee increase but the other school fees had an average increase of 17.14%% due to the extended laboratory and RLE hours as mandated by CHED. For SY 2012-13 and SY 2013-14, there were no increase in the tuition fees and other school fees. The average increase on tuition fee of STI College – Quezon Avenue for SY 2013-2014 is at 5%. West Negros University (“WNU”)

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

New Programs/Majors and Revised Curricula STI ESG STI ESG regularly conducts market studies to determine what programs, both degree and technical-vocational, are needed by the industry and the market. Moreover, revisions to existing programs are implemented to meet changes in the identified needs, as well as changes in government regulatory requirements. In SY 2011-12, STI ESG started to offer the BS in Accounting Technology program, and in SY 2012-13, Bachelor of Arts in Communication, BS in Culinary Management, BS in Real Estate Management, 2-Yr. Information Technology, 2-Yr. Computer and Consumer Electronics, 2-Yr., and 2-Yr. Tourism and Events Management programs were offered.

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

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


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

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

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

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

Development of competency-based Learning Materials (CBLMs) for ECs and Colleges: 1. Bartending NC II

2. Housekeeping NC II

3. Attractions and Theme Parks Operations NC II

4. Front Office Services NC II

5. Food and Beverage Services NC II

6. Tour Guiding Services NC II

7. Cookery NC II

8. Travel Services NC II

9. Tourism Promotion Services NC II

10. Events Management NC III

Milestones STI ESG STI ESG remains steadfast to its commitment to strive for academic excellence and search for milestones directed towards the development of the institution and the improvement of the quality of its graduates. Kabalikat Award STI Calbayog was the sole educational institution to receive the Kabalikat Award under the Institution category from TESDA in SY 2011-12 for its active support to TESDA Region 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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Leaders Convention STI ESG held its 26th Annual Leaders Convention in Bangkok, Thailand on July 2013. More than 100 School Leaders, School Operations Managers, Senior School Administrators, and Senior Operations Committee members together with the STI ESG Executives attended the convention which was aimed to provide an overview of the impact of the Philippines’ K+12 Program to STI and how the network intends to address this impending shift in the education landscape. Professor Tomas B. Lopez, Jr., one of the pioneers of the implementation of the K+12 program in the Philippines, served as the keynote speaker and shared with the leaders possible school management strategies that may be applied at the onset of the K+12 program. Administrative Planning Sessions and Workshops The overall strategic objective of STI ESG is to gain first-to-market advantage by offering Senior High School program in the STI ESG network of campuses before SY 2016-17. To ensure the smooth transition in the operations of all campuses of STI ESG during the initial stages of the program, the School Operations Group and the School Management Group spearheaded a strategic planning session for each campus to assess the impact of the K+12 Program to STI ESG. The session focused on strategic objectives and pathways for each school that will allow them to ride on the wave of K+12 and convert disruption into an opportunity. Consequently, after most of the campuses have gone through the strategic planning process to draw the pathways leading into the full implementation of K+12 in 2014 and 2015, and the transition years beginning 2016, the STI ESG also conducted a School Administrators Workshop to discuss various operational challenges that the schools will face once the Senior High School program is implemented in STI ESG and at the same time, collaborate on possible solutions to address these challenges. The workshop covered the areas of finance, marketing, human resource, and academics as well as day-to-day administration of the school. TESDA Accreditation Centers In SY 2011-12, STI College – Digos, on the other hand, completed all the pre-requisites of TESDA and became the first TESDA-Accredited Computer Programming NC IV Assessment Center in Davao del Sur. STI College – San Pablo is also the first in the area of San Pablo City to be acknowledged as a TESDA Certified Assessment Center for Commercial Cooking NC II and Computer Hardware Servicing NC II. Rotaract Club The Rotaract Club of STI College – Baguio was also awarded with the Change Maker Award by Rotary International in SY 2011-12. The school also received the following awards for SY 2012-13: DRR Citation Award, Peace through Service Award, and Presidential Citation by the Rotary Club District 3790. West Negros University (“WNU”) WNU in its decades of existence in the field of academe has always been an achiever, whether in the military, sports, research or culture.

The Design of Collapsible Toilet using 5-Gallons Mineral Water Containers and Used Tarpaulins by Engr.

Rey Ramos (Adviser), Jun Anthony Golez, Ma. Gina Sanares, John Michael Paderog and Lorven E. Libo-on

won First Runner-up in the 2011 Invention Category of Regional Invention Contest and Exhibits (RICE)

hosted by Department of Science and Technology (“DOST”).

Meanwhile, the Design and Development of Modular Beams for Single Storey Building also by Engr. Rey

Ramos (Adviser), Jun Anthony Golez, Ma. Gina Sanares, John Michael Paderog and Lorven E. Libo-on

bagged Second Runner-up in the 2011 Invention Category of RICE hosted by DOST.


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Bio-Power Up Hybrid Fuel Additive for Both Gasoline and Diesel Fuel Engines by Engrs. Paolo Petalver and

Dioscoro Marañon Jr. were RICE Finalist in the 2011Creative Research Category or the Likha Award for

College hosted by DOST.

Densifier Briquetting Machine for Low Density Biomass by Engrs. Paolo Petalver and Dioscoro Marañon Jr.

were also RICE Finalist in the 2011 Creative Research Category or the Likha Award for College hosted by

DOST.

In the 2012 Regional Annual Administrative Tactical Inspection, ROTC bagged the championship and over

the years it has consistently been at the top three slots.

Moreover, WNU has also been the host in or venue for various national endeavors like Philippine Basketball

Association (PBA) games, Metropolitan Basketball Association (MBA) games, Negros Occidental Private

Schools’ Sports Cultural and Educational Association (NOPSSCEA) games, Philippine University Games

(UNIGAMES) and Leodegario N. Agustin Foundation (LNAF) Cup.

Faculty Achievements STI ESG In SY 2011-12, more assessors were recognized in other STI ESG campuses. From STI College – Digos, Eduard Pulvera and Anamerthyl Regala were recognized as TESDA Assessors for Computer Programming NCIV in their region. Receiving the same recognition are faculty members from STI College – Surigao namely, Nathaniel Abris, Lex Angelo Estrella, Joemel Resare, and Iricher Supera. Ornel Lloyd 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 member of the Board of Directors of the Philippine e-Learning Society – Luzon Chapter. In SY 2013-14, STI ESG provided assistance to faculty members by coordinating with an accredited Assessment Center to facilitate their TESDA Assessments and consequently, achieved a 100% passing rate. Thirty-six (36) faculty members passed the Tour Guiding Services NC II and twenty-five (25) faculty members passed the Tourism Promotion Services NC II. Moreover, two faculty members were added to STI ESG’s roster of TESDA assessors in the same school year. Leandro Bautista of STI Pasay became an assessor in Bartending NC II and Jay Ian Lim of STI Valencia in Front Office NC II, Bartending NC II, and Food and Beverage NC II. Reputable IT companies also gave recognitions to our faculty members: Jerry Agbayani of STI College – Fairview was certified as a Microsoft Office Specialist; Jefferson Costales of STI College – San Fernando was acknowledged both as a Microsoft Certified Technology Specialist and an IBM Certified Database Associate, Ricky Jay Riel of STI College – Fairview, and Gualberto Coquilla II of STI Maasin were recognized as Cisco Certified Network Associates; and Abraham Saldivia of STI College – Southwoods earned his Six Sigma Green and Black Belts. Other notable achievers were: Dr. Darwin Jaime of STI College – Baguio, recipient of the Institutional Award 2013 from the Philippine e-Learning System; Jamielyn Yaneza, also from STI College – Baguio, placed 2nd runner-up in the Toastmasters International Evaluation Speech Contest; and Christian Santos of STI College – Calamba who competed in the Professional Division of the National Food Showdown and won two bronze medals in the Mocktail Mixing and Cocktail Mixing.


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West Negros University (“WNU”)

In 2011, an Engineering faculty member, Engr. Dioscoro Marañon, was awarded in the 2011 The Outstanding Mechanical Engineering (TOME) in the field of research. The activity was sponsored by PSME – Integrated Association of Mechanical Engineers.

The adviser/moderator of The Wesneco Torch, official student publication of WNU, was recently awarded Best Performing School Paper Adviser 2013 by the Presidential Communications Operations Office – Philippine Information Agency Region VI in Iloilo City.

Student Achievements STI ESG

In SY 2011-12, STIers continued to excel in academics and other co-curricular activities. Celeste Abansi from STI College – Baguio was also recognized as one of the TOSP in the Cordillera region. She was also awarded as Outstanding Rotaract Club President by the Rotary Club District 3790. Six 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 3rd 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 4th 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 4th 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. In SY 2012-13, STI College – Baguio was once again cited in the TOSP through its student Joshua Rarama. Likewise, Loijer Salto from STI Valencia was recognized as one of the Ten Outstanding Pupils and Students (“TOPS”) in their region.


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In this same school year, various STI students were able to go abroad for their OJT and as a foreign exchange student. Sergiris A. Ortega who was then a 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 3rd 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. In SY 2013-14, STI Valencia made it once again to the Ten Outstanding Pupils and Students (“TOPS”) as 2nd year HRS student Angelica Jacob Babalo landed in the top ten. Alijoy Marie Amores of STI College – Tacurong, on the other hand, placed second in an Essay Writing competition organized by the local government of Tacurong. Students of STI College – Dagupan piled up an impressive medal haul of ten gold, two silver, and six bronze medals to end up as one of the top finishers in the Pangasinan Taekwondo Championship. STI College – Balayans’ Bachelor of Science in Secondary Education students went home as champions of the 3rd Educational Congress for Batangas Future Educators (“BAFED”) as they swept the championship title in Impromptu Speech, Cultural Dance, and Challenge Team competition. Aside from being hailed as champions of the inter-school tourism quiz bee organized by the Aklan Tourism Officers Association, Aklan Provincial Tourism Office, and the Aklan Press Club, Inc., STI College – Kalibo was also recognized as the Best Performing School and 1st year BS Travel Management student Esrah Jims Gutierrez as the Best Performing Student. Multimedia Arts students of STI Laoag likewise showed off their creativity in video production and editing when they won first place in the 5th Advertising Competition. Dan Christian Mendoza and Diane Cassandra Relleja participated in a six-month OJT program at the Enchantment Resort in Sedona, Arizona, USA. STI College – Tacloban also emerged victorious in the Society of Mechatronics and Information Technology Enthusiasts, Inc. (SMITE) Robotics and Web Programming Festival 2013 as its students Lester Ag Padul, Peachy Joyce Manasis, and Maico Soledad bested their competitors in the Web Programming category.


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STI’s HRM students were also triumphant in various competitions across the nation. 4th year BSHRM students William Reyes, Kenneth Valliente, and Kelly Gonzales of STI College – San Fernando won the gold medal in the cake decorating category of the Mimosa Toque Off: Culinary Skills Showdown. STI College – La Union took home two silvers and one bronze in the commercial cooking, table skirting, and waitering competitions of the Association of Technical Vocation Institutions of La Union (“ATVILU”) Olympic Skills Competition. On the other hand, 2nd year BSHRM student Mark Aries Libiran of STI College – Sta. Maria won the Best Chicharon dish in the On-the-Spot Cooking competition. Two more HRS students from STI San Francisco came out on top of the culinary contest held during the Nutrition Month celebration of San Francisco, Agusan del Sur. Jayson Escabal, 2nd year HRS student from STI College – Surigao, also bagged the top prize in the Table Skirting competition during the Surigaonon Food Festival. Not to be left behind, STI College – Cagayan de Oro was awarded the bronze medal in the Fruit and Vegetable Carving during the Kumbira Festival. Students from STI College – Calamba won numerous awards as well in the Laguna Hospitality Exposition 2013 and Malayan Colleges Laguna Tourism and Hospitality Expo 2013. Meanwhile, STI Iligan reaped awards in the annual Association of Lanao Technical Institutions, Inc. (“ALTI”) Olympics. 2nd year HRS student Christy Marie Sabanal placed second in the Cooking competition while 1st year CCE student Kirk Anthony Añana finished first in the Information Network Cabling event and 2nd year IT student Lorebill de Amor Loresto also took the first spot in the Programming NC II competition. STI College – Koronadal also emerged victorious in the T’nalak Festival as 4th year BSIT student Julius Marcelino took home the gold medal in the Quiz Bee event while its BSHRM students grabbed the championship titles in Table Skirting, Table Setting, and Table Napkin Folding. iACADEMY SY 2011-12 proved to be a fruitful year for iACADEMY as its students received accolades from various institutions. 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 2nd 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. De Los Santos STI (“DLS STI”) College Meanwhile, DLS STI maintains its unwavering commitment to strive for academic excellence and is

committed towards the continuing improvement of the institution as well as the quality of its graduates. In


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SY 2012-13, 12 of its BSHRM students joined the Aji No Moto Umami Challenge held at the SMX Convention

Center and earned rave reviews as they bagged the gold award for its Pilipino Umami Dish.For the SY 2013-

14, BS Psychology students were invited by Psychological Association of the Philippines Junior Affiliates

(PAPJA) to join in their 27th Annual PAPJA Convention. The students battled it out with students of other

colleges and universities across the country. They were not declared winner, but still the experience gained

by the students in the activity makes them winners as well.

In the recently concluded Tagisan ng Talino 2014 cluster competition, STI College – Quezon Avenue had garnered various major awards. Odeza R. Bautista garnered 1st place in Worth the Whisk competition. Also in 1st place for the All in Place competition was Jake Christian Z. Escobar and Jonalyn H. Bardoquillo. Meanwhile, three students represented the school in the Think Quest competition and won 2nd place. In Chef Express, another three students garnered 2nd place in the said competition. Student Paul Eugene Mangahas, the batch magna cum laude, was voted national finalist in the STI Student of the Year competition. West Negros University (“WNU”)

Licensure Examination for Teachers

Marie Franz D. Jeruta, a graduate of the Teachers Certificate Program (TCP) of West Negros University ranked 10th place in the Licensure Examination for Teachers conducted on September 2012. Other successful examinees were 11 graduates from TCPand 54 graduates from the Bachelor of Elementary Education (BEED) and Bachelor of Secondary Education (BSED).

Nursing Board Examination

Ma. Ellen A. Gabrido, SY 2011-2012 BS Nursing graduate placed 10th in the 2012 Nursing Board Exam.

Charity Mondragon, a 2013 BS Nursing graduate landed 6th place in the Nursing Board Examination given in December 2013.

Ten Outstanding Students of the Philippines (TOSP)

Lucellie P. Santibañez, a summa cum laude graduate of Bachelor of Science in Psychology was awarded as one of 2013 TOSP. She was also a delegate to the Ayala Young Leaders Award (AYLC).

Marlie Joie A. Bombita, a nursing graduate represented West Negros University (“WNU”) in the national finals of the 50th search for TOSP in Metro Manila.

Carlos J. Gerogalin, a summa cum laude graduate of Bachelor of Secondary Education in 2010 was also awarded as one of TOSP.

TOSP is an Awards and Formation Program that seeks to galvanize the youth into nation building through exemplary academic performance, social involvement, and inspiring leadership services to their school, local communities, and the country. It is also serves as a beacon of hope for the Filipino youth through its significant contribution in encouraging the students to aspire more despite of the adversaries experienced.

Philippine Rescue 2012

Four Wesnecans represented the university and the country in the 2012 Life Saving World Championships in Adelaide, South Australia last November 2-13, 2012. The Biennial Lifesaving Sports World Championships Event is participated by 112 nations worldwide and it is a great opportunity to showcase skills in the various life-saving events like swimming pool events, beach and surf events.


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West Negros University (“WNU”)Wins in 2nd Regional Newscasting Tilt

Beverly Apple Remo, third year Bachelor in Elementary Education, Major in Special Education bested 10 other finalists from Bacolod and Iloilo City in the tertiary level of the ABS-CBN 2nd regional Newscasting Competition held November 10 in Iloilo City.

In a related field, Theoniko Del Mundo, a graduate of B.S. Education (SY 2012-2013) was recognized as one of the IWAG Awardees.

Philippine Information Agency Awards

Seven recognitions were awarded to The Wesneco Torch, official student publication of WNU in the Campus Journalism Seminar-Workshop held last August 6-8, 2012 at Casa Real, Iloilo Grand Hotel, Iloilo City spearheaded by the Philippine Information Agency (PIA). TWT bagged the Most Promising Copy Editor Award for English and Promising Awards for News Writer (English), Feature Writer (English) News Writer (Filipino), Copy Editor (Filipino), Photojournalism and Promising Page Design.

Center for Performing Arts and Culture

West Negros University has been known in its commitment for preservation of Filipino Culture through its Kaanyag Pilipinas Dance Company (KPDC) that has been recognized not only in the local setting but also in international competitions. It represented the Philippines in the International Festival at Port Island Exposition (Portopia ’81), in Kobe, Japan. Among the 35 participating countries, KaanyagPilipinas Dance Company was awarded with the gold medal together with Bolshoi Ballet of Russia.

The KPDC continues to receive citations and awards from various civic and religious groups, professional organizations and government agencies locally, nationally and internationally.

Provincial Sports Dominance

The West Negros University has always been known as the proud home of the Mustangs. Since its inception in 2005, WNU’s men’s basketball team has been a force to be reckoned with in Region VI. Some of the team’s noteworthy achievements are 14 championship titles in the Negros Occidental Private School Sports Cultural Educational Association (“NOPSSCEA”) and another title in the Basketball Association of the Philippines (“BAP”) National Students’ Finals. The NOPSSCEA is an athletic, cultural, and educational program in Negros Occidental with 54 private high schools, colleges, and universities as members.

The men’s football team has likewise garnered respect in the region having won two national football titles and having produced prominent players who later on played for the Philippine Football Federation such as Norman “Nonoy” Fegidero, Afredo Dioso, Melo Sabacan, Loreto Kalalang, Jezurel Tono, Joshua Fegidero, and Richard Canedo, among others.

Faculty Development and Certification STI ESG provides faculty development programs to its members which are designed as a system of services, opportunities, and projects that assist faculty members in acquiring competencies necessary to effectively perform their respective function. Under its faculty development program, STI ESG has two major types of national trainings held regularly every school year, the Courseware-based training (“CBT”) and Teaching Skills Training (“TST”). The CBT are training programs for all faculty members from wholly-owned and franchised schools that are aimed to improve the teaching methodologies and content knowledge for specific courses held during


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semestral and summer breaks. Courses offered for training vary year-to-year depending on the needs analysis of the faculty members of the whole STI network. Since SY 2011-12, the CBT included trainings in courses such as Web Programming, Neural Networks, Operation Research, Control Systems, VB. NET, Culinary Hands-on Training, Databases, Java Programming, Computer Security, Electronics, Computer Networks, Communication Arts, Nursing Practicum/Competency Appraisal, AMADEUS Basic Certification (a training provided by AMADEUS, one of STI’s corporate partners), Discrete Math, Operating System, Mobile Applications Development, Data Structures, Software Engineering, Theory of Computations, Web Applications Development, Robotics, and Quickbooks. In SY 2011-12, the CBT had 246 participants and increased to 290 participants in SY 2012-13. For SY 2013-14, the CBT focused on courses such as AMADEUS Basic Certification, Microcontroller System, HRM System, Quickbooks, Broadband Technology, Mobile Technology, Fundamentals of VB (Using VBA), Advance Microcontroller System, Tour Guiding Services, Tourism Promotion Services, and Travel Services. The CBT had 403 participants nationwide. STI ESG also administers a faculty competency certification program (“FCC”) which serves as the process of evaluating a faculty 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 2011-12 with 936 FCCs granted, SY 2012-13 with 1601 FCCs granted, andin SY 2013-14, a total of 973 faculty members were certified and 2,628 certificates were released.

Student Development STI ESG believes that learning should not be confined within the four corners of the classroom. With the effort to ensure that its graduates will be equipped with a well-rounded education that will help them reach their highest potential, STI allows students to explore, enjoy, and learn through a wide array of academic, co-curricular, and extra-curricular activities. The STI National Youth Convention Since 1995, the STI National Youth Convention has been an annual venue where students are provided with opportunities to learn the latest trends from the industry leaders and motivate them to apply the values and information they have gained with the objective of contributing to their school and community. The theme and topics vary every school year but always focus on alternative and innovative learning to discover the latest trends in technology, acquire the most in-demand and job-ready skills, and enhance specific values anchored on attributes that a model citizen should exhibit. In SY 2011-12, a total of 32,789 students attended the event which was held in 10 key cities nationwide namely Baguio, Iloilo, Bacolod, Cebu, Tacloban, Cagayan de Oro, Davao, Legazpi, Puerto Princesa, and Metro Manila. The number of student attendees continued to grow to 34,394 in SY 2012-13 while the venues remained the same. In SY 2013-14, the attendees slightly dipped to 33,404 students while General Santos and Naga replaced Tacloban and Legazpi in the line-up of venues. Tagisan ng Talino (“TNT”) The TNT is an annual academic competition that tests the capabilities of students on impromptu speech, essay writing, programming, cooking, cake and table design, and general knowledge. Over the years, specific competitions comprising the TNT have been enhanced to ensure that the competitions’ objectives are met. SY 2011-12 saw a total number of 1,450 students nationwide who participated in the competitions. In SY 2012-13, 863 students nationwide participated after reducing the total number of competitions from 10 in SYs


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2010-11 and 2011-12 to 8 in SY 2012-13.For SY 2013-14, the participants slightly increased to 879 students and the number of competitions remain the same. Tagisan ng Sining (“TNS”)

Launched in SY 2013-14, the TNS is an annual competition that aims to challenge the students’ artistry, creativity, and originality in the field of photography and music video making. During the launch, 147 students nationwide competed in the TNS. Talent Search The STI Talent Search is an annual showcase of talents that aims to recognize the various skills of STIers nationwide — from singers and musicians to dancers and the up-and-coming models. Every year, 130 contestants compete for the STI Idol Singing competition, Battle of the Bands, Hataw Sayaw Dance competition, and the search for Mr. and Ms. STI. Since SY 2011-12, the Talent Search competitions have been held at the Enchanted Kingdom in Santa Rosa, Laguna. An impressive number of 18,809 students witnessed the event in SY 2011-12. The numbers soared to 20,839 in SY 2012-13while SY 2013-14 saw a slight decrease in attendees to 20,000 students. STI College Olympians STI ESG joined the National Athletic Association of Schools, Colleges, and Universities (“NAASCU”) in order to develop its roster of student athletes by competing against different colleges and universities. STI formed several teams in basketball, volleyball, track and field, badminton, table tennis, chess, billiards, and cheer dancing. SY 2011-12 showed remarkable improvements in sports. The 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. Gift of Knowledge To provide educational opportunities to deserving individuals who have no means to pursue post-secondary education, STI, through the STI Foundation, strengthens its partnership with various TV programs from different TV networks. There were 113 scholars registered from the TV programs in SY 2011-12 and 63 scholars in SY 2012-13. In SY 2013-14, the number of scholars declined to 43.


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Sponsored Scholarship Programs STI ESG and STI Foundation for Leadership in Information Technology and Education, Inc. (STI Foundation) continually strengthen partnerships with corporations to be able to provide scholarship programs to support the tertiary education of deserving individuals. As such, STI ESG has established a partnership with the Jollibee Foods 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 2011-12, the STI Foundation and its partners were able to support 155 scholars nationwide, 109 scholars received financial support in SY 2012-13, and 104 scholars in SY 2013-14. West Negros University (“WNU”) The following grantors sponsor scholarship programs through the University:

CHED Scholars

FAPE Scholarship

Green Scholars – Engr. Dioscoro Marañon and Engr. Paolo Petalver

Pastor Paul Pineda Scholarship

SEEDS Scholarship from Jollibee, Greenwich and Chowking

Additional scholarships are as follows: Academic Scholarship 1. Institutional- Free tuition, registration, miscellaneous and laboratory fees [one (1) lab. Subject] for one

(1) semester only.

2. College Scholars- 50% discount on tuition, registration & miscellaneous fees for one semester only.

3. Engineering Scholars- free tuition, registration & miscellaneous fees for one (1) semester only.

4. Entrance Scholars- free tuition, miscellaneous, registration and laboratory fees [one (1) lab. Subject

per semester] for one school year excluding summer.

5. First honorable mention- 50% discount on tuition, registration miscellaneous & laboratory fees [one

(1) lab. Subject per semester] for one school year excluding summer.

6. Second Honorable Mention- 35% discount on tuition, registration, miscellaneous & laboratory fees

[one (1) lab. Subject per semester] for one school year excluding summer.

7. Third Honorable Mention- 25% discount on tuition, registration, miscellaneous & laboratory fees [one

(1) lab. Subject per semester] for one school year excluding summer.

8. Top Ten Graduates of WNU Integrated School- (high school level)- Discounts on registration, basic

miscellaneous, laboratory fees (for 1lab. Subject per semester) and tuition fee for one school year

excluding summer.

a. Third to Fifth in Rank – 80%

b. Sixth to Tenth in Rank – 50%


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9. High School and Elementary Scholars

a. Valedictorian / First Honors- free tuition, registration and miscellaneous fees for one school year.

b. Salutatorian / Second Honors- 50% discount on tuition, registration and miscellaneous fees for

one (1) school year.

c. Top Ten Graduates of WNU Integrated School

c.1 Valedictorian & Salutatorian- 100%

c.2 Third to Tenth in Rank- 50%

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

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

Cultural Scholarship (Units allowed with miscellaneous, registration)

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

Ministers and Ministers’ Children- 18 units with miscellaneous, registration WNU Special Scholarship Program for Advertising Partners (SSPAP) - 18 units only WESNECO TORCH- full tuition, miscellaneous, registration and other fees except ID. STI Partnership Program (“PP”) STI ESG establishes, maintains, and promotes partnerships with the legitimate members of the industry to increase our students and graduates’ employability under the PP. Through the PP, opportunities such as on-the-job training (“OJT”), employment, courseware enhancements, faculty development are made available to STI, its students, and partners. In addition, activities such as mock recruitment, employment preparation seminars, job fairs, scholarships, postings of employment opportunities, and faculty trainings are also made possible. On the other hand, the employment placement of graduates is also covered by the PP. As such, partners for job placement of STI graduates are enabled to post their job openings and request for lists of graduates through www.i-cares.com or the Interactive Career Assistance and Recruitment System (“ICARES”) at no cost. The ICARES is an exclusive job search system for STI graduates which facilitates the easy dissemination of 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 2011-12, 94partners utilized the ICARES system, the number slightly increased in SY 2012-13 to 96, and in SY 2013-14, ICARES reached a total of 104 academic partners wherein 73 of its partners were able to post job vacancies on the ICARES website. On-the-ground school activities such as job fairs are conducted for recruitment purposes and to provide employment preparation seminars for graduating STI Students. In SY 2011-12, 26 partners participated in STI

http://www.i-cares.com/


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job fairs, there were 28 partners who participated in SY 2012-13, and 30 partners who participated in SY 2013-14. iACADEMY Industry Partners iACADEMY is the first Lotus Academic Institute Partner in the Philippines and the ASEAN Region. It is also the first and only college that is a Wacom Authorized Training Partner in the country today. iACADEMY equips students with state-of-the-art facilities and technology through its partnership with Wacom. In 2010, iACADEMY was appointed by IBM as its first IBM Center of Excellence (“CoE”) in the ASEAN region. As an IBM CoE, iACADEMY will serve as a venue to expose existing and prospective IBM clients to current state-of-the-art technology solutions. Furthermore, iACADEMY aims to be the source of technical skills and talent to feed the IBM Ecosystem, which is composed of IBM, IBM Business Partners, and IBM Clients. The Philippine Stock Exchange (PSE) has chosen iACADEMY to offer the PSE Certified Financial Analyst Program. iACADEMY became the best choice primarily because of its strategic location. iACADEMY was the official school partner for season 3 of Project Runway Philippines (“PRP”), a search for “the next big Filipino fashion designer”. The reality show, which airs on free TV channel ETC, features 15 aspiring designers and the 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. De Los Santos STI (“DLS STI”) College Affiliations DLS STI has been a loyal partner of notable healthcare institutions in the Philippines which further enhances the capabilities and skills of its students. These institutions include the De Los Santos – STI Medical Center, National Children’s Hospital, National Center for Mental Health, San Lazaro Hospital, TLC Psychiatric Facility, QCHD Lying–In Clinic, St. Camillus Medhaven Nursing Home, Philippine Orthopedic Center, East Avenue Medical Center, Dr. Fe Del Mundo Medical Center, Hospicio De San Jose, St. Vincent General Hospital, Jose Reyes Memorial Medical Center, Philippine Heart Center, National Kidney & Transplant Institute and Home for the Aged. These Institutions covered special areas which allow DLS STI students to have a hands-on practice in providing healthcare to patients in areas such as Pediatrics, Intensive Care Unit (“ICU”), Surgical, Delivery, Orthopedic, Communicable Diseases, Neonatal ICU(NICU), and Geriatrics. West Negros University (“WNU”) International and Local Linkages West Negros University has international and local linkages for research purposes. WNU has two international linkages, namely: Asian University Digital Resource Network (AUDRN) and German Development Cooperation (GIZ), both organizations provide financial support to the institution while WNU provide logistics and human resources. As for national linkages, Miriam College, DepEd Kabankalan and Partnership for Clean Indoor Air (PCIA) help provide human resources and logistics in conducting researches. WNU students are also enjoying scholarship grants attributable to the institutions tie-up with Commission on Higher Education (CHED) under the Tulong Dunong (ACT-CIS Party List) Program, Public Employment Service Office (PESO), AFPEBSO and Skills Enhancement and Educational Development for Students (SEEDS). The latter provides WNU Students training through Jollibee Food Corporation, Chowking and Greenwich. Other organization or business organization providing tie-up to WNU for students’ training include 2GO Group Incorporated for Maritime students; Teresita Lopez Jalandoni Provincial Hospital, The Doctors


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Hospital, Murcia Health Center and Corazon Locsin Montelibano Memorial Regional Hospital for Nursing Students; Bacolod City Police Office (BCPO), Bureau of Fire Protection (BFP), Parole and Probation Office of Bacolod City and Bureau of Jail Management and Penology (BJMP) for Criminology students; and Philippine National Bank (PNB) and Yusay Credit and Lending Corporation for Business students.

Community Extension and Outreach Programs Given the national reach of STI ESG, the company has taken upon itself to uphold socially responsible activities that are aimed to better the communities that individual campuses belong to, and at the same time, develop a positive environment that will be beneficial to all stakeholders. The STI Foundation The STI Foundation aims to contribute to the improvement of the country’s educational system through programs and projects that address the digital divide and promote excellence in education. The Voice of the Youth National Oratorical Competition Set towards inspiring the youth to actively stay informed with the current issues, STI partnered with the Department of Education (“DepEd”) and the National Youth Commission (“NYC”) for the Voice of the Youth (“VOTY”) – National Oratorical Competition. This advocacy serves as a platform to encourage the students to fluently express their views in English for global competency as well as develop critical thinking through the art of public speaking. Since SY 2011-12, more than PhP2 Million worth of prizes were awarded every year to the winners, their coaches, and their respective schools. In SY 2011-12, 676 high schools from Luzon, Visayas, and Mindanao joined the competition while 660 high schools participated in this nationwide competition for SY 2012-13 and SY 2013-14. In SY 2012-13, VOTY joined the 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 advocacy also won in SY 2013-14 an Award of Merit under the Advocacy Communications category of the Philippine Quill Awards organized by the International Association of Business Communicators (“IABC”) Philippines. The Philippine Quill Awards is the local counterpart of IABC’s Gold Quill Awards, joined in by the world’s biggest corporations and agencies, and regarded as the highest standard in business communication. The STI Mobile School The STI Mobile School is a tourist-sized bus that has been converted into a roving computer laboratory. It is equipped with a state-of-the-art computer laboratory with internet access, multimedia computers, LCD monitors, sound system, and other top-of-the-line computer equipment. Since SY 2011-12 until SY 2013-14, the STI Mobile School has travelled to 872 sites and trained 105,218 participants nationwide. Today, a total of six mobile school buses travel across Luzon, Visayas, and Mindanao. Run for Pasig Since SY 2011-12 until SY 2013-14, STI ESG has supported the advocacy of ABS-CBN Foundation's Kapit Bisig Para sa Ilog Pasig, which aims to raise awareness and funds for the rehabilitation of Ilog Pasig and the esteros


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connected to it. In SY 2013-14, the Run for Pasig, for the first time, was staged as a simultaneous eco-run held in different key locations nationwide namely Quezon City, Cebu, Bacolod, Davao, and in Los Angeles, USA. 14 STI Colleges in Metro Manila (Alabang, Caloocan, Cubao, Shaw, Fairview, Global City, Las Piñas, Makati, Muñoz-EDSA, Novaliches, Parañaque, Quezon Avenue, Recto, and Taft) mobilized 5,391 STIers in SY 2011-12. In SY 2012-13, STI College Ortigas-Cainta joined for the first time and added to the strong number of 11,240 students, faculty members, and staff. Thus, STI was recognized as the school with the largest contingent based on CHED data. For SY 2013-14, 21 STI Colleges in Metro Manila, Visayas, and Mindanao (Alabang, Caloocan, Cubao, Fairview, Global City, Las Piñas, Makati, Marikina, Muñoz-EDSA, Novaliches, Parañaque, Pasay, Quezon Avenue, Recto, Shaw, Taft, Ortigas-Cainta, Bacolod, Cebu, Davao, and Tagum) mobilized 13,672 students, faculty members, and staff to participate in the 3k category. Halalan 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 2013-14, STI partnered once again with ABS-CBN for the 2013 national elections. Thousands of students, faculty members, and staff heeded the call to become Bayan Patrollers. The STI volunteers were tasked to be the key content aggregators wherein they received and verified reports from the Bayan Patrollers through face-to-face interviews and various media platforms. Super Typhoon Yolanda At the height of the calamity that struck the country during SY 2013-14, STI ESG and its campuses, STI Alumni Association, and STI Foundation pooled together resources to assist in the rebuilding efforts for the families devastated by the Super Typhoon Yolanda. A total of PhP1.185 Million, both cash and in-kind donations, were collected wherein a portion was used to help the affected STI ESG campuses in Tacloban, Ormoc, Kalibo, and Iloilo. West Negros University (“WNU”)

The English Department of WNU extends its expertise in TESOL in Puroks/Barangays where out-of-school youth, willing mothers and pupils need extra help in English. This is done on weekends and extends until December when a joint culminating and Christmas activity takes place. The English teachers take turns in teaching these young people and their mothers English for Speakers of Other Languages (ESOL).

WNU continues to extend outreach activities to its adopted community in Purok Tunggoy, Mandalagan, Bacolod City and an adopted school in Granada, Bacolod City, specifically, VAGRES (Vista Alegre Granada Relocation Elementary School).

WNU had the “Care and Share Yolanda Survivors” project days after the huge devastation brought by Super Typhoon Yolanda on November 8, 2013. The project is a collaborative effort of the Wesnecan Community and the Protestant Church of Laichingen in South Germany through its volunteer student Nadja Gruhler. A total of PhP3 Million was raised that was used to fund relief operations and a Rehabilitation and Recovery Shelter for Yolanda Survivors Homestay Scheme Program at Purok Kantamayon Brgy. Patao in Bantayan Cebu. There were 62 houses built and 31 more to be turned over; while 43 partially damaged houses were also repaired.


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Business of Issuer STI Holdings, being a holding company, derives its revenues from dividends declared by its subsidiaries. It also derives income from business advisory services it provides to the subsidiaries. In the fiscal years ending March 31, 2014 and 2013, it earned interest from funds received from the follow on offering, while these funds were not yet deployed to its subsidiaries in accordance with the follow-on offering work program. STI ESG and its subsidiaries, as educational institutions, derive its revenues from tuition and other school fees from its owned schools and royalties and other fees for various educational services provided to franchised schools. STI ESG has a total of 80 schools nationwide and is comprised of 64 STI branded colleges and 16 STI branded education centers. Of these, 27 college campuses are wholly-owned, while 37 college campuses are operated by franchisees, 12 educational centers are operated by franchisees, and 4 are wholly-owned educational centers. STI ESG purchased STI Batangas from its franchisee in September 2013. STI College – Balanga, STI Ozamis, and STI College – Tacloban have ceased operations this school year. STI College – Tacloban’s closure was brought about by super typhoon Yolanda which devastated the campus and has displaced most of the students, faculty, and staff of the school. STI ESG has since opened other STI schools nationwide to accommodate student transferees from STI College – Tacloban providing them with 100% scholarship on tuition fees, free uniforms and books; likewise, faculty and staff members were given priority in their job applications in STI. Apart from the STI branded campuses, iACADEMY has one campus in the Central Business District of Makati while DLS STI College has a campus adjacent to De Los Santos STI Medical Center. STI 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.

STI School Programs

BS in Computer Science

BS in Information Technology

BS in Information Technology major in Network Engineering

BS in Information Technology major in Digital Arts

BS in Accounting Technology

BS in Business Management major in Operations

BS in Office Administration

BS in Office Administration with Specialization in Customer Relations

BS in Real Estate Management

BS in Culinary Management

BS in Hotel and Restaurant Management

BS in Travel Management

BS in Tourism Management

BS in Computer Engineering

AB Communication

BS Nursing

Bachelor of Secondary Education major in Mathematics

Bachelor of Secondary Education major in Computer Education

3-yr. Hotel and Restaurant Administration


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2-yr. Information Technology Program

2-yr. Associate in Computer Technology

2-yr. Hospitality and Restaurant Services

2-yr. Tourism and Events Management

2-yr. Computer and Consumer Electronics Program with Broadband Technology

2-yr. Multimedia Arts Program

2-yr. Practical Nursing Program

BS in Computer Science

BS in Information Technology

iACADEMY School Programs

AB in Fashion Design

AB in Multimedia Arts and Design

BS in Animation

BS in Game Development

BS Business Administration major in Marketing and Advertising

BS Business Administration major in Operations Management

BS Business Administration with specialization in Financial Management

BS Computer Science major in Software Engineering

BS Information Technology major in Digital Arts

BS Information Technology major in Web Development

De Los Santos STI (“DLS STI”) College School Programs

BS Nursing

BS Physical Therapy

BS Radiologic Technology

BS Psychology

BS Hotel and Restaurant Management

BS Tourism Management

Caregiver

Commercial Cooking

Housekeeping

Bartending

Baking and Pastry

Food and Beverage

STI College Quezon Avenue School Programs

Bachelor of Science in Computer Science

Bachelor of Science in Information Technology

Bachelor of Science in Business Management Major in Operations

Bachelor of Science in Hotel & Restaurant Management

Associate in Computer Technology

Hospitality & Restaurant Services West Negros University (“WNU”) School Programs School of Professional Studies:

Bachelor of Science in Accountancy (BSA)

Bachelor of Science in Criminology (BS Crim)


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Engineering Programs

Bachelor of Science in Civil Engineering (BSCE)

Bachelor of Science in Electrical Engineering (BSEE)

Bachelor of Science in Mechanical Engineering (BSME)

Bachelor of Science in Electronics Engineering (BS Elec. Eng.)

Bachelor of Science in Chemical Engineering (BS Chem. Eng.)

Education Programs

Bachelor of Elementary Education

o Major in

General Curriculum

Special Education

Pre-School Education

Bachelor of Secondary Education

o Major in

English

Filipino

Music, Arts & P.E. (MAPE)

Mathematics

Values Education (VAED)

Teachers’ Certificate Program (TCP)

Maritime Programs

Bachelor of Science in Marine Engineering (BS MArE)

Bachelor of Science in Marine Transportation (BSMT)

School of Arts and Sciences:

Bachelor of Arts in English (AB Engl.)

Bachelor of Science in Mathematics (BS Math)

Bachelor of Science in Psychology (BS Psyc)

Bachelor of Science in Information Technology (BSIT)

Bachelor of Science in Computer Science (BSCS)

Bachelor of Science in Hospitality Management (BSHM)

Bachelor of Science in Business Administration (BSBA)

o Major in

Marketing Management

Financial Management

School of Basic Education:

Nursery

Kinder (1 & 2)

Elementary

Secondary

School of Graduate Studies:

Doctor of Philosophy in Educational Management (Ph.D.)

Doctor in Public Administration (DPA)


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Master in Public Administration (MPAD- Thesis)

Master in Public Administration (MPAD- Non Thesis)

Master in Nursing (MN-Thesis)

Master in Nursing (MN-Non Thesis)

Master of Arts in Education (MAED)

o Major in

Administration and Supervision

Guidance and Psychology

Physical Education

Filipino

Mathematics

English

Values Education

Early Childhood Education

West Negros University (“WNU”)

Philippine Association of Colleges and Universities Commission on Accreditation (PACUCOA) Accreditation

Level III Accredited Status – School of Arts and Sciences – Business and Management (Bachelor of Science in Business Administration major in: Business Economics, Human Resource Management, Operation Management, Marketing Management and Financial Management). Re-accredited status for the period February 2011-2014.

Level III Accredited Status – School of Arts and Sciences – Bachelor of Arts in English. Re-accredited status for the period February 2011-2014.

Level I Accredited Status – School of Arts and Sciences – Bachelor of Science in Mathematics, Bachelor of Science in Psychology.

Level III Accredited Status – School of Professional Studies – Education Courses -Bachelor of Elementary Education, Bachelor of Secondary Education. Re-accredited status for the period February 2011-2014.

Level II (ongoing) – School of Professional Studies – Engineering Courses – Bachelor of Science in Civil Engineering, Bachelor of Science in Mechanical Engineering, Bachelor of Science in Electrical Engineering.

Level I Accredited Status – School of Arts and Science – Information and Communication Technology – Bachelor of Science in Information Technology

Level I Accredited Status – School of Professional Studies – Bachelor of Science in Nursing

Level II Accredited Status – School of Graduate Studies – Master in Public Administration, Master of Arts in Educational Management

Level I Accredited Status – School of Graduate Studies – Doctor of Philosophy in Educational Management

PROGRAM LEVEL DURATION

Liberal Arts Level III RA February 2011-2014

Business Administration Level III RA February 2011-2014

BEED Level III RA February 2011-2014


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BSED Level III RA February 2011-2014

MAED Level III RA March 2013-2015

MPA Level III RA March 2013-2015

PhD in Education Management Level I Formal October 2010-2013

Nursing Level I Formal October 2010-2013

B.S. Math Level I Formal October 2010-2013

B.S. Psych Level I Formal October 2010-2013

Criminology Candidate February 2011-2013

Electronics Engineering Candidate February 2011-2013

Civil Engineering Level I Formal January 2008-2011

Mechanical Engineering Level I Formal January 2008-2011

Electrical Engineering Level I Formal January 2008-2011

Marine Engineering ISO: 9001:2008 SY 2013-2014 to SY 2014-2015

Marine Transportation ISO: 9001:2008 SY 2013-2014 to SY 2014-2015

Pre-Elementary Re-certification FAPE SY 2013-2014 to SY 2015-2016

Elementary Re-certification FAPE SY 2013-2014 to SY 2015-2016

High School Re-certification FAPE SY 2013-2014 to SY 2015-2016

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

FUNCTION NUMBER OF EMPLOYEES

STI

Main Office

Senior Management 12

Managers 58

Staff 128

Total 198

STI Schools

Teaching personnel (wholly-owned schools) 869

Non-teaching personnel (wholly-owned schools) 295

Total 1,164

STI ESG GRAND TOTAL 1,362 iACADEMY

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

De Los Santos STI (“DLS STI”) College

DLS-STI College has 55 employees, 42 of whom are faculty members and 13 non-teaching personnel. As

such, 75% of the faculty members are MA or MBA holders on their respective field of expertise.


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West Negros University (“WNU”) WNU has employed 99 full-time and part-time non-teaching personnel assigned to various departments and 171 teaching personnel.

Item 2. PROPERTIES STI ESG has an extensive list of properties that are either owned or under long-term lease which serve as sites for campuses, warehouses, for rental, and investment. The following table sets forth information on the properties which STI ESG owns.

LOCATION TYPE USE AREA (IN SQ.M)

LOT FLOOR

Caloocan Land and Building School Campus 15,495.00 10,671.00

Cubao Land and Building School Campus 3,768.00 9,600.00

Cainta, Rizal Land and building School Campus 39,880.00 9,031.00

Administration Building 4,951.00

Novaliches Land and building School Campus 4,983.00 7,160.71

Batangas Land and building School Campus 5,934.00 5,672.00

Lucena Building School Campus; Land is on long term lease

4,347.00 6,870.00**

Calamba Building School Campus 6,237.00 6,750.00

Naga*** Land and building School Campus 5,170.00 3,206.00

Carmona, Cavite Land and building School Campus 6,582.00 2,838.00

Lucban, Baguio Land and building School Campus 731.00 1,726.00

Kauswagan, Cagayan de Oro

Land and building School Campus 17,563.00 3,540.00

Fort Bonifacio, Global City

Building School Campus; Land is on long term lease

- 7,845.66

Fairview, Quezon City***

Land and building School Campus 1,208.00 3,905.00

Rented buildings C&D 1,460.00

Valencia, Bukidnon Land and building School Campus 300.00 1,166.12

Kalibo, Aklan Land School Campus 1,612.00 -

Las Piñas Land School Campus 10,000.00 -

Sto. Tomas Baguio Land Investment Property 512.00 -

Almanza, Las Pinas 3 Condominium units (37.2sqm/unit)

Investment Property - 111.6

Ayala Avenue, Makati City***

Condominium building (4th, 5th & 6th floors)

4th and 5th floors school premises, 6th floor for rental

- 3,096.00

Caliraya Springs, Cavinti Laguna

Land Investment Property 948.00 -

BF Homes, Las Piñas (HS)***

Land and building GS

Warehouse 4,094.00 1,891.00

BF Homes, Las Piñas (GS)

Land and building HS

Warehouse 3,091.00 1,851.00

Ternate, Cavite Townhouse Training Center 107.00 -

Cebu City * Land Investment Property 1,100.00 -


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* properties intended for sale ** proposed floor areas ***mortgaged to secure bank loans

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

OWNED LEASED

Alabang Alaminos La Union Rosario Zamboanga

Balagtas Angeles Lipa San Fernando

Balayan Bacolod College Maasin San Francisco

Dasmariñas Bacolod EC Malolos San Jose

General Santos Bacoor Marikina Santiago

Iloilo Baliuag Muñoz-EDSA Tagaytay

Koronadal Calbayog Ormoc Tagbilaran

San Carlos Cauayan Pagadian Tagum

Santa Rosa Cotabato Parañaque Tanauan

Sta. Maria Dipolog Pasay Tanay

Surigao Dumaguete Quezon Avenue Tarlac

Tacurong Ilagan Recto Vigan

Campus Expansion Projects STI ESG invested in a number of expansion projects for its company-owned campuses. The eight-storey building for STI College Novaliches which was inaugurated on June 29, 2012. On September 25, 2013, the three-storey administration and seven-storey school buildings of STI College Ortigas-Cainta were inaugurated. These buildings sit on a 39,880-square-meter property in Cainta, Rizal. In Caloocan, a ten-storey building standing on 15,495-square-meter property was unveiled on February 7, 2014 for the transfer of STI College Caloocan to its new home. STI Malaybalay’s leased three-storey building opened on November 26, 2011 as part of its efforts to upgrade from an education center to college. STI Valencia moved to its new four-storey building in June 2013. Construction of the nine-storey building for STI College Cubao and the five-storey building for STI College Calamba are in full swing to meet the target opening for school year 2014-2015. Also operational for the same school year are the newly renovated school buildings for STI College Batangas that has recently transferred to a 5,934-square-meter property. With ongoing efforts for expansion is STI College Lucena that broke ground on a 6,387-square-meter property on January 10, 2014. The construction works is scheduled to complete a five-storey building by November of 2014. Likewise, a number of franchised schools embarked on facilities expansion programs. STI College – Tacurong was granted college status by the CHED during the first year of SY 2010-11 and subsequently, inaugurated its 2,400-square-meter school building on August 15, 2012. In SY 2011-12, STI Vigan upgraded to a college, followed by STI San Jose in SY 2012-13. Two franchised schools embarked on facilities expansion programs this SY 2013-14. The 3,500-square-meter property of STI College–Malolos located along McArthur Highway will be completed in time for the 1st semester of SY 2014-15. On the other hand, STI College–Tanay broke ground on March 21, 2014 and will be ready to start its classes on its new campus on the 2nd semester of SY 2014-15.


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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 iACADEMY recently moved to a refurbished building along Senator Gil Puyat Avenue, the iACADEMY Plaza. With eight floors to accommodate the school’s growing population, the iACADEMY Plaza has an auditorium which could house at least 450 people. The Multimedia Arts laboratories and Computer laboratories have been improved for the better use of the students. All the other laboratories, such as Cintiq and the iMAC were also developed to satisfy all the needs of the students. All laboratories are equipped with high speed internet and latest software. All the classrooms and lecture rooms are fully equipped with the latest teaching aids. The new foundation rooms have adequate physical space for worktables and chairs. Studios have adequate physical space for worktables and chairs. Students may use the computer laboratories to help support their studies. iACADEMY is also properly equipped with top-of-the-line computer suites that provide the necessities of education, available WI-FI internet access within the campus, and an extensive library holdings. Another key improvement in iACADEMY facilities was the increased bandwidth of the school’s internet, with stabilized network. De Los Santos STI (“DLS STI”) College 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. As part also of the Institution’s commitment to give excellent service to its clients, who happens to be the

students, Management replaced and made major repairs on all air-conditioning units in all laboratories and

classrooms, giving a much conducive place for students to study.

Major renovation on the façade area of the school were made by repainting the whole building both inside

and out.

Likewise, STI College – Quezon Avenue had in the area, major repairs and improvements have been done to the school which included painting of building façade, installation of lighting fixtures and granite tiles in the walkway, installation of window and door cladding, one way mirror shade in the 2nd floor rooms, repainting of all classrooms and minor repair of interior and plumbing works. This is to improve its visibility in the area. West Negros University (“WNU”)

West Negros University is strategically located at the center of Bacolod City. The site is in close proximity to the Burgos Public Market, the New Government Center, Corazon Locsin Montelibano Memorial Regional Hospital (CLMMRH) and a number of commercial buildings mainly owned by Chinese businessmen.

The main campus houses the Maritime Building, Football Field, Engineering Building, Open Court, LNAM Sports Centre (Gymnasium), Sports Office, Student Activity Center, five-storey Main Building, three-storey IT Building and two-storey HM Building.


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Summary of the institution’s properties are as follows:

Location Type Use/College Lot Area

(sq.m.)

Burgos and Malaspina Land and building Maritime 1,176

Burgos and Malaspina Land and building Engineering 4,839

Burgos and Malaspina Land and building Engineering 2,266

Burgos and Malaspina Land and building Football/Open court

5,803

Burgos and Malaspina Cemented lot Parking lot 814

Burgos and Malaspina Land and building Gymnasium 1,512

Burgos and Malaspina Land and building Sports Office 494

Burgos and Malaspina Land and building Main building 139

Burgos and Malaspina Land and building Main building 364

Burgos and Malaspina Land and building Main building 6,097

Burgos and Malaspina Land 179

Hilado Land 1,044

Hilado Land 1,135

Hilado Land 733

Hilado Land 400

Hilado Land 1,292

Over-all Campus lot area 28,287

Item 3: LEGAL PROCEEDINGS 1. In the course of the 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 12 labor cases still pending with various judicial and quasi-judicial bodies for illegal dismissal/termination of former employees, involving claims in aggregate amount of approximately P4.9 Million. The 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. 2. STI ESG is also involved in certain tax proceedings. STI ESG filed a petition for review with the Court of Tax Appeals (the “CTA”) in 2009 to contest the Final Decision on Disputed Assessment issued by the Bureau of Internal Revenue (“BIR”) for alleged deficiencies on income tax, and expanded withholding tax for the fiscal year ending 31 March 2003 amounting to P124.3 Million. On 20 February 2012, STI ESG rested its case and its evidence has been admitted into the records. On 27 June 2012, the BIR rested its case and has formally offered its evidence. On 17 April 2013, the CTA issued a Decision which granted STI 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 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 13, 2013. On August 22, 2013, the CIR filed its Petition for Review dated August 16, 2013, with the CTA en banc. On October 29, 2013, STI ESG filed its Comment to the CIR’s Petition for Review. The CTA en banc deemed the case submitted for decision on May 19, 2014, considering the CIR’s failure to file its memorandum. As at July 9, 0214, the case is still for decision by the CTA en banc. 3. On April 21, 2014, West Negros University [WNU] filed a Petition for Certiorari with an application for the issuance of temporary restraining order and preliminary injunction against the Commission on Higher Education (“CHED”) with the Regional Trial Court of Quezon City. The Petition was filed in


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

Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Except for matters taken up during the annual meeting of stockholders held on 4 October 2013, there was no other matter submitted to a vote of security holders during the period covered by this report.

PART II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5: MARKET FOR 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.


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As of 31 March 2014, the high share price of the Company was P0.71 and the low share price was P0.66.As of 30 June 2014, the high share price of the Company was P 0.80 and the low share price was P0.79. The Company’s public float as of 31 March2014 is 3,555,405,214 shares equivalent to 35.90% of the total issued and outstanding shares of the Company. The following table sets forth the Company’s high and low intra-day sales prices per share for the past two (2) years and the first and second quarters of 2014:

High Low

2014

Second Quarter 0.87 0.69

First Quarter 0.72 0.65

2013

Fourth Quarter 0.74 0.59

Third Quarter 0.90 0.73



2012

Fourth Quarter 2.22 0.92

Third Quarter 3.00 1.50



(2) Holders As of 31 March 2014, there were 1,245 shareholders of the 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 2014.

NAME OF STOCKHOLDER NUMBER OF

SHARES PERCENTAGE

OF OWNERSHIP

PCD NOMINEE CORPORATION (FILIPINO) 3,085,958,3701 31.1561%

PRUDENT RESOURCES, INC. 1,614,264,964 16.2978%

PCD NOMINEE CORPORATION (NON-FILIPINO) 1,280,209,907 12.9251%

TANCO, EUSEBIO H. 1,157,913,875 11.6904%

RESCOM DEVELOPERS, INC. 794,343,934 8.0198%

EUJO PHILIPPINES, INC. 728,626,048 7.3563%

INSURANCE BUILDERS, INC. 428,723,003 4.3284%

STI EDUCATION SERVICES GROUP, INC. 397,908,895 4.0173%

CAPITAL MANAGERS AND ADVISORS. INC. 397,908,894 4.0173%

TANCO, ROSIE L. 13,000,000 0.1312%

HTG TECHNOLOGIES, INC. 1,000,000 0.0101%

EDAN CORPORATION 861,350 0.0087%

1Eusebio H. Tanco is the beneficial owner of 284,100,000 shares. Eujo Philippines, Inc. is the beneficial owner of 35,247,082 shares.

STI Education Services Group, Inc. is the beneficial owner of 104,399,000 shares. Insurance Builders, Inc. is the beneficial owner of 150,952,989 shares. Joseph Augustin L. Tanco is the beneficial owner of 2,000,000 shares.


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LERIO CABALLERO CASTIGADOR AND/OR VICTORINA 399,000 0.0040%

HENRY SY SR. 350,000 0.0035%

QUALITY INVESTMENTS & SECURITIES CORPORATION 320,000 0.0032%

TACUB, PACIFICO B. 200,000 0.0020%

CRUZ, YOLANDA M. DELA 150,000 0.0015%

VICSAL SECURITIES & STOCK BROKERAGE, INC. 129,500 0.0013%

E. SANTAMARIA & CO., INC. 128,919 0.0010%

TOBIAS JOSEF BROWN 99,400 0.0010%

THE PHILIPPINE AMERICAN INVESTMENTS CORP. 88,508 0.0009%

ROSELLE DEL ROSARIO 84,427 0.0009%

(3) Cash Dividends On 8 December 2011, cash dividends amounting to P 0.02 per share were paid to stockholders of record as of 11 November 2011. On 5 December 2012, cash dividends amounting to P0.01 per share were paid to stockholders of record as of 19 December 2012. On 4 September 2013, cash dividends amounting to P 0.015144 per share were paid to stockholders of record as of 18 September 2013. Dividends will be evaluated by the Board of Directors on an annual basis. It shall be the policy of the Company to declare dividends whenever there are unrestricted retain earnings available. Such declaration will take into consideration factors such as restrictions that may be imposed by current and prospective financial covenants; projected levels of operating results, working capital needs and long-term capital expenditures; and regulatory requirements on dividend payments, among others. (4) Recent Sales of Unregistered or Exempt Securities Private Placement

On 21 November 2011, the Board of Directors approved the issuance of 795,817,789 shares (the “Private Placement Shares”) out of the 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 Number of Shares Amount of Subscription

CMA 397,908,894 P238,745,336.40

STI ESG 397,908,895 238,745,337.00

Total 795,817,789 P477,490,673.40

The Subscription Agreements with CMA and STI ESG were executed on 24 November 2011. On 25 November 2011, the Company filed SEC Form 10-1 with the SEC since the issuance of the Private Placement Shares qualifies as an exempt transaction under Section 10.1(k) of the Securities Regulation Code i.e., the sale of securities by an issuer to fewer than twenty (20) persons in the Philippines during any twelve-month period.


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Since STI ESG and CMA are related parties, the Company complied with the Revised Listing Rules and obtained: (a) shareholders’ approval for the listing of the Private Placement Shares; and (b) a waiver of the requirement to conduct a rights or public offering in connection with the Private Placement Shares during the special stockholders’ meeting on 10 August 2012. The Philippine Stock Exchange (the “PSE”) issued a Notice of Approval in connection with the listing of the Private Placement Shares on 28 September 2012, subject to the submission of: (a) a duly executed lock-up agreement at least three days prior to the actual listing date of the Private Placement Shares; and (b) a confirmation from the SEC that the mandatory tender offer rule does not apply to the subject private placement transaction, or if a mandatory tender offer is required to be conducted, a confirmation from the Company that the mandatory tender offer requirement and other related requirements of the SEC have been complied with. On 10 May 2013, the SEC granted the 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 in compliance with Article V, Part A, Section 7 of the Revised Listing Rules and to facilitate the listing of the Private Placement Shares. On 25 July 2013, the Company, STI ESG, and CMA executed an Escrow Agreement with Unionbank of the Philippines – Trust & Investment Services Group as the Escrow Agent to implement the 180-day lock-up requirement applicable to the Private Placement Shares reckoned from the listing date of the said shares. The listing of the additional 795,817,789 common shares of the Company was approved on 19 August 2013. The lock-up period of the Private Placement shares expired on 18 February 2014 and said shares became eligible for trading on the Exchange on 19 February 2014. Share-for-Share Swap Transaction

On 28 August 2012, 31 August 2012 and 1 September 2012, the Company executed Share Swap Agreements with the following stockholders of STI ESG: (a) Prudent Resources, Inc.; (b) Mr. Eusebio H. Tanco; (c) Eujo Philippines, Inc.; (d) Rescom Developers, Inc.; and (e) Insurance Builders, Inc. (collectively referred to as the “STI Majority Shareholders”) as well as with 90 other stockholders of STI ESG. The aforementioned share swap transactions are based on an exchange ratio of 6.5 shares of the Company for every 1 STI ESG share. The share swap transactions sought to consolidate all of the education assets of the STI/Tanco Group of Companies into one holding company. The share swap also provided an opportunity for the education group of the STI/Tanco Group of Companies to raise funds through the capital markets for the expansion and upgrading of its current facilities, the acquisition of educational entities and the improvement of the quality of education being offered by these entities or institutions. Pursuant to the aforementioned Share Swap Agreements, the Company issued a total of 5,901,806,924 common shares (the “Share Swap Shares”) in exchange for 907,970,294 STI ESG shares as follows:

Stockholders No. of STI ESG Shares No. of Company Shares

STI Majority Shareholders 726,749,511 4,723,871,823

Other STI ESG Stockholders 181,220,783 1,177,935,101

TOTAL 907,970,294 5,901,806,924

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


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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 with the requirements of such law as to the percentage of the capital stock of a corporation which should be subscribed before its authorized capital is increased. On 26 September 2012, the PSE Board of Directors approved the application of STI Holdings to list an additional 5,901,806,924 common shares (the “Share Swap Shares”) with a par value of P0.50 per share, to cover the share-for-share swap transaction with various shareholders of STI ESG (the “STI ESG Shareholders”). The 5,901,806,924 common shares were issued in exchange for 907,970,295 STI ESG common shares held by the STI ESG Shareholders. The total swap value is P9,743,378,087.43, broken down as follows: (1) 5,887,969,327 STI Holdings shares at a swap price of P1.65 per share for a consideration of P9,715,149,389.55; and( 2) 13,837,597 STI Holdings shares at a swap price of P2.04 per share for a consideration of P28,228,697.88. In compliance with Article V, Part A, Section 7 of the Revised Listing Rules of the Exchange, STI Holdings, Ms. Rosie L. Tanco, the STI Majority Shareholders and Union Bank of the Philippines executed an Escrow Agreement on 22 October 2012 to implement the required lock-up requirement of their respective Swap Shares reckoned from the listing date. A total of 4,736,871,823 common shares were covered by the Escrow Agreement. On 29 October 2012 (the “Listing Date”), 5,901,806,924 common shares of STI Holdings were listed in the Exchange. Out of the 5,901,806,924 common shares, only 1,164,935,101 common shares were eligible for trading on the Listing Date. The remaining 4,736,871,823 common shares held by Ms. Rosie L. Tanco and the STI Majority Shareholders were placed in escrow for 180days counted from the Listing Date. The said lock-up period lapsed on 27 April 2013. On 9 May 2013, the 4,736,871,823 common shares held by Ms. Rosie L. Tanco and the STI Majority Shareholders became eligible for trading on the Exchange.

Item 6: MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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, 2014 and 2013. The following discussion should be read in conjunction with the attached audited consolidated financial statements of the Company as of and for the year ended 31 March 2014 and for all the other periods presented.


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

Financial Condition March 31, 2014 vs. 2013 The Group’s assets as at March 31, 2014 consisted mainly of its Property and Equipment, which at P4,421.3 million accounts for 53% of its total assets. This is in accordance with the Group’s expansion plan. In the past one and a half years since the Group’s follow-on offering, total investment in Property and Equipment has reached P2,470.2 million for the acquisition of land, construction of school facilities and purchase of school furniture and equipment for STI Ortigas-Cainta, STI Caloocan, STI Cubao, STI Calamba, STI Batangas and STI Lucena. Total assets stood at P8,299.1 million as at March 31, 2014, slightly lower by 2% than last year’s figure, as some investments reflected negative variances due to market conditions. Cash and cash equivalents declined by 61% from P1,489.5 million last year due to the completion of building construction and purchase of furniture and equipment for STI Ortigas-Cainta. STI Caloocan was completed in February, 2014 while construction is ongoing in sites intended for STI Cubao, STI Batangas, STI Calamba and STI Lucena. Current receivables, on the other hand, increased by 19% to P297.4 million as receivables from students increased in line with the 4% increase in the number of students of STI ESG and its subsidiaries. Receivables from students of WNU contributed P34.6 million, net of allowance for doubtful accounts. Inventories increased by P3.1 million or 9% as the schools increased their stocks of uniforms in preparation for the start of the coming school year. Prepaid expenses and other current assets rose by 186% to P107.0 million due to substantial increases in VAT input taxes and creditable withholding taxes arising from the swap of the Group’s land in Makati City in exchange for units in the condominium building being constructed on the same property. Property and equipment increased by 68% to P4,421.3 million due to the completion of the buildings for STI Ortigas-Cainta and STI Caloocan and the purchase of the needed furniture and equipment to complete the school facilities. The construction of the buildings for STI Cubao and STI Calamba are in full swing to meet the target availability of the facilities for school year (SY) 2014-2015. Improvement of various facilities in other owned schools were also undertaken. Renovations on buildings for STI Batangas is almost complete and the school is likewise expected to be fully operational in time for SY 2014-15. Investment properties increased slightly by 2%. Value of Investments in and advances to associates and joint ventures decreased by 47% mainly due to the decline in market value of investments in bonds and equities held by an associate and to losses incurred by some associates. Available-for-sale financial assets rose by 985% or P45.9 million due to reclassification of investments in De Los Santos-STI Megaclinic, Inc. (Megaclinic) and De Los Santos General Hospital, Inc. (the Hospital) from Investments in and advances to associates and joint ventures account as a result of the Investment Agreement entered into with Metro Pacific Investments Corporation (MPIC) which was implemented in June 2013. The infusion of equity in the Hospital by MPIC resulted to a dilution of the ownership of the Group to 10%, thus the reclassification. The shareholdings of De Los Santos-STI College (DLS-STI College) in Megaclinic were also swapped with shares in the Hospital. On August 15, 2013 STI


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Investments purchased 40,051 shares of Megaclinic from the Hospital. This represents 6% of the total outstanding capital stock of Megaclinic. Deferred tax assets rose by 289% or P24.6 million primarily due to deferred tax recognized on the swap of the Group’s land in Makati City in exchange for units in the condominium building being constructed on the same property. Taxes paid on the transaction were paid by the Group. The related deferred tax asset will be reversed upon completion of the condominium units swapped for the land. Goodwill, intangible and other noncurrent assets slightly increased by P90.4 million or 14%. Goodwill on the purchase of STI Batangas was computed at P2.6 million. The purchase of computer licenses for STI ESG and iACADEMY amounted to P21.2 million. Balance of the increase was due to utility bill deposits for STI Ortigas-Cainta, STI Caloocan and STI Cubao. STI ESG has also acquired a new school management system and is in the process of implementing the same. Accounts payable and other current liabilities rose by 61% or P196.7 million primarily due to bills for construction of schools buildings unpaid as of balance sheet date. Short term loans of P180.0 million were availed to finance short-term working capital requirements. Nontrade payable of P151.5 million pertains to the amount withheld for payment to WNU’s former shareholders relative to the acquisition of WNU. Current portion of long-term debt of P49.9 million is part of WNU’s liabilities outstanding as of the time of purchase of the university. Current portion of obligations under finance lease increased by 16% due to new availments while the long-term portion decreased by 14% due to payment of monthly amortizations. Income tax payable grew by 18% reflecting the increase in taxable income. Long-term debt, net of current portion, amounting to P58.5 million is part of WNU’s liabilities absorbed by the Group. Pension liabilities increased by P38.5 million or 172% primarily from WNU’s pension liability. Deferred tax liability of P128.0 million represents the tax impact of acquisition-date fair value measurement of WNU’s net assets arising from business combination. 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, decreased by net amount of P1,477.4 million. This represents a decline in the gains earlier reported as of March 31, 2013 by an associate as a result of: (1) the realization of gains on some of the AFS assets; and (2) decrease in market values of bonds and equities held by an associate as of March 31, 2014. Cumulative actuarial gains or losses, including the Group’s share in its associates’ cumulative actuarial losses, amounted to net gain of P3.0 million as of March 31, 2014, representing realization of the re-measurement gains or losses resulting from the adoption of PAS 19R by the Group and its associates. This represents a 14% decline from last year’s net gain of P14.4 million. The increase in Unappropriated retained earnings of P1,338.7 million resulted from the year’s net income earned less dividends declared and from the reclassification of P800.0 million appropriated retained earnings.

March 31, 2013 vs. 2012 The Group’s total assets as at March 31, 2013 amounted to P8,503.3 million, 85% higher than the amount as at March 31, 2012. There was a recorded increase of P4,400.9 million in capital arising from (1) the


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share-for-share swap between the shareholders of STI ESG and STI Holdings at an exchange ratio of 6.5 shares of STI Holdings for every one (1) STI ESG share, thus increasing the capital by P2,950.9 million, and (2) proceeds of the follow-on offering of STI Holdings on November 7, 2012 amounting to P2,610.0 million at an offer price of P0.90 per share for 2,900,000,000 shares. Paid-up capital increased by P1,450.0 million from the follow-on offering. Additional paid-in capital increased by P1,041.5 million due to the excess over par value of the shares issued arising from the follow-on offering, net of transaction costs related to the issuance of shares. Cash and cash equivalents increased by P933.2 million or 168% due to receipt of proceeds of follow-on offering by STI Holdings on November 7, 2012, net of transaction costs and actual use of the proceeds. It can also be attributed to the increase in the number of students of STI ESG and its subsidiaries from 66,740 last year to 68,363 students this year. Current receivables slightly decreased by 6% or P15.1 million mainly due to the conversion to equity of the P41.6 million advances to STI Investments, Inc. (STI Investments), an associate, thus, the transfer to Investments in Associates account. There is no change in the percentage of ownership in STI Investments after the conversion as the other shareholders proportionately did the same. Inventories dropped by 18% or P7.4 million, ending the year at P34.7 million. This can be attributed to the increased demand for uniforms and educational materials resulting from the increased number of students. Prepaid expenses and other current assets rose by P12.8 million or 52% as VAT input taxes arising from disbursements related to the follow-on offering were recognized. Advance payments were also made to suppliers and other third parties for construction activities in various schools. Property and equipment increased by 71% or P1,091.0 million due to the acquisition of land for STI Ortigas-Cainta, STI Caloocan, STI Cubao and STI Las Piñas, construction costs incurred for STI Academic Center Novaliches, STI Ortigas-Cainta and STI Caloocan, and improvement of various facilities. Based on past experience, enrollment increased in areas where STI ESG constructed campuses with better facilities. Investment properties decreased by 17% or P7.8 million due to the disposal of STI ESG’s idle property in Manila, and the recognition of depreciation expenses. Value of Investments in and advances to associates and joint ventures increased by P1,306.6 million mainly from profitable operations of an associate, STI Investments. The recognition of the Company’s share in unrealized mark-to-market gain on investments of the same associate also contributed to the increase. Noncurrent receivables rose by P236.7 million or 104% due to the full release of loans to Unlad Resources Development Corporation (Unlad) and the Philippine Women’s University (PWU) in accordance with existing agreements. Available-for-sale financial assets slightly decreased by 6% due to decrease in fair market value of some investments. Deferred tax assets decreased by P2.5 million or 23% due to the tax impact of the adoption of PAS 19R. Goodwill, intangible and other noncurrent assets rose 133% from P275.3 million to P642.0 million due to the reclassification of land from Property and Equipment to Other Noncurrent Assets. Accounts payable and other current liabilities slightly rose by 6% to P320.7 million mainly due to increase in payables related to construction. Short-term loans of P746.7 million were fully paid during the fiscal year, using the proceeds of the follow-on offering and internally generated funds.


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Current portion of obligations under finance lease decreased by 34% due to payment of monthly amortizations while the long term portion increased by 49% due to additional finance lease availments. These pertain mostly to company vehicles and computer equipment purchased under finance lease arrangements. Income tax payable increased by 150% due to substantial increase in taxable income. Pension liabilities declined by P32.4 million due to the impact of the adoption of PAS 19R. Capital stock increased by P4,400.9 million due to the issuance by STI Holdings of 5,901.8 million shares arising from the share-for-share swap between the shareholders of STI ESG and STI Holdings at an exchange ratio of 6.5 shares of STI Holdings for every one (1) STI ESG share and the follow-on offering where 2,900.0 million shares were issued last November 7, 2012. Additional paid-in capital increased by P1,041.5 million due to the excess over par value of the shares issued arising from the follow-offering, net of transaction costs related to the issuance of shares. Unrealized mark-to-market gains or losses on available-for-sale financial assets, including the 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.

Results of Operations Years ended March 31, 2014 vs. 2013 Total revenues improved by 15% or P247.7 million due to the increase in the number of students of STI ESG and its subsidiaries from 68,363 to 71,195 students and the favorable enrollment mix resulting to higher revenues from tuition and other school fees. WNU’s revenues for the six-month period after acquisition contributed P78.0 million to the increase. Tuition and other school fees increased by P265.0 million or 20% from last year’s P1,357.3 million, mainly due to the increase in the number of students and the 5,000 students of WNU. STI ESG’s enrollment mix was also more favorable in SY 2014 than in 2013, as enrollment leaned more towards STI Network’s four-year programs than the two-year programs. Ratio in 2014 was 76% four-year programs and 24% two-year programs, as compared to 70% and 30%, respectively, in 2013. The four-year programs charge higher tuition and bring in more revenue per student. STI ESG’s subsidiary, iACADEMY, had a 25% increase in number of students and more enrollees in programs with higher tuition fees. WNU’s students accounted for P78.0 million of total tuition and other school fees. Revenues from educational services also improved by 2% or P4.2 million. Sale of educational materials and supplies likewise rose by 8%, following the trend of increased enrollment. Royalty fees slightly increased by 3% reflective of the almost constant number of students in franchised schools. Other income went down by 40% or P26.0 million due to various one-time adjustments recognized last year arising from the merger of schools with STI ESG. Cost of educational services increased by 14% from P485.4 million last year to P553.0 million this year due to higher faculty salaries and other direct expenses as a result of the increased number of students. Depreciation expenses of the recently completed buildings in STI Ortigas-Cainta and STI Caloocan accounted for P23.5 million of the P67.6 million cost increase.


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Cost of educational materials and supplies sold increased by 8%, mainly due to increased sale of uniforms. General and administrative expenses rose by 13% or P93.2 million. Of this increase, WNU’s administrative expenses accounted for P26.8 million. STI ESG’s security and janitorial expenses rose by P19.7 million as STI Fairview, STI Novaliches, STI Ortigas-Cainta and STI Caloocan became fully operational. This also resulted to P19.6 million increase in depreciation costs. Salaries and employee benefits likewise rose by P17.7 million as vacant plantilla positions were filled up and performance-based increases were granted to deserving employees. Equity in net gains of associates and joint ventures decreased by P195.4 million as losses were incurred by some associates. Excess of fair values of net assets acquired over acquisition costs of P32.7 million relates to the acquisition of WNU. Loss on deemed sale amounting to P36.3 million represents the amount deemed lost due to the dilution of the Group’s ownership in the Hospital from 33% to 10%. Loss on swap in the amount of P6.7 million pertains to the exchange of shares of Megaclinic with the shares in the Hospital held by DLS-STI College. Interest expense decreased from P18.8 million last year to only P10.9 million this year, with the cost incurred this year mainly due to the long-term loan of WNU. Rental income increased by P6.2 million mainly due to the rental income recognized from canteen concessionaire, gym and auditorium. Interest income went down by P22.5 million due to the discontinued imposition of interest on the loans to PWU and Unlad. Dividend income slightly increased by P0.07 million or 16% while gain on sale of Property and equipment slightly decreased by P0.09 million or 11%. As a result of unfavorable market conditions, the Group’s unrealized mark-to-market losses on its AFS investments slightly increased by 26% while its share in associates’ unrealized mark-to-market losses, net of realized mark-to-market gains/losses recognized to profit or loss, also rose by 277%. Consequently, the Group’s total comprehensive income declined by 151%.

Years ended March 31, 2013 vs. 2012 The Group registered substantial improvements in its profitability as shown by the 173% increase in net income from P291.5 million in 2012 to P794.4 million in 2013. Total comprehensive income increased by 41% to P1,665.4 million for 2013. Increase in total revenues of P93.2 million or 6% from last year is due to the increase in the number of students of STI ESG and its subsidiaries from 66,740 to 68,363 students resulting in higher revenues from tuition and other school fees. Tuition and other school fees increased by P84.6 million to P1,357.3 million from last 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 70% four-year programs and 30% two-year programs, as compared to 65% and 35%, respectively, in 2012. The four-year programs charge higher tuition and bring in more revenue per student.


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Educational services followed suit with a P9.3 million or 6% increase to P177.9 million this year. Sale of educational materials and supplies likewise rose by 6%. Cost of educational services was slightly up by 0.7% to P485.4 million as a result of additional depreciation cost due to the completion of the STI Academic Center Novaliches and the full year recognition of depreciation of the new building in STI Fairview. This was partially offset by reduced rental of school facilities from third parties. Economies of scale in terms of faculty costs and courseware development also reduced the impact of the increased depreciation cost. Cost of educational materials and supplies sold was 25% higher at P49.5 million. This is mainly due to the higher cost of items sold and changes in product mix. General and administrative expenses increased by P57.1 million or 8% from P688.3 million to P745.3 million, mainly due to the share swap and follow-on offering related expenses in 2013 amounting to P50.4 million. Taxes and licenses rose by P40.5 million as filing fees paid to the SEC and documentary stamp taxes were incurred when both STI Holdings and STI ESG increased their respective authorized capital stock. This also includes P13.1 million listing fee paid to the Philippine Stock Exchange (PSE) for the follow-on offering. Professional fees related to the follow-on offering resulted to the P4.7 million increase this year as compared to last year. Salaries and wages increased by P8.3 million from last year’s P215.9 million due to increases in retirement cost. Lower retirement cost was recorded last year due to actuarial gains recognized in the merger of the schools with STI ESG. Utilities costs also increased by P5.9 million due to increases in power rates, the increased utilization in STI Novaliches Academic Center and the full use of the new building in STI Fairview. Outside services expenses increased by P7.0 million due to the additional security and janitorial services for current and new facilities. However, this was partially offset by the P8.8 million reduction in impairment provisions for receivables and goodwill. Equity in net gains of associates and joint ventures increased by P465.8 million due to the increase in net income of STI Investments, Inc., in which STI ESG has a 20% interest. Interest expense in 2013 decreased by P15.0 million as STI ESG fully paid its short term loans during the year. Rental income decreased slightly by P0.7 million as facilities originally being leased out were utilized as school premises. Interest income increased by P18.5 million as funds from the follow-on offering were invested in time deposits and special savings accounts. Dividend income decreased by P2.4 million due to the disposal of available-for-sale financial assets which generated dividend income in 2012. Gain on sale of property and equipment was recognized in 2013 due to disposal of fully depreciated transportation equipment. Loss on disposal of investment property amounted to P2.3 million as STI ESG’s idle property was sold.

Liquidity and Capital Resources The following table shows the Group’s consolidated cash flows for the years ended March 31, 2014, 2013 and 2012 as well as the consolidated capitalization and other consolidated selected financial data as at March 31, 2014 and 2013.


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2014

2013

2012

(PHP millions)

Cash flows

Net cash provided by operating activities 454.4 460.2 900.9

Net cash provided by (used in) investing activities (1,327.4) (1,754.4) (515.2)

Capital expenditures 1,049.9 1,539.6 255.3

Net cash provided by (used in) financing activities (33.1) 2,227.4 (305.3)

Net increase (decrease) in cash and cash equivalents (906.1) 933.2 80.4

2014 2013

(PHP millions)

Capitalization

Interest-bearing financial liabilities

Long-term financial liabilities

Long-term debt 58.5 -

Obligations under finance lease 11.4 13.3

69.9 13.3

Current portion of interest-bearing financial liabilities

Long-term debt maturing within one year 229.9 -

Obligations under finance lease maturing within one year 7.4 6.4

237.3 6.4

Total interest-bearing financial liabilities 307.2 19.7

Total equity attributable to equity holders of STI Holdings 7,039.0 7,993.1

7,346.2 8,012.8

Other Selected Financial Data

Total assets 8,299.1 8,503.2

Property and equipment – net 4,421.3 2,635.3

Cash and cash equivalents 583.3 1,489.5

The Group’s cash and cash equivalents amounted to P583.3 million as at March 31, 2014, main sources of which were cash flows from operating activities amounting to P698.5 million, proceeds from availments of debt of P280.0 million, net collection of receivables of P12.3 million, dividends received amounting to P8.1 million, and cash acquired through business combination of P7.7 million. These funds were mainly used for capital outlays of P1,049.9 million, investments in subsidiaries and associates of P200.9 million, net of cash acquired, debt principal and interest payments of P152.1 million, and dividend payments of P153.2 million. As at March 31, 2013, the Group’s cash and cash equivalents amounted to P1,489.5 million. Sources were primarily from operating activities amounting to P574.1 million, proceeds from the parent company’s follow-on offering of P2,476.0 million and from issuance of a subsidiary’s shares of P608.8 million, proceeds from loan availments of P539.0 million, dividends received of P14.4 million and interest received of P10.6 million. The funds were used mainly for acquisition of property and equipment amounting to P1,539.6 million, debt principal and interest payments of P1,311.1 million, and dividend payments of P101.0 million.


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Debt Financing and Covenants The Group has various short term and long term loans with commercial banks secured by certain real estate properties owned by companies in the Group. On March 20, 2014, STI ESG signed a Credit Notes Facility Agreement with China Banking Corp. where the latter is granting STI ESG a credit facility of P3 Billion. As of March 31, 2014, STI ESG has not drawn on this Credit Notes Facility.

Key Performance Indicators (KPIs) The top five key performance indicators of the Group include tests of profitability, liquidity and solvency. Profitability refers to the 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.

EBITDA margin

Net income excluding depreciation and amortization, equity in net earnings (losses) of associates and joint ventures, interest expense, interest income, provision for income tax and loss on deemed sale and share swap of an associate, excess of fair values of net assets acquired over acquisition costs from a business combination divided by total revenues

36.0% 32.9% EBITDA margin improved due to faster increase in revenues from tuition and other school fees, the Group’s main source of revenues, as compared to direct and operating costs.

Return on equity

Net income attributable to equity holders of the Parent company divided by average equity attributable to equity holders of the Parent company

9.1% 13.8% Net income attributable to equity holders of the Parent Company decreased by 12% or P96.3 million from P777.4 million in 2013 to P681.1 million in 2014. Meantime, Equity attributable to equity holders of the parent company increased by 33%.

Gross profit margin

Gross profit divided by total revenues

68.4% 68.0% Increase in gross profit margin resulted mainly from the increase in the number of students of STI ESG and its subsidiaries from


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68,363 last year to 71,195 students this year resulting to increased revenues from tuition and other school fees.

Current ratio

Current assets divided by Current liabilities

1.12:1.00 5.46:1.00 The substantial decrease in current ratio as of March 31, 2014 is due to the payments made for acquisition of property and equipment in accordance with the expansion plan and payments for the acquisition of WNU.

Debt to equity ratio

Total liabilities divided by Total equity

0.16:1.00 0.05:1.00 Slight increase due to payables to contractors for building construction and to former shareholders for WNU acquisition as well as loans incurred for short-term working capital requirements.

Financial Risk Disclosure The 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 internally-generated funds and avails of various bank loans. On November 7, 2012 the Company received the proceeds from its follow on offering. The usage of funds is in line with the plan as approved by the SEC and the PSE. There are unutilized funds as of the end of the fiscal year, which funds are invested in short-term bank deposits that provide flexibility of withdrawing the funds anytime. The Group regularly evaluates available financial products and monitors market conditions for opportunities to enhance yields at acceptable risk levels. Credit risk – Credit risk is the risk that the Group will incur a loss arising from students, franchisees or counterparties that fail to discharge their contractual obligations. The Group manages and controls credit risk by setting limits on the amount of risk that the Group is willing to accept for each counterparty and by monitoring expenses in relation to such limits. It is STI 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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Agreements/Commitments and Contingencies/Other Matters a. There are no changes in accounting estimates used in the preparation of the audited consolidated

financial statements for the current and prior financial periods.

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

c. On June 3, 2013, STI ESG executed a deed of pledge on all its shares in the Hospital in favor of

Neptune Stroika Holdings, Inc., a wholly owned subsidiary of MPIC, to cover the indemnity obligations of STI ESG enumerated in the Investment Agreement with MPIC.

d. There are no material events and uncertainties known to management that would address the past

and would have an impact on future operations of the Group.

e. There are no known trends, demands, commitments, events of uncertainties that will have an impact

on the Group’s liquidity except for the contingencies and commitments enumerated in Note 29 of the

Notes to Audited Consolidated Financial Statements attached as Annex “A”.

f. Except for the conditions set forth in the accession made by STI Holdings to the JVA and

Shareholders’ Agreement between PWU, Unlad, a private individual and Mr. Eusebio H. Tanco,

there are no other events that will trigger direct or contingent financial obligations that is material to

the Group, including any default or acceleration of an obligation.

g. Construction of school buildings and improvements for STI Batangas, STI Cubao, STI Calamba and

STI Lucena are ongoing as of March 31, 2014. Source of funds for the capital expenditures are

provided by financing and internally-generated funds.

h. The various loan agreements entered into by the Group provide certain restrictions and conditions

with respect to, among others, change in majority ownership and management and maintenance of

financial ratios. The Group is fully compliant with all the covenants of the loan agreements. Please

see notes 16 and 33 of the Notes to Audited Consolidated Financial Statements of the Company

attached as Annex “A”.

i. The education landscape in the Philippines has changed with the introduction of the K+ 12 program

which in summary adds two (2) years prior to tertiary education. For the schools in the Philippines

that offer tertiary education, similar to STI ESG, this will mean two (2) academic years with no

incoming college freshmen students.

This threat has been constructively converted into an opportunity for the STI ESG network of

campuses nationwide. STI ESG has decided to capitalize on its nationwide presence and ample

facilities to be able to implement the first-to-market approach of the Senior High School program.

Seventy three (73) STI Colleges and Education Center nationwide have applied for the advance

implementation of Senior High School for SY 2014-15 and six (6) STI campuses for SY 2015-16. The

Senior High School offering of STI ESG aims to minimize the impact of the expected reduction in

enrollment since there will be no incoming freshmen during the transition period from Senior High

School to College. Likewise, there is an opportunity for STI ESG to increase its student retention and


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migration when the students graduate in Senior High School and decide to pursue a Baccalaureate

degree.

j. There are no significant elements of income or loss that did not arise from the Group’s continuing

operations.

k. The Group’s business is linked to the academic cycle. The academic cycle which is one academic year

starts in the month of June and ends in the month of March. The core business and revenues of the

Group, which is mainly from tuition and other school fees, is recognized as income over the

corresponding academic year to which they pertain.

Item 7: FINANCIAL STATEMENTS

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

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

1. The accounting firm of Sycip Gorres Velayo & Co. (“SGV”) has been the Company’s External Auditors for the past years (2010 up to the present). They were reappointed in the Annual Stockholders’ Meeting held on 04 October 2013, as external auditors for the ensuing fiscal year. A representative of SGV is expected to be present at the Annual Meeting of the Stockholders and will have the opportunity to make a statement if he or she so desires. The representative will also be available to respond to appropriate questions from the stockholders. Pursuant to SRC Rule 68 (3) (b) (iv), as amended (Rotation of External Auditors), the Company has engaged Mr. Roel E. Lucas of SGV as the Partner-in-charge of the Company. This is his first year of engagement for STI Holdings. 2. There has not been any disagreement between the Company and said accounting firm with regard to any matter relating to accounting principles or practices, financial statement disclosures or auditing scope or procedure. As stated in the March 31, 2014 “Statement of Management Responsibility for Financial Statements”, SGV is the appointed independent auditors of STI Holdings. They have examined the financial statements of the Company in accordance with Philippine Standards on Auditing and have expressed their opinion on the fairness of presentation upon completion of such examination, in its report to the Board of Directors and stockholders. The 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.


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The Company had engaged SGV for the annual audit covering the period from April 1, 2013 to March 31, 2014 for Php770,000.00. The engagement letter for the year-end audit was sent to the Company on 11 October 2013. The following information pertains to their fees and charges over the last two fiscal years (amounts in thousands): 2013-2014 2012-2013 Audit Fees P995 P500 Tax Fees 100 0 All Other Fees P2,300* P14,400** *Represents professional fees paid relative to the acquisition of WNU **Represents professional fees paid relative to the follow-on offering

PART III – CONTROL AND COMPENSATION INFORMATION

Item 9: DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER

A) Directors and Executive Officers

1) Directors, Independent Directors and Executive Officers

The 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) Eusebio H. Tanco (b) Monico V. Jacob (c) Joseph Augustin L. Tanco (d) Ma. Vanessa Rose L. Tanco (e) Martin K. Tanco (f) Rainerio M. Borja (g) Paolo Martin O. Bautista (h) Maulik R. Parekh (i) Johnip Cua (j) Ernest Lawrence Cu (k) Jesli A. Lapus Messrs. Johnip Cua, Ernest Lawrence Cu and Jesli A. Lapus have been nominated as independent directors by Capital Managers & Advisors, Inc. (“CMA”), a stockholder of the Company. CMA has no business or professional relationship with Messrs. Cua, Cu and Lapus. The Company has adopted and complied with Rule 38 of the Securities Regulation Code on the nomination of independent directors and the required number of independent directors. The corresponding ages, citizenships, business experiences and directorships held for the past five (5) years of the incumbent directors who have been nominated to the Board for the ensuing year are set forth below:


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Eusebio H. Tanco, 64, Filipino, Chairman of the Board Mr. Tanco has been Chairman of STI Holdings since 17 March 2010. He is also the Chairman of the Executive, Nominations and Compensation Committees of STI Holdings. Mr. Tanco is the Chairman of the Executive Committee and Director of STI ESG and the Chairman of Mactan Electric Company, Rescom Developers Inc., International Hardwood & Veneer Corp, Cement Center Inc., Agatha Builders Corp, First Optima Realty Corp, Marbay Homes Inc., Insurance Builders, Inc., Delos Santos-STI College, West Negros University, STI Investments, Inc. and Capital Managers and Advisors, Inc. He is Vice-Chairman and President of Asian Terminals, Inc. and Vice-Chairman and Director of Philippine Women’s University. Mr. Tanco is President of Philippines First Insurance Co. Inc., Optima Financing Corporation, Classic Finance Inc., Venture Securities Inc., STMI Logistics, Inc., Total Consolidated Asset Management, Inc., Eujo Philippines, Inc., Global Resource for Outsourced Workers, Inc. and Prime Power Holdings Corporation. Mr. Tanco is also a director in Advent Capital & Finance Corp., PhilPlans First, Inc., Philippine Life Financial Assurance Corp., J&P Coats Manila Bay, Manila Bay Spinning Mills, Inc., United Coconut Chemicals, Inc., MB Paseo, Philippine Health Educators, Inc., i-ACADEMY, PhilhealthCare, Inc., Delos Santos – STI Medical Center, Delos Santos – STI Megaclinic, Philippine Racing Club, Inc. and Leisure and Resorts World Corporation. Mr. Tanco is a director of the Philippine Stock Exchange. He is also Chairman of the Philippine-Thailand Business Council and the Philippines-UAE Business Council. He likewise sits as a member of the Board of Trustees of Philippines, Inc. and member of the Philippine Chamber of Commerce and Industry. Mr. Tanco earned his Master of Science in Economics degree from the London School of Economics and Political Science and his Bachelor of Science degree in Economics from the Ateneo de Manila University. He was also awarded a Doctorate of Humanities degree, honoris causa, from the Palawan State University. Monico V. Jacob, 69, Filipino, Director Mr. Jacob has been the President and CEO of STI Holdings since 17 March 2010. He is likewise a member of the Executive, Compensation and Compliance Committees of STI Holdings. Mr. Jacob is the President and CEO of STI Education Services Group, Inc. He also serves as the President of West Negros University, Capital Managers and Advisors, Inc., STI Investments, Inc. and Insurance Builders Inc. Mr. Jacob is the Chairman of Philplans First, Inc., Philippine Life Financial Assurance Corporation, Total Consolidated Asset Management, Inc., Global Resource for Outsourced Workers, Inc. Republic Surety & Insurance Co., Inc., and Classic Finance, Inc. Mr. Jacob serves as the Chairman of the Executive Committee of Philippine Women’s University. Mr. Jacob is also a Director in Advent Capital & Finance Corporation, Anvaya Cove Beach and Nature Club, Asian Terminals, Inc., Ateneo De Naga University, Century Properties, Inc., Delos Santos – STI College, Delos Santos-STI Medical Center, Information and Communications Technology (i-ACADEMY), Inc., Jollibee Foods, Inc., PhilhealthCare, Inc., Philippine Health Educators, Inc., Phoenix Petroleum Philippines, Inc. and UNLAD Resources Development Corporation. He is also an Independent Director of 2Go Group, Inc. and Negros Navigation Co., Inc. Prior to his present positions, Mr. Jacob was the Chairman and CEO of Petron Corporation. As Chairman, he presided over its privatization and implemented and led the partnership of the government with Saudi


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Aramco in Petron. He also presided over the Initial Public Offering (IPO) of Petron shares which has since been hailed as one of the most successful IPO offerings in the country. He retired from Petron at the close of the Ramos Presidency in July of 1998. He was also Chairman and CEO of Philippine National Oil Company (PNOC) and all of its subsidiaries. As Chairman of the PNOC, he presided over the privatization of the PNOC Dockyard and Engineering Corporation. Before Petron, Mr. Jacob was the General Manager of the National Housing Authority (NHA) where he successfully introduced the joint venture approach to low cost and socialized housing. He was also Chief Executive Officer of the Home Development Mutual Fund, popularly known as the PAG-IBIG Fund, where he decentralized operations and established regional offices nationwide. He also introduced various programs that brought back membership to the Fund. He first joined government in 1986 as Associate Commissioner for the Securities and Exchange Commission. He carried out needed reforms in the capital market and introduced the express lane program. Prior to government, he was a Partner of the law firm Jacob Acaban Corvera Valdez and Del Castillo and was an active trial lawyer. Today, he is a partner in the law firm of Jacob & Jacob. His areas of specialization are energy, corporate law, corporate recovery and rehabilitation work, including receivership and restructuring advisory for companies. As Rehabilitation Receiver, Mr. Jacob successfully implemented the financial rehabilitation of the Ramcar Group of Companies, Atlantic Gulf & Pacific Co. of Manila (AG&P), and Negros Navigation Co., Inc. He is currently wrapping up the termination of rehabilitation proceedings for Philippine Investment Two (SPV-AMC), Inc. Currently, Mr. Jacob is the Receiver for Trust International Paper Corporation and is the Court-appointed Assignee for Nasipit Lumber Company and Affiliates. Mr. Jacob is a member of the Management Association of the Philippines (MAP) of which he was President for 1998. He is also a member of the Integrated Bar of the Philippines. Mr. Jacob finished his Bachelor of Arts degree with a Major in Liberal Arts from the Ateneo de Naga University in 1966 and his Bachelor of Laws degree from the Ateneo de Manila University in 1971. Joseph Augustin L. Tanco, 33, Filipino, Director Mr. Tanco has been a Director of STI Holdings since 27 October 2010. He is likewise the Vice President for Investor Relations as well as a member of the Compensation Committee of STI Holdings. Mr. Tanco is the Chairman of the Board of PhilhealthCare, Inc. He is President and Chief Executive Officer of Philippine Life Financial Assurance Corporation and Comm & Sense, Inc. He founded Comm & Sense, Inc., an integrated marketing and communications agency offering comprehensive services in the areas of creative design, event conceptualization and management, public relations and promotions, in 2005. . Prior to founding Comm & Sense, Inc., Mr. Tanco had years of experience as the Channel Manager for STI Headquarters and Chief Operating Officer of STI College Makati. Mr. Tanco serves as a Director of STI Education Services Group, Inc., West Negros University, Philplans First, Inc., Insurance Builders Inc., EujoPhils. Inc., Capital Managers and Advisors, Inc., STI Investments, Inc., Prudent Resources, Inc. and Rescom Developers, Inc. He is also the Director and Chief Operating Officer of UNLAD Resources Development Corporation. Mr. Tanco is the 2013 National Chairman– Nothing but Nets and Area Director for Individual for Metro Area 2 of the Junior Chamber International Philippines and 2012 LO President of the Junior Chamber International Philippines – Ortigas Chapter. He is also an Entrepreneurship Mentor at the University of Asia and the Pacific.


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Mr. Tanco is a graduate of the University of Asia and the Pacific with a Bachelor of Science degree in Entrepreneurial Management. He obtained his Master in Business Administration from the Ateneo Graduate School of Business. Ma. Vanessa Rose L. Tanco, 36, Filipino, Director Ms. Tanco has been a Director of STI Holdings since 27 October 2010. She is likewise a member of the Nomination Committee of STI Holdings. Ms. Tanco is currently the President and CEO of iAcademy, Chief Operating Officer of the Philippine Women’s University, and President of Makati Medical Center College. Ms. Tanco is also a Director of West Negros University, All Asia Capital Managers, Inc., Classic Finance, Inc., STI ESG, Philplans First, Inc., Banclife Insurance Co., Inc., PhilhealthCare, Inc., Insurance Builders Inc., Prudent Resources, Inc. and Rescom Developers, Inc. Ms. Tanco earned her Master in Business Administration Degree – Major in Finance and Marketing from the University of Southern California, Marshall School of Business and her Bachelor of Science degree in Legal Management from the Ateneo de Manila University. Martin K. Tanco, 48, Filipino, Director Mr. Tanco has been a Director of STI Holdings since 19 December 2012. He is likewise a member of the Executive and Audit Committees of STI Holdings. Mr. Tanco is the Director for Investment of Philplans First, Inc. He is the President of the Philfirst Condominium Association. Mr. Tanco is also a director of Diliman Realty Corp. and Coats Manila Bay. Mr. Tanco earned his Bachelor of Science Degree in Electrical Engineering from the University of Southern California. He obtained his Master of Science degree in Electrical Engineering and Master in Business Administration from the University of Southern California. Paolo Martin O. Bautista, 44, Filipino, Director

Mr. Bautista has been a Director of STI Holdings since 19 December 2012. He is likewise the Chief Investment Officer, Head of Corporate Strategy and a member of the Audit and Compliance Committees of STI Holdings. Mr. Bautista is an advisor to the Investment Committees of Philplans, Philcare and PhilLife. He has over 15 years’ experience in the areas of corporate finance, mergers and acquisition, debt and equity capital markets, credit risk management and securities law. Prior to joining STI Holdings, he was a director at Citigroup Global Markets and a Vice President at Investment Banking Division of Credit Suisse. Mr. Bautista obtained his Bachelor of Arts degree, Bachelor of Laws degree and Juris Doctor from the Ateneo de Manila University and obtained a Master of Science degree in Management from the Arthur D. Little School of Management, Cambridge, MA. Rainerio M. Borja, 51, Filipino, Director Mr. Borja has been a Director of STI Holdings since 19 December 2012. He is likewise a member of the Executive and Nomination Committees of STI Holdings. Mr. Borja serves as a Director of STI ESG, PhilPlans, Inc. and Total Consolidated Asset Management Inc. He is also Chairman of the Board of Techzone Inc. and 88Gren Inc.


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Mr. Borja is also the Country Head and President of Expert Global Solutions, a holding company for two global leaders in business process outsourcing, namely NCO Financial Systems and APAC Customer Services. He oversees the overall operations of these companies and the integration of their processes in the Philippines. From 2000 to July 2012, Mr. Borja was President of Aegis PeopleSupport in the Philippines and concurrently head of its Global Operations and Strategy. He also pioneered the setup of call center/BPO in Cebu and Baguio and expansion to other places. He was also instrumental in the successful listing of PeopleSupport in NASDAQ (symbol: PSPT) in 2004 and responsible for its global operations, global strategy and corporate development. Mr. Borja is credited by many in the Philippines as the man behind the success of the call center and BPO industry in the country. His opinions and contributions are highly valued and sought by government officials in the formulation of legislation and policies that will govern ICT and BPO in the future. Mr. Borja founded and served as the Chairman of the Business Processing Association of the Philippines, the umbrella organization of BPO, Contact Center and IT-enabled Service Companies in the country, for five years. . He is also a director of the Contact Center Association of the Philippines. He is a member of the US-Asean Business Council and the Makati Business Development Council. Mr. Borja obtained his Bachelor of Science degree at De La Salle University and Masters of Science in Economics units at the De La Salle Graduate School of Business and Economics. Maulik Ramniklal Parekh, 44, Indian, Director

Mr. Parekh was elected as Director of STI Holdings on 10 December 2013. Mr. Maulik R. Parekh serves as the President and Chief Executive Officer (November 2009 to present) of SPi Global, Philippines, a leading Knowledge Process Outsourcing (“KPO”) and Customer Relationship Management (“CRM”) service provider with more than 19,000 employees in 30 facilities in North America, Latin America, Europe, Australia, and Asia. As such, Mr. Parekh is responsible for the planning, execution, and management of the overall strategy and operations of the SPi Global Group of Companies. Mr. Parekh successfully consolidated all the BPO business of telecoms giant PLDT and integrated it with other distinct outsourcing operations to create one of the most diversified BPO enterprises. He formed a strong global leadership team responsible for Business Unit Operations and Corporate Support from its Headquarters in the Philippines. He led the company to be recognized globally with major awards and recognitions citing leadership and management capability, operational excellence, employee and customer management practices and corporate social responsibility programs. He jumpstarted the growth of the combined entities and sustained double-digit growth every year since 2010. He also led a successful management buy-out amounting to more than $300 Million of the controlling interest in SPi Global by partnering with CVC Capital Partners, a leading private equity firm. From January 2006 to May 2009, Mr. Parekh was Executive Vice President and General Manager, Asia, of TeleTech Holdings Inc., a $1 Billion, publicly traded company (NASDAQ: TTEC) delivering specialized contact center solutions, including customer management, sales, technology solutions, collections and BPO services. Key focuses included Financial Services, Insurance, Medical and Consumer Markets Services, and Communications. Mr. Parekh was responsible for the largest region within TeleTech , representing over 30% of TeleTech’s employees and over 70% of TeleTech’s profit and had direct operational responsibility for 14 centers in the Philippines, Hong Kong, Malaysia and Singapore with 13,000 seats and 23,000 professionals. He was a member of the Operating Committee which included the CEO, CFO, CIO and EVP, Human Capital. During his stint at Teletech, Mr. Parekh successfully orchestrated the largest and the fastest BPO expansion in the Philippines – growing from 6,000 employees in June 2006 to 23,000 employees in May


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2009. He won seven industry awards as a result of a well-choreographed and well-synchronized communications strategy to brand TeleTech as the Employer of Choice. He led the due diligence process for new call center locations in the Philippines and opened and staffed 8 new centers in three years. He pioneered an award-winning “Leadership Institute” which inspired and trained high potential employees for promotional opportunities to support the exponential growth. He consistently met and exceeded operational goals through Six Sigma based and multi-layered process improvement initiatives. . He helped design and launch Teletech’s internal outsourcing arm “Global Business Services” to move accounts payable, payroll, financial analysis, global quality, resource planning and forecasting to the Philippines and other countries. He was recognized and promoted three times in three years – Vice President of Operations in January 2006 to General Manager, Asia in September 2006 to Senior Vice President & General Manager, Asia in February 2008 to EVP & General Manager, Asia in January 2009. From January 2003 to December 2005, Mr. Parekh was Director, Call Center Services & Special Projects of Echostar Communications Corporation, a $7 Billion publicly traded company (NASDAQ: DISH) which delivers Direct Broadcast Satellite television products and services to US customers and employs over 22,000 employees around the world. DISH currently serves over 14 Million customers. His previous positions in the company were: from January 2001 to January 2003 - Special Projects Manager, Call Center Operations; from January 1997 to July 1999 – Regional Sales Director; and from January 1994 to December 1996 – Project Manager. Mr. Parekh earned his International MBA from Thunderbird, the American Graduate School of International Management and his Bachelor of Engineering from Gujarat University, India. He pursued his MS in Computer Science from Texas Tech University, Lubbock, Texas. Ernest Lawrence Cu, 52, Filipino, Independent Director

Mr. Cu has been an Independent Director of STI Holdings since 19 December 2012. He is likewise a member of the Audit and Nomination Committees of STI Holdings. Mr. Cu is, at present, the President and Chief Executive Officer of Globe Telecom. Mr. Cu is a Director of Asiacom Philippines, Prople BPO, Inc., Games Services Group, ConcettiGlobali Inc. He also a Trustee of Ayala Foundation, Inc. Mr. Cu earned his Master of Management degree, specializing in finance, accounting, and operations management from the J.L. Kellogg Graduate School of Management at Northwestern University. He also has a Bachelor of Science degree in Industrial Management Engineering and a Minor in Mechanical Engineering from the De La Salle University. JohnipCua, 57, Filipino, Independent Director Mr. Cua has been an Independent Director of STI Holdings since 19 December 2012. He is likewise the Chairman of the Audit Committee of STI Holdings. Mr. Cua isanIndependent Director of Philplans First, Inc. and MacroAsia Corporation. He is also the Chairman and President of Taibrews Corporation. Mr. Cua is also a director of BDO Private Bank, MacroAsia Catering Services, MacroAsia Airport Services Corporation, Alpha Alleanza Manufacturing, Inc., Allied Botanical Corporation, Century Pacific Food, Inc., Eton Properties Philippines, Inc., Interbake Marketing Corporation, Lartizan Corporation, and Teambake Marketing Corporation. Mr. Cua has served as the Chairman of the Board of Trustees of Xavier School, Inc. and P&Gers Fund, Inc. He is also a member of the Board of Trustees of Xavier School Educational & Trust Fund. Mr. Cua served as the first Filipino President and General Manager of Procter & Gamble Philippines, Inc. from 1995 to 2006. He also held the position of Vice President, Marketing Function from 2003 to 2006 and Vice President, Market and Customer Operations from 2000 to 2003 for ASEAN, Australasia and India.


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Mr. Cua has received the following citations: GK Bayani Nation Builder, Gawad Kalinga (2006); 100 Most Outstanding U.P. Alumni Engineers (2009); 2007 Most Distinguished Alumnus, U.P. Alumni Engineers, College of Engineering, U.P. Diliman; Outstanding Achievement in Marketing Management (1998 Agora Awards); Lifetime Capability Development Award, Procter& Gamble Philippines (2006); Passionate Leadership Award, Procter & Gamble Global Marketing Organization (2006). Mr. Cua earned his Bachelor of Science degree in Chemical Engineering from the University of the Philippines. Jesli A. Lapus, 64, Filipino, Independent Director

Mr. Lapus was elected as Director of STI Holdings on 21 March 2013. He was also elected as an Independent Director of STI Holdings at the Annual Stockholders Meeting held on 4 October 2013. Mr. Lapus is currently Independent Director of: Metropolitan Bank & Trust Company and Philippine Life Financial Assurance Corporation. He is a Director of iACADEMY; Chairman of the Trust Banking of Metropolitan Bank and Trust Company, STI Education Services Group, Inc., LBP Service Corporation, Asian Institute of Management –Center for Tourism and Honorary Chairman of Manila Tytana Colleges. He is also a Member of the Investment Committee of Philplans First, Inc. and Advisory Board Member of Radiowealth Finance Company, Inc. A multi-awarded executive in the private sector (i.e. manufacturing, financial services and international trade), Mr. Lapus has successfully managed and turned around firms and a universal bank in attaining industry leaderships. With a solid track record as a prominent professional executive in the private sector behind him, Mr. Lapus has the distinction of having served in the cabinets of three (3) Philippine Presidents namely: President Gloria Macapagal-Arroyo, President Fidel Ramos and President Corazon Aquino in the following capacities: Secretary, Department of Trade and Industry (2010); Secretary, Department of Education (2006-2010); President and CEO, The Land Bank of the Philippines (1992-1998); Undersecretary, Department of Agrarian Reform. He was elected member of the Philippine Congress for three (3) consecutive terms in 1998-2006. During his stint in Congress, Mr. Lapus was Chairman of the House Committees on Ways and Means, Trade and Industry, Suffrage and Electoral Reforms and Vice-Chairman of Appropriations. Mr. Lapus was the former President of Southeast Asia Ministers of Education Organization; Executive Board Member of UNESCO-Paris; Chairman of Board of Investments, Philippine Export Zone Authority, Cabinet Committee on Tariff and Related Matters, Export Development Council, MSMED Council (Micro, Small and Medium Enterprises), and National Development Corporation; Governor of Management Association of the Philippines and Bankers Association of the Philippines; and Member of YPO, Finex, PICPA, PCCI, GBAP, and Rotary Club of Manila. Mr. Lapus earned his Doctor of Public Administration from Polythechnic University of the Philippines; Master in Business Management from Asian Institute of Management; Investment Appraisal and Management from Harvard University, USA; Management of Transfer of Technology from INSEAD, France; and Project Management from BITS, Sweden. Yolanda M. Bautista, 61, Filipino, Treasurer

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


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Ms. Bautista is a Partner of Bautista Sagcal & Associates. She is Chairman and President of Unitrans International Forwarders, Inc. and President of Corporate Reference, Inc., Oro Bueno, Inc., Lakeview Realty, Inc. and Yellow Meadows Business Ventures, Inc. Ms. Bautista serves as Director and Treasurer of Capital Managers and Advisors, Inc., Banclife Insurance Co., Inc., Insurance Builders Inc., DLS-STI College, Inc., Philippine Women’s University and Information and Communications Technology Academy (iAcademy), Inc. She is also the Group Chief Financial Officer of Philippine Life Financial Assurance Corporation and Philhealthcare, Inc. as well as the Chief Financial Officer and Treasurer of STI ESG, West Negros University and UNLAD Resources Development Corporation. Ms. Bautista is a Director of Philippine Healthcare Educators, Inc. and Southern Textile Mills, Inc. She serves as Treasurer of STI Investments, Inc., Kusang Loob Foundation, Inc., Lasik Surgery, Inc., Megaclinic Derma Laser Center, Inc. and P & O Management Services Phils., Inc. She is also Assistant Treasurer of DLS-STI Megaclinic, Inc. and Total Consolidated Asset Management, Inc. Ms. Bautista is a Certified Public Accountant. She graduated Magna Cum Laude from the University of Santo Tomas with a Bachelor of Science degree in Commerce, major in Accounting. Arsenio C. Cabrera, Jr., 54, Filipino, Corporate Secretary Atty. Arsenio C. Cabrera, Jr. was elected Corporate Secretary and Chairman of the Compliance Committee of STI Holdings on 17 March 2010. He is also the current Corporate Information Officer of the Company. Atty. Cabrera is a Managing Partner of Herrera Teehankee& Cabrera Law Offices. He is currently General Counsel of STI Education Services Group, Inc. He also serves as Corporate Secretary of BOIE Drug, Inc., BOIE, Incorporated, BOIE Prime, Inc., Calatagan Bay Realty, Inc., Canlubang Golf and Country Club, Inc., Capital Managers and Advisors, Inc., Classic Finance Corporation, Coinage, Inc., DLS-STI Colleges, Inc., Foundation for Filipinos, Inc., GEOGEN Corporation, GEOGRACE Resources Philippines, Inc., Masbate13 Philippines, Inc., Mina Tierra Gracia, Inc., NiHAO Mineral Resources International, Inc., Oregalore, Inc., Philippine American Drug Company, Philippine First Condominium Corporation, Philippines First Insurance Co., Inc., Philippine Life Assurance Financial Corporation, Philippine Women’s University, Philhealthcare, Inc., Philplans First, Inc., Renaissance Condominium Corporation, Rosehills Memorial Management Philippines, Inc. Sonak Holdings, Inc., STI Education Systems Holdings, Inc., STI Investments, Inc., Total Consolidated Asset Management, Inc., Trend Developers, Inc., Unlad Resources Development Corporation, Villa Development Corporation, West Negros University Corp. and WVC Development Corporation. Atty. Cabrera holds a Bachelor of Laws (Second Honors) and a Bachelor of Science in Legal Management from the Ateneo De Manila University. Ana Carmina S. Herrera, 39, Filipino, Assistant Corporate Secretary

Atty. Ana Carmina S. Herrera was elected Assistant Corporate Secretary of the Company on 17 March 2010. A Senior Associate of Herrera Teehankee and Cabrera Law Offices, Atty. Herrera also performs the role of Corporate Secretary of Dunes and Eagle Land Development Corporation, STI College Batangas, Inc., STI Dagupan, Inc. and STI Tuguegarao, Inc. She also serves as Assistant Corporate Secretary in a number of other corporations: Amica Corporation, Banclife Insurance Co., Inc., Coastal Bay Chemicals, Inc., STI Education Systems Holdings, Inc., Palisades Condominium Corporation, Philippine Life Assurance Financial Corporation, Philhealthcare, Inc., Philippines First Insurance Co., Inc., Philippine First Condominium Corporation, Philippine Life Financial Assurance Corporation, STI College of Kalookan, Inc., STI College of Novaliches, Inc. and Venture Securities, Inc. She received her Bachelor of Laws degree from the University of the Philippines in 2000.


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(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.

(3) Family Relationships

Mr. Joseph Augustin L. Tanco is the son of Mr. Eusebio H. Tanco. Ms. Ma. Vanessa Rose Tanco is the daughter of Mr. Eusebio H. Tanco. Mr. Martin Tanco and Mr. Eusebio H. Tanco are cousins. There are no other family relationships up to the 4th civil degree, either by consanguinity or affinity among the current Directors other than those already disclosed in this report.

(d) Involvement in Certain Legal Proceedings

None of the above named directors and executive officers of the Company have been involved in any of the following events for the past five (5) years and up to the date of this SEC Form 17-A: (1) any bankruptcy petition filed by or against any business of which such person was a general

partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

(2) any conviction by final judgment; (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or

vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, commodities or banking activities; and

(4) being found by a domestic or foreign court of competent jurisdiction (in a civil action), the

Commission or comparable foreign body, or a domestic or foreign Exchange or other organized trading market or self-regulatory organization, to have violated a securities or commodities law or regulation, and the judgment has not been reversed, suspended, or vacated.

Item 10: EXECUTIVE COMPENSATION

(1) During the 28 June 2010 meeting of the Board of Directors, the Board approved a resolution increasing the per diems of the directors from P10,000.00 to P15,000.00 per board meeting. The directors are paid P5,000.00 per committee meeting attended by them. There is no arrangement for compensation of directors. For FY 2011-2012 and 2012-2013, the CEO and top four (4) executive officers as a group, did not receive compensation from the Company. There is no employment contract between the Company and any of its executive officers. (2) The following table summarizes the aggregate compensation for the fiscal years ended 31 March 2011-2012, 2012-2013 and 2013-2014. The amounts set forth in the table below have been prepared based on


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what the Company paid its directors and named executive officers as a group and other officers for the fiscal years ended 31 March 2011-2012 and 2012-2013 and what the Company expects to pay for the year ended 31 March 2013-2014. The compensation for board members comprises per diems.

ANNUAL COMPENSATION

Name and principal Position

Fiscal Year Ended 31

March

Salary (PHP) Bonus (PHP)

Other annual compensation

(PHP)

All other Officers as a Group

2012-2013 597,052.00 - -

2013-2014 1,551,053.28 - -

2014-2015 P3,800,000.001 - -

All Named Executive Officers2 and Board of Directors as a Group

2011-2012 - 564,706.00

2012-2013 - - 1,005,882.00

2013-2014 - - 1,735,000.00

2014-2015 - - 1,735,000.001

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 2014

As of 31 March2014, 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.


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Title of Class

Name, Address of Record Owner and Relationship with

Issuer

Name of Beneficial Owner and

Relationship with Record owner

Citizenship No. of Shares Held

Percent

Common PCD Nominee 37/F Tower I, Enterprise Center, 6766 Ayala Avenue cor. Paseo de Roxas, Makati City

Filipino 3,085,958,3702 31.16%

Common Prudent Resources, Inc. 7/F iAcademy Building, 6764 Ayala Avenue, Makati City

Mr. Eusebio H. Tanco, the Chairman of Prudent Resources, Inc. is authorized to vote its shares in the Company.

Filipino (Direct)

1,614,264,964 16.30%

Common Mr. Eusebio H. Tanco (Chairman of the Board) (Direct and Indirect shares through PCD Nominee Corporation) 543 Fordham Street, Wack-Wack Village, Mandaluyong City

Mr. Eusebio H. Tanco

Filipino (Direct) (Indirect) Total

1,157,913,875

284,100,000 -------------------

1,442,013,875 ===========

11.69%

2.87% -----------

14.56% ======

Common PCD Nominee 37/F Tower I, Enterprise Center, 6766 Ayala Avenue cor. Paseo de Roxas, Makati City

Non-Filipino 1,280,209,9073 12.93%

Common Rescom Developers, Inc. 7/F iAcademy Building, 6764 Ayala Avenue, Makati City

Mr. Eusebio H. Tanco, the Chairman of Rescom Developers, Inc. is authorized to vote its shares in the Company.

Filipino (Direct)

794,343,934 8.02%

Common Eujo Philippines, Inc. (Direct and Indirect shares through PCD Nominee Corporation) 7/F iAcademy Building, 6764 Ayala Avenue, Makati City

Mr. Eusebio H. Tanco, the Chairman of Eujo Philippines, Inc. is authorized to vote its shares in the Company.

Filipino (Direct) (Indirect)

728,626,048

35,247,082 ------------------

763,873,130 ==========

7.35%

0.36% ----------

7.71% ======

2Eusebio H. Tanco is the beneficial owner of 284,100,000 shares. Eujo Philippines, Inc. is the beneficial owner of 35,247,082 shares.

STI Education Services Group, Inc. is the beneficial owner of 104,399,000 shares. Insurance Builders, Inc. is the beneficial owner of 150,952,989 shares.

3Morgan Stanley Investment Management Company is the beneficial owner of 816,264,000 shares or 8.24%. Contact Person is Linyu

Qi; Address: Morgan Stanley, 16/F, Kerry Parkside, 1155 Fang Dian Road, Pudong New District, Shanghai, China


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Common Insurance Builders, Inc. (Direct and Indirect shares through PCD Nominee Corporation) 7/F iAcademy Building, 6764 Ayala Avenue, Makati City

Mr. Eusebio H. Tanco, the Chairman of Insurance Builders, Inc. is authorized to vote its shares in the Company.

Filipino (Direct) (Indirect) Total

428, 723,003

150,952,989 ------------------

579,675,992 ===========

4.33%

1.52% -----------

5.85% ======

Common STI Education Services Group, Inc. STI Academic Center, University Parkway Drive, Fort Bonifacio Global City, Taguig City

Mr. Monico V. Jacob, the President of STI, is authorized to vote the shares of STI ESG in the Company

Filipino (Direct) (Indirect)

397,908,895

104,399,000 -----------------

502,307,895 ===========

4.02%

1.05% ----------

5.07% ======

Note: PCD Nominee Corporation is a wholly-owned subsidiary of the Philippine Central Depository, Inc. (PCD), and is the registered owner of the shares in the records of the 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 2014

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

Title of Class

Name of Beneficial Owner

Amount & Nature of Beneficial Ownership

Citizenship Percent of Class

Common

Eusebio H. Tanco (Director and Chairman of the Board)

1,157,913,875 284,100,000

------------------ 1,442,013,875

==========

Direct Indirect Total

Filipino 11.69% 2.87%

----------- 14.56%

=======

Common

Monico V. Jacob (Director, President and CEO)

1 33,784,056

--------------- 33,784,057

========


Filipino

0.34%

Common Yolanda M. Bautista (Treasurer)

1 5,000,000

--------------- 5,000,001

========


Filipino

0.05%

Common Arsenio C. Cabrera, Jr. (Corporate Secretary)

6,500,000 Indirect Filipino 0.06%

Common Joseph Augustin L. Tanco (Director and VP for Investor Relations)

1 2,000,000

---------------- 2,000,001

==========


Filipino 0.00% 0.02%

-------------- 0.02%

======


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Title of Class

Name of Beneficial Owner

Amount & Nature of Beneficial Ownership

Citizenship Percent of Class

Common Paolo Martin Bautista (Director and Chief Investment Officer and Head of Corporate Strategy)


Common

Vanessa Rose L. Tanco (Director)

1 Direct Filipino 0.00%

Common

Martin K. Tanco (Director)


Common

Rainerio M. Borja (Director)


Common Maulik R. Parekh (Independent Director)

1,000 Direct Filipino 0.00%

Common Jesli A. Lapus (Independent Director)


Common Ernest Lawrence Cu (Independent Director)


Common Johnip G. Cua (Independent Director)

1,000 Indirect Filipino 0.00%

Common Directors and Officers as a Group 1,564,808,935 Direct and Indirect

Filipino 15.80%

(c) Voting Trust Holders of 5% or More As of 31 March 2014, no person holds at least 5% or more of a class under a voting trust or similar agreement.

(d) Changes in Control On 14 June 2012, the Company entered into a Memorandum of Agreement (the “MOA”) with the following stockholders of STI ESG: (a) Prudent Resources, Inc.; (b) Mr. Eusebio H. Tanco; (c) Insurance Builders, Inc.; (d) Eujo Philippines, Inc.; and (e) Rescom Developers, Inc. (collectively referred to as the “STI Majority Shareholders”). The MOA relates to the share-for-share swap of the STI ESG shares held by the STI Majority Shareholders with shares of the Company whereby each STI ESG share owned by the STI Majority Shareholders will be exchanged for 6.5 Company shares. The same swap ratio was also offered to other STI ESG shareholders. To accommodate the issuance of shares to the STI Majority Shareholders and the other STI ESG shareholders, the Company increased its authorized capital stock from P551,000,000.00 consisting of 1,103,000,000 shares with a par value of P0.50 per share to Php5,000,000,000.00 consisting of 10,000,000,000 shares with a par value of P0.50 per share. The aforementioned increase in authorized capital stock was approved by the 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.


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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. On 26 September 2012, the PSE Board of Directors approved the application of STI Holdings to list an additional 5,901,806,924 common shares (the “Share Swap Shares”) with a par value of P0.50 per share, to cover the share-for-share swap transaction with various shareholders of STI ESG (the “STI ESG Shareholders”). The Share Swap Shares were issued in exchange for 907,970,295 STI ESG common shares held by the STI ESG shareholders. The total swap value is P9,743,378,087.43, broken down as follows: (1)5,887,969,327 STI Holdings shares at a swap price of P1.65 per share for a consideration of P9,715,149,389.55; and (2) 13,837,597 STI Holdings shares at a swap price of P2.04 per share for a consideration of P28,228,697.88. In compliance with Article V, Part A, Section 7 of the Revised Listing Rules of the Exchange, STI Holdings, Ms. Rosie L. Tanco, the STI Majority Shareholders (Rescom Developers, Inc., Eujo Philippines, Inc,, Insurance Builders, Inc., Prudent Resources, Inc. and Mr. Eusebio H. Tanco) executed an Escrow Agreement dated 22 October 2012 with Union Bank of the Philippines to implement the required lock-up requirement of their respective Swap Shares reckoned from the listing date. A total of 4,736,871,823 common shares were covered by the Escrow Agreement. On 29 October 2012 (the “Listing Date”), 5,901,806,924 common shares of STI Holdings were listed in the Exchange. Out of the 5,901,806,924 common shares, only 1,164,935,101 common shares were eligible for trading on the Listing Date. The remaining 4,736,871,823 common shares held by Ms. Rosie L. Tanco and the STI Majority Shareholders were placed in escrow for 180days counted from the Listing Date. The said lock-up period lapsed on 27 April 2013. On 9 May 2013, the 4,736,871,823 common shares held by Ms. Rosie L. Tanco and the STI Majority Shareholders became eligible for trading on the Exchange.

Item 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has the following major transactions with related parties: Joint Venture Agreement with Philippine Women’s University (“PWU”), Unlad Resources Development Corporation (“UNLAD”) and Mr. Alfredo Abelardo Benitez (“Mr. Benitez”)

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.


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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 P 32 Million, respectively. On 25 March 2013, the Joint Venture Agreement and Omnibus Agreement were amended to discontinue the imposition of interest on the Loan to PWU, Loan to UNLAD and AHC Loan to UNLAD effective 1 January 2013. As of March 31, 2014 and 2013, noncurrent receivables consist of loans of P 448.0 million and accrued interest of P 16.0. Interest income in 2013 amounted to P=12.7 million.

As of March 31, 2014 and 2013, the equity interest in UNLAD has not been assigned to the Parent Company in exchange for the receivables from PWU and the Loan to UNLAD. The said receivables from PWU and the Loan to UNLAD are presented as “Noncurrent receivables” in the consolidated statements of financial position. The Company is working on the submission of all required documents to effect the conversion of these receivables into equity. The Company has nominated its representatives as directors/trustees and officers of PWU and UNLAD. Land Held for Swap

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


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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.

In August 2013, the Deed of Absolute Sale for the sale of the land was executed between STI ESG and TechZone in accordance with the BOD approval. Title to the land has now been transferred in favor of TechZone and consequently, the amount was reclassified, including other directly attributable costs, as “Condominium deposit.” Development of the condominium project is likewise ongoing.

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

This advance was fully settled by STI Investments on 14 June 2012. Short-term cash placement in a financing institution with a common shareholder As at 31 March 2011, the Company has outstanding short-term cash placement in a financing institution which is owned by a common shareholder amounting to P 101.5 Million. The short-term cash placement was terminated on 8 April 2011. Interest income earned on the short-term cash placement amounted to P 0.1 Million and the years ended 31 March 2012 and 2011, respectively. Receivable from Philippine Racing Club, Inc. (PRCI) The Company has outstanding receivables of P 10.2 Million from PRCI arising from the assignment of a local tax credit certificate originally issued in favor of the Company by the local government of Makati. PRCI was the Company’s parent company until 18 March 2010. PRCI made a partial payment of P 2 Million as of 30 June 2013 and full payment of P 8.2 Million as of 27 December 2013. Agreement with Comm & Sense On 15 January 2013, the Company entered into an agreement with Comm & Sense owned by Mr. Joseph Augustin L. Tanco, Director and Vice President for Investor Relations of STI Holdings, on the overall management for PR consultation and planning of activities and execution strategies, management of all media interview, development of campaign messaging and media monitoring. Comm & Sense is in charge of the Press Releases for the Corporation, development of story angles, writing and editing of articles, media relations and the Corporate Social Responsibility projects of the Corporation. Consultancy Agreement with STI ESG The Company entered into an agreement with STI ESG on the rendering of advisory services starting 01 January 2013. To date, there are no complaints received by the Company regarding related-party transactions. Transactions with Promoters There are no transactions with promoters within the past five (5) years.


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PART IV – CORPORATE GOVERNANCE Item 13. CORPORATE GOVERNANCE In accordance with SEC Memorandum Circular No. 5, Series of 2013, the Corporate Governanceitem in the Annual Report (SEC Form 17-A) shall be deleted. The Company submitted the Annual Corporate Governance Report to the Securities and Exchange Commission on 28 June 2013.

PART V – EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17 – C (a) Exhibits and Schedules

Statement of Management’s Responsibility for Financial Statements Report of Independent Auditors Audited Financial Statements and Notes for the fiscal year ended 31 March 2014 Schedule A. Financial Assets in Equity Securities Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Parties Schedule C. Amounts Receivable/Payables from and to Related Parties which are eliminated

during the Consolidation of Financial Statements Schedule D. Intangible Assets – Other Assets Schedule E. Long term debt Schedule F. Indebtedness to Related Parties (Long Term Loans from Related Companies) Schedule G. Guarantees of Securities of Other Issuers Schedule H. Capital Stock

Schedule I. Reconciliation of Retained Earnings Available for Dividend Declaration Schedule J. Map of the Relationships of the Companies within the Group Schedule K. Schedule of All the Effective Standards and Interpretations as of March 31, 2013 Schedule L. Financial Ratios

(b) Reports on SEC Form 17 – C (for the last six [6] months of the fiscal year)

1. Item 9 filed with SEC on 03 October 2013

Item 9 -Other Events

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

2. Certifications of Independent Director (for Messrs. Jesli A. Lapus, Johnip G. Cua and Ernest

Lawrence Cu ) filed with the SEC on 4 October 2013


69

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

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

Directors Eusebio H. Tanco Monico V. Jacob Yolanda M. Bautista Joseph Augustin L. Tanco Vanessa Rose L. Tanco Martin K. Tanco Rainerio M. Borja Paolo Martin O. Bautista Jesli A. Lapus – Independent Director Johnip G. Cua – Independent Director Ernest Lawrence Cu - Independent Director At the Organizational Meeting of the Board of Directors immediately held after the annual stockholders’ meeting of the Company, the following were duly elected as Officers and Committee Members: Officers: Chairman of the Board - Eusebio H. Tanco President & Chief Executive Officer - Monico V. Jacob Vice President for Investor Relations - Joseph Augustin L. Tanco Treasurer& Chief Finance Officer - Yolanda M. Bautista Vice President and Chief Investment Officer - Paolo Martin O. Bautista Corporate Secretary & Compliance Officer - Arsenio C. Cabrera, Jr. Assistant Corporate Secretary - Ana Carmina S. Herrera

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

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

Paolo Martin O. Bautista Ernest Lawrence Cu

Nomination Committee Chairman - Eusebio H. Tanco Members - Ernest Lawrence Cu

Ma. Vanessa Rose L. Tanco Rainerio M. Borja

Compensation Committee Chairman - Eusebio H. Tanco Members - Monico V. Jacob


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Yolanda M. Bautista Joseph Augustin L. Tanco

Compliance Committee Chairman &

Corporate Information Officer - Arsenio C. Cabrera, Jr. Members - Monico V. Jacob

- Yolanda M. Bautista Paolo Martin O. Bautista

Member & Alternate Corporate Information Officer - Elizabeth M. Guerrero

4. Audit Committee Charter Self-Assessment Worksheet filed with SEC on 7 October 2013 5. Item 4 filed with the SEC on 06 December 2013

Item 4 -Resignation, Removal or Election of Registrant’s Directors or Officers At the meeting of the Board of Directors of STI Education Services Group, Inc. (“STI ESG”), Mr. Martin K. Tanco and Ms. Marie Ampeloquio were elected as the new Directors of STI ESG. STI ESG is 99% owned by STI Education Systems Holdings, Inc.

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

Item 4 - Resignation, Removal or Election of Registrant’s Directors or Officers At the meeting of the Board of Directors of STI Education Systems Holdings, Inc. (“STI ESH”), the Board accepted the resignation of Ms. Yolanda M. Bautista as Director and elected Mr. Maulik R. Parekh as Director for the unexpired portion of the term of Ms. Bautista. The resignation of Ms. Bautista as Director was not due to any disagreement with STI ESH on any matter relating to its operations, policies or practices.

7. Item 9 filed with SEC on 22 January 2014

Item 9 – Other Events STI Academic Center Lucena breaks ground (Press Release)

8. Letter dated 24 January 2014 re Attendance of Board of Directors during board meetings for the

period from 1 January 2013 to 31 December 2013 filed with the SEC on 27 January 2014. 9. Item 9 filed with SEC on 10 February 2014

Item 9 – Other Events Half-billion-peso STI Academic Center Caloocan opens for students (Press Release)

10. Item 9 filed with SEC on 19 February 2014

Item 9 – Other Events Quality Enrollments push STI Holdings revenues to P1.4B (Press Release)


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11. Item 9 filed with SEC on 20 March 2014 Item 9 – Other Events

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

12. Amended Letter dated 04 April 2014 re Attendance of Board of Directors during board meetings

for the period 1 January 2013 to 31 December 2013 filed with the SEC on 04 April 2014. 13. Item 9 filed with SEC on 19 May 2014

Item 9 – Other Events STI to open three (3) new colleges for the coming school year- STI Holdings (Press Release)

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INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsSTI Education Systems Holdings, Inc.

We have audited the accompanying consolidated financial statements of STI Education SystemsHoldings, Inc. (formerly JTH Davies Holdings, Inc.) and Subsidiaries, which comprise theconsolidated statements of financial position as at March 31, 2014 and 2013, and the consolidatedstatements of comprehensive income, statements of changes in equity and statements of cash flows foreach of the three years in the period ended March 31, 2014, and a summary of significant accountingpolicies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with accounting principles generally accepted in the Philippines as describedin Note 2 to the consolidated financial statements, and for such internal control as managementdetermines is necessary to enable the preparation of consolidated financial statements that are freefrom material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudits. We conducted our audits in accordance with Philippine Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin 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 controlrelevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 28, 2012, valid until December 31, 2015SEC Accreditation No. 0012-FR-3 (Group A), November 15, 2012, valid until November 16, 2015

A member firm of Ernst & Young Global Limited

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Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of STI Education Systems Holdings, Inc. and its subsidiaries as at March 31, 2014and 2013, and their financial performance and their cash flows for each of the three years in the periodended March 31, 2014 in accordance with accounting principles generally accepted in the Philippinesas described in Note 2 to the consolidated financial statements.

SYCIP GORRES VELAYO & CO.

Roel E. LucasPartnerCPA Certificate No. 98200SEC Accreditation No. 1079-AR-1 (Group A), March 4, 2014, valid until March 3, 2017Tax Identification No. 191-180-015BIR Accreditation No. 08-001998-95-2014, January 22, 2014, valid until January 21, 2017PTR No. 4225185, January 2, 2014, Makati City

July 9, 2014

A member firm of Ernst & Young Global Limited

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STI EDUCATION SYSTEMS HOLDINGS, INC.(Formerly JTH Davies Holdings, Inc.)AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION

March 31 April 12013 2012

2014 (As restated - Note 2)

ASSETS

Current AssetsCash and cash equivalents (Notes 6, 30 and 31) P=583,302,563 P=1,489,451,909 P=556,282,842Receivables (Notes 7, 12, 27, 30 and 31) 297,350,741 250,773,204 265,915,000Inventories (Note 8) 37,833,467 34,740,103 42,143,148Prepaid expenses and other current assets

(Notes 9, 24, 25, 30 and 31) 107,001,375 37,467,793 24,660,884Total Current Assets 1,025,488,146 1,812,433,009 889,001,874

Noncurrent AssetsProperty and equipment (Notes 10, 11 15, 16 and 25) 4,421,253,356 2,635,275,971 1,544,229,394Investment properties (Notes 11 and 16) 40,197,895 39,325,291 47,107,290Investments in and advances to associates and joint ventures

(Notes 12, 27, 30 and 31) 1,532,051,587 2,897,068,557 1,590,477,010Noncurrent receivables (Notes 27, 30 and 31) 463,978,935 463,978,935 227,254,574Available-for-sale financial assets (Notes 14, 30 and 31) 50,599,940 4,663,478 4,987,638Deferred tax assets - net (Note 26) 33,103,977 8,505,574 10,989,343Goodwill, intangible and other noncurrent assets

(Notes 15, 25, 30 and 31) 732,429,451 642,000,576 275,286,520Total Noncurrent Assets 7,273,615,141 6,690,818,382 3,700,331,769

P=8,299,103,287 P=8,503,251,391 P=4,589,333,643

LIABILITIES AND EQUITY

Current LiabilitiesAccounts payable and other current liabilities

(Notes 17, 18, 30 and 31) P=517,430,492 P=320,685,821 P=301,720,294Short-term loans (Notes 16, 30 and 31) 180,000,000 – 746,687,336Nontrade payable (Note 3) 151,470,221 – –Current portion of long-term debt (Note 16) 49,940,706 – –Current portion of obligations under finance lease (Note 25) 7,435,444 6,419,251 9,741,235Income tax payable 5,917,572 5,030,213 2,015,617

Total Current Liabilities 912,194,435 332,135,285 1,060,164,482

Noncurrent LiabilitiesLong-term debt - net of current portion (Note 16) 58,465,494 – –Obligations under finance lease - net of current portion

(Note 25) 11,430,653 13,339,807 8,956,367Pension liabilities (Note 24) 60,875,268 22,420,108 54,774,132Deferred tax liability (Notes 3 and 26) 127,967,442 – –

Total Noncurrent Liabilities 258,738,857 35,759,915 63,730,499Total Liabilities (Carried Forward) 1,170,933,292 367,895,200 1,123,894,981

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March 31 April 12013 2012


Total Liabilities (Brought Forward) P=1,170,933,292 P=367,895,200 P=1,123,894,981Equity Attributable to Equity Holders of the Parent

Company (Note 18)Capital stock 4,952,403,462 4,952,403,462 551,500,000Additional paid-in capital 1,119,079,467 1,119,079,467 77,592,234Cost of shares held by a subsidiary (500,009,337) (500,009,337) (500,009,337)Unrealized mark-to-market gain (loss) on available-for-sale

financial assets (Note 14) (525,048) (121,773) 207,684Share in associates’ unrealized mark-to-market gain on

available-for-sale financial assets (Note 12) 428,253,571 1,905,291,022 1,039,792,823Cumulative actuarial gain (loss) 18,014,452 21,253,817 (12,708,006)Share in associates’ cumulative actuarial gain (loss) (Note 12) (15,003,756) (6,845,516) 2,882,164Other equity reserve (Note 3) (1,653,497,803) (1,649,448,394) 648,667,134Retained earnings:

Appropriated – 800,000,000 800,000,000Unappropriated 2,690,263,952 1,351,532,167 668,155,173

Total Equity Attributable to Equity Holdersof the Parent Company 7,038,978,960 7,993,134,915 3,276,079,869

Equity Attributable to Non-controlling Interests 89,191,035 142,221,276 189,358,793Total Equity 7,128,169,995 8,135,356,191 3,465,438,662

P=8,299,103,287 P=8,503,251,391 P=4,589,333,643

See accompanying Notes to Consolidated Financial Statements.

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STI EDUCATION SYSTEMS HOLDINGS, INC.(Formerly JTH Davies Holdings, Inc.)AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended March 312013 2012


REVENUESSale of services:

Tuition and other school fees P=1,622,310,418 P=1,357,315,423 P=1,272,721,163Educational services 182,182,989 177,944,697 168,612,940Royalty fees 16,294,660 15,840,267 16,032,509Others 38,857,459 64,894,222 68,687,863

Sale of goods -Sale of educational materials and supplies 58,001,750 53,943,516 50,732,590

1,917,647,276 1,669,938,125 1,576,787,065

COSTS AND EXPENSESCost of educational services (Note 20) 553,019,985 485,410,056 481,856,696Cost of educational materials and supplies sold

(Note 21) 53,341,680 49,489,639 39,537,202General and administrative expenses (Note 22) 838,510,401 745,328,724 688,262,078

1,444,872,066 1,280,228,419 1,209,655,976

INCOME BEFORE OTHER INCOMEAND INCOME TAX 472,775,210 389,709,706 367,131,089

OTHER INCOME (EXPENSES)Equity in net earnings (losses) of associates and joint

ventures (Note 12) 232,818,520 428,251,940 (37,574,331)Loss on deemed sale and share swap of an associate

(Note 14) (43,000,287) – –Excess of fair values of net assets acquired over

acquisition cost from a business combination(Note 3) 32,681,078 – –

Interest income (Note 19) 12,199,579 34,723,888 16,198,233Interest expense (Note 19) (10,926,797) (18,831,366) (33,865,444)Rental income (Notes 11, 25 and 27) 10,792,540 4,610,690 5,363,360Gain (loss) on sale of:

Property and equipment 706,578 795,160 –Investment properties – (2,306,813) –Investment in an associate – – (1,124,356)Available-for-sale financial assets (Note 14) – – 4,679,557

Dividend and other income 510,329 440,507 2,877,934235,781,540 447,684,006 (43,445,047)

INCOME BEFORE INCOME TAX(Carried Forward) 708,556,750 837,393,712 323,686,042

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INCOME BEFORE INCOME TAX(Brought Forward) P=708,556,750 P=837,393,712 P=323,686,042

PROVISION FOR (BENEFIT FROM) INCOMETAX (Note 26)

Current 70,633,909 44,333,135 28,388,054Deferred (17,275,026) (1,380,231) 3,839,271

53,358,883 42,952,904 32,227,325

NET INCOME 655,197,867 794,440,808 291,458,717

OTHER COMPREHENSIVE INCOME (LOSS)Items to be reclassified to profit or loss in subsequent

years:Share in associates’ unrealized mark-to-market gain

(loss) on available-for-sale financial assets, net ofrealized mark-to-market gain recognized to profitor loss (Note 12) (1,496,110,186) 846,474,380 909,831,490

Unrealized mark-to-market loss on available-for-salefinancial assets (Note 14) (409,190) (324,160) (2,708,603)

Realized mark-to-market gain on available-for-salefinancial assets recognized to profit or loss(Note 14) – – (4,679,557)

(1,496,519,376) 846,150,220 902,443,330Items not to be reclassified to profit or loss in subsequent

years:Share in associates’ remeasurement gain (loss) on

pension liability (Notes 2 and 12) (8,272,379) (9,938,783) 3,003,867Remeasurement gain (loss) on pension liability

(Notes 2 and 24) (3,732,410) 38,640,001 (14,716,241)Income tax effect (Note 2) 411,355 (3,864,000) 1,471,624

(11,593,434) 24,837,218 (10,240,750)

TOTAL COMPREHENSIVE INCOME (LOSS) (P=852,914,943) P=1,665,428,246 P=1,183,661,297

Net Income Attributable ToEquity holders of the Parent Company P=681,123,230 P=777,415,889 P=287,028,095Non-controlling interests (25,925,363) 17,024,919 4,430,622

P=655,197,867 P=794,440,808 P=291,458,717

Total Comprehensive Income Attributable ToEquity holders of the Parent Company (P=807,556,959) P=1,630,224,880 P=1,143,096,185Non-controlling interests (45,357,984) 35,203,366 40,565,112

(P=852,914,943) P=1,665,428,246 P=1,183,661,297

Basic/Diluted Earnings Per Share on Net IncomeAttributable to Equity Holders of the ParentCompany (Note 28) P=0.069 P=0.096 P=0.044

See accompanying Notes to Consolidated Financial Statements.

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STI EDUCATION SYSTEMS HOLDINGS, INC.(Formerly JTH Davies Holdings, Inc.)AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED MARCH 31, 2014, 2013 AND 2012

Equity Attributable to Equity Holders of the Parent Company

AdditionalCost of Shares

Held by

UnrealizedMark-to-Market

Gain (Loss) onAvailable-

for-Sale Financial

Share inAssociates’Unrealized

Mark-to-MarketGain on

Available-for-Sale

FinancialCumulative

Actuarial

Share inAssociates’Cumulative

Actuarial Other Equity Retained Earnings

EquityAttributable

to Non-Controlling

Capital Stock Paid-in Capital a Subsidiary Assets Assets Gain (Loss) Gain (Loss) Reserve Appropriated Unappropriated Total Interests Total Equity

Balance at April 1, 2013 P=4,952,403,462 P=1,119,079,467 (P=500,009,337) (P=121,773) P=1,905,291,022 P=– P=– (P=1,649,448,394) P=800,000,000 P=1,351,854,503 P=7,979,048,950 P=142,037,319 P=8,121,086,269Effect of change in accounting policy on employee

benefits (see Note 3) – – – – – 21,253,817 (6,845,516) – – (322,336) 14,085,965 183,957 14,269,922Balance at April 1, 2013, as restated 4,952,403,462 1,119,079,467 (500,009,337) (121,773) 1,905,291,022 21,253,817 (6,845,516) (1,649,448,394) 800,000,000 1,351,532,167 7,993,134,915 142,221,276 8,135,356,191Net income – – – – – – – – – 681,123,230 681,123,230 (25,925,363) 655,197,867Other comprehensive loss – – – (403,884) (1,476,876,802) (3,232,884) (8,166,619) – – – (1,488,680,189) (19,432,621) (1,508,112,810)Total comprehensive income (loss) – – – (403,884) (1,476,876,802) (3,232,884) (8,166,619) – – 681,123,230 P(807,556,959) (45,357,984) (852,914,943)Reversal of appropriation of retained earnings (Note

18) – – – – – – – – (800,000,000) 800,000,000 – – –Dividend declaration (Note 18) – – – – – – – – – (142,391,445) (142,391,445) – (142,391,445)Reallocation of non-controlling interests (Note 3) – – – 609 (160,649) (6,481) 8,379 (4,049,409) – – (4,207,551) 3,354,426 (853,125)Share of non-controlling interest on dividends declared

by a subsidiary (Note 18) – – – – – – – – – – – (11,026,683) (11,026,683)

Balance at March 31, 2014 P=4,952,403,462 P=1,119,079,467 (P=500,009,337) (P=525,048) P=428,253,571 P=18,014,452 (P=15,003,756) (P=1,653,497,803) P=– P=2,690,263,952 P=7,038,978,960 P=89,191,035 P=7,128,169,995

Balance at April 1, 2012 P=551,500,000 P=77,592,234 (P=500,009,337) P=207,684 P=1,039,792,823 P=– P=– P=648,667,134 P=800,000,000 P=668,670,934 P=3,286,421,472 P=189,795,480 P=3,476,216,952Effect of change in accounting policy on employee

benefits (see Note 3) – – – – – (12,708,006) 2,882,164 – – (515,761) (10,341,603) (436,687) (10,778,290)Balance at April 1, 2012, as restated 551,500,000 77,592,234 (500,009,337) 207,684 1,039,792,823 (12,708,006) 2,882,164 648,667,134 800,000,000 668,155,173 3,276,079,869 189,358,793 3,465,438,662Issuance of shares through Share Swap

(Notes 1, 3 and 18) 2,950,903,462 – – – – – – (2,367,194,841) – – 583,708,621 25,302,729 609,011,350Issuance of shares through offering (Notes 1 and 18) 1,450,000,000 1,041,487,233 – – – – – – – – 2,491,487,233 – 2,491,487,233Net income – – – – – – – – – 777,415,889 777,415,889 17,024,919 794,440,808Other comprehensive income (loss) – – – (306,875) 828,598,831 34,327,694 (9,810,659) – – – 852,808,991 18,178,447 870,987,438Total comprehensive income (loss) – – – (306,875) 828,598,831 34,327,694 (9,810,659) – – 777,415,889 1,630,224,880 35,203,366 1,665,428,246Dividend declaration (Note 18) – – – – – – – – – (94,024,046) (94,024,046) – (94,024,046)Acquisition of non-controlling interests (Note 3) – – – (22,582) 36,899,368 (365,871) 82,979 69,079,313 – (14,849) 105,658,358 (105,658,358) –Share of non-controlling interest on dividends declared

by a subsidiary (Note 18) – – – – – – – – – – – (1,985,254) (1,985,254)Balance at March 31, 2013 P=4,952,403,462 P=1,119,079,467 (P=500,009,337) (P=121,773) P=1,905,291,022 P=21,253,817 (P=6,845,516) (P=1,649,448,394) P=800,000,000 P=1,351,532,167 P=7,993,134,915 P=142,221,276 P=8,135,356,191

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Equity Attributable to Equity Holders of the Parent Company

AdditionalCost of Shares

Held by

UnrealizedMark-to-Market

Gain (Loss) onAvailable-

for-Sale Financial

Share inAssociates’Unrealized

Mark-to-MarketGain on

Available-for-Sale

FinancialCumulative

Actuarial

Share inAssociate’sCumulative

Actuarial Other Equity Retained Earnings

EquityAttributable

to Non-Controlling

Capital Stock Paid-in Capital a Subsidiary Assets Assets Gain Gain Reserve Appropriated Unappropriated Total Interests Total Equity

Balance at April 1, 2011 P=153,591,106 P=– P=– P=7,283,059 P=166,823,516 P=– P=– P=727,367,827 P=– P=1,186,716,570 P=2,241,782,078 P=226,846,960 P=2,468,629,038Restatement arising from business combination under

common control (see Note 3) – – – – – – – – – 554,152 554,152 23,399 577,551Balance at April 1, 2011, as restated 153,591,106 – – 7,283,059 166,823,516 – – 727,367,827 – 1,187,270,722 2,242,336,230 226,870,359 2,469,206,589Issuance of shares 397,908,894 77,592,234 – – – – – – – – 475,501,128 – 475,501,128Subscription of the Parent Company's shares by a

subsidiary – – (500,009,337) – – – – – – – (500,009,337) – (500,009,337)Net income – – – – – – – – – 287,028,095 287,028,095 4,430,622 291,458,717Other comprehensive income (loss) – – – (7,075,375) 872,969,307 (12,708,006) 2,882,164 – – – 856,068,090 36,134,490 892,202,580Total comprehensive income (loss) – – – (7,075,375) 872,969,307 (12,708,006) 2,882,164 – – 287,028,095 1,143,096,185 40,565,112 1,183,661,297Dividend declaration (Note 18) – – – – – – – – (6,143,644) (6,143,644) – (6,143,644)Appropriation of retained earnings (Note 18) – – – – – – – 800,000,000 (800,000,000) – – –Movement in equity adjustment – – – – – – (80,811,543) – – (80,811,543) – (80,811,543)Transaction with non-controlling interest through:

Subscription of shares of a subsidiary – – – – – – – 2,110,850 – – 2,110,850 (2,110,850) –Redemption of treasury shares by a subsidiary – – – – – – – – – – – (3,965,828) (3,965,828)

Share of non-controlling interest on dividends declaredby a subsidiary (Note 18) – – – – – – – – – – – (72,000,000) (72,000,000)

Balance at March 31, 2012, as restated P=551,500,000 P=77,592,234 (P=500,009,337) P=207,684 P=1,039,792,823 (P=12,708,006) P=2,882,164 P=648,667,134 P=800,000,000 P=668,155,173 P=3,276,079,869 P=189,358,793 P=3,465,438,662

See accompanying Notes to Consolidated Financial Statements

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STI EDUCATION SYSTEMS HOLDINGS, INC.(Formerly JTH Davies Holdings, Inc.)AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS



CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax P=708,556,750 P=837,393,712 P=323,686,042Adjustments for:

Equity in net losses (earnings) of associates and joint ventures(Note 12) (232,818,520) (428,251,940) 37,574,331

Depreciation and amortization (Notes 10, 11 and 15) 205,551,974 156,430,779 144,450,351Loss on deemed sale and share swap of an associate

(Note 14) 43,000,287 – –Excess of fair values of net assets acquired over acquisition

costs (Note 3) (32,681,078) – –Interest income (Notes 19) (12,199,579) (34,723,888) (16,198,233)Interest expense (Note 19) 10,926,797 18,831,366 33,865,444Pension expense (Note 24) 10,133,891 19,256,755 5,151,804Provision for (reversal of) impairment losses on:

Investment in and advances to an associate (719,873) 4,120,636 3,047,124Goodwill – – 3,383,556

Loss (gain) on sale of:Property and equipment (706,578) (795,160) –Available-for-sale financial assets – – (4,679,557)Investment in an associate – – 1,124,356Investment properties – 2,306,813 –

Dividend income (510,329) (440,507) (2,835,783)Operating income before working capital changes 698,533,742 574,128,566 528,569,435Decrease (increase) in:

Receivables 12,319,381 (39,846,971) 437,716,452Inventories (2,949,649) 7,403,045 (7,732,531)Prepaid expenses and other current assets (4,452,498) (14,759,440) (11,392,828)

Decrease in accounts payable and other current liabilities (103,970,320) (27,126,618) (21,432,295)Contributions to plan assets (20,244,897) (12,970,779) (7,733,288)Net cash generated from operations 579,235,759 486,827,803 917,994,945Income and other taxes paid (134,479,338) (37,928,948) (24,562,000)Interest received 9,613,127 11,258,718 7,437,611Net cash flows provided by operating activities 454,369,548 460,157,573 900,870,556

CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of:

Property and equipment (Note 10) (1,049,885,679) (1,539,623,771) (255,301,730)Subsidiary, net of cash acquired (200,913,272) – –Intangible assets (24,577,384) – –Available-for-sale financial assets (19,519,759) – (80,811,545)Investment properties (3,981,559) – (3,096,000)Available-for-sale financial assets – –

Decrease (increase) in:Goodwill, intangible and other noncurrent assets (65,656,047) (7,951,224) (34,447,337)Investments in and advances to associates and joint ventures 24,346,108 (13,244,087) 21,089,801Noncurrent receivables – (223,998,027) (223,979,084)

(Forward)

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Dividends received P=8,117,279 P=14,371,696 P=4,787,881Interest received 2,812,228 10,599,965 6,237,344Proceeds from sale of:

Property and equipment 1,798,746 1,967,660 –Available-for-sale financial assets – – 48,013,237Investment in an associate – – 2,335,480Investment properties – 3,500,000 –

Proceeds from deposit for future stock subscription of non-controlling interests 39,475 – –

Net cash flows used in investing activities (1,327,419,864) (1,754,377,788) (515,171,953)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from availments of long-term debts 280,000,000 – –Dividends paid (153,170,255) (101,017,657) (6,105,785)Payments of:

Short-term loans (100,000,000) (1,285,687,336) (913,000,000)Long-term debts (40,677,196) – –Obligations under finance lease (8,291,192) (6,572,944) (1,016,625)Dividends to non-controlling interest (7,869,976) – (72,000,000)Interest (3,090,411) (18,831,366) (30,719,156)

Proceeds from:Issuance of capital stock – 2,475,977,202 475,501,128Issuance of subsidiary’s shares – 608,807,586 –Availments of short-term loans (Note 16) – 539,000,000 746,000,000Sale of treasury shares by a subsidiary – 15,713,797 –

Acquisition of the Parent Company’s shares by STI ESG – – (500,009,337)Redemption of treasury shares by a subsidiary – – (3,965,828)Net cash flows provided by (used in) financing activities (33,099,030) 2,227,389,282 (305,315,603)

NET INCREASE (DECREASE) IN CASH AND CASHEQUIVALENTS (906,149,346) 933,169,067 80,383,000

CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 1,489,451,909 556,282,842 475,899,842

CASH AND CASH EQUIVALENTSAT END OF YEAR (Note 6) P=583,302,563 P=1,489,451,909 P=556,282,842

See accompanying Notes to Consolidated Financial Statements..

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STI EDUCATION SYSTEMS HOLDINGS, INC.(Formerly JTH Davies Holdings, Inc.)AND SUBSIDIARIESNOTES 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 Securitiesand Exchange Commission (“SEC”). STI Holdings was originally established in 1928 as thePhilippine branch office of Theo H. Davies & Co., a Hawaiian corporation. It wasreincorporated as a Philippine corporation and registered with the SEC on June 28, 1946. STIHoldings’ shares were listed on the Philippine Stock Exchange (“PSE”) on October 12, 1976.On June 25, 1996, the SEC approved the extension of the Parent Company’s corporate life foranother 50 years. The primary purpose of the Parent Company is to invest in, purchase orotherwise acquire and own, hold, use, sell, assign, transfer, lease, mortgage, pledge, exchange,or otherwise dispose of real properties as well as personal and movable property of any kindand description, including shares of stock, bonds, debentures, notes, evidence of indebtednessand other securities or obligations of any corporation or corporations, association orassociations, domestic or foreign and to possess and exercise in respect thereof all the rights,powers and privileges of ownership, including all voting powers of any stock so owned, butnot to act as dealer in securities and to invest in and manage any company or institution. STIHoldings 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 ofMarch 31, 2012 (see Note 18).

On June 14, 2012 and August 10, 2012, the Board of Directors (“BOD”) and stockholdersof STI Holdings, respectively, approved the following: (i) change in its corporate name toSTI Education Systems Holdings, Inc., (ii) the share-for-share swap agreement (“ShareSwap”) with the shareholders of STI ESG (“STI ESG Stockholders”) and (iii) thecorresponding increase in its authorized capital stock from 1,103,000,000 shares with anaggregate par value of P=551.5 million to 10,000,000,000 shares with an aggregate parvalue of P=5,000.0 million (see Notes 3 and 18). The change in corporate name wasapproved by the SEC on September 10, 2012 while the Share Swap agreement andincrease 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, STIHoldings issued 5,901,806,924 shares to STI ESG Stockholders in exchange for907,970,294 STI ESG shares. As a result, immediately after the Share Swap, the STIESG Stockholders who joined the Share Swap owned approximately 84% interest in STIHoldings while STI Holdings owned 96% of STI ESG (see Notes 3 and 18).

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ii) On August 28, 2012, the BOD approved the offering and issuance by way of a follow-onoffering of up to a maximum 3,000,000,000 common shares (the “Offer”) at an offer priceto be determined based on a bookbuilding process and from discussion between STIHoldings and the International Lead Manager and Domestic Lead Manager. The Offercomprised of the following: (i) up to 2,627,000,000 common shares offered to the publicon a primary basis (“Primary Offering”); (ii) up to 105,209,527 common shares offered tothe public on a secondary basis by Korea Merchant Banking Corporation (“SecondaryOffering”); 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 thesame terms and conditions as the Primary Offering and Secondary Offering. The offerprice was set at P=0.90 per share on October 22, 2012. The Primary Offering andSecondary Offering were completed on November 7, 2012 while the Over-allotmentOption was exercised on November 28, 2012 (see Note 18).

iii) In November and December 2012, STI Holdings subscribed to 2,100,000,000 STI ESGshares at a consideration price equal to its par value of P=2,100.0 million. In July 2013,STI Holdings acquired additional 328,125 STI ESG shares. As a result, STI Holdings’ownership interest in STI ESG is approximately 99% as of March 31, 2014 and 2013.

c. STI Education Services Group, Inc. and Subsidiaries (collectively referred to as “STI ESG”)

The Group has investments in several entities which own and operate STI ESG schools. STIESG is involved in establishing, maintaining, and operating educational institutions to providepre-elementary, elementary, secondary, and tertiary as well as post-graduate courses, post-secondary and lower tertiary non-degree programs. STI ESG also develops, adopts and/oracquires, entirely or in part, such curricula or academic services as may be necessary in thepursuance of its main activities, relating but not limited to information technology services,information technology-enabled services, nursing, education, hotel and restaurantmanagement, engineering, business studies and care-giving. Other activities of STI ESGinclude computer services, such as, but not limited to, programming, systems design andanalysis, feasibility studies, installation support, job processing, consultancy, and other relatedactivities.

d. West Negros University Corp. (“WNU”)

WNU owns and operates West Negros University in Bacolod City. It offers pre-elementary,elementary, secondary and tertiary education and graduate courses. On October 1, 2013, theParent Company acquired 99.45% of the issued and outstanding common shares and 99.93%of the issued and outstanding preferred shares of WNU. As a result, WNU became asubsidiary of STI Holdings as of March 31, 2014 (see Note 3).

On July 9, 2014, WNU’s BOD approved WNU’s change of its corporate name to “STI WestNegros University.” The said amendment is to be submitted for approval of WNU’sstockholders during its Annual Stockholders’ Meeting on July 25, 2014.

The accompanying consolidated financial statements were approved and authorized by the BODof STI Holdings on July 9, 2014.

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2. Basis of Preparation, Basis of Consolidation, Changes to the Group’s Accounting Policiesand Summary of Significant Accounting Policies

Basis of PreparationThe 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 fairvalue. The consolidated financial statements are presented in Philippine peso, which is the ParentCompany’s functional and presentation currency, and all values are rounded to the nearest peso,except when otherwise indicated.

Statement of ComplianceThe accompanying consolidated financial statements of the Group have been prepared inaccordance with accounting principles generally accepted in the Philippines, which includes allapplicable Philippine Financial Reporting Standards (PFRS). PFRS also include PhilippineAccounting Standards (PAS) and Philippine Interpretations based on equivalent interpretationsfrom the International Financial Reporting Interpretations Committee (IFRIC) adopted by thePhilippine Financial Reporting Standards Council (FRSC), and the accounting standards set forthin the Pre-Need Rule 31, As Amended: Accounting Standards for Pre-Need Plans and Pre-NeedUniform 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 withaccounting principles generally accepted in the Philippines.

Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Parent Companyand its subsidiaries as at March 31, 2014 and 2013. Control is achieved when the Group isexposed, or has rights, to variable returns from its involvement with the investee and has theability to affect those returns through its power over the investee.

Specifically, the Parent Company controls an investee, if and only if, the Parent Company has:§ Power over the investee (i.e. existing rights that give it the current ability to direct the relevant

activities of the investee)§ Exposure, or rights, to variable returns from its involvement with the investee, and§ The ability to use its power over the investee to affect its returns

When the Parent Company has less than a majority of the voting or similar rights of an investee,the Parent Company considers all relevant facts and circumstances in assessing whether it haspower over an investee, including:§ The contractual arrangement with the other vote holders of the investee§ Rights arising from other contractual arrangements§ The Parent Company’s voting rights and potential voting rights

The consolidated financial statements include the accounts of STI College Kalookan, Inc.(STI-Kalookan) and STI College of Novaliches, Inc. (STI-Novaliches), which are both non-stockcorporations wherein the Parent Company has control by virtue of management contracts.

The Parent Company re-assesses whether or not it controls an investee if facts and circumstancesindicate that there are changes to one or more of the three elements of control. Consolidation of asubsidiary begins when the Parent Company obtains control over the subsidiary and ceases whenthe Parent Company loses control of the subsidiary. Assets, liabilities, income and expenses of asubsidiary acquired or disposed of during the year are included in the consolidated statement of

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comprehensive income from the date the Parent Company gains control until the date the ParentCompany ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to theequity holders of the Parent Company and to the non-controlling interests, even if this results inthe non-controlling interests having a deficit balance. When necessary, adjustments are made tothe financial statements of subsidiaries to bring their accounting policies into line with the Group’saccounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flowsrelating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as anequity transaction. If the Parent Company loses control over a subsidiary, it:

§ Derecognizes the assets (including goodwill) and liabilities of the subsidiary;§ Derecognizes the carrying amount of any non-controlling interest;§ Derecognizes the unrealized other comprehensive income deferred in equity;§ Recognizes the fair value of the consideration received;§ Recognizes the fair value of any investment retained;§ Recognizes any surplus or deficit in profit or loss; and§ Reclassifies the Parent Company’s share of components previously recognized in other

comprehensive income to profit or loss or retained earnings, as appropriate.

As at March 31, 2014 and 2013, subsidiaries of STI Holdings include:

Effective Percentage of Ownership2014 2013

Subsidiary Principal Activities Direct Indirect Direct IndirectSTI ESG Educational Institution 99 – 99 –WNU(a) Educational Institution 99 – – –Information and Communications TechnologyAcademy, Inc. (iAcademy) Educational Institution 100 100STI College Tuguegarao, Inc. (STI-Tuguegarao) Educational Institution – 100 – 100STI-Kalookan (b) Educational Institution – 100 – 100STI-Novaliches (b) Educational Institution – 100 – 100STI College of Batangas, Inc. (STI-Batangas)(c) Educational Institution – 100 – –STI Dagupan, Inc. (STI-Dagupan) Educational Institution – 77 – 77STI College Taft, Inc. (STI-Taft) Educational Institution – 75 – 75De Los Santos - STI College Educational Institution – 52 – 52STI College Quezon Avenue, Inc. (STI-QA)(d) Educational Institution – 52 – 52(a) Became a subsidiary of the Parent Company in October 2013(b) A subsidiary of STI ESG through a management contract(c)Became a subsidiary of STI ESG in June 2013(d) A wholly owned subsidiary of De Los Santos - STI College

On December 9, 2010, STI ESG’s stockholders approved the following mergers:

§ Phase 1: The merger of three (3) majority owned schools and fourteen (14) wholly ownedschools with STI ESG, with STI ESG as the surviving entity. The Phase 1 merger wasapproved by the Commission on Higher Education (CHED) and the SEC on March 15, 2011and May 6, 2011, respectively.

§ Phase 2: The merger of one (1) majority owned school and eight (8) wholly owned pre-operating schools with STI ESG, with STI ESG as the surviving entity. The Phase 2 mergerwas approved by the CHED and the SEC on July 18, 2011 and August 31, 2011, respectively.

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As at July 9, 2014, STI ESG’s request for confirmatory ruling on the tax-free merger from the BIRis still pending.

On September 25, 2013, STI ESG’s BOD approved the Phase 3 merger whereby STI-Taft andSTI-Dagupan will be merged with STI ESG, with STI ESG as the surviving entity. As at July 9,2014, STI ESG has not filed for approval from the CHED and the SEC.

On the same date, STI ESG’s BOD approved an amendment to the Phase 1 and 2 mergerswhereby STI ESG would issue shares at par value, to the stockholders of the non-controllinginterests. As at July 9, 2014, the amendment is pending approval by the SEC. In 2014, STI ESGissued additional shares at par value to the stockholders of one of the merged schools (see Note 3).

Accounting Policies of Subsidiaries. The financial statements of subsidiaries are prepared usinguniform accounting policies for like transactions and other events in similar circumstances.

The consolidated financial statements include the accounts of the Parent Company and itssubsidiaries as at March 31 of each year, except for the accounts of STI-Dagupan,STI-Tuguegarao, STI-Kalookan and STI-Novaliches whose financial reporting date ends onDecember 31. Adjustments are made for the effects of significant transactions or events that occurbetween the financial reporting date of the above-mentioned subsidiaries and the financialreporting date of the Group’s consolidated financial statements.

Non-Controlling Interests. Non-controlling interests represent the portion of profit or loss and netassets in the subsidiaries not held by the Parent Company and are presented in the profit or lossand within equity in the consolidated statement of financial position, separately from equityattributable to equity holders of the Parent Company.

On transactions with non-controlling interests without loss of control, the difference between thefair value of the consideration and the book value of the share in the net assets acquired ordisposed is treated as an equity transaction and is presented as part of “Other equity reserve”within equity section in the consolidated statement of financial position.

Changes in Accounting Policies, Disclosures and PresentationThe accounting policies adopted are consistent with those of the previous financial year, except forthe adoption of the new and amended PFRS that became effective beginning on or after April 1,2012. The changes introduced by such new standards and amendments are as follows:

§ PAS 19, Employee Benefits (Revised)

For defined benefit plans, the Revised PAS 19 requires all actuarial gains and losses to berecognized in OCI and unvested past service costs previously recognized over the averagevesting period to be recognized immediately in profit or loss when incurred.

Prior to the adoption of the Revised PAS 19, the Group recognized actuarial gains and lossesas income or expense when the net cumulative unrecognized gains and losses for eachindividual plan at the end of the previous period exceeded 10% of the higher of the definedbenefit obligation and the fair value of the plan assets and recognized unvested past servicecosts as an expense on a straight-line basis over the average vesting period until the benefitsbecome vested. Upon adoption of the Revised PAS 19, the Group changed its accountingpolicy to recognize all actuarial gains and losses in OCI and all past service costs in profit orloss in the period they occur.

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The Revised PAS 19 replaced the interest cost and expected return on plan assets with theconcept of net interest on defined benefit liability or asset which is calculated by multiplyingthe net balance sheet defined benefit liability or asset by the discount rate used to measure theemployee benefit obligation, each as at the beginning of the annual period.

The Revised PAS 19 also amended the definition of short-term employee benefits and requiresemployee benefits to be classified as short-term based on expected timing of settlement ratherthan the employee’s entitlement to the benefits. In addition, the Revised PAS 19 modifies thetiming of recognition for termination benefits. The modification requires the terminationbenefits to be recognized at the earlier of when the offer cannot be withdrawn or when therelated restructuring costs are recognized.

Changes to the definition of short-term employee benefits and timing of recognition fortermination benefits do not have any impact to the Group’s financial position and financialperformance.

The changes in accounting policies have been applied retrospectively. The effects of adoptionon the consolidated financial statements are as follows:

March 31,2014

March 31,2013

April 1,2012

Increase (Decrease)Consolidated Statements of Financial PositionInvestments in and advances to associates

and joint ventures (P=16,763,469) (P=8,250,819) P=2,036,863Deferred tax asset (1,063,180) (2,502,305) 1,423,906Pension liabilities (11,012,937) (25,023,046) 14,239,059Cumulative actuarial gain 18,014,444 21,253,817 (12,708,006)Share in associates’ cumulative actuarial

gain (15,003,756) (6,845,516) 2,882,164Retained earnings (9,685,354) (322,336) (515,761)Equity attributable to non-controlling

interests (139,046) 183,957 (436,687)

For the Years Ended March 312014 2013 2012

Increase (Decrease)Consolidated Statements of Comprehensive IncomePension expense P=10,277,699 (P=622,103) P=164,541Equity in net earnings of associates and

joint ventures (240,271) (348,899) (967,004)Provision for deferred income tax (1,027,769) 62,210 (16,454)Net income (9,490,200) 210,994 (1,115,091)Other comprehensive income:

Share in associates’ remeasurement gain (loss) on pension liability (8,272,379) (9,938,783) 3,003,867

Remeasurement gain (loss) on pension liability (3,732,410) 38,640,001 (14,716,241)

Income tax effect 411,355 (3,864,000) 1,471,624

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The adoption did not have any significant impact on the consolidated statements of cashflows.

§ Philippine Interpretations Committee (PIC) Q&A No. 2013-03, PAS 19, Accounting forEmployee Benefits under a Defined Contribution Plan subject to Requirements of RA No.7641, The Philippine Retirement Law.

This PIC Q&A seeks to provide guidance in accounting for post-employment benefits for anentity which has opted to provide a defined contribution plan as its only post-employmentbenefit plan despite the minimum retirement benefits required to be provided to employeesunder RA No. 7641. The benefits mandated under RA No. 7641 are considered as a minimumbenefit guarantee for qualified private sector employees in the Philippines. Hence, an entity’sobligation for post-employment benefits is not limited to the amount it agrees to contribute tothe fund. Therefore, the entity’s retirement plan shall be accounted for as a defined benefitplan. The relevant disclosure requirements of PAS 19 for a defined benefit plan should becomplied with. In addition, the accounting policy describing the accounting treatment forsuch a plan should also be disclosed in the notes to financial statements. The definedcontribution liability shall be recognized, and if there is an excess of the projected definedbenefit obligation over the projected defined contribution obligation, the entity should applythe projected unit credit method on such excess to determine the additional liability. The PICQ&A is effective for annual financial statements beginning on or after January 1, 2013 andrequires retrospective application.

Certain subsidiaries of the Group maintain a defined contribution plan that covers all regularfull time employees under which they pay fixed contributions based on the employees’monthly salaries. These entities, however, are covered under RA 7641, which provides adefined benefit minimum guarantee.

The Group obtained the services of an external actuary to compute the impact on theconsolidated financial statements upon adoption of the accounting interpretation and hasdetermined that it did not have a significant impact on the consolidated financial statements.

§ PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and FinancialLiabilities (Amendments)

These amendments require an entity to disclose information about rights of set-off and relatedarrangements (such as collateral agreements). The new disclosures are required for allrecognized financial instruments that are set off in accordance with PAS 32. These disclosuresalso apply to recognized financial instruments that are subject to an enforceable master nettingarrangement or ‘similar agreement’, irrespective of whether they are set-off in accordancewith PAS 32. The amendments require entities to disclose, in a tabular format unless anotherformat is more appropriate, the following minimum quantitative information. This is presentedseparately for financial assets and financial liabilities recognized at the end of the reportingperiod:

a) The gross amounts of those recognized financial assets and recognized financial liabilities;b) The amounts that are set off in accordance with the criteria in PAS 32 when determining

the net amounts presented in the consolidated statement of financial position;c) The net amounts presented in the consolidated statement of financial position;d) The amounts subject to an enforceable master netting arrangement or similar agreement

that are not otherwise included in (b) above, including:

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i. Amounts related to recognized financial instruments that do not meet some or all ofthe offsetting criteria in PAS 32; and

ii. Amounts related to financial collateral (including cash collateral); ande) 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 noimpact 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 issuesraised in SIC 12, Consolidation - Special Purpose Entities. PFRS 10 establishes a singlecontrol model that applies to all entities including special purpose entities. The changesintroduced by PFRS 10 required management to exercise significant judgment to determinewhich 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 inaccordance with the provisions of PFRS 10. Following the reassessment and based on thenew definition of control under PFRS 10, the Group determined that the adoption of thisstandard does not change its relationship over its subsidiaries and associates, therefore, has noimpact 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 forjointly controlled entities using proportionate consolidation. Instead, jointly controlled entitiesthat 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 injoint 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 werepreviously in PAS 27, as well as all the disclosures that were previously included in PAS 31and PAS 28, Investments in Associates. These disclosures relate to an entity’s interests insubsidiaries, joint arrangements, associates and structured entities. A number of newdisclosures are also required. The adoption of PFRS 12 will affect disclosures only and haveno impact on the Group’s financial position or performance.

§ PFRS 13, Fair Value Measurement

PFRS 13 establishes a single source of guidance under PFRSs for all fair value measurements.PFRS 13 does not change when an entity is required to use fair value, but rather providesguidance 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 inwhich it is initially applied. Its disclosure requirements need not be applied in comparativeinformation provided for periods before initial application of PFRS 13. Additional disclosureswere provided in Notes 11 and 31.

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§ PAS 1, Presentation of Financial Statements - Presentation of Items of Other ComprehensiveIncome or OCI (Amendments)

The amendments to PAS 1 change the grouping of items presented in OCI. Items that can bereclassified (or “recycled”) to profit or loss at a future point in time (for example, uponderecognition or settlement) will be presented separately from items that will never berecycled. The amendments affected presentation only and had no impact on the Group’sfinancial position or performance.

§ PAS 27, Separate Financial Statements (as revised in 2011)

As a consequence of the issuance of the new PFRS 10 and PFRS 12, what remains of PAS 27is limited to accounting for subsidiaries, jointly controlled entities, and associates in theseparate financial statements. The adoption of the amended PAS 27 had no a significantimpact 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 beenrenamed PAS 28, Investments in Associates and Joint Ventures, and describes the applicationof the equity method to investments in joint ventures in addition to associates. The adoptionof the revised standard did not have a significant impact on the consolidated financialstatements.

§ Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine

This interpretation applies to waste removal (stripping) costs incurred in surface miningactivity, during the production phase of the mine. The interpretation addresses the accountingfor the benefit from the stripping activity. This new interpretation is not relevant to the Group.

§ PFRS 1, First-time Adoption of International Financial Reporting Standards – GovernmentLoans (Amendments)

The amendments to PFRS 1 require first-time adopters to apply the requirements of PAS 20,Accounting for Government Grants and Disclosure of Government Assistance, prospectivelyto government loans existing at the date of transition to PFRS. However, entities may chooseto apply the requirements of PAS 39, Financial Instruments: Recognition and Measurement,and PAS 20 to government loans retrospectively if the information needed to do so had beenobtained at the time of initially accounting for those loans. These amendments are notrelevant to the Group.

Annual Improvements to PFRS (2009-2011 cycle). The Annual Improvements to PFRSs (2009-2011 cycle) contain non-urgent but necessary amendments to PFRSs. The Group adopted theseamendments for the current year.

§ PFRS 1, First-time Adoption of PFRS – Borrowing Costs - The amendment clarifies that, uponadoption of PFRS, an entity that capitalized borrowing costs in accordance with its previousgenerally accepted accounting principles, may carry forward, without any adjustment, theamount previously capitalized in its opening statement of financial position at the date oftransition. Subsequent to the adoption of PFRS, borrowing costs are recognized in accordancewith PAS 23, Borrowing Costs. The amendment does not apply to the Group as it is not afirst-time adopter of PFRS.

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§ PAS 1, Presentation of Financial Statements – Clarification of the requirements forcomparative information - These amendments clarify the requirements for comparativeinformation that are disclosed voluntarily and those that are mandatory due to retrospectiveapplication of an accounting policy, or retrospective restatement or reclassification of items inthe financial statements. An entity must include comparative information in the related notesto the financial statements when it voluntarily provides comparative information beyond theminimum required comparative period. The additional comparative period does not need tocontain a complete set of financial statements. On the other hand, supporting notes for thethird statement of financial position (mandatory when there is a retrospective application of anaccounting policy, or retrospective restatement or reclassification of items in the financialstatements) are not required. As a result of this clarification, except for employee definedbenefit plan, the Group has not included comparative information in respect of the openingstatement of financial position as at April 1, 2013. The amendments affect disclosures onlyand have no impact on the Group’s financial position or performance.

§ PAS 16, Property, Plant and Equipment – Classification of servicing equipment - Theamendment clarifies that spare parts, stand-by equipment and servicing equipment should berecognized as property, plant and equipment when they meet the definition of property, plantand equipment and should be recognized as inventory if otherwise. The amendment did nothave any impact on the Group’s financial position or performance.

§ PAS 32, Financial Instruments: Presentation – Tax effect of distribution to holders of equityinstruments - The amendment clarifies that income taxes relating to distributions to equityholders and to transaction costs of an equity transaction are accounted for in accordance withPAS 12, Income Taxes. The amendment did not have any significant impact on the Group’sfinancial position or performance.

§ PAS 34, Interim Financial Reporting – Interim financial reporting and segment informationfor total assets and liabilities - The amendment clarifies that the total assets and liabilities fora particular reportable segment need to be disclosed only when the amounts are regularlyprovided to the chief operating decision maker and there has been a material change from theamount disclosed in the entity’s previous annual financial statements for that reportablesegment. The amendment had no significant impact on the consolidated financial statements.

New Accounting Standards, Interpretations and Amendments to Existing StandardsEffective Subsequent to March 31, 2014The Group will adopt the following revised standards, interpretations and amendments to existingstandards enumerated below when these become effective. Except as otherwise indicated, theGroup does not expect the adoption of these revised standards, interpretations and amendments toPFRS to have a significant impact on the consolidated financial statements.

Effective in 2014

§ PAS 36, Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets(Amendments) - These amendments remove the unintended consequences of PFRS 13 on thedisclosures required under PAS 36, Impairment of Assets. In addition, these amendmentsrequire disclosure of the recoverable amounts for the assets or cash-generating units (CGUs)for which impairment loss has been recognized or reversed during the period. Theseamendments are effective retrospectively for annual periods beginning on or afterJanuary 1, 2014 with earlier application permitted, provided PFRS 13 is also applied.

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§ Investment Entities (Amendments to PFRS 10, PFRS 12 and PAS 27) - These amendmentsare effective for annual periods beginning on or after January 1, 2014. They provide anexception to the consolidation requirement for entities that meet the definition of aninvestment entity under PFRS 10. The exception to consolidation requires investment entitiesto account for subsidiaries at fair value through profit or loss (FVPL).

§ Philippine Interpretation IFRIC 21, Levies - IFRIC 21 clarifies that an entity recognizes aliability for a levy when the activity that triggers payment, as identified by the relevantlegislation, occurs. For a levy that is triggered upon reaching a minimum threshold, theinterpretation clarifies that no liability should be anticipated before the specified minimumthreshold is reached. IFRIC 21 is effective for annual periods beginning on or afterJanuary 1, 2014.

§ PAS 39, Financial Instruments: Recognition and Measurement – Novation of Derivatives andContinuation of Hedge Accounting (Amendments) - These amendments provide relief fromdiscontinuing hedge accounting when novation of a derivative designated as a hedginginstrument meets certain criteria. These amendments are effective for annual periodsbeginning on or after January 1, 2014.

§ PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and FinancialLiabilities (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 ascentral clearing house systems) which apply gross settlement mechanisms that are notsimultaneous. The amendments affect presentation only and have no impact on the Group’sfinancial position or performance.

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 theclassification and measurement of financial assets and liabilities as defined in PAS 39,Financial Instruments: Recognition and Measurement. Work on impairment of financialinstruments and hedge accounting is still ongoing, with a view to replacing PAS 39 in itsentirety. 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 subsequentlymeasured at amortized cost if it is held within a business model that has the objective to holdthe assets to collect the contractual cash flows and its contractual terms give rise, on specifieddates, to cash flows that are solely payments of principal and interest on the principaloutstanding. All other debt instruments are subsequently measured at fair value through profitor loss. All equity financial assets are measured at fair value either through OCI or profit orloss. Equity financial assets held for trading must be measured at fair value through profit orloss. For FVO liabilities, the amount of change in the fair value of a liability that isattributable to changes in credit risk must be presented in OCI. The remainder of the changein fair value is presented in profit or loss, unless presentation of the fair value change inrespect of the liability’s credit risk in OCI would create or enlarge an accounting mismatch inprofit or loss. All other PAS 39 classification and measurement requirements for financialliabilities have been carried forward into PFRS 9, including the embedded derivativeseparation rules and the criteria for using the FVO. The adoption of the first phase of PFRS 9

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will have an effect on the classification and measurement of the Group’s financial assets, butwill 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 thatundertake the construction of real estate directly or through subcontractors. The interpretationrequires that revenue on construction of real estate be recognized only upon completion,except when such contract qualifies as construction contract to be accounted for underPAS 11, Construction Contracts, or involves rendering of services in which case revenue isrecognized based on stage of completion. Contracts involving provision of services with theconstruction materials and where the risks and reward of ownership are transferred to thebuyer on a continuous basis will also be accounted for based on stage of completion. ThePhilippine SEC and the FRSC have deferred the effectivity of this interpretation until the finalRevenue standard is issued by the International Accounting Standards Board (IASB) and anevaluation of the requirements of the final Revenue standard against the practices of thePhilippine 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.

Annual Improvements to PFRSs (2010-2012 cycle). The Annual Improvements to PFRSs (2010-2012 cycle) contain non-urgent but necessary amendments to the following standards:

§ PFRS 2, Share-based Payment – Definition of Vesting Condition - The amendment revised thedefinitions of vesting condition and market condition and added the definitions ofperformance condition and service condition to clarify various issues. This amendment shallbe prospectively applied to share-based payment transactions for which the grant date is on orafter July 1, 2014.

§ PFRS 3, Business Combinations – Accounting for Contingent Consideration in a BusinessCombination - The amendment clarifies that a contingent consideration that meets thedefinition of a financial instrument should be classified as a financial liability or as equity inaccordance with PAS 32. Contingent consideration that is not classified as equity issubsequently measured at fair value through profit or loss whether or not it falls within thescope of PAS 39, Financial Instruments: Recognition and Measurement. The amendmentshall be prospectively applied to business combinations for which the acquisition date is on orafter July 1, 2014.

§ PFRS 8, Operating Segments – Aggregation of Operating Segments and Reconciliation of theTotal of the Reportable Segments’ Assets to the Entity’s Assets - The amendments requireentities to disclose the judgment made by management in aggregating two or more operatingsegments. This disclosure should include a brief description of the operating segments thathave been aggregated in this way and the economic indicators that have been assessed indetermining that the aggregated operating segments share similar economic characteristics.The amendments also clarify that an entity shall provide reconciliations of the total of thereportable segments’ assets to the entity’s assets if such amounts are regularly provided to thechief operating decision maker. These amendments are effective for annual periods beginningon or after July 1, 2014 and are applied retrospectively.

§ PFRS 13, Fair Value Measurement – Short-term Receivables and Payables - The amendmentclarifies that short-term receivables and payables with no stated interest rates can be held atinvoice amounts when the effect of discounting is immaterial.

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§ PAS 16, Property, Plant and Equipment – Revaluation Method – Proportionate Restatementof Accumulated Depreciation - The amendment clarifies that, upon revaluation of an item ofproperty, plant and equipment, the carrying amount of the asset shall be adjusted to therevalued amount, and the asset shall be treated in one of the following ways:– The gross carrying amount is adjusted in a manner that is consistent with the revaluation

of the carrying amount of the asset. The accumulated depreciation at the date ofrevaluation is adjusted to equal the difference between the gross carrying amount and thecarrying amount of the asset after taking into account any accumulated impairment losses.

– The accumulated depreciation is eliminated against the gross carrying amount of the asset.

The amendment is effective for annual periods beginning on or after July 1, 2014. Theamendment shall apply to all revaluations recognized in annual periods beginning on or afterthe date of initial application of this amendment and in the immediately preceding annualperiod.

§ PAS 24, Related Party Disclosures – Key Management Personnel - The amendments clarifythat an entity is a related party of the reporting entity if the said entity, or any member of agroup for which it is a part of, provides key management personnel services to the reportingentity or to the parent company of the reporting entity. The amendments also clarify that areporting entity that obtains management personnel services from another entity (also referredto as management entity) is not required to disclose the compensation paid or payable by themanagement entity to its employees or directors. The reporting entity is required to disclosethe amounts incurred for the key management personnel services provided by a separatemanagement entity. The amendments are effective for annual periods beginning on or afterJuly 1, 2014 and are applied retrospectively.

§ PAS 38, Intangible Assets – Revaluation Method – Proportionate Restatement of AccumulatedAmortization - The amendments clarify that, upon revaluation of an intangible asset, thecarrying amount of the asset shall be adjusted to the revalued amount, and the asset shall betreated in one of the following ways:– The gross carrying amount is adjusted in a manner that is consistent with the revaluation

of the carrying amount of the asset. The accumulated amortization at the date ofrevaluation is adjusted to equal the difference between the gross carrying amount and thecarrying amount of the asset after taking into account any accumulated impairment losses.

– The accumulated amortization is eliminated against the gross carrying amount of the asset.

The amendments also clarify that the amount of the adjustment of the accumulatedamortization should form part of the increase or decrease in the carrying amount accounted forin accordance with the standard.

The amendments are effective for annual periods beginning on or after July 1, 2014. Theamendments shall apply to all revaluations recognized in annual periods beginning on or afterthe date of initial application of this amendment and in the immediately preceding annualperiod.

Annual Improvements to PFRSs (2011-2013 cycle). The Annual Improvements to PFRSs (2011-2013 cycle) contain non-urgent but necessary amendments to the following standards:

§ PFRS 1, First-time Adoption of Philippine Financial Reporting Standards – Meaning of‘Effective PFRSs’ - The amendment clarifies that an entity may choose to apply either acurrent standard or a new standard that is not yet mandatory, but that permits early

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application, provided either standard is applied consistently throughout the periods presentedin the entity’s first PFRS financial statements.

§ PFRS 3, Business Combinations – Scope Exceptions for Joint Arrangements - The amendmentclarifies that PFRS 3 does not apply to the accounting for the formation of a joint arrangementin the financial statements of the joint arrangement itself. The amendment is effective forannual periods beginning on or after July 1, 2014 and is applied prospectively.

§ PFRS 13, Fair Value Measurement – Portfolio Exception - The amendment clarifies that theportfolio exception in PFRS 13 can be applied to financial assets, financial liabilities and othercontracts. The amendment is effective for annual periods beginning on or after July 1, 2014and is applied prospectively.

§ PAS 40, Investment Property - The amendment clarifies the interrelationship between PFRS 3and PAS 40 when classifying property as investment property or owner-occupied property.The amendment stated that judgment is needed when determining whether the acquisition ofinvestment property is the acquisition of an asset or a group of assets or a businesscombination within the scope of PFRS 3. This judgment is based on the guidance of PFRS 3.This amendment is effective for annual periods beginning on or after July 1, 2014 and isapplied prospectively.

The Group has not early adopted the above standards. The Group continues to assess the impactof the above new, amended and improved accounting standards and interpretations effectivesubsequent to March 31, 2014 on its consolidated financial statements in the period of initialapplication. Additional disclosures required by these amendments will be included in theconsolidated financial statements when these amendments are adopted.

Summary of Significant Accounting Policies

Business Combination Involving Entities under Common ControlWhere there are business combinations in which all the combining entities within the Group areultimately controlled by the same ultimate parent before and after the business combination andthat the control is not transitory (“business combinations under common control”), the Group mayaccount such business combinations under the acquisition method of accounting or pooling ofinterests method, if the transaction was deemed to have substance from the perspective of thereporting entity. In determining whether the business combination has substance, factors such asthe underlying purpose of the business combination and the involvement of parties other than thecombining entities such as the noncontrolling interest, shall be considered.

In cases where the business combination has no substance, the Group shall account for thetransaction similar to a pooling of interests. The assets and liabilities of the acquired entities andthat of the Group are reflected at their carrying values. The difference in the amount recognizedand the fair value of the consideration given, is accounted for as an equity transaction, i.e., aseither a contribution or distribution of equity. Further, when a subsidiary is disposed in a commoncontrol transaction, the difference in the amount recognized and the fair value of the considerationreceived, is also accounted for as an equity transaction. The Group records the difference asexcess of consideration over carrying amount of disposed subsidiary and presents as separatecomponent of equity in the combined consolidated statement of financial position.

Comparatives shall be restated to include balances and transactions of the entities had beenacquired at the beginning of the earliest period presented as if the companies had always beencombined.

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Business Combination and GoodwillBusiness combinations are accounted for using the acquisition method. The cost of an acquisitionis measured as the aggregate of the consideration transferred measured at acquisition date fairvalue and the amount of any non-controlling interests in the acquiree. For each businesscombination, the Group elects whether to measure the non-controlling interests in the acquiree atfair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-relatedcosts are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed forappropriate classification and designation in accordance with the contractual terms, economiccircumstances and pertinent conditions as at the acquisition date. This includes the separation ofembedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognized in profit orloss. It is then considered in the determination of goodwill. Any contingent consideration to betransferred by the acquirer will be recognized at fair value at the acquisition date. Contingentconsideration classified as an asset or liability that is a financial instrument and within the scope ofPAS 39 is measured at fair value with changes in fair value recognized either in either profit orloss or as a change to OCI. If the contingent consideration is not within the scope of PAS 39, it ismeasured in accordance with the appropriate PFRS. Contingent consideration that is classified asequity is not re-measured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the considerationtransferred and the amount recognized for non-controlling interests, and any previous interestheld, over the net identifiable assets acquired and liabilities assumed. If the fair value of the netassets acquired is in excess of the aggregate consideration transferred, the Group re-assesseswhether it has correctly identified all of the assets acquired and all of the liabilities assumed andreviews the procedures used to measure the amounts to be recognized at the acquisition date. Ifthe re-assessment still results in an excess of the fair value of net assets acquired over theaggregate consideration transferred, then the gain is recognized in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.For the purpose of impairment testing, goodwill acquired in a business combination is, from theacquisition date, allocated to each of the Group’s cash-generating units that are expected to benefitfrom the combination, irrespective of whether other assets or liabilities of the acquiree areassigned to those units.

Where goodwill has been allocated to a cash-generating unit and part of the operation within thatunit is disposed of, the goodwill associated with the disposed operation is included in the carryingamount of the operation when determining the gain or loss on disposal. Goodwill disposed inthese circumstances is measured based on the relative values of the disposed operation and theportion of the cash-generating unit retained.

Current versus Noncurrent ClassificationThe Group presents assets and liabilities in the consolidated statement of financial position basedon current/non-current classification. An asset is current when:§ It is expected to be realized or intended to be sold or consumed in the normal operating cycle§ It is held primarily for the purpose of trading§ It is expected to be realized within twelve months after the reporting period, or§ It is cash or cash equivalent unless restricted from being exchanged or used to settle a liability

for at least twelve months after the reporting period

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All other assets are classified as noncurrent. A liability is current when:§ It is expected to be settled in the normal operating cycle§ It is held primarily for the purpose of trading§ It is due to be settled within twelve months after the reporting period, or§ There is no unconditional right to defer the settlement of the liability for at least twelve

months after the reporting period

The Group classifies all other liabilities as noncurrent.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities, respectively.

Fair Value MeasurementThe Group measures financial instruments such as AFS financial assets at fair value at eachreporting date. Also, fair values of financial instruments measured at amortized cost andinvestment properties are disclosed in the notes to the consolidated financial statements.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:§ In the principal market for the asset or liability, or§ In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in theireconomic best interest. A fair value measurement of a non-financial asset takes into account amarket participant's ability to generate economic benefits by using the asset in its highest and bestuse or by selling it to another market participant that would use the asset in its highest and bestuse.

The Group uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financialstatements are categorized within the fair value hierarchy, described as follows, based on thelowest level input that is significant to the fair value measurement as a whole:

§ Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities§ Level 2 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is directly or indirectly observable§ Level 3 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is unobservable

For assets and liabilities that are recognized in the consolidated financial statements on a recurringbasis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair valuemeasurement as a whole) at the end of each reporting period.

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Management determines the policies and procedures for both recurring fair value measurementand non-recurring measurement.

External valuers are involved for valuation of significant assets, such as investment property.Involvement of external valuers is decided upon annually. Selection criteria include marketknowledge, reputation, independence and whether professional standards are maintained.Management decides, after discussions with the external valuers, which valuation techniques andinputs to use for each case.

At each reporting date, the management analyzes the movements in the values of assets andliabilities which are required to be re-measured or re-assessed as per accounting policies. For thisanalysis, the management verifies the major inputs applied in the latest valuation by agreeing theinformation in the valuation computation to contracts and other relevant documents.

Management, in conjunction with the Group’s external valuers, also compares each change in thefair value of each asset and liability with relevant external sources to determine whether thechange is reasonable.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilitieson the basis of the nature, characteristics and risks of the asset or liability and the level of the fairvalue hierarchy as explained above.

Cash and Cash EquivalentsCash includes cash on hand and in banks. Cash equivalents are short-term, highly liquidinvestments that are readily convertible to known amounts of cash with original maturities of up tothree months or less from date of acquisition and are subject to an insignificant risk of change invalue.

Financial Instruments - Initial Recognition and Subsequent Measurement

Date of Recognition. The Group recognizes a financial asset or a financial liability in theconsolidated statement of financial position when it becomes a party to the contractual provisionsof the instrument. All regular way purchases and sales of financial assets are recognized on thetrade date, which is the date that the Group commits to purchase the asset. Regular way purchasesor sales are purchases or sales of financial assets that require delivery of assets within the periodgenerally established by regulation or convention in the market place.

Initial Recognition of Financial Instruments. Financial instruments are recognized initially at fairvalue. Transaction costs are included in the initial measurement of all financial assets andliabilities, except for financial instruments measured at fair value through profit or loss (FVPL).

Day 1 Difference. Where the transaction price in a non-active market is different from the fairvalue from other observable current market transactions of the same instrument or based on avaluation technique whose variables include only data from an observable market, the Grouprecognizes the difference between the transaction price and fair value (a Day 1 difference) in theprofit or loss unless it qualifies for recognition as some other type of asset. In cases where use ismade of data which is not observable, the difference between the transaction price and modelvalue is only recognized in the profit or loss when the inputs become observable or when theinstrument is derecognized. For each transaction, the Group determines the appropriate method ofrecognizing the Day 1 difference amount.

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Classification of Financial Instruments. A financial instrument is classified as liability if itprovided for a contractual obligation to: (a) deliver cash or another financial asset to anotherentity; or (b) exchange financial assets or financial liabilities with another entity under conditionsthat are potentially unfavorable to the Group; or (c) satisfy the obligation other than by theexchange of a fixed amount of cash or another financial asset for a fixed number of the Group’sown shares. If the Group does not have the unconditional right to avoid delivering cash or anotherfinancial asset to settle its contractual obligation, the obligation meets the definition of a financialliability.

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 Groupdetermines the classification at initial recognition and re-evaluates this designation at everyreporting date, where appropriate. The Group has no financial instruments at FVPL and HTMinvestments.

a. Loans and Receivables

Loans and receivables are nonderivative financial assets with fixed or determinable paymentsthat are not quoted in an active market.

After initial measurement, loans and receivables are measured at amortized cost using theeffective interest rate method less allowance for impairment. Amortized cost is calculated bytaking into account any discount or premium on acquisition and fees and costs that are anintegral part of the effective interest rate. The amortization is included in the interest incomein profit or loss. Losses arising from impairment are recognized as provision for impairmentloss on receivables in profit or loss.

Loans and receivables are included in current assets when the Group expects to realize orcollect the assets within 12 months from the financial reporting date. Otherwise, these areclassified 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 toassociates and joint ventures” account) and deposits (included under the “Prepaid expensesand other current assets” and “Goodwill, intangible and other noncurrent assets” accounts) areclassified in this category (see Note 31).

b. AFS Financial Assets

AFS financial assets are those nonderivative financial assets that are not classified as at FVPL,loans and receivables or HTM investments. They are purchased and held indefinitely, andmaybe sold in response to liquidity requirements or changes in market conditions.

After initial measurement, AFS financial assets are subsequently measured at fair value withunrealized gains or losses being recognized under “Unrealized mark-to-market gain (loss) onavailable-for-sale financial assets” account in other comprehensive income until these arederecognized. When the investment is disposed of, the cumulative gain or loss previouslyrecorded under “Unrealized mark-to-market gain on available-for-sale financial assets”account under equity is recycled to profit or loss. Interest earned on the investments isreported as interest income using the effective interest rate method. Dividends earned oninvestments are recognized in profit or loss when the right to receive payment has been

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established. AFS financial assets are classified as noncurrent assets unless the intention is todispose such assets within 12 months from financial reporting date.

The fair value of AFS financial assets consisting of any investments that are actively traded inorganized financial markets is determined by reference to quoted market bid prices at the closeof business on the financial reporting date.

The Group’s investments in club and ordinary shares are classified in this category (see Note31).

Unlisted investments in shares of stock for which no quoted market prices and no otherreliable sources of their fair values are available, are carried at cost.

c. Other Financial Liabilities

Other financial liabilities at amortized cost pertain to issued financial instruments or theircomponents that are not classified or designated at FVPL and contain contractual obligationsto deliver cash or another financial asset to the holder as to settle the obligation other than bythe exchange of a fixed amount of cash or another financial asset for a fixed number of ownequity shares. The financial instruments are classified as current if they are expected to besettled or disposed of within 12 months from financial reporting date. Otherwise, these areclassified as noncurrent.

These include liabilities arising from operations such as accounts payable and other currentliabilities (excluding unearned tuition and school fees, government and other statutoryliabilities), short-term loans, long-term debt and nontrade payable (see Note 31).

Impairment of Financial AssetsThe Group assesses at each reporting date whether a financial asset or group of financial assets isimpaired. A financial asset or a group of financial assets is deemed to be impaired if there isobjective evidence of impairment as a result of one or more events that has occurred after theinitial recognition of the asset (an incurred loss event) and that loss event has an impact on theestimated future cash flows of the financial asset or the group of financial assets that can bereliably estimated. Objective evidence of impairment may include indications that the debtors or agroup of debtors is experiencing significant financial difficulty, default or delinquency in interestor principal payments, the probability that they will enter bankruptcy or other financialreorganization and where observable data indicate that there is a measurable decrease in theestimated future cash flows, such as changes in arrears or economic conditions that correlate withdefaults.

Financial Assets Carried at Amortized Cost. The Group first assesses whether an objectiveevidence of impairment exists individually for financial assets that are individually significant, orcollectively for financial assets that are not individually significant. If it is determined that noobjective evidence of impairment exists for an individually assessed financial asset, whethersignificant or not, the asset is included in a group of financial assets with similar credit riskcharacteristics and that group of financial assets is collectively assessed for impairment. Assetsthat are individually assessed for impairment and for which an impairment loss is or continues tobe recognized are not included in a collective assessment of impairment.

If there is an objective evidence that an impairment loss has been incurred, the amount of the lossis measured as the difference between the asset’s carrying amount and the present value of theestimated future cash flows (excluding future credit losses that have not been incurred). The

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carrying amount of the asset is reduced through use of an allowance account and the amount ofloss is charged to profit or loss. Interest income continues to be recognized based on the originaleffective interest rate of the asset. Loans and receivables, together with the associated allowanceaccounts, are written off when there is no realistic prospect of future recovery and all collateral, ifany, have been realized. If, in a subsequent year, the amount of the estimated impairment lossdecreases because of an event occurring after the impairment was recognized, the previouslyrecognized impairment loss is reduced by adjusting the allowance account. If a future write-off islater 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 originaleffective interest rate. If a loan has a variable interest rate, the discount rate for measuring anyimpairment 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 financialasset reflects the cash flows that may result from foreclosure less costs for obtaining and sellingthe collateral, whether or not foreclosure is probable.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basisof 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 areestimated on the basis of historical loss for assets with credit risk characteristics similar to those inthe group. Historical loss is adjusted on the basis of current observable data to reflect the effectsof current conditions that did not affect the period on which the historical loss is based and toremove the effects of conditions in the historical period that do not exist currently. Estimates ofchanges in future cash flows reflect, and are directionally consistent with changes in relatedobservable 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 theGroup and their magnitude). The methodology and assumptions used for estimating future cashflows are reviewed regularly by the Group to reduce any difference between loss estimates andactual 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 fairvalue of the investments below its cost. “Significant” is to be evaluated against the original costof the investment and “prolonged” against the period in which the fair value has been below itsoriginal cost. When there is evidence of impairment, the cumulative loss which is measured as thedifference between the acquisition cost and the current fair value, less any impairment loss on thatfinancial asset previously recognized in other comprehensive income under “Unrealized mark-to-market gain on available-for-sale financial assets” account, is removed from equity and recognizedin 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 beenincurred in an unquoted equity instrument that is not carried at fair value because its fair valuecannot be reliably measured, or on a derivative asset that is linked to and must be settled bydelivery of such an unquoted equity instrument, the amount of loss is measured as the differencebetween the asset’s carrying amount and the present value of estimated future cash flowsdiscounted 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 agroup 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 obligationto 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 neithertransferred nor retained substantially all the risks and rewards of the asset, but has transferredcontrol of the asset.

When the Group has transferred its right to receive cash flows from an asset and has neithertransferred nor retained substantially all the risks and rewards of the asset nor transferred controlof the asset, the asset is recognized to the extent of the Group’s continuing involvement in theasset.

Financial Liabilities. A financial liability is derecognized when the obligation under the liabilityis discharged or cancelled or has expired.

When an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as a derecognition of the original liability and the recognition of a newliability, and the difference in the respective carrying amounts is recognized in profit or loss.

Offsetting of Financial InstrumentsFinancial assets and liabilities are offset and the net amount is reported in the consolidatedstatement of financial position if, and only if, there is a currently enforceable legal right to offsetthe recognized amounts and there is an intention to settle on a net basis, or to realize the asset andsettle 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 statementof financial position.

InventoriesInventories are valued at the lower of cost and net realizable value. Cost is determined using theweighted average method. Net realizable value of educational materials is the selling price in theordinary course of business, less estimated costs necessary to make the sale. Net realizable valueof promotional and school materials and supplies is the current replacement cost.

Prepaid ExpensesPrepaid expenses are carried at cost and are amortized on a straight-line basis over the period ofexpected usage, which is equal to or less than 12 months or within the normal operating cycle.

Input Value-added Taxes (VAT)Input VAT represents VAT imposed on the Group by its suppliers for the acquisition of goods andservices required under Philippine taxation laws and regulations. The portion of excess inputVAT over output VAT is presented as part of “Prepaid taxes” under the “Prepaid expenses and

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other current assets” account in the consolidated statement of financial position. Input VAT isstated at its estimated net realizable value (NRV).

Creditable Withholding Taxes (CWT)CWT represents the amount of tax withheld by counterparties from the Group. These arerecognized upon collection and are utilized as tax credits against income tax due as allowed by thePhilippine 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 financialposition. CWT is stated at its estimated NRV.

Property and EquipmentProperty 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 costincludes the cost of replacing part of such property and equipment when that cost is incurred andthe 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 economicbenefits are expected from its use or disposal. Any gain or loss arising on derecognition of theasset (calculated as the difference between the net disposal proceeds and the carrying amount ofthe 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 followingestimated useful lives:

Buildings 20–25 yearsOffice and school equipment 5 yearsOffice furniture and fixtures 5 yearsLeasehold improvements 5 years or terms of the lease agreement,

whichever is shorterTransportation equipment 5 years or terms of the lease agreement,

whichever is shorterComputer equipment and peripherals 3 yearsLibrary holdings 3–5 years

The estimated useful lives and the depreciation and amortization method are reviewed periodicallyto ensure that the periods and depreciation and amortization method are consistent with theexpected 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 furtherdepreciation and amortization is charged to current operations.

Construction in progress represents structures under construction and is stated at cost less anyimpairment in value. This includes cost of construction and other direct costs, including anyinterest on borrowed funds during the construction period. Construction in progress is notdepreciated until the relevant assets are completed and become available for operational use.

Investment PropertiesInvestment properties include land and buildings held by the Group for capital appreciation andrental purposes. Buildings are carried at cost less accumulated depreciation and any impairment invalue, while land is carried at cost less any impairment in value. The carrying amount includes thecost of constructing a significant portion of an existing investment property if the recognitioncriteria are met; and excludes the costs of day-to-day servicing of an investment property.

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Depreciation of buildings is computed on a straight-line basis over 20–25 years. The asset’suseful life and method of depreciation are reviewed and adjusted, if appropriate, at each financialyear-end.

Investment properties are derecognized when either they have been disposed of or when theinvestment property is permanently withdrawn from use and no future economic benefit isexpected from its disposal. Any gains or losses on the retirement or disposal of an investmentproperty are recognized in profit or loss in the year of retirement or disposal.

Transfers are made to investment property when, and only when, there is a change in use,evidenced by ending of owner-occupation or commencement of an operating lease to anotherparty. Transfers are made from investment property when there is a change in use, evidenced bycommencement 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 ofproperty for subsequent accounting is its carrying value at the date of change in use. If theproperty 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 andequipment up to the date of change in use.

Investments in Associates and Joint VenturesAn associate is an entity over which the Group has significant influence. Significant influence isthe power to participate in the financial and operating policy decisions of the investee, but is notcontrol or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of thearrangement have rights to the net assets of the joint venture. Joint control is the contractuallyagreed sharing of control of an arrangement, which exists only when decisions about the relevantactivities require unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to thosenecessary to determine control over subsidiaries. The Group’s investments in its associate andjoint venture are accounted for using the equity method. Under the equity method, the investmentin an associate or a joint venture is initially recognized at cost. The carrying amount of theinvestment is adjusted to recognize changes in the Group’s share of net assets of the associate orjoint venture since the acquisition date. Goodwill relating to the associate or joint venture isincluded in the carrying amount of the investment and is neither amortized nor individually testedfor impairment.

The consolidated statement of comprehensive income reflects the Group’s share of the results ofoperations of the associate or joint venture. Any change in OCI of those investees is presented aspart of the Group’s OCI. In addition, when there has been a change recognized directly in theequity of the associate or joint venture, the Group recognizes its share of any changes, whenapplicable, in the consolidated statement of changes in equity. Unrealized gains and lossesresulting from transactions between the Group and the associate or joint venture are eliminated tothe extent of the interest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown onthe face of the consolidated statement of comprehensive income outside operating profit andrepresents profit or loss after tax and non-controlling interests in the subsidiaries of the associateor joint venture.

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The financial statements of the associate or joint venture are prepared for the same reportingperiod as the Group. When necessary, adjustments are made to bring the accounting policies inline with those of the Group.

The financial reporting dates of the associates, joint ventures and the Parent Company areidentical, except for the accounts of STI College Marikina, Inc. (STI-Marikina) and SynergiaHuman Capital Solutions, Inc. (Synergia) whose financial reporting date ends in December, andthe associates’ and joint ventures’ accounting policies conform to those used by the Group for liketransactions and events in similar circumstances. Adjustments are made for the Group’s share inthe effects of significant transactions or events that occur between the financial reporting date ofthe above-mentioned associates and joint ventures and the financial reporting date of the Group’sconsolidated financial statements.

After application of the equity method, the Group determines whether it is necessary to recognizean impairment loss on its investment in its associate or joint venture. At each reporting date, theGroup determines whether there is objective evidence that the investment in the associate or jointventure is impaired. If there is such evidence, the Group calculates the amount of impairment asthe difference between the recoverable amount of the associate or joint venture and its carryingvalue, then recognizes the loss as ‘Share of profit of an associate and a joint venture’ in theconsolidated statement of comprehensive income.

Upon loss of significant influence over the associate or joint control over the joint venture, theGroup measures and recognizes any retained investment at its fair value. Any difference betweenthe carrying amount of the associate or joint venture upon loss of significant influence or jointcontrol and the fair value of the retained investment and proceeds from disposal is recognized inprofit or loss.

The following are the associates of STI ESG (which are all incorporated in the Philippines) andSTI ESG’s effective interest in the following entities as at March 31, 2014 and 2013:

Effective Percentage of Ownership2014 2013

Associate Principal Activities Direct Indirect Direct IndirectAccent/STI Banawe, Inc. (STI-Accent)

(see Note 11)(a)Hospital

49 – 49 –STI College Alabang, Inc. (STI-Alabang) Educational Institution 40 – 40 –Synergia(a) Management Consulting

Services 30 – 30 –STI-Marikina Educational Institution 24 – 24 –STI Investments Holding Company 20 – 20 –De Los Santos General Hospital, Inc.

(De Los Santos General Hospital) (b)Hospital

5 5 20 13Global Resource for Outsourced Workers,

Inc. (GROW)Recruitment Agency

17 – 17 –De Los Santos - STI Megaclinic, Inc.

(De Los Santos - STI Megaclinic) (b)(c)Health and Wellness

Clinic – 9 – 30(a) Dormant entities(b) Through De Los Santos - STI College; subsequently diluted and ceased to be an associate in 2014 (see Note 13)(c) Through De Los Santos General Hospital

The Group has interests in Philippine Healthcare Educators, Inc. (PHEI) and STI-PHNSOutsourcing Corporation (STI-PHNS), both jointly-controlled entities.

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Intangible AssetsIntangible assets acquired separately are measured on initial recognition at cost. Following initialrecognition, intangible assets are carried at cost less any accumulated amortization in the case ofintangible assets with finite lives, and any accumulated impairment losses.

The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assetswith finite lives are amortized over the useful economic life and assessed for impairmentwhenever there is an indication that the intangible asset may be impaired. The amortization periodand the amortization method for an intangible asset with a finite useful life are reviewed at least ateach financial year-end. Changes in the expected useful life or the expected pattern ofconsumption of future economic benefits embodied in the asset is accounted for by changing theamortization 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 consolidatedstatement of comprehensive income in the expense category consistent with the function of theintangible asset.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairmentannually, either individually or at the cash generating unit level. The assessment of indefinite lifeis 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 ofits contractual term or economic life. Amortization is on a straight-line basis over the estimateduseful lives of 3 years.

Gains or losses arising from derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds and the carrying amount of the asset and are recognized inprofit or loss when the asset is derecognized.

Impairment of Nonfinancial AssetsThe carrying values of investments in associates and joint ventures, property and equipment,investment properties, land and intangible assets are reviewed for impairment when events orchanges in circumstances indicate that the carrying value may not be recoverable. When anindicator of impairment exists or when an annual impairment testing for an asset is required, theGroup makes a formal estimate of recoverable amount. Recoverable amount is the higher of anasset’s (or cash-generating unit’s) fair value less costs to sell and its value in use and is determinedfor an individual asset, unless the asset does not generate cash inflows that are largely independentof those from other assets or groups of assets, in which case the recoverable amount is assessed aspart of the cash generating unit to which it belongs. Where the carrying amount of an asset (orcash generating unit) exceeds its recoverable amount, the asset (or cash generating unit) isconsidered impaired and is written down to its recoverable amount. In assessing value in use, theestimated future cash flows are discounted to their present value using a pre-tax discount rate thatreflects 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 valuationmodel is used. These calculations are corroborated by valuation multiples, quoted share prices forpublicly traded securities or other available fair value indicators.

Impairment losses are recognized in the consolidated statement of comprehensive income in thoseexpense categories consistent with the function of the impaired asset, except for assets previouslyrevalued where the revaluation was taken to equity. In this case, the impairment is alsorecognized in equity up to the amount of any previous revaluation.

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For nonfinancial assets, excluding goodwill, an assessment is made at each reporting date as towhether there is any indication that previously recognized impairment losses may no longer existor may have decreased. If such indication exists, the recoverable amount is estimated. Apreviously recognized impairment loss is reversed only if there has been a change in the estimatesused 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. Thatincreased amount cannot exceed the carrying amount that would have been determined, net ofdepreciation 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, inwhich case the reversal is treated as a revaluation increase. After such a reversal, the depreciationand amortization expense is adjusted in future years to allocate the asset’s revised carryingamount, 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 changesin circumstances indicate that the carrying value may be impaired. Impairment is determined forgoodwill by assessing the recoverable amount of the cash-generating units, to which goodwillrelates. Where the recoverable amount of the cash-generating unit (or group of cash-generatingunits) is less than the carrying amount of the cash-generating unit (or group of cash generatingunits) to which the goodwill has been allocated, an impairment loss is recognized in theconsolidated statement of comprehensive income. Impairment losses relating to goodwill cannotbe reversed for subsequent increases in its recoverable amount in future periods. The Groupperforms its annual impairment test of goodwill as at March 31 of each year.

Borrowing CostsBorrowing costs are capitalized if they are directly attributable to the acquisition, construction orproduction of a qualifying asset. Qualifying assets are assets that necessarily take a substantialperiod of time to get ready for its intended use or sale. To the extent that funds are borrowedspecifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligiblefor capitalization on that asset shall be determined as the actual borrowing costs incurred on thatborrowing during the year less any investment income on the temporary investment of thoseborrowings. To the extent that funds are borrowed generally and used for the purpose of obtaininga qualifying asset, the amount of borrowing costs eligible for capitalization shall be determined byapplying a capitalizable rate to the expenditures on that asset. The capitalization rate shall be theweighted average of the borrowing costs applicable to our borrowings that are outstanding duringthe 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 ofborrowing costs incurred during that year.

Capitalization of borrowing costs commences when the activities necessary to prepare the asset forintended use are in progress and expenditures and borrowing costs are being incurred. Borrowingcosts are capitalized until the asset is available for their intended use. If the resulting carryingamount of the asset exceeds its recoverable amount, an impairment loss is recognized. Borrowingcosts 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 theseprojects, 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.

ProvisionsProvisions are recognized when the Group has a present obligation (legal or constructive) as aresult of a past event, it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation and a reliable estimate can be made of the amount of the

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obligation. When the Group expects a provision to be reimbursed, such as under an insurancecontract, the reimbursement is recognized as a separate asset but only when the reimbursement isvirtually certain. The expense relating to any provision is presented in profit or loss, net of anyreimbursement. If the effect of the time value of money is material, provisions are determined bydiscounting the expected future cash flow at a pre-tax rate that reflects current market assessmentsof the time value of money and, where appropriate, the risks specific to the liability. Whendiscounting is used, the increase in the provision due to the passage of time is recognized asinterest expense.

Capital Stock and Additional Paid-in CapitalCommon stock is measured at par value for all shares issued. Incremental costs incurred directlyattributable to the issuance of new shares are shown in equity as a deduction from proceeds, net oftax. Proceeds and/or fair value of consideration received in excess of par value are recognized asadditional paid-in capital.

Cost of Shares Held by a SubsidiaryCost of shares held by a subsidiary is accounted for similar to treasury shares which are recordedat cost. Own equity instruments which are reacquired are deducted from equity. No gain or lossis recognized in profit or loss on the purchase, sale, issuance or the cancellation of the Group’sown equity instruments.

Retained Earnings and Dividend on Common Stock of the Parent CompanyThe amount included in retained earnings includes profit attributable to the Parent Company’sequity holders and reduced by dividends on capital stocks. Dividends on capital stocks arerecognized as liability and deducted from equity when approved by the shareholders of the ParentCompany and its subsidiaries. Dividends for the year that are approved after the financialreporting date are dealt with as an event after the financial reporting period.

Earnings Per Share (EPS) Attributable to the Equity Holders of the Parent CompanyEPS is computed by dividing income attributed to equity holders of the Parent Company for theyear by the weighted average number of shares issued and outstanding after giving retroactiveeffect 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 ParentCompany by the weighted average number of common shares outstanding during the year adjustedfor the effects of any dilutive convertible common shares.

Basic and diluted EPS for all periods presented are also adjusted for the effects of businesscombination accounted for using the pooling of interests method, thus, the Parent Company’sshares issued for the Share Swap were presumed to be issued at the beginning of the earliestperiod presented, i.e. April 1, 2012.

RevenueRevenue is recognized to the extent that it is probable that the economic benefits will flow to theGroup and the amount of the revenue can be measured reliably. The Group assesses whether it isacting as a principal or an agent in every revenue arrangements. It is acting as a principal when ithas the primary responsibility for providing the goods or services. The Group also acts as aprincipal 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, rebatesand value-added tax (VAT).

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The following specific recognition criteria must also be met before revenue is recognized:

Tuition and Other School Fees. Revenue from tuition and other school fees is recognized asincome over the corresponding school term to which they pertain. Fees received pertaining to theschool year commencing after the financial reporting date are recorded as unearned tuition andother school fees shown under “Accounts payable and other current liabilities” account in theconsolidated 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 theterms of the licensing agreements.

Management Fees. Revenue is recognized when services are rendered (included as part of “Otherrevenues” account in the consolidated statement of comprehensive income).

Sale of Educational Materials and Supplies. Revenue is recognized at the time of sale whensignificant risks and rewards of ownership have been transferred.

Interest Income. Interest income is recognized as the interest accrues considering the effectiveyield on the asset.

Rental Income. Rental income is recognized on a straight-line basis over the term of the leaseagreement.

Dividend Income. Revenue is recognized when the Group’s right to receive the payment isestablished.

Costs and ExpensesCosts and expenses are decreases in economic benefits during the accounting period in the form ofoutflows or decrease of assets or incurrence of liabilities that result in decreases in equity, otherthan those relating to distributions to equity participants. Costs and expenses are recognized inprofit or loss in the year these are incurred.

Pension CostsThe Group has the following pension plans (Plan) covering substantially all of its regular andpermanent employees:

Type of PlanSTI ESG Funded and unfunded, noncontributory defined

benefit plan

Indirect Subsidiaries (except De Los Santos -STI College and STI-QA)

Unfunded, noncontributory defined benefit plan

De Los Santos - STI College and STI-QA Funded, noncontributory defined contribution plan

Defined Benefit Plan. The net defined benefit liability or asset is the aggregate of the presentvalue of the defined benefit obligation at the end of the reporting period reduced by the fair valueof plan assets (if any), adjusted for any effect of limiting a net defined benefit asset to the assetceiling. The asset ceiling is the present value of any economic benefits available in the form ofrefunds from the plan or reductions in future contributions to the plan.

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The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit method.

Defined benefit costs comprise the following:- Service cost- Net interest on the net defined benefit liability or asset- Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognizedwhen plan amendment or curtailment occurs. These amounts are calculated periodically byindependent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined byapplying the discount rate based on government bonds to the net defined benefit liability or asset.Net interest on the net defined benefit liability or asset is recognized as expense or income inprofit or loss.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change inthe effect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in other comprehensive income in the period in which they arise. Remeasurementsare not reclassified to profit or loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Group, nor can they be paid directly tothe Group. Fair value of plan assets is based on market price information. When no market priceis available, the fair value of plan assets is estimated by discounting expected future cash flowsusing a discount rate that reflects both the risk associated with the plan assets and the maturity orexpected disposal date of those assets (or, if they have no maturity, the expected period until thesettlement of the related obligations).

The Group’s right to be reimbursed of some or all of the expenditure required to settle a definedbenefit obligation is recognized as a separate asset at fair value when and only whenreimbursement is virtually certain.

Defined Contribution Plan. De Los Santos - STI College and STI-QA are members of theCatholic Educational Association of the Philippines Retirement Plan (CEAP). CEAP is a funded,defined contribution plan covering De Los Santos - STI College’s and STI-QA’s qualifiedemployees. Pension costs consist of future service costs and past service costs. Future servicecosts are determined in accordance with PAS 19 while past service cost is computed based on acertain percentage of an employee’s average monthly salary for the 12-month period, immediatelypreceding the date of acceptance of the Group in the CEAP Plan, multiplied by the number ofmonths of the employees past service amortized over 10 years.

De Los Santos - STI College and STI-QA, however, are covered under RA 7641, The PhilippineRetirement Law, which provides for its qualified employees a defined benefit (DB) minimumguarantee. The DB minimum guarantee is equivalent to a certain percentage of the monthly salarypayable to an employee at normal retirement age with the required credited years of service basedon the provisions of RA 7641.

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Accordingly, De Los Santos - STI College and STI-QA accounts for its retirement obligationunder the higher of the DB obligation relating to the minimum guarantee and the obligation arisingfrom the defined contribution (DC) plan. For the DB minimum guarantee plan, the liability isdetermined based on the present value of the excess of the projected DB obligation over theprojected DC obligation at the end of the reporting period. The DB obligation is calculatedannually by a qualified independent actuary using the projected unit credit method. De Los Santos– STI College and STI-QA determines the net interest expense (income) on the net DB liability(asset) for the period by applying the discount rate used to measure the DB obligation at thebeginning of the annual period to the then net DB liability (asset), taking into account any changesin the net DB liability (asset) during the period as a result of contributions and benefit payments.Net interest expense and other expenses related to the DB plan are recognized in profit or loss.

The DC liability, on the other hand, is measured at the fair value of the DC assets upon which theDC benefits depend, with an adjustment for margin on asset returns, if any, where this is reflectedin the DC benefits. Remeasurements of the net DB liability, which comprise actuarial gains andlosses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any,excluding interest), are recognized immediately in other comprehensive income.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefitthat relates to past service or the gain or loss on curtailment is recognized immediately in profit orloss. De Los Santos - STI College and STI-QA recognizes gains or losses on the settlement of aDB plan when the settlement occurs.

LeasesThe determination whether an arrangement is, or contains, a lease is based on the substance of thearrangement at the inception date of whether the fulfillment of the arrangement is dependent onthe 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 andbenefits incidental to ownership of the leased item, are capitalized at the inception of the lease atthe fair value of the leased property or, if lower, at the present value of the minimum leasepayments. Lease payments are apportioned between the finance charges and reduction of the leaseliability 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 noreasonable certainty that the Group will obtain ownership by the end of the lease term, the asset isdepreciated over the shorter of the estimated useful life of the asset and the lease term.

Leases where the lessor retains substantially all the risks and benefits of ownership of the assetsare classified as operating leases. Operating lease payments are recognized as expense in profit orloss on a straight-line basis over the lease term.

Group as a Lessor. Leases where the Group retains substantially all the risks and benefits ofownership of the asset are classified as operating leases. Initial direct costs incurred in negotiatingan operating lease are added to the carrying amount of the leased asset and recognized over thelease term on the same basis as rental income.

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Taxes

Current Tax. Current tax assets and liabilities for the current and prior periods are measured at theamount expected to be recovered from or paid to the taxation authorities. The tax rates and taxlaws used to compute the amount are those that are enacted or substantially enacted at thefinancial reporting date.

Deferred Tax. Deferred tax is provided using the liability method on temporary differences at thefinancial reporting date between the tax bases of assets and liabilities and their carrying amountsfor financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporarydifferences, except:

§ when the deferred tax liability arises from the initial recognition of goodwill or of an asset orliability 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 andassociates and interests in joint ventures, when the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will not reversein the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences and carryforwardbenefit of net operating loss carryover (NOLCO), unused tax credits from excess minimumcorporate income tax (MCIT) over regular corporate income tax (RCIT), and to the extent that it isprobable that taxable income will be available against which the deductible temporary differencesand carryforward benefits NOLCO and MCIT can be utilized, except:

§ when the deferred tax asset relating to the deductible temporary difference arises from theinitial recognition of an asset or liability in a transaction that is not a business combinationand, at the time of the transaction, affects neither the accounting income nor taxable income orloss;

§ 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 extentthat it is probable that the temporary differences will reverse in the foreseeable future andtaxable 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 andreduced to the extent that it is no longer probable that sufficient future taxable profit will beavailable to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred taxassets are reassessed at each financial reporting date and are recognized to the extent that it hasbecome 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 toapply in the year when the asset is realized or the liability is settled, based on tax rates and taxlaws 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 othercomprehensive income or directly in equity.

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Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists tooffset current tax assets against current tax liabilities and the deferred taxes relate to the sametaxable entity and the same taxation authority.

Value-Added Tax (VAT). Revenue, expenses and assets are recognized net of the amount of VAT,except:

§ when the VAT incurred on a purchase of assets or services is not recoverable from thetaxation authority, in which case the VAT is recognized as part of the cost of acquisition of theasset 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 partof “Prepaid expenses and other current assets” or “Accounts payable and other current liabilities”accounts in the consolidated statement of financial position.

Operating SegmentFor management purposes, the Group is organized into business units based on the geographicallocation of the students and assets. Financial information about operating segments are presentedin Note 4.

ContingenciesContingent liabilities are not recognized in the consolidated financial statements. These aredisclosed in the notes to consolidated financial statements unless the possibility of an outflow ofresources embodying economic benefits is remote. A contingent asset is not recognized in theconsolidated financial statements but disclosed in the notes to consolidated financial statementswhen an inflow of economic benefits is probable.

Events after the Reporting PeriodPost year-end events that provide additional information about the Group’s financial position atthe financial reporting date (adjusting events) are reflected in the consolidated financialstatements. Post year-end events that are not adjusting events are disclosed in the notes toconsolidated financial statements when material.

3. Business Combinations

a. Acquisition of WNU

As discussed in Note 1, on October 1, 2013, STI Holdings acquired 99.45% of the issued andoutstanding common shares and 99.93% of the issued and outstanding preferred shares ofWNU for a total purchase price of P=400.0 million, including contingent consideration. Thesaid purchase price was reduced to P=397.0 million, including contingent consideration ofP=151.5 million as of March 31, 2014.

In November 2013, the BOD approved the reclassification of the preferred shares intocommon shares, awaiting the SEC approval for WNU’s increase in its authorized capitalstock. As at July 9, 2014, the SEC approval on WNU’s application is still pending.

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The acquisition of WNU is accounted for as a business combination using acquisition method.The Parent Company elected not to account for the noncontrolling interests in WNU as it isconsidered not material to the Group.

The fair values of the identifiable assets and liabilities of WNU at acquisition date and thecorresponding carrying amounts immediately before the acquisition were as follows:

Fair ValueRecognized on

AcquisitionCash and cash equivalents P=7,703,105Trade and other receivables 40,960,059Inventories 143,715Prepaid expenses and other current assets 677,019Property and equipment 750,813,061Investment property 48,972,000Deferred tax asset 7,299,317Other noncurrent assets 660,870Trade and other payables (104,300,607)Short-term loan (7,026,780)Deferred tax liability (128,354,737)Other current liabilities (999,322)Loans payable (140,601,746)Other noncurrent liabilities (46,243,536)Net assets acquired 429,702,418Excess of fair values of net assets acquired over acquisition cost from a

business combination (32,681,078)Consideration* P=397,021,340

*Includes contingent consideration amounting to P=151.5 million with the corresponding liability presented as “Nontradepayable” in the consolidated statement of financial position as of March 31, 2014.

b. Business Combination Involving Entities under Common Control

As discussed in Note 1, as a result of the Share Swap, the original shareholders of STI ESGowned approximately 84% of STI Holdings while STI Holdings owned approximately 96% ofSTI ESG (including its 3% shareholding in STI ESG prior to Share Swap) immediately afterthe Share Swap.

Management of the Group assessed that this transaction is a business combination involvingentities under common control since STI Holdings and STI ESG are under common control ofa shareholder (the “Controlling Shareholder”). Business combinations involving entitiesunder common control are excluded from the scope of PFRS 3, Business Combinations.Management has elected to adopt the pooling of interests method when preparing theconsolidated financial information in accordance with the guidance provided by the PhilippineInterpretations Committee on its Q&A No. 2011-02 “PFRS 3.2 - Common Control BusinessCombinations”.

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Under the pooling of interests method:

§ The assets and liabilities of the combining entities are reflected at their carrying amounts;

§ No adjustments are made to reflect fair values, or recognize any new assets or liabilities atthe date of the combination. The only adjustments would be to harmonize accountingpolicies 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 isreflected within equity under “Other equity reserve”;

§ The income statement in the year of acquisition reflects the results of the combiningentities 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 theperiod that the entities were under common control.

Common control transactions are viewed from the perspective of the ultimate parent or theControlling Shareholder. Since STI Holdings and STI ESG were not under common controlfrom the start, a predecessor entity should be identified. In this case, despite the legal form ofthe transaction (i.e. STI Holdings acquires STI ESG common shares through Share Swap), thepredecessor entity is STI ESG since it was controlled by the Controlling Shareholder prior toSTI Holdings. The Controlling Shareholder only acquired STI Holdings in March 2010.

In the parent company financial statements, STI Holdings used the cost method of accountingfor its investment in STI ESG. Thus, at initial recognition of its investment in STI ESG, theParent Company measured its investment using the fair value of the shares it has given up inexchange for the STI ESG shares (i.e. quoted price of STI Holdings shares as of September28, 2012). The difference between the quoted price and par value of the shares wasrecognized as additional paid-in capital (“APIC”) in the parent company statement of financialposition. In the application of pooling of interests method in the consolidated financialstatements, the acquisition-date carrying values of STI Holdings and STI ESG are the amountsused since the entities are combined at historical cost. Thus, the APIC created in the parentcompany financial statements is not reflected in the consolidated financial statements sinceeffectively, the capital stock issued pursuant to the Share Swap are carried at cost under thepooling of interests method.

c. Movement in Non-controlling Interests

In July 2013, the Parent Company acquired additional 328,125 STI ESG shares from variousshareholders further increasing its ownership interest in STI ESG by 0.01% immediately afterthe acquisition.

In 2014, STI ESG issued additional shares at par value to the stockholders of one of themerged schools, which resulted to dilution of the Parent Company’s interest in STI ESG by0.06%.

For the year ended March 31, 2014, the Parent Company recognized a net increase in the non-controlling interests amounting to P=3.4 million and reattributed the non-controlling interest’sshare in other comprehensive income to the equity holders of the Parent Company amounting

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to P=158,142 with the difference, amounting to P=4.1 million, charged to “Other equity reserve”account (see Note 18).

In November 2012, the Parent Company subscribed to 1,020,000,000 STI ESG shares at P=1.00per share. In December 2012, the Parent Company advanced P=1,080.0 million to STI ESG forfuture subscription of STI ESG shares, while waiting for the SEC’s approval of the increase inauthorized capital stock. On March 8, 2013, STI ESG issued 1,080,000,000 shares to STIHoldings upon SEC’s approval of its application. As a result, STI Holdings’ ownershipinterest in STI ESG increased to approximately 99% as of March 31, 2013.

For the year ended March 31, 2013, the Parent Company recognized a reduction in the non-controlling interests amounting to P=105.7 million and reattributed the non-controllinginterest’s share in other comprehensive income to the equity holders of the Parent Companyamounting to P=36.6 million with the difference, amounting to P=69.1 million, charged to“Other equity reserve” account (see Note 18).

d. Acquisition of STI-Batangas

On June 30, 2013, the stockholders of STI-Batangas and STI ESG executed a deed of sale forthe transfer of 100.00% of the outstanding shares of STI-Batangas to STI ESG with anacquisition cost amounting to P=4.0 million. Effective that date, STI ESG gained control overthe financial and reporting policies of STI-Batangas.

STI-Batangas is a franchisee of STI ESG and is engaged in the operation of educationalinstitutions offering tertiary formal education, post-secondary certificate courses and short-term courses. STI-Batangas was acquired to expand the Group’s controlled network ofschools and be able to improve its operations.

The purchase price consideration has been allocated, provisionally, to the assets and liabilitiesbased on the fair values at the date of acquisition resulting to goodwill of P=2.6 million.

The carrying values of the financial assets and liabilities and other assets recognized at thedate of acquisition approximate their fair values due to the short-term nature of thetransactions.

4. Segment Information

For management purposes, the Group is organized into business units based on the geographicallocation of the students and assets, and has five reportable segments as follows:

a. Metro Manilab. Northern Luzonc. Southern Luzond. Visayase. Mindanao

Management monitors operating results of its business segments separately for the purpose ofmaking decisions about resource allocation and performance assessment. Segment performance isevaluated based on operating profit or loss and is measured consistently with profit and loss in theconsolidated financial statements.

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On consolidated basis, the Group’s performance is evaluated based on net income for the year andEBITDA defined as earnings before provision for income tax, interest expense, interest income,depreciation and amortization, equity in net earnings/losses of associates and nonrecurringgains/losses (excess of fair values of net assets acquired over acquisition cost and loss on deemedsale and share swap of an associate).

The following table shows the reconciliation of the consolidated net income to consolidatedEBITDA for the years ended March 31, 2014, 2013 and 2012:

2014 2013 2012Consolidated net income P=655,197,867 P=794,440,808 P=291,458,717Equity in net losses (earnings) of

associates and joint ventures (232,818,520) (428,251,940) 37,574,331Depreciation and amortization 205,551,974 156,430,779 144,450,351Provision for income tax 53,358,883 42,952,904 32,227,325Loss on deemed sale and share swap

of an associate 43,000,287 – –Excess of fair values of net assets

acquired over acquisition costfrom a business combination (32,681,078) – –

Interest income (12,199,579) (34,723,888) (16,198,233)Interest expense 10,926,797 18,831,366 33,865,444Consolidated EBITDA P=690,336,631 P=549,680,029 P=523,377,935

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The following tables present revenue and income information regarding geographical segments for the years ended March 31, 2014, 2013 and 2012:March 31, 2014

Metro Manila Northern Luzon Southern Luzon Visayas Mindanao TotalEliminations/

Adjustments ConsolidatedRevenuesExternal revenue P=1,326,510,858 P=98,553,335 P=291,013,140 P=122,597,660 P=78,972,283 P=1,917,647,276 P=– P=1,917,647,276Intersegment revenue 265,360,474 – – – – 265,360,474 (265,360,474) –Total Revenues P=1,591,871,332 P=98,553,335 P=291,013,140 P=122,597,660 P=78,972,283 P=2,183,007,750 (P=265,360,474) P=1,917,647,276

ResultsIncome before other income and income tax P=275,282,351 P=22,893,182 P=82,463,620 P=21,582,488 P=18,024,519 P=420,246,160 P=52,529,050 472,775,210Equity in net earnings of associates and joint ventures – – – – – – 232,818,520 232,818,520Interest income 11,723,181 113,239 185,071 149,380 28,708 12,199,579 – 12,199,579Interest expense (5,272,839) 865,014 (117) (6,518,855) (10,926,797) – (10,926,797)Other income 317,046,248 188,599 144,353 1,310,978 414,327 319,104,505 (317,414,267) 1,690,238Provision for income tax (44,428,429) – 94,764 (1,280,365) – (45,614,030) (7,744,853) (53,358,883)Net Income P=554,350,512 P=24,060,034 P=82,887,691 P=15,243,626 P=18,467,554 P=695,009,417 (P=39,811,550) P=655,197,867

EBITDA P=690,336,631

March 31, 2013


Adjustments ConsolidatedRevenuesExternal revenue P=1,208,089,762 P=83,916,512 P=260,328,160 P=44,593,451 P=73,010,240 P=1,669,938,125 P=– P=1,669,938,125Intersegment revenue 188,858,531 – – – – 188,858,531 (188,858,531) –Total Revenues P=1,396,948,293 P=83,916,512 P=260,328,160 P=44,593,451 P=73,010,240 P=1,858,796,656 (P=188,858,531) P=1,669,938,125

ResultsIncome before other income and income tax P=187,741,026 P=18,229,373 P=76,496,819 P=8,726,225 P=8,218,233 P=299,411,676 P=90,298,030 P=389,709,706Equity in net earnings of associates and joint ventures – – – – – – 428,251,940 428,251,940Interest income 34,373,420 186,445 99,869 27,165 36,989 34,723,888 – 34,723,888Interest expense (18,814,558) (13,729) – – (3,079) (18,831,366) – (18,831,366)Other income 161,316,030 – 59,269 – – 161,375,299 (157,835,755) 3,539,544Provision for income tax (27,878,099) – – – – (27,878,099) (15,074,805) (42,952,904)Net Income P=336,737,819 P=18,402,089 P=76,655,957 P=8,753,390 P=8,252,143 P=448,801,398 P=345,639,410 P=794,440,808

EBITDA P=549,680,029

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March 31, 2012(As restated - see Note 2)


Adjustments ConsolidatedRevenuesExternal revenue P= 1,123,478,215 P=98,414,257 P=224,546,316 P=45,417,519 P=84,930,758 P=1,576,787,065 P=– P=1,576,787,065Intersegment revenue 208,864,945 – – – – 208,864,945 (208,864,945) –Total Revenues P=1,332,343,160 P=98,414,257 P=224,546,316 P=45,417,519 P=84,930,758 P=1,785,652,010 (P=208,862,902) P=1,576,787,065

ResultsIncome before other income and income tax P=99,177,135 P=27,249,774 P=45,422,923 P=5,871,809 P= 13,006,153 P=190,727,794 P=176,403,295 P=367,131,089Equity in net losses of associates and joint ventures – – – – – – (37,574,331) (37,574,331)Interest income 26,527,234 200,924 405,493 38,661 58,851 27,231,163 (11,032,930) 16,198,233Interest expense (37,610,943) (1,243,365) (33,000) – (28,953) (38,916,261) 5,050,817 (33,865,444)Other income 121,968,535 – – – – 121,968,535 (110,172,040) 11,796,495Benefit from (provision for) income tax (30,378,684) 28,303 3,471 46,229 146,944 (30,153,737) (2,073,588) (32,227,325)Net Income P=179,683,277 P=26,235,636 P=45,798,887 P=5,956,699 P=13,182,995 P=270,857,494 P=20,601,223 P=291,458,717

EBITDA P=523,377,935

The following tables present certain assets and liabilities information regarding geographical segments as of March 31, 2014 and 2013:

March 31, 2014


Adjustments ConsolidatedAssets and LiabilitiesSegment assets(a) P=5,202,405,725 P=53,145,292 P=228,706,052 P=443,971,443 P=88,531,959 P=6,016,760,471 P=514,343,507 P=6,531,103,978Investments in and advances to associates and joint ventures 16,734,825,149 – 12,500,000 – – 16,747,325,149 (15,215,273,562) 1,532,051,587Goodwill – – – – – – 202,843,745 202,843,745Deferred tax assets 22,677,630 259,189 1,313,080 7,347,603 1,506,475 33,103,977 – 33,103,977Total Assets P=21,959,908,504 P=53,404,481 P=242,519,132 P=451,319,046 P=90,038,434 P=22,797,189,597 (P=14,498,086,310) P=8,299,103,287

Segment liabilities(b) P=348,157,859 P=6,787,713 (P=31,315,814) 168,937,809 P=6,956,942 499,524,509 411,667,418 911,191,927Loans payable 180,000,000 – – – – 180,000,000 – 180,000,000Pension liabilities 14,885,926 2,852,352 14,595,697 38,843,393 4,713,387 75,890,755 (15,015,487) 60,875,268Obligations under finance lease 18,866,097 – – – – 18,866,097 – 18,866,097Total Liabilities P=561,909,882 P=9,640,065 (P=16,720,117) P=207,781,202 P=11,670,329 P=774,281,361 P=396,651,931 P=1,170,933,292

Other Segment InformationCapital expenditure -

Property and equipment P=1,185,736,216Depreciation and amortization 205,551,974Noncash expenses other than depreciation and amortization 74,057,903(a) Segment assets exclude goodwill, investments in and advances to associates and joint ventures and deferred tax assets.(b) Segment liabilities exclude short-term loans, pension liabilities and obligations under finance lease.

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March 31, 2013


Adjustments ConsolidatedAssets and LiabilitiesSegment assets(a) P=20,721,112,617 P=53,378,214 P=254,742,544 P=51,950,808 P=85,465,639 P=21,166,649,822 (P=15,769,230,815) P=5,397,419,007Goodwill – – – – – – 200,258,253 200,258,253Investments in and advances to associates and joint ventures 871,217,782 – – – – 871,217,782 2,025,850,775 2,897,068,557Deferred tax assets 6,808,554 259,189 1,313,080 124,751 – 8,505,574 – 8,505,574Total Assets P=21,599,138,953 P=53,637,403 P=256,055,624 P=52,075,559 P=85,465,639 P=22,046,373,178 (P=13,543,121,787) P=8,503,251,391

Segment liabilities(b) P=327,910,280 P=25,442,403 P=66,682,255 P=3,174,829 P=20,537,146 P=443,746,913 (P=118,030,879) P=325,716,034Pension liabilities 10,958,661 1,464,070 6,822,139 799,207 2,376,031 22,420,108 – 22,420,108Obligations under finance lease 19,759,058 – – – – 19,759,058 – 19,759,058Total Liabilities P=358,627,999 P=26,906,473 P=73,504,394 P=3,974,036 P=22,913,177 P=485,926,079 (P=118,030,879) P=367,895,200

Other Segment InformationCapital expenditure -

Property and equipment P=1,634,537,504Depreciation and amortization 156,430,779Noncash expenses other than depreciation and amortization 58,779,699(a) Segment assets exclude goodwill, investments in and advances to associates and joint ventures and deferred tax assets.(b) Segment liabilities exclude short-term loans, pension liabilities and obligations under finance lease.

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5. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements requires management to make judgments,estimates and assumptions that affect the amounts reported in the consolidated financialstatements and related notes. The estimates used are based upon management’s evaluation ofrelevant facts and circumstances as at the date of the consolidated financial statements, giving dueconsideration to materiality. Actual results could differ from such estimates.

The Group believes the following represents a summary of these significant judgments, estimatesand assumptions and related impact and associated risks in its consolidated financial statements.

JudgmentsIn the process of applying the Group’s accounting policies, management has made the followingjudgments, apart from those involving estimations, which have the most significant effect on theamounts recognized in the consolidated financial statements.

Operating Lease Commitments - Group as Lessee. The Group has entered into various operatinglease agreements and has determined, based on evaluation of the terms and conditions of thearrangements, that it has not acquired significant risks and rewards of ownership of the leasedproperties because the lease agreements do not transfer to the Group the ownership over the leasedassets at the end of the lease term and do not provide with a bargain purchase option over theleased assets and accounts for these arrangements as operating leases.

Rental expense amounted to P=136.6 million, P=143.3 million and P=145.2 million in 2014, 2013 and2012, respectively (see Notes 20, 22 and 25).

Operating Lease Commitments - Group as Lessor. The Group has entered into lease of variousinvestment properties and has determined, that it retains all the significant risks and rewards ofownership of the leased properties because the lease agreements do not transfer ownership of theleased assets to the lessee at the end of the lease term and do not give the lessee a bargain purchaseoption over the leased assets and accounts for these agreements as operating leases.

Rental income amounted to P=10.8 million, P=4.6 million and P=5.4 million in 2014, 2013 and 2012,respectively (see Notes 11, 25 and 27).

Finance Lease Commitments - Group as Lessee. The Group has entered into finance leaseagreements covering its computer equipment and peripherals and transportation equipment andhas determined, that it bears substantially all the risks and benefits incidental to ownership of thesaid properties which are on finance lease agreements.

The carrying value of the obligations under finance lease amounted to P=18.9 million andP=19.8 million as at March 31, 2014 and 2013, respectively. Interest incurred amounted toP=1.3 million, P=1.5 million and P=1.3 million in 2014, 2013 and 2012, respectively (see Notes 19and 25).

Transfers of Investment Properties. The Group has made transfers to investment properties afterdetermining 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 bycommencement 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 ofchange in use.

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There were no transfers to (from) investment properties in 2014 and 2013. Transfers to (from)investment properties amounted to P=24.9 million and (P=16.3 million) in 2012.

Determination of Control Arising from a Management Contract. The Group has existingmanagement contracts with STI-Kalookan and STI-Novaliches. Management has concluded that theGroup in substance has the control over the financial and operating policies and has the means toobtain 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 overSTI-Kalookan and STI-Novaliches and accordingly, consolidates the two entities effective from thedate control was obtained.

Classification of Interests in Joint Ventures. Under PFRS 11, the Group classified its interest in jointarrangements as either joint operations or joint ventures depending on its rights to the assets andobligations for the liabilities of the arrangements. When making this assessment, managementconsiders the structure of the arrangements, the legal form of any separate vehicles, the contractualterms of the arrangements and other facts and circumstances. Management re-evaluated itsinvolvement in its joint arrangements and assessed that it has joint control over PHEI and STI‑PHNSand accounted for such entities as joint ventures (see Note 13).

Contingencies. The Group is currently a defendant to a number of cases involving claims anddisputes mainly related to labor. The Group’s estimate of the probable costs for the resolution ofthese claims has been developed in consultation with outside legal counsels handling defense inthese matters and is based upon an analysis of potential results. Management and its legalcounsels believe that the Group has substantial legal and factual bases for its position and are ofthe opinion that losses arising from these legal actions, if any, will not have a material adverseimpact on the consolidated financial statements. It is possible, however, that future results ofoperations could be materially affected by changes in the estimates or in the effectiveness ofstrategies relating to these proceedings (see Note 29).

Estimates and AssumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at thefinancial reporting date that have a significant risk of causing a material adjustment to the carryingamounts 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 instrumentsthe fair value of that class of assets and liabilities in a way that permits it to be compared with thecorresponding carrying amount in the consolidated statements of financial position, which requiresthe use of accounting judgment and estimates. Significant components of fair value measurementare determined using verifiable objective evidence (i.e., interest rates, volatility rates), and timingand amount of changes in fair value would differ with the valuation methodology used.

Estimating Allowance for Impairment Loss on Financial Assets. The Group reviews itsreceivables and advances to associates and joint ventures and other related parties at eachreporting date to assess whether an allowance for doubtful accounts should be recorded in theconsolidated statement of financial position. In particular, judgment by management is required inthe estimation of the amount and timing of future cash flows when determining the level ofallowance required. Such estimates are based on assumptions about a number of factors andactual results may differ, resulting in future changes to the allowance.

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In addition to specific allowance against individually significant receivables and advances, theGroup also makes a collective impairment allowance against exposures which, although notspecifically identified as requiring a specific allowance, have a greater risk of default than whenoriginally granted. This collective allowance is based on any deterioration in the internal rating ofthe receivables and advances since it was granted or acquired. These internal ratings take intoconsideration factors such as any deterioration in industry, as well as identified structuralweaknesses or deterioration in cash flows.

Total receivables (including noncurrent receivables), net of allowance for doubtful accountsamounted to P=761.3 million and P=714.8 million as at March 31, 2014 and 2013, respectively.Provision for impairment loss on receivables (net of reversals) recognized amounted to P=57.6million, P=34.5 million and P=41.0 million in 2014, 2013 and 2012, respectively (see Notes 7 and22).

Advances to associates and joint ventures, net of allowance for impairment loss, amounted toP=21.2 million and P=45.5 million as at March 31, 2014 and 2013, respectively. Provision for(reversal of ) impairment in value of advances recognized amounted to (P=0.7 million), P=4.1million and P=3.0 million in 2014, 2013 and 2012, respectively (see Notes 12 and 22).

Estimating Allowance for Inventory Obsolescence. The allowance for obsolescence relating toinventories consists of provision based on the aging of inventories and other factors that mayaffect recoverability of these assets. The allowance is established by charges to income in theform of excess of cost over net realizable value of inventories.

Inventories at net realizable value amounted to P=37.8 million and P=34.7 million as at March 31,2014 and 2013, respectively. Provision for inventory obsolescence in the form of excess of costover net realizable value of inventories amounted to P=2.4 million, P=0.2 million and P=0.7 million in2014, 2013 and 2012, respectively (see Notes 8 and 22).

Impairment of AFS Financial Assets. The Group treats AFS financial assets as impaired whenthere has been a significant or prolonged decline in the fair value below its cost or where otherobjective evidence of impairment exists. The determination of what is “significant” or“prolonged” requires judgment. The Group treats “significant” generally as 20.00% or more ofthe original cost of investment, and “prolonged,” greater than six months. In addition, the Groupevaluates other factors, including normal volatility in share price for quoted equities and the futurecash flows and the discount factors for unquoted equities.

No impairment loss for AFS financial assets was recognized in profit or loss in 2014, 2013 and2012. The carrying values of AFS financial assets amounted to P=50.6 million, P=4.7 million andP=5.0 million as at March 31, 2014 and 2013 and April 1, 2012, respectively (see Note 14).

Estimating Useful Lives of Nonfinancial Assets. Management determines the estimated usefullives 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 theproperty and equipment, investment properties and intangible assets are expected to provideeconomic benefits. Management’s estimation of the useful lives of property and equipment,investment properties and intangible assets is based on a collective assessment of industrypractice, internal technical evaluation, and experience with similar assets while for intangibleassets with a finite life, estimated useful life is based on the contractual term of the intangibleassets. These estimations are reviewed periodically and could change significantly due to physicalwear and tear, technical or commercial obsolescence and legal or other limits on the use of theassets. Management will increase the depreciation and amortization charges where useful lives

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are less than previously estimated. A reduction in the estimated useful lives of property andequipment, investment properties and intangible assets would increase recorded expenses anddecrease noncurrent assets.

There were no changes in the estimated useful lives of the Group’s property and equipment,investment properties and intangible assets in 2014, 2013 and 2012.

Impairment of Nonfinancial Assets. An impairment review is performed whenever events or changesin circumstances indicate that the carrying amount of a nonfinancial asset may not be recoverable orthat the previously recognized impairment loss may no longer exist or may have decreased. Thefactors that the Group considers important which could trigger an impairment review include thefollowing:

§ 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 isdeclared; or

§ the carrying amount of the investment in an associate in the parent company financial statementsexceeds 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 itsrecoverable 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 cashgenerating unit to which the asset belongs.

While it is believed that the assumptions used in the estimation of fair values reflected in theconsolidated financial statements are appropriate and reasonable, significant changes in theseassumptions may materially affect the assessment of recoverable value and any resulting impairmentloss would have a material adverse impact on the results of operations.

Nonfinancial assets that are subjected to impairment testing when impairment indicators are presentare as follows:

March 31,2014

March 31,2013

Property and equipment (see Note 10) 4,421,253,356 P=2,635,275,971Investment properties (see Note 11) 40,197,895 39,325,291Investments in associates and joint ventures (see Note 12) 1,510,875,712 2,851,546,573Condominium deposit (see Note 15) 397,262,833 –Intangible assets (see Note 15) 29,898,142 7,711,712Advances to suppliers (see Note 15) 15,786,333 5,314,902Land (see Note 15) – 387,862,833

No impairment loss was recognized in 2014, 2013 and 2012.

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Goodwill. Acquisition method requires extensive use of accounting estimates and judgments toallocate the purchase price to the fair market values of the acquiree’s identifiable assets, liabilitiesand contingent liabilities at the acquisition date. It also requires the acquirer to recognize anygoodwill as the excess of the acquisition cost over the fair value of the acquiree’s identifiableassets, liabilities and contingent liabilities. The Group’s business acquisitions have resulted ingoodwill which is subject to an annual impairment testing. This requires an estimation of thevalue in use of the cash-generating units to which the goodwill is allocated. Estimating the valuein use requires the Group to make an estimate of the expected future cash flows from thecash-generating unit and also to choose a suitable discount rate in order to calculate the presentvalue of those cash flows.

The recoverable amounts of cash generating units have been determined based on value in usecalculations using cash flow projections covering a five-year period based on long-range plansapproved by management.

Management used an appropriate discount rate for cash flows equal to the prevailing rates ofreturn for a Group having substantially the same risks and characteristics. Management used theweighted average cost of capital wherein the source of the costs of equity and debt financing areweighted. The weighted average cost of capital is the overall required return on the Group. Adiscount rate of 12.00% was used as at March 31, 2014 and 2013 and April 1, 2012. The Group’sgrowth rates in extrapolating its cash flows beyond the period covered by its recent budgets rangedfrom 8.00% to 10.00%.

Other assumptions used in the calculations for impairment testing of goodwill are projection ratesof 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 whichthe recoverable amount is based on would not cause the carrying value of the goodwill tomaterially exceed its recoverable amount.

No provision for impairment loss was recognized in 2014 and 2013. Impairment loss recognizedin 2012 amounted to P=3.4 million. Goodwill, net of allowance for impairment loss, amounted toP=202.8 million and P=200.3 million as at March 31, 2014 and 2013, respectively (see Notes 15and 22).

Realizability of Deferred Tax Assets. Deferred tax assets are recognized for all deductibletemporary differences and carryforward benefits of NOLCO and MCIT to the extent that it isprobable that taxable profit will be available against which the deductible temporary differencesand carryforward benefits of NOLCO and MCIT can be utilized. Significant managementjudgment is required to determine the amount of deferred tax assets that can be recognized, basedupon the likely timing and level of future taxable profits together with future tax planningstrategies.

Deductible temporary differences and unused NOLCO and MCIT for which no deferred tax assetswere recognized by the Group amounted to P=122.2 million and P=111.5 million as at March 31,2014 and 2013, respectively. Deferred tax assets recognized amounted to P=33.1 million andP=8.6 million as at March 31, 2014 and 2013, respectively (see Note 26).

Present Value of Pension Liabilities. The cost of the defined benefit pension plan as well as thepresent value of the pension obligation are determined using actuarial valuations. The actuarialvaluation involves making various assumptions. These include the determination of the discount

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rates, future salary increases, mortality rates and future pension increases. Due to the complexityof the valuation, the underlying assumptions and its long-term nature, defined benefit obligationsare highly sensitive to changes in these assumptions. All assumptions are reviewed at eachreporting date.

In determining the appropriate discount rate, management considers the interest rates ofgovernment bonds that are denominated in the currency in which the benefits will be paid, withextrapolated maturities corresponding to the expected duration of the defined benefit obligation.

Future salary increases and pension increases are based on expected future inflation rates for thespecific country.

Pension liabilities recognized amounted to P=60.9 million and P=22.4 million as at March 31, 2014and 2013, respectively (see Note 24).

6. Cash and Cash Equivalents

This account consists of the following:

March 31,2014

March 31,2013

Cash on hand and in banks P=397,988,727 P=209,549,974Cash equivalents 185,313,836 1,279,901,935

P=583,302,563 P=1,489,451,909

Cash in banks earn interest at their respective bank deposit rates. Cash equivalents are short-terminvestments which are made for varying periods of up to three months, depending on theimmediate cash requirements of the Group, and earn interest at their respective short-terminvestment rates.

Interest earned from cash in banks and cash equivalents amounted to P=11.0 million, P=19.0 millionand P=9.8 million for the years ended March 31, 2014, 2013 and 2012, respectively (see Note 19).

7. Receivables

This account consists of:

March 31,2014

March 31,2013

Tuition and other school fees P=276,546,802 P=159,127,235Educational services 56,155,911 48,276,130Advances to officers and employees (see Note 27) 25,024,703 22,592,828Current portion of advances to associates, joint

ventures and other related parties (see Note 27) 12,356,218 11,419,489Rent and other related receivables (see Note 27) 7,575,384 12,970,554Others 25,321,407 54,202,769

402,980,425 308,589,005Less allowance for doubtful accounts 105,629,684 57,815,801

P=297,350,741 P=250,773,204

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The terms and conditions of the above receivables are as follows:

a. Tuition and other school fees receivables are noninterest-bearing and are normally collectedon or before the date of major examinations.

b. Educational services receivables pertain to receivables from franchisees arising fromeducational services, royalty fees and other charges. These receivables are generallynoninterest-bearing and are normally collected within 40 days. Interest is charged on past-dueaccounts.

Interest earned from past due accounts amounted to P=0.3 million, P=0.4 million and P=31,951for the years ended March 31, 2014, 2013 and 2012, respectively (see Note 19).

c. For terms and conditions relating to advances to associates, joint ventures and other relatedparties, refer to Note 27.

d. Advances to officers and employees are normally liquidated within one month.

e. Rent and other related receivables are normally collected within the next financial year.

f. Other receivables include receivable from CEAP and other miscellaneous receivables, and areexpected to be collected within the next financial year.

The movements in the allowance for doubtful accounts as a result of individual and collectiveassessments are as follows:

March 31, 2014Tuition

and OtherSchool Fees

EducationalServices Others Total

Balance at beginning of year P=46,191,864 P=– P=11,623,937 P=57,815,801Effect of business combination (see

Note 3) 33,711,471 – 1,510,778 35,222,249Provisions (see Note 22) 57,648,376 – – 57,648,376Reclassification to advances to

associates and joint ventures(see Note 12) – – (8,500,000) (8,500,000)

Write-off (36,556,742) – – (36,556,742)Balance at end of year P=100,994,969 P=– P=4,634,715 P=105,629,684

March 31, 2013Tuition

and OtherSchool Fees

EducationalServices Others Total

Balance at beginning of year P=41,435,131 P=– P=11,623,937 P=53,059,068Provisions (see Note 22) 34,534,038 – – 34,534,038Write-off (29,777,305) – – (29,777,305)Balance at end of year P=46,191,864 P=– P=11,623,937 P=57,815,801

As at March 31, 2014 and 2013, allowance for doubtful accounts amounting to P=4.6 million andP=11.6 million, respectively, relates to individually significant accounts that were assessed asimpaired. The remaining balance of P=101.0 million and P=46.2 million as at March 31, 2014 and2013, respectively, relates to accounts that were collectively assessed as impaired.

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8. Inventories

This account consists of:March 31,

2014March 31,

2013At net realizable value:

Educational materials P=31,440,575 P=29,618,188Promotional materials 5,539,944 4,494,601School materials and supplies 852,948 627,314

P=37,833,467 P=34,740,103

The cost of inventories carried at net realizable value amounted to P=48.0 million and P=42.7 millionas at March 31, 2014 and 2013, respectively. Provision for inventory obsolescence in the form ofexcess of cost over net realizable value of inventories amounted to P=2.4 million, P=0.2 million andP=0.7 million in 2014, 2013 and 2012, respectively (see Note 22).

Inventories charged to cost of educational materials and supplies sold for the years endedMarch 31, 2014, 2013 and 2012 amounted to P=53.3 million, P=49.5 million and P=39.5 million,respectively (see Note 21).

9. Prepaid Expenses and Other Current Assets

This account consists of:March 31,

2014March 31,

2013Prepaid taxes P=85,698,938 P=18,426,069Prepaid rent (see Note 25) 10,609,722 7,260,566Excess contributions to CEAP (see Note 24) 3,233,030 3,645,974Deposits 1,831,769 1,379,769Prepaid license and insurance 589,772 1,767,813Others 5,038,144 4,987,602

P=107,001,375 P=37,467,793

Prepaid taxes represent excess creditable withholding tax which may be applied against futureincome tax, and other internal revenue taxes, which mainly arose from the acquisition of officecondominium units from TechZone (see Notes 15 and 27).

Prepaid rent represents advance rent paid for the lease of land and building, which shall be appliedto 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 toCEAP which are already considered forfeited pension benefits of those employees who can nolonger avail their pension benefits or when De Los Santos - STI College has already advanced thebenefits of qualified employees (see Note 24). These will be recognized as expense depending onthe required future contributions to the fund.

Prepaid license represents software license costs which are amortized over one year.

Deposits pertain to security deposits made for warehouse and office space rentals, which expirewithin one year, to be applied against future lease payments in accordance with the respectivelease agreements (see Note 25).

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10. Property and Equipment

The rollforward analysis of this account follows:

March 31, 2014

Land Buildings

Officeand SchoolEquipment

OfficeFurniture

and FixturesLeasehold

Improvements

TransportationEquipment(see Note 25)

ComputerEquipment

andPeripherals

LibraryHoldings

ConstructionIn Progress Total

Cost, Net of Accumulated Depreciation andAmortization

Balance at beginning of year P=1,296,723,152 P=696,730,272 P=61,520,527 P=31,012,008 P=93,491,471 P=22,238,184 P=28,880,111 P=30,004,141 P=374,676,105 P=2,635,275,971Additions 60,098,428 147,410,908 76,706,514 40,061,020 20,098,796 13,402,650 27,651,209 226,895 800,079,796 1,185,736,216Effect of business combination (see Note 3) 494,887,999 248,256,609 4,906,441 509,284 64,163 – 1,886,415 1,902,490 – 752,413,401Reclassifications 48,972,001 921,159,367 (5,599) 5,599 3,332,693 – – (118,473) (924,373,587) 48,972,001Disposal – – (69,857) (17,314) (10,128) (994,104) – (765) – (1,092,168)Depreciation and amortization

(see Notes 20 and 22) – (75,428,552) (32,842,432) (16,267,375) (35,815,307) (9,615,292) (22,091,737) (7,991,370) – (200,052,065)Balance at end of year P=1,900,681,580 P=1,938,128,604 P=110,215,594 P=55,303,222 P=81,161,688 P=25,031,438 P=36,325,998 P=24,022,918 P=250,382,314 P=4,421,253,356At March 31, 2014:Cost P=1,900,681,580 P=2,355,082,628 P=357,709,729 P=165,672,192 P=346,890,623 P=68,986,903 P=369,693,500 P=165,972,882 P=250,382,314 P=5,981,072,351Accumulated depreciation and amortization – 416,954,024 247,494,135 110,368,970 265,728,935 43,955,465 333,367,502 141,949,964 – 1,559,818,995Net carrying amount P=1,900,681,580 P=1,938,128,604 P=110,215,594 P=55,303,222 P=81,161,688 P=25,031,438 P=36,325,998 P=24,022,918 P=250,382,314 P=4,421,253,356

March 31, 2013

Land Buildings

Officeand SchoolEquipment

OfficeFurniture

and FixturesLeasehold

Improvements

TransportationEquipment(see Note 25)

ComputerEquipment

andPeripherals

LibraryHoldings

ConstructionIn Progress Total

Cost, Net of Accumulated Depreciation andAmortization

Balance at beginning of year P=648,949,537 P=489,952,915 P=84,054,171 P=26,551,149 P=90,149,525 P=20,830,918 P=35,817,767 P=15,802,480 P=132,120,932 P=1,544,229,394Additions 1,035,636,448 113,903,997 5,571,344 16,164,912 36,937,557 13,156,923 17,829,902 20,660,316 374,676,105 1,634,537,504Reclassification to other noncurrent assets

(see Note 15) (387,862,833) – – – – – – – – (387,862,833)Reclassifications – 132,120,932 – – – – – – (132,120,932) –Disposal – – – – – (1,172,501) – – – (1,172,501)Depreciation and amortization

(see Notes 20 and 22) – (39,247,572) (28,104,988) (11,704,053) (33,595,611) (10,577,156) (24,767,558) (6,458,655) – (154,455,593)Balance at end of year P=1,296,723,152 P=696,730,272 P=61,520,527 P=31,012,008 P=93,491,471 P=22,238,184 P=28,880,111 P=30,004,141 P=374,676,105 P=2,635,275,971At March 31, 2013:Cost P=1,296,723,152 P=927,986,992 P=262,656,033 P=122,600,237 P=337,876,133 P=65,416,128 P=308,398,041 P=82,171,080 P=374,676,105 P=3,778,503,901Accumulated depreciation and amortization – 231,256,720 201,135,506 91,588,229 244,384,662 43,177,944 279,517,930 52,166,939 – 1,143,227,930Net carrying amount P=1,296,723,152 P=696,730,272 P=61,520,527 P=31,012,008 P=93,491,471 P=22,238,184 P=28,880,111 P=30,004,141 P=374,676,105 P=2,635,275,971

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AdditionsAcquisitions. In 2014, the Group acquired land and a building located in Batangan, Batangasamounting to P=122.5 million. These properties will be the new site of STI-Batangas.

In 2013, the Group acquired land located in Cainta, Rizal, Las Piñas City, Quezon City, Valenciaand Caloocan City, aggregating to P=1,035.6 million. These properties will be the new sites of theschools of the Group in the area mentioned.

Property and Equipment under Construction. As at March 31, 2014, the construction in-progressaccount includes costs incurred for the construction of the school buildings and improvementslocated in Batangas, Calamba, Quezon City and Lucena. The related construction contractsamounted to P=1,248.8 million, inclusive of materials, cost of labor and overhead and all othercosts necessary for the proper execution of the works in the next fiscal year.

As at March 31, 2013, the construction in progress account includes costs incurred for theconstruction of the school buildings and improvements located in Cainta, Rizal and Caloocan City.The related construction contracts amounted to P=1,057.2 million, inclusive of materials, cost oflabor and overhead and all other costs necessary for the proper execution of the works in the nexttwo years. These were completed and reclassified as part of the “Buildings” account in 2014.

Capitalized Borrowing Costs. Total borrowing costs capitalized as part of property and equipmentamounted to nil and P=19.7 million as at March 31, 2014 and 2013, respectively. Average interestcapitalization rate is at 3.3% in 2013 which is the effective rate of the general borrowing.

Finance LeasesCertain transportation equipments were acquired under finance lease agreements. The net bookvalue of this equipment amounted to P=16.4 million and P=15.9 million as at March 31, 2014 and2013, respectively (see Note 25).

CollateralsAs at March 31, 2014, property and equipment with a carrying value amounting toP=27.9 million are pledged as security to the short-term loan of the Group (see Note 16), whiletransportation equipment, which were acquired under finance lease, are pledged as security for therelated finance lease liabilities as at March 31, 2014 and 2013.

11. Investment Properties

The rollforward analysis of this account follows:

March 31, 2014

LandCondominium

units TotalCost: Balance at beginning of year P=23,986,424 P=32,758,893 P=56,745,317 Additions – 3,981,559 3,981,559 Balance at end of year 23,986,424 36,740,452 60,726,876Accumulated depreciation: Balance at beginning of year – 17,420,026 17,420,026 Depreciation (see Note 22) – 3,108,955 3,108,955 Balance at end of year – 20,528,981 20,528,981Net book value P=23,986,424 P=16,211,471 P=40,197,895

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March 31, 2013

LandCondominium

units TotalCost: Balance at beginning of year P=28,521,424 P=36,723,893 P=65,245,317 Disposal (4,535,000) (3,965,000) (8,500,000) Balance at end of year 23,986,424 32,758,893 56,745,317Accumulated depreciation: Balance at beginning of year – 18,138,027 18,138,027 Depreciation (see Note 22) – 1,975,186 1,975,186 Disposal – (2,693,187) (2,693,187) Balance at end of year – 17,420,026 17,420,026Net book value P=23,986,424 P=15,338,867 P=39,325,291

LandLevel 3 fair value of land had been derived using the sales comparison approach. The salescomparison approach is a comparative approach to value that considers the sales of similar orsubstitute properties and related market data and establishes a value estimate by process involvingcomparison. Listings and offerings may also be considered. Sales prices of comparable land inclose proximity (external factor) are adjusted for differences in key attributes (internal factors)such as location and size.

The following table shows the valuation technique used in measuring the fair value of the land, aswell as the significant unobservable inputs used:

Fair value at March 31, 2014 P=37,070,000Valuation technique Sales comparison approachUnobservable input Net price per square meterRelationship of unobservable inputs to

fair valueThe higher the price per square

meter, the higher the fair value

The highest and best use of the land is commercial utility.

Condominium UnitsLevel 3 fair values of buildings have also been derived using the sales comparison approach.

The following table shows the valuation technique used in measuring the fair value of thebuilding, as well as the significant unobservable inputs used:

Fair value at March 31, 2014 P=86,435,200Valuation technique Sales comparison approachUnobservable input Net price per square meterRelationship of unobservable inputs to

fair valueThe higher the price per square

meter, the higher the fair value

The highest and best use of the condominium units is commercial utility (commercial/officecondominium building).

CollateralAs at March 31, 2014, investment properties with a carrying value amounting to P=13.9 million arepledged as security to the short-term loans of the Group (see Note 16).

Rental income earned from investment properties amounted to P=10.8 million, P=4.6 million andP=5.4 million in 2014, 2013 and 2012, respectively (see Notes 25 and 27). Direct operating

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expenses, including repairs and maintenance, arising from investment properties amounted toP=0.4 million, P=0.7 million and P=0.3 million in 2014, 2013 and 2012, respectively.

12. Investments in and Advances to Associates and Joint Ventures

The details and movements in this account follow:

March 31,2014

March 31,2013

(As restated -see Note 2)

April 1,2012


Investments in associates and jointventures:

Acquisition cost:Balance at beginning of year P=249,252,600 P=207,664,874 P=208,375,212Conversion of advances – 41,587,726 –Disposal (76,000,000) – (710,338)Balance at end of year 173,252,600 249,252,600 207,664,874

Accumulated equity in net earnings:Balance at beginning of year, as previously reported 680,371,081 261,722,342 303,031,267Effect of adoption of PAS 19R (see Note 2) (1,315,903) (967,004) –Balance at beginning of year, as restated 679,055,178 260,755,338 303,031,267Equity in net earnings (losses) 232,818,520 428,251,940 (37,574,331)Disposal – – (2,749,498)Dividends received – (9,952,100) (1,952,100)Reclassification (see Note 14) 6,893,184 – –Balance at end of year 918,766,882 679,055,178 260,755,338

Share in associates’ othercomprehensive income:Balance at beginning of year, as previously reported 1,930,173,711 1,083,699,331 173,867,841Effect of adoption of PAS 19R (see Note 2) (6,934,916) 3,003,867 –Balance at beginning of year, as restated 1,923,238,795 1,086,703,198 173,867,841Unrealized MTM gain (loss) (1,496,110,186) 846,474,380 909,831,490Remeasurement gain (loss) on pension liability (8,272,379) (9,938,783) 3,003,867Balance at end of year (Notes 3 and 18) 418,856,230 1,923,238,795 1,086,703,198

1,510,875,712 2,851,546,573 1,555,123,410Advances (see Note 27) 36,123,762 52,689,744 38,400,724Less allowance for impairment loss 14,947,887 7,167,760 3,047,124

21,175,875 45,521,984 35,353,600P=1,532,051,587 P=2,897,068,557 P=1,590,477,010

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The detailed carrying values of the Group’s investments in and advances to associates and jointventures are as follows:

2014Investments Advances Total

Associates:STI Investments P=1,500,471,108 P=– P=1,500,471,108STI-Alabang 14,326,499 – 14,326,499GROW 10,597,308 – 10,597,308STI-Accent (20,166,002) 35,923,762 15,757,760STI-Marikina 1,650,967 – 1,650,967Synergia 46,969 – 46,969

Joint ventures:PHEI (see Note 13) 3,948,863 200,000 4,148,863

1,510,875,712 36,123,762 1,546,999,474Allowance for impairment loss

Balance at beginning of year – 7,167,760 7,167,760Reclassification from

receivables (see Note 7) – 8,500,000 8,500,000Reversal (see Note 22) – (719,873) (719,873)Balance at end of year – 14,947,887 14,947,887

P=1,510,875,712 P=21,175,875 P=1,532,051,587

2013(As restated - see Note 2)

Investments Advances TotalAssociates:

STI Investments P=2,759,989,922 P=– P=2,759,989,922De Los Santos - General Hospital 59,440,352 – 59,440,352STI-Accent (20,166,002) 27,333,762 7,167,760De Los Santos - STI Megaclinic 18,352,722 24,396,410 42,749,132STI-Alabang 14,326,499 216,000 14,542,499GROW 10,529,778 143,572 10,673,350STI-Marikina 1,042,897 – 1,042,897Synergia 46,969 – 46,969

Joint ventures:PHEI 6,999,009 600,000 7,599,009STI-PHNS 984,427 – 984,427

2,851,546,573 52,689,744 2,904,236,317Allowance for impairment loss

Balance at beginning of year – 3,047,124 3,047,124Provisions (see Note 22) – 4,120,636 4,120,636Balance at end of year – 7,167,760 7,167,760

P=2,851,546,573 P=45,521,984 P=2,897,068,557

Information about and major transactions of significant indirect associates are discussed below:

STI Investments. STI Investments is a holding company that holds investments in PhilPlans,PhilHealth Care, Inc. (PhilCare) and Banclife Insurance Co., Inc. (Banclife). PhilPlans is aleading pre-need company, providing innovative pension, education and life plans while PhilCareprovides a multi-service healthcare program that makes available to its clients a comprehensivehealthcare benefits package that provides quality healthcare services at a cost-efficient price.Banclife is engaged in life insurance business in the Philippines. In October 2013, PhilPlansacquired 65% of Rosehills Memorial Management Philippines, Inc. (RMMI). RMMI is presently

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engaged in the operation and management of a memorial park, memorial and internet services andsale of memorial products. In 2013, STI Investments acquired 70% equity interest in PhilippineLife Financial Assurance Corporation (PhilLife, formerly AsianLife and General AssuranceCorporation). PhilLife is engaged in the business of life insurance and, in particular, to grant oreffect assurances of all kinds of the payments of money by way of single payment or by severalpayments, or by way of immediate or deferred annuities upon the death of or upon attaining agiven age by any person or persons.

Condensed financial information for STI Investments is as follows:

2014 2013Current assets P=17,648,121,501 P=4,817,840,974Noncurrent assets 27,722,263,499 46,402,910,790Current liabilities 37,547,030,692 36,917,889,979Noncurrent liabilities 82,847,336 344,253,638Total equity 7,740,506,972 13,958,608,147Less equity attributable to equity holders of non- controlling interests 238,151,432 158,658,537Equity attributable to equity holders of the parent company 7,502,355,540 13,799,949,610Proportion of the Group’s ownership 20% 20%Carrying amount of the investment P=1,500,471,108 P=2,759,989,922

Revenues P=7,161,375,046 P=8,393,171,350Net income 1,252,149,077 2,220,567,110Other comprehensive income (loss) (7,524,711,486) 4,182,128,852Total comprehensive income (6,272,562,409) 6,402,695,962Less total comprehensive income attributable to equity holders of non-controlling interests 25,031,656 27,840,525Total comprehensive income attributable to equity holders of the parent company (6,297,594,065) 6,374,855,437Proportion of the Group’s ownership 20% 20%Share in total comprehensive income (P=1,259,518,813) P=1,274,971,087

De Los Santos - General Hospital. De Los Santos General Hospital is primarily engaged in theoperation, managing and maintenance of hospitals, clinics, medical and chemical laboratories.

De Los Santos - STI Megaclinic. De Los Santos - STI Megaclinic was organized primarily toestablish, maintain, adopt and engage in the business of offering, providing and promotingmedical services to the general public through accessible, economical and private clinics, healthand treatment centers, together with the professional management of the services rendered bylicensed and competent physicians, surgeons, medical specialists within the said clinics, health andtreatment centers.

As a result of the Share Swap transaction discussed in Note 14, the Group’s investments in De LosSantos - General Hospital and De Los Santos - STI Megaclinic were diluted and reclassified toAFS financial assets.

STI-Accent. STI-Accent is engaged in providing medical and other related services. In 2012, thecontract of usufruct between STI-Accent and Dr. Fe Del Mundo Medical Center Foundation Phil.,Inc. to operate the hospital and its related healthcare service businesses for an initial term of

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twenty years starting July 2007 was rescinded. Thus, the Group ceased the recognition of its sharein the losses of STI-Accent. In 2013, the Group recognized its previously unrecognized equity inlosses of STI-Accent amounting to P=6.2 million as at March 31, 2012. As at March 31, 2014 and2013, the Group provided allowance for impairment loss on its investments in STI-Accent andrelated advances amounting to P=14.9 million and P=7.2 million, respectively.

Interest income earned from the Group’s advances to its associates and joint ventures amounted toP=0.9 million, P=2.6 million and P=2.0 million in 2014, 2013 and 2012, respectively (see Notes 19and 27).

The Group’s share in the net earnings (losses) of its associates, which are individually immaterial,amounted to P=0.1 million, (P=7.5 million) and P=0.1 million in 2014, 2013 and 2012, respectively.

For terms and conditions relating to advances to associates and joint ventures, refer to Note 27.

The associates had no contingent liabilities and capital commitments as at March 31, 2014 and2013.

13. Interests in Joint Ventures

PHEIOn March 19, 2004, STI ESG, together with University of Makati (UMak) and anothershareholder, incorporated PHEI. STI ESG and UMak each owns 40.00% of the equity of PHEIwith the balance owned by the other shareholder. PHEI is envisioned as the College of Nursing ofUMak. The following are certain key terms under the Joint Venture Agreement (JVA) datedMay 2, 2003 signed by STI ESG and UMak:

a. STI ESG shall be primarily responsible for the design of the curriculum for the BachelorsDegree in Nursing (BSN) and Masters Degree in Nursing Informatics, with such curriculumduly 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 iAcademywill 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 coursesthat are non-technical in nature.

STI-PHNSOn September 16, 2005, GROW and PHNS International Holdings, Inc., a company incorporatedin Dallas, Texas, USA, entered into a JVA. Under the JVA, the parties have agreed to incorporatea 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 affairsof the joint venture company for the primary purpose of engaging, directly or indirectly, in thebusiness of medical transcription and other related business in the Philippines. In relation to theincorporation of a joint venture company, the parties incorporated STI-PHNS. The parties eachhave a 50.00% ownership of the outstanding capital stock of STI-PHNS.

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A Deed of Assignment between GROW and STI ESG was executed on May 5, 2006 to transfer allthe rights of GROW in the JVA to the latter.

STI-PHNS has already ceased operations in 2014.

The Group’s share in the net earnings of its joint ventures amounted to P=4.0 million, P=3.3 millionand P=12.0 million in 2014, 2013 and 2012, respectively. The unrecognized share in the net lossesof the joint ventures amounted to P=4.1 million and nil as at March 31, 2014 and 2013,respectively.

For terms and conditions relating to advances to associates and joint ventures, refer to Note 27.

The joint ventures had no contingent liabilities or capital commitments as at March 31, 2014 and2013.

14. Available-for-Sale Financial Assets


March 31,2014

March 31,2013

Quoted equity shares - at fair value P=3,757,345 P=3,716,495Unquoted equity shares - at cost 46,842,595 946,983

P=50,599,940 P=4,663,478

a. Quoted Equity Shares

The quoted equity shares above are traded in the PSE. These are carried at fair value withcumulative 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 theconsolidated statements of financial position. The fair values of these shares are based on thequoted market price as at financial reporting date.

The rollforward analysis of the “Unrealized mark-to-market gain (loss) on available-for-salefinancial assets”, gross of non-controlling interests, follows:

March 31,2014

March 31,2013

Balance at beginning of year (P=131,189) P=192,971Unrealized MTM loss on AFS financial assets (409,190) (324,160)Balance at end of year (see Note 18) (P=540,379) (P=131,189)

Dividend income earned from AFS financial assets amounted to P=0.5 million, P=0.4 millionand P=2.8 million in 2014, 2013 and 2012, respectively.

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b. Unquoted Equity Shares

Unquoted equity shares pertain to unlisted shares of stocks which the Group will continue tocarry as part of its investment. The fair value if these unquoted equity shares is not reasonablydeterminable due to the unpredictable nature of future cash flows and the lack of suitablemethod of arriving at a reliable fair value, hence, these are carried at cost less impairment, ifany.

c. Share Swap Transactions with Metro Pacific Investments Corporation (MPIC)

On December 21, 2012, De Los Santos - STI College, De Los Santos General Hospital, STIESG, the Delos Santos family (a shareholder in De Los Santos - STI College, De Los SantosGeneral Hospital and De Los Santos - STI Megaclinic) and MPIC entered into an investmentagreement, wherein MPIC shall invest in De Los Santos General Hospital by subscribing to401,942 new common shares or equivalent to 51% equity interest in General Hospital, subjectto certain terms and conditions. The terms and conditions include De Los Santos - STICollege’s sale of its 42% ownership in De Los Santos - STI Megaclinic to De Los SantosGeneral Hospital, in exchange for De Los Santos - STI College’s additional subscription of29,399 new common shares or equivalent to 4% equity interest in De Los Santos GeneralHospital.

On February 6, 2013, STI ESG executed a Deed of Assignment with De Los Santos GeneralHospital wherein the latter would open for subscription to STI ESG 40,000 common shareswith an aggregate par value of P=4.0 million. On the same date, De Los Santos - STI Collegealso executed a Deed of Assignment with the De Los General Hospital wherein the latterwould likewise open for subscription to De Los Santos - STI College 50,000 common shareswith an aggregate par value of P=5.0 million.

On June 3, 2013, STI ESG executed a deed of pledge on all of its De Los Santos GeneralHospital shares in favor of Neptune Stroika Holdings, Inc., a wholly owned subsidiary ofMPIC, to cover the indemnity obligations of ESG enumerated in its investment agreementwith MPIC. The completion of MPIC’s subscription transpired in June 2013, following thefulfillment of the conditions specified in the agreement. As a result, De Los Santos - STIMegaclinic and De Los Santos General Hospital ceased to be associates of the Group effectiveJune 2013. Consequently, the Group’s effective percentage ownership in De Los SantosGeneral Hospital was diluted and such was reclassified to AFS financial assets. The Groupthen recognized a loss arising from the dilution amounting to P=43.0 million presented as “Losson deemed sale and share swap of an associate” in the consolidated statement ofcomprehensive income.

On August 15, 2013, STI Investments purchased 40,051 shares of De Los Santos - STIMegaclinic representing 6.06% of the total outstanding capital stock of the latter from De LosSantos General Hospital. The Group, through De Los Santos – STI College also made anadditional investment to De Los Santos General Hospital amounting to P=11.8 million. Out ofthe total amount, P=5.8 million remain unpaid as at March 31, 2014, which was included as partof “Other payables” under the “Accounts payable and other current liabilities” account.

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15. Goodwill, Intangible and Other Noncurrent Assets


March 31,2014

March 31,2013

Condominium deposit P=397,262,833 P=–Goodwill 202,843,745 200,258,253Deposits (see Note 25) 38,755,552 31,962,268Intangible assets 29,898,142 7,711,712Deposit for future purchase of net assets 20,000,000 –Advances to suppliers 15,786,333 5,314,902Land (see Note 10) – 387,862,833Others 27,882,846 8,890,608

P=732,429,451 P=642,000,576

Land and Condominium DepositOn March 21, 2013, STI ESG’s BOD approved the transfer of a parcel of land to TechZonePhilippines, Inc. (TechZone), an entity under common control with the Group (see Note 27), inexchange for condominium units to be developed by TechZone.

In April 2013, STI ESG and TechZone, entered into a real estate mortgage for TechZone’s loanamounting to P=800.0 million. STI ESG’s land was used as collateral for TechZone’s loan, theproceeds of which were used by TechZone to develop the property.

In August 2013, the Deed of Absolute Sale for the sale of the land was executed between STI ESGand TechZone in accordance with the BOD approval. Title to the land has now been transferred infavor of TechZone and consequently, the amount was reclassified, including other directlyattributable costs, as “Condominium deposit.” Development of the condominium project islikewise ongoing.

GoodwillThe rollforward analyses of this account follow:

March 31,2014

March 31,2013

Balance at beginning of year P=200,258,253 P=200,258,253Additions due to business combinations (see Note 3) 2,585,492 –Balance at end of year P=202,843,745 P=200,258,253

Goodwill acquired through business combinations have been allocated to the following entitieswhich are considered as separate CGUs:

March 31,2014

March 31,2013

STI-Kalookan P=64,147,877 P=64,147,877STI-Novaliches 21,803,322 21,803,322STI-Taft 19,030,844 19,030,844STI-Tuguegarao (see Note 3) 13,638,360 13,638,360STI-Dagupan (see Note 3) 6,835,818 6,835,818

(Forward)

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March 31,2014

March 31,2013

STI-Batangas P=2,585,492 P=–Merged entities:

STI-Cubao 28,327,670 28,327,670STI-Global City 11,360,085 11,360,085STI-Edsa Crossing 11,213,342 11,213,342STI-Ortigas-Cainta 7,476,448 7,476,448STI-Meycauayan 5,460,587 5,460,587STI-Makati 3,261,786 3,261,786STI-Las Piñas 2,922,530 2,922,530STI-Kalibo 2,474,216 2,474,216STI-Naga 2,305,368 2,305,368

P=202,843,745 P=200,258,253

DepositsThis account includes security deposits made for utility companies and warehouse andoffice space rentals to be applied against future lease payments in accordance with the respectivelease agreements.

Intangible AssetsIntangible assets represent STI ESG’s new accounting software, which was implemented andstarted to be amortized in June 2013. In 2014, the Group is in the process of implementing its newschool management software.

The rollforward analyses of this account follow:

March 31,2014

March 31,2013

Balance at beginning of year P=7,711,712 P=7,521,312Additions 24,577,384 –Reclassification – 190,400Amortization (see Note 22) (2,390,954) –Balance at end of year P=29,898,142 P=7,711,712

2014 2013Cost P=32,289,096 P=7,711,712Accumulated amortization 2,390,954 –Net carrying amount P=29,898,142 P=7,711,712

Deposit for Future Purchase of Net AssetsOn February 21, 2014, WNU’s BOD approved the acquisition of net assets of BacolodEducational Service and Technology Center, Inc. (formerly STI College Bacolod, Inc.), which isowned by a franchisee of STI ESG. In March 2014, WNU made an initial deposit for the purchaseamounting to P=20 million. In May 2014, the sale was consummated and the deed of absolute salewas executed with agreed total purchase price of P=24 million.

Advances to SuppliersAdvances to suppliers pertain to advance payments made in relation to the acquisition of propertyand equipment. These will be reclassified to the “Property and equipment” account when thegoods are received or the services are rendered.

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16. Short-term Loans and Long-term Debt

Short-term LoansIn 2014, STI ESG availed of short-term loans from Security Bank Corporation (Security Bank)amounting to P=280.0 million with an interest rate of 3.75% and maturing on September 2014. Theproceeds from these short-term loans will be used for working capital purposes. STI ESG settledP=100.0 million in November 2013. Outstanding short-term loan as of March 31, 2014 amountedto P=180.0 million.

STI ESG availed of unsecured, interest-bearing loans from Metropolitan Bank and Trust Company(Metrobank), Security Bank, Bank of the Philippine Islands (BPI), UnionBank of the Philippinesand Classic Finance, Inc. (an entity under common control) aggregating to P=539.0 million. Theseloans bear interest rates ranging from 5.00% to 6.00%. The proceeds from these loan availmentsand proceeds from issuances of STI ESG shares were used for the payment of its outstandingloans, acquisition of various properties and construction of new school buildings. These loanswere fully settled in December 2012.

The loan agreements provide certain restrictions and requirements with respect to, among others,change in majority ownership and management, merger or consolidation with other corporationresulting to loss of control over the overall resulting entity and sale, lease, transfer or otherwisedisposal of all or substantially all of its assets. The Group has complied with the noticerequirement under the loan agreements with the creditor banks.

As discussed in Notes 10 and 11, as at March 31, 2014, property and equipment and investmentproperties with a carrying value amounting toP=27.9 million and P=13.9 million are pledged assecurity to the short-term loans of the Group.

Long-term DebtAs at March 31, 2014, long-term debt consists of:

Bank loans - China Banking Corporation (Chinabank) P=88,811,174Loan from WNU’s former stockholders 19,485,271Mortgage payable 109,755

108,406,200Less current portion 49,940,706

P=58,465,494

The loan from Chinabank is secured by certain land of the Group and WNU’s former owners.These loans have maturities of 5 years or less with interest rates ranging from 4.75% to 13.60% in2014.

The loan agreements provide certain restrictions and requirements with respect to, among others,change in majority ownership and management, merger or consolidation with other corporationresulting to loss of control over the overall resulting entity and sale, lease, transfer or otherwisedisposal of all or substantially all of its assets. As at March 31, 2014, WNU has complied withthese covenants. WNU has also complied with the notice requirement under the loan agreementswith the creditor banks.

As at July 9, 2014, the loan from WNU’s former stockholders were already paid in full.

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Corporate Notes FacilityOn March 20, 2014, STI ESG entered into a Corporate Notes Facility Agreement (Credit FacilityAgreement) with China Banking Corp. (Chinabank) granting STI ESG a credit facility amountingto P=3.0 billion with a term of either 5 or 7 years. The net proceeds from the issuance of the notesshall be used for capital expenditures and other general corporate purposes.

The interest rate shall either be floating or fixed and the term can either be 5 or 7 years dependingon the election made by STI ESG on the first drawdown date. The interest rate is benchmarked onthe Philippine Dealing System Treasury - Fixing (PDST-F) rate plus a margin of 2% or 2.5% perannum, depending on the term, but in no case be lower than the Bangko Sentral ng Pilipinasovernight rate plus a margin of 0.75% per annum.

The Credit Facility Agreement provides certain restrictions and requirements with respect to,among others, change in majority ownership and management, merger or consolidation with othercorporation resulting to loss of control over the overall resulting entity and sale, lease, transfer orotherwise disposal of all or substantially all of its assets. As at March 31, 2014, STI ESG hascomplied with these covenants. STI ESG has also complied with the notice requirement under theloan agreements with the creditor banks. The Credit Facility Agreement also contains, amongothers, covenants regarding incurring additional debt and declaration of dividends, to the extentthat such will result in a breach of the required debt-to-equity and debt service coverage ratios. Asat March 31, 2014, STI ESG has complied with the above covenants. STI ESG has also compliedwith the notice requirement under the loan agreements with the other creditor banks.

As of March 31, 2014, STI ESG has not drawn on the credit facility.

InterestInterest incurred from short-term loans amounted to P=3.1 million, P=17.3 million and P=32.5 millionin 2014, 2013 and 2012, respectively (see Note 19).

17. Accounts Payable and Other Current Liabilities


March 31,2014

March 31,2013

Accounts payable P=310,531,279 P=174,408,815Accrued expenses:

Rent 29,850,740 47,913,702School-related expenses 22,151,354 18,514,400Salaries, wages and benefits 13,257,284 9,283,290Advertising and promotion 13,277,589 7,131,086Contracted services 28,036,409 4,259,353Utilities 3,766,903 4,187,980Others 7,873,563 12,189,508

Dividends payable (see Note 18) 12,745,604 11,840,316Unearned tuition and other school fees 9,621,664 5,342,406Withholding taxes payable 11,504,184 8,115,060Others 54,813,919 17,499,905

P=517,430,492 P=320,685,821

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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 nextfinancial year.

c. Unearned tuition and other school fees are amortized over the related school term.

d. Other payables primarily include costs related to the demolition of the existing building on arecently purchased property and equipment and nontrade payables related to purchase ofcertain property. These are expected to be settled within the next financial year.

e. For terms and conditions with related parties, refer to Note 27.

18. Equity

Common Stock and Additional Paid-in CapitalDetails and movement in common stock follow:

March 31, 2014 March 31, 2013Shares Amount Shares Amount

Common Stock - P=0.50 par valueper share

Authorized 10,000,000,000 P=5,000,000,000 10,000,000,000 P=5,000,000,000

Issued and outstanding:Balance at beginning of year 9,904,806,924 P=4,952,403,462 1,103,000,000 P=551,500,000Issuances (see Note 1) – – 8,801,806,924 4,400,903,462Balance at end of year 9,904,806,924 P=4,952,403,462 9,904,806,924 P=4,952,403,462

In December 2011, the Parent Company issued 397,908,895 and 397,908,894 of its unissuedcommon shares to STI ESG and CMA, respectively, via a private placement for an aggregatesubscription amount of P=477.5 million. Documentary stamp taxes paid relative to the issuances ofshares amounting to P=2.0 million is presented as deduction from additional paid-in capital.

The 795,817,789 private placement shares were approved for listing with the PSE on September28, 2012 subject to the fulfillment of certain conditions. On May 10, 2013, the SEC granted theParent Company’s request for exemptive relief from the requirements of the mandatory tenderoffer relative to the private placement transaction. On June 27, 2013, the PSE advised the ParentCompany to submit duly executed lock-up agreements to facilitate the listing of private placementshares. The lock-up agreements were executed on August 5, 2013 and were submitted to the PSEon August 7, 2013. The lock-up period expired on February 18, 2014.

On September 28, 2012, the Parent Company issued 5,901,806,924 shares to STI ESGstockholders in exchange for 907,970,294 STI ESG shares pursuant to the Share Swap transactionresulting to recognition of common stock of P=2,950.9 million, decrease in other equity reserve ofP=2,367.2 million and increase in non-controlling interests of P=25.3 million (see Notes 1 and 3).

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On November 7, 2012, the Parent Company issued 2,627,000,000 new shares relative to thePrimary Offering at P=0.90 per share following its listing in the PSE. The transaction resulted toincreases in common stock and APIC of P=1,313.5 million and P=1,050.8 million, respectively.

On November 28, 2012, the Parent Company issued the 273,000,000 Over-allotment Optionshares to UBS AG (see Note 1) resulting to recognition of common stock and APIC ofP=136.5 million and P=109.2 million, respectively.

Transaction costs incurred in connection with the issuance of shares, charged against APIC,amounted to P=118.5 million.

Set out below is the Parent Company’s track record of registration of its securities:

Date of ApprovalNumber of Shares Issue/

Offer PriceAuthorized IssuedDecember 4, 2007* 1,103,000,000 307,182,211 P=0.50November 25, 2011** 1,103,000,000 795,817,789 0.60September 28, 2012*** 10,000,000,000 5,901,806,924 2.22November 7, 2012 10,000,000,000 2,627,000,000 0.90November 28, 2012 10,000,000,000 273,000,000 0.90*** Date when the registration statement covering such securities was rendered effective by the SEC.*** Date when the Parent Company filed SEC form 10-1(k) (Notice of Exempt Transaction) with the SEC in accordance with the Securities Regulation Code and its

Implementing Rules and Regulations*** Date when the SEC approved the increase in authorized capital stock.

As of March 31, 2014 and 2013, the Parent Company has a total number of shareholders on recordof 1,245 and 1,243, respectively.

Cost of Shares Held by a SubsidiaryThis account includes 502,308,895 STI Holdings shares owned by STI ESG as of March 31, 2014and 2013 amounting to P=500.0 million which is treated as treasury shares in the consolidatedstatements of financial position. Dividends related to these shares, amounting to P=7.6 million andP=5.0 million, were offset against the dividends declared in 2014 and 2013, as shown in theconsolidated statement of changes in equity.

Other Comprehensive Income (Loss)

March 31, 2014Attributable toEquity Holders

of the ParentCompany

Non-controlling interests Total

Unrealized MTM loss on AFS financial assets(Notes 3 and 14) (P=525,048) (P=15,331) (P=540,379)

Share in associates’ unrealized MTM gain on AFSfinancial assets (Notes 3 and 12) 428,253,571 5,809,954 434,063,525

Cumulative actuarial gain 18,014,452 195,877 18,210,329Share in associates’ cumulative actuarial loss (15,003,756) (203,540) (15,207,296)

P=430,739,219 P=5,786,960 P=436,526,179

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March 31, 2013(As restated - see Note 2)

Attributable toEquity Holders



Unrealized MTM loss on AFS financial assets(Notes 3 and 14) P= (121,773) P= (9,416) P=(131,189)

Share in associates’ unrealized MTM gain on AFSfinancial assets (Notes 3 and 12) 1,905,291,022 24,882,689 1,930,173,711

Cumulative actuarial gain 21,253,817 277,567 21,531,384Share in associates’ cumulative actuarial loss (6,845,516) (89,400) (6,934,916)

P=1,919,577,550 P=25,061,440 P=1,944,638,990

April 1, 2012(As restated - see Note 2)

Attributable toEquity Holders



Unrealized MTM gain (loss) on AFS financialassets (Note 14) P=207,684 P= (14,713) P=192,971

Share in associates’ unrealized MTM gain on AFSfinancial assets (Note 12) 1,039,792,823 43,906,508 1,083,699,331

Cumulative actuarial loss (12,708,006) (536,611) (13,244,617)Share in associates’ cumulative actuarial gain 2,882,164 121,703 3,003,867

P=1,030,174,665 P=43,476,887 P=1,073,651,552

Other Equity ReserveThis 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 AmountIssuance of STI Holdings shares at par Capital stock P=2,950,903,462Recognition of non-controlling interests (NCI) Non-controlling interests 173,954,704Elimination of STI ESG common shares Capital stock (980,000,000)Elimination of STI ESG additional paid in capital Additional paid-in capital (379,937,290)Elimination of retained earnings of STI Holdings

prior to being under common control Retained earnings (24,004,083)Elimination of other comprehensive income of STI

Holdings prior to being under common control Other comprehensive income 119,472Transfer from STI ESG’s retained earnings to NCI

relative to amount attributed to minorityshareholders Retained earnings (74,108,762)

Transfer from STI ESG’s other comprehensiveincome to NCI relative to amount attributed tominority shareholders Other comprehensive income (44,748,649)

Elimination of investment of STI Holdings to STIESG prior to the Share Swap Available-for-sale financial assets 80,811,545

Reclassification of STI ESG’s investment in STIHoldings and elimination of STI ESG’s share innet income of STI Holdings

Investments in and advances toassociates and joint ventures 501,153,708

Cost of shares held by a subsidiary (500,009,337)Retained earnings (1,144,371)

Stock issue cost relative to the Share Swap 15,510,031P=1,718,500,430

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ii. Parent Company’s equity adjustment for the excess of acquisition cost over the carryingvalue of non-controlling interests in STI ESG, after reattribution of non-controllinginterests’ share in other comprehensive income to the equity holders of the ParentCompany, amounting to P=65.0 million P=69.1 million as of March 31, 2014 and 2013,respectively (see Note 3).

Retained EarningsConsolidated retained earnings represent STI ESG’s retained earnings, net of amount attributableto 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 associatesamounting to P=2,511.1 million and P=1,443.0 million as at March 31, 2014 and 2013, respectively.The Parent Company’s retained earnings available for dividend declaration, computed based onthe guidelines provided in the SEC Memorandum Circular No. 11, amounted to P=106.4 millionand P=11.2 million as at March 31, 2014 and 2013, respectively.

STI ESG’s BOD approved the appropriation amounting to P=800.0 million out of itsunappropriated retained earnings balance on December 7, 2011 for the Group’s future expansionof nine schools within the next two years. On August 29, 2013, STI ESG’s BOD approved thereversal of the amount to unappropriated retained earnings.

On September 4, 2013, cash dividends amounting to P=0.015144 per share or the aggregate amountof P=150.0 million were declared by the Parent Company’s BOD in favor of all stockholders onrecord as at September 18, 2013, payable on October 14, 2013.

On December 5, 2012, cash dividends amounting to P=0.01 per share or the aggregate amount ofP=99.0 million were declared by the Parent Company’s BOD in favor of all stockholders on recordas of December 19, 2012, payable on December 28, 2012.

On October 13, 2011, cash dividends amounting to P=0.02 per share or the aggregate amount ofP=6.1 million were declared by the Parent Company’s BOD in favor of all stockholders on recordas of November 11, 2011, payable on December 8, 2011.

As of March 31, 2014 and 2013, long outstanding unclaimed dividends amounting toP=11.8 million pertains to dividend declarations from 1998 to 2006.

Dividends Declared by Noncontrolling InterestDividends declared by subsidiaries to non-controlling interest owners amounted to P=11.0 million,P=2.0 million and P=72.0 million for the year ended March 31, 2014, 2013 and 2012, respectively.

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19. Interest Income and Interest Expense

Interest income is derived from the following sources:

2014 2013 2012Cash and cash equivalents (see Note 6) P=10,997,206 P=18,975,999 P=9,750,825Advances to associates and joint ventures

(see Note 27) 925,114 2,608,782 2,020,625Past due accounts receivables (see Note 7) 277,259 412,772 31,951Noncurrent receivables (see Note 27) – 12,726,335 3,725,489Restructured receivables – – 560,995Accretion of discount on refundable deposits

(see Note 15) – – 108,348P=12,199,579 P=34,723,888 P=16,198,233

Interest expenses are incurred from the following sources:

2014 2013 2012Long-term debts (see Note 16) P=6,518,855 P=– P=–Short-term loans (see Note 16) 3,090,411 17,320,345 32,533,323Obligations under finance lease (see Note 25) 1,317,531 1,511,021 1,332,121

P=10,926,797 P=18,831,366 P=33,865,444

20. Cost of Educational Services


2014 2013 2012Faculty salaries and benefits

(see Notes 23 and 24) P=238,054,539 P=190,101,113 P=192,126,640Cost of student activities 92,718,562 101,543,377 91,731,260Rental (see Note 25) 87,691,656 95,083,498 97,054,973Depreciation and amortization

(see Note 10) 110,553,121 87,088,146 79,229,573Courseware development 6,444,628 1,525,885 3,205,510Others 17,557,479 10,068,037 18,508,740

P=553,019,985 P=485,410,056 P=481,856,696

21. Cost of Educational Materials and Supplies Sold


2014 2013 2012Educational materials P=32,565,707 P=25,659,453 P=18,467,803Promotional materials 11,837,412 13,076,515 11,384,345School materials and supplies 7,557,627 9,105,552 8,675,101Others 1,380,934 1,648,119 1,009,953

P=53,341,680 P=49,489,639 P=39,537,202

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22. General and Administrative Expenses


2013 20122014 (As restated - see Note 2)

Salaries, wages and benefits(see Notes 23, 24 and 27) P=242,730,816 P=224,270,503 P=215,934,947

Light and water 99,131,497 93,622,687 87,728,365Depreciation and amortization

(see Notes 10 and 11) 94,998,853 69,342,633 65,220,778Taxes and licenses 34,939,382 68,800,958 28,325,491Rental (see Note 25) 48,869,422 48,232,708 48,161,313Professional fees 48,854,457 39,097,439 34,396,335Provision for (reversal of) impairment loss on:

Receivables (see Note 7) 57,648,376 34,534,038 40,994,410Investments in and advances to associates

and joint ventures (see Note 12) (719,873) 4,120,636 3,047,124Goodwill (see Note 15) – – 3,383,556

Outside services 58,037,324 34,263,759 27,277,269Advertising and promotions 23,092,713 21,168,920 18,466,455Transportation 25,204,879 21,158,560 21,079,158Meetings and conferences 15,874,352 13,438,035 14,129,561Entertainment, amusement and recreation 14,997,531 12,078,133 9,980,928Office supplies 13,029,334 10,235,845 8,637,864Repairs and maintenance 11,786,754 9,430,056 9,745,033Communication 9,812,693 7,565,325 7,410,537Purchased services and utilities 6,049,955 6,099,640 7,438,820Insurance 5,450,574 4,515,053 4,234,335Excess of cost over net realizable value of

inventories (see Note 8) 2,420,456 246,168 679,052Others 26,300,906 23,107,628 31,990,747

P=838,510,401 P=745,328,724 P=688,262,078

Share Swap and follow-on offering expenses in 2013, included as part of “General andadministrative expenses”, amounted to P=50.4 million.

23. Personnel Costs



Salaries and wages P=414,814,263 P=344,045,511 P=348,679,602Pension expense (see Note 24) 10,133,891 19,256,756 5,151,804Other employee benefits (see Note 27) 55,837,201 51,069,349 54,230,181

P=480,785,355 P=414,371,616 P=408,061,587

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24. Pension Liabilities

Defined Benefit PlansThe Group (except De Los Santos - STI College and STI-QA) has separate, noncontributory,defined benefit retirement plans covering substantially all of its faculty and regular employees.The benefits are based on the faculties’ and employees’ salaries and length of service.

Under the existing regulatory framework, RA No. 7641 requires a provision for retirement pay toqualified private sector employees in the absence of any retirement plan in the entity, providedhowever that the employee’s retirement benefits under any collective bargaining and otheragreements shall not be less than those provided under the law. The law does not requireminimum funding of the plan.

Retirement benefits are payable in the event of termination of employment due to: (i) early,normal, or late retirement; (ii) physical disability; (iii) voluntary resignation; or (iv) involuntaryseparation from service. For plan members retiring under normal, early or late terms, retirementbenefit is equal to a percentage of final monthly salary for every year of credited service.

In case of involuntary separation from service, benefit is determined in accordance with theTermination Pay provision under the Philippine Labor Code or similar legislation on involuntarytermination.

The funds are administered by a trustee bank under the supervision of the Board of Trustees of theplan. The Board of Trustees is responsible for investment of the assets. It defines the investmentstrategy as often as necessary, at least annually, especially in the case of significant marketdevelopments or changes to the structure of the plan participants. When defining the investmentstrategy, it takes account of the plans’ objectives, benefit obligations and risk capacity. Theinvestment strategy is defined in the form of a long-term target structure (Investment policy). TheBoard of Trustees delegates the implementation of the Investment policy in accordance with theinvestment strategy as well as various principles and objectives to an Investment Committee,which also consists of members of the Board of Trustees, a Director and the Chief Finance Officer(CFO). The CFO oversees the entire investment process.

The following tables summarize the components of the Group’s net pension costs recognized inprofit or loss and amounts recognized in the consolidated statements of financial position:

2014

2013(As restated -

see Note 2)Pension expense (recognized under the “Salaries,

wages and benefits” account):Current service cost P=10,382,377 P=10,972,534Net interest cost (627,573) 934,297

P=9,754,804 P=11,906,831

Pension liabilities (recognized in the consolidatedstatements of financial position):Present value of defined benefit obligations P=137,381,189 P=107,466,613Fair value of plan assets (76,505,921) (85,046,505)

P=60,875,268 P=22,420,108

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2014

2013(As restated -

see Note 2)

Changes in the present value of defined benefitobligations:Balance at beginning of year 107,466,613 84,147,605Effect of business combination (see Note 3) 46,399,488 –Current service cost 10,382,377 10,972,534Interest cost 2,031,669 4,592,186Benefits paid (7,590,094) (20,928,160)Actuarial loss (gain) on obligations (21,308,864) 28,682,448Balance at end of year P=137,381,189 P=107,466,613

Changes in the fair value of plan assets:Balance at beginning of year P=85,046,505 P=29,373,472Effect of business combination (see Note 3) 1,565,732 –Contributions 19,865,810 5,620,855Return on plan assets 2,659,242 3,657,889Benefits paid (7,590,094) (20,928,160)Actuarial gain (loss) on plan assets (25,041,274) 67,322,449Balance at end of year P=76,505,921 P=85,046,505

Actual return (loss) on plan assets (P=20,850,191) P=71,192,302

The principal assumptions used in determining pension liabilities are shown below:

April 1, 2013 April 1, 2012 April 1, 2011Discount rate 3.04–7.90% 3.00–8.00% 5.00–11.00%Future salary increases 5.00–8.00% 5.00–8.00% 6.00–8.00%

The maximum economic benefit available is a combination of expected refunds from the plan andreductions in future contributions.

The major categories of the Group’s total plan assets as a percentage of the fair value of the totalplan assets are as follows:

2014 2013Cash 30% 14%Investment in debt securities 5% 4%Investments in equity securities 65% 82%

100% 100%

The plan assets of the Group are maintained by Union Bank of the Philippines, United CoconutPlanters Bank and Rizal Commercial Banking Corporation.

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Details of STI ESG’s net assets available for plan benefits and their related market values are asfollows:

2014 2013Cash P=10,858,828 P=–Short-term fixed income 14,736,492 12,329,338Investments in government securities 4,716,657 3,043,165Investments in equity securities 46,178,969 69,674,002Others 14,975 –

P=76,505,921 P=85,046,505

Short-term Fixed Income. Short-term fixed income investment includes time deposits and specialsavings deposits.

Medium and Long-term Fixed Income. Investments in medium and long-term fixed income whichinclude Philippine peso-denominated bonds, such as government securities whose maturities rangefrom 1 to 25 years with interest rates ranging from 2.75% to 6.38%.

Investments in Government Securities. Investments in government securities include treasury billsand fixed-term treasury notes with maturities ranging from one to thirteen years and bear interestrates ranging from 5.9% to 9.0%. These securities are fully guaranteed by government of theRepublic of the Philippines.

The overall expected rate of return on plan assets is determined based on the market pricesprevailing on that date, applicable to the period over which the obligation is expected to be settled.

The plan may expose the Group to a concentration of equity market risk since the Group’s planassets are primarily composed of investments in listed equity securities.

The management performed an Asset-Liability Matching Study (ALM) annually. The overallinvestment policy and strategy of the Group’s defined benefit plans is guided by the objective ofachieving an investment return which, together with contributions, ensures that there will besufficient assets to pay pension benefits as they fall due while also mitigating the various risk ofthe plans. The Group’s current strategic investment strategy consists of 65% of equityinstruments, 5% of debt instruments and 30% cash.

The average duration of the defined benefit obligation at the end of the period is 22 years.

Shown below is the maturity analysis of the undiscounted benefit payments:

AmountLess than one year P=20,324,738More than one year to five years 24,330,827More than five years to 10 years 49,580,356More than 10 years to 15 years 105,040,687More than 15 years to 20 years 144,729,170

The expected contribution of the Group in 2015 is P=10.9 million.

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The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the defined benefit obligation (DBO) as of the end of the reportingperiod, assuming all other assumptions were held constant:

Increase(decrease)

Present Value ofDBO

Discount rates 1.00% (P=15,030,045)(1.00%) 15,233,234

Future salary increases 1.00% 15,233,234(1.00%) (15,030,045)

Employee turnover 10.00% (2,123,774)(10.00%) 2,123,774

Defined Contribution PlansDe 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 participatingemployer in CEAP Retirement Plan. The De Los Santos Plan has a defined contribution formatwherein the obligation is limited to specified contributions to the De Los Santos Plan and theemployee’s contribution is optional.

De Los Santos - STI College and STI-QA’s contributions consist of future service cost and pastservice cost. Future service cost is equal to 4.00% of employee’s monthly salary from the date anemployee 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 pastservice amortized over 10 years. Future service refers to the periods of covered employment on orafter the date of De Los Santos - STI College and STI-QA’s participation in CEAP. Past servicerefers to the continuous service of an employee from the date employee met the requirements formembership in the retirement plan to the date of acceptance of De Los Santos - STI College andSTI-QA as a Participating Employer in CEAP Retirement Plan. In addition, De Los Santos - STICollege and STI-QA give the employee an option to make a personal contribution to the fund at anamount not to exceed 4.00% of his monthly salary. De Los Santos - STI College and STI-QAthen provide an additional contribution of 1.00% of the employee’s contribution based on thelatter’s years of tenure. Although the De Los Santos Plan has a defined contribution format, theGroup regularly monitors compliance with RA 7641. As at March 31, 2014 and 2013, the Groupis in compliance with the requirements of RA 7641.

As at March 31, 2014 and 2013, De Los Santos -STI College and STI-QA have excesscontributions to CEAP amounting to P=3.2 million and P=3.6 million, respectively (see Note 9).These excess contributions are classified as prepaid expense and will be offset against De LosSantos -STI College and STI-QA’s future required contributions to CEAP.

In 2012, De Los Santos - STI College offered an early retirement program to its employees evenwhen 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 Collegerecognized the payments as part of pension expense amounting to P=1.6 million in 2012.

Pension expense recognized by De Los Santos - STI College and STI-QA in 2014, 2013 and 2012,shown as part of “Cost of educational services” and “General and administrative expenses”accounts, amounted to P=0.4 million, P=7.3 million and P=2.8 million, respectively.

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Total pension expense recognized in profit or loss follows:2013 2012

2014 (As restated - see Note 2)Defined benefit plans P=9,754,804 P=11,906,831 P=2,391,707Defined contribution plans 379,087 7,349,924 2,760,097

P=10,133,891 P=19,256,755 P=5,151,804

25. Leases

a. Finance Lease

The Group acquired various transportation equipment under various finance leasearrangements. These are included as part of transportation equipment under the “Property andequipment” account in the consolidated statements of financial position.

Future annual minimum lease payments under the lease agreements, together with the presentvalue of the minimum lease payments as at financial reporting date follow:

2014 2013 2012Within one year P=8,617,060 P=8,216,385 P=8,521,931After one year but not more than five years 14,466,643 14,205,559 16,273,590Total minimum lease payments 23,083,703 22,421,944 24,795,521Less amount representing interest 4,217,606 2,662,886 6,097,919Present value of lease payments 18,866,097 19,759,058 18,697,602Less current portion of obligations under

finance lease 7,435,444 6,419,251 9,741,235Noncurrent portion of obligations under

finance lease P=11,430,653 P=13,339,807 P=8,956,367

Interest incurred from finance lease amounted to P=1.3 million, P=1.5 million and P=1.3 millionin 2014, 2013 and 2012, respectively (see Note 19).

b. Operating Lease

As LessorThe Group entered into several lease agreements, as lessors, on their buildings under operatinglease agreements with varying terms and periods. All leases are subject to annual repricingbased on a pre-agreed rate. Total rental income amounted to P=10.8 million, P=4.6 million andP=5.4 million in 2014, 2013 and 2012, respectively (see Notes 11 and 27).

Future minimum rental receivable for the remaining lease terms as at financial reporting datefollow:

2014 2013 2012Within one year P=3,888,786 P=1,195,760 P=467,692After one year but not more than five years 2,714,374 4,248,000 18,303,132Total P=6,603,160 P=5,443,760 P=18,770,824

As LesseeThe Group lease land and building spaces, where the corporate office, schools, and warehouseare located, under operating lease agreements with varying terms and periods. The lease rates

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are subject to annual repricing based on a pre-agreed rate. Total rental expense charged tooperations amounted to P=136.6 million, P=143.3 million and P=145.2 million for the years endedMarch 31, 2014 and 2013 and April 1, 2012, respectively (see Notes 20 and 22).

Certain subsidiaries also paid its lessors refundable deposits equivalent to several months ofrental payments as security for its observance and faithful compliance with the terms andconditions of the agreement (see Notes 9 and 15).

Future minimum rental payables under the lease agreements as at financial reporting datefollow:

2014 2013 2012Within one year P=184,313,624 P=99,988,542 P=54,895,288After one year but not more than five years 435,951,409 291,361,404 97,999,009After five years and onwards 345,719,361 133,723,061 141,389,342Total P=965,984,394 P=525,073,007 P=294,283,639

26. Income Tax

Except for STI-UWI, all domestic subsidiaries qualifying as private educational institutions aresubject to tax under RA No. 8424, “An Act Amending the National Internal Revenue Code, asamended, and For Other Purposes” which was passed into law effective January 1, 1998. Title IIChapter 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 privateindividuals or groups with an issued permit to operate from DepEd, or CHED, or TESDA, as thecase may be, in accordance with the existing laws and regulations and shall pay a tax of tenpercent (10.00%) on its taxable income.

The components of recognized deferred tax assets and liabilities are as follows:

March 31,2014

March 31,2013


Net deferred tax assets:Gain on constructive sale of land held for swap P=17,213,717 P=–Allowance for doubtful accounts 7,453,869 4,251,262Pension liabilities 5,812,161 2,230,932Excess of:

Cost over net realizable value of inventories 1,025,741 783,695Rental under operating lease computed on a

straight-line basis 734,310 879,814Unearned tuition and other school fees 853,351 482,108Others 10,828 –

33,103,977 8,627,811Accrued rent – (122,237)

33,103,977 8,505,574Deferred tax liability -

Excess of fair values over carrying values of netassets acquired in business combination 127,967,442 –

(P=94,863,465) P=8,505,574

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Certain deferred tax assets of subsidiaries were not recognized as at March 31, 2014 and 2013 as itis 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 whichno deferred tax assets were recognized:

2014 2013 2012NOLCO P=80,683,803 P=76,012,347 P=52,067,934Allowance for doubtful accounts 31,090,994 30,019,589 12,902,776Pension liabilities 2,753,658 1,947,714 3,537,685Acquisition-related expenses 4,773,584 – –Unearned tuition and other school fees 1,088,154 521,326 –MCIT 740,309 454,137 112,243Excess of:

Cost over net realizable valueof inventories 194,274 194,274 194,274

Rental under operating lease computedon a straight-line basis – 1,356,488 2,325,252

Unrealized foreign exchange losses 145,604 2,541 2,849Provision for impairment loss – – 1,709,044Others 273,900 1,034,481 2,078,213

P=121,744,280 P=111,542,897 P=74,930,270

As at March 31, 2014, the Group also did not recognize any deferred tax assets on the provisionfor impairment losses on investment in and advances to an associate and goodwill aggregating toP=4.1 and P=1.0 million, respectively, because management does not expect to generate enoughcapital gains against which these capital losses can be offset.

The details of the Group’s NOLCO, which can be claimed as deduction from future taxableincome, are as follows:

Year Incurred Expiry Dates Beginning AdditionApplied/Expired End

December 31, 2010 December 31, 2013 P=13,987,456 P=– P=13,987,456 P=–March 31, 2011 March 31, 2014 10,001,279 – 10,001,279 –December 31, 2011 December 31, 2014 2,613,791 – – 2,613,791March 31, 2012 March 31, 2015 17,323,404 – – 17,323,404December 31, 2012 December 31, 2015 3,747,181 – – 3,747,181March 31, 2013 March 31, 2016 28,339,236 – – 28,339,236December 31, 2013 December 31, 2016 – 1,382,082 – 1,382,082March 31, 2014 March 31, 2017 – 27,278,109 – 27,278,109

P=76,012,347 P=28,660,191 P=23,988,735 P=80,683,803

The details of the Group’s excess MCIT over RCIT, which can be claimed as deduction fromfuture tax payable, are as follows:

Year Incurred Expiry Date Beginning

Addition(Applied/Expired) End

March 31, 2011 March 31, 2014 P=18,628 (P=18,628) P=–March 31, 2012 March 31, 2015 56,782 – 56,782March 31, 2013 March 31, 2016 378,727 – 378,727March 31, 2014 March 31, 2017 – 304,800 304,800

P=454,137 P=286,172 P=740,309

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The reconciliation of the provision for income tax on income before income tax computed at theeffect of the applicable statutory income tax rate to the provision for income tax as shown in theconsolidated statements of comprehensive income is summarized as follows:


Provision for income tax at statutoryincome tax rate P=212,567,025 P=251,218,114 P=97,105,813

Income tax effects of:Equity in net losses (earnings) of

associates and joint ventures (69,845,555) (128,475,582) 11,272,299Nondeductible expenses 17,906,494 8,069,513 7,585,677Loss on deemed sale of an investment in

an associate 12,900,087 – –Excess of fair values of net assets

acquired over acquisition costs (9,804,323) – –Gain on sale of investment in associate – – (1,512,015)Others (4,131,908) (2,710,785) (17,601,237)

Difference in 10% and 30% tax rate (106,232,937) (85,148,356) (64,623,212)P=53,358,883 P=42,952,904 P=32,227,325

Others pertain to the income tax effects of income subject to final tax, change in unrecognizeddeferred tax assets, expired NOLCO and MCIT and other items.

27. Related Party Transactions

Parties are considered to be related if one party has the ability to control the other party or exercisesignificant influence over the other party in making financial and operating decisions. Thisincludes: (a) enterprises or individuals owning, directly or indirectly through one or moreintermediaries, 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 thecompany 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 suchenterprise or individual.

The following are the Group’s transactions with its related parties:

Amount/Volume

OutstandingBalance

Receivable(Payable)

CategoryMarch 31,

2014March 31,

2013March 31,

2012March 31,

2014March 31,

2013 Terms Conditions

AssociatesSTI Investments

Advances for workingcapital requirements

P=– P=– P=5,946,690 P=– P=– 30 days upon receipt of billings;Noninterest-bearing

Unsecured;no impairment

GROW Advances for various

expenses3,933,836 – – 4,077,408 143,572 30 days upon receipt of billings

but no intention to collectwithin one year; Noninterest-bearing


Rental and related charges 2,834,199 43,936 – 5,259,339 8,093,538 30 days upon receipt of billingsbut no intention to collectwithin one year; Noninterest-bearing


(Forward)

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Amount/Volume

OutstandingBalance

Receivable(Payable)

CategoryMarch 31,

2014March 31,

2013March 31,

2012March 31,

2014March 31,


De Los Santos - STIMegaclinicAdvances for various

expenses and workingcapital

P=31,061,257 P=– P=– P=3,682,180 P=34,743,437 Payable in 5 years; bears 6.50%interest


Interest income 2,608,782 2,020,625 –

STI-AlabangAdvances for various

expenses and workingcapital

216,000 – – – 216,000 30 days upon receipt of billings;Noninterest-bearing


STI-AccentAdvances for various

expenses and othercharges

8,590,000 10,365,820 3,047,124 35,923,762 27,333,762 30 days upon receipt of billingsbut no intention to collectwithin one year; Noninterest-bearing

Unsecured;withimpairment

OthersAdvances for variousexpenses

4,596,630 – – 4,596,630 – 30 days upon receipt of billings;Noninterest-bearing

Unsecured; noimpairment

Joint VenturePHEI

Management fees 600,000 3,025,815 3,475,103 200,000 600,000 30 days upon receipt of billings;Noninterest-bearing


AffiliatesPhilippine Women’s

University (PWU)*Principal – 26,470,915 223,529,085 250,000,000 250,000,000 To be settled by way of

assignment of investments inshares

Secured;no impairment

Interest – 9,189,946 3,725,489 12,651,546 12,651,546

UNLAD*Principal – 198,000,000 – 198,000,000 198,000,000 To be settled by way of equity

conversionSecured;

no impairment

Interest – 3,536,389 – 3,327,389 3,327,389

CMA**Rentals and related

charges– – – 58,830 58,830 30 days upon receipt of billings;

Noninterest-bearingUnsecured;

no impairment

Comm & Sense, Inc**.Rentals and related

charges134,590 138,466 57,764 282,197 147,607 30 days upon receipt of billings;


no impairment

Phil First Condominium, Inc. **Rentals and related

charges12,447,228 80,704 – (1,023,915) 6,074 30 days upon receipt of billings;


no impairment

Phil First Insurance Co.,Inc. **Rentals and related

charges16,729 – – 168,922 185,651 30 days upon receipt of billings;


no impairment

Employee benefits – 6,716,054 3,484,752 – (407,670) 30 days upon receipt of billings;Noninterest-bearing

Unsecured

PhilCare**Rentals and related

charges49,959 1,314,992 902,776 309,844 259,885 30 days upon receipt of billings;

Noninterest-bearingUnsecured; no

impairment

Employee benefits 4,808 7,278,847 4,350,433 – –

PhilPlans**Rentals and related

charges– 593,863 967,511 113,521 113,521 30 days upon receipt of billings;


impairment

Banclife**Rentals and related

charges163,985 359,863 243,975 15,926 179,911 30 days upon receipt of billings;


no impairmentEmployee benefits – 142,660 113,600 – –

(Forward)

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Amount/Volume

OutstandingBalance

Receivable(Payable)

CategoryMarch 31,

2014March 31,

2013March 31,

2012March 31,

2014March 31,


Ventures Securities**Rentals and related

chargesP=– P=– P=– P=36,465 P=36,465 30 days upon receipt of billings;


impairment

Classic Finance**Availment of short-term

loan– 160,000,000 – – – 1 year; interest-bearing Unsecured

Interest expense – 2,442,736 – – –

Officers and employeesAdvances for various

expenses7,269,928 38,694,691 36,492,764 25,024,703 22,592,828 Liquidated within one month;


no impairmentP=542,704,747P=558,282,346

*Entities under common management**Entities under common control

Outstanding receivables, before any allowance for impairment, and payables arising from thesetransactions are summarized below:

March 31,2014

March 31,2013

Noncurrent receivables P=463,978,935 P=463,978,935Advances to associates and joint ventures (see Note 12) 36,123,762 52,689,744Advances to officers and employees (see Note 7) 25,024,703 22,592,828Current portion of advances to associates, joint ventures and other

related parties (see Note 7) 12,356,218 11,419,489Rent and other related receivables (see Note 7) 6,245,044 8,009,020Accounts payable (see Note 17) (1,023,915) (407,670)

P=542,704,747 P=558,282,346

Other information on major transactions with related parties follows:

a. Agreements with Philippine Women’s University (“PWU”), UNLAD Resources DevelopmentCorporation (“UNLAD”) and an unrelated individual (“Individual”)

In November 2011, the Parent Company acceded to a joint venture agreement and ashareholders’ agreement by and amongst PWU, UNLAD, an Individual and Mr. Eusebio H.Tanco, STI Holdings’ BOD Chairman, for the formation of a strategic arrangement withregard 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 companycontrolled by the Benitez Family and has some assets which are used to support theeducational thrust of PWU.

Pursuant to the Agreement, the Parent Company acquired PWU’s debt (the “Receivable fromPWU”) from PWU’s creditor bank, together with all of the bank’s rights to the underlyingcollateral and security, for the amount of P=223.5 million, on a without recourse basis, inNovember 2011. Likewise in accordance with the Agreement, the Parent Company is obligedto extend: (a) a direct loan to PWU in the amount of P=26.5 million (the “Loan to PWU”) and(b) a loan to UNLAD in the amount of P=198.0 million (the “Loan to UNLAD”). TheReceivable from PWU and the Loan to PWU aggregating to P=250.0 million shall be securedby the PWU Indiana Property and PWU Taft Property while the Loan to UNLAD shall besecured by the PWU Quezon City Property, UNLAD Davao Property and UNLAD QuezonCity Property.

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The Receivable from PWU and Loan to PWU, inclusive of 5% interest per annum, shall beaccrued and paid by way of the assignment by PWU of its shares in UNLAD (which PWUwill 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 equityin UNLAD to enable the Parent Company to acquire, together with the shares assigned byPWU to the Parent Company as payment for the Receivable from PWU and Loan to PWU, atotal of forty percent (40%) equity in UNLAD.

On May 17, 2012, the Individual, who’s a party to the Agreement with the Parent Company,PWU and UNLAD, assigned his rights, title and interest in the Agreement to AttenboroughHoldings Corporation (“AHC”). AHC thereby assumed the Individual’s obligation to grant aloan to UNLAD in the principal amount of P=224.0 million (the “AHC Loan to UNLAD”).Pursuant to the agreement, the Parent Company and AHC (collectively referred to as the“Lenders”) agreed to lend UNLAD a principal amount of P=422.0 million consisting of theParent Company’s loan to UNLAD (“Loan to UNLAD”) and the AHC Loan to UNLAD.Accordingly, on June 8, 2012, the Parent Company entered into an Omnibus Agreement withUNLAD and AHC (“Omnibus Agreement”) which consisted of: (1) a prefatory agreement; (2)a loan agreement; and (3) a real estate mortgage.

Under said loan agreement, the Lenders will extend a loan to UNLAD which is payable byway of conversion into equity in UNLAD. Said conversion into equity in UNLAD mustenable: (a) the Parent Company to acquire, together with the shares acquired by it as paymentof the Parent Company's Loan to PWU, 40.0% of the issued and outstanding capital stock ofUNLAD, as discussed above; and (b) AHC to acquire 20.0% of UNLAD’s issued andoutstanding capital stock.

In June 2012, the Parent Company extended the direct loan to PWU amounting toP=26.5 million in accordance with the Agreement, while in August and October 2012, theParent Company granted the Loan to UNLAD amounting to P=166.0 million and P=32.0 million,respectively.

On March 25, 2013, the joint venture agreement and Omnibus Agreement have been amendedto discontinue imposition of interest on the Loan to PWU, Loan to UNLAD and AHC Loan toUNLAD effective January 1, 2013.

As of March 31, 2014 and 2013, noncurrent receivables consist of loans of P=448.0 million andaccrued interest of P=16.0. Interest income in 2013 amounted to P=12.7 million (see Note 19).

As of March 31, 2014 and 2013, the equity interest in UNLAD has not been assigned to theParent Company in exchange for the receivables from PWU and the Loan to UNLAD. The saidreceivables from PWU and the Loan to UNLAD are presented as “Noncurrent receivables” in theconsolidated statements of financial position.

Currently, the Parent Company is working on the submission of all required documents toeffect the conversion of these receivables into equity. The Parent Company has nominated itsrepresentatives as directors/trustees and officers of PWU and UNLAD.

b. Land held for Swap

As discussed in Note 15, STI ESG’s BOD approved the transfer of the land to TechZone, acompany under common control with the Group, in exchange for condominium units to bedeveloped by TechZone. Subsequent to the transfer, the land was reclassified as “Deposit for

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condominium units” under the “Goodwill and other noncurrent assets” account in theconsolidated statements of financial position.

Compensation and Benefits of Key Management Personnel of the Group


Short-term employee benefits P=28,970,705 P=22,191,822 P=21,444,985Post-employment benefits 1,436,336 1,809,718 1,048,982

P=30,407,041 P=24,001,540 P=22,493,967

28. Basic and Diluted Earnings Per Share on Net Income Attributed to Equity Holdersof STI Holdings

The table below shows the summary of net income and weighted average number of commonshares outstanding used in the calculation of earnings per share for the year ended March 31, 2014and 2013:


Net income attributable to equity holdersof STI Holdings P=681,123,230 P=777,415,889 P=287,028,095

Common shares outstanding atbeginning of period 9,904,806,924 7,004,806,924 307,182,211

Weighted average number of:5,901,806,924 shares issued -

Share Swap (see Note 2) – – 5,901,806,924795,817,789 shares issued

on November 24, 2011 – – 276,900,9842,627,000,000 shares issued on

November 7, 2012 – 1,039,252,747 –273,000,000 shares issued on

November 28, 2012 – 92,250,000 –Weighted average number of common shares 9,904,806,924 8,136,309,671 6,485,890,119

Basic and diluted earnings per share on netincome attributed to equity holders ofSTI Holdings P=0.069 P=0.096 P=0.044

The basic and diluted earnings per share are the same for the years ended March 31, 2014, 2013and 2012 as there are no dilutive potential common shares.

29. Contingencies and Commitments

Contingencies

a. STI ESG filed a petition for review with the Court of Tax Appeals (CTA) on October 12,2009. This is to contest the Final Decision on Disputed Assessment issued by the BIRassessing STI ESG for deficiencies on income tax, and expanded withholding tax for the yearended March 31, 2003 amounting to P=124.3 million. On February 20, 2012, STI ESG rested

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its case and its evidence has been admitted into the records. On June 27, 2012, the BIR restedits case and has formally offered its evidence. On April 17, 2013, the CTA issued a Decisionwhich granted STI ESG’s petition for review and ordered a cancellation of the said BIR’sassessment since the right to issue an assessment for the alleged deficiency taxes had alreadyprescribed. On May 16, 2013, STI ESG received a copy of the Commissioner of InternalRevenue’s (CIR) Motion for Reconsideration dated May 8, 2013. STI ESG filed its Commentto CIR’s Motion for Reconsideration on June 13, 2013. On August 22, 2013, the CIR filed itsPetition for Review dated August 16, 2013, with the CTA en banc. On October 29, 2013, STIESG filed its Comment to the CIR’s Petition for Review. The CTA en banc deemed the casesubmitted for decision on May 19, 2014, considering the CIR’s failure to file itsmemorandum. As at July 9, 2014, the case is still for decision by the CTA en banc.

b. A case for illegal dismissal, previously filed by a group of former employees of a schoolowned by STI ESG, was terminated in favor of STI ESG with the finality of the decision ofthe Supreme Court dated April 16, 2010 denying the claimants’ Petition for Review onCertiorari. Said Petition for Review sought, among others, to assail the decisions of both theCourt of Appeals and National Labor Relations Commission (NLRC) finding that no illegaldismissal was committed by STI ESG upon said former employees.

Also, STI ESG is waiting for the resolution of the Supreme Court of a Petition for Review onCertiorari filed by a former employee for constructive dismissal. The former employee filedsaid Petition with the Supreme Court after both the Court of Appeals and NLRC denied herclaims and rendered prior decisions in favor of STI ESG.

c. Due to the nature of STI ESG’s business, it is involved in various legal proceedings, both asplaintiff and defendant, from time to time. The majority of outstanding litigation involvesillegal dismissal cases under which faculty members have brought claims against STI ESG byreason of their faculty contract. Except as discussed in (d), STI ESG is not engaged in anylegal or arbitration proceedings (either as plaintiff or defendant), including those which arepending or known to be contemplated and its BOD has no knowledge of any proceedingspending or threatened against STI ESG or its franchises or any facts likely to give rise to anylitigation, claims or proceedings which might materially affect its financial position orbusiness. Management and its legal counsels believe that STI ESG has substantial legal andfactual bases for its position and is of the opinion that losses arising from these legal actionsand proceedings, if any, will not have a material adverse impact on STI ESG’s consolidatedfinancial position and results of operations.

d. STI ESG is likewise contingently liable for lawsuits or claims filed by third parties, includinglabor-related cases, which are pending decision by the courts, the outcome of which are notpresently determinable.

e. Other subsidiaries also stand as defendant of various lawsuits and claims filed by their formeremployees. The complainants are seeking payment of damages such as backwages andattorney’s fees. As at July 9, 2014, the cases are pending before the Labor Arbiter.

Management and their legal counsels believe that the outcome of these cases will not have asignificant impact on the consolidated financial statements.

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Commitments

a. Financial Commitments

STI ESG has a P=50.0 million domestic bills purchase line from a local bank specifically forthe purchase of local and regional clearing checks. Interest on drawdown from such facility iswaived except when drawn against returned checks, to which the interest shall be theprevailing lending rate of such local bank. The terms of such facility include, among others,the continuing suretyship of the major shareholder.

As at March 31, 2014, the Group has P=3.0 billion of undrawn committed borrowing facilitiesrelated to its Credit Facility Agreement with Chinabank (see Note 16).

b. Capital Commitments

The Group has contractual commitments and obligations for the construction of the schoolbuildings and improvements in Batangas, Calamba, Quezon City and Lucena aggregating toP=1,057.2 million as at March 31, 2014.

The Group has contractual commitments and obligations for the construction of the schoolbuildings and improvements in STI-Kalookan and STI-Ortigas-Cainta aggregatingP=1,057.2 million as at March 31, 2013.

c. Other Matters

i) The Group, as an educational institution, is subject to CHED Memorandum Order No. 13,Series of 1998, otherwise known as the “Guidelines on the Procedure to be Followed byHigher Education Institutions (HEIs) Intending to Increase Their Tuition Fees, EffectiveSchool Year 1998–2000,” which states that 70.00% of the proceeds derived from thetuition fee increase for the current school year should be used for the payment of increasein salaries and wages, allowances and other benefits of its teaching and non-teachingpersonnel and other staff, except those who are principal stockholders of the HEIs.

On April 21, 2014, WNU filed a Petition for Certiorari with an application for theissuance of temporary restraining order and preliminary injunction against the CHED withthe Regional Trial Court of Quezon City.

The Petition was filed in response to the Order dated January 6, 2014 issued by Atty.Julito Vitriolo, CHED’s Executive Director, which affirmed/executed the ClosureOrder(s) dated July 19, 2011 and April 26, 2013 of WNU’s Bachelor of Science in MarineTransportation (“BS MT”) and Bachelor of Science in Maritime Engineering (“BSMarE”) degrees.

In the said Order , CHED resolved: (1) to allow WNUs existing students enrolled prior tothe issuance of the denial of its Motion for Reconsideration, Academic Year (AY) 2012-2013, to complete and graduate their Bachelor of Science in Marine Transportation(BSMT) and Bachelor of Science in Maritime Engineering (BS MarE) degrees in WNU;(2) WNU shall be directed to submit a complete list of the students enrolled as of AY2012-2013; and (3) effective AY 2013-2014, WNU offering of maritime programs shallbe considered to have shifted to a rating school and shall be recognized as a pilot maritimetechnical school in Western Visayas with 2-3 year “non-officer maritime program” andthat students admitted in WNU’s maritime programs effective AY 2013-2014 shall not be

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considered to have enrolled in degree program but only in a “non-officer maritimeprogram” of WNU.

The issues presented in the Petition filed by WNU are as follows: (a) the April 26, 2013Order denying WNU’s Motion for Reconsideration of the July 11, 2011 Closure Orderwas issued despite full compliance by WNU on the required areas for evaluation ofWNU’s Maritime Programs; (b) the January 6, 2014 Order did not resolve nor mention thestatus of the Verified Appeal filed on June 7, 2013; (c) the January 6, 2014 Orderdowngrading WNU’s BS MT and BS MarE did not provide guidelines for itsimplementation; (d) the shifting of the enrollees/students for AY 2013-2014 from arating/degree program to a pilot non officer program/certification will cause grave andirreparable damage on the part of the affected students; (e) under the Manual ofRegulations for Private Higher Education, the January 6, 2014 Order should be effected atthe end of the academic year.

On May 23, 2014, the Trial Court issued an Order dismissing the case on the ground that(a) the period to file the petition for certiorari lapsed on July 28, 2013 or after the sixty(60) day period from receipt of the April 26, 2013 Order of CHED and (b) the Court ofAppeals has jurisdiction over petition for certiorari against quasi- judicial agencies such asCHED.

On June 11, 2014, WNU filed a Motion for Reconsideration of the May 23, 2014 Order ofthe Trial Court. In the said Motion for Reconsideration, WNU asserted that (a) the sixty(60) day period to file the petition for certiorari should be counted from the time of thereceipt of the assailed order, January 6, 2014 Order of CHED and (b) the Regional TrialCourt of Quezon City has jurisdiction over the said case.

WNU set the Motion for Reconsideration for hearing on June 20, 2014. However, thepresiding judge of the Trial Court was on leave. The Trial Court instead informed theparties that it will issue a notice of the schedule of hearing of the WNU’s Motion forReconsideration.

30. Financial Risk Management Objectives and Policies

The principal financial instruments of the Group comprise cash and cash equivalents and short-term loans. The main purpose of these financial instruments is to raise working capital and majorcapital investment financing for the Group’s school operations. The Group has various otherfinancial assets and liabilities such as receivables and accounts payable and other currentliabilities, 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 assummarized below.

Liquidity RiskThe Group’s liquidity profile is managed to be able to finance its operations and capitalexpenditures and other financial obligations. To cover its financing requirements, the Group usesinternally-generated funds. As part of its liquidity risk management program, the Group regularlyevaluates the projected and actual cash flow information and continuously assesses conditions inthe financial markets for opportunities to pursue fund-raising initiatives.

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Any excess funds are primarily invested in short-dated and principal-protected bank products thatprovide flexibility of withdrawing the funds anytime. The Group regularly evaluates availablefinancial products and monitors market conditions for opportunities to enhance yields atacceptable risk levels.

The Group’s current liabilities are mostly made up of trade liabilities with 30 to 60-day paymentterms. 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 creditterms of 30 days and AFS financial assets.

As at March 31, 2014 and 2013 and April 1, 2012, the Group’s current assets amounted toP=1,025.5 million, P=1,812.4 million and P=889.0 million, respectively, while current liabilitiesamounted to P=912.2 million, P=332.1 million and P=1,060.2 million, respectively.

The table below summarizes the maturity profile of the Group’s financial assets held for liquiditypurposes and other financial liabilities as at financial reporting date based on undiscountedcontractual payments.

March 31, 2014Due and

DemandableLess than2 Months 2 to 3 Months 3 to 12 Months

More than1 Year Total

Financial AssetsLoans and receivables:

Cash and cash equivalents P=583,302,563 P=– P=– P=– P=– P=583,302,563Receivables (current and noncurrent)* 26,653,074 65,764,225 14,548,895 165,359,844 463,978,935 736,304,973Advances to associates and joint ventures

(included as part of “Investments inand advances to associates and jointventures” account) 36,123,762 – – – – 36,123,762

Deposits (included as part of “Prepaidexpenses and other current assets”and “Goodwill, intangible and othernoncurrent assets” accounts) – – – 1,831,769 38,755,552 40,587,321

AFS financial assets – – – – 50,599,940 50,599,940P=646,079,399 P=65,764,225 P=14,548,895 P=167,191,613 P=553,334,427 P=1,446,918,559

Financial LiabilitiesOther financial liabilities-

Accounts payable and other currentliabilities** P=211,421,740 P=27,744,853 P=10,947,443 P=244,293,427 P=– P=494,407,463

Nontrade payable 151,470,221 – – – – 151,470,221Short-term loan:

Principal – – – 180,000,000 – 180,000,000Interest – – 1,706,250 1,650,000 – 3,356,250

Long-term debt:Principal – – – 49,940,706 58,465,494 108,406,200

P=362,891,961 P=27,744,853 P=12,653,693 P=475,884,133 P=58,465,494 P=937,640,134

March 31, 2013Due and

DemandableLess than2 Months 2 to 3 Months 3 to 12 Months

More than1 Year Total


Cash and cash equivalents P=1,489,451,909 P=– P=– P=– P=– P=1,489,451,909Receivables (current and noncurrent)* 240,539,396 17,918,138 3,939,716 10,944,280 418,817,781 692,159,311Advances to associates and joint ventures

(included as part of “Investments inand advances to associates and jointventures” account) 52,689,744 – – – – 52,689,744

Deposits (included as part of “Prepaidexpenses and other current assets”and “Goodwill, intangible and othernoncurrent assets” accounts) – – – – 33,342,037 33,342,037

AFS financial assets – – – – 4,663,478 4,663,478P=1,782,681,049 P=17,918,138 P=3,939,716 P=10,944,280 P=456,823,296 P=2,272,306,479

Financial LiabilitiesOther financial liabilities-

Accounts payable and other currentliabilities** P=80,417,708 P=219,860,121 P=1,110,063 P=3,746,413 P=552,956 P=305,687,261

* Excluding advances to officers and employees amounting to P=25,024,073 and P=22,592,828 as at March 31, 2014 and 2013, respectively.** Excluding taxes payable, unearned tuition and school fees, subscriptions payable, SSS, Philhealth and Pag-ibig benefits payable amounting to P=23,023,029 and P=14,998,560 as

at March 31, 2014 and 2013, respectively.

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As at March 31, 2014 and 2013, the Group’s current ratios are as follows:

March 31,2014

March 31,2013

Current assets P=1,025,488,146 P=1,812,433,009Current liabilities 912,194,435 332,135,285Current ratios 1.124:1.000 5.457:1.000

Credit RiskCredit risk is the risk that the Group will incur a loss arising from students, franchisees or othercounterparties that fail to discharge their contractual obligations. The Group manages andcontrols credit risk by setting limits on the amount of risk that the Group is willing to accept forindividual 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 beforethey can get their report cards and other credentials. In addition, receivable balances aremonitored on an ongoing basis with the result that the Group’s exposure to bad debts is notsignificant.

With respect to credit risk arising from the other financial assets of the Group, which comprisecash and cash equivalents and AFS financial assets, the Group’s exposure to credit risk arises fromdefault of the counterparty, with a maximum exposure equal to the carrying amount of theseinstruments. 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 thecomponents of the consolidated statements of financial position as at financial reporting date:

March 31, 2014Gross

MaximumExposure(1)

Net MaximumExposure(2)

Financial AssetsLoans and receivables: Cash and cash equivalents (excluding cash on hand) P=581,840,338 P=575,340,337 Receivables (current and noncurrent)* 736,304,973 272,326,038 Advances to associates and joint ventures** 21,175,875 21,175,875 Deposits*** 40,587,321 40,587,321AFS financial assets 50,599,940 50,599,940

P=1,430,508,447 P=960,029,511

March 31, 2013Gross

MaximumExposure(1)

Net MaximumExposure(2)

Financial AssetsLoans and receivables: Cash and cash equivalents (excluding cash on hand) P=1,488,848,927 P=1,481,845,131 Receivables (current and noncurrent)* 692,159,311 228,180,376 Advances to associates and joint ventures** 52,689,744 52,689,744 Deposits*** 33,342,037 33,342,037AFS financial assets 4,663,478 4,663,478

P=2,271,703,497 P=1,800,720,766 * Excluding advances to officers and employees amounting to P=25,024,703 and P=22,592,828 as at March 31, 2014 and 2013,

respectively.**Included as part of “Investments in and advances to associates and joint ventures” account***Included as part of “Prepaid expenses and other current assets” and “Goodwill, intangible and other noncurrent assets” account(1) Gross financial assets before taking into account any collateral held or other credit enhancements or offsetting arrangements.

(2) Gross financial assets after taking into account any collateral held or other credit enhancements or offsetting arrangements orinsurance in case of bank deposits.

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The credit quality of financial assets is managed by the Group using its internal credit ratings. Thetable below shows the credit quality by class of financial assets that are neither past due norimpaired as at financial reporting date:

March 31, 2014Class A(1) Class B(2) Total

Financial AssetsLoans and receivables: Cash and cash equivalents (excluding cash on hand) P=581,840,338 P=– P=581,840,338 Receivables (current and noncurrent)* 78,722,372 – 78,722,372 Advances to associates and joint ventures 21,175,875 – 21,175,875 Deposits 40,587,321 – 40,587,321AFS financial assets 50,599,940 – 50,599,940

P=772,925,846 P=– P=772,925,846

March 31, 2013Class A(1) Class B(2) Total

Financial AssetsLoans and receivables: Cash and cash equivalents (excluding cash on hand) P=1,488,848,927 P=– P=1,488,848,927 Receivables (current and noncurrent)* 63,498,628 – 63,498,628 Advances to associates and joint ventures 45,521,984 – 45,521,984 Deposits 33,342,037 – 33,342,037AFS financial assets 4,663,478 – 4,663,478

P=1,635,875,054 P=– P=1,635,875,054 * Excluding advances to officers and employees amounting to P=25,024,703 and P=22,592,828 as at March 31, 2014 and 2013, respectively..**Included as part of “Investments in and advances to associates and joint ventures” account***Included as part of “Prepaid expenses and other current assets” and “Goodwill, intangible and other noncurrent assets” account(1) This includes low risk and good paying customer accounts with no history of account treatment for a defined period and no overdue accounts

as at report date and deposits or placements to counterparties with good credit rating or bank standing financial review. (2) This includes medium risk and average paying customer account with no overdue accounts as at report date and new customer accounts for

which sufficient credit history has not been established and deposits or placements to counterparties not classified as Class A.

The table below shows the aging analysis of financial assets that are past due but not impaired asat financial reporting date:

March 31, 2014Neither

Past Due Past Due but not ImpairedNor Impaired 31 to 60 Days 61 to 90 Days Over 90 days Impaired Total


Cash and cash equivalents (excludingcash on hand) P=581,840,338 P=– P=– P=– P=– P=581,840,338

Receivables (current and noncurrent)* 78,722,372 61,586,694 132,016,972 463,978,935 105,629,684 841,934,657Advances to associates and joint

ventures 21,175,875 – – – 14,947,887 36,123,762Deposits 40,587,321 – – – – 40,587,321

AFS financial assets 50,599,940 – – – – 50,599,940P=772,925,846 P=61,586,694 P=132,016,972 P=463,978,935 P=120,577,571 P=1,551,086,018

March 31, 2013Neither

Past Due Past Due but not ImpairedNor Impaired 31 to 60 Days 61 to 90 Days Over 90 days Impaired Total


Cash and cash equivalents (excludingcash on hand) P=1,488,848,927 P=- P=- P=- P=- P=1,488,848,927

Receivables (current and noncurrent)* 63,498,628 15,871,279 151,653,229 461,136,175 57,815,801 749,975,112Advances to associates and joint

ventures 45,521,984 - - - 7,167,760 52,689,744Deposits 33,342,037 - - - - 33,342,037

AFS financial assets 4,663,478 - - - - 4,663,478P=1,635,875,054 P=15,871,279 P=151,653,229 P=461,136,175 P=64,983,561 P=2,329,519,298

* Excluding advances to officers and employees amounting to P=25,024,703 and P=22,592,828 as at March 31, 2014 and 2013, respectively.**Included as part of “Investments in and advances to associates and joint ventures” account***Included as part of “Prepaid expenses and other current assets” and “Goodwill, intangible and other noncurrent assets” account

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Impairment AssessmentThe main consideration for the impairment assessment include whether any payments of principalor interest are overdue by more than 90 days or there are any known difficulties in the cash flowsof counterparties or infringement of the original terms of the contract.

Individually Assessed Allowances. The Group determines the allowance appropriate for eachindividually significant account balance on an individual basis. Items considered whendetermining allowance amounts include the sustainability of the counterparty’s business plan, itsability to improve performance once a financial difficulty has arisen, projected receipts and theexpected dividend payout should bankruptcy ensue, the availability of other financial support, therealizable value of collateral, if any, and the timing of the expected cash flows. The impairmentlosses are evaluated at each reporting date, unless unforeseen circumstances require more carefulattention.

Collectively Assessed Allowances. Allowances are assessed collectively for losses on accountbalances that are not individually significant and for individually significant loans and advanceswhere there is no objective evidence of individual impairment. Allowances are evaluated on eachreporting date with each portfolio receiving a separate review.

The collective assessment takes account of impairment that is likely to be present in the portfolioeven though there is no objective evidence of the impairment in an individual assessment.Impairment losses are estimated by taking into consideration the following information; historicallosses on the portfolio, current economic conditions, the approximate delay between the time aloss is likely to have been incurred and the time it will be identified as requiring an individuallyassessed impairment allowance and expected receipts and recoveries once impaired. Theimpairment allowance is then reviewed by credit management to ensure alignment with theGroup’s policy.

Capital Risk Management PolicyParent Company. The Parent Company aims to achieve an optimal capital structure in pursuit ofits 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 agoing concern in order to provide returns for stockholders and benefits for other stakeholders andto 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 ineconomic conditions. The Group is not subject to externally imposed capital requirements.

The Group considers its equity contributed by stockholders as capital.

March 31,2014

March 31,2013

Capital stock P=4,952,403,462 P=4,952,403,462Additional paid-in capital 1,119,079,467 1,119,079,467Treasury stock (500,009,337) (500,009,337)Retained earnings 2,690,263,952 2,151,532,167

P=8,261,737,544 P=7,723,005,759

- 86 -

*SGVFS008027*

The Group monitors capital on the basis of the debt-to-equity ratio which is calculated as totaldebt divided by total equity. The Group includes all liabilities within debt. The Group definestotal equity as common stock, additional paid-in capital, unrealized mark-to-market gain (loss) oninvestments in equity securities and retained earnings.

As at March 31, 2014 and 2013, the Group’s debt-to-equity ratios are as follows:

March 31,2014

March 31,2013

Total liabilities P=1,170,933,292 P=367,895,200Total equity 7,128,169,995 8,135,356,191Debt-to-equity ratio 0.164:1.000 0.045:1.000

Another approach used by the Group is the asset-to-equity ratios shown below:

March 31,2014

March 31,2013

Total assets P=8,299,103,287 P=8,503,251,391Total equity 7,128,169,995 8,135,356,191Asset-to-equity ratio 1.164:1.000 1.045:1.000

No changes were made in the objectives, policies or processes in 2014, 2013 and 2012.

31. Financial Instruments

The Group’s financial instruments consist of cash and cash equivalents, receivables, advances toassociates and joint ventures, deposits, loans payable, accounts payable and other currentliabilities. The primary purpose of these financial instruments is to finance the Group’soperations.

There are no material unrecognized financial assets and liabilities as at March 31, 2014 and 2013.

Fair Value InformationDue to the short-term nature of cash and cash equivalents, receivables, short-term loans, accountspayable and other current liabilities, current portion of long-term debt, their carrying valuesreasonably approximate their fair values at year end.

The following methods and assumptions were used to estimate the fair value of each class offinancial instrument for which it is practicable to estimate such value.

Advances to Associates and Joint Ventures and Deposits. The fair value of these instruments arecomputed by discounting the face amount using PDSTF-R2 at reporting date.

The fair value of advances to associates and joint ventures, classified under Level 2, amounted toP=36.5 million and P=34.8 million as at March 31, 2014 and 2013, respectively.

The fair value of rental deposits, classified under Level 2, amounted to P=37.9 million andP=30.6 million as at March 31, 2014 and 2013, respectively.

- 87 -

*SGVFS008027*

AFS Financial Assets. The fair values of publicly-traded instruments are determined by referenceto market bid quotes as of financial reporting date. Investments in unquoted equity securities forwhich no reliable basis for fair value measurement is available are carried at cost, net ofimpairment.

As of March 31, 2014 and 2013, there were no other financial assets and liabilities other thanquoted AFS financial assets which are measured at fair value determined in reference with quotedprices in active market (Level 1 Hierarchy).

Noncurrent receivables. The fair value of noncurrent receivables from unlisted entities to besettled by common shares does not materially differ from its fair value.

Long-term debt. The carrying value approximates fair value because of recent and regularrepricing based on market conditions. Variable rate loans are repriced on a quarterly/ semi-annualbasis (see Note 16).

The carrying value of long-term debt, classified under Level 2, amounted to P=58.5 million as atMarch 31, 2014.

For the years ended March 31, 2013 and 2012, there were no transfers between Level 1 and 2 fairvalue 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 toP=2,950.9 million (see Notes 1, 3 and 18).

b. Acquisitions of property and equipment under finance lease recorded under the “Property andequipment” account amounted to P=6.1 and P=7.6 million as at March 31, 2014 and 2013,respectively (see Note 10).

c. Unpaid progress billing for construction in progress amounting to P=129.6 million andP=46.2 million as at March 31, 2014 and 2013, respectively (see Note 10).

d. Conversion of advances to related parties amounting to P=41.6 million into equity investment(see Note 12).

e. Reclassification of land amounting to P=387.9 million from “Property and equipment” accountto “Other noncurrent assets” account in 2013 (see Note 10).

f. Application of the cash bond amounting to P=21.9 million to purchase a certain land to be usedfor the construction of a school building in 2013.

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*SGVFS008027*

33. Events after the Reporting Date

The Group entered into the following transactions after March 31, 2014:

a. Deposit for Future Stock Subscription in AHC

In May 2014, the Parent Company made a deposit for future subscription to 40% ofoutstanding common stock of AHC.

b. Chinabank Credit Facility

On May 9, 2014, the first drawdown date, STI ESG elected to have a 7 year term loan withfloating interest based on the 1-year PDST-F plus a margin of two percent (2.00%) per annum,which interest rate shall in no case be lower than the BSP overnight rate plus a margin ofthree-fourth percent (0.75%) per annum. Said interest rate shall be repriced and determinedon the relevant interest rate repricing date, and thereafter, such repriced interest rate shall bethe applicable interest rate for the immediately succeeding two (2) interest periods. Theamounts of P=200.0 million and P=100.0 million were drawn from the facility in May 2014,subject to 4.34% and 4.43% interest rates, respectively. These loans are unsecured and aredue in July 2021.

c. Land Acquisition

Subsequent to March 31, 2014, STI ESG made various payments to acquire a parcel of land inSan Jose del Monte, Bulacan with a total purchase price amounting to P=154.4 million.

SCHEDULE G - GUARANTEES OF SECURITIES OF OTHER ISSUERSMarch 31, 2014

(Amount in Pesos)

STI EDUCATION SYSTEMS HOLDINGS, INC.7/F iAcademy Building,

6764 Ayala Avenue,Makati City

Name of Issuing Entity ofSecurities Guaranteed by

the Company

Title of Issue ofEach Class of

SecuritiesGuaranteed

Total AmountGuaranteed and

Outstanding

Amount Owedby Person for

which Statementis Filed

Nature ofGuarantee

Not applicable

SCHEDULE A – FINANCIAL ASSETSMarch 31, 2014

(Amount in Pesos)



Name of Issuing Entity andDescription of Each Issue

Number of Sharesor Principal

Amount of Bondsand Notes

Amount Shown in theBalance Sheet

Value Based onMarket Quotations atBalance Sheet Date

IncomeReceived and

Accrued

The Group has no financial assets at FVPLas of March 31, 2014

SCHEDULE B – AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS, EMPLOYEES,RELATED PARTIES, AND PRINCIPAL STOCKHOLDERS (Other than Related Parties)

March 31, 2014(Amount in Pesos)



Name and Designation of Debtor Balance atbeginning of year Additions Collections /

LiquidationsBalance at end

of year

Andaya, Mitch VP - Academics 196,693 13,070 209,763 -

Aporo , Kathy Deputy School Administrator 448,393 - 448,393 -

Basilio, Rowena School Administrator 305,902 - 305,902 -

Bautista, Teodoro VP – Academics - 356,288 129,418 226,870

Bundoc, Restituto O. VP - School Operations 156,632 318,781 102,520 372,893

Cualoping, Vanessa Director 239,312 - 239,312 -

De Guzman, Engelbert L VP – Communications 635,322 1,304,075 1,731,666 207,731

Fabro, Ferdinand AVP - Campus Development - 326,992 86,210 240,782

Fernandez, Peter EVP and COO 884,989 5,120 643,284 246,825

Jacob, Monico V. President 2,537,308 427,411 1,292,018 1,672,701

Jamandre, Jay Joseph C. AVP – HROD 219,545 1,662 221,207 -

Joson, Harry Alfonso AVP – ARA/CCD/MIS - 308,043 121,154 186,889

Magano, Shiela AVP - School Management - 511,285 296,358 214,927

Ortega, Ferdie Creative Manager - 502,061 262,459 239,602

Pebenito, Vanessa Special Assistant to the COO - 289,430 112,615 176,815

Rabaya, Colbert Senior School Administrator 240,013 1,391 120,855 120,549

Sangalang, Amiel VP – Comptrollership 292,790 40,905 116,149 217,546

Tabije, Karen Precious Brand Manager - 420,524 188,012 232,512

Tan, Suzette R. AVP - Comptrollership 224,398 - 224,398 -

Tubongbanua, John VP – CIS 266,178 - 266,178 -

6,647,475 4,827,038 7,117,871 4,356,642

The above schedule of advances to officers and employees of the Group with balances above P100,000 asof March 31, 2014 pertain to car plan agreements. Such advances are non-interest bearing and are liquidatedon a semi-monthly basis. There were no amounts written off during the year.

SCHEDULE C – AMOUNTS RECEIVABLE FROM/PAYABLE TO RELATED PARTIES WHICH AREELIMINATED DURING THE CONSOLIDATION OF THE FINANCIAL STATEMENTS




Name andDesignation of

Debtor

Balance atbeginning

of year

Additions Collections/Liquidations

Balance atend of year

Description Terms

Receivable ofSTIEducationSystemsHoldings,Inc. (“STIHoldings”)from STIEducationServicesGroup, Inc.(“STI ESG”)

Receivable ofSTI ESGfrom STIHoldings

Receivable ofWest NegrosUniversityfrom STIHoldings

Receivable ofSTI ESGfrom WestNegrosUniversity

5,100,000

-

-

-

-

13,539,911

7,321,342

22,515,669

5,100,000

3,290,996

-

-

-

10,248,915

7,321,342

22,515,669

Businessadvisory fees

Reimbursement

Assignment ofliability

Advances

Non-interestbearing andto be settledwithin theyear




The above-mentioned receivables are current and to be settled within the year.

SCHEDULE D – INTANGIBLE ASSETS – OTHER ASSETS




Description Beginningbalance

Additions at cost Reclassifications Charged to costand expenses

Ending balance

Condominiumdeposit

Goodwill

-

200,258,253

397,262,833

2,585,492

-

-

-

-

397,262,833

202,843,745

Deposits 31,962,268 6,793,284 - - 38,755,552

Deposit forfuture purchaseof net assets

- 20,000,000 - - 20,000,000

ComputerSoftware

Land

7,711,712

387,862,833

24,577,384

-

-

387,862,833

2,390,954

-

29,898,142

-

Other noncurrent asset

14,205,510 29,463,669 43,669,179

642,000,576 480,682,662 387,862,833 2,390,954 732,429,451

SCHEDULE E – LONG TERM DEBTMarch 31, 2014

(Amount in Pesos)



Title of issue andtype of obligation

Amountauthorized by

indenture

Amount shown undercaption “Current

portion of long-termdebt” in relatedbalance sheet

Amount shownunder caption

“Long-Term Debt”in related balance

sheetChina BankingCorporation(Chinabank) -Bank loans:

Maturity Date /Interest Rate

09.25.14 / 6% 20,279,160

05.16.18 / 4.75% 2,901,479

05.16.18 / 4.75% 8,218,765

09.29.15 / 6% 1,428,590

09.29.15 / 6% 250,000

09.29.15 / 6% 325,000

04.20.18 / 6% 18,500,000

12.16.15 / 6% 6,562,500

88,811,174 30,345,680 58,465,494

Loan from WNU’sformerstockholders

19,485,271 19,485,271

Mortgage payable 109,755 109,755

108,406,200 49,940,706 58,465,494

SCHEDULE F –INDEBTEDNESS TO RELATED PARTIES(LONG-TERM LOANS FROM RELATED COMPANIES)




Name of Related Party Beginning balance Additions at cost Ending balance

The Group has no long-term loans from relatedparties as of March 31,2014

SCHEDULE H –CAPITAL STOCKMarch 31, 2014

(Amount in Pesos)



Number of Shares Held By

Title ofIssue

Number ofShares

Authorized

Number ofShares Issued

StockDividendsdeclared

Number ofShares

Outstanding

Numberof

TreasuryShares

Number ofShares

Reserved forOptions

Warrants,Conversions,

and OtherRights

Related PartiesDirectors,

Officers andEmployees

Others

CommonStock

10,000,000,000 9,904,806,924 - 9,904,806,924 None None 4,652,374,809* 1,564,809,935** 3,687,622,180

*Related PartiesPrudent Resources, Inc. 1,614,264,964Rescom Developers, Inc. 794,343,934Eujo Philippines, Inc. 763,873,130Insurance Builders, Inc. 579,675,992Capital Managers and Advisors, Inc. 397,908,894STI Education Services Group, Inc. 502,307,895

T O T A L 4,652,374,809

**Directors/Officers:Eusebio H.Tanco 1,442,013,875Monico V. Jacob 33,784,057Vanessa Rose L. Tanco 1Joseph Augustin L. Tanco 2,000,001Martin K. Tanco 36,560,000Paolo Martin O. Bautista 3,250,000Rainerio M. Borja 3,200,000Maulik R. Parekh 1,000Jesli A. Lapus 6,500,000Ernest Lawrence Cu 26,000,000Johnip G. Cua 1,000Yolanda M. Bautista 5,000,001Arsenio C. Cabrera, Jr. 6,500,000

T O T A L 1,564,809,935

SCHEDULE I –USE OF PROCEEDSMarch 31, 2014

(Amount in Pesos)



No. of Offer Shares: 2,900,000,000Offer Price: P 0.90Gross Proceeds: P 2,610,000,000

USE OF PROCEEDS AS OF MARCH 31, 2014Disbursements Amount

Subscription to 2.1 billion STI Education Services Group, Inc.(“STIESG”) shares (Refer to Annex A below) P2,100,000,000.00Underwriting fees 90,432,409.01Professional fees and other expenses 23,643,137.50Documentary stamp taxes paid 7,250,000.00Acquisition of West Negros University (WNU) 242,970,428.04Equity contribution to WNU 145,704,025.45TOTAL P2,610,000,000.00

ANNEX A

USE OF PROCEEDS by STI ESG

Disbursements AmountAcquisition of land – Cubao and Las Piñas P 434,921,286.54Acquisition of land, buildings and renovation of buildings – STI

Batangas 141,251,067.29Construction of school buildings – Ortigas-Cainta, Caloocan, Cubao,Calamba and Las Piñas 792,931,285.82Purchase of equipment for Ortigas-Cainta, Caloocan and Cubao 32,806,153.33Purchase of furniture for Ortigas-Cainta and Caloocan 21,250,068.13Payment of loans incurred for the purchase of land in Ortigas- Cainta,Caloocan and Cubao 591,388,300.00Payment of loans incurred for working capital requirements 85,451,838.89TOTAL P2,100,000,000.00

STI EDUCATION SYSTEMS HOLDINGS, INC.RETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATIONMARCH 31, 2014

Unappropriated retained earnings, beginning P=11,232,418

Adjustments: –

Unappropriated retained earnings as adjusted, beginning 11,232,418

Net income based on the face of the AFS 245,120,656

Less: Non-actual/unrealized income net of taxEquity in net income of associate/joint ventureUnrealized foreign exchange gain - net (except those attributable to

Cash and Cash equivalents) Unrealized actuarial gainFair Value adjustment (M2M gains)Fair Value adjustment of Investment Property resulting to gainAdjustment due to deviation from PFRS/GAAP-gainOther unrealized gains or adjustments to the retained earnings

as a result of certain transactions accounted for under the PFRS

Add: Non-actual lossesDepreciation on revaluation increment (after tax)Adjustments due to deviation from PFRS/GAAP-lossLoss on fair value adjustment of Investment property (after tax)

Net income actual/realized 256,353,074

Add (Less):Dividend declarations during the period (149,998,396)

Appropriation of Retained Earnings during the periodReversals of appropriationsEffects of prior period adjustmentsTreasury shares

TOTAL RETAINED EARNINGSAVAILABLE FOR DIVIDEND, MARCH 31, 2014 P=106,354,678

STI EDUCATION SYSTEMS HOLDINGS, INC.MAP OF RELATIONSHIPS BETWEEN AND AMONG THE COMPANY AND ITS ULTIMATEPARENT COMPANY, MIDDLE PARENT, SUBSIDIARIES OR CO-SUBSIDIARIES, ANDASSOCIATESMARCH 31, 2014

*STI Education Services Group, Inc. owns 5% equity interest in STI Holdings as at March 31, 2014.**A dormant company accounted for as an associate for accounting purposes and the carrying value has beenreduced to zero.

SUBSIDIARIES

99%

STI EDUCATION SYSTEMSHOLDINGS, INC.*

STI EDUCATIONSERVICES GROUP, INC.*

iAcademy100%

STI CollegeTuguegarao,

Inc.100%

STI Collegeof Batangas,

Inc.100%

STI Collegeof Dagupan,

Inc.77%

De LosSantos – STI

College52%

STI CollegeAlabang, Inc.

40%

STIMarikina,

Inc.24%

STIInvestments,

Inc.20%

Global Resourcefor OutsourcedWorkers, Inc.

17%

ASSOCIATES

AccentHealthcare, Inc./ STI-Banawe,

Inc.49%**

WEST NEGROSUNIVERSITY CORP.

STI CollegeTaft, Inc.

75%

99%

DLS-STICollege Quezon

Avenue, Inc.100%

STI EDUCATION SYSTEM HOLDINGS, INC.SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONSMarch 31, 2014

PHILIPPINE FINANCIAL REPORTING STANDARDSAND INTERPRETATIONSEffective as at March 31, 2014 Adopted

NotAdopted

NotApplicable

NotEarly

Adopted

Framework for the Preparation and Presentation of FinancialStatementsConceptual Framework Phase A: Objectives and qualitative characteristics

PFRSs Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1(Revised)

First-time Adoption of Philippine Financial ReportingStandards

Amendments to PFRS 1 and PAS 27: Cost of anInvestment in a Subsidiary, Jointly Controlled Entity orAssociate

Amendments to PFRS 1: Additional Exemptions forFirst-time Adopters

Amendment to PFRS 1: Limited Exemption fromComparative PFRS 7 Disclosures for First-time Adopters

Amendments to PFRS 1: Severe Hyperinflation andRemoval of Fixed Date for First-time Adopters

Amendments to PFRS 1: Government Loans

PFRS 2 Share-based Payment

Amendments to PFRS 2: Vesting Conditions andCancellations

Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions

PFRS 3(Revised)

Business Combinations

PFRS 4 Insurance Contracts

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts

PFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations

PFRS 6 Exploration for and Evaluation of Mineral Resources

PFRS 7 Financial Instruments: Disclosures

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets - Effective Date and Transition


NotAdopted

NotApplicable

NotEarly

Adopted

Amendments to PFRS 7: Improving Disclosures aboutFinancial Instruments

Amendments to PFRS 7: Disclosures - Transfers ofFinancial Assets

Amendments to PFRS 7: Disclosures – OffsettingFinancial Assets and Financial Liabilities

Amendments to PFRS 7: Mandatory Effective Date ofPFRS 9 and Transition Disclosures

PFRS 8 Operating Segments

PFRS 9* Financial Instruments

Amendments to PFRS 9: Mandatory Effective Date ofPFRS 9 and Transition Disclosures

Financial Instruments – New hedge accountingrequirements

PFRS 10* Consolidated Financial Statements

PFRS 11* Joint Arrangements

PFRS 12* Disclosure of Interests in Other Entities

PFRS 13* Fair Value Measurement

Investment entities (amendments to PFRS 10, PFRS 12 and PAS 27)

Philippine Accounting Standards

PAS 1(Revised)

Presentation of Financial Statements

Amendment to PAS 1: Capital Disclosures

Amendments to PAS 32 and PAS 1: Puttable FinancialInstruments and Obligations Arising on Liquidation

Amendments to PAS 1: Presentation of Items of OtherComprehensive Income

PAS 2 Inventories

PAS 7 Statement of Cash Flows

PAS 8 Accounting Policies, Changes in Accounting Estimatesand Errors

PAS 10 Events after the Reporting Period

PAS 11 Construction Contracts

PAS 12 Income Taxes

Amendment to PAS 12 - Deferred Tax: Recovery ofUnderlying Assets

PAS 16 Property, Plant and Equipment


NotAdopted

NotApplicable

NotEarly

Adopted

PAS 17 Leases

PAS 18 Revenue

PAS 19 Amendments to PAS 19: Actuarial Gains and Losses,Group Plans and Disclosures

Employee Benefits (Amended)

Employee Benefits - Defined Benefit Plans: EmployeeContributions (Amendments)

PAS 20 Accounting for Government Grants and Disclosure ofGovernment Assistance

PAS 21 The Effects of Changes in Foreign Exchange Rates

Amendment: Net Investment in a Foreign Operation

PAS 23(Revised)

Borrowing Costs

PAS 24(Revised)

Related Party Disclosures

PAS 26 Accounting and Reporting by Retirement Benefit Plans

PAS 27(Amended)*

Separate Financial Statements

PAS 28(Amended)*

Investments in Associates and Joint Ventures

PAS 29 Financial Reporting in Hyperinflationary Economies

PAS 31 Interests in Joint Ventures

PAS 32 Financial Instruments: Disclosure and Presentation

Amendments to PAS 32 and PAS 1: Puttable FinancialInstruments and Obligations Arising on Liquidation

Amendment to PAS 32: Classification of Rights Issues

Amendments to PAS 32: Offsetting Financial Assets andFinancial Liabilities

PAS 33 Earnings per Share

PAS 34 Interim Financial Reporting

PAS 36 Impairment of Assets

Impairment of Assets - Recoverable Amount Disclosuresfor Non-Financial Assets (Amendments)

PAS 37 Provisions, Contingent Liabilities and Contingent Assets

PAS 38 Intangible Assets

PAS 39 Financial Instruments: Recognition and Measurement


NotAdopted

NotApplicable

NotEarly

Adopted

Amendments to PAS 39: Transition and InitialRecognition of Financial Assets and Financial Liabilities

Amendments to PAS 39: Cash Flow Hedge Accountingof Forecast Intragroup Transactions

Amendments to PAS 39: The Fair Value Option

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets – Effective Date and Transition

Amendments to Philippine Interpretation IFRIC–9 andPAS 39: Embedded Derivatives

Amendment to PAS 39: Eligible Hedged Items

Financial Instruments: Recognition and Measurement -Novation of Derivatives and Continuation of HedgeAccounting (Amendments)

PAS 40 Investment Property

PAS 41 Agriculture

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration andSimilar Liabilities

IFRIC 2 Members' Share in Co-operative Entities and SimilarInstruments

IFRIC 4 Determining Whether an Arrangement Contains a Lease

IFRIC 5 Rights to Interests arising from Decommissioning,Restoration and Environmental Rehabilitation Funds

IFRIC 6 Liabilities arising from Participating in a Specific Market- Waste Electrical and Electronic Equipment

IFRIC 7 Applying the Restatement Approach under PAS 29Financial Reporting in Hyperinflationary Economies

IFRIC 8 Scope of PFRS 2

IFRIC 9 Reassessment of Embedded Derivatives

Amendments to Philippine Interpretation IFRIC–9 andPAS 39: Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 11 PFRS 2- Group and Treasury Share Transactions

IFRIC 12 Service Concession Arrangements


NotAdopted

NotApplicable

NotEarly

Adopted

IFRIC 13 Customer Loyalty Programmes

IFRIC 14 The Limit on a Defined Benefit Asset, MinimumFunding Requirements and their Interaction

Amendments to Philippine Interpretations IFRIC- 14,Prepayments of a Minimum Funding Requirement

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

IFRIC 17 Distributions of Non-cash Assets to Owners

IFRIC 18 Transfers of Assets from Customers

IFRIC 19 Extinguishing Financial Liabilities with EquityInstruments

IFRIC 20 Stripping Costs in the Production Phase of a SurfaceMine

IFRIC 21 Levies

SIC-7 Introduction of the Euro

SIC-10 Government Assistance - No Specific Relation toOperating Activities

SIC-12 Consolidation - Special Purpose Entities

Amendment to SIC - 12: Scope of SIC 12

SIC-13 Jointly Controlled Entities - Non-MonetaryContributions by Venturers

SIC-15 Operating Leases – Incentives

SIC-25 Income Taxes - Changes in the Tax Status of an Entity orits Shareholders

SIC-27 Evaluating the Substance of Transactions Involving theLegal Form of a Lease

SIC-29 Service Concession Arrangements: Disclosures.

SIC-31 Revenue - Barter Transactions Involving AdvertisingServices

SIC-32 Intangible Assets - Web Site Costs

Annual improvements to PFRSs 2009 – 2011 cycle

Annual improvements to PFRSs 2010 – 2012 Cycle

Annual improvements to PFRSs 2011 – 2013 Cycle

*SGVFS008028*

1 7 4 6

SEC Registration Number

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

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

, I n c . )

(Company’s Full Name)

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

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

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

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

0 3 3 1 A A P F S 1 0 0 4

Month Day (Form Type) Month Day (Fiscal Year) (Annual Meeting)

(Secondary License Type, If Applicable)

N/A

Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

1,245 N/A N/A

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S

Remarks: Please use BLACK ink for scanning purposes.

COVER SHEET

- 2 -

*SGVFS008028*

Holdings and the International Lead Manager and Domestic Lead Manager. The Offercomprised of the following: (i) up to 2,627,000,000 common shares offered to the publicon a primary basis (“Primary Offering”); (ii) up to 105,209,527 common shares offered tothe public on a secondary basis by Korea Merchant Banking Corporation (“SecondaryOffering”); 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 thesame terms and conditions as the Primary Offering and Secondary Offering. The offerprice was set at P=0.90 per share on October 22, 2012. The Primary Offering andSecondary Offering were completed on November 7, 2012 while the Over-allotmentOption was exercised on November 28, 2012 (see Note 12).

iii) In November and December 2012, STI Holdings subscribed to 2.1 billion STI ESG sharesat a consideration price equal to its par value of P=2,100.0 million. In July 2013, TheCompany acquired additional 328,125 STI ESG shares for P=853,125. As of March 31,2014 and 2013, STI Holdings’ ownership interest in STI ESG is approximately 99%(see Note 7).

c. Acquisition of West Negros University Corp. (WNU)

On October 1, 2013, STI Holdings executed a Deed of Absolute Sale to acquire the shares inWNU constituting 99.45% of the issued and outstanding common stock and 99.93% of theissued and outstanding preferred stock of WNU for an aggregate purchase price P=400.0million, including contingent consideration (see Note 7).

WNU owns and operates West Negros University in Bacolod City. It offers pre-elementary,elementary, secondary and tertiary education and graduate courses.

The parent company financial statements have been approved and authorized for issuance by theBOD on July 9, 2014.

2. Summary of Significant Accounting Policies and Disclosures

Basis of PreparationThe financial statements have been prepared under the historical cost basis, except for available-for-sale (AFS) financial assets that have been measured at fair values.

The financial statements are presented in Philippine Peso, the Company’s functional andpresentation currency, and all values are rounded to the nearest peso, except when otherwiseindicated.

Statement of ComplianceThe Company’s financial statements have been prepared in accordance with Philippine FinancialReporting Standards (PFRS) as issued by the Philippine Financial Reporting Standards Council(FRSC) and adopted by the Philippine SEC. PFRS also includes Philippine Accounting Standards(PAS) and Philippine Interpretations based on equivalent interpretations issued by theInternational Financial Reporting Interpretations Committee (IFRIC) adopted by the FRSC.

The Company also prepares and issues consolidated financial statements for the same period asthe parent company financial statements which have been prepared in compliance with PFRS.These may be obtained at 7/F, iAcademy Building, 6764 Ayala Avenue, Makati City.

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Changes in Accounting Policies, Disclosures and PresentationThe accounting policies adopted are consistent with those of the previous financial year, except forthe adoption of the new and amended PFRS that became effective beginning on or after April 1,2013. The adoption of the following amendments and interpretations did not have any significanteffect on the accounting policies, financial position or performance of the Company:

§ PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and FinancialLiabilities (Amendments)

These amendments require an entity to disclose information about rights of set-off and relatedarrangements (such as collateral agreements). The new disclosures are required for allrecognized financial instruments that are set off in accordance with PAS 32. These disclosuresalso apply to recognized financial instruments that are subject to an enforceable master nettingarrangement or ‘similar agreement’, irrespective of whether they are set-off in accordancewith PAS 32. The amendments require entities to disclose, in a tabular format unless anotherformat is more appropriate, the following minimum quantitative information. This is presentedseparately for financial assets and financial liabilities recognized at the end of the reportingperiod:

a) The gross amounts of those recognized financial assets and recognized financial liabilities;b) The amounts that are set off in accordance with the criteria in PAS 32 when determining

the net amounts presented in the parent company statement of financial position;c) The net amounts presented in the parent company statement of financial position;d) The amounts subject to an enforceable master netting arrangement or similar agreement

that are not otherwise included in (b) above, including:i. Amounts related to recognized financial instruments that do not meet some or all of

the offsetting criteria in PAS 32; andii. 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 noimpact on the Company’s financial statements.

§ PFRS 10, “Consolidated Financial Statements”

PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements,which addresses the accounting for consolidated financial statements. It also includes theissues raised in Standing Interpretation Committee, or SIC, 12, Consolidation – SpecialPurpose Entities. PFRS 10 establishes a single control model that applies to all entitiesincluding special purpose entities. The changes introduced by PFRS 10 require managementto exercise significant judgment to determine which entities are controlled, and therefore, arerequired to be consolidated by a parent, compared with the requirements that were in PAS 27.

A reassessment of control was performed by the Company on all its subsidiaries in accordancewith the provisions of PFRS 10. Following the reassessment and based on the new definitionof control under PFRS 10, the Company determined that the adoption of this standard does notchange its relationship over its subsidiaries, therefore, has no impact on the Company’sfinancial position or performance.

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§ PFRS 11, “Joint Arrangements”

PFRS 11 superseded PAS 31, Interests in Joint Ventures, and SIC 13, Jointly ControlledEntities – Non-Monetary Contributions by Venturers. PFRS 11 removes the option to accountfor jointly controlled entities, or JCEs, using proportionate consolidation. Instead, JCEs thatmeet the definition of a joint venture must be accounted for using the equity method. Theadoption of this standard has no impact on the Company’s financial position or performance.

§ PFRS 12, “Disclosure of Interest in Other Entities”

PFRS 12 includes all of the disclosures that were previously in PAS 27 related to consolidatedfinancial statements, as well as all of the disclosures that were previously included in PAS 31and PAS 28, Investments in Associates. These disclosures relate to an entity’s interests insubsidiaries, joint arrangements, associates and structured entities. A number of newdisclosures are also required. The adoption of the revised standard has no significant impacton the Company’s financial statements.

§ PFRS 13, “Fair Value Measurement”

PFRS 13 establishes a single source of guidance under PFRS for all fair value measurements.PFRS 13 does not change when an entity is required to use fair value, but rather providesguidance on how to measure fair value under PFRS. PFRS 13 defines fair value as an exitprice. As a result of the guidance in PFRS 13, the Company reassessed its policies formeasuring fair values. The Company assessed that the application of PFRS 13 has no materialimpact on its fair value measurements.

§ Amendments to PAS 1, “Financial Statement Presentation – Presentation of Items of OtherComprehensive Income”

The amendments to PAS 1 change the grouping of items presented in other comprehensiveincome. Items that could be reclassified (or “recycled”) to profit or loss at a future point intime (for example, upon derecognition or settlement) would be presented separately fromitems that may not be reclassified at any point in time. The amendment solely affectspresentation and therefore has no impact on the Company’s financial position or performance.

§ Revised PAS 19, “Employee Benefits”

Amendments to PAS 19 range from fundamental changes such as removing the corridormechanism and the concept of expected returns on plan assets to simple clarifications and re-wording.

The Revised PAS 19 amended the definition of short-term employee benefits and requiresemployee benefits to be classified as short-term based on expected timing of settlement ratherthan the employee’s entitlement to the benefits. In addition, the Revised PAS 19 modified thetiming of recognition for termination benefits. The modification requires the terminationbenefits to be recognized at the earlier of when the offer cannot be withdrawn or when therelated restructuring costs are recognized.

As the Company has only four employees, the adoption of this standard will not have asignificant impact on its financial statements.

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§ Revised PAS 27, “Separate Financial Statements”

As a consequence of the new PFRS 10 and PFRS 12, PAS 27 is now limited to accounting forinvestments in subsidiaries, joint ventures and associates when an entity elects, or is requiredby local regulations, to present separate financial statements. This revised standard has noimpact on the Company’s financial position or performance.

§ Revised PAS 28, “Investments in Associates and Joint Ventures”

Superseding PAS 28, Investments in Associates, is PAS 28, Investments in Associates andJoint Ventures, which prescribes the accounting for investments in associates and sets out therequirements for the application of the equity method when accounting for investments inassociates and joint ventures. This revised standard has no impact on the Company’s financialposition or performance.

§ Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine

This interpretation applies to waste removal (stripping) costs incurred in surface miningactivity, during the production phase of the mine. The interpretation addresses the accountingfor the benefit from the stripping activity. This new interpretation is not relevant to theCompany.

§ PFRS 1, First-time Adoption of International Financial Reporting Standards – GovernmentLoans (Amendments)

The amendments to PFRS 1 require first-time adopters to apply the requirements of PAS 20,Accounting for Government Grants and Disclosure of Government Assistance, prospectivelyto government loans existing at the date of transition to PFRS. However, entities may chooseto apply the requirements of PAS 39, Financial Instruments: Recognition and Measurement,and PAS 20 to government loans retrospectively if the information needed to do so had beenobtained at the time of initially accounting for those loans. These amendments are notrelevant to the Company.

Improvements to PFRSsThe annual improvements to PFRS contain non-urgent but necessary amendments to PFRS. Theamendments are effective for annual periods beginning on or after April 1, 2013 and to be appliedretrospectively.

§ PFRS 1, “First-time Adoption of Philippine Financial Reporting Standards”

The amendments clarify that an entity that has stopped applying PFRS may choose to either:(a) re-apply PFRS 1, even if the entity applied PFRS 1 in a previous reporting period; or(b) apply PFRS retrospectively in accordance with PAS 8, Accounting Policies, Changes inAccounting Estimates and Errors, in order to resume reporting under PFRS. It also clarifiesthat upon adoption of PFRS, an entity that capitalized borrowing costs in accordance with itsprevious generally accepted accounting principles may carryforward, without adjustment, theamount previously capitalized in its opening statement of financial position at the date oftransition. Such borrowing costs are then recognized in accordance with PAS 23, BorrowingCosts. The amendment has no impact on the Company’s financial position or performance, asthe Company is not a first-time adopter of PFRS.

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§ PAS 1, “Presentation of Financial Statements – Clarification of the Requirements forComparative Information”

The amendment requires an entity to present a: (a) comparative information in the relatednotes to the financial statements when it voluntarily provides comparative information beyondthe minimum required comparative period; and (b) opening statement of financial positionwhen an entity changes its accounting policies, makes retrospective restatements or makesreclassifications, and that change has a material effect on the statement of financial position.The opening statement will be at the beginning of the preceding period.

The amendment has no impact on the Company’s financial statements.

§ PAS 16, “Property, Plant and Equipment – Classification of Servicing Equipment”

The amendment clarifies that major spare parts and servicing equipment that meet thedefinition of property and equipment are not inventory. The amendment has no impact on theCompany’s financial position or performance.

§ PAS 32, “Financial Instruments: Presentation – Tax Effect of Distribution to Holders ofEquity Instruments”

The amendment removes existing income tax requirements from PAS 32 and requires entitiesto apply requirements in PAS 12, Income Taxes, to any income tax arising from distributionsto equity holders. The amendment has no impact on the Company’s financial position orperformance.

§ PAS 34, “Interim Financial Reporting and Segment Information for Total Assets andLiabilities”

The amendment clarifies the requirements in PAS 34 relating to segment information for totalassets and liabilities for each reportable segment to enhance consistency with the requirementin PFRS 8, Operating Segments. The amendment has no impact on the Company’s financialposition or performance.

New Accounting Standards, Interpretations and Amendments to Existing StandardsEffective Subsequent to March 31, 2014The Company will adopt the following revised standards, interpretations and amendments toexisting standards when these become effective. Except as otherwise indicated, the Companydoes not expect the adoption of these revised standards interpretations and amendments to PFRSto have a significant impact on the parent company financial statements.

Effective in 2014

§ Amendments to PAS 19, “Employee Benefits – Defined Benefit Plans: EmployeeContributions”

The amendments apply to contributions from employees or third parties to defined benefitplans. Contributions that are set out in the formal terms of the plan shall be accounted for asreductions to current service costs if they are linked to service or as part of theremeasurements of the net defined benefit asset or liability if they are not linked to service.Contributions that are discretionary shall be accounted for as reductions of current service costupon payment of these contributions to the plans. The amendments to PAS 19 are to beretrospectively applied for annual periods beginning on or after July 1, 2014. The

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amendments do not apply to the Company since its employees are not required to makecontributions to the Plan.

Standard with No Mandatory Effective Date

§ PFRS 9, “Financial Instruments: Classification and Measurement”

PFRS 9, as issued, reflects the first and third phases of the project to replace PAS 39 andapplies to the classification and measurement of financial assets and financial liabilities andhedge accounting, respectively. Work on the second phase, which relate to impairment offinancial instruments, and the limited amendments to the classification and measurementmodel is still on-going, with a view to replace PAS 39 in its entirety. PFRS 9 requires allfinancial assets to be measured at fair value at initial recognition. A debt financial asset may,if the fair value option, or FVO, is not invoked, be subsequently measured at amortized cost ifit is held within a business model that has the objective to hold the assets to collect thecontractual cash flows and its contractual terms give rise, on specified dates, to cash flows thatare solely payments of principal and interest on the principal outstanding. All other debtinstruments are subsequently measured at fair value through profit or loss. All equityfinancial assets are measured at fair value either through other comprehensive income or profitor loss. Equity financial assets held-for-trading must be measured at fair value through profitor loss. For liabilities designated as at fair value through profit or loss using the FVO, theamount of change in the fair value of a financial liability that is attributable to changes incredit risk must be presented in other comprehensive income. The remainder of the change infair value is presented in profit or loss, unless presentation of the fair value change relating tothe entity’s own credit risk in other comprehensive income would create or enlarge anaccounting mismatch in profit or loss. All other PAS 39 classification and measurementrequirements for financial liabilities have been carried forward to PFRS 9, including theembedded derivative bifurcation rules and the criteria for using the FVO. The adoption of thefirst phase of PFRS 9 will have an effect on the classification and measurement of theCompany’s financial assets, but will potentially have no impact on the classification andmeasurement of financial liabilities.

PFRS 9 currently has no mandatory effective date. PFRS 9 may be applied before thecompletion of the limited amendments to the classification and measurement model andimpairment methodology. The Company will not adopt the standard before the completion ofthe limited amendments and the second phase of the project.

Interpretation whose Effective Date was Deferred

§ Philippine Interpretation IFRIC 15, “Agreements for the Construction of Real Estate”

This interpretation covers accounting for revenue and associated expenses by entities thatundertake the construction of real estate directly or through subcontractors. The PhilippineSEC and the FRSC have deferred the effectivity of this interpretation until the final RevenueStandard is issued by the International Accounting Standards Board and an evaluation of therequirements of the final Revenue Standard against the practices of the Philippine real estateindustry is completed. Adoption of the interpretation when it becomes effective will not haveany impact on the Company’s financial statements.

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Improvement to PFRSThe Annual Improvements to PFRSs (2010-2012 Cycle) contain non-urgent but necessaryamendments to the following standards:

§ PFRS 2, “Share-based Payment – Definition of Vesting Condition”

The amendment revised the definitions of vesting condition and market condition and addedthe definitions of performance condition and service condition to clarify various issues. Thisamendment shall be prospectively applied to share-based payment transactions for which thegrant date is on or after July 1, 2014. This amendment does not apply to the Company as ithas no share-based payments.

§ PFRS 3, “Business Combinations – Accounting for Contingent Consideration in a BusinessCombination”

The amendment clarifies that a contingent consideration that meets the definition of afinancial instrument should be classified as a financial liability or as equity in accordance withPAS 32. Contingent consideration that is not classified as equity is subsequently measured atfair value through profit or loss whether or not it falls within the scope of PFRS 9 (or PAS 39,if PFRS 9 is not yet adopted). The amendment shall be prospectively applied to businesscombinations for which the acquisition date is on or after July 1, 2014. The Company shallconsider this amendment for future business combinations.

§ PFRS 8, “Operating Segments – Aggregation of Operating Segments and Reconciliation ofthe Total of the Reportable Segments’ Assets to the Entity’s Assets”

The amendments require entities to disclose the judgment made by management inaggregating two or more operating segments. This disclosure should include a briefdescription of the operating segments that have been aggregated in this way and the economicindicators that have been assessed in determining that the aggregated operating segments sharesimilar economic characteristics. The amendments also clarify that an entity shall providereconciliations of the total of the reportable segments’ assets to the entity’s assets if suchamounts are regularly provided to the chief operating decision maker. These amendments areeffective for annual periods beginning on or after July 1, 2014 and are applied retrospectively.The Company will consider the amendments in its segment reporting disclosure.

§ PFRS 13, “Fair Value Measurement – Short-term Receivables and Payables”

The amendment clarifies that short-term receivables and payables with no stated interest ratescan be held at invoice amounts when the effect of discounting is immaterial.

§ PAS 16, “Property, Plant and Equipment – Revaluation Method – Proportionate Restatementof Accumulated Depreciation”

The amendment clarifies that, upon revaluation of an item property, plant and equipment, thecarrying amount of the asset shall be adjusted to the revalued amount, and the asset shall betreated in one of the following ways: (a) the gross carrying amount is adjusted in a mannerthat is consistent with the revaluation of the carrying amount of the asset. The accumulateddepreciation at the date of revaluation is adjusted to equal the difference between the grosscarrying amount and the carrying amount of the asset after taking into account anyaccumulated impairment losses; and (b) the accumulated depreciation is eliminated against thegross carrying amount of the asset.

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The amendment is effective for annual periods beginning on or after July 1, 2014. Theamendment shall apply to all revaluations recognized in annual periods beginning on or afterthe date of initial application of this amendment and in the immediately preceding annualperiod. The amendment has no impact on the Company’s financial position or performance.

§ PAS 24, “Related Party Disclosures – Key Management Personnel”

The amendments clarify that an entity is a related party of the reporting entity if the saidentity, or any member of a group for which it is a part of, provides key management personnelservices to the reporting entity or to the parent company of the reporting entity. Theamendments also clarify that a reporting entity that obtains management personnel servicesfrom another entity (also referred to as management entity) is not required to disclose thecompensation paid or payable by the management to its employees or directors. The reportingentity is required to disclose the amounts incurred for the key management personnel servicesprovided by a separate management entity. The amendments are effective for annual periodsbeginning on or after July 1, 2014 and are applied retrospectively. The amendments affectdisclosures only and have no impact on the Company’s financial position or performance.

§ PAS 38, “Intangible Assets – Revaluation Method – Proportionate Restatement ofAccumulated Amortization”

The amendments clarify that, upon revaluation of an intangible asset, the carrying amount ofthe asset shall be adjusted to the revalued amount, and the asset shall be treated in one of thefollowing ways: (a) the gross carrying amount is adjusted in a manner that is consistent withthe revaluation of the carrying amount of the asset. The accumulated amortization at the dateof revaluation is adjusted to equal the difference between the gross carrying amount and thecarrying amount of the asset after taking into account any accumulated impairment losses; and(b) the accumulated amortization is eliminated against the gross carrying amount of the asset.

The amendments also clarify that the amount of the adjustment of the accumulatedamortization should form part of the increase or decrease in the carrying amount accounted forin accordance with the standard.

The amendments are effective for annual periods beginning on or after July 1, 2014. Theamendments shall apply to all revaluations recognized in annual periods beginning on or afterthe date of initial application of this amendment and in the immediately preceding annualperiod. The amendments have no impact on the Company’s financial position orperformance.

The Annual Improvements to PFRS (2011-2013 Cycle) contain non-urgent but necessaryamendments to the following standards:

§ PFRS 1, “First-time Adoption of Philippine Financial Reporting Standards – Meaning of“Effective PFRSs”

The amendment clarifies that an entity may choose to apply either a current standard or a newstandard that is not yet mandatory, but that permits early application, provided either standardis applied consistently throughout the periods presented in the entity’s first PFRS financialstatements. This amendment is not applicable to the Company as it is not a first-time adopterof PFRS.

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§ PFRS 3, “Business Combinations – Scope Exceptions for Joint Arrangements”

The amendment clarifies that PFRS 3 does not apply to the accounting for the formation of ajoint arrangement in the financial statements of the joint arrangement itself. The amendmentis effective for annual periods beginning on or after July 1, 2014 and is applied prospectively.The amendment is expected to have no impact on the Company.

§ PFRS 13, “Fair Value Measurement – Portfolio Exception”

The amendment clarifies that the portfolio exception in PFRS 13 can be applied to financialassets, financial liabilities and other contracts. The amendment is effective for annual periodsbeginning on or after July 1, 2014 and is applied prospectively. The amendment has nosignificant impact on the Company’s financial position and performance.

§ PAS 40, “Investment Property”

The amendment clarifies the inter-relationship between PFRS 3 and PAS 40 when classifyingproperty as investment property or owner-occupied property. The amendment stated thatjudgment is needed when determining whether the acquisition of investment property is theacquisition of an asset or a group of assets or a business combination within the scope ofPFRS 3. This judgment is based on the guidance of PFRS 3. This amendment is effective forannual periods beginning on or after July 1, 2014 and is applied prospectively. Theamendment has no significant impact on the Company’s financial position or performance.

The Company has not early adopted the above standards. The Company continues to assess theimpact of the above new, amended and improved accounting standards and interpretationseffective subsequent to March 31, 2014 on its parent company financial statements in the period ofinitial application. Additional disclosures required by these amendments will be included in theparent company financial statements when these amendments are adopted.

Summary of Significant Accounting Policies

Cash and Cash EquivalentsCash includes cash on hand and in banks. Cash equivalents are short-term, highly liquidinvestments that are readily convertible to known amounts of cash with maturities of up to threemonths or less from date of acquisition and are subject to an insignificant risk of change in value.

Financial Instruments - Initial Recognition and Subsequent Measurement

Date of Recognition. The Company recognizes a financial asset or a financial liability in theparent company statement of financial position when it becomes a party to the contractualprovisions of the instrument. All regular way purchases and sales of financial assets arerecognized on the trade date. Regular way purchases or sales are purchases or sales of financialassets that require delivery of assets within the period generally established by regulation orconvention in the market place.

Initial Recognition. Financial instruments are recognized initially at fair value. Transaction costsare included in the initial measurement of all financial assets and liabilities, except for financialinstruments measured at fair value through profit or loss (FVPL).

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Fair Value Measurement. The Company measures financial instruments, such as, AFS financialassets, at fair value at every financial reporting date. The Company also discloses the fair valuesof financial instruments measured at amortized cost.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:

§ In the principal market for the asset or liability, or§ In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in theireconomic best interest. A fair value measurement of a non-financial asset takes into account amarket participant's ability to generate economic benefits by using the asset in its highest and bestuse or by selling it to another market participant that would use the asset in its highest and bestuse.

The Company uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statementsare categorized within the fair value hierarchy, described as follows, based on the lowest levelinput that is significant to the fair value measurement as a whole:

§ Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities§ Level 2 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is directly or indirectly observable§ Level 3 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is unobservable

For assets and liabilities that are recognized in the parent company financial statements on arecurring basis, the Company determines whether transfers have occurred between levels in thehierarchy by re-assessing categorization (based on the lowest level input that is significant to thefair value measurement as a whole) at the end of each reporting period.

Management determines the policies and procedures for both recurring fair value measurementand non-recurring measurement.

External valuers are involved for valuation of significant assets, such as investment property.Involvement of external valuers is decided upon annually. Selection criteria include marketknowledge, reputation, independence and whether professional standards are maintained.Management decides, after discussions with the external valuers, which valuation techniques andinputs to use for each case.

At each reporting date, the management analyzes the movements in the values of assets andliabilities which are required to be re-measured or re-assessed as per accounting policies. For this

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analysis, the management verifies the major inputs applied in the latest valuation by agreeing theinformation in the valuation computation to contracts and other relevant documents.

Management, in conjunction with the Company’s external valuers, also compares each change inthe fair value of each asset and liability with relevant external sources to determine whether thechange is reasonable.

For the purpose of fair value disclosures, the Company has determined classes of assets andliabilities on the basis of the nature, characteristics and risks of the asset or liability and the levelof the fair value hierarchy as explained above.

‘Day 1’ Difference. Where the transaction price in a non-active market is different from the fairvalue from other observable current market transactions of the same instrument or based on avaluation technique whose variables include only data from an observable market, the Companyrecognizes the difference between the transaction price and fair value (a ‘Day 1’ difference) in theprofit or loss unless it qualifies for recognition as some other type of asset or liability. In caseswhere use is made of data which is not observable, the difference between the transaction priceand model value is only recognized in the parent company statement of comprehensive incomewhen the inputs become observable or when the instrument is derecognized. For each transaction,the Company determines the appropriate method of recognizing the ‘Day 1’ difference amount.

Classification. A financial instrument is classified as liability if it provides for a contractualobligation to: (a) deliver cash or another financial asset to another entity; (b) exchange financialassets or financial liabilities with another entity under conditions that are potentially unfavorableto the Company; or (c) satisfy the obligation other than by the exchange of a fixed amount of cashor another financial asset for a fixed number of the Company’s own shares. If the Company doesnot have the unconditional right to avoid delivering cash or another financial asset to settle itscontractual obligation, the obligation meets the definition of a financial liability.

Financial assets are categorized as either financial assets at FVPL, held-to-maturity (HTM)investments, loans and receivables or AFS financial assets. Financial liabilities, on the other hand,are categorized either as financial liabilities at FVPL and other financial liabilities. The Companydetermines the classification at initial recognition and re-evaluates this designation at everyreporting date, where appropriate.

The Company has no financial assets or financial liabilities at FVPL and HTM investments as atMarch 31, 2014 and 2013.

a. Loans and Receivables

Loans and receivables are nonderivative financial assets with fixed or determinable paymentsthat are not quoted in an active market.

After initial recognition, loans and receivables are measured at amortized cost using theeffective interest method less allowance for impairment. Amortized cost is calculated bytaking into account any discount or premium on acquisition, and fees and costs that are anintegral part of the effective interest rate. The amortization is recognized in the parentcompany statement of comprehensive income under the “Interest income” account. Lossesarising from impairment are recognized as provision for doubtful accounts in the parentcompany statement of comprehensive income.

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Loans and receivables are included in current assets when the Company expects to realize orcollect the assets within 12 months from the reporting date. Otherwise, these are classified asnoncurrent assets.

The Company’s cash and cash equivalents and receivables are included in this category.

b. AFS Financial Assets

AFS financial assets are those nonderivative financial assets that are not classified as at FVPL,loans and receivables or HTM investments. These are purchased and held indefinitely, andmaybe sold in response to liquidity requirements or changes in market conditions.

After initial recognition, AFS financial assets are subsequently measured at fair value withunrealized gains or losses being recognized under “Unrealized mark-to-market gain onavailable-for-sale financial assets” account in other comprehensive income until these arederecognized or determined to be impaired at which time the cumulative gain or losspreviously recognized under “Unrealized mark-to-market gain on available-for-sale financialassets” account in other comprehensive income is recorded in profit or loss. Interest earned onthe investments is reported as interest income using the effective interest method. Dividendsearned on investments are recognized in the parent company statement of comprehensiveincome when the right to receive payment has been established. AFS financial assets areclassified as noncurrent assets unless the intention is to dispose of such assets within12 months from reporting date.

The fair value of AFS financial assets consisting of investments that are actively traded inorganized financial markets is determined by reference to quoted market bid prices at the closeof business on the reporting date.

When the fair value of AFS financial assets cannot be measured reliably because of lack ofreliable estimates of future cash flows and discount rates necessary to calculate the fair valueof unquoted equity instruments, these investments are carried at cost.

The Company’s investments in quoted equity securities are included in this category.

c. Other Financial Liabilities

Other financial liabilities at amortized cost pertain to issued financial instruments or theircomponents that are not classified or designated at FVPL and contain contractual obligationsto deliver cash or another financial asset to the holder as to settle the obligation other than bythe exchange of a fixed amount of cash or another financial asset for a fixed number of ownequity shares. Financial liabilities are classified as current if they are expected to be settled ordisposed of within 12 months from reporting date. Otherwise, these are classified asnoncurrent.

Other financial liabilities are initially recognized at fair value of the consideration received,less directly attributable transaction costs. After initial recognition, other financial liabilitiesare subsequently measured at amortized cost using the effective interest method. Amortizedcost is calculated by taking into account any related issue costs and discount or premium.

Gains and losses are recognized in the parent company statement of income when theliabilities are derecognized, as well as through the amortization process.

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These include liabilities arising from operations such as accounts payable and other currentliabilities, dividends payable and nontrade payable.

Impairment of Financial AssetsThe Company assesses at each reporting date whether a financial asset or a group of financialassets is impaired. A financial asset or a group of financial assets is deemed to be impaired ifthere is objective evidence of impairment as a result of one or more events that has occurred afterthe initial recognition of the asset (an incurred loss event) and that loss event has an impact on theestimated future cash flows of the financial asset or the group of financial assets that can bereliably estimated. Objective evidence of impairment may include indications that the debtors or agroup of debtors is experiencing significant financial difficulty, default or delinquency in interestor principal payments, the probability that they will enter bankruptcy or other financialreorganization and where observable data indicate that there is a measurable decrease in theestimated future cash flows, such as changes in arrears or economic conditions that correlate withdefaults.

Financial Assets Carried at Amortized Cost. The Company first assesses whether an objectiveevidence of impairment exists individually for financial assets that are individually significant, orcollectively for financial assets that are not individually significant. If it is determined that noobjective evidence of impairment exists for an individually assessed financial asset, whethersignificant or not, the asset is included in a group of financial assets with similar credit riskcharacteristics and that group of financial assets is collectively assessed for impairment. Assetsthat are individually assessed for impairment and for which an impairment loss is or continues tobe recognized are not included in a collective assessment of impairment.

If there is an objective evidence that an impairment loss has been incurred, the amount of the lossis measured as the difference between the asset’s carrying amount and the present value of theestimated future cash flows (excluding future credit losses that have not been incurred). Thecarrying amount of the asset is reduced through use of an allowance account and the amount ofloss is charged to the parent company statement of comprehensive income. Interest incomecontinues to be recognized based on the original effective interest rate of the asset. Loans andreceivables, together with the associated allowance accounts, are written off when there is norealistic 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 anevent occurring after the impairment was recognized, the previously recognized impairment loss isreduced by adjusting the allowance account. If a future write-off is later recovered, any amountsformerly charged are credited to income.

Assets Carried at Cost. If there is objective evidence that an impairment loss had been incurredon an unquoted equity instrument that is not carried at fair value because its fair value cannot bereliably measured, the amount of the loss is measured as the difference between the asset’scarrying amount and the present value of estimated future cash flows discounted at the currentmarket rate of return for a similar financial asset.

The carrying amount of the asset is reduced through the use of an allowance account and theamount of the loss is recognized in the parent company statement of comprehensive income. Theasset together with the associated allowance are written off when there is no realistic prospect offuture recovery and all collateral has been realized or has been transferred to the Company.

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AFS Financial Assets. For AFS financial assets, the Company assesses at each reporting datewhen there has been a “significant” or “prolonged” decline in the fair value below its cost orwhere other objective evidence of impairment exists. “Significant” is to be evaluated against theoriginal cost of the investment and “prolonged” against the period in which the fair value has beenbelow its original cost. If an AFS financial asset is impaired, an amount comprising the differencebetween its cost (net of any principal payment and amortization) and its current fair value, less anyimpairment loss previously recognized in the parent company statement of comprehensiveincome, is transferred from equity to the parent company statement of comprehensive income.Reversals in respect of equity instruments classified as AFS financial assets are not recognized inthe profit or loss but are recognized directly in other comprehensive income.

Derecognition of Financial Assets and Liabilities

Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part of agroup of similar financial assets) is derecognized when:

§ the rights to receive cash flows from the asset have expired;

§ the Company retains the right to receive cash flows from the asset, but has assumed anobligation to pay them in full without material delay to a third party under a “pass-through”arrangement; or

§ the Company has transferred its right to receive cash flows from the asset and either(a) has transferred substantially all the risks and rewards of the asset, or (b) has neithertransferred nor retained substantially all the risks and rewards of the asset, but has transferredcontrol of the asset.

When the Company has transferred its right to receive cash flows from an asset and has neithertransferred nor retained substantially all the risks and rewards of the asset nor transferred controlof the asset, the asset is recognized to the extent of the Company’s continuing involvement in theasset. In that case, the Company also recognizes an associated liability. The transferred asset andthe associated liability are measured on a basis that reflects the rights and obligations that theCompany has retained.

Financial Liabilities. A financial liability is derecognized when the obligation under the liabilityis discharged or cancelled or has expired.

When an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as a derecognition of the original liability and the recognition of a newliability, and the difference in the respective carrying amounts is recognized in the parent companystatement of comprehensive income.

Offsetting of Financial InstrumentsFinancial assets and liabilities are offset and the net amount reported in the parent companystatement of financial position if there is a currently enforceable legal right to offset therecognized amounts and there is an intention to settle on a net basis, or to realize the asset andsettle the liability simultaneously. This is not generally the case with master netting agreements,and the related assets and liabilities are presented at gross amounts in the parent companystatement of financial position.

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Input Value-added Taxes (VAT)Input VAT represents VAT imposed on the Company by its suppliers for the acquisition of goodsand services required under Philippine taxation laws and regulations. The portion of excess inputVAT over output VAT is presented as part of “Prepaid taxes” under the “Other current assets”account in the parent company statement of financial position. Input VAT is stated at its estimatednet realizable value (NRV).

Creditable Withholding Taxes (CWT)CWT represents the amount withheld from advances made by the Company. These arerecognized upon collection and are utilized as tax credits against income tax due as allowed by thePhilippine taxation laws and regulations. CWT is presented as part of “Prepaid taxes” under the“Other current assets” account in the parent company statement of financial position. CWT isstated at its estimated NRV.

Investment in SubsidiariesThe Company’s investment in subsidiaries (entity which the Company controls) is carried in theparent company statement of financial position at cost less any accumulated impairment in value.

Property and EquipmentProperty and equipment is stated at cost, excluding the costs of day-to-day servicing, lessaccumulated depreciation and amortization and any impairment in value.

The initial cost of property and equipment consists of its purchase price, including import duties,taxes, and any directly attributable costs of bringing the property and equipment to its workingcondition and location for its intended use. Expenditures incurred after the property andequipment have been put into operation, such as repairs and maintenance, are normally charged tothe parent company statement of comprehensive income in the period such costs are incurred. Insituations where it can be clearly demonstrated that the expenditures have resulted in an increasein the future economic benefits expected to be obtained from the use of an item of property andequipment beyond its original assessed standard of performance, the expenditures are capitalizedas an additional costs of property and equipment.

Depreciation and amortization are computed using the straight-line method over the followingestimated useful lives of property and equipment:

Office equipment 2 yearsLeasehold improvements 5 years or term of the lease, whichever is shorterFurniture and fixtures 2 years

The estimated useful lives and depreciation and amortization method are reviewed periodically toensure that the periods and method of depreciation and amortization are consistent with theexpected pattern of economic benefits from items of property and equipment. The useful lives ofproperty and equipment are estimated based on the period over which property and equipment areexpected to be available for use and on collective assessment of industry practice, internaltechnical evaluation and experience with similar assets. The estimated useful lives of the propertyand equipment are updated if expectations differ from previous estimates due to wear and tear,technical or commercial obsolescence and legal or other limits on the use of the property andequipment. However, it is possible that future financial performance could be materially affectedby changes in the estimates brought about by changes in factors mentioned above. The amountsand timing of recorded expenses for any period would be affected by changes in these factors andcircumstances.

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An item of property and equipment is derecognized upon disposal or when no future economicbenefits are expected from its use or disposal. Any gain or loss arising from derecognition of theasset (calculated as the difference between the net disposal proceeds and carrying amount of theasset) is included in the parent company statement of comprehensive income in the year the assetis derecognized.

Property under construction is stated at cost less any impairment in value. This includes cost ofconstruction, equipment and other direct costs associated to construction of leaseholdimprovements. Property under construction is not depreciated until such time that the relevantassets are completed and available for its intended use.

Property under construction is transferred to leasehold improvements when the construction orinstallation and related activities necessary to prepare the leasehold improvements for theirintended use have been completed, and the leasehold improvements are ready for commercialservice.

Impairment of Nonfinancial Assets

Investments in Subsidiaries and Property and Equipment. The Company assesses at eachreporting date whether there is an indication that an asset may be impaired. If any such indicationexists, the Company makes an estimate of the asset’s recoverable amount. The recoverableamount of the asset is the greater of fair value less cost to sell and value in use. The fair value isthe amount obtainable from the sale of an asset in arm’s length transaction betweenknowledgeable, willing parties, less cost of disposal. In assessing value in use, the estimatedfuture cash flows are discounted to their presented value using a pre-tax discount rate that reflectscurrent market assessment of the time value of money and the risks specific to the asset. For anasset that does not generate largely independent cash inflows, the recoverable amount isdetermined for the cash-generating unit to which the asset belongs. Any impairment loss ischarged to the parent company statement of comprehensive income.

An assessment is made at each reporting date as to whether there is any indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indicationexists, the recoverable amount is estimated. A previously recognized impairment loss is reversedonly if there has been a change in the estimates used to determine the asset’s recoverable amountsince the last impairment loss was recognized. If that is the case, the carrying amount of the assetsis increased to its recoverable amount. That increased amount cannot exceed the carrying amountthat would have been determined, net of depreciation and amortization, had no impairment lossbeen recognized for the asset in the prior years. Such reversal is recognized in the parent companystatement of comprehensive income. After such reversal, the depreciation and amortizationcharges are adjusted in future periods to allocate the asset’s revised carrying amount, less anyresidual value, on a systematic basis over its remaining useful life.

EquityCommon stock is measured at par value for all shares issued. Incremental costs incurred directlyattributable to the issuance of new shares are shown in equity as a deduction of proceeds, net oftax. Proceeds and/or fair value of considerations received in excess of par value are recognized asadditional paid-in capital.

Retained earnings represent the Company’s net accumulated earnings less cumulative dividendsdeclared.

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Issuance of Common Stock for Noncash AssetsIn case of issuance of common stock for noncash assets and services, the cost is equivalent to thefair market value of the (i) consideration given up (i.e., fair market value of the common stock) or(ii) consideration received (i.e., fair market value of services, noncash assets), whichever is morereadily determinable. The Company recognized its investment in STI ESG at the fair marketvalue of the Company’s common stock given up in exchange for STI ESG shares.

Revenue RecognitionThe Company recognizes revenue when the amount of revenue can be reliably measured, it ispossible that future economic benefits will flow into the entity and specific criteria have been metfor each of the Company’s activities described below. The amount of revenue is not considered tobe reliably measured until all contingencies relating to the sale have been resolved. The Companybases its estimates on historical results, taking into consideration the type of customer, the type oftransaction and the specifics of each arrangement.

The following specific recognition criteria must also be met before revenue is recognized:

Interest Income. Interest income is recognized as it accrues on a time proportion basis taking intoaccount the principal amount outstanding and the effective interest rate. Interest incomerepresents interest earned from receivables and cash and cash equivalents.

Dividend Income. Dividend income is recognized when the right to receive has been established.

Advisory Fee. Advisory fee is recognized when the service is rendered.

Other Income. Other income is recognized when earned.

General and Administrative ExpensesGeneral and administrative expenses are recognized in the parent company statement ofcomprehensive income in the period these are incurred.

ProvisionsProvisions are recognized when the Company has present obligations, legal or constructive, as aresult of past events, when it is probable that an outflow of resources embodying economicbenefits will be required to settle the obligation and a reliable estimate can be made of the amountof the obligation. Where the Company expects some or all of a provision to be reimbursed, thereimbursement is recognized as a separate asset but only when the reimbursement is virtuallycertain. The expense relating to any provision is presented in the parent company statement ofcomprehensive income, net of any reimbursements. If the effect of the time value of money ismaterial, provisions are discounted using a current pre-tax rate that reflects, where appropriate, therisks specific to the liability. Where discounting is used, the increase in the provision due topassage of time is recognized as interest expense.

LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance ofthe arrangement at the inception date of whether the fulfillment of the arrangement is dependenton the use of a specific asset or assets or the arrangement conveys a right to use the asset, even ifthat right is not explicitly specified in an arrangement. A reassessment is made after the inceptionof the lease only if one of the following applies: (a) there is a change in contractual terms, otherthan a renewal or extension of the agreement; (b) a renewal option is exercised or extensiongranted, unless the term of the renewal or extension was initially included in the lease term;

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(c) there is a change in the determination of whether the fulfillment is dependent on a specifiedasset; or (d) there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when thechange in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) and the date ofrenewal or extension period for scenario (b).

As a lessee. Leases where the lessor retains substantially all the risks and benefits of ownership ofthe assets are classified as operating leases. Operating lease payments are recognized as expensein the parent company statement of comprehensive income on a straight-line basis over the leaseterm.

Taxes

Current tax. Current tax assets and liabilities for the current and prior years are measured at theamount expected to be recovered from or paid to the taxation authority. The tax rates and tax lawsused to compute the amount are those that are enacted or substantively enacted as at reportingdate.

Deferred tax. Deferred tax is provided, using the liability method, on all temporary differences atthe reporting date between the tax bases of assets and liabilities and their carrying amounts forfinancial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences except when thedeferred tax liability arises from the initial recognition of goodwill or of an asset or liability in atransaction that is not a business combination and, at the time of the transaction, affects neither theaccounting profit nor taxable profit or loss.

Deferred tax assets are recognized for all deductible temporary differences, carryforward benefitof unused tax credits from excess minimum corporate income tax (MCIT) over regular corporateincome tax (RCIT) and unused net operating loss carry-over (NOLCO) to the extent that it isprobable that taxable profit will be available against which the deductible temporary differencesand the carry-forward benefit of unused tax credits and unused tax losses can be utilized exceptwhen the deferred tax asset relating to the deductible temporary difference arises from the initialrecognition of an asset or liability in a transaction that is not a business combination and, at thetime of the transaction, affects neither the accounting profit nor taxable profit or loss.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to theextent that it is no longer probable that sufficient future taxable profit will be available to allow allor part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed ateach reporting date and are recognized to the extent that it has become probable that sufficientfuture taxable profit will allow the deferred tax asset, to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in theperiod when the asset is realized or the liability is settled, based on tax rates (and tax laws) thathave been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognized directly in equity is also included in equity and not inprofit or loss of the parent company statement of comprehensive income.

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Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists tooffset current tax assets against current tax liabilities and the deferred taxes relate to the sametaxable entity and the same taxation authority.

ContingenciesContingent liabilities are not recognized in the parent company financial statements but aredisclosed in the notes to the parent company financial statements, unless the possibility of anoutflow of resources embodying economic benefits is remote. Contingent assets are notrecognized in the parent company financial statements but are disclosed in the notes to parentcompany financial statements when an inflow of economic benefits is probable.

Events After the Reporting DatePost year-end events that provide additional information about the parent company’s financialposition at reporting date (adjusting events) are reflected in the parent company financialstatements. Post year-end events that are not adjusting events, if any, are disclosed in the notes toparent company financial statements, when material.

Earnings Per ShareThe Company presents basic and diluted earnings per share rate for its common shares. BasicEarnings Per Share (EPS) is calculated by dividing net income for the period attributable tocommon equity shareholders by the weighted average number of common shares outstandingduring the period after giving retroactive effect to any stock dividend declarations.

Diluted EPS is calculated in the same manner, adjusted for the dilutive effect of any potentialcommon shares. As the Company has no dilutive common shares outstanding, basic and dilutedearnings per share are stated at the same amount.

Segment ReportingA segment is a distinguishable component of the Company that is engaged either in providingproducts or services within a particular economic environment, which is subject to risks andrewards that are different from those of other segments. Such business segment is the base uponwhich the Company reports its operating segment information. The Company operates in onegeographical area where it derives its revenue. The Company did not present segment informationin the parent company financial statements as the Company has only one reportable segment.However, the Company presents segment information in the consolidated financial statements asthe Company’s subsidiary is organized into business units based on geographical location ofstudents and assets.

3. Management’s Use of Judgments, Estimates and Assumptions

The preparation of the parent company financial statements in conformity with PFRS requires theCompany to make judgments, estimates and assumptions that affect the reported amounts ofrevenues, expenses, assets and liabilities and disclosure of contingent liabilities at the reportingdate. The uncertainties inherent in these assumptions and estimates could result in outcomes thatcould require a material adjustment to the carrying amount of the assets or liabilities affected inthe future years.

Judgments. In the process of applying the Company’s accounting policies, management has made thefollowing judgments apart from those including estimations and assumptions, which have the mostsignificant effect on the amounts recognized in the parent company financial statements.

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Impairment of Investments in Equity SecuritiesThe Company follows the guidance of PAS 39 to determine when an investments in equitysecurities is impaired. This determination requires significant judgment. In making thisjudgment, the Company evaluates, among other factors, the duration and extent to which the fairvalue of an investment is less than its cost; and the financial health of and near-term businessoutlook for the investee, including factors such as industry and sector performance, changes intechnology and operational and financing cash flow.

An AFS financial asset is considered to be impaired when there has been a significant orprolonged decline in the fair value below its cost or where other objective evidence of impairmentexists. The determination of what is “significant” or “prolonged” requires judgment. TheCompany treats “significant”, generally as 20% or more decline in the original cost of investment;and “prolonged”, as a period of greater than six months. In addition, the Company evaluates otherfactors, including normal volatility in share price for quoted equities and the future cash flows andthe discount factors for unquoted equities.

No impairment loss for investments in equity securities was recognized for the years endedMarch 31, 2014 and 2013.

Available-for-sale financial assets amounted to P=0.8 million as at March 31, 2014 and 2013(see Note 8).

Impairment of Nonfinancial AssetsAn impairment review is performed whenever events or changes in circumstances indicate that thecarrying amount of a nonfinancial asset may not be recoverable or that the previously recognizedimpairment loss may no longer exist or may have decreased. The factors that the Companyconsiders important which could trigger an impairment review include the following:

§ significant under performance relative to expected historical or projected future operatingresults;

§ significant changes in the manner of use of the acquired assets or the strategy for overallbusiness;

§ significant negative industry or economic trends;

§ the dividend exceeds the total comprehensive income of the associate in the period thedividend is declared; or

§ the carrying amount of the investment in an associate in the parent company financialstatements exceeds the carrying amount in the financial statements of the investee’s net assets,including associated goodwill.

At each financial reporting date, the Company assesses whether there are any indicators ofimpairment. Only if indicators of impairment are present will the Company perform theimpairment testing.

The Company recognizes an impairment loss whenever the carrying amount of an asset exceedsits 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.

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While it is believed that the assumptions used in the estimation of fair values reflected in theparent company financial statements are appropriate and reasonable, significant changes in theseassumptions may materially affect the assessment of recoverable value and any resultingimpairment loss would have a material adverse impact on the results of operations.

Noncurrent nonfinancial assets that are subject for impairment testing as at March 31, 2014 and2013 are as follows:

2014 2013Investments in and advances to subsidiaries

(see Note 7) P=15,830,847,317 P=15,282,822,916Property and equipment (see Note 9) 12,758,936 11,528,450

No impairment loss was recognized for the years ended March 31, 2014 and 2013.

Evaluating Lease CommitmentsThe evaluation of whether an arrangement contains a lease is based on its substance. An arrangementis, or contains a lease when the fulfillment of the arrangement depends on a specific asset or assetsand the arrangement conveys a right to use the asset, even if that right is not explicitly specified in thearrangement.

The Company has entered into various operating lease agreements as a lessee. The Company hasdetermined, based on an evaluation of the terms and conditions of the arrangements, that the lessorretains all the significant risks and rewards of ownership of these properties because the leaseagreements do not transfer to the Company the ownership over the assets at the end of the lease termand do not provide the Company with a bargain purchase option over the leased assets and soaccounts for the contracts as operating leases. Rent expense amounted to P=2.4 million andP=1.1 million for the years ended March 31, 2014 and 2013, respectively.

Estimates and Assumptions. The key estimates and assumptions concerning the future and other keysources of estimation uncertainty at reporting date, that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilities recognized in the parent company financialstatements within the next financial year are discussed as follows:

Estimating Allowance for Doubtful AccountsThe Company maintains an allowance for doubtful accounts at a level considered adequate toprovide for potential uncollectible receivables. The level of allowance is evaluated by theCompany on the basis of factors that affect the collectability of the accounts. The review isaccomplished using a combination of specific and collective assessment. The factors consideredin specific impairment assessment are the length of the Company’s relationship with customers,customers’ current credit status based on known factors, age of the accounts and other availableinformation that will indicate objective evidence that the customers may be unable to meet theirfinancial obligations. The collective impairment assessment is based on historical loss experienceand deterioration in the market in which the customers operate. The amounts and timing ofrecorded provision for doubtful accounts for any period will differ if the Company made differentassumptions or utilized different estimates.

There were no provisions for doubtful accounts recognized for the years ended March 31, 2014and 2013. Receivables, including noncurrent receivables, amounted to P=464.3 million andP=479.8 million as at March 31, 2014 and 2013, respectively (see Notes 5 and 11).

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Recognition of Deferred Tax AssetsThe Company reviews the carrying amounts of deferred tax assets at each reporting date andreduced these to the extent that it is no longer probable that sufficient taxable income will beavailable to allow all or part of the deferred tax assets to be utilized.

Since the Company is a holding company, management assessed that no sufficient future taxableincome will be generated to allow all or part of its deferred tax assets to be utilized as theCompany’s income mainly pertains to passive income which are not subject to income tax.

Deductible temporary differences and unused NOLCO and MCIT for which no deferred tax assetswere recognized amounted to P=5.6 million and P=6.7 million as at March 31, 2014 and 2013,respectively (see Note 14).

4. Cash and Cash Equivalents

2014 2013Cash on hand P=5,000 P=5,000Cash in banks 22,682,932 5,453,761Cash equivalents 153,962,880 458,412,600

P=176,650,812 P=463,871,361

Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are short-termplacements which are made for varying periods of up to three months depending on the immediatecash requirements of the Company and earn interest at the prevailing short-term investment rates.

Interest income earned from cash in banks and short-term cash placements for the years endedMarch 31, 2014 and 2013 amounted to P=2.6 million and P=10.7 million, respectively.

5. Receivables

2014 2013Accrued interest P=17,232 P=243,008Receivable from Philippine Racing Club, Inc. (PRCI) – 10,179,312Receivable from STI ESG (see Note 11) – 5,100,000Others 270,909 274,831

P=288,141 P=15,797,151

a. Accrued interest pertains to accrued interest from short-term cash placements which are normallycollectible within one year.

b. Receivable from PRCI

On July 7, 2008, the Company and PRCI (the Company’s major shareholder up to March2010) executed a Deed of Transfer with Subscription Agreement pursuant to the resolution ofthe BOD and Shareholders to approve a property-for-share swap transaction involving aproperty owned by PRCI. The Company paid local transfer taxes to the City Treasurer ofMakati amounting to P=10.2 million, in relation to the property-for-share swap transaction.However, on August 22, 2008, the Company agreed with PRCI to disengage effectiveimmediately from the agreement.

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In 2009, the Company received a tax credit certificate (TCC), amounting to P=10.2 million,covering the local transfer taxes and the said TCC was subsequently assigned to PRCI.

As of March 31, 2014, PRCI fully settled their liability to the Company.

c. Other receivables are collectible within one year.

6. Other Current Assets

2014 2013Prepaid taxes P=12,271,042 P=10,592,104Others 170,524 110,313

P=12,441,566 P=10,702,417

Prepaid taxes primarily include input VAT and creditable withholding taxes.

7. Investments in and Advances to Subsidiaries


2014 2013Investments in shares of stock P=15,651,120,967 P=15,282,822,916Deposit for future stock subscription 179,726,350 –

P=15,830,847,317 P=15,282,822,916

The Company carries its investments in shares of stock of the following subsidiaries under the costmethod:

Principal PlacePercentage of

Ownership Costof Business 2014 2013 2014 2013

STI ESG Cainta, Rizal 99% 99% P=15,283,676,041 P=15,282,822,916WNU Bacolod City, Negros

Occidental 99% – 367,444,926 –P=15,651,120,967 P=15,282,822,916

Movements in the investment cost are as follows:

2014 2013Balance at beginning of year P=15,282,822,916 P=–Additions 368,298,051 15,282,822,916Balance at end of year P=15,651,120,967 P=15,282,822,916

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STI ESGThe movements in the Company’s investment in STI ESG for the year ended March 31, 2014 and2013 are as follows:

2014 2013Balance at beginning of year P=15,282,822,916 P=–Additions 853,125 –Share swap (see Notes 1, 11 and 12) – 13,102,011,371Subscriptions (see Notes 1, 11 and 12) – 2,100,000,000Reclassification from available-for-sale financial

assets (Note 8) – 80,811,545Balance at end of year P=15,283,676,041 P=15,282,822,916

On September 28, 2012, pursuant to the Share Swap discussed in Notes 1 and 11, the Companyissued 5,901,806,924 shares to STI ESG Stockholders at a quoted price of P=2.22 per share (STIHoldings’ quoted price as of September 28, 2012) in exchange for 907,970,294 STI ESG shares(see Note 12).

In November 2012, the Company subscribed to 1,020,000,000 STI ESG shares at P=1.00 per share.In December 2012, the Company advanced P=1,080.0 million to STI ESG for future subscription ofSTI 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 ofits application.

In July 2013, the Company acquired additional 328,215 STI ESG shares from variousshareholders for a cash consideration of P=853,125.

On August 30, 2013 and November 23, 2012, the Company received cash dividends from STIESG amounting to P=246.8 million or P=0.08116883 per STI ESG share and P=98.0 million or P=0.05per STI ESG share, respectively.

WNUInvestments in and advances to WNU consists of:

AmountInvestment in shares of stock P=367,444,926Deposit for future stock subscription 179,726,350

P=547,171,276

On September 11, 2013, STI Holdings executed a Share Purchase Agreement with the formershareholders of WNU. WNU owns and operates West Negros University in Bacolod City. Itoffers pre-elementary, elementary, secondary and tertiary education and graduate courses.

On October 1, 2013, STI Holdings executed a Deed of Absolute Sale to acquire the shares inWNU constituting 99.45% of the issued and outstanding common stock and 99.93% of the issuedand outstanding preferred stock of WNU for an aggregate purchase price of P=400.0 million,including contingent consideration. As of March 31, 2014, the acquisition cost was recorded atP=397.0 million broken down as follows: (a) cash payment of P=238.2 million, including advancesamounting to P=34.4 million; (b) contingent consideration amounting to P=151.5 million and(c) payable to WNU on behalf of WNU’s previous shareholders amounting to P=7.3 million(see Note 10).

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Certain acquisition-related expenses amounting to P=4.7 million were capitalized as part of the costof acquiring WNU.

In November 2013, the BOD and the stockholders of WNU approved the reclassification of thepreferred shares into common shares and the increase in its authorized capital stock. As at July 9,2014, the SEC approval on WNU’s application is still pending.

As of March 31, 2014, the Company has made a deposit for future stock subscription in WNU foran aggregate amount of P=179.7 million, including advances converted into deposit for future stocksubscription of P=34.4 million.

8. Available-for-sale Financial Assets

This account represents the Company’s investment in quoted equity securities amounting toP=850,065 and P=844,255 as of March 31, 2014 and 2013, respectively.

Movement in unrealized mark-to-market gain on available-for-sale financial assets follows:

2014 2013Balance at beginning of year P=479,788 P=436,628Unrealized mark-to-market gain 5,810 43,160Balance at end of year P=485,598 P=479,788

In December 2011, the Company acquired 32,324,618 STI ESG shares, approximating 4.4% ofownership interest in STI ESG, from various shareholders for a total consideration ofP=80.8 million. The Company accounted such investment as AFS financial assets in the March 31,2012 parent company statement of financial position.

After the Share Swap in September 2012 (see Notes 1 and 7), the Company gained control overSTI ESG. Thus, the Company reclassified its investment in STI ESG to “Investments in andadvances to subsidiaries” account immediately after the Share Swap.

9. Property and Equipment

The rollforward analyses of this account follows:

2014

OfficeEquipment

LeaseholdImprovements

Furnitureand Fixtures

Propertyunder

Construction TotalCostBalance at beginning of year P=292,677 P=12,108,761 P=95,774 P=492,114 P=12,989,326Additions 209,618 3,553,913 205,193 – 3,968,724Reclassification 492,114 (492,114) –Balance at end of year 502,295 16,154,788 300,967 – 16,958,050Accumulated Depreciation

and AmortizationBalance at beginning of year 292,677 1,131,236 36,963 – 1,460,876Depreciation and amortization 34,233 2,647,385 56,620 – 2,738,238Balance at end of year 326,910 3,778,621 93,583 – 4,199,114Net Book Value P=175,385 P=12,376,167 P=207,384 P=– P=12,758,936

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2013

OfficeEquipment

LeaseholdImprovements

Furnitureand Fixtures

Propertyunder

Construction TotalCostBalance at beginning of year P=292,677 P=133,279 P=36,964 P=– P=462,920Additions – 11,975,482 58,810 492,114 12,526,406Balance at end of year 292,677 12,108,761 95,774 492,114 12,989,326Accumulated Depreciation

and AmortizationBalance at beginning of year 242,045 133,279 24,583 – 399,907Depreciation and amortization 50,632 997,957 12,380 – 1,060,969Balance at end of year 292,677 1,131,236 36,963 – 1,460,876Net Book Value P=– P=10,977,525 P=58,811 P=492,114 P=11,528,450

Total fully depreciated property and equipment that are still in use is not material.

10. Accounts Payable and Other Current Liabilities

2014 2013Payable to STI ESG (see Note 11) P=10,248,915 P=13,412,540Payable to WNU (see Note 11) 7,321,342 –Accrued expenses 2,631,263 2,604,760Accounts payable 698,107 2,780,558Others 110,202 114,298

P=21,009,829 P=18,912,156

a. Payable to STI ESG primarily pertains to expenses incurred for the Company’s leaseholdimprovements paid by STI ESG on behalf of the Company.

b. Payable to WNU represents the amount due to WNU arising from the sale of WNU’s investmentin joint venture to an entity owned by the previous shareholders. Based on the agreementbetween the Company and the previous shareholders, such amount will be settled by theCompany on behalf of the previous shareholders and will form part of the cost of acquiring WNU(see Notes 7 and 11).

c. As of March 31, 2013, accounts payable and accrued expenses primarily pertain to unpaid billingfor printing of offering prospectus and accrued professional fees. These are normally settledwithin one year.

11. Related Party Transactions

Enterprises and individuals that directly, or indirectly through one or more intermediaries, control,or are controlled by, or under common control with the Company, including holding companies,and fellow subsidiaries are related entities of the Company. Associates and individuals owning,directly or indirectly, an interest in the voting power of the Company that gives them significantinfluence over the enterprise, key management personnel, including directors and officers of theCompany and close members of the family of these individuals and companies associated withthese individuals also constitute related entities.

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The Company, in the normal course of business, has the following transactions with relatedparties:

Amount/VolumeOutstanding

Receivable (Payable)Category 2014 2013 2014 2013 Terms ConditionsAffiliatesPhilippine Women’s

University (PWU)*Principal P=– P=26,470,915 P=250,000,000 P=250,000,000 To be settled by way of

assignment of investmentin shares


Interest – 9,189,946 12,651,546 12,651,546UNLAD Resources

Development Corporation(UNLAD)*

Principal – 198,000,000 198,000,000 198,000,000 To be settled by way ofequity conversion


Interest – 3,536,389 3,327,389 3,327,389

SubsidiarySTI ESGReimbursement (see Note 10) `5,838,668 13,412,540 (10,248,915) (13,412,540) 30 days upon receipt

of billings;Noninterest-bearing

Unsecured

Advisory fee (see Note 5) 14,400,00 6,000,000 – 5,100,000 30 days upon receiptof billings;Noninterest-bearing


WNUDeposit for future stock

subscription179,726,350 – 179,726,350 – 30 days upon receipt

of billings;Noninterest-bearing

Unsecured

Assignment of liability 7,321,342 – (7,321,342) – 30 days upon receiptof billings;Noninterest-bearing

Unsecured

P=626,135,028 P=455,666,395**Entities under common management

Other information on major transactions with related parties follows:

a. Agreements with PWU, UNLAD and an unrelated individual (“Individual”)

In November 2011, the Company acceded to a joint venture agreement and a shareholders’agreement by and amongst PWU, UNLAD, an Individual and Mr. Eusebio H. Tanco, STIHoldings’ BOD Chairman, for the formation of a strategic arrangement with regard to theefficient 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 companycontrolled by the Benitez Family and has some assets which are used to support theeducational 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 collateraland security, for the amount of P=223.5 million, on a without recourse basis, in November2011. Likewise in accordance with the Agreement, the Company is obliged to extend: (a) adirect loan to PWU in the amount of P=26.5 million (the “Loan to PWU”) and (b) a loan toUNLAD in the amount of P=198.0 million (the “Loan to UNLAD”). The Receivable fromPWU and the Loan to PWU aggregating to P=250.0 million shall be secured by the PWUIndiana Property and PWU Taft Property while the Loan to UNLAD shall be secured by thePWU 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 beaccrued and paid by way of the assignment by PWU of its shares in UNLAD (which PWU

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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 equityin UNLAD to enable the Company to acquire, together with the shares assigned by PWU tothe Company as payment for the Receivable from PWU and Loan to PWU, a total of fortypercent (40%) equity in UNLAD.

On May 17, 2012, the Individual, who is a party to the Agreement with the Company, PWUand UNLAD, assigned his rights, title and interest in the Agreement to AttenboroughHoldings Corporation (“AHC”). AHC thereby assumed the Individual’s obligation to grant aloan 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’sloan to UNLAD (“Loan to UNLAD”) and the AHC Loan to UNLAD. Accordingly, onJune 8, 2012, the Company entered into an Omnibus Agreement with UNLAD and AHC(“Omnibus Agreement”) which consisted of: (1) a prefatory agreement; (2) a loan agreement;and (3) a real estate mortgage.

Under said loan agreement, the Lenders will extend a loan to UNLAD which is payable byway of conversion into equity in UNLAD. Said conversion into equity in UNLAD mustenable: (a) the Company to acquire, together with the shares acquired by it as payment of theCompany's Loan to PWU, 40.0% of the issued and outstanding capital stock of UNLAD, asdiscussed above; and (b) AHC to acquire 20.0% of UNLAD’s issued and outstanding capitalstock.

In June 2012, the Company released the Loan to PWU amounting to P=26.5 million. In Augustand October 2012, the Company granted the Loan to UNLAD amounting to P=166.0 million andP=32.0 million, respectively.

On March 25, 2013, the joint venture agreement and Omnibus Agreement have been amended todiscontinue imposition of interest on the Loan to PWU, Loan to UNLAD and AHC Loan toUNLAD effective January 1, 2013.

As of March 31, 2014 and 2013, noncurrent receivables consist of loan principal of P=448.0million and accrued interest of P=16.0 million. Interest income for the year endedMarch 31, 2013 amounted to P=12.7 million.

As of March 31, 2014 and 2013, the equity interest in UNLAD has not been assigned to theCompany in exchange for the receivables from PWU and the Loan to UNLAD. The saidreceivables from PWU and the Loan to UNLAD are presented as “Noncurrent receivables” in theparent company statements of financial position.

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

b. Share-for-share swap agreement with STI ESG Stockholders

As discussed in Note 1, on June 14, 2012 and August 10, 2012, the BOD and stockholders of STIHoldings, respectively, approved the Company’s Share Swap with the STI ESG Stockholders andthe increase in the Company’s authorized capital stock from 1,103,000,000 shares with anaggregate par value of P=551.5 million to 10,000,000,000 shares with an aggregate par value of5,000.0 million. On September 28, 2012, the Company issued 5,901,806,924 shares to STI ESG

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Stockholders in exchange for 907,970,294 STI ESG shares following the SEC’s approval of theincrease in its authorized capital stock (see Notes 7 and 12).

The Company and STI ESG were under common control.

c. Business advisory agreement with STI ESG

In November 2012, the Company and STI ESG entered into an agreement for the Company to actas an adviser for the latter with monthly fee of P=1.2 million.

Advisory fee earned for the years ended March 31, 2014 and 2013 amounted to P=14.4 millionand P=6.0 million, respectively.

d. Compensation and benefits of key management personnel

Since the Company is a holding company and its key officers are the same with that of STI ESG,the Company has four and one employee as of March 31, 2014 and 2013, respectively.

Key management compensation for the years ended March 31, 2014 and 2013 amounted toP=1.7 million and P=1.0 million, respectively.

12. Equity

a. Common Stock

Details and movement in common stock follows:

2014 2013Shares Amount Shares Amount

Common stock - P=0.50 par value per shareAuthorized 10,000,000,000 P=5,000,000,000 10,000,000,000 P=5,000,000,000

Issued and outstanding: Balance at beginning of period 9,904,806,924 P=4,952,403,462 1,103,000,000 P=551,500,000 Issuances – – 8,801,806,924 4,400,903,462

9,904,806,924 P=4,952,403,462 9,904,806,924 P=4,952,403,462

In December 2011, the Company issued 397,908,895 and 397,908,894 of its unissuedcommon shares to STI ESG and CMA (the “Private Placement Shares”), respectively, via aprivate placement for an aggregate subscription amount of P=477.5 million (see Note 11). Theexcess of the subscription amount over the par value of the shares (net of documentary stamptaxes paid relative to the issuances of shares amounting to P=2.0 million) is recognized asadditional paid-in capital (APIC).

The 795,817,789 private placement shares were approved for listing with the PSE onSeptember 28, 2012 subject to the fulfillment of certain conditions. On May 10, 2013, theSEC granted the Company’s request for exemptive relief from the requirements of themandatory tender offer relative to the private placement transaction. On June 27, 2013, thePSE advised the Company to submit duly executed lock-up agreements to facilitate the listingof private placement shares. The lock-up agreements were executed on August 5, 2013 andwere submitted to the PSE on August 7, 2013. The lock-up period expired on February 18,2014.

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On September 28, 2012, the Company issued 5,901,806,924 shares to STI ESG stockholdersin exchange for 907,970,294 STI ESG shares pursuant to the Share Swap transactiondiscussed in Notes 1 and 11. The transaction resulted to the recognition of common stock andAPIC of P=2,950.9 million and P=10,151.1 million, respectively.

On November 7, 2012, the Company issued 2,627,000,000 new shares relative to the PrimaryOffering at P=0.90 per share following its listing in the PSE. The transaction resulted toincreases in common stock and APIC of P=1,313.5 million and P=1,050.8 million, respectively.

On November 28, 2012, the Company issued the 273,000,000 Over-allotment Option shares toUBS AG (see Note 1) resulting to recognition of common stock and APIC of P=136.5 millionand P=109.2 million, respectively.

Transaction costs incurred in connection with the issuance of shares for the year endedMarch 31, 2013 amounting to P=134.0 million were offset against APIC.

Set out below is the Company’s track record of registration of its securities:

Number of SharesIssue/

Offer PriceDate of Approval Authorized IssuedDecember 4, 2007* 1,103,000,000 307,182,211 P=0.50November 25, 2011** 1,103,000,000 795,817,789 0.60September 28, 2012*** 10,000,000,000 5,901,806,924 2.22November 7, 2012 10,000,000,000 2,627,000,000 0.90November 28, 2012 10,000,000,000 273,000,000 0.90*** Date when the registration statement covering such securities was rendered effective by the SEC.*** Date when the Company filed SEC form 10-1(k) (Notice of Exempt Transaction) with the SEC in accordance with the

Securities Regulation Code and its Implementing Rules and Regulations*** Date when the SEC approved the increase in authorized capital stock.

As at March 31, 2014 and 2013, the Company has a total number of shareholders on record of1,245 and 1,243, respectively.

b. Retained Earnings

On September 4, 2013, cash dividends amounting to P=0.015144 per share or the aggregateamount of P=150.0 million were declared by the Company’s BOD in favor of all stockholderson record as at September 18, 2013, payable on September 30, 2013.

On December 5, 2012, cash dividends amounting to P=0.01 per share or the aggregate amountof P=99.0 million were declared by the Company’s BOD in favor of all stockholders on recordas of December 19, 2012, payable on December 28, 2012.

As at March 31, 2014 and 2013, long outstanding unclaimed dividends amounting toP=11.9 million pertain to dividend declarations from 1998 to 2006.

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13. Basic/Diluted Earnings Per Share

The table below shows the summary of net income and weighted average number of commonshares outstanding used in the calculation of earnings per share:

2014 2013Net income P=245,120,656 P=93,257,505

Common shares at beginning of year 9,904,806,924 1,103,000,000Weighted average of:

5,901,806,924 shares issued on September 28, 2012 – 2,983,330,9732,627,000,000 shares issued on November 7, 2012 – 1,039,252,747273,000,000 shares issued on November 28, 2012 – 92,250,000

Weighted average number of common shares 9,904,806,924 5,217,833,720P=0.025 P=0.018

The basic and diluted earnings per share are the same as at March 31, 2014 and 2013 as there areno dilutive potential common shares.

14. Income Taxes

The Company’s provision for current income tax for the years ended March 31, 2014 and 2013pertains to MCIT.

The reconciliation between the provision for income tax at the applicable statutory tax rate and theprovision for current income tax as shown in the statements of comprehensive income are asfollows:

2014 2013Provision for income tax at statutory tax rate P=73,627,637 P=28,090,870Tax effects of:

Dividend income (74,043,884) (29,404,424)Expired NOLCO 1,516,194 389,404Income subjected to final tax (775,936) (3,221,651)Change in unrecognized deferred tax assets (132,518) 317,262Nondeductible expenses 94,679 4,170,433Expired MCIT 18,628 36,833

Provision for current income tax P=304,800 P=378,727

As at March 31, 2014 and 2013, the Company did not recognize the deferred tax assets on thefollowing NOLCO, MCIT and unrealized foreign exchange losses as management believes thatfuture taxable income will not be available to allow all or part of NOLCO, MCIT and unrealizedforeign exchange losses to be utilized as the Company’s income mainly pertains to passive incomewhich are not subject to income tax:

2014 2013NOLCO P=4,731,498 P=6,270,193MCIT 740,309 454,137Unrealized foreign exchange losses 145,604 2,541

P=5,617,411 P=6,726,871

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As at March 31, 2014, the Company has available NOLCO and MCIT as follows:

Year Incurred Expiry Date NOLCO MCIT2014 2017 P=3,515,286 P=304,8002013 2016 1,216,212 378,7272012 2015 – 56,782

P=4,731,498 P=740,309

NOLCO amounting to P=5,053,981 and P=1,298,012 expired in 2014 and 2013, respectively, whileMCIT amounting to P=18,628 and P=36,833 expired in 2014 and 2013, respectively.

15. Financial Risk Management Objectives and Policies

The Company’s principal financial instruments comprise cash and cash equivalents. The mainpurpose of these financial assets is to support the Company’s operations. The Company hasvarious other financial assets and liabilities such as receivables, available-for-sale financial assets,accounts payable and other current liabilities and dividends payable which arise directly from itsoperations.

The main risks arising from the Company’s financial instruments are credit risk and liquidity risk.The Company’s BOD reviews and approves policies for managing each of these risks and they aresummarized below.

Credit Risk. Credit risk is the risk that the Company will incur a loss arising from its debtors orcounterparties that fail to discharge their contractual obligations. Credit risk arises from depositsand short-term placements with banks as well as credit exposure on receivables from its debtors.Cash transactions are limited to high credit quality financial institutions. Cash in banks and short-term cash placements are maintained with universal banks. On the other hand, managementbelieves that the debtors have a strong financial position and ability to settle its payable to theCompany upon maturity.

As at March 31, 2014 and 2013, the Company’s receivables are classified as high grade. TheCompany’s financial assets are all neither past due nor impaired.

With respect to credit risk arising from cash in banks and short-term cash placements, theexposure to credit risk arises from default of the counterparty, with a maximum exposure to thecarrying amount of these financial instruments.

The table below shows the maximum exposure to credit risk for the components of the statementsof financial position as at March 31:

Gross Maximum Exposure Net Maximum Exposure(1)

2014 2013 2014 2013Cash and cash equivalents:

Cash in banks P=22,682,932 P=5,453,761 P=21,682,932 P=4,453,761Cash equivalents 153,962,880 458,412,600 153,462,880 457,408,804

Receivables 464,267,076 479,776,086 288,141 15,797,151AFS financial assets 850,065 844,255 850,065 844,255Total P=641,762,953 P=944,486,702 P=176,284,018 P=478,503,971(1) Net financial assets after taking into account insurance on bank deposits and the fair value of the collateral on noncurrent

receivables held by the Company

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Liquidity Risk. Liquidity risk relates to the failure of the Company to settle itsobligations/commitments as they fall due. The Company observes prudent liquidity riskmanagement through the maintenance of sufficient cash funds and short-term cash placements,and availability of funding in the form of adequate credit lines.

The tables below summarize the maturity profile of the Company’s financial assets held forliquidity purposes and liabilities based on contractual undiscounted payments:

2014Due within

3 MonthsDue from

3 to 6 MonthsMore than

6 Months TotalFinancial assets:

Cash and cash equivalents P=176,650,812 P=– P=– P=176,650,812Receivables 288,141 – 463,978,935 464,267,076AFS financial assets – – 850,065 850,065

P=176,938,953 P=– P=464,829,000 P=641,767,953

Financial liabilities:Dividends payable P=11,864,639 P=– P=– P=11,864,639Accounts payable 698,107 – – 698,107Accrued expenses 2,631,263 – – 2,631,263Payable to STI ESG 10,248,915 – – 10,248,915Payable to WNU 7,321,342 – – 7,321,342Nontrade payable 151,470,221 – – 151,470,221

P=184,234,487 P=– P=– P=184,234,487

2013Due within

3 MonthsDue from

3 to 6 MonthsMore than6 Months Total

Financial assets:Cash and cash equivalents P=463,871,361 P=– P=– P=463,871,361Receivables 15,797,151 – 463,978,935 479,776,086AFS financial assets – – 844,255 844,255

P=479,668,512 P=– P=464,823,190 P=944,491,702

Financial liabilities:Dividends payable P=11,840,316 P=– P=– P=11,840,316Accounts payable 2,780,558 – – 2,780,558Accrued expenses 2,604,760 – – 2,604,760Payable to STI ESG 13,412,540 – – 13,412,540

P=30,638,174 P=– P=– P=30,638,174

Correspondingly, the financial assets that can be used by the Company to manage its liquidity riskas at March 31, 2014 and 2013 consist of cash and cash equivalent and receivables.

As at March 31, 2014 and 2013, the Company’s current ratios are as follows:

2014 2013Current assets P=189,380,519 P=490,370,929Current liabilities 184,344,689 30,752,472Current ratios 1.027:1.000 15.946:1.000

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Capital Risk ManagementThe Company’s objectives when managing capital are to safeguard the Company’s ability tocontinue as a going concern so that it can provide returns to shareholders and benefits for otherstakeholders and to maintain an optimal capital structure to reduce the cost of capital.Management is looking into several business proposals which the Company may venture into inthe near future. In order to maintain or adjust the capital structure, the Company adjusted theamount of dividends paid to shareholders, returned capital to shareholders and issued stockdividends.

The Company monitors capital on the basis of the debt-to-equity ratio which is calculated as totaldebt divided by total equity. The Company includes all liabilities within debt. The Companydefines total equity as common stock, additional paid-in capital, unrealized mark-to-market gain(loss) on investments in equity securities and retained earnings.

As at March 31, 2014 and 2013, the Company’s debt-to-equity ratios are as follows:

2014 2013Total liabilities P=184,344,689 P=30,752,472Total equity 16,313,921,083 16,218,793,013Debt-to-equity ratio 0.011:1.000 0.002:1.000

Another approach used by the Company is the asset-to-equity ratios shown below:

2014 2013Total assets P=16,498,265,772 P=16,249,545,485Total equity 16,313,921,083 16,218,793,013Asset-to-equity ratio 1.011:1.000 1.002:1.000

There were no changes in the Company’s approach to capital risk management during the year.

16. Fair Value Information of Financial Instruments

The carrying values of the Company’s financial assets and liabilities, except available-for-salefinancial assets, approximate their fair values as at March 31, 2014 and 2013 due to short-termnature and/or maturities of these financial instruments. The carrying value of noncurrentreceivables does not materially differ from its fair value.

As at March 31, 2014 and 2013, the fair value of the Company’s available-for-sale financial assetsare based on quoted market prices (Level 1).

During the year, there were no transfers among levels 1, 2 and 3 fair value measurements.

There were no financial instruments subject to an enforceable master netting arrangement thatwere not set-off in the parent company statements of financial position.

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17. Notes to Parent Company Statements of Cash Flows

The Company’s non-cash investing and financing activities for the year ended March 31, 2014 and2013 consists of:

a. Acquisition of WNU in October 2013 resulting to recognition of nontrade payable ofP=151.5 million and payable to WNU amounting to P=7.3 million (see Notes 7 and 11).

b. The Company’s issuance of 5,901,806,924 shares to STI ESG Stockholders in exchange for907,970,294 STI ESG shares resulting to recognition of (i) investment in a subsidiary ofP=13,102.0 million, (ii) common stock of P=2,950.9 million and (iii) APIC of P=10,151.1 million(see Notes 7, 11 and 12).

c. Expenses incurred for the Company’s leasehold improvements paid by STI ESG on behalf ofthe Company amounted to P=12.0 million as of March 31, 2013 (see Note 10).

18. Events after the Reporting Date

In May 2014, the Company made a deposit for future stock subscription to 40% of outstandingcommon stock of AHC.

19. Supplementary Information Required by RR No. 15-2010

In compliance with the requirements set forth by RR 15-2010, hereunder are the information ontaxes, duties and license fees paid or accrued during the taxable year ended March 31, 2014:

Value-added Tax (VAT)

Output VAT declared for the year ended March 31, 2014 and the receipts upon which the samewas based consist of:

Gross amount Output VATAdvisory services P=20,400,000 P=2,448,000Others 1,050,000 126,000Total P=21,450,000 P=2,574,000

The amount of sales of services is based on gross receipts of the Company. Hence, these may notbe the same as the amount of gross revenues accrued in the parent company statement ofcomprehensive income. The Company has no VAT-exempt or VAT zero-rated sales during theyear ended March 31, 2014.

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VAT arising from domestic purchases of goods and services for the year ended March 31, 2014are detailed as follows:

AmountInput VAT

Beginning of year P=6,091,353Current year’s domestic purchases / payments for:

Goods for resale / manufacture or further processing –Goods other than for resale or manufacture 88,975Capital goods subject for amortization 392,903Capital goods not subject for amortization –Services lodged under other accounts 1,874,610

8,447,841Claimed against output VAT and other adjustments (2,953,806)Balance at the end of year P=5,494,035

Withholding TaxesThe amount of withholding taxes paid/accrued for the year ended March 31, 2014 is as follows:

AmountFinal withholding taxes on dividends P=7,295,065Expanded withholding taxes 724,227Withholding taxes on compensation 242,847

P=8,262,139

Documentary Stamp Tax (DST)Documentary stamp taxes paid for the year ended March 31, 2014 are as follows:

AmountAcquisition of shares* P=291,540Advances* 48,631Others 67,100

P=407,271*Expenses related to acquisition of WNU capitalized as part of investment cost

Other Taxes and LicensesThe breakdown of other taxes and licenses recognized as part of “Taxes and licenses” account forthe year ended March 31, 2014 are as follows:

AmountAnnual listing maintenance fee P=641,908License and permit fees 579,564BIR annual registration fee 500

P=1,221,972

Status of Tax Assessment and Court CasesThe Company has no outstanding final assessment notice from the BIR as of March 31, 2014.There were also no outstanding tax cases nor litigation and/or prosecution in courts or bodiesoutside the BIR as of March 31, 2014.

STI: Annual report

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Transcript of STI: Annual report