COVER SHEET - STI Education Systems Holdings, Inc

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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 S T I H O L D I N G S C E N T E R

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

Company Telephone NumberContact Person

COVER SHEET

(Company's Full Name)

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

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Fiscal Year

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Last Friday of September

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Annual Meeting

SEC FORM 17-A For the Fiscal Year ended 31 March 2016Month

Total Amount of Borrowings

STI Education Systems Holdings, Inc.SEC Form 17 – AAs of 31 March 2016Page 2

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

3,593,087,024 shares x P 0.57 per share = P2,048,059,603.68

Note: As of the last trading date which was on 31 March 2016, the Company’s shares weretraded at P 0.57 each.

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

DOCUMENTS INCORPORATED BY REFERENCE

15. The March 31, 2016 Audited Consolidated Financial Statements is incorporated by reference inthis 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 4Item 2 Properties 43Item 3 Legal Proceedings 47Item 4 Submission of Matters to a Vote of Security Holders 55

PART II – OPERATIONAL AND FINANCIAL INFORMATION

Item 5 Market for Issuer’s Common Equity and Related Stockholder Matters 55Item 6 Management’s Discussion and Analysis of Financial Condition and

Results of Operation and Plan of Operation 57Item 7 Financial Statements 71Item 8 Changes in and Disagreements with Accountants on Accounting and

Financial Disclosures 71

PART III – CONTROL AND COMPENSATION INFORMATION

Item 9 Directors and Executive Officers of the Issuer 72Item 10 Executive Compensation 79Item 11 Security Ownership of Certain Beneficial Owners and Management 80Item 12 Certain Relationships and Related Transactions 84

PART IV – CORPORATE GOVERNANCE

Item 13 Corporate Governance 85

PART V – EXHIBITS AND SCHEDULES

Item 14 Exhibits and Reports on SEC Form 17-C 85

SIGNATURES 88

MARCH 31, 2016 AUDITED CONSOLIDATED FINANCIAL STATEMENTS ANDSUPPLEMENTARY SCHEDULES

CONSOLIDATED CHANGES IN ACGR FOR 2015


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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 in1928 as the Philippine branch office of Theo H. Davies & Co., a Hawaiian corporation. It wasreincorporated as a Philippine corporation in 1946. After many years of operations as part of theJardine-Matheson group, STI Holdings was sold to local Philippine investors in 2006. In March 2010, itbecame part of the Tanco Group of Companies.

STI Holdings is the holding company within the Tanco Group that drives investment in its educationbusiness. It is a publicly-listed company in the Philippine Stock Exchange (“PSE”) and its registeredoffice address and principal place of business is 7th Floor, STI Holdings Center, 6764 Ayala Avenue,Makati City. Unless indicated otherwise or the context otherwise requires, reference to the “Group” areto STI Holdings and its subsidiaries.

In June and August 2012, the Board of Directors and stockholders of the Company, respectively,approved the share-for-share swap transaction (the “Share Swap”) between the shareholders of theCompany and the shareholders of STI Education Services Group, Inc. (“STI ESG Shareholders”) and thecorresponding increase in the Company’s authorized capital stock from 1,103,000,000 shares with anaggregate par value of P551.5 million to 10,000,000,000 shares with an aggregate par value of P5 billion.The Securities and Exchange Commission (“SEC”) approved both the Share Swap and increase inauthorized capital stock in September 2012.

On the latter part of August 2012, the Board of Directors of STI Holdings approved the offering andissuance by way of a follow-on offering of up to a maximum of 3 billion common shares of theCompany. The O f f e r , c o m p r i s e d o f Primary Offering, Secondary Offering and the OverAllotment Option were a l l e x e c u t e d a n d completed in November 2012 where a total of 2,900,000,000shares were issued following its listing in the PSE.

As of March 31, 2016 and March 31, 2015, STI Holdings has outstanding shares totaling to 9,904,806,924out of its authorized capital stock of 10 billion shares.

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

In August 2012, STI Holdings’ shareholders approved an increase in share capital from 1,103,000,000shares with an aggregate par value of P551.5 million to 10,000,000,000 shares with an aggregate par valueof P5 billion and a share swap agreement with the STI ESG Shareholders. The SEC approved theagreement and the increase in the authorized capital of the Company in September 2012. By end ofOctober 2012, the consolidation of the two companies was completed.

In view of the increase in its authorized capital stock and pursuant to the Share Swap, STI Holdingsissued 5,901,806,924 shares to STI ESG Shareholders in exchange for 907,970,294 common shares ofSTI ESG As a result, immediately after the Share Swap, the STI ESG Shareholders who joined the ShareSwap owned approximately 84% interest in STI Holdings while STI Holdings increased its shareholdingsto 96.0% of the total issued and outstanding capital stock of STI ESG.


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In November and December 2012, STI Holdings subscribed to 2.1 billion STI ESG shares. In July 2013,the Company acquired an additional 328,125 shares. STI Holdings’ ownership of STI ESG is at 98.66% asof March 31, 2016 and March 31, 2015.

Acquisition of West Negros University

STI Holdings acquired on October 1, 2013, 99.45% of the issued and outstanding common shares and99.93% of the issued and outstanding preferred shares of West Negros University Corp., now known asSTI West Negros University, a leading university in the City of Bacolod in Negros Occidental.

West Negros University offers a wide variety of programs and complements the courses offered bythe Company’s other subsidiary, STI ESG.

The acquisition is part of the planned expansion of the Company. It not only widened its courseofferings at the tertiary level but the acquisition also provided STI Holdings another entry into basiceducation which is the focus of the government’s K to 12 program, and into the graduate school levelwhich is vital in uplifting the development of human capital in the country.

In May 2015, the SEC approved the change in the corporate name of West Negros University Corp. to STIWest Negros University, Inc.

Attenborough Holdings Corporation (“AHC”)

The Company became a stockholder owning 40% of AHC in November 2014 following the SEC approvalof the increase in the authorized capital stock of AHC. In February 2015, STI Holdings acquired theremaining 60% ownership of AHC from various individuals making it a 100% owned subsidiary.

AHC is a holding company which is a party to the Joint Venture Agreement and Shareholders’Agreement (“the Agreements”) among Philippine Women’s University (PWU”), Unlad ResourcesDevelopment Corporation (“Unlad”) and the Benitez Group. Under the Agreements, AHC is set to ownup to 20% of Unlad. AHC is also a party to the Omnibus Agreement it executed with STI Holdings andUnlad.

Business Development

STI Education Services Group, Inc. (“STI ESG”)

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

Shortly after the establishment of its first wholly-owned training center, STI ESG began grantingfranchises for other locations within Metro Manila. In 1985, STI ESG established its first provincial schoolwith a wholly- owned campus in Baguio City. In l986, expansion moved to the southern part of thePhilippines with a wholly-owned school in Cebu. In 1988, STI ESG established its first campus inMindanao, 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 toadjust to the changing business environment. In 1994, STI ESG developed a 2-year associate degree incomputer 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 theBachelor’s Degree in Computer Science.


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In 2001, the Tanco Group, a minority shareholder at that time, acquired control of STI ESG bypurchasing a controlling interest from the founders. The Tanco group then installed a new managementteam. 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 existingprograms to bachelor’s degree in the fields of business administration, computer engineering,secondary education, and by introducing new programs in electronics and communicationsengineering, nursing, and hotel and restaurant management. To date, new programs continue to beconsidered 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 also officiallyapplied for the initial offering of the Senior High School program (Grades 11 and 12) beginning SchoolYear (SY) 2014-15. As of today, all 77 schools in the STI ESG network have been granted the Departmentof Education (“DepEd”) permit to offer Senior High School.

STI ESG continued to embark on expansion and capital improvement projects as it encouraged schoolsto move from rented space into school-owned stand-alone campuses. STI ESG also acquired certainfranchises and converted them into wholly-owned schools. In addition, STI ESG has centralized its focusinto academic quality and started investing on trainings on awareness, documentation, and internalquality audit to achieve ISO 9001:2008 certification for its core academic processes — the coursewaredevelopment process, the faculty certification process, and the faculty training process — which wasawarded on February 5, 2015 by the ISO certifying body TÜV Rheinland Philippines Inc.

In August 2009, STI ESG subscribed to a 20% interest in a newly created holding company, STIInvestments, Inc. (“STI Investments”). STI Investments subsequently acquired a 100.0% interest inPhilPlans First, Inc. (“PhilPlans”), now a leading pre-need company, providing innovative pension,education and life plans. PhilPlans later acquired a 65% interest in Rosehills Memorial Management, Inc.,a company engaged in the operation and management of a memorial park, memorial and intermentservices and sale of memorial products. STI Investments also acquired a 99.74% interest inPhilhealthCare, Inc., (“PhilCare”) a Health Maintenance Organization (HMO) that provides effective andquality health services and operates through its own clinics and through nationwide accredited clinicsand hospitals. In May 2012, STI Investments acquired 70.0% of Philippine Life Financial Assurance Corp.(“PhilLife”), formerly Asian Life Financial Assurance Corp. PhilLife provides financial services, such asindividual, family and group life insurance, investment plans and loan privilege programs. In December2015, STI Investments subscribed to additional shares of PhilLife thus increasing its ownership to 70.6%as of March 31, 2016. SEC approved the change in the corporate name of STI Investments, Inc. to MaestroHoldings, Inc. on February 17, 2016.

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”) 10533on May 15, 2013, also known as the Enhanced Basic Education Act of 2013. The emphasis of RA 10533 isthe introduction of the K to 12 program which in summary adds two (2) years prior to tertiaryeducation.For schools in the Philippines that offer tertiary education, similar to STI ESG, this means a substantialreduction in incoming college freshmen students for two (2) academic years.

This threat has been constructively converted into an opportunity for the STI ESG network of campusesnationwide. STI ESG has decided to capitalize on its nationwide presence and ample facilities to be ableto implement the first-to-market approach of the Senior High School (“SHS”) program.

In 2014, DepEd granted permit to offer SHS to sixty-seven (67) STI ESG schools out of a total of ninety-two (92) schools. As of today, all 77 schools in the STI ESG network have been granted the DepEd permitto offer Senior High School.


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Likewise, in June 2014, thirty-two (32) STI ESG schools were able to pilot Senior High School with a totalof 1,195 students. For SY 2015-16, four (4) more schools started its Senior High School program and thetotal number of students increased to 1,577.

The two (2 ) program tracks covered by the permit are the Academic and Technical-Vocational-Livelihood tracks. Under the Technical-Vocational-Livelihood Track, STI ESG offers three strands withvarious specializations.

Academic TrackAccountancy, Business and ManagementHumanities and Social SciencesScience, Technology, Engineering, and MathematicsGeneral Academic Strand

Technical – Vocational-Livelihood TrackInformation and Communications Technology (“ICT”) Strand

Specializations: Computer Programming Animation Illustration Computer Hardware Servicing Broadband Installation

Home Economics StrandSpecializations: Commercial Cooking Cookery Bartending Food and Beverage Services Tour Guiding Services Travel Services Tourism Promotion Services Front Office Services Housekeeping

Industrial Arts StrandSpecialization: Consumer Electronics Servicing

The Senior High School offering of STI ESG aims to minimize the impact of the expected reduction inenrollment since there will be a substantial reduction of incoming freshmen during the transition periodfrom Senior High School to College. Likewise, there is an opportunity for STI ESG to increase its studentretention and migration when the students graduate from Senior High School and decide to pursue aBaccalaureate degree.

STI Senior High School Early Registration

To help prepare the incoming Grade 11 students in choosing the right track, DepEd released Order No. 41or known as the Senior High School Guidance Program and Early Registration. This aims to guide Grade10 students or Senior High entrants in coming up with informed decisions regarding their choice of trackor specialization for the Early Registration from October 19 up to November 13, 2015.

STI ESG collaborated with DepEd and conducted career guidance and orientation seminars for Grade 10students in various public and private high schools nationwide. During the registration period, all Grade


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10 students in all public and private high schools were encouraged to submit their choice of school andSHS track to their respective class advisers. The class advisers of Grade 10 in public schools were thentasked to register their students for SHS and submit learners’ preferences through the SHS registrationmodule in the Learner Information System (LIS) of DepEd.

In addition, aligned with DepEd’s objectives to assist students with their decisions, STI developed a toolcalled the Student’s Career Opportunity and Personality Evaluator or SCOPE. It is a uniquecomputerized program that would help Grade 10 students find the best career for them that fits theirstrengths, interests, and personality. With the assistance of a Guidance Counselor, incoming Senior Highstudents will get a free comprehensive report in less than 30 minutes that can lead them in making animportant decision for their future.

As a result of STI ESG’s marketing efforts in the early registration campaign for SHS, a total of 30,917Grade 10 students registered in STI ESG with 2,577 officially enrolled as of March 31, 2016.

Post-Graduation Report for SY 2014-15

The STI Alumni Relations, Placement, and Linkages (“STI APL”) department conducts a survey of thegraduating class to track employment rate six (6) months after graduation. This is facilitated through theSTI School’s Alumni and Placement Office. For SY 2014-15, 60% of the surveyed graduates wereemployed within six (6) months after graduation and 64% were employed after one (1) year.

Still as part of the job placement assistance of STI, the STI APL institutionalizes partnerships locally andinternationally to help increase the employability of graduates through the Interactive Career Assistanceand Recruitment System.

Interactive Career Assistance and Recruitment System (“ICARES”)

The ICARES is an exclusive job search system for STI graduates which facilitates the easy disseminationof STI’s partners for their placement opportunities and provision of candidates (STI graduates) to fill injob openings. Partners for job placement of STI graduates are enabled to post their job openings andrequest for lists of graduates through www.i-cares.com or the ICARES at no cost. Registration withICARES is required for all graduating STI students. In SY 2013-14, 104 partners utilized the ICARESsystem wherein 73 of its partners were able to post job vacancies on the ICARES website. The numbersslightly increased in SY 2014-15 to 112 partners with 85 partners posting job opportunities on the website.With 111 partner companies in SY 2015-16, the number of companies using the ICARES system continuedto increase to 91.

On-the-ground school activities such as job fairs are conducted for recruitment purposes and toprovide employment preparation seminars for graduating STI ESG students. In SY 2013-14, 30institutional partners participated in STI ESG job fairs and 31 participants in SY 2014-15, and 34 partnersin SY 2015-16. Schools nationwide also have local partnerships within their community to provide moreavenues available to graduating students.

The STI Distinguished Alumni Awards

SY 2014-15 marks the launch of the STI Distinguished Alumni Awards. STI ESG campuses nationwidenominated deserving alumni who have received distinction and achievement in their chosen field.

The winners — Jose Agustinho Salvador, Janice Lagundi, Felix Emradura, Michael Cunanan, and EdwardCzar Aquino — were awarded on April 30, 2015 during the Achievers’ Night of the 2015 STI Leaders’Convention held at the Boracay Regency Hotel Resort and Spa.

In its second year, another batch of exemplary alumni were recognized on April 28, 2016 at the HennanResort Alona Beach, Bohol.


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STI West Negros University, Inc. (“STI WNU”, formerly West Negros University Corp.)

West Negros University was founded on February 14, 1948 by three Baptist women leaders. The school,then West Negros College (“WNC”), first operated as a sectarian educational institution in an old rentedValentine Memorial Hall in Bacolod, offering six undergraduate programs that attracted 710 studentshandled 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 separatebuilding was also built for elementary and high school pupils.

With the continued increase in enrolment, then President Leodegario N. Agustin initiated theconstruction of a P2.2 million concrete five-storey building. The building accommodated all academicdepartments 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 graduationactivities, and extended its services to the community by accommodating, among others, basketballgames, 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-storeybuilding 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 itsown 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 thepioneers of computer schools in Western Visayas.

On October 1, 2007, as initiated by then President, Dr. Suzette Lilian A. Agustin, an application forUniversity status was submitted at the CHED Central Office, Manila. CHED Central Office sent aSpecial Team from November 22 to 23, 2007 to evaluate and verify compliance of WNC with theuniversity standards. The school’s readiness for a final CHED visit to inspect and evaluate WNC’s levelof compliance was conveyed on January 25, 2008 to the Commission en banc and to the Office ofPrograms and Standards of the Commission on Higher Education, which resulted to the conduct ofthe detailed and rigorous process of verification by the CHED Commissioners on February 5, 2008.

On February 11, 2008, the Commission on Higher Education found WNC in full compliance of CHEDrequirements, and granted WNC the University Status, per Resolution No. 78, s. 2008. The WNCBoard of Trustees then unanimously approved the change of the school’s name from West NegrosCollege to West Negros University, on February 26, 2008. On June 10, 2008, West Negros Universityreceived the official confirmation through a Certificate of University Status from CHED, by virtue ofResolution No. 290, s. 2008, dated June 2, 2008.

On October 1, 2013, STI Holdings acquired 99.45% of the issued and outstanding common shares and 99.93%of the preferred shares of STI WNU thus making it a subsidiary of the Company.

On May 15, 2015, the SEC approved the change of the University’s name to STI West Negros University.It is now branded as an STI school.

On October 5, 2015, DepEd granted STI WNU the Permit to Operate SHS Program for all tracks. On May11, 2016, DepEd also granted the university the permit to offer ICT Strand and certain specializations. STIWNU’s SHS offering is as follows:


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Academic TrackAccountancy, Business and ManagementScience, Technology, Engineering and MathematicsHumanities and Social SciencesGeneral Academic Strand

Technical-Vocational TrackICT Strand

Specializations: Computer Programming Computer Hardware Servicing Broadband Installation Contact Center Services

Home Economics StrandSpecializations: Bread and Pastry Production Cookery Food and Beverage Services Front Office Services Housekeeping Local Guiding Services Tourism Promotion Services Travel Services

Sports Track

Arts and Design Track

On May 13, 2014, West Negros University purchased the net assets of Bacolod Educational Service andTechnology Center, Inc. (“STI College – Bacolod”) from an STI ESG franchisee, thus taking over theoperation of its schools, a college and a Technical Education and Skills Development Authority(“TESDA”) registered education center in Bacolod City, on the same date. The students of both the collegeand the education center were fully integrated into STI WNU in the second semester of SY 2014-15.

On December 9, 2015, the SEC approved the amendment of STI WNU’s Articles of Incorporation allowingSTI WNU to provide maritime training services that will offer and conduct training required by theMaritime Industry Authority (“MARINA”) for officers and crew on board Philippine and/or foreignregistered ships operating in the Philippine and/or international waters.

On March 2, 2016, STI WNU submitted an application to MARINA for the accreditation of the followingnon-simulator training courses:

Consolidated Marine Pollution 73/78 Annexes I-VI Ship Security Officer (“SSO”) Seafarer Security Awareness Training (“SSAT”) / Seafarer with Designated Security Duties

(“SDSD”)

On March 29, 2016, STI WNU submitted an application to MARINA for the accreditation of the followingsimulator training courses:


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New Management Level Course for Marine Deck Officers (“MLC-DECK”) Updating Training for Officer in Charge of a Navigational Watch (“OIC-NW”) Ratings Forming Part of a Navigational Watch (“Deckwatchkeeping”) Ship Stability and Bridge Teamwork (“SSBT”) Updating Management Level Course for Marine Deck Officers (“Updating Training for MLC-

Deck”)

Non-STI Branded Schools

In addition to the schools in the STI ESG Network, STI ESG operates two schools that are not branded asSTI schools: iACADEMY, which specializes in course offerings in animation and multimedia anddigital arts and De Los Santos STI (“DLS STI”) College, a health science and nursing school andits wholly-owned subsidiary, STI College – Quezon Avenue, which is part of the STI ESG Network.

iACADEMY

iACADEMY started in 2002 with an initial class of 72 students. At the beginning of SY 2015-16,iACADEMY had 994 students enrolled. The school is located in Makati - the Central Business District ofManila. The faculty is comprised of both experienced academicians and industry practitioners.iACADEMY prides itself in being the first Wacom Authorized training partner in the Philippines, as wellas the first college in the ASEAN region to be appointed as an IBM Center of Excellence. Aside frombringing in industry professionals to teach at iACADEMY, the school also has an impressive internshipprogram, which is one of the most intensive in the country today. Under the program, iACADEMYstudent interns work full-time in partner companies for at least 960 hours. This model has resulted in a96% job placement rate within the first six (6) months after graduation.

iACADEMY’s transfer to iACADEMY Plaza for SY 2014-15 accommodated its growing studentpopulation. The auditorium, commissioned with its lights and sounds fixtures located at the 2nd floor hasa 450-500 seating capacity. iACADEMY occupies 8 floors of the 11-storey building. All 8 floors have beendesigned to provide modern facilities with the entire 7th floor equipped with top of the line computersuites that provide necessities of education including high speed internet at 20 Mbps each from twointernet service providers, namely Eastern Telecoms and PT&T.

On August 10, 2015, DepEd granted iACADEMY’s permit to offer Senior High School. iACADEMY willbe offering three tracks, as follows:

Academic TrackAccountancy, Business and ManagementHumanities and Social SciencesGeneral Academic Strand


Specializations: Computer Programming Animation

Home Economics StrandSpecialization: Fashion Design

Arts & Design Track


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DLS STI College

De Los Santos STI College was established and recognized by the Department of Education Cultureand Sports (“DECS”) in 1975 as part of the expanding services of the De Los Santos General Hospital(“the Hospital”) to the Filipino community. The school opened its College of Nursing with only 65students. In the school’s interest to ensure quality students for its system, only student applicants with aminimum rating of 95% in their NCEE were accepted into the College of Nursing. By 1979, 42 of its firstnursing students graduated with 135 students enrolled. Through diligence and careful management, thepopulation increased to 300.

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

The courses, which the school offered, continued to increase as it kept pace with its maturing years. In1981 the School opened Junior Secretarial courses and Midwifery. Two years later, its first batch ofenrollees graduated.

In the next decade, the De Los Santos College has added to its line, the College of Physical Therapy,which received DECS authority to operate in June 1993.

In September 2002, the merger with STI ESG was established. This merger was a strategic move onboth 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.

STI ESG has a 52% interest in DLS STI, which is a CHED licensed college specializing in healthscience education. Approximately 80% of the students were then enrolled in health sciences. In addition,it offered programs in hotel and restaurant management, and tourism.

Due to the visa retrogression in the U.S.A. and the lowering demand for Nurses in other countries,nursing colleges in Asia experienced a continuing drop in their enrollees, including DLS STI College.

Further, anticipating the substantial reduction in the number of freshmen enrollees in the SY 2016-2017and 2017-2018 as a result of the implementation of the Government’s K to 12 program, the school’s boarddecided to suspend its operations for the foregoing school years.

DLS STI’s wholly-owned subsidiary, STI College Quezon Avenue, Inc., is incorporated in thePhilippines and registered with SEC on March 20, 2007. Its registered office address is 133 QuezonAvenue, Quezon City.

STI College Quezon Avenue, Inc. was established as an Education Center in San Juan from 1993 to1995, then transferred to Sta. Mesa f r o m 1996 up to 2000. It was upgraded to College status in 2001offering bachelor degree programs. STI College Quezon Avenue, Inc. was formerly situated at 1050CDC Bldg. Quezon Avenue, Quezon City near Pantranco until second quarter of 2009. In June 2009, itmoved to its present location in a four-storey building with mezzanine floor conducive to a campussetting.

Enrollment

STI ESG

STI ESG had an average total enrollment of 66,259 for the first and second semesters in SY 2013-14. By SY2014-15, there was an increase of 5.49% over the previous year as the average total enrollment for both thefirst and second semesters went up to 69,896. The average total enrollment continued to go up to 74,524 inSY 2015-16 which consequently attained a 6.62% increase.


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In SY 2013-14, the total freshmen enrollees was 31,871 and grew by 3.52% in SY 2014-15. The number ofenrollees continued to improve in SY 2015-16 attaining an increase of 8.13% with 34,149.

The average percentage of students retained in a semester was 96% from SY 2013-14 to SY 2015-16.Meanwhile, the average percentage of students who migrated to the succeeding semester is at 91% inSY 2013-14 and 92% in SY 2014-15. In SY 2015-16, the average percentage of students who migrated to thesucceeding semester is still at 92%.

In the previous years, significant increases in the enrollment are more evident in the degree programs ofSTI ESG compared to its technical/vocational programs. The share of associate and baccalaureate degreeprograms to technical/vocational programs improved from 76% versus 24% in SY 2013-14 to 81% versus16% in SY 2014-15. It continued to increase to 85% versus 12% in SY 2015-16.

On the other hand, the senior high school tracks and specializations posted a 3% share for both SY 2014-15 and SY 2015-16.

In SY 2013-14, STI ESG generated 13,647 graduates for the first and second semesters, and 12,280 in SY2014-15. For SY 2015-16, there were 12,672 graduates for the first and second semesters.

STI WNU

For SY 2013-14, enrollment in STI WNU was at 5,000. As for SY 2014-15, STI WNU showedimprovement as it registered 5,080 students and an additional of 1,386 students from the acquired STICollege – Bacolod franchised schools, thus increasing the number of enrolled students to 6,466. Thisgenerated an increase of 29% compared to previous year’s total student population. The followingschool year, SY 2015-16, it had 6,091 students; 6% shy of last year’s enrollment. Contributing factorsinclude financial constraints and the graduation of the last batch of Nursing students. Due to thecontinuous decline in the number of enrollees, STI WNU surrendered its permit to offer the Nursingprogram.

The share of Basic Education and Graduate Studies program increased by 1 percentage point each in thelast two years, whereas, the share of Tertiary programs in the enrollment mix decreased from 72% to70%. On the other hand, the ratio of new students to continuing students remained unchanged at 37%versus 63% in the last two school years.

Tuition Fee Increases

STI ESG

For SY 2013-14, there was an average increase of 5% in the tuition fees. In SY 2014-15, no increase wasimplemented in the tuition fees and other school fees. On the other hand, a 5% increase was implementedin SY 2015-16 in the tuition fees and other school fees.

STI WNU

For the school years covering SY 2013-14, SY 2014-15 and SY 2015-16, STI WNU has not implemented anyincrease in tuition and other charges. This resulted to very affordable pricing in both basic education andcollege/post-college courses versus immediate competitors in the market.


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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 areimplemented to meet changes in the identified needs, as well as changes in government regulatoryrequirements.

Existing course offerings are likewise reviewed as needed. The streamlining of program curricula inresponse to the needs of the market and developments in the industry drives the rationalization ofSTI course offerings. In SY 2014-15, one program underwent program revisions.

STI ESG’s Standardized Courseware

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

As of this writing, STI ESG has developed courseware for over 500 courses and new coursewarematerials are being developed as new courses and programs are offered. Moreover, existingcourseware are regularly revised and updated to keep up with recent developments in target industriesand the schools.In SY 2015-16, forty-nine (49) courseware materials were developed and revised for Arts and Sciences, ITand Engineering, Business and Management, Tourism Management, and Hospitality Management. Thesecourseware materials were embedded with activities leading toward attainment of the STI 4Cs —Character, Change-adeptness, being a Communicator, and being a Critical Thinker. The materials werealso Outcome-based education (OBE)-aligned with assessment tools, rubric, and tasks.

Following recent developments in the industry and the trends in academic delivery, courseware revisionsare 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, STI ESG prepared the following curricula and coursewarefor Senior High School:

Curriculum for the Academic Track:Accountancy, Business and ManagementHumanities and Social SciencesScience, Technology, Engineering, and MathematicsGeneral Academic Strand

Curriculum for Technical-Vocational-Livelihood Track:ICT Strand

Specializations: Computer Programming Animation Illustration Broadband Installation


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Computer Hardware Servicing Broadband Installation

Home Economics StrandSpecializations: Commercial Cooking Cookery Bartending Food and Beverage Services Tour Guiding Services Travel Services Tourism Promotions Services Front Office Services Housekeeping

Industrial Arts StrandSpecialization: Consumer Electronics Servicing

Standardized Periodical Examination

The Standardized Periodical Examination for the preliminary and finals period, which used to beoutsourced to a third party, is now being developed by the Academic Research Group. For SY 2015-16,the group developed 197 exams in the first semester and 145 exams in the second semester.

Milestones

STI ESG

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

International Organization for Standardization 9001:2008 (“ISO 9001:2008”)

In SY 2014-15, STI ESG worked together in achieving the ISO 9001:2008 certification of its LearningDelivery System. This system covers development of tertiary level courseware and curriculum, facultytraining, and faculty certification. The network has worked to fulfill the requirements that includedextensive research; training sessions on proper documentation and internal quality audit; documentationof policies, processes, and work instructions; and the orientations given to STI ESG employees.

The ISO 9001:2008 is an international certification that indicates an institution’s effectiveness andconsistency in managing and carrying out its system regulation. It has strengthened the institution’sstanding in its performance to provide quality education that the students need. With an internationalaccreditation, it has verified the institution’s world-class performance in its education delivery

Senior High School Graduation

STI ESG celebrated its 1st Senior High School Graduation with 706 graduates from 36 campusesnationwide in SY 2015-16. The network graduation was held on April 8, 2016 at the STI Academic CenterGlobal City in Taguig. The graduation ceremony was attended by the DepEd Regional Director for NCR,Dr. Ponciano Menguito, and DepEd Assistant Secretary for Curriculum and Instruction, Mr. Elvin Uy.


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Partnership with DepEd and other Educational Institutions

As the largest pioneer school in Senior High School, STI ESG was continuously invited by DepEd to shareto the NCR Regional Directors, Division Superintendents, and Division Assistant Superintendents itswealth of knowledge and experience in implementing the Senior High School program to its 77 campusesnationwide: DepEd NCR Conference Room in January 2015, TYTANA College in July 2015, and ManilaOcean Park in Pasay City in November 2015. In June 2015, STI was given a plaque of recognition forbeing one of DepEd’s partners during its K to 12 Anniversary. STI ESG was also invited by thePolytechnic University of the Philippines San Juan campus, a city government funded higher educationalinstitution, in October 2015 and Roosevelt College in November 2015.

Ads Standards Council (“ASC”)

The Ads Standards Council is an organization which aims to promote truth and fairness in advertisingthrough self-regulation. ASC also handles the screening of all advertising materials and settlementdisputes regarding advertising content. In December 2015, a complaint lodged with ASC against STI ESGfor its claim of “Pioneering the Largest Network of Senior High Schools” was decided to be invalid.

Leaders Convention

Held at the Boracay Regency Hotel Resort and Spa in Boracay, Aklan from April 29 to May 1, 2015, the28th Annual Leaders Convention focused on the full implementation of the Senior High School programfor school year 2016-2017. It was attended by the STI ESG Executives, School Leaders, School OperationsManagers, and Senior School Administrators. Gracing the event were: DepEd’s Undersecretary forPrograms and Projects, Dr. Dina S. Ocampo, who discussed updates and shared her expertise on DepEd’sK to 12 program conceptualization; and Dr. Ethel Agnes P. Valenzuela, Senior Specialist and Head of theResearch Unit at the Southeast Asian Ministers of Education Organization Regional Center forEducational Innovation and Technology (“SEAMEO INNOTECH”), who talked about the imminentASEAN 2015 integration and its impact on the country.

Peoplesoft Campus Solutions (“PSCS”)

Oracle’s Peoplesoft Campus Solutions is a system that facilitates student admission, enrollment,assessment, and grading, among others. Paired with Report Services, a web-based application hosting thereportorial requirements of STI ESG, the PSCS was launched in SY 2015-16 to STI’s network of campuses.Available in real time, the STI schools are able to access numerous reports which they can also modifyaccording to their own requirements. The reports are categorized into four (4) — Academics, Financials,Enrollment, and Government-mandated reports — using the SQL Server Reporting Services 2008 R2.

Learning Management System

In SY 2015-16, STI ESG launched Learning Management System (LMS), a software application running onAmazon cloud, to better manage the delivery of educational courses and/or training programs of itsstudents. The curricular course materials aim to augment classroom learning while the extra-curricularcourse materials are prepared to further nurture student development. The LMS features a built-insupport for collaboration through various tools such as wikis, forums, and discussion groups; an internalmessaging system with bidirectional support for emails and text messaging; and a built-in portfoliosystem which students can use to collect works to support learning and/or achievements. With LMS, STIstudents can now complete their lessons at their own pace, wherever they are.

iLearn and Share

In SY 2015-16, STI ESG introduced iLearn and Share (“iLS”) to its Senior High School students. It is aperformance task wherein students were assessed based on their products or performance, which serve


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as proof of how well they understood and learned the task. Students can then apply their learnings to reallife situations.

New Colleges

STI Colleges Laoag and Dipolog were granted college status by CHED in SY 2014-15 and STI College –Dumaguete in SY 2015-16.

STI WNU

On December 4, 2014, STI WNU was recognized by the Philippine Association of Colleges andUniversities Commission on Accreditation (“PACUCOA”) as the “Institution with the Highest Numberof Accredited Programs in Region VI.”

On August 8, 2015, the Treasury Department of STI WNU was recognized by the Bangko Sentral ngPilipinas (BSP) as its Outstanding Regional Partner in Currency Programs for Region VI and NIR. Theaward was given due to the efficiency of the institution in detecting counterfeit bills.

STI WNU has also been the host or venue for Negros Occidental Private Schools’ Sports Cultural andEducational Association (NOPSSCEA) games.

Faculty Achievements

STI ESG

For SY 2015-16, faculty members underwent a two-day training on the Certified Accounting Technician(“CAT®”) Level 2 and seventeen (17) faculty members successfully passed CAT® Level 2 examinationand are eligible to become Registered Cost Accountants.

Six faculty members, on the other hand, were recognized as TESDA assessors: Haidee G. Pestilos of STICollege – Vigan for Food and Beverage Services NC II, Bartending NC II, Housekeeping NC II,Commercial Cooking NC II, Bread and Pastry Production NC II, Cookery NC II, Front Office Services NCII, and Tour Guiding Services NC II; Mark Ryan E. Capacio of STI College – San Pablo for Food andBeverage Services NC II; Jeanette L. Rabia of STI Tagum for Bread and Pastry Production NC II,Housekeeping NC II, and Food and Beverage Services NC II; Leomar T. Busalla of STI Tagum for TourGuiding Services NC II; and Antonio M. Lazona of STI College – Makati and Melvin C. Ado of STITagum for Computer Hardware Servicing NC II.

Similarly, two faculty members were given recognitions by STI’s partner IT companies. Ramil D. Dery ofSTI College – Baliuag, and STI College – Vigan’s Jayson S. Viernes are proud Microsoft User OfficeSpecialist and Microsoft Certified Professional, respectively.

Lastly, Rhon C. Suliva of STI College – Quezon Avenue is a distinguished Mathematics TeacherAssociation of the Philippines (MTAP) Trainor for DepEd – NCR, while Elvi Lito E. Ubas from STICollege – Davao is certified by the Philippine National IT Standards (PhilNITS) - FundamentalInformation Technology Engineers (FE).

STI WNU

Ritzy R. Malo-oy, adviser/moderator of The Wesneco Torch, official student publication of STI WNU, wasawarded Best Performing School Paper Adviser by the Presidential Communications Operations Office –Philippine Information Agency (PIA) Region VI in Iloilo City for two consecutive years, 2013 and 2014.


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Dr. Wilfredo O. Hermosura, a part-time professor of the School of Graduate Studies and principal ofDoña Montserrat Lopez Memorial High School, was awarded third place for Best Oral ResearchPresentation during the 4th International Conference on Multidisciplinary Research held on February 4 to6, 2015. The international conference on Multidisciplinary Research with the theme “2015 ASEANIntegration: Challenges and Opportunities in Multidisciplinary Research” was attended by researchingfaculty of higher educational institutions in Asia.

Student Achievements

STI ESG

For SY 2015-16, Yancy Kabigan of STI College – Balagtas represented the country in the Southeast Asian(SEA) Games in Singapore and finished 4th place in the Male Windsurfing Sailing competition.

Additionally, AB Communication students dominated the prestigious AdSpeak 2016 where they bestedother colleges and universities in the different advertising competitions. Sophomores from STI College –Global City bagged awards for their moving works in the TV Category. Roy John Libres’ video "Be Like"won the Online Choice Award, while Jerald Rioflorido’s video entitled "Coin" won 2nd runner-up in theStudents’ Choice Award. Moreover, two freshmen from STI College – Novaliches brought home threemajor awards. John Jeffry Calma’s entry dubbed "Air" grabbed the Students’ Choice Award and theValues Advertising Award for Print Category. For his work, John was also granted a scholarship atMcCann University Summer Practicum under McCann Worldgroup Asia-Pacific. Just a notch away,Janine Lopez was proclaimed the 1st runner-up in the Students’ Choice Award in the Radio Category.

STI College – Baguio’s Mary Grace Glorydelle Sayo bagged the championship title in the InternationalPrepared Speech Category in the ESLYMPICS 2015, while STI College – Kalibo’s Clerie Jane T. Sucgan,Jeofelene Faye O. David, and Nova Grace Casidsid were declared as champions in the Provincial TourismQuiz Bee. Topping the list is Allan Kent P. Manuba of STI College – Bacoor who placed 1st in the 24th

Philippine Statistics Quiz - Provincial Elimination.

Robert Jhon Camarillo of STI College – La Union won a silver medal for the Skilled Area Category in theIT-Network System Administration during the 16th TESDA Regional Skills Competition, whereas ReyMark Cabuntagon of STI College – Bohol was declared champion in the 2015 Regional Skills Competitionunder the Web Design Category.

Furthermore, Rhea Montojo of STI College – Alabang took home the grand prize in the nationwide searchfor the Great Adobo Cook brought by DeliChef and HMR Philippines. Not to be left behind werestudents from STI College – Global City: Jeastene Gutierrez, Chezka Marqueta, and John Michael Caberwon 1st runner-up with their Peanut Chicken in Congee Spoons, Deconstructed Filipino Kare-Kare, andElvis Presley Inspired Iced Cream in the Lily's Peanut Butterific University Fun Day. On the other hand,Heidy Mae Mangsat, Nercy Fernandez, Jesus Aaron Mallavo, Ricarnet, Valerio, Honey Grace Velasco,and Daxielle Duke of STI College – Dagupan seized one gold, one silver, and one bronze medals from the2nd Pangasinan Tourism Skills Competition.

For its active involvement and contributions to humanitarian services, STI College – San Pablo received aPlaque of Service Award from the Philippine Red Cross San Pablo Chapter.

STI College – Ormoc’s Dance Team composed of 100 students, faculty members, and employees won P200,000 cash as the grand prize in the 6th Tugob Festival, while Kristine Laurente was declared as the 1st

runner-up at the Tugob Festival Queen Pageant.


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STI WNU

In SY 2014-15, the school’s basketball, football, and chess teams finished as champions in NOPSSCEA.The chess team added four more medals including a championship title when they participated in theUNIGAMES and another championship win in the National Shell Active Chess Championship.

Rhyan Cuervo de Loyola also brought home a gold medal in the Web Design and Development Contestduring the 18th PSIT Western Visayas Regional IT Congress. Jan Richmond Padilla was likewise one ofthe recipients of The Outstanding Student (THOS) Awards 2015 (city level) by the Junior ChamberInternational Bacolod, Inc.; while Jodi Ambid, Jr. received the 2015 IWAG Award from the PhilippineInformation Agency Region VI and Kimberly Perez was recognized as the 2014-2015 Outstanding Studentin Accounting and Auditing Studies by the Philippine Institute of Certified Public Accountants, NegrosOccidental Chapter.

Seven students were also recognized for their outstanding leadership skills by the Office of the NationalYouth Commission on March 18, 2015: Remar Mallari, Alvilyn Jeaneth Tubosa, Barbie Riza Estacion, NicaSongaling, Joycee Grace Razonable, Peter Luis Napallatan, and Gener John Ferrariz.

Two members of the school paper participated in the TOSP Youth Hour held on January 24, 2014. This isa leadership training seminar/workshop organized by the Ten Outstanding Students of the Philippines(“TOSP”).

In addition, STI WNU’s Hospitality Management students received a 100% passing rate for theCommercial Cooking NC II TESDA National Assessment held in August 2014. Three students alsopassed the Philippine Information Technology General Certifications Examination (provincial level)conducted by Cebu Educational Development Foundation for Information Technology in November2014.

The Philippine Association for Teacher Education, an organization of teacher educators, awarded thefollowing students in March 2015 for achieving the Highest Academic Average Per Program: Cyrel JoyM. Ebrada, Cyla Mae Porras and Sheila Mae A. Salivio.

Medals of Service were given by East West Educational Specialist (Bloomberg Philippines) on March 18,2015 to the following students of Business Administration: Remar Mallari, Alvilyn Jeaneth Tubosa andBarbie Riza Estacion.

In SY 2015-16, Cadet Jerry Mae Dela Peña was awarded as Most Outstanding Officer Candidate inPhysical Fitness Test – ROTC Summer Camp Training out of 409 Officers in Region 6. Also from theCollege of Arts and Sciences, Debbie O. Benedicto, Bachelor of Science in Communication, Member,Think Quest won the championship in the Tagisan ng Talino, Cluster Category, held in Bohol last March3, 2016. The Men’s Chess Team, on the other hand, bagged the championship award in JohorChallenger’s Cup in Johor, Malaysia held from December 14-19, 2015.

Other students with notable achievements in the fields of Sports and Arts for SY 2015-2016 are as follows:

STI WNU Mustangs – Champion, Pasalamat Festival Open Basketball (April 2015 at LaCarlota City); 1st Runner-Up, VMA Open Invitational (April 2015 at VMA Gymnasium);Champion, NOPSSCEA 2015-2016 UNIGAMES (February 8, 2016 at Riverside College Gym);Champion, STI National Basketball Tournament Visayas League Round 1 (February 22-23,2016 at STI WNU Gymnasium); Champion, STI National Basketball Tournament - AllVisayas (March 29, 2016 at STI WNU Gymnasium); Champion, STI National BasketballTournament (April 11 to 16, 2016 in Cainta, Rizal)

Hannah Axel Mae C. Endrina (BSED-MAPE 2) – Champion, Tagisan Ng Talino Singing IdolNational Level Competition (September 25, 2015 @ Enchanted Kingdom, Sta. Rosa, Laguna)


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Kaanyag Pilipinas Dance Company – Champion, NOPSSCEA 2015-2016 (November 2015 atUSLS)

Men’s Chess Team – 1st Runner-Up, NOPSSCEA 2015-2016 (September 19 to December 2,2015 at STI WNU Study Area)

Women’s Chess Team – 2nd Runner-Up, NOPSSCEA 2015-2016 (September 19 to December 2,2015 at STI WNU Study Area)

Michael H. Ocido (BSHM 4), Men’s Chess (Individual) – Champion, Negros CloseChampionship (December 26 to 30, 2015)

Michael M. Bacan (BSTM 1), Debbie O. Benedicto (Bachelor of Arts in Communications 1)and Adrian M. Leonardia (BS Chemical Engineering 1) – 2nd Runner-Up, Tagisan Ng TalinoThink Quest National Level Competition (March 3, 2016 in Tagbilaran, Bohol)

Axel Mae S. Dela Cruz (BS Criminoly 4) – Top 10 Finalist, Tagisan Ng Sining Shutter’s BestNational Level Competition (March 2, 2016 in Tagbilaran, Bohol

Hannah Axel Mae C. Endrina (BSED MAPE 2) and Janine P. Pialan (BSED MAPE 2) –Champion, National PRISAA (April 6, 2016 in Koronadal, South Cotabato)

For leadership potential and service, the following were the student awardees of various institutions forSY 2015-2016:

Edcelle D. Pamplona (BSBA Financial Management) – Medal of Leadership from the Councilof Management Educators and Practitioners in the Philippines (COMEPP)

Cherry Mae B. Praico (BSED Mathematics), Elaiza Mae A. Balansay (BSED General), JochelleJoy A. Delgado (BSED English), Daisy D. Cayetano (BSEED Special Education), Cyrus L.Gonzales (BSED Filipino) and Kelly Coleen N. Contreras (BSED MAPE) – Special Awardsfrom the Philippine Association for Teachers and Educators (PAFTE)

Stephen A. Barillo (BS Civil Engineering) – Service Award as Junior Philippine Institute ofCivil Engineers President from the Philippine Institute of Civil Engineers – NegrosOccidental Chapter (PICE-NOC)

Brianna G. Aguilar (BS Electronics Engineering) – Most Outstanding Student Award from theInstitute of Electronics Engineers of the Philippines – Negros Occidental Chapter (IECEP-NOC)

John Wesley R. Ang (BS Mechanical Engineering) – Most Outstanding BS MechanicalEngineering Graduate and Service Award as JPSME President from the Philippine Society ofMechanical Engineers – Negros Occidental Chapter (PSME-NOC)

Nikko M. Dy Guaso (BS Civil Engineering) – Outstanding Student Award from the Councilof Engineering and Architecture Schools in Western Visayas (CEAS-WV)

STI WNU students likewise successfully passed several licensure and accreditation examinations, to wit:

Engineering Board Examination

The 2014 board performance showed 15 Civil Engineering and 14 Mechanical Engineering studentspassed the licensure examination with 60% passing rate compared to 43.40% in the national exams forCivil Engineering and 77.78% passing rate compared to 77.06% in the national exams for MechanicalEngineering. Said examinations were conducted in December 2014 and October 2014 respectively. In2015, STI WNU had eight new Civil Engineers.

Electronics Engineering students passed the licensure examination held in September 2014 with 33.33%passing rate compared to the 31.59% national passing rate. In 2015, STI WNU had two new ElectronicsEngineers.


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In 2015, STI WNU had seven new Mechanical Engineers. In 2016, STI WNU had six new MechanicalEngineers or a 100% passing percentage during the March 2016 Mechanical Board Examination.National passing percentage was at 55.32%.

Criminology Board Examination

The University boasts 41 new Criminologists in the October 2014 Licensure Examination forCriminology with a national passing rate of 43.44%. In 2015, it had forty-seven (47) new Criminologists.

Licensure Exam for Teachers

STI WNU also had a strong performance in the licensure examination for teachers conducted in August2014, as the university got a passing rate of 77.36% for elementary teachers and 67.74% for secondaryteachers. In March 2016, the rates increased to 80.00% and 68.42% respectively. In both instances, theoverall passing percentages were higher than the national passing percentage.

Faculty Development and Certification

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

The Courseware-based trainings (“CBT”) are training programs for all faculty members from wholly-owned and franchised schools that aim to improve the teaching methodologies and content knowledgefor specific courses held during semestral and summer breaks. Courses offered for training vary fromyear-to-year depending on the needs analysis of the faculty members of the whole STI ESG network.

The CBT focused on courses such as AMADEUS Basic Certification, Microcontroller System, HRMSystem, QuickBooks, Broadband Technology, Mobile Technology, Fundamentals of VB (using VBA),Advance Microcontroller System, Tour Guiding Services, Tourism Promotion Services, and TravelServices and had 403 participants nationwide in SY 2013-14. In SY 2014-15, there were 94 participants forthe courses C# (C Sharp) Programming, QuickBooks, and Radio/TV Principles and Practices withProduction. In addition, 65 faculty members also underwent industry-provided trainings andcertifications, during SY 2014-15, on Amadeus Basic Certification, Max’s Training Online, and TATAGroup’s Accounting and Finance Course.

On the other hand, in SY 2015-16, there were 155 participants in the Huawei Certified Network Associate(“HCNA”) Training and Gatessoft’s Genesis Property Management System (“PMS”) and Point-of Sales(“POS”) System. Trainings were likewise conducted to help improve the faculty members’ knowledge onteaching methodologies and use of technology. Among these trainings were the STI LMS with 72participants; Outcome-Based Education for Tourism and Hospitality Management (“THM)” ProgramHeads with 69 participants; and Faculty Capacity Development for Senior High School Implementationwhich was attended by 145 Academic Heads and Assistant Principals.

STI ESG also administers a faculty competency certification program (“FCC”) which serves as theprocess of evaluating a faculty member’s knowledge of the course in order to ascertain that he/she hasthe minimum level of competence needed to teach that course. Certification requirements include passinga comprehensive certification exam and garnering above average faculty evaluation ratings fromsuperiors, peers, and students.

The number of FCCs granted by STI has continually increased from SY 2013-14 with 973 FCCs grantedand 2,628 certificates released to 1,121 FCCs and 2,748 certificates in SY 2014-15, and 1,306 FCCs and2,858 certificates in SY 2015-16.


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Student Development

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

The STI National Youth Convention (“STI NYC”)

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

In SY 2013-14, there were 33,404 attendees in the STI NYC held in Baguio, Bacolod, Cebu, Cagayan deOro, Davao, General Santos, Iloilo, Legazpi, Puerto Princesa, and Metro Manila. The number ofattendees increased to 34,574 in SY 2014-15 now in nine (9) venues, removing Puerto Princesa from the roster.As a means to continually improve the quality of the STI NYC, this year, the students were grouped per sessionaccording to their tracks, namely, ICT and Engineering; Business and Management; and Tourism andHospitality Management. The topics are now more specialized to the track of the student-participant.

In SY 2015-16, the number of attendees continued to increase to 39,467 and the convention is still held in ninedifferent areas with the exception of Legazpi, which was replaced with Naga. With the theme “I Will LeadInnovation,” the 21st STI NYC challenged STIers to think differently, be creative, collaborate, rise abovetrials, and break grounds in their respective industries with the help of experts who shared their insightsand experience for future shakers and movers.

Tagisan ng Talino (“TNT”)

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

For SY 2013-14, the participants numbered 879 students in eight (8) various competitions. With the samenumber of competitions, but with the programming competition reduced into one category, a newcompetition was launched about the in-demand industry of mobile applications development. Thenumber of participants from STI campuses nationwide increased to 909 students in SY 2014-15. For SY2015-16, the participants competing in the same categories continued to increase to 933 students.

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, 147students nationwide competed in the TNS. In its second year, SY 2014-15, 149 students from STIcampuses nationwide participated in the TNS. Now on its third year, participants significantly increasedto 211 students from STI campuses nationwide.


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Talent Search

The STI Talent Search is an annual showcase of talents that aims to recognize the various skills ofSTIers nationwide — from singers and musicians to dancers and the up-and-coming models. Everyyear, all STI campuses nationwide send a total of over 100 contestants to compete in nine (9) regional sitesbefore advancing to the National Finals in events like the STI Singing Idol competition, Battle of theBands, Hataw Sayaw Dance competition, and the search for Mr. and Ms. STI.

In SY 2013-14 the event had a delegation of 22,369 students to commemorate the 30th Anniversary of STIwhile in SY 2014-15, 20,065 students witnessed the grand event. In SY 2015-16, the number of studentsslightly increased to 21,177.

Student Leaders’ Congress (“SLC”)

The SLC is a leadership program that nurtures outstanding student leaders from STI campusesnationwide. It aims to hone the leadership skills and potential of students to become catalysts for positivechange in their communities. Held at the STI Academic Center Ortigas-Cainta from May 20-22, 2015,forty (40) delegates from STI network of schools participated — 13 from Metro Manila, 7 in NorthernLuzon, 12 from Southern Luzon, 3 from Visayas, and 5 in Mindanao.

National Basketball Tournament (“NBT”)

To promote sportsmanship, camaraderie, and team spirit amongst students, STI conceptualized theNational Basketball Tournament. A sports program for STI basketball teams nationwide. In SY 2014-15,STI College – Global City won the 1st NBT, and for SY 2015-16, STI West Negros University grabbed thechampionship title besting 51 teams this tournament.

Institutional Linkages

STI ESG

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

Gift of Knowledge

To provide educational opportunities to deserving individuals who have no means to pursue post-secondary education, STI ESG, through the STI Foundation for Leadership in Information Technologyand Education, Inc. (“STI Foundation”), strengthens its partnership with various TV programs fromdifferent TV networks. There were 47 scholars registered from the TV programs in SY 2013-14 and itincreased to 59 in SY 2014-15, and 22 in SY 2015-16.

Sponsored Scholarship Programs

STI ESG and STI Foundation continually strengthen partnerships with corporations to be able to providescholarship programs to support the tertiary education of deserving individuals. As such, STI ESG hasestablished partnerships with various companies and government organizations.

The STI Foundation and its partners were able to support 104 scholars nationwide in SY 2013-14, 156scholars in SY 2014-15, and 169 scholars in SY 2015-16.


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STI WNU

The following grantors sponsor scholarship programs through the University:

Alfredo G. Marañon, Jr. Scholarship Program (“AGMSP”) Associated Planters of Silay-Sarabia, Inc. (“APPSSI”) Bacolod Patenkinder Youth Development Foundation, Inc. (“BACPAT”) Central Azucarera de La Carlota, Inc. (“CAC”) Department of Labor and Employment Special Program for Employment of Students

(“DOLE-SPES”) Elmer Sy Marketing (“ES MKTG”) First Farmers Holding Co. Incorporated (“FFHCI”) Government Assistance to Students and Teachers in Private Education (“GASTPE”; also

called “FAPE” or Fund Assistance to Private Education) Green Scholars – Engr. Dioscoro Marañon and Engr. Paolo Petalver Hawaiian Philippine Company (“HPCO”) Negros Women for Tomorrow Foundation Incorporated (“NWTFI”) Perpetual Educational Foundation (“PEF”) Public Employment Services Office (“PESO”) Sagay Central Skills Enhancement and Educational Development for Students (“SEEDS”; Scholarship from

Jollibee, Greenwich and Chowking) CHED Student Financial Assistance Programs (“StuFAPs”) Congressional Tulong Dunong Grant (“TD Grant”)

In addition, deserving students are given academic, athletic and cultural scholarships based on set criteriaand coverage.

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

Microsoft Corporation (“Microsoft”)

In this partnership, Microsoft will provide modules on Microsoft Phone Application Development,Windows 8, and Microsoft Azure which will be integrated into the courseware of STI ESG’s ICTprograms. It will also implement the Microsoft Student Partner (“MSP”) Program, wherein two (2)qualified STI ESG students will be recruited to become Microsoft’s ambassadors in their schools and helppromote Microsoft’s events and application development initiatives. In addition, Microsoft will providetraining programs on the latest technology trends in the industry to STI ESG faculty members and MSPs.Faculty members will likewise be able to use the Microsoft Virtual Academy (“MVA”) which will allowthem to monitor their students’ performance more easily and access Webinars (web seminars) whereinprofessionals from Microsoft share their expertise online.

Huawei Technologies Philippines (“Huawei”)

Under the new partnership, Huawei will be providing content from the ICT industry that will beintegrated into STI ESG's curriculum for ICT programs. It will also hold training sessions for STI ESG'sfaculty members as well as for STI ESG students through internship programs, grant STI ESG with


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company certifications and accreditation, and make Huawei equipment and devices available for use inSTI classrooms and laboratories. Students will also be given an edge in seeking employmentopportunities with Huawei through STI's Interactive Career Assistance & Recruitment System(“ICARES”) where the company's job postings will be available. Furthermore, STI ESG and Huawei willalso be working together in building the STI-Huawei Innovation Center for new ICT systems,applications, and products.

Gatessoft Corp

The Philippine-based Canadian-American software firm Gatessoft Corp. is one of the leading hotelsoftware providers in the country. Under the new partnership, Gatessoft Corp. and STI ESG will worktogether to equip STI ESG's faculty members teaching Hotel and Restaurant Management (“HRM”),Hotel and Restaurant Administration (“HRA”), Hospitality and Restaurant Services (“HRS”), andTourism and Events Management (“TEM”) with skills in using Property Management System (“PMS”)and Point-of-Sale System (“POS”) through in-depth training sessions. These new areas of knowledge willthen be taught to the HRM, HRA, HRS, and TEM students.

European Innovation, Technology, and Science Center Foundation (“EITSC”) initiative of the European Chamberof Commerce of the Philippines (“ECCP”)

EITSC's work immersion program aims to provide training opportunities to students and develop theirskills as early as Senior High School in the fields of business, production, and services. Additionally, STIESG's academic curriculum will be aligned with the industry requirements to cultivate the student's corecompetencies.

Global Max’s Services Pte. Ltd. (“Max’s”)

STI ESG students will now be better equipped with the knowledge and skills needed in the industryupon graduation through the integration of Max’s expertise of the industry with the courseware materialsof HRM and HRS Programs, and through supervised training by Max’s that will increase the chance ofSTI ESG students to become members of the organization upon graduation.

Following the partnership, student training is taken to a higher level as Max’s online modules will beintegrated with STI ESG’s curriculum providing industry-based practices. Max’s will also provide STIESG’s HRM and HRS students with an OJT program that seeks to immerse the students with practicalprocedures and techniques on handling restaurant management operations, customer service orientation,cuisine-menu preparations, and other technical skills.

British Council

Outcome-Based Education (“OBE”) is essentially designed to focus on what the students shoulddemonstrate and possess as knowledge, skills, and values after the completion of the course. In OBE,students should be able to shape themselves by starting with the desired end in mind and workingbackwards to innovate the learning activities and methods for assessment.

The British Council and STI ESG agreed to collaborate towards innovative learning by holding a trainingworkshop for STI ESG’s Content Developers for both tertiary and Senior High School to equip them withskills in improving STI ESG’s OBE and their methods of assessing the students’ OBE performance.

SITEL

Expounded in the agreement is the practical education the STI ESG students will receive from STI ESGand SITEL’s collaboration. Aside from the training sessions, vital contents from SITEL will be integratedinto STI ESG's courseware and curriculum, which students can put to good practice at the same company


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as they are also entitled to a choice to undergo their internship at SITEL. To give their learning a furtherboost, faculty members will also receive proper training from SITEL which will also help themsubstantiate the lectures they give to their students. SITEL will also be participating in STI ESG's job fairsand will be active in posting job opportunities for graduating STI ESG students.

Tata Consultancy Services (“TCS”)

The partnership with TCS marks the launch of its Academic Interface Program (“AIP”) in the Philippines.It is a holistic initiative to enhance the quality of the emerging workforce across the globe by supportingstudents, faculty, and institutes. The agreement will strengthen the industry-academic linkages incourseware development and faculty training of STI ESG which will in turn benefit the academic growthof STI ESG students. These students, who will gain from TCS’s courses, will also serve as theorganization’s human capital investment for the future as the courseware itself speeds up the trainingprogram, therefore presenting the students better chances of employment with the company. TCS hasalso expressed intentions of participating in STI ESG’s mission to nurture job-ready students by takingpart in job fairs and internship programs.

National Institute of Accounting Technicians (“NIAT”)

Through this partnership, STI ESG has earned the recognition of the business and accounting coursesunder the Bachelor of Science in Accounting Technology (“BSAT”) program, qualifying STI ESG studentsfor the three-part CAT® licensure examinations without additional training which is required for BSATgraduates of non-recognized schools.

The recognition STI ESG received from NIAT not only acknowledges STI ESG's design of the BSATprogram, but also helps propel the success of the accounting technology career of students undergoingthe program. Passing each level of the exams confers an honorific that is recognized by the Institute ofCertified Bookkeepers of UK, Institute of Certified Management Accountants (“ICMA”) in Australia, andAssociation of Accounting Technicians of UK, giving the passers a promising future abroad.

Department of Labor and Employment (“DOLE”)

DOLE exempts STI ESG schools from applying for a job fair permit provided that it will be held withinthe school premises. Also, DOLE will provide a speaker to join our schools’ job fair events to educate ourgraduates of their rights and responsibilities as prospective employees to become productive members ofsociety. In return, STI ESG extends its assistance by promoting and cascading DOLE’s mandate ofensuring the jobseeker’s protection in any employment facilitation related activities to its schoolsnationwide.

Solaire Resort and Casino

The alliance between STI ESG and Solaire Resort and Casino will provide internship programs toqualified STI ESG students in any 4-year program from any campus nationwide. This program includesthe following: (1) an orientation to prepare interns; (2) a formal training in a real life workplace; and (3)other activities conducted by the facilitators to help gauge the students’ practical aptitude. Theirperformances will be monitored by industry experts through monthly and term-end evaluations. Uponthe completion of the program, interns will be granted certificates to recognize their participation andaccomplishment. With the promise to provide students with a memorable and unparalleled internshipexperience, interns can look forward to gainful learning at Solaire.


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Zuellig Pharma Asia Pacific Ltd. Phils.

Zuellig Pharma Asia Pacific Ltd. operates as a subsidiary of The Zuellig Group, Inc. The collaborationwill provide internship opportunities to STI ESG students in any 4-year program from any STI ESGCampus.

The Asia Foundation

STI ESG signed a Memorandum of Agreement (MOA) with Asia Foundation on August 19, 2015 led bythe then STI ESG President Monico V. Jacob and The Asia Foundation Country Representative Dr.Steven Rood. The partnership is another milestone in STI’s advocacy to empower the future througheducational opportunities for public school teachers, students, and disadvantaged youths. In thiscollaboration, STI ESG will be allocated with 66 US-produced reference books for the school’s library. Inreturn, Asia Foundation will match another set of reference books for donation to one public highschool. In a nutshell, STI ESG schools will donate a total of $132 to Asia Foundation to ensure thecontinuance of this program.

STI WNU

STI West Negros University has international and local linkages for research purposes. STI WNU hastwo international linkages, namely: Asian University Digital Resource Network (“AUDRN”) andGerman Development Cooperation (“GIZ”). Both organizations provide financial support to theinstitution while STI WNU provides logistics and human resources. As for national linkages, MiriamCollege, DepEd Kabankalan and Partnership for Clean Indoor Air (“PCIA”) help provide humanresources and logistics in conducting researches.

STI WNU students are also enjoying scholarship grants attributable to the institutions’ tie-up withCHED under the Tulong Dunong (“ACT-CIS Party List”) Program, PESO, AFP Educational BenefitSystem Office (“AFPEBSO”) and SEEDS. The latter provides STI WNU students training throughJollibee Foods Corporation, Chowking and Greenwich.

Other organizations or business organizations with which STI WNU has a tie-up for students’ traininginclude 2GO Group Incorporated and John B. Lacson Colleges Foundation Training Center for Maritimestudents; Bacolod City Police Office (“BCPO”), Bureau of Fire Protection (“BFP”), Parole andProbation Office of Bacolod City, Philippine National Police RTS-6, Carmela Valley Subdivision andBureau of Jail Management and Penology (“BJMP”) for Criminology students; and Philippine NationalBank (“PNB”) and Yusay Credit, and Lending Corporation for Business students; Northwest Inn, MiddleTown Inn, Island Spoon Restaurant, Metro Inn, Crown Regency Institute of Tourism and Hospitality, FastTravel and Tours, Bacolod Travel and Tours, Summit World Travel and Tours, The Travel Lounge andPhilippine Airlines for Hospitality Management students; Jason Korean English School, Convergys CallCenter, Pan Asiatic Call Center, Transcom Call Center, Negros Summit English Language Center, HatchLink English Tutorial Center, VAGRES-Vista Alegre-Granada Elementary School, Central Negros ElectricCooperative (“CENECO”), Pepsi Cola, Bacolod City Water District (“BACIWA”), Island Merchants Corp.,Chevrolet, Development Bank of the Philippines, National Bureau of Investigation (“NBI”) and NegrosOccidental Provincial Government for Arts and Sciences students; and Lopez Sugar Corporation, CentralAzucarera de La Carlota, BISCOM, SONEDCO, Department of Education – Province of NegrosOccidental, Division of Bacolod City and Division of Silay City for Education students.

Community Extension and Outreach Programs

STI ESG

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


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The STI Foundation

The STI Foundation aims to contribute to the improvement of the country’s educational systemthrough programs and projects that address the digital divide and promote excellence in education.

Alternative Learning System (“ALS”)

STI Foundation responded to the call of DepEd for the private sector’s participation and support in theirALS program. STI ESG reached out to out-of-school youth aged 15 and above who still have not finishedtheir secondary education and cannot afford to go through formal schooling.

The ALS sessions are conducted every Saturday and employ blended and collaborative modes ofinstruction (face-to-face instructions), e-learning materials (eSkwela), and performance-based assessmentin order to prepare and equip the ALS learners with the knowledge required to pass the Accreditationand Equivalency (“A&E”) Test given by DepEd. In SY 2015-16, twenty-nine (29) ALS Learners took theA&E test.

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 2015-16, the STI Mobile School has travelled to 1,098 sites and trained 144,065participants nationwide. Today, a total of six mobile school buses travel across Luzon, Visayas, andMindanao.

Adopt-a-School Program

STI ESG received a Certificate of Appreciation from DepEd for being one of its active partners in theimplementation of the Adopt-a-School program. With this alliance, STI Mobile School or the computerlaboratory on wheels were utilized to provide alternative learning facilities to DepEd’s high schools infar-flung communities to teach basic skills on computer concepts, GNU Image Manipulation Program(“GIMP”), multimedia animation, audio editing, and movie presentation through ICT-enhanced trainingsessions.

STI Foundation extended assistance to various special community development projects, outreachprograms, and humanitarian services in SY 2015-16 to help tackle the needs of the disadvantaged sectorsand other organizations.

In support of the DepEd’s back-to-school efforts, STI ESG, through its advocacy arm STI Foundation,donated over 1,400 sets of school uniforms to public schools in Mt. Pulag, Bukidnon, and Maguindanao.In addition, assorted old stocks of STI ESG books, uniforms, and proware items were donated to DSWDRegion 4-A, Friendship Home Fr. Luis Amigo in Manila, Bantay Batas DASALKA in Antipolo, andMandaluyong National High School totaling to P926,911.00 in acquisition cost.

Moreover, the turnover of donations coincided with DepEd’s Brigada Eskwela at Carlos L. Albert HighSchool in Quezon City on May 20, 2015 where STI ESG employees volunteered along with other privatepartners including Meralco Foundation, Maynilad, and Samsung Foundation.

Lastly, STI Foundation collaborated with Caritas Manila’s Segunda Mana Project in the latter’s goal ofgenerating in-kind donations such as clothes, toys, shoes, and others to be given away to the recipients ofthe Caritas Manila.


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STI WNU

The English Department of STI WNU extends its expertise in TESOL in Puroks/Barangays whereout-of-school youth, willing mothers and pupils need extra help in English. This is done on weekendsand extends until December when a joint culminating and Christmas activity takes place. TheEnglish teachers take turns in teaching these young people and their mothers English for Speakers ofOther Languages (ESOL). This project has been ongoing since 2009.

STI 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, Vista AlegreGranada Relocation Elementary School (VAGRES).

In 2013, STI WNU had the “Care and Share Yolanda Survivors” project days after the huge devastationbrought by Super Typhoon Yolanda on November 8, 2013. The project is a collaborative effort of theWesnecan Community and the Protestant Church of Laichingen in South Germany through itsvolunteer student Nadja Gruhler. The total amount of P3 million that was raised was used to fund reliefoperations and a Rehabilitation and Recovery Shelter for Yolanda Survivors Homestay Scheme Programat Purok Kantamayon Brgy. Patao in Bantayan Cebu. From SY 2013-14 until SY 2014-15, over 93houses were built and turned over; materials for 40 partially damaged houses were turned over; and 43partially damaged houses were repaired. Training sessions were also conducted for the locals on varioustopics such as Home Stay Project: Spiritual Development, Basic Tips on How to Start a Business, andCosting and Basic Recording. Other trainings and seminars offered to locals and launched in SY 2015-2016 include: Lecture on Proper Hygiene, Proper Handwashing and Brushing of Teeth (December 16,2015), Happy Tummy: An Orientation on Proper Food Preparation (December 16, 2015), Lecture onEcological Waste Management (August 8, 2015) and Lecture on Community Relations to ABKASANational High School Teachers (October 26, 2016).

Non-STI Branded Schools

iACADEMY

Enrollment History

iACADEMY had an average total enrollment of 801 for the first, second and third trimesters of SchoolYear 2013-2014, posting a 23% increase from SY 2012-2013. In SY 2014-2015, the average combinedenrollment for the first, second and third trimesters was at 845 which increased by 6%. For SY 2015-2016,an increase of 17% in the average total enrollment of 991 for the first, second, and third trimesters wasobtained.

There was a 39% growth in the total number of freshmen students by SY 2013-14, but freshmen enrolleesdipped by 30% in SY 2014-2015. For SY 2015-2016, the total freshmen enrollees increased by 64%.

The average percentage of students retained in a trimester for SY 2013-2014 was at 93%, and it remainedthe same in SY 2014-2015. For SY 2015-2016, the average retention rate increased to 94%.

For the past three years, a significant proportion of the student population were enrolled in the School ofDesign, specifically in the BS in Animation and AB in Multimedia Arts and Design programs in which59% of the student population was enrolled. For SY 2014-2015, Design students increased to 60% of thestudent population. Design students were at 58% of the total student population for SY 2015-2016.

In SY 2013-2014, iACADEMY generated 90 graduates. For SY 2014-2015, the number of graduatesincreased to 157, inclusive of the first batch of BS in Game Development with specialization in Game


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Programming and Design. As for SY 2015-2016, iACADEMY generated another 157 graduates inclusiveof the first batch of AB in Fashion Design and Technology.

Tuition Fee Increases

There was no increase in the tuition fees and other school fees for the school years 2013-14. For SY 2014-15, there was an average increase of 3.07% in the tuition fees and other school fees due to the increase inthe salaries of teaching and non-teaching personnel and school renovation. There was no increase intuition fees and other school fees for SY 2015-16.

New Programs

iACADEMY’s first course offerings included BSBA with specialization in e-Management, BSCS withspecialization in Software Engineering, BSCS with specialization in Network Engineering and BSIT withspecialization in Digital Arts – courses designed to develop the technical and creative skills of itsstudents.

iACADEMY is the pioneer in offering the BS in Animation and BS in Game Development programs in thePhilippines.

To answer the changing demands in the field of business and economy, iACADEMY decided tointroduce the courses BS in Entrepreneurship (2003), BSBA with specialization in Marketing andAdvertising (2004), BSBA with specialization in Operations Management (2006), AB in Fashion Designand Technology (2011), AB in Multimedia Arts and Design (2011), BSBA with specialization in FinancialManagement (2013) and BSIT with specialization in Web Development (2013).

Achievements

1. Last April 2014, two (2) teams from iACADEMY became runners up in the 12th MicrosoftImagine Cup Philippines Finals. Team members of Full Sails, Charles Frederic Atienza (BS inGame Development), Jose Paolo Padilla (BS in Software Engineering), Brendo Toledo (BS inSoftware Engineering), and Renee Jason Jover (BS in Software Engineering), unveiled the gameFurbs. The other group, Team Lemniscate, with BS in Game Development students Carl MichaelZamora, Lawrence Victor Zarasate, Chrysia Wayan, and Elaine Monica Luna, created a 3Dsimulator game called Subject of Change.

2. iACADEMY BS in Animation alumna Katherine Junginger made it to the finals for the AudienceChoice Awards for the short films category in the Animahenasyon 2013 which was held inNovember 2013.2013.

3. iACADEMY BS in Animation students produced Hamster Quest, an animated short film thatmade it to the finals of the short films category in the Animahenasyon 2014 which was held inNovember 2014.

4. Jonamai Frago, BSBA with specialization in Marketing and Advertising, was elected as SecretaryGeneral of the Philippine Association of Campus Student Leaders held in Baguio City inNovember 2014.


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5. Elijane Tan, an AB in Fashion Design and Technology student, was appointed as Director forMarketing and Promotions by the Philippine Association of Campus Student Leaders – NationalCapital Region (PACSL-NCR) in July 2015.

6. Game Development students Jhunel de la Cruz, Meris Soneja, Gian Legaspi and Karl Rodriguezbagged the top prize in the Salinlahi Evolution Game Development competition held by theNational Academy of Science and Technology of the Department of Science and Technology(NAST-DOST) in September 2015. The game they developed is called "Tuklas" which is aneducational game for kids that offers simple yet engaging puzzles where children learn, exploreand enjoy science at its basic form.

7. AB in Multimedia Arts and Design students Jen Castillejo and Krizia Villanueva won the BestStudent Film award at the International Film Festival Manhattan last October 2015. Their thesisfilm, "Yolanda", competed against works by other filmmakers from USA, Australia, Philippinesand Belarus. “Yolanda,” is about a frustrated writer who retells the story of a Yolanda survivor’sexperience after the devastating typhoon.

"Yolanda" also won the National Commission for Culture and Arts Ani ng Dangal Award forCinema.

8. Dean of Business Lucky Malveda is a Board Exam Passer (Real Estate Broker's LicensureExamination) in February 2016 and was the Outstanding High School Teacher Awardee – 2006 ofDe La Salle University.

9. Rayanorlie Abeledo, Dean of School of Design, was one of the 9 young directors who have beenselected to present a short film at World Youth Alliance's 2015 Manhattan International FilmFestival which took place in New York City. Nearly 50 directors applied for this opportunity.

Outstanding Alumni

Vinzel C. Frago – Awardee (Full Scholarship), Master of Science in Technopreneurship andInnovation, Nanyang Technological University, Singapore

Isamu Shinozaki – Microsoft MVP (Most Valuable Professional) Jeanne Harn – Ms. Philippines – Earth 2007 Krista Lozada – First in Asia to perfect an international certification exam for IBM’s

Websphere Software, 2007 JR Parelejo – Winner, 2004 International Marketing Competition – Feathers to Fish Aisaku Yokugawa – 2012 Philippine Ambassador for Operation Smile International/

International Jazz Singer Nielson Henri Riddle – Outstanding Alumni Awardee 2014 Jennelyn Castillejo and Krizia Villanueva – Creators of the Short Film Thesis “Yolanda”

which won the Best Student Film Award at the International Film Festival Manhattan held onOctober 22, 2015

Graduation Special Merit Awards

1. Outstanding Leadership AwardThis award is granted by iACADEMY in recognition of the leadership skills and committedservice shown by the graduating student. One (1) graduate received this award on May 10, 2014.

o Martha Lois O. Bartolome (BSCS with specialization in Software Engineering) Two (2) graduates received this award on April 25, 2015.

o John Gabrielangelo P. Cruz (BS in Animation)o Maria Julie Ann S. Valencia (AB in Multimedia Arts and Design)


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Three (3) graduates received this award on April 30, 2016.o John Paul T. Castillo (AB in Multimedia Arts and Design)o Renee Jason H. Jover (BSCS with specialization in Software Engineering)o Reina Marie F. Cayabyab (AB in Multimedia Arts and Design)

2. Outstanding Internship AwardDuring the 9th Commencement Exercises on May 10, 2014, three (3) graduates received thisaward: Kyel John M. David (BSCS with specialization in Software Engineering), Greta Garda A.Fuentes (BSIT with specialization in Digital Arts) and Ma. Jodelle C. Jover (BS in Animation).

During the 10th Commencement Exercises on April 25, 2015, Mikee S. Velez (AB in MultimediaArts and Design) received this award.

Last April 30, 2016, during the 11th Commencement Exercises, Edward Allen M. Arcenal (BSCSwith specialization in Software Engineering) and Don Miguel Frances C. Viejon (BSGD withspecialization in Game Programming and Design) also received this award.

Industry Partners

1. IBMIn 2010, iACADEMY was appointed by IBM as its first IBM Center of Excellence (CoE) in theASEAN region.

As an IBM CoE, iACADEMY will serve as a venue to expose existing and prospective IBM clientsto current state-of-the-art technology solutions. Furthermore, iACADEMY aims to be the sourceof technical skills and talent to feed the IBM Ecosystem, which is composed of IBM, IBM BusinessPartners, and IBM Clients.

2. iACADEMY is the first Lotus Academic Institute Partner in the Philippines and the ASEANregion.

3. WacomiACADEMY is the first academic institute identified as a Wacom Authorized Training Partner inthe Philippines. iACADEMY equips students with state-of-the-art facilities and technologythrough its partnership with Wacom.

4. Project RunwayiACADEMY is the official school partner of Project Runway Philippines, a search for “the nextbig Filipino fashion designer”. The reality show, which airs on free TV channel ETC, featuresaspiring designers and a who’s who of the Philippine fashion scene. Supermodel-turned-entrepreneur Tweetie de Leon-Gonzales plays the glamorous host while trailblazing designerJojie Lloren serves as the mentor.

5. Philippine Stock ExchangeThe Philippine Stock Exchange (PSE) has chosen iACADEMY to offer the PSE Certified FinancialAnalyst Program.

6. Indigo Entertainment Philippines Inc.Indigo Entertainment is a leading online game development firm in South East Asia. Theyspecialize in the production of high quality games in various platforms. The company has choseniACADEMY specifically the Game Development Program and Animation program for thestudents to be trained on how to develop web-based, single or multiplayer games, and mobileapplications.


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7. Intern MeIntern Me became an Industry Partner in October 2014. It provides quality Internship placementassistance to students under different programs, allowing iACADEMY to choose from highcaliber companies.

8. Jobs180.ComJobs180.com started partnering with iACADEMY in December 2014 to help support theemployability of our graduating students. They also help in preparing the students to join thecompetitive world through their free Marketing Career Orientation Program and the school’s freeaccess to the portal for career insights.

9. ABS-CBNABS-CBN started accommodating iACADEMY Interns in June 2014. The interns became part ofABS-CBN Star Magic Workshops and ABS-CBN Film Production Inc. – Star Creatives. Theywere trained well in specific departments in order to be a successful multimedia practitioner.

10. Philippine Bank of Communications (“PB Com”)Among all the Industry Partners, PBCom has hired the most number of Interns particularlyunder the programs Bachelor of Science in Computer Science with specialization in SoftwareEngineering and Bachelor of Science in Information Technology with specialization in WebDevelopment from 2010 to 2015. iACADEMY Interns were assigned to assist in developingfinancial solutions, improve systems and work with the Marketing Team.

11. Smart Communications, Inc.Smart Communications, Inc. continuously accommodates iACADEMY Interns for them tobecome adequately familiar with the actual office environment and Industrial Operations andManagement to augment formal training.

12. Animation Council of the Philippines (ACPI)The Animation Council of the Philippines conducts several programs and activities foriACADEMY Interns that aims to develop their potential as artists.

13. Zalora PhilippinesWith over 500 brands across women’s wear, men’s wear, foot wear, accessories, beauty andsports, Zalora Philippines is one of the fastest growing online fashion retailers in Asia.iACADEMY Interns started working with the company in April 2014. Interns were given course-related work assignments and exposed them to relevant learning experiences.

14. OSI Consulting Inc.OSI Consulting, is a leading information technology services company that creates business valuefor customers through the innovative application of advanced technologies. Clients worldwidebenefit from OSI’s agile approach toward building global solutions. iACADEMY Interns weretrained to Innovate, Integrate and Operate. They have learned to be fast and flexible in workingin their departments in order to meet the International Standards of the company.

15. Portfolio MNL.comPortofolio MNL.com is a jobsite dedicated to discovering and hiring creative professionals. It is amarketplace where students can upload their resumes and portfolios for potential employers orclients.


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16. Level Up Games.PhLevel Up Games.Ph pioneered the online gaming business in the Philippines in 2002. Thecompany expanded by partnering with Brazil and India. They offer Internship Trainings toiACADEMY students to start careers as professional game developers.

17. Summit MediaSummit Media is the leading magazine publisher in the Philippines. They are also involved indigital media, mobile marketing services, outside-of-home media, book publishing and consumerevents. The company provides hands-on opportunities to iACADEMY Interns by exposing themto different types of work that would help them define their career goals.

18. Neun Farben CorporationNeun Farben is an international computer animation studio that aims to create high-endcomputer graphics and visual effects for films, commercials, promotional videos, games, and websites.

19. First Metro Securities Brokerage CorporationFirst Metro Securities Brokerage Corporation or FirstMetroSec is a stockbrokerage house licensedto trade in the PSE. The company is wholly-owned by First Metro Investment Corporation(“FMIC”), the investment-banking arm of the Metropolitan Bank and Trust Company(“Metrobank”).

20. WYD ProductionsWYD Productions is a Manila-based creative video production outfit where passion, creativity,energy and freshness come together to form ideas and create entertainment with the power totransform.

WYD Productions has worked with different clients and advertising agencies, from start-ups toestablished companies, providing pre-production to post-production services from conceptdevelopment to final video output.

21. Stream Engine StudiosA digital media production company that specializes in Explainer Videos, Stream Engine Studiosis an out-of-the-box studio located in the busy concrete jungles of the Ortigas Business District.

22. Thirty Six-O MediaThirty Six-O Media is a compact team of driven and passionate innovators. They provide a widearray of services, from content development, video and photography coverage, state-of-the-artediting, sound engineering, and digital marketing.

23. ZMG Ward HowellZMG Ward Howell is an executive search firm in Southeast Asia with more than 30 years of solidexperience in local and international searches for senior and mid-level executives in variousindustries.

The firm is part of Ward Howell International, a global alliance of search firms active in Asia,Europe, the Middle East, North Africa, and the Americas.

24. Snipple Animation Studios, Inc.Snipple’s goal was to not only produce and deliver quality Animation for Digital Media,Television, Features, Gaming and Commercials but also to create an environment that wouldnurture creativity and encourage excellence in all areas of production. Our interns are trained in2D and 3D animation and are part of actual project production.


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25. Top Peg Animation and Creative Studio, Inc.Top Peg Animation & Creative Studio, Inc. is considered as one of the most stable studios in thePhilippines. As one of the key players and pioneers of the Animation Council of the Philippines,an organization backed by the Philippine government, Top Peg successfully proved to be a leaderby being part of many projects, and still continues to play a major role in the production ofquality animation. The company provides animation services from storyboarding, character &props design, layout, animation, clean up, inbetween, digital ink & paint and pencil testing. It isalso known for training potential artists from in and out of the company in order to discover anddevelop hidden talents. These trainings are conducted with the aim of expanding the field of art,and producing competent artists.

26. Gurango Software CorporationGurango Software Corporation (“GSC”) is a multinational software company that providespowerful and affordable business software solutions built on the Microsoft technology platform.

GSC has successfully delivered services to clients of every size, from Fortune 500 firms to smalland midsized enterprises. They are a full-service provider across enterprise resource planning(“ERP”), customer relationship management (“CRM”), human capital management (“HCM”),and all core Microsoft technologies.

27. Globe TelecomGlobe Telecom is a major provider of telecommunications services in the Philippines, supportedby over 6,200 employees and nearly 1.05 million retailers, distributors, suppliers, and businesspartners nationwide. Our interns work hand in hand with their creative team in designing theirpromotional materials.

28. Carbon Digital, Inc.Carbon Digital is poised to be the foremost digital production house in the country and thecompany has lined up essential products and services that will cater to the primary needs of ourclientele. Our interns mostly work on website production, game development, social media andmobile marketing and management.

29. PlayPark, Inc.Formerly known as Playweb Games, Inc., PlayPark, Inc. is the publisher and operator of LevelUp! and PlayPark in the Philippines. With a vast portfolio of hugely popular MassivelyMultiplayer Online Games, which include Cabal, Assault Fire, World in Audition, Phantasy StarOnline 2 and Ragnarok Online – the game that started the online gaming craze in 2003, PlayParkInc. is the leading game publisher in the online gaming industry in the country today.

30. ZeenohZeenoh, Inc. is an entertainment software company for Internet of things. Zeenoh Gamesdeveloped and self-published original games for mobile, web, consoles and PC. Zeenoh evolvedfrom a third-party developer to self-publishing of its own developed games.

31. AninoPlaylab, Inc.Playlab is a leading game developer and publisher that has grown from a handful of passionategamers to a group of 100 and more enthusiasts striving to create the best games for iOS andAndroid devices along with Facebook. The headquarters are based in Hong Kong, withproduction studios located in Bangkok, Thailand (Pocket Playlab) and Manila, Philippines(AninoPlaylab) and are respectively the homes of hit titles including Lost Cubes and Juice Cubes,and award winning games of the Games Festival (2004), International Mobile Game Awards(2006 and 2007), and Indie Games Showcase (2007).


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32. Fun Guy Studio Philippines, Inc.FunGuy Studio is the premier game development and design outsourcing studio in thePhilippines, having over eight years of experience in producing top quality entertainment andenterprise technology for companies across the world. Our interns in this company mostly workon game concepts and game documents, adding features in an actual game, and testing actualgames.

33. The Studio of Secret 6Secret 6 was founded on the principle that cost, quality, and schedule are the key elements ofsuccess. With a rich offering of full or partial game development services (design, art,programming, and QA), Secret 6 is committed to playing its part in delivering anything from keyassets to a full game or application to their clients.

With client relations handled from its San Francisco office and production done in Manila, Secret6 prides itself in getting the job done accurately and on time. They are a full development studio,providing top-quality 2D and 3D art assets, as well as full game production for over ten years.Our interns are assigned to Quality Assurance department.

34. Kooapps Philippines CorporationKOOAPPS is a mobile gaming company with millions of downloads. Founded in 2008, Kooappshas released more than 30 games with several top selling titles.

35. Movent, Inc.Movent is the largest, full service, digital advertising agency in the Philippines. They offer anintegrated marketing suite composed of strategy, creative, media and production services thatwill catapult your brand into the digital hemisphere. Our interns mostly work on enhancing theirclients’ websites and also work hand in hand with their developers for new projects.

DLS STI College

DLS STI maintains its unwavering commitment to strive for academic excellence and is committedtowards the continuing improvement of the institution as well as the quality of its graduates. In SY2013-14, BS Psychology students were invited by Psychological Association of the Philippines JuniorAffiliates (PAPJA) to join in their 27th Annual PAPJA Convention. The students battled it out withstudents of other colleges and universities across the country. They were not declared winner, but stillthe experience gained by the students in the activity makes them winners as well.

DLS STI has been a loyal partner of notable healthcare institutions in the Philippines which furtherenhances the capabilities and skills of its students. These institutions include the De Los Santos MedicalCenter, National Children’s Hospital, National Center for Mental Health, San Lazaro Hospital, TLCPsychiatric Facility, QCHD Lying–In Clinic, St. Camillus Medhaven Nursing Home, PhilippineOrthopedic Center, East Avenue Medical Center, Dr. Fe Del Mundo Medical Center, Hospicio De SanJose, 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 practicein providing healthcare to patients in areas such as Pediatrics, Intensive Care Unit (“ICU”), Surgical,Delivery, Orthopedic, Communicable Diseases, Neonatal ICU(NICU), and Geriatrics.

Due to the visa retrogression in the U.S.A. and the lowering demand for nurses in other countries,nursing colleges in Asia experienced a continuing drop in their enrollees. DLS STI College was no


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exception. On March 19, 2015, DLS STI College advised CHED on the gradual closure of its degreeprograms, indicating therein that for a more cost efficient school operations, the venue of classes forfourth year graduating students for school year 2015-2016 in degree programs BS Nursing, BS RadiologicTechnology, BS Tourism, and BS Hotel & Restaurant Management as well as third year and fourth yearBS Physical Therapy students shall be at STI College – Quezon Avenue campus. CHED acknowledgedreceipt of the letter on April 6, 2015.

The DLS STI board decided to suspend the operations of the school starting with SY 2016-2017 up to SY2017-2018. These are the years when there is a substantial reduction in incoming freshmen. Schooloperations will be resumed starting SY 2018-2019.

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

STI ESG and its subsidiaries, as educational institutions, derive its main revenues from tuition andother school fees from its owned schools and royalties and other fees for various educational servicesprovided to franchised schools. STI ESG has a total of 77 schools nationwide and is comprised of 66 STIbranded colleges, and 11 STI branded education centers. Of these, 32 college campuses are wholly-owned, 34 college campuses are operated by franchisees, 7 education centers are operated byfranchisees, and 4 are wholly-owned education centers. STI ESG purchased STI College – Batangas fromits franchisee in SY 2013-14 and STI Colleges Lipa, Tanauan, Iloilo, Pagadian, and Tagum in SY 2014-15.

STI ESG’s college campuses offer associate/baccalaureate degree and technical/vocational programs inICT, arts and sciences, business and management, education, engineering, hospitality and tourismmanagement, and healthcare. These programs are accredited by CHED and/or TESDA. The educationcenters of STI ESG offer technical/vocational diploma, certificate, and short-term courses for computerprogramming, computer technology, software applications, and office administration, among others.The programs in the education centers are accredited by TESDA. All 77 schools in the STI ESG networkhave been granted the DepEd permit to offer Senior High School.

Apart from the STI branded campuses, iACADEMY operates as a high-end school and likewise derivesrevenues from tuition and other school fees. It has a campus in Makati - the Central Business District ofManila. iACADEMY also has a permit to offer Senior High School.

STI WNU, for its part, offers associate/baccalaureate degree programs in education, engineering,maritime, criminology, IT, arts and sciences, business and management, hospitality and tourismmanagement, and healthcare. These programs are accredited by CHED and/or TESDA. TheUniversity also offers programs for graduate studies. In addition, it offers basic education from nurseryto secondary levels. These programs are accredited by DepEd. It also has a permit to offer Senior HighSchool.

AHC is a 100% owned subsidiary of STI Holdings. The parent company subscribed to 40% of its sharesin November 2014 and eventually bought the balance of 60% of its outstanding capital stock in February2015. At the time of purchase, it has receivables from PWU and Unlad. It is not operating as of March 31,2016.


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STI ESG School Programs

BS in Computer ScienceBS in Information TechnologyBS in Information Technology major in Network EngineeringBS in Information Technology major in Digital ArtsBS in Accounting TechnologyBS in Business Management major in OperationsBS in Office AdministrationBS in Office Administration with Specialization in Customer RelationsBS in Real Estate ManagementBS in Culinary ManagementBS in Hotel and Restaurant ManagementBS in Travel ManagementBS in Tourism ManagementBS in Computer EngineeringAB CommunicationBS NursingBachelor of Secondary Education major in MathematicsBachelor of Secondary Education major in Computer EducationMaster in Information Technology3-year Hotel and Restaurant Administration2-year Information Technology Program2-year Associate in Computer Technology2-year Hospitality and Restaurant Services2-year Tourism and Events Management2-year Computer and Consumer Electronics Program with Broadband Technology2-year Multimedia Arts Program2-year Practical Nursing ProgramSenior High School

STI WNU School Programs

School of Professional StudiesBachelor of Science in AccountancyBachelor of Science in Criminology

Engineering ProgramsBachelor of Science in Civil EngineeringBachelor of Science in Electrical EngineeringBachelor of Science in Mechanical EngineeringBachelor of Science in Electronics EngineeringBachelor of Science in Chemical EngineeringAssociate in Civil Engineering (2-year Certificate Program)Associate in Electrical Engineering (2-year Certificate Program)Associate in Electronics Engineering (2-year Certificate Program)Associate in Mechanical Engineering (2 year Certificate Program)


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Education ProgramsBachelor of Elementary Education

Major ino General Curriculumo Special Educationo Pre-School Education

Bachelor of Secondary Education Major in

o Englisho Filipinoo Music, Arts & P.E. (MAPE)o Mathematicso Values Education (VAED)

Teachers’ Certificate Program (TCP)

Maritime ProgramsBachelor of Science in Marine EngineeringBachelor of Science in Marine TransportationEnhanced Support Level Program Marine DeckEnhanced Support level Program Marine Engineering

School of Arts and SciencesBachelor of Arts Major in EnglishBachelor of Arts in CommunicationBachelor of Science in MathematicsBachelor of Science in PsychologyBachelor of Science in Information TechnologyBachelor of Science in Computer ScienceBachelor of Science in Hospitality ManagementBachelor of Science in Tourism ManagementBachelor of Science in Accounting TechnologyBachelor of Science in Office AdministrationBachelor of Science in Business Administration

Major ino Marketing Managemento Financial Management

Hotel and Restaurant ServicesProgramming NC IV (2 years)Computer Hardware Servicing NC II ( 2 years)

School of Basic EducationNurseryKinder (1 & 2)ElementarySecondary (Grades 7 to 10)

Senior High SchoolAcademic Track

Accountancy, Business and Management


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General Academic StrandHumanities and Social Sciences StrandScience, Technology, Engineering and Mathematics Strand


Specializations: Computer Programming Computer Hardware Servicing Broadband Installation Contact Center Services

Home Economics StrandSpecializations: Bread and Pastry Production Cookery Food and Beverage Services Front Office Services Housekeeping Local Guiding Services Tourism Promotion Services Travel Services

Sports TrackArts and Design Track

School of Graduate StudiesDoctor of Philosophy in Educational Management (Ph.D.)Doctor of Public Administration (DPA)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)

Major ino Administration and Supervisiono Guidance and Psychologyo Physical Educationo Filipinoo Mathematicso Englisho Values Educationo Early Childhood Education

iACADEMY School Programs

AB in Fashion Design and TechnologyAB in Multimedia Arts and DesignBS in AnimationBS in Game Development with specialization in Game Programming and DesignBS in Business Administration with specialization in Marketing and AdvertisingBS in Business Administration with specialization in Financial ManagementBS in Computer Science with specialization in Software EngineeringBS in Information Technology with specialization in Digital ArtsBS in Information Technology with specialization in Web Development


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DLS STI College School Programs

BS NursingBS Physical TherapyBS Radiologic TechnologyBS Hotel and Restaurant ManagementBS Tourism Management

STI College – Quezon Avenue School Programs

BS in Computer ScienceBS in Information TechnologyBS in Business Management Major in OperationsBS in Hotel & Restaurant ManagementBS in Tourism ManagementAssociate in Computer TechnologyHospitality & Restaurant ServicesInformation Technology Program

Professional Accreditations

STI ESG

International Organization for Standardization 9001:2008 (“ISO 9001:2008”)

In November 2014, STI ESG was recommended by ISO certifying body TÜV Rheinland Philippines Inc.for ISO 9001:2008 certification. On February 5, 2015, STI ESG received the official ISO 9001:2008Certification for its Learning Delivery System. The ISO 9001:2008 certification is a milestone for theinstitution’s thrust towards academic excellence by reaching global standards in its learning deliverysystem.

STI WNU

The various programs of the university are accredited under any of the following bodies: PhilippineAssociation of Colleges and Universities Commission on Accreditation (“PACUCOA”) Accreditation,International Organization for Standardization 9001:2008 (“ISO 9001:2008”) by Det Norske VeritasGermanischer Lloyd (DNV GL) and Fund Assistance to Private Education (FAPE). The following tableshows the accreditation status of the different programs:

PROGRAM LEVEL EXPIRATIONLiberal Arts Level III RA December 2020Business Administration Level III RA December 2020Bachelor of Science in ElementaryEducation Level III RA December 2020

Bachelor of Science in SecondaryEducation Level III RA December 2020

Master of Arts in Education Level III RA March 2015-2016 (scheduled forReaccreditation in September 2016)

Master in Public Administration Level III RA March 2015-2016 (scheduled forReaccreditation in September 2016)

Doctor of Philosophy in EducationManagement Level I Formal February 2021

Nursing Level I Formal DeferredBachelor of Science in Math Level I Formal DeferredBachelor of Science in Psychology Level II RA November 2020


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Bachelor of Science in Criminology Level I Formal November 2018Civil Engineering Level I Formal DeferredMechanical Engineering Level I Formal DeferredElectrical Engineering Level I Formal DeferredElectronics Engineering Candidate DeferredMarine Engineering ISO: 9001:2008 SY 2013-2014 to SY 2015-2016Marine Transportation ISO: 9001:2008 SY 2013-2014 to SY 2015-2016Pre-Elementary Re-certification FAPE SY 2013-2014 to SY 2015-2016Elementary Re-certification FAPE SY 2013-2014 to SY 2015-2016High School Re-certification FAPE SY 2013-2014 to SY 2015-2016

Employees

STI ESG

STI ESG has 2,173 employees, 1,405 of whom are faculty members, 571 non-teaching personnel, and 197employees from the main office. STI E S G provides employees with development programs thatassist them in effectively carrying out their jobs and prepare them for career advancement.

FUNCTION NUMBER OF EMPLOYEES

STI ESGMain Office

Senior Management 13Managers 60Staff 124

TotalSTI Schools

Teaching personnel (wholly-owned schools)

197

1,405Non-teaching personnel (wholly-owned schools) 571

Total 1,976STI ESG GRAND TOTAL 2,173

STI WNU

STI WNU has employed 105 non-teaching personnel assigned to various departments and 207 full-timeand part-time teaching personnel.


Senior Management 5Managers 21

Total 26Teaching Personnel

Full time 87Part time 120

Total 207Non-teaching personnel 79

STI WNU GRAND TOTAL 312


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Non–STI Branded Schools

iACADEMY

iACADEMY has 120 employees, 73 of whom are faculty members, both full-time and part-time and 47non-teaching personnel, from rank-and-file to executive level.


Senior Management 5Managers 9Total 14Teaching Personnel

Full time 9Part time 64Total 73

Non-teaching personnel 33Total 106

iACADEMY GRAND TOTAL 120

DLS STI College

DLS STI College has 9 employees, 5 of whom are faculty members, both full-time and part-time and 4non-teaching personnel, from rank-and-file to executive level.


Senior Management 1Managers -Total 1Teaching Personnel

Full time 1Part time 4Total 5

Non-teaching personnel 3Total 8

DLS STI COLLEGE GRAND TOTAL 9

Item 2. PROPERTIES

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

LOCATION TYPE USEAREA (IN SQ.M)LOT FLOOR

Batangas Land and building School Campus 6,564 5,670Cainta, Rizal Land and building School Campus 39,880 11,727


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LOCATION TYPE USEAREA (IN SQ.M)LOT FLOOR

AdministrationBuilding - 5,291

Calamba Building School Campus 6,237 7,368Caloocan Land and Building School Campus 15,495 11,832Carmona, Cavite Land and building School Campus 6,582 3,497Cubao Land and Building School Campus 3,768 9,881

Fairview, Quezon City Land and buildingSchool Campus 1,808 4,167Rented buildingsC&D - 1,338

Fort Bonifacio, GlobalCity Building

School Campus;Land is on longterm lease

2,632 10,101

Kalibo, Aklan Land School Campus 1,612 -Kauswagan, Cagayan deOro Land and building School Campus 17,563 3,415

Las Piñas Land School Campus 10,000 -Lucban, Baguio Land and building School Campus 731 1,726

Lucena BuildingSchool Campus;Land is on longterm lease

4,347 7,708

Naga Land and building School Campus 5,170 4,506Novaliches Land and building School Campus 4,983 7,436San Jose del Monte City,Bulacan Land School Campus 4,178 -

Valencia, Bukidnon Land and building School Campus 300 1,166Ternate, Cavite Townhouse Training Center 107 -BF Homes, Las Piñas(GS) Land and building – GS Warehouse 4,094 2,921

BF Homes, Las Piñas(HS) Land and building – HS Warehouse 3,091 1,851

Almanza, Las Piñas 3 Condominium Units(37.2sqm/unit) Investment Property - 112

Ayala Avenue, MakatiCity

Condominium Units (4th , 5th

& 6th floors) Investment Property - 3,096

Caliraya Springs,Cavinti Laguna Land Investment Property 948 -

Cebu City Land Investment Property 1,100 -

Gil PuyatAvenue, Makati City

Condominium Units(10th,11th, 12th and UpperPenthouse)

Investment Property - 7,924

Sto. Tomas Baguio Land Investment Property 512 -


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Listed in the table below is the campus ownership of franchised schools as of SY 2015-16.

Owned by theSchool

Owned by STIFranchisee

Leased from other parties

1 Balagtas 10 Alabang 20 Alaminos 31 Ormoc2 Bohol 11 Baliuag 21 Angeles 32 Parañaque3 Dasmariñas 12 Balayan 22 Bacoor 33 Pasay

4Koronadal

13Cotabato

23Calbayog

34QuezonAvenue

5La Union

14GeneralSantos 24

Cauayan35

Recto

6Malolos

15SanFrancisco 25

Dipolog36

Rosario

7Santa Rosa

16Santiago

26Dumaguete

37SanFernando

8 Tacurong 17 Sta. Maria 27 Ilagan 38 San Jose9 Tanay 18 Surigao 28 Maasin 39 Tagaytay

19 Vigan 29 Marikina 40 Tarlac30 Muñoz 41 Zamboanga

Campus Expansion Projects

STI ESG

STI ESG invested in a number of expansion projects for its company-owned campuses. Theseexpansion projects were funded in most part from the proceeds from the follow-on offering conducted inNovember 2012 and partially through bank loans and internally generated funds. In Caloocan, a ten-storey building standing on 15,495-square meter property was unveiled on February 7, 2014 for thetransfer of STI College – Caloocan to its new home.

Four campuses were inaugurated in January 2015: the five-storey school building for STI College –Calamba and the newly renovated STI College – Batangas on January 20, the nine-storey building ofSTI College – Cubao on January 22, and the five-storey building of STI College – Lucena on January 27.

STI ESG also purchased a 4,178-square-meter property located in San Jose del Monte City, Bulacan inApril 2014 intended for use as a school campus.

Likewise, a number of franchised schools embarked on facilities expansion programs. Two franchisedschools embarked on facilities expansion programs in SY 2013-14. The 3,500-square-meter property of STICollege – Malolos located along McArthur Highway was completed in time for the 1st semester of SY2014-15. On the other hand, STI College – Tanay broke ground on March 21, 2014 and started its classes onits new campus in the 2nd semester of SY 2014-15. . The 1,200-square meter property of STI College –Vigan also had its groundbreaking in July 2014 and started its classes on the new campus in the 2ndsemester of SY 2015-16. Meanwhile, STI College – Bohol (formerly known as STI College – Tagbilaran) hadits inauguration on November 7, 2015. The four-storey building has a total area of 2,200 square meters.

All of the improved campuses house state-of-the-art facilities, with spacious classrooms, top-of-the-linecomputer laboratories, and recreational facilities for high quality academic delivery. The expansion ofthese campuses is part of STI ESG’s commitment to continuously improve the delivery of education to itsstudents and, at the same time, increase the total capacity of STI ESG for further expansion in itsenrollment base in the years ahead.


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STI WNU

STI WNU is strategically located at the center of Bacolod City. The site is in close proximity to the BurgosPublic 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 five-storey Main Building, three-storey HM Building, three-storey ITBuilding, two-storey Engineering Building, four-storey IS Building, and other various facilities includingthe Gymnasium, Football Field, and Student Activity Center.

The campus now boasts of a façade that reflects the new University Signage – “STI West NegrosUniversity” – and showcases the new admission office and the refurbished Kitchen & Dining Laboratorythat can be seen along Burgos Street. The Main, IT and HM buildings have been renovated and the workswere completed in February 2015. In January 2016, the construction of the Firing Range and SwimmingPool was launched. These facilities will be used by Criminology and Maritime students, respectively.

The ground floor of the Main Building now houses the office space for all staff and faculty. Variousstudent services offices, such as the clinic, guidance services, and student records are also located here. Aportion of the ground floor has been prepared for the state of the art Maritime Simulator Room. All in all,the Main Building has 60 classrooms and laboratories that are equipped with air-conditioning andmultimedia projection systems.

The IT building houses eight computer laboratories and eight classrooms, while the HM Building housesthe newly re-modeled HRM Laboratories such as the Kitchen, Food & Beverage Room, Hotel Suite, FrontDesk Area. The HM Building also provides a multi-purpose area and six additional classrooms that arealso equipped with air-conditioning and multimedia projection systems.

Summary of the institution’s properties are as follows:

LOCATION TYPE USE/COLLEGE LOT AREA(IN SQ.M.)

Burgos and Malaspina Land and building Maritime 1,176Burgos and Malaspina Land and building Engineering 4,839Burgos and Malaspina Land and building Engineering 2,266Burgos and Malaspina Land and building Football/Open

court5,803

Burgos and Malaspina Cemented lot Parking lot 814Burgos and Malaspina Land and building Gymnasium 1,512Burgos and Malaspina Land and building Sports Office 494Burgos and Malaspina Land and building Main building 139Burgos and Malaspina Land and building Main building 364Burgos and Malaspina Land and building Main building 6,097Burgos and Malaspina Land 179Hilado Land 1,044Hilado Land 1,135Hilado Land 733Hilado Land 400Hilado Land 1,292


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iACADEMY

In April 2014 iACADEMY moved to an 11-storey refurbished building along Senator Gil Puyat Avenue,the iACADEMY Plaza. The property is under a long term lease arrangement that started on March1, 2014 and will end on May 31, 2029.

With eight floors to accommodate the school’s growing population, the iACADEMY Plaza has anauditorium which can seat 450 to 500 people. The addition of the Dance Room now also allows forPE classes to be conducted in the auditorium. The Multimedia Arts laboratories and Computerlaboratories have been improved for the better use of the students. All the other laboratories, such asCintiq and the iMAC, were also developed to satisfy all the needs of the students. All laboratories areequipped with high speed internet as well as the latest software and hardware.

All the classrooms and lecture rooms are fully equipped with the latest teaching aids. The newfoundation rooms have adequate physical space for worktables and chairs. Studios have adequatephysical space for worktables and chairs. Students may use the computer laboratories to helpsupport their studies. iACADEMY is also properly equipped with top-of-the-line computer suites thatprovide the necessities of education, available WI-FI internet access within the campus, and extensivelibrary holdings.

Another key improvement in iACADEMY facilities was the increased bandwidth of the school’s internetconnection, with stabilized network.

Item 3. LEGAL PROCEEDINGS

1. In the Matter Of: Petition for Rehabilitation of PhilippineWomen’s University, Dr. Helena Z. Benitez v. Philippine Women’sUniversitySP Case No. 15133200Branch 46, Regional Trial Court of Manila

On 13 March 2015, Dr. Helena Z. Benitez filed a Creditor-Initiated Petition for Involuntary Rehabilitationof Philippine Women’s University (“PWU”) docketed as SP Case No. 15133200 in the Regional TrialCourt of Manila (the “PWU Rehabilitation Case”). The PWU Rehabilitation Case was raffled to Branch 46of the Regional Trial Court of Manila (the “Rehabilitation Court”) presided over by Judge Rainelda H.Estacio-Montesa.

On 20 March 2015, the Rehabilitation Court issued a Commencement Order in the PWU RehabilitationCase. In the Commencement Order, the Rehabilitation Court declared PWU to be under rehabilitation.The Commencement Order contains a Stay Order, which among others, effectively suspends all actions orproceedings enforcing all claims against PWU in court or otherwise. The Rehabilitation Court appointedMr. Miguel P. Hernandez as the Rehabilitation Receiver for this case. The Initial Hearing for the PWURehabilitation Case was set on 24 April 2015. The Corporation received the Commencement Order on 23March 2015.

On 26 March 2015, the Corporation filed a Notice of Claim in the PWU Rehabilitation Case. Under theNotice of Claim, PWU has outstanding obligations amounting to Seven Hundred Sixty-Three MillionFive Hundred Sixty-Four Nine Hundred Twenty-Four and 23/100 Pesos (Php763,564,924.23) to theCorporation as of 25 March 2015.

On 8 April 2015, the Corporation filed its Opposition to the PWU Rehabilitation Case.


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On 24 April 2015, the Rehabilitation Court Judge reset the Initial Hearing for the PWU RehabilitationCase due to the failure of Dr. Helena Z. Benitez to comply with the publication of the CommencementOrder. The Initial Hearing was reset on 26 May 2015.

On 26 May 2015, the Rehabilitation Court Judge referred the PWU Rehabilitation Case to theRehabilitation Receiver for evaluation. The Rehabilitation Receiver has forty (40) days from 26 May 2015to consider whether the rehabilitation of PWU is feasible or not.

On 29 August 2015, the Rehabilitation Court Judge rendered a Decision dismissing the PWUrehabilitation case for being, among others, a sham filing. The Rehabilitation Court Judge also orderedthat the Stay Order be lifted due to the dismissal of the case.

After filing of the Motion for Reconsideration and responsive pleadings thereto, on 21 January 2016, theRehabilitation Court Judge denied the respective Motions for Reconsideration filed by Dr. Helena Z.Benitez and PWU.

PWU then filed a Petition for Certiorari with Application for Temporary Mandatory/Restraining Orderand/or Writ of Preliminary Injunction dated 26 February 2016 to the Court of Appeals. Subsequently, Dr.Benitez filed her Petition for Certiorari (with Urgent Application for Temporary Restraining OrderAnd/or Writ of Preliminary Injunction) dated 29 February 2016 to the Court of Appeals.

Eventually, both PWU and Dr. Benitez filed their respective Motion to Withdraw of their Petition forCertiorari both dated 11 April 2016 to the Court of Appeals.

On 13 May 2016, the Motion to Withdraw the Petition for Certiorari of PWU was granted by the Court ofAppeals.

The Motion to Withdraw the Petition of Certiorari of Dr. Benitez is pending for resolution of the Court ofAppeals.

2. STI Education Systems Holdings, Inc. v. Philippine Women’sUniversityForeclosure No. 15-3285Office of the Clerk of Court and Ex-Officio Sheriff of Manila

On 10 February 2015, the Corporation filed a Petition for Extra-Judicial Foreclosure against PWU with theOffice of the Clerk of Court and Ex-Officio Sheriff of Manila. The Petition for Extra-Judicial Foreclosureseeks the foreclosure and sale of PWU’s properties covered by Transfer Certificate of Title (“TCT”) Nos.227390, 227391, 227392, 227393, and 227394 located along Taft Avenue, Manila (“PWU Taft Properties”) tosatisfy the unpaid loan of PWU to the Corporation in the amount of Seven Hundred Two Million FourHundred Forty Six Thousand Three Hundred Eight and 8/100 Pesos (Php702,446,308.08) as of 7December 2014. The loan is based on the Facility Agreement dated 20 October 2009 (the “FacilityAgreement”) between the Corporation, as assignee of BDO Unibank, Inc. and PWU. The extra-judicialforeclosure sale of the PWU Taft Properties was scheduled on 18 March 2015, with 26 March 2015 as thealternative date.

On 18 March 2015, the extra-judicial foreclosure sale was conducted and the Corporation was declared asthe winning bidder for the PWU Taft Properties, with a bid amount of Three Hundred Thirty Million SixHundred Thirteen Thousand Five Hundred Pesos (Php330,613,500.00). The Certificate of Sale for this casewas issued on 20 March 2015.

On 24 March 2015, the Corporation caused the annotation of the Certificate of Sale in the TCTs coveringthe PWU Taft Properties with the Register of Deeds of Manila.


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The Corporation, Attenborough Holdings Corporation (“AHC”), PWU and Unlad ResourcesDevelopment Corporation (“Unlad”) have arrived at a settlement over all claims stemming from the JVAand all agreements arising thereto including the Facility Agreement. Under the settlement, PWU was ableto redeem the PWU Taft Properties.

3. STI Education Systems Holdings, Inc. v. Philippine Women’sUniversityForeclosure No. 15-3284Office of the Clerk of Court and Ex-Officio Sheriff of Manila

On 10 February 2015, the Corporation filed a Petition for Extra-Judicial Foreclosure against PWU with theOffice of the Clerk of Court and Ex-Officio Sheriff of Manila. The Petition for Extra-Judicial Foreclosureseeks the foreclosure and sale of the PWU Taft Properties and PWU’s property covered by TCT No.112932 (“PWU Indiana Property”) located in P.Hidalgo Lim Street, Malate, Manila to satisfy the unpaidloan of PWU to the Corporation in the amount of Thirty Million Seven Hundred Forty-Two ThousandOne Hundred Forty-Five and 41/100 Pesos (Php30,742,145.41) as of 7 December 2014. The loan is basedon the Omnibus Agreement dated 8 June 2012 between the Corporation and PWU (the “PWU OmnibusAgreement”). The extra-judicial foreclosure sale of the PWU Taft Properties and PWU Indiana Propertywas scheduled on 18 March 2015, with 26 March 2015 as the alternative date.

On 18 March 2015, the extra-judicial foreclosure sale was conducted and the Corporation was declared asthe winning bidder for the PWU Indiana Property, with a bid amount of Five Million Two HundredFifty-Five Thousand Five Hundred Pesos (Php5,255,500.00). The Certificate of Sale for this case wasissued on 20 March 2015.

On 24 March 2015, the Corporation caused the annotation of the Certificate of Sale in the TCT coveringthe PWU Indiana Property with the Register of Deeds of Manila.

The Corporation, AHC, PWU and Unlad have arrived at a settlement over all claims stemming from theJVA and all agreements arising thereto including the PWU Omnibus Agreement. Under the settlement,PWU was able to redeem the PWU Indiana Property.

4. STI Education Systems Holdings, Inc. v. Philippine Women’sUniversity and Unlad Resources Development CorporationFRE No. 10462Office of the Clerk of Court and Ex-Officio Sheriff of Quezon City

On 18 February 2015, the Corporation filed an Amended Petition for Extra-Judicial Foreclosure againstPWU and Unlad Resources Development Corporation (“Unlad”) with the Office of the Clerk of Courtand Ex-Officio Sheriff of Quezon City. The Amended Petition for Extra-Judicial Foreclosure seeks theforeclosure and sale of Unlad’s properties covered by TCT Nos. RT-71871(271024)PR-29615, and RT-71872(271025)PR-29616 located in Quezon City to satisfy the unpaid loan of PWU to the Corporation inthe amount of Seven Hundred Two Million Four Hundred Forty Six Thousand Three Hundred Eight and8/100 Pesos (Php702,446,308.08) as of 7 December 2014. The loan is based on the Facility Agreementbetween the Corporation, as assignee of BDO Unibank, Inc. and PWU. Unlad acted as third-partymortgagor and surety of PWU in the Facility Agreement. The extra-judicial foreclosure sale of theproperties covered by TCT Nos. RT-71871(271024)PR-29615, and RT-71872(271025)PR-29616 wasscheduled on 24 March 2015, with 7 April 2015 as the alternative date.

On 24 March 2015, the extra-judicial foreclosure sale of Unlad’s properties covered by TCT Nos. RT-71871(271024)PR-29615, and RT-71872(271025)PR-29616 was temporarily suspended by the ExecutiveJudge of Quezon City on the basis of the Commencement Order issued in the PWU Rehabilitation Case.On 7 April 2015, the Corporation received the Executive Judge’s Disposition denying the Motion forReconsideration filed by the Corporation asking the Executive Judge to lift the temporary suspension ofthe extra-judicial foreclosure sale in this case.


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On 30 October 2015, the extra-judicial foreclosure sale of the Unlad properties in Quezon City wasresumed pursuant to a Disposition of the Executive Judge of RTC Quezon City. After the public auction,STI Holdings was declared the winning bidder, and the corresponding Certificate of Sale was issued.

On 1 December 2015, the Corporation was able to cause the annotation of the Certificate of Sale on TCTNo. RT-71871(271024) PR-29615 only.

The Corporation, AHC, PWU and Unlad have arrived at a settlement over all claims stemming from theJVA and all agreements arising thereto including the Facility Agreement. Under the settlement, Unladceded to the Corporation by way of dacion en pago on 31 March 2016 its properties located in Quezon Cityand Davao City, which includes the properties in Quezon City covered by TCT Nos. RT-71871(271024)PR-29615, and RT-71872(271025)PR-29616.

5. STI Education Systems Holdings, Inc. and Attenborough HoldingsCorporation v. Unlad Resources Development CorporationFRE No. 10463Office of the Clerk of Court and Ex-Officio Sheriff of Quezon City

On 12 February 2015, the Corporation and Attenborough Holdings Corporation (“AHC”) filed a JointPetition for Extra-Judicial Foreclosure against Unlad with the Office of the Clerk of Court and Ex-OfficioSheriff of Quezon City. The Joint Petition for Extra-Judicial Foreclosure seeks the foreclosure and sale ofUnlad’s properties covered by TCT Nos. RT-79300(202647)PR-29042, RT-71871(271024)PR-29615, and RT-71872(271025)PR-29616 located in Quezon City (“Unlad QC Properties”) to satisfy the unpaid loan ofUnlad to the Corporation and AHC. The loan is based on the Omnibus Agreement dated 8 June 2012among the Corporation, AHC, and Unlad (the “Unlad Omnibus Agreement”). Unlad’s unpaid loan to theCorporation is Two Hundred Twenty-Three Million Seven Hundred Thousand Five Hundred Seventy-Seven and 78/100 Pesos (Php 223,700,577.78) as of 7 December 2014, while Unlad’s unpaid loanobligation to AHC amounts to Seventy Million Three Hundred Seventy-Two Thousand Eight HundredEighty-Eight and 89/100 Pesos (Php70,372,888.89) as of 15 December 2014. The extra-judicial foreclosuresale of the Unlad QC Properties was scheduled on 24 March 2015, with 7 April 2015 as the alternativedate.

On 24 March 2015, the Executive Judge of the Regional Trial Court of Quezon City temporarilysuspended the extra-judicial foreclosure sale of the Unlad QC Properties on the basis, among otherthings, of the Commencement Order issued by the Rehabilitation Court in the PWU Rehabilitation Case.On 7 April 2015, the Corporation received the Executive Judge’s Disposition denying the Motion forReconsideration filed by the Corporation asking the Executive Judge to lift the temporary suspension ofthe extra-judicial foreclosure sale in this case.

On 30 October 2015, the extra-judicial foreclosure sale of the Unlad properties in Quezon City wasresumed pursuant to a Disposition of the Executive Judge of RTC Quezon City. After the public auction,STI Holdings was declared the winning bidder, and the corresponding Certificate of Sale was issued.

On 13 November 2015, the Corporation caused the annotation of the Certificate of Sale on TCT No. RT-79300(202647)PR-29042.

The Corporation, AHC, PWU and Unlad have arrived at a settlement over all claims stemming from theJVA and all agreements arising thereto including the Unlad Omnibus Agreement. Under the settlement,Unlad ceded to the Corporation by way of dacion en pago on 31 March 2016 its properties located inQuezon City and Davao City, which includes the property in Quezon City covered by TCT No. RT-79300(202647)PR-29042.


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6. STI Education Systems Holdings, Inc. and Attenborough HoldingsCorporation v. Unlad Resources Development CorporationEJF Rem Case No. 15,117-15Office of the Clerk of Court and Ex-Officio Sheriff of Davao City

On 18 February 2015, the Corporation and AHC filed a Joint Petition for Extra-Judicial Foreclosureagainst Unlad with the Office of the Clerk of Court and Ex-Officio Sheriff of Davao City. The JointPetition for Extra-Judicial Foreclosure seeks the foreclosure and sale of Unlad’s property covered by TCTNo. T-129545 located in Davao City (“Unlad Davao Property”) to satisfy the unpaid loan of Unlad to theCorporation and AHC. The loan is based on the Unlad Omnibus Agreement. Unlad’s unpaid loan to theCorporation is Two Hundred Twenty-Three Million Seven Hundred Thousand Five Hundred Seventy-Seven and 78/100 Pesos (Php 223,700,577.78) as of 7 December 2014, while Unlad’s unpaid loanobligation to AHC amounts to Seventy Million Three Hundred Seventy-Two Thousand Eight HundredEighty-Eight and 89/100 Pesos (Php70,372,888.89) as of 15 December 2014. The extra-judicial foreclosuresale of the Unlad Davao Property was scheduled on 17 April 2015, with 22 May 2015 as the alternativedate.

On 17 April 2015, the Vice-Executive Judge of the Regional Trial Court of Davao City temporarilysuspended the extra-judicial foreclosure sale of the Unlad Davao Property on the basis, among otherthings, of the Commencement Order issued by the Rehabilitation Court in the PWU Rehabilitation Case.On 23 April 2015, the Vice-Executive Judge of the Regional Trial Court of Davao City denied the Motionfor Reconsideration filed by the Corporation and AHC asking the Vice-Executive Judge to lift thetemporary suspension of the extra-judicial foreclosure sale in this case.

On 18 June 2015, the Corporation and AHC filed a Petition for Certiorari and Mandamus with the Courtof Appeals – Mindanao Station to question the decision of the Vice-Executive Judge of RTC Davao City totemporarily suspend the extra-judicial foreclosure sale on the basis of the Commencement Order issuedin the Rehabilitation Case of PWU.

On 25 August 2015, the Corporation wrote a letter to the Office of the Clerk of Court and Ex-OfficioSheriff of the RTC of Davao City asking for the resumption of the extra-judicial foreclosure sale of theUnlad property in Davao City due to the dismissal of the Rehabilitation Case of PWU. The Company’sletter was referred to the Executive Judge of RTC Davao City. The Executive Judge of RTC Davao Citydenied the Company’s request in a 2nd Indorsement dated 26 August 2015 due to the pendency of thePetition for Certiorari and Mandamus with the Court of Appeals – Mindanao Station questioning thesuspension of the extra-judicial foreclosure sale of the Unlad property in Davao City.

On 28 August 2015, the Corporation and AHC filed a Verified Motion to Withdraw the Petition forCertiorari and Mandamus with the Court of Appeals – Mindanao Station because the subject matter ofthe case has been rendered moot and academic by the dismissal of the Rehabilitation Case of PWU.

On January 12, 2016, the Corporation wrote another letter to the Office of the Clerk of Court and Ex-Officio Sheriff of the RTC of Davao City asking for the resumption of the extra-judicial foreclosure sale ofthe Unlad property in Davao City. The Corporation informed the Office of the Clerk of Court and Ex-Officio Sheriff of the RTC of Davao City, in this letter, of the Verified Motion to Withdraw the Petition forCertiorari and Mandamus that it filed with the Court of Appeals together with AHC. The Corporation’sletter was referred to the Executive Judge of RTC Davao City. The Executive Judge of RTC Davao City, ina 2nd Indorsement dated January 27, 2016, granted the Corporation’s request and ordered the resumptionof the extra-judicial foreclosure sale of the Unlad Property in Davao City. The extra-judicial foreclosuresale was set on March 10, 2016, with April 7, 2016 as the alternative date.

On 10 March 2016, the extra-judicial foreclosure sale proceeded wherein STI Holdings was declared asthe highest bidder.


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The Corporation, AHC, PWU and Unlad have arrived at a settlement over all claims stemming from theJVA and all agreements arising thereto including the Unlad Omnibus Agreement. Under the settlement,Unlad ceded to the Corporation by way of dacion en pago on 31 March 2016 its properties located inQuezon City and Davao City, which includes the property in Davao City covered by TCT No. T-129545.

7. STI Education Systems Holdings, Inc. and Attenborough HoldingsCorporation v. Hon. Retrina E. Fuentes in her capacity as the Vice-Executive Judge of the Regional Trial Court of Davao City, Officeof the Clerk of Court of the Regional Trial Court of Davao City, inits capacity as Ex-Officio Sheriff of Davao City, Sheriff JosephCastro and Unlad Resources Development CorporationCase No. 0685123rd Division, Court of Appeals – Mindanao Station

On 18 June 2015, the Corporation and AHC filed a Petition for Certiorari and Mandamus against theVice-Executive Judge of the Regional Trial Court of Davao City, Retrina E. Fuentes, the Office of the Clerkof Court of Davao City, in its capacity as Ex-Officio Sheriff of Davao City, Sheriff Joseph Castro, andUnlad. The Petition for Certiorari and Mandamus seeks to declare Judge Retrina E. Fuentes to have actedwith grave abuse of discretion amounting to lack or excess of jurisdiction when she suspended the extra-judicial foreclosure sale in EJF Rem Case No. 15,117-15 on the basis of, among others, the CommencementOrder issued in the PWU Rehabilitation Case. The Petition for Certiorari and Mandamus was docketed asCase No. 06851, and it was raffled to the 23rd Division of the Court of Appeals – Mindanao Station.

On 28 August 2015, the Corporation and AHC filed a Verified Motion to Withdraw the Petition forCertiorari and Mandamus with the Court of Appeals – Mindanao Station because the subject matter ofthe case has been rendered moot and academic by the dismissal of the Rehabilitation Case of PWU.

On 25 January 2016, the Court of Appeals – Mindanao Station issued a Resolution granting thewithdrawal of the Petition for Certiorari and Mandamus filed by the Corporation and AHC.

8. The Heirs of Carlos Villa-Abrille, et al, v. The Philippine Women’sEducational Association (PWU), et al.Civil Case No. 36,430-2015Branch 10, Regional Trial Court, Davao City

On October 21, 2015, the Corporation and AHC each received copies of the Complaint filed by the Heirsof Carlos Villa-Abrille, Heirs of Luisa Villa-Abrille, Heirs of Candelaria V.A. Tan, Heirs of Adolfo V.A.Lim, Heirs of Saya V.A. Lim Chiu, Heirs of Guinga V.A. Lim Lu, Heirs of Rosalia V.A. Lim Lua, Heirs ofLorenzo V.A. Lim, and Heirs of Fermin Abella (“Plaintiffs”) against the Philippine Women’s EducationalAssociation (“PWEA”), Unlad, the Corporation, and AHC for cancellation of certificate of title,reconveyance of real property, declaration of nullity of real estate mortgage, damages, and attorney’sfees. The subject matter of the case is Unlad’s property covered by TCT No. T-129545 located in DavaoCity (“Unlad Davao Property”).

The Plaintiffs claim that ownership of Unlad’s property in Davao City should revert back to them becausePWEA and Unlad violated the restrictions contained in the Deed of Sale covering the property. Therestrictions referred to by the Plaintiffs provides that the Vendee [PWEA] shall use the land foreducational purposes only and shall not subdivide the land for purposes of resale or at lease to otherpersons.

Likewise, the Plaintiffs also claim that the real estate mortgage constituted over Unlad’s property inDavao City in favor of the Corporation and AHC should be declared null and void because PWEA andUnlad have no capacity to mortgage the property based on the restrictions contained in the Deed of Sale.

On November 20, 2015, the Corporation and AHC filed the Motion to Dismiss (“First Motion toDismiss”). In the First Motion to Dismiss, the Corporation and AHC asserted that the Plaintiffs’ cause of


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action against PWEA and Unlad has prescribed considering that the alleged violation of the restrictions inthe Deed of Sale occurred in 1987 or more than ten (10) years from the filing of the case. In addition,Plaintiffs cannot seek the cancellation of the real estate mortgage in favor of the Corporation and AHCbecause (a) Plaintiffs are not privy/real parties in interest to the said mortgage, and (b) the restrictions inthe title and Deed of Sale do not prohibit the mortgage of the subject property.

The First Motion to Dismiss was scheduled by the Trial Court on December 4, 2015.

On December 4, 2015, Plaintiffs failed to attend the hearing of the First Motion to Dismiss. The Trial Courtinstead ordered the Plaintiffs to file their comment to the First Motion to Dismiss within ten (10) daysfrom receipt of its order while the Corporation and AHC are given the same period to file their replythereto.

The Trial Court also noticed that the records failed to show that PWEA and Unlad received theSummons. The Trial Court then ordered the branch sheriff to cause the service of the Summons to PWEAand Unlad.

Despite the extensions given to the Plaintiffs, Plaintiffs belatedly filed its Comment/Opposition to theFirst Motion to Dismiss.

Because of the aforesaid circumstances, the Corporation and AHC filed an Omnibus Motion dated 21March 2016. In the said Omnibus Motion, the Corporation and AHC moved that Plaintiffs’Comment/Opposition be stricken down for being belatedly filed and consequently submit the FirstMotion to Dismiss for resolution.

Subsequently, the Corporation and AHC filed a Second Motion to Dismiss (on grounds of res judicataand willful and deliberate forum shopping) dated 22 March 2016 (“Second Motion to Dismiss”).

In the Second Motion to Dismiss, STI Holdings and AHC informed the Trial Court that they were able todiscover that the Plaintiffs filed a similar case against PWEA and Unlad with another Trial Court ofDavao City (Civil Case No. 20,415-90 filed before Branch 15 of the Regional Trial Court of Davao City),which was dismissed without qualifications for their failure to comply with the said Trial Court’s Order.Said dismissal was eventually affirmed with finality by the Supreme Court. Because of this information,the Corporation and AHC moved to dismiss the case for res judicata and willful and deliberate forumshopping for filing the same case to the Trial Court.

Both Motions were set for hearing on 22 April 2016.

On 22 April 2016, Plaintiffs failed to attend the hearing of the aforesaid Motions. The Trial Court insteadordered the Plaintiffs to file their Comment to the Omnibus Motion within a non-extendible period of five(5) days, after which, the same shall be submitted for resolution.

Likewise, the Trial Court ordered the Plaintiffs to file their Comment to the Second Motion to Dismisswithin ten (10) days, from receipt of its Order. STI Holdings and AHC were likewise given the sameperiod to file their responsive pleading thereto.

Plaintiff filed their Comment/Opposition to the (1) Omnibus Motion and (2) Second Motion to Dismiss.

In their Comment/Opposition, the Plaintiffs, among others, sought the liberality of rules in allowing theirbelated filing of their Comment/Opposition to the First Motion to Dismiss.

Meanwhile, in their Comment/Opposition to the Second Motion to Dismiss, Plaintiffs alleged that (a) theSecond Motion to Dismiss violates the Omnibus Motion Rule of asserting all objections in the FirstMotion to Dismiss, (b) the dismissal of the previous case was no on the merits, and (c) the elements of res


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judicata are inexistent considering that the previous case and the pending case dealt with differentparties, and causes of action.

On 30 May 2016, the Corporation and AHC filed their Reply to Plaintiffs’ Comment/Opposition to theSecond Motion to Dismiss. In the Reply, the Corporation and AHC assert the following:

1. The existence of res judicata in the instant case is an exception to the Omnibus Motion Rule.

2. The dismissal of the instant case based on res judicata is warranted by the apparent similarcircumstances with the previous case - Civil Case No. 20,415-90 filed before Branch 15 of the RegionalTrial Court of Davao City. Plaintiffs attempt to re-litigate of issues already settled and dismissed withfinality is against both law and public policy.

3. Both the Rules of Court and jurisprudence affirms that an unqualified dismissal based onSection 3 of Rule 17 of the Rules of Court is with prejudice and tantamount to adjudication onthe merits of Plaintiffs’ previous similar case.

4. The previous case - Civil Case No. 20,415-90 filed before Branch 15 of the Regional TrialCourt of Davao City – has the similar parties (Plaintiffs v. PWEA and Unlad), subject matter(Unlad Davao Property) and cause of action (Alleged violations of PWEA and Unlad on therestriction of the Deed of Absolute Sale and prayer for the return of the Unlad DavaoProperty to the Plaintiffs). The operation of res judicata in the instant case is not altered bythe inclusion of Defendant Mortgagees as a co-defendant.

The First Motion to Dismiss, Omnibus Motion and Second Motion to Dismiss is deemed submitted forresolution by the Trial Court.

9. Anthony Carlo A. Agustin, Suzzette A. Agustin, V-2 G. Agustin,Vincent Paul A. Agustin, Tisha Angeli Sy, HananaiahConstruction & Manpower Resources, Inc. and V.S. HeirloomsPacifica, Inc. v. STI Education Systems Holdings, Inc.Civil Case No. 16-14678Branch 42, Regional Trial Court of Bacolod City

This is a case for Specific Performance filed by Anthony Carlo A. Agustin, Suzzette A. Agustin, V-2 G.Agustin, Vincent Paul A. Agustin, Tisha Angeli Sy, Hananaiah Construction & Manpower Resources, Inc.and V.S. Heirlooms Pacifica, Inc. (the “Agustins”) against the Corporation for the payment of the latter ofthe remaining balance of the purchase price for the sale of the Agustins’ shares in West Negros University(“WNU”).

The Agustins allege in their Complaint that based on the Share Purchase Agreement and Deed ofAbsolute they executed with the Corporation, the price of their shares in WNU has been pegged at FourHundred Million Pesos (Php400,000,000.00). Despite these two agreements, the Corporation refuses topay the full purchase price for the WNU shares they acquired from the Agustins.

In its Answer, the Corporation stated that the Agustins are not entitled to the full purchase price of theirWNU shares because they have not complied with all the requirements for its release. In particular, theAgustins have not been able to deliver the Commission on Higher Education permits for the operation ofWNU’s Maritime Program as provided in the MOA, and the Share Purchase Agreement. In addition,there are other trade receivables in favor of WNU wherein full satisfaction of the same entitles theAgustins a portion of the balance of the purchase price.

On 2 June 2016, the Corporation received the Agustin’s Reply to the Answer. In the Reply, the Agustinsare asserting that (a) the Memorandum of Agreement, Share Purchase Agreement and Deed of AbsoluteSale (the “WNU Contracts”) provide that the Corporation can withhold the payment of the remaining


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balance of P50,000,000.00, which alleged to be pursuant to the license to operate the Maritime Programsof WNU, and (b) the Corporation should be deemed to have agreed on the P400,000,000.00 purchaseprice. Likewise, the allegations in the Answer are also against the Parol Evidence Rule which providesthat the parties to a written agreement cannot change the stipulations provided therein.

The Agustins also filed and served a Request for Admission to the Corporation’s counsel wherein theysought the Corporation to admit (a) the existences and authenticity of the WNU Contracts, (b) issues ofthe instant case are (i) determination of the final purchase price based on the WNU Contracts and (ii) finalpurchase price should be either the P400,000,000.00 or the adjusted price of P350,000,000.00, and (c) theWNU Contracts constitute the entire written agreement of the parties.

On 17 June 2016, the Corporation filed its Comment/Opposition to the Agustins’ Request for Admission.In the Comment/Opposition, the Corporation filed their objections thereto and sought the same to bedenied or deemed ineffectual on the following grounds; (a) defective service because it should have beenserved directly to the Corporation and not to its counsel as required under the Rules of Court, (b)redundant because the matters raised therein have already been addressed in the Answer, and (c)improper and irrelevant because it sought admission of issues which are proper during pre-trial and notin a Request for Admission.

Besides the Trial Court’s resolution on the aforesaid objections to the Request for Admission, the casemay be referred to pre-trial and/or court-annexed mediation unless the Agustins filed any other motionsor pleading.

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

Except for matters taken up during the annual meeting of stockholders held on 25 September 2015, therewas 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 RELATEDSTOCKHOLDER 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 thisReport, the Company has 9,904,806,924 shares outstanding.

As of 31 March 2016, the high share price of the Company was P0.59 and the low share price was P0.36.As of 30 June 2016, the high share price of the Company was P0.59 and the low share price was P0.57.

The Company’s public float as of 31 March 2016 is 3,593,087,024 shares equivalent to 36.28% of the totalissued 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 pasttwo (2) years and the first and second quarters of 2016:


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High Low2016Second Quarter 0.59 0.57First Quarter 0.59 0.362015Fourth Quarter 0.52 0.39Third Quarter 0.71 0.47Second Quarter 0.70 0.64First Quarter 0.75 0.632014Fourth Quarter 0.82 0.66Third Quarter 0.85 0.77Second Quarter 0.87 0.69First Quarter 0.72 0.65

(2) Holders

As of 31 March 2016, there were 1,256 shareholders of the Company’s outstanding capital stock. TheCompany has common shares only.

The following table sets forth the top 20 shareholders of the Company’s common stock, the number ofshares held, and the percentage of total shares outstanding held by each as of 31 March 2016.

NAME OF STOCKHOLDERNUMBER OF

SHARESPERCENTAGE

OF OWNERSHIPPCD NOMINEE CORPORATION (FILIPINO) 3,450,192,6721 34.8335%PRUDENT RESOURCES, INC. 1,614,264,964 16.2977%TANCO, EUSEBIO H. 1,253,666,793 12.6571%PCD NOMINEE CORPORATION (NON-FILIPINO) 979,909,238 9.8932%BIOLIM HOLDINGS AND MANAGEMENT CORP. (FORMERLY:RESCOM DEVELOPERS, INC.) 794,343,934 8.0197%EUJO PHILIPPINES, INC. 763,873,130 7.7121%INSURANCE BUILDERS, INC. 626,776,992 6.3280%STI EDUCATION SERVICES GROUP, INC. 397,908,895 4.0173%TANCO, ROSIE L. 13,000,000 0.1312%VITAL VENTURES MANAGEMENT CORPORATION 2,800,000 0.0282%YU, JUAN G. YU OR JOHN PETER C. 1,300,000 0.0131%CASA CATALINA CORPORATION 1,000,000 0.0100%HTG TECHNOLOGIES, INC. 1,000,000 0.0100%EDAN CORPORATION 861,350 0.0086%YU, JUAN G. YU OR JOHN PETER C. 600,000 0.0060%LERIO CABALLERO CASTIGADOR AND/OR VICTORINA 399,000 0.0040%TACUB, PACIFICO B. 200,000 0.0020%VICSAL SECURITIES & STOCK BROKERAGE, INC. 129,500 0.0013%E. SANTAMARIA & CO., INC. 128,919 0.0013%TOBIAS JOSEF BROWN 99,400 0.0010%

1Eusebio H. Tanco is the beneficial owner of 210,765,082 shares. Eujo Philippines, Inc. is the beneficial owner of 16,160,000 shares.STI Education Services Group, Inc. is the beneficial owner of 104,399,000 shares. Insurance Builders, Inc. is the beneficial owner of3,000,000 shares. Joseph Augustin L. Tanco is the beneficial owner of 2,000,000 shares. Biolim Holdings and Management Corp.(Formerly: Rescom Developers, Inc.) is the beneficial owner of 922,000 shares. Capital Managers and Advisors is the beneficialowner of 304,460,332 shares.


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(3) Cash Dividends

On 30 September 2013, cash dividends amounting to P0.015144 per share were paid to stockholders ofrecord as of 18 September 2013.

On 11 November 2014, cash dividends amounting to P0.02 per share were paid to stockholders of recordas of 17 October 2014.

On 5 November 2015, cash dividends amounting to P0.02 per share were paid to stockholders of record asof 12 October 2015.

Dividends will be evaluated by the Board of Directors on an annual basis. It shall be the policy of theCompany to declare dividends whenever there are unrestricted retain earnings available. Suchdeclaration will take into consideration factors such as restrictions that may be imposed by current andprospective 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

There is no sale of unregistered or exempt securities for the past three (3) years.

Item 6. MANAGEMENT’S DISCUSSION AND ANALYSIS

This discussion summarizes the significant factors affecting the financial condition and operatingresults of STI Education Systems Holdings, Inc. (“STI Holdings” or the “Parent Company”) and itssubsidiaries (hereafter collectively referred to as the “Group”) for the fiscal years ended March 31, 2016and 2015. The following discussion should be read in conjunction with the attached auditedconsolidated financial statements of the Group as of and for the year ended March 31, 2016 and for allthe other periods presented.

Financial Condition

March 31, 2016 vs. 2015

The Group’s total assets as at March 31, 2016 slightly increased by P464.2 million to P10,500.2 millionfrom last year’s P10,036.0 million. This is mainly due to the net effect of the increase in Investmentproperties amounting to P1,258.8 million less the reductions in Noncurrent receivables, Investments inassociates and joint ventures, and Cash balance of P561.9 million, P197.6 million and P138.7 million,respectively. In March 2016, the Parent Company acquired several properties in Quezon City andDavao City under a dacion en pago arrangement as settlement of its noncurrent receivables fromPhilippine Women's University ("PWU") and Unlad Resources Development Corporation ("Unlad").

Cash and cash equivalents stood at P664.8 million as at March 31, 2016 or 17 % lower than last year’sP803.5 million substantially due to the payment of the Current portion of long term loans amountingto P236.0 million and dividends paid by both STI ESG and STI Holdings.

Receivables, which consist mainly of receivables from students, increased by P26.1 million or 9%. Thisis lower than the 17% increase in revenues from tuition and other school fees indicating improvementin collection from students.


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Inventories increased by 12% or P4.1 million as the schools increased their stocks of uniforms inpreparation for the enrollment in the coming school year. Procurement of marketing, educational andproware materials were also ramped up primarily for STI ESG’s Senior High School program.

Prepaid expenses decreased slightly by 10% mainly due to decreases in prepaid taxes/creditablewithholding taxes and input value-added tax (VAT), as the input VAT related to the acquisition ofcondominium units by STI ESG in exchange for its land is applied to pay for the output VAT on therent collected during the year for the lease of the said condominium units.

Property and equipment rose by P29.1 million net of depreciation expense for the period amounting toP324.7 million, as construction of the school building in STI College - Las Piñas reached the half-waymark and construction activities in other campuses were completed. The additional classrooms in STICollege - Novaliches, STI College - Caloocan and STI College - Ortigas-Cainta were completed, as wellas the gymnasium and warehouse in STI College - Ortigas-Cainta. School equipment and furniturewere also acquired for said schools.

Investment properties rose by P1,258.8 million due to the acquisition by the Parent Company of severalproperties in Quezon City and Davao City through dacion en pago arrangement pursuant to anagreement among STI Holdings, PWU, Unlad and Dr. Helena Z. Benitez ("HZB") for theextinguishment and settlement of the outstanding obligations of PWU and Unlad to STI Holdings.

Investments in and advances to associates and joint ventures decreased by 12% as an associateregistered declines in the market value of its investments in equities.

Noncurrent receivables of P561.9 million were settled through a dacion en pago arrangement.

Deferred tax assets increased by P7.4 million mainly due to taxes paid on tuition and other school feesand rental income collected in advance. Following statutory regulations, income received or collectedin advance shall be taxable in the same year said income was actually received. Unearned revenuesrepresent payments received from Senior High School students who registered for the School Year2016-2017.

Goodwill, intangible and other noncurrent assets rose by P47.3 million or 14% mainly due to the downpayment made to a contractor for the STI College - Las Piñas campus construction project.

Accounts payable and other current liabilities declined by 10% or P67.5 million substantially due topayment to suppliers for completed expansion projects.

Both current and non-current portions of interest-bearing loans and borrowings declined by P119.2million and P116.8 million, respectively, as principal payments were made during the period.

Payments were also made for finance lease obligations, bringing down the balance payable by P1.6million and P2.9 million, respectively, for current and non-current portions.

Unearned tuition and other school fees increased by P33.5 million from P20.6 million as at March 31,2015 to P54.1 million as at March 31, 2016. The increase is substantially due to the registration feesreceived from Senior High School students for School Year 2016-2017.

Nontrade payable, which represents amounts withheld from the purchase price of STI WNU pendingresolution of issues with STI WNU’s former shareholders relative to the acquisition of STI WNU,decreased by P28.7 million as payments were made during the period.

Other noncurrent liabilities of P31.4 million pertain to advance rent and security deposits paid bylessees of STI ESG’s condominium units which were acquired in exchange for its land.


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Income tax payable rose by P42.1 million reflecting the increase in the Group’s taxable income.

Pension liabilities increased by 14% to P72.6 million as of March 31, 2016 due to recognition ofadditional retirement expenses.

Deferred tax liability increased from P127.2 million as at March 31, 2015 to P237.3 million this year dueto the P110.1 million deferred tax on the difference between the fair market value of the propertiesacquired by dacion and the total dacion price, which is now the recorded cost, of said properties.

Unrealized mark-to-market losses on available-for-sale financial assets increased from P0.001 millionas at March 31, 2015 to P0.4 million this year as market values of equities declined.

The Group’s share in its associates' unrealized mark-to-market gains on available-for-sale financialassets decreased by 71% as the market values of certain equity shares declined as of the financialstatements reporting date.

Cumulative actuarial gain decreased by P4.7 million as adjustments were made on actuarial valuationsbased on experience.

Retained earnings increased by 27% or P873.3 million as a result of this year’s net income earned lessdividends declared.

March 31, 2015 vs. 2014

Total assets amounted to P10,036.0 million as at March 31, 2015, up by 21% from the March 31, 2014balance of P8,299.1 million. This is mainly due to the substantial increase of P1,160.0 million in theGroup’s Property and Equipment, as construction of more buildings in various campuses arecompleted along with the renovation work conducted. Two parcels of land in Bulacan have also beenacquired as the Group continued its expansion program.

Cash and cash equivalents of P803.5 million as at March 31, 2015 was 38% higher than the balance as atMarch 31, 2014 of P583.3 million, as cash is built up in time for the full settlement of payables asconstruction work is completed.

Receivables slightly decreased from P297.4 million to P278.3 million as at March 31, 2014 and 2015,respectively, or a 6% decrease. This is largely due to the purchase of 5 schools which were formerlyfranchised schools. As part of the financial statement consolidation, these schools are now consideredsubsidiaries, hence, intercompany receivables and payables are adjusted accordingly following therules in consolidation. Receivables from students for tuition and other school fees, however, increasedby P11.5 million or 4% following the trend of increased enrollment.

Inventories decreased slightly by P2.3 million or 6% due to deliveries of uniforms after the end of thefiscal year.

Property and equipment, net of accumulated depreciation, increased by P1,160.0 million or 26%mainly due to the completion of school buildings constructed for STI College - Batangas, STI College -Calamba, STI Colle ge - Cubao and STI College - Lucena. Additional classrooms were also constructedin STI College - Ortigas-Cainta, STI College - Novaliches and STI College - Caloocan. A gymnasiumand warehouse were being constructed in the STI College - Ortigas-Cainta campus. School furnitureand equipment were purchased for these campuses. Two parcels of land in San Jose Del Monte City,Bulacan with a total land area of 4,178 square meters were acquired for P154.4 million in April 2014.

Investment properties increased by P589.1 million. This is mainly attributed to 4 floors ofcondominium units which were acquired by STI ESG in exchange for its land. The condominium units


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were turned-over for retrofitting as at March 31, 2015. STI ESG recognized the total purchase price ofthe condominium units amounting to P560.0 million plus directly attributable costs amounting to P8.4million under the Investment properties account.

Investments in and advances to associates and joint ventures increased by P90.4 million or 6% due toincome earned by associates.

Noncurrent receivables rose by P97.9 million. This amount now includes the P65.0 million loangranted by Attenborough Holdings Corporation (“AHC”) to Unlad. With the acquisition of additionalequity in AHC in February 2015, it has become a 100% owned subsidiary of STI Holdings. Thisaccount also includes the disbursements related to the foreclosure of PWU and Unlad mortgagedassets.

Deferred tax assets decreased by 33% or P10.9 million primarily due to recognition of the taxable gainresulting from the exchange of land with condominium units for accounting purposes, tax on whichwas already paid for last year.

Goodwill, intangible and other noncurrent assets decreased by P387.3 million or 53% mainly due to thereclassification of condominium deposits amounting to P396.3 million relative to the condominiumunits acquired in exchange for STI ESG’s land.

Accounts payable and other current liabilities rose by 31% or P156.0 million due to unpaid accountsrelated to the construction of school buildings and other capital expenditures as of financial statementreporting date.

Short-term loans of P180.0 million outstanding as of March 31, 2014 and term loans of P108.3 millionlikewise outstanding as of March 31, 2014 were fully paid during the year.

Nontrade payable, which represents amounts withheld from the purchase price of STI WNU pendingresolution of issues with STI WNU’s former shareholders relative to the acquisition of STI WNU,decreased by P55.8 million as payments were made during the period.

Unearned tuition and other school fees increased by 114% or P11.0 million following the trend ofincreased number of students paying in advance.

Long term loans of P1,500.0 million were availed during the year from the China Bank loan facility toaugment the funding requirements for construction projects and purchase of school furniture andequipment for the new school facilities. As at March 31, 2015, P236.0 million is due within the next 12months while P1,151.0 million is due after 12 months. Amortization of the principal and interest isevery 6 months until July 31, 2021.

Income tax payable decreased by P1.5 million. The income tax on the gain on exchange of STI ESG’sland with condominium units, recognized as income this year, was paid last year when the title to theland was transferred following government regulations.

Obligations under finance lease, both current and noncurrent portions, decreased by P0.7 million as aresult of payments of monthly amortizations.

Pension liabilities slightly increased by P2.6 million as both faculty salaries and employees’ salariesalso increased with the increase in number of employees arising from the acquisition of new schoolsfrom franchisees.

Unrealized mark-to-market losses on available-for-sale financial assets, including the Group’s share inits associates’ unrealized mark-to-market gains on available-for-sale financial assets, slightly decreasedby 2% as market values of bonds and equities held by an associate declined as of March 31, 2015.


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The Group’s cumulative actuarial gain slightly increased by P2.4 million mainly due to re-measurement gains recognized by STI WNU.

Meantime, the share in associates’ cumulative actuarial loss increased by P3.6 million as a result of theincrease in the number of an associate’s employees which are covered by the pension plan as well asthe increase in salary rate of its existing employees.

Retained earnings increased by 20% or P543.7 million as a result of this year’s net income earned lessdividends declared.

Results of Operations

Years ended March 31, 2016 vs. 2015

The continuous increase in number of enrollees in STI ESG owned and franchised schools propelledrevenue growth by 16% or P352.7 million, reaching P2,576.7 million in total revenues this year.

The student enrollment of the schools under STI Holdings are as follows:

SY 2015-2016 SY 2014-2015 Increase (Decrease)

Enrollees PercentageSTI Network

Owned schools 42,878 39,404 3,474 9%Franchised schools 34,767 33,212 1,555 5%

77,645 72,616 5,029 7%

iACADEMY 994 878 116 13%DLS STI College 34 240 (206) -86%STI WNU 6,091 6,466 (375) -6%

Total Enrollees 84,764 80,200 4,564 6%

Tuition and other school fees increased by P326.1 million or 17% from last year’s P1,948.8 million toP2,274.9 million this year, due to the increase in the student enrollment by 6% or 4,564 and the averageincrease of 5% in tuition fees implemented by most schools. In addition, STI ESG’s enrollment mix wasmore favorable in SY 2015-2016 than in SY 2014-2015, as enrollment leaned more towards STInetwork’s CHED four-year programs than the two-year programs. Proportion ofCHED:TESDA:DepEd students are 86:12:02 for SY 2015-2016 as against 82:16:02 for SY 2014-2015. Thefour-year CHED programs charge higher tuition and bring in more revenue per student.

Revenues from educational services and royalty fees increased by P10.3 million and by P1.1 million,respectively, mainly due to the increased collections of the franchised schools. Revenues fromeducational services are derived as a percentage of the tuition and other school fees collected by thefranchised schools from their students.

Sale of educational materials and supplies increased by 15% largely due to increased sale of uniforms.

Other income increased by 24% or P5.5 million largely due to the increase in number of students.


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Cost of educational services increased by 11% or P72.7 million from P655.6 million last year to P728.3million this year mostly due to the 22% or P33.6 million increase in depreciation expenses charged todirect cost. Faculty salaries and benefits increased by 9% largely due to the hiring of additional facultymembers to handle the increased enrollment and the acquisition of the 5 schools from franchisees inOctober 2014.

Cost of educational materials and supplies sold increased by P10.3 million concomitant with theincrease in sales.

General and administrative expenses rose by P83.6 million or 8% from P992.2 million last year toP1,075.8 million this year. Of the increase, P27.9 million was due to the increased depreciation chargessubstantially due to the depreciation expense recognized for the 4 floors of condominium units whichwere acquired by STI ESG in March 2015 in exchange for its land. The cost of advertising andpromotions rose by P25.3 million as STI ESG stepped up its marketing campaign for both Tertiary andSenior high school programs. Professional fees rose by P22.1 million substantially due to legal feesrelated to the PWU and Unlad collection case and the acquisition of various schools. Salaries andemployee benefits also increased by P11.4 million due to the addition of employees of the newlyacquired schools in October 2014 and the filling up of plantilla positions.

Excess of consideration received from collection of receivables amounting to P553.4 million wasrecorded this year, representing the difference between the fair market value of the properties acquiredvs. the recorded balance of the noncurrent receivables from PWU and Unlad as of the time of thesettlement.

Rental income increased by P31.6 million or almost double last year’s level as revenues from lease ofcondominium units owned by STI ESG were recognized this year.

Net of the impact of the P9.7 million excess of acquisition cost over fair value of assets acquired whenSTI Holdings acquired 100% ownership of AHC last year, Dividend income increased by P1.4 milliondue to dividends received from De Los Santos Medical Center.

Equity in net earnings of associates and joint ventures decreased by 67% or P70.3 million as someassociates generated lower profits this year.

The Group incurred a net loss of P0.5 million this year from the retirement of some assets as comparedto net gain of P0.3 million from the disposal of transportation equipment last year.

Interest income continued to decline from P12.2 million in 2014 to P6.1 million in 2015 to P5.8 millionin 2016 as bank interest rates on short-term placements remained low and cash balances were used tofully pay construction costs and other related capital expenditures.

On the other hand, interest expenses increased by P35.0 million due to the interest charges on the longterm loans from China Bank which are now charged to operations with the completion of the projectsfunded by the principal amounts of the loans.

Provision for income tax rose by P158.5 million due to corresponding increase in taxable income andthe provision for deferred tax on the difference between the fair values of the assets acquired throughdacion en pago and the cost of said properties.

The Group’s share in associates’ unrealized mark-to-market loss on available-for-sale financial assetsincreased by P292.7 million as an associate recognized fair value losses on its investments in equities.

Fair values of the Group’s investment in available-for-sale financial assets likewise declined, thus, fromunrealized gain of P0.5 million last year, an unrealized loss of P0.4 million this year is shown in thereport.


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The Group’s share in associates’ remeasurement gain (loss) on pension liability improved by P4.2million from a loss of P3.6 million last year to a gain of P0.6 million as several associates postedpositive actuarial adjustments.

Meanwhile, the Group incurred remeasurement loss on pension liability of P5.3 million this yearcompared to last year’s remeasurement gain of P2.7 million largely due to the decline in market valueof the investment in equity securities of the pension plan assets.

Total comprehensive income slightly increased by P44.7 million as the P341.3 million increase in netincome was reduced by unfavorable market conditions in the equities market which resulted insubstantial unrealized mark-to-market losses this year as compared to last year.

Earnings before interest, taxes, depreciation and amortization or EBITDA, computed as net incomeexcluding provision for income tax, depreciation and amortization, equity in net earnings (losses) ofassociates and joint ventures, interest expense, interest income, and excess of consideration receivedfrom collection of receivables, increased by P278.9 million to P1,126.5 million from last year’s P847.6million or 33%. EBITDA margin likewise improved from 38% last year to 44% this year.

Years ended March 31, 2015 vs. 2014

Total revenues improved by 16% or P306.3 million due to the increase in the number of students of STIESG and its subsidiaries. The total number of students of the Group increased from 76,195 in SY 2013-2014 to 80,200 students in SY 2014-2015 or an increase of 5.3%. Enrollment in STI WNU, which wasacquired on October 1, 2013, stood at 6,466 students in SY 2014-2015 as against last year’s 5,000students. This number includes the students from the former STI College – Bacolod and its EducationCenter (EC) which have been integrated into STI WNU.

The student enrollment of the schools under STI Holdings are as follows:

SY 2014-2015 SY 2013-2014 Increase (Decrease)

Enrollees PercentageSTI Network

Owned schools 39,404 33,726 5,678 17%Franchised schools 33,212 36,381 (3,169) -9%

72,616 70,107 2,509 4%

iACADEMY 878 822 56 7%DLS STI College 240 266 (26) -10%STI WNU 6,466 5,000 1,466 29%

Total Enrollees 80,200 76,195 4,005 5%

Students reported under owned schools for SY 2014-2015 also include the students from the schoolsnewly acquired from franchisees, namely: STI College - Pagadian, STI Tagum, STI College - Lipa, STICollege - Tanauan and STI College - Iloilo.

Tuition and other school fees increased by P304.9 million or 19% from SY 2013-2014 which is, P1,643.9million to P1,948.8 million this SY 2014-2015, due to the increase in students enrolled and the


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recognition of the tuition fee income from the newly acquired schools from franchisees. In addition,STI ESG’s enrollment mix was more favorable in 2015 than in 2014, as enrollment leaned more towardsSTI Network’s four-year programs than the two-year programs. Ratio for 2015 was 82% four-yearprograms and 18% two-year programs, as compared to 76% and 24%, respectively, in 2014. The four-year programs charge higher tuition and bring in more revenue per student. Enrollment mix of STIWNU for this school year, after integration of the former STI College – Bacolod and its EC, is at 86%four-year programs and 14% two-year programs. The Group’s enrollment mix is at 82% four-yearprograms and 18% two-year programs.

Revenues from educational services decreased by P8.2 million or 5% to P174.0 million in SY 2014-2015.The acquisition of the 5 schools from the franchisees and the integration of STI College – Bacolod andits EC acquired also from a franchisee, to STI WNU affected the revenues reported in this account.Revenues from educational services are derived as a percentage of the tuition and other school feescollected by these schools from students. With the acquisition, these tuition fees are now recorded astuition fee revenues in full. The percentage previously reported as educational services is no longerrecognized.

Income from royalty fees declined by P1.5 million likewise due to the acquisition by STI ESG of the 5schools and integration of another school to STI WNU. Royalty fees are computed at 2% of collectedtuition and other school fees.

Other income increased by 34% or P5.9 million mainly due to reversal of long outstanding payables ofvarious schools and the reversal of previously accrued rent payable pertaining to a preterminated leaseof a subsidiary.

Sale of educational materials and supplies increased by 9%, concomitant with the increase in numberof students. In addition, this year’s STI Anniversary celebration recorded higher sales compared to lastyear.

Cost of educational services increased by 19% from P553.0 million in SY 2013-2014 to P655.6 million inSY 2014-2015 mostly due to the 39% or P43.4 million increase in depreciation expenses charged todirect cost. Construction of school buildings for the following campuses have been completed as ofMarch 31, 2015, namely: STI College - Lucena, STI College - Cubao, STI College - Calamba and STICollege - Batangas. STI WNU has also completed more than half of its campus improvement project,involving renovation of school buildings and acquisition of school furniture and equipment. Facultysalaries and benefits also increased by 18% or P43.1 million, mainly due to the increase in STI WNU’sexpenses as a result of the integration of the former STI College – Bacolod and its EC in June 2014 andthe acquisition of the 5 schools by STI ESG from former franchisees.

Cost of educational materials and supplies sold went up by 12% or P6.2 million due to the change inproduct mix of items sold.

General and administrative expenses rose by 18% or P153.7 million. Increases in depreciation chargeson the new buildings and school furniture and equipment amounted to P49.0 million. Salaries andemployee benefits grew by P38.1 million as vacant positions were filled up and a full year of STIWNU’s cost of salaries was recorded this year as compared to only six months last year along with theintegration of the employees of the former STI College – Bacolod and its EC into STI WNU and the 5newly acquired schools of STI ESG. Utilities costs and cost of outside services increased by P17.5million and P16.7 million, respectively, largely due to the higher cost of light and water and securityservices needed for the new school facilities as STI College - Cubao, STI College - Calamba, STI College- Batangas and STI College - Lucena became fully operational. Provision for doubtful accounts rose byP14.4 million or 25% mainly due to the provisions recognized in the books of the newly acquiredschools and various other schools, following STI ESG’s impairment policy. However, the ratio of thisprovision for doubtful accounts to total revenues remained consistent at 3%.


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Equity in net earnings of associates and joint ventures decreased by P127.5 million due to the lowerprofits posted by some associates.

Last year, the Company recognized loss on deemed sale transaction amounting to P36.3 millionrepresenting the amount deemed loss due to the dilution of the Group’s ownership in the Hospitalfrom 33% to 10%. Loss on swap in the amount of P6.7 million pertains to the exchange of shares ofMegaclinic with the shares in the Hospital held by DLS STI College, set as a condition in theInvestment Agreement with MPIC.

Interest income went down by P6.1 million as funds were used to finance construction and banksoffered lower interest rates on short-term placements.

Interest expense, on the other hand, increased by P17.3 million largely due to the loan availmentsmade from the short term and long term loan facilities granted by China Bank.

One of STI ESG’s subsidiaries, iACADEMY recently moved to a refurbished 11-storey building alongSenator Gil Puyat Avenue, the iACADEMY Plaza. iACADEMY occupies 8 floors while Philippine LifeFinancial Assurance Corporation (“PhilLife”), an affiliate of STI ESG, occupies 3 floors and is rentingfrom iACADEMY. This resulted to P20.8 million increase in rental income.

Gain on disposal of property and equipment decreased by P0.4 million from P0.7 million last year toP0.3 million this year due to the disposal last year by STI WNU of some fully-depreciatedtransportation equipment.

Income from the exchange of land with condominium units amounting to P172.1 million, was onlyrecognized as income this year, for accounting purposes, upon turnover of the condominium units.This amount was declared as gain last year for income tax purposes following statutory rules.

Excess of fair values of assets acquired over acquisition cost from a business combination amounting toP2.1 million in 2015 relates to acquisition by STI ESG of STI Tagum, located in Davao del Norte.

Gain on recovery of doubtful accounts amounting to P1.8 million was recorded in 2015 as receivablespreviously provided with allowance for uncollectibility were collected.

Dividend income earned for the year ended March 31, 2015 amounted to P1.5 million, almost threetimes last year’s dividend income, P1.1 million of which were dividends declared by the Hospital.

Recorded this year as part of Dividend and other income (expense) is P9.7 million excess of acquisitioncost over fair value of assets acquired from a business combination as STI Holdings acquired 100%ownership of AHC.

The Group’s share in associates’ unrealized mark-to-market loss on available-for-sale financial assetssignificantly decreased by 99% as an associate recognized lower fair value losses on its investments inbonds and equities.

Meanwhile, fair values of the Group’s investment in available-for-sale financial assets improved due tofavorable market conditions resulting in a reversal from unrealized loss of P0.4 million last year tounrealized gain of P0.5 million this year.

Share in associates' remeasurement loss on pension liability declined by P4.7 million or 57% asactuarial adjustments were made based on experience.

The Group’s remeasurement loss on pension liability amounting to P3.7 million last year, changed to aremeasurement gain of P2.7 million this year, as experience resulted to actuarial adjustments.


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Total comprehensive income increased by P1,574.2 million. An associate of the Group posted a muchlower decline in the fair market value of its AFS financial assets compared to last year.

Financial Highlights and Key Performance Indicators

Increase(Decrease)

March 31

(in millions except margins, financial ratiosand earnings per share) 2016 2015 Amount %

Condensed Statements of FinancialPosition

Total assets 10,500.2 10,036.0 464.2 5

Current assets 1,104.2 1,222.7 (118.5) (10)

Cash and cash equivalents 664.8 803.5 (138.7) (17)Equity attributable to equity holders ofthe parent 8,138.7 7,572.7 566.0 7

Total liabilities 2,269.9 2,380.3 (110.4) (5)

Current liabilities 886.7 1,028.1 (141.4) (14)

Financial ratios

Debt to equity ratio (1) 0.28 0.31 (0.03) (10)

Current ratio (2) 1.25 1.19 0.06 5

Asset to equity ratio (3) 1.28 1.31 (0.03) (2)


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Year ended March 31Increase

(Decrease)

2016 2015 Amount %

Condensed Statements of Income

Revenues 2,576.7 2,224.0 352.7 16

Direct costs (4) 798.1 715.2 82.9 12

Gross profit 1,778.6 1,508.8 269.8 18

Operating profit 702.8 516.6 186.2 36

Other income - net 596.5 282.9 313.6 111

Income before income tax 1,299.3 799.5 499.8 63

Net income 1,072.7 731.4 341.3 47

EBITDA (5) 1,126.5 847.6 278.9 33Net income attributable to equityholders of the parent company 1,061.3 731.7 329.6 45

Earnings per share (6) 0.107 0.074 0.033 45

Condensed Statements of Cash Flows

Net cash from operating activities 851.6 721.7 129.9 18

Net cash used in investing activities (487.6) (1,382.9) 895.3 (65)

Net cash provided by (used in) financingactivities (502.7) 881.3 (1,384.0) (157)


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Financial Soundness Indicators

Year ended March 31Increase

(Decrease)

2016 2015 Amount %

Liquidity Ratios

Current ratio (2) 1.25 1.19 0.06 5

Quick ratio (7) 1.09 1.05 0.04 4

Cash ratio (8) 0.75 0.78 (0.03) (4)

Solvency ratios

Debt to equity ratio (1) 0.28 0.31 (0.03) (10)

Asset to equity ratio (3) 1.28 1.31 (0.03) (2)

Interest coverage ratio (9) 21.55 29.31 (7.76) (27)

Debt service coverage ratio (10) 6.26 2.86 3. 40 119

Profitability ratios

EBITDA margin (11) 44% 38% 6 16Gross profit margin (12) 69% 68% 1 1

Operating profit margin (13) 27% 23% 4 17

Net profit margin (14) 42% 33% 9 27Return on equity(15) 14% 10% 4 40Return on assets (16) 10% 8% 2 25

(1) Debt to equity ratio is measured as total liabilities divided by total equity.(2) Current ratio is measured as current assets divided by current liabilities.(3) Asset to equity ratio is measured as total assets divided by total equity.

(4) Direct costs is calculated by adding the costs of educational services and educational materialsand supplies sold.

(5) EBITDA is Net income excluding provision for income tax, interest expense, depreciation andamortization, equity in net earnings (losses) of associates and joint ventures, interest income,gain on exchange of land, excess of fair values of net assets acquired over acquisition cost, losseson deemed sale and share swap of an associate and excess of consideration received fromcollection of receivables.

(6) Earnings per share is measured as net income attributable to equity holders of the parentcompany divided by the weighted average number of outstanding common shares

(7) Quick ratio is measured as current assets less inventories and prepayments divided by currentliabilities.


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(8) Cash ratio is measured as cash and cash equivalents divided by current liabilities.

(9) Interest coverage ratio is measured as Net income excluding provision for income tax andinterest expense divided by interest expense.

(10) Debt service coverage ratio is measured as EBITDA divided by total principal and interest tobe paid within the next 12 months.

(11) EBITDA margin is measured as EBITDA divided by total revenues.

(12) Gross profit margin is measured as gross profit divided by total revenues.(13) Operating profit margin is measured as operating profit divided by total revenues.(14) Net profit margin is measured as net income after income tax divided by total revenues.(15) Return on equity is measured as net income attributable to equity holders of the parent

Company divided by average equity attributable to equity holders of the parent company.(16) Return on assets is measured as net income divided by average total assets.

Financial Risk Disclosure

The Group’s present activities expose it to liquidity risk, credit risk, interest rate risk andcapital risk.

Liquidity risk – Liquidity risk relates to the possibility that the Group might not be able to settle itsobligations/commitments as they fall due. To cover its financing requirements, the Group usesinternally-generated funds and avails of various bank loans. On November 7, 2012 the ParentCompany received the proceeds from its follow on offering. The usage of funds is in line with the planas approved by the SEC and the PSE. The Group regularly evaluates available financial products andmonitors market conditions for opportunities to enhance yields at acceptable risk levels. The debtservice coverage ratio, as a bank requirement, is also monitored on a regular basis. The debt servicecoverage ratio is equivalent to EBITDA divided by total principal and interest due for the next twelvemonths. The Group monitors its debt service coverage ratio to keep it at a level acceptable to theGroup and the lender bank. The Group’s policy is to keep the debt service coverage ratio not lowerthan 1.1:1.0.

Credit risk – Credit risk is the risk that the Group will incur a loss arising from students, franchisees orcounterparties that fail to discharge their contractual obligations. The Group manages and controlscredit risk by setting limits on the amount of risk that the Group is willing to accept for eachcounterparty and by monitoring expenses in relation to such limits.

It is the Group’s policy to require students to pay all their tuition and other incidental fees before theycan get their report cards and other credentials. Receivable balances are monitored such that exposureto bad debts is minimal.

Interest rate risk - Interest rate risk is the risk that the fair value or future cash flows of a financialinstrument will fluctuate because of changes in market interest rates. While the Group’s long term debthas a floating interest rate, the Group elected to have the interest rate repriced every year, thusminimizing the exposure to market changes in interest rates.

Capital Risk- The Group’s objectives when managing capital are to provide returns for stockholdersand benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost ofcapital. The Group monitors capital using the debt-to-equity ratio, which is computed as the total ofcurrent and noncurrent liabilities divided by total equity. The Group monitors its debt-to-equity ratioto keep it at a level acceptable to the companies in the Group and the lender bank. The Group’s policyis to keep the debt-to-equity ratio at a level not exceeding 1:1 for STI ESG and 1.5:1.0 for STI WNU.


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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 consolidatedfinancial statements for the current and prior financial periods, except for De Los Santos-STICollege and iACADEMY which revised the estimated useful lives of their building andimprovements and leasehold improvements to consider the termination of the lease agreements.

b. On June 3, 2013, STI ESG executed a deed of pledge on all of its shares in De Los Santos MedicalCenter (formerly De Los Santos General Hospital) in favor of Neptune Stroika Holdings, Inc., awholly-owned subsidiary of Metro Pacific Investments Corporation (MPIC), to cover theindemnity obligations of STI ESG enumerated in its investment agreement entered into in 2013with MPIC. The carrying value of the investment in De Los Medical Center amounted to P25.9million as at March 31, 2016 and 2015.

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

d. There are no known trends, demands, commitments, events of uncertainties that will have animpact on the Group’s liquidity except for the contingencies and commitments enumerated inNote 31 of the Notes to Consolidated Financial Statements attached as Annex “A”.

e. The various loan agreements entered into by the Group provide certain restrictions and conditionswith respect to, among others, change in majority ownership and management and maintenanceof financial ratios. The Group is fully compliant with all the covenants of the loan agreements.Please see Notes 18 and 32 of the Notes to Consolidated Financial Statements of the Companyattached as Annex “A”.

f. The education landscape in the Philippines has changed with the introduction of the K to 12program which in summary adds two (2) years prior to tertiary education. For the schools in thePhilippines that offer tertiary education, similar to STI ESG, STI WNU, iACADEMY and DLS STICollege, this will mean two (2) academic years with significantly reduced and minimal incomingcollege freshmen students.

This threat has been constructively converted into an opportunity for the STI ESG network ofcampuses nationwide. All 77 schools of STI ESG have been granted permits to offer Senior HighSchool. The DepEd also granted permits to offer Senior High School to iACADEMY and STIWNU. Management is confident that the schools comprising the Group are adequately preparedand ready to meet the challenges of the K to 12 program.

STI ESG offers two (2 ) program tracks covered by the permit. These are the Academic andTechnical-Vocational-Livelihood tracks. Under the Technical-Vocational-Livelihood Track, STIESG offers three strands with various specializations.

For its part, STI WNU’s permit covers four tracks, namely: Academic Track, Technical-VocationalTrack, Sports Track and Arts and Design Track, with various specializations.

iACADEMY’s permit covers three tracks, namely: Academic Track, Technical-Vocational Trackand Arts and Design Track, with various specializations.

The Senior High School offering of STI ESG, iACADEMY and STI WNU aims to minimize theimpact of the expected reduction in enrollment since there will be a substantial reduction ofincoming freshmen during the transition period from Senior High School to College. Likewise,there is an opportunity for the three institutions to increase their student retention and migrationwhen the students graduate from Senior High School and decide to pursue a Baccalaureate degree.


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DLS STI College, on the other hand, wrote a letter to the CHED in June, 2016, advising the latter thatit is suspending its operations for school years 2016-2017 and 2017-2018 due to the implementation ofthe K to 12 program. It also requested in the said letter that it be allowed to keep its permits andlicenses for its academic programs so it can immediately resume its operations in school year 2018-2019.

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

h. The Group’s business is linked to the academic cycle. The academic cycle which is one academicyear starts in the month of June and ends in the month of March. The core business and revenuesof the Group, which is mainly from tuition and other school fees, is recognized as income over thecorresponding academic year to which they pertain.

i. On May 18, 2016, STI ESG entered into a Memorandum of Agreement to acquire for P20.0 millionthe net assets of STI College Sta. Maria, Inc. (STI College - Sta. Maria), a school located in Sta.Maria, Bulacan, which is operated by a franchisee of STI ESG. On May 31, 2016, STI ESG made aninitial deposit of P10 million for the planned acquisition.

Item 7. FINANCIAL STATEMENTS

The March 31, 2016 Audited Consolidated Financial Statements and schedules listed in the accompanyingindex to Supplementary Schedules are incorporated by reference to this SEC Form 17-A.

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURES

1. The accounting firm of Sycip Gorres Velayo & Co. (“SGV”) has been the Company’s ExternalAuditors for the past years (2010 up to the present). They were reappointed in the Annual Stockholders’Meeting held on 25 September 2015, 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 willhave the opportunity to make a statement if he or she so desires. The representative will also be availableto respond to appropriate questions from the stockholders.

Pursuant to SRC Rule 68 (3) (b) (iv), as amended (Rotation of External Auditors), the Company hasengaged Mr. Benjamin N. Villacorte of SGV as the Partner-in-charge of the Company. This is his first yearof engagement for STI Holdings.

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

As stated in the March 31, 2016 “Statement of Management Responsibility for Financial Statements”, SGVis the appointed independent auditors of STI Holdings. They have examined the financial statements ofthe Company in accordance with Philippine Standards on Auditing and have expressed their opinion onthe fairness of presentation upon completion of such examination, in its report to the Board of Directorsand stockholders.


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The Company’s Audit Committee reviews and approves the scope of audit work of the external auditorand the amount of audit fees for a given year. With respect to services rendered by the external auditorother than the audit of financial statements, the scope of and payment for the same are subject to reviewand approval by the management.

Mr. Johnip G. Cua, Independent Director, is currently the Chairman of the Audit Committee whileMessrs. Martin K. Tanco, Paolo Martin O. Bautista and Ernest Lawrence Cu are its Members.The Company engaged SGV for the annual audit covering the period from April 1, 2015 to March 31, 2016for P935,000.00. The engagement letter dated May 5, 2016 for the year-end audit was sent to the Companyon 7 June 2016.

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

2015-2016 2014-2015Audit Fees P935 P850Tax Fees - -All Other Fees P1,281* P102

*Represents professional fees paid for the 2015 Corporate Governance Seminar attended by all themembers of the Board and officers of STI Holdings and its group amounting to P140,000 and for generaltax advisory fees amounting to P1,141,035.

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 OfficersThe 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 untilthe 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) Teodoro L. Locsin, Jr.(i) Johnip Cua(j) Ernest Lawrence Cu(k) Jesli A. Lapus


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Messrs. Johnip Cua, Ernest Lawrence Cu and Jesli A. Lapus have been nominated as independentdirectors by Capital Managers & Advisors, Inc. (“CMA”), a stockholder of the Company. CMA hasno 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 thenomination 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 forthbelow:

Eusebio H. Tanco, 66, Filipino, Chairman of the Board

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

Mr. Tanco is Chairman of the Board and President of Prudent Resources, Inc. He is the Chairman of theExecutive Committee and Director of STI ESG and the Chairman of Mactan Electric Company, VentureSecurities Inc., International Hardwood & Veneer Corp, Cement Center Inc., First Optima Realty Corp,GROW Vite, Inc., Marbay Homes Inc., Delos Santos-STI College, STI West Negros University, MaestroHoldings, Inc. (formerly STI Investments, Inc.) and Capital Managers and Advisors, Inc. He is Vice-Chairman and President of Asian Terminals, Inc.

Mr. Tanco is President of Philippines First Insurance Co. Inc., Biolim Holdings and Management Corp(formerly Rescom Developers Inc.), Insurance Builders, Inc., Bloom with Looms Logistics, Inc. (formerlySTMI Logistics, Inc.), Total Consolidated Asset Management, Inc., Eujo Phils, Inc., Global Resource forOutsourced Workers, Inc., Prime Power Holdings Corporation and CEO of Classic Finance Inc.

Mr. Tanco is also a director in Philippine Life Financial Assurance Corp., Manila Bay Spinning Mills,Inc., United Coconut Chemicals, Inc., MB Paseo, Philippine Health Educators, Inc., i-ACADEMY,PhilhealthCare, Inc., 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-ThailandBusiness Council and the Philippines-UAE Business Council. He likewise sits as a member of the Boardof 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 andPolitical 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 StateUniversity.

Monico V. Jacob, 71, Filipino, Director

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

Mr. Jacob is the Vice-Chairman and CEO of STI Education Services Group, Inc., and President of STI WestNegros University. He is also the President of Capital Managers and Advisors, Inc., Maestro Holdings,Inc. (formerly STI Investments, Inc.) and Insurance Builders, Inc.

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


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Mr. Jacob is also a Director in Asian Terminals, Inc., Ateneo De Naga University, Delos Santos – STICollege, De Los Santos Medical Center, Information and Communications Technology (iACADEMY),Inc., Jollibee Foods, Inc., PhilhealthCare, Inc., Phoenix Petroleum Philippines, Inc., Lopez Holdings,Inc., Rockwell Land Corporation, and the 2Go Group.

Prior to his present positions, Mr. Jacob was the Chairman and CEO of Petron Corporation, and thePhilippine National Oil Company (PNOC) and all of its subsidiaries. He also served as the GeneralManager of the National Housing Authority (NHA), and Chief Executive Officer of the HomeDevelopment Mutual Fund. He was also an Associate Commissioner for the Securities and ExchangeCommission in 1986.

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

Mr. Jacob is a member of the Management Association of the Philippines (MAP) of which he wasPresident 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 NagaUniversity in 1966 and his Bachelor of Laws degree from the Ateneo de Manila University in 1971.

Joseph Augustin L. Tanco, 35, Filipino

Mr. Tanco is a Director of STI Holdings since 27 October 2010. He is likewise the Vice President forInvestor Relations and a member of the Compensation Committee of STI Holdings.

Mr. Tanco is currently the President and Chief Executive Officer of Philippine Life Financial AssuranceCorporation and Comm&Sense, Inc. He founded Comm&Sense, Inc., an integrated marketing andcommunications agency offering comprehensive services in the areas of creative design, eventconceptualization and management, public relations and promotions, in 2005.

Mr. Tanco serves as the Chairman of the Board of PhilhealthCare, Inc., Director and Treasurer ofPhilPlans First, Inc., Director and member of the Nomination and Election Committee of STI EducationServices Group, Inc., Director and Vice President of Eujo Phils. Inc., Director of Maestro Holdings, Inc.(formerly STI Investments, Inc.), iAcademy, STI West Negros University, Capital Managers and Advisors,Inc., Prime Power Holdings Corporation, Global Resource for Outsourced Workers (GROW), VentureSecurities, Inc., Bloom with Looms Logistics, Inc. (formerly Southern Textiles Mills, Inc.) and BiolimHoldings & Management Corporation (formerly Rescom Developers, Inc.).

Furthermore, Mr. Tanco is an active member of the Junior Chamber International Philippines (JCI) wherehe was Chapter President of JCI Ortigas in 2012. He was Area Director for Individual for Metro Area 2and National Chairman for Nothing but Nets in 2013 and National Chairman for The Outstanding YoungMen (TOYM) in 2015. He also became a mentor for BS Entrepreneurship at the University of Asia and thePacific in 2012.

Mr. Tanco is a graduate of the University of Asia and the Pacific with a Bachelor of Science degree inEntrepreneurial Management. He obtained his Master in Business Administration from the AteneoGraduate School of Business.

Ma. Vanessa Rose L. Tanco, 38, Filipino, Director

Ms. Tanco has been a Director and member of the Nomination Committee of STI Holdings, since 27October 2010.


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She also holds directorships at STI West Negros University, STI ESG, PhilPlans First, Inc., and PhilhealthCare, Inc. Currently, she is the President and CEO of Information and Communications TechnologyAcademy, Inc. or popularly known as iACADEMY.

Ms. Tanco obtained her Masters degree in Business Administration at the University of SouthernCalifornia, and her Bachelor of Science degree in Legal Management at Ateneo de Manila University.

Martin K. Tanco, 50, Filipino, Director

Mr. Tanco has been a Director of STI Holdings since 19 December 2012. He is likewise a member of theExecutive and Audit Committees of STI Holdings.Mr. Tanco is the Director for Investment of Philplans First, Inc. He is the President of the PhilfirstCondominium Association. Mr. Tanco is also a director of Manila Bay Thread Corporation (Formerly:Coats Manila Bay).

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

Paolo Martin O. Bautista, 46, Filipino, Director

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

Mr. Bautista is an advisor to the Investment Committee of PhilPlans. He has over 15 years’ experience inthe areas of corporate finance, mergers and acquisition, debt and equity capital markets, credit riskmanagement and securities law. Prior to joining STI Holdings, he was a director at Citigroup GlobalMarkets 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 theAteneo 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, 53, Filipino, Director

Mr. Borja has been a Director of STI Holdings since 19 December 2012. He is likewise a member of theExecutive 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.

Mr. Borja is the President of Expert Global Solutions for Philippines and Australia. Prior to joining EGS in2012, he spent 12 years as President of Aegis PeopleSupport Philippines, a startup company that hehelped grow to more than 13,000 employees. In 2004, the company achieved a major milestone by doingan Initial Public Offering (IPO) in the United States, and being listed in NASDAQ as the only BusinessProcess Outsourcing (BPO) Company with its entire operations handled in the Philippines. Mr. Borja, asthe prime mover in the industry, also established the expansion of BPO to Philippine provinces, as well asto other regions, such as San Jose, Costa Rica.

Mr. Borja is credited by many in the Philippines as the man behind the success of call center and BPOindustry in the country. He is one of the founders and former chairman of the Information Technologyand Business Process Association of the Philippines (IBPAP), formerly the Business ProcessingAssociation of the Philippines (BPA/P). He continues to support the industry by taking on leadershiproles and sitting on the Board of Directors for both IBPAP and the Contact Center Association of the


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Philippines (CCAP). His opinions and contributions are highly valued by government and industryofficials in the formulation of legislations and policies that govern the country's Information andCommunications Technology (ICT) and BPO industry. Being one of the country's BPO industryambassadors who supported the industry's phenomenal growth to now being one of the country's majoreconomic contributors, Mr. Borja was the first recipient of the Individual ICT Contributor Award in thePhilippines in 2007.

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

Teodoro L. Locsin, Jr., 67, Filipino, Director

Mr. Teodoro L. Locsin, Jr. was elected as Director of STI Holdings at the regular meeting of the Board ofDirectors of the Company held on 2 February 2015.

He has been an independent director of The Medical City since 2005 and Asian Terminals, Inc. since 2010and a member of the Board of Governors of iACADEMY. He is also the Chairman of the AuditCommittee and member of the Executive Committee of Asian Terminals, Inc.

He served as member of the House of Representatives from 2001 to 2010. He is an editorial writer,television host and speechwriter of former Presidents Corazon C. Aquino, Joseph E. Estrada and GloriaM. Arroyo. He also served as a Minister of Information during President Aquino’s term.

Mr. Locsin, Jr. worked at Angara Abello Concepcion Regala and Cruz Law Offices and he served as theexecutive assistant to the Chairman of Ayala Corporation and Bank of the Philippine Islands, Mr. EnriqueZobel.

He obtained his Bachelor of Laws from the Ateneo de Manila University and Master of Laws fromHarvard University.Ernest Lawrence Cu, 54, Filipino, Independent Director

Ernest has been an Independent Director of STI Holdings since 19 December 2012. He is likewise amember of the Audit and Nomination Committees of STI Holdings.

Currently, Ernest is the President and Chief Executive Officer of Globe Telecom. He is a Director ofAsiacom Philippines, Prople BPO, Inc., Games Services Group, and Concetti Globali Inc. He is also aTrustee of Ayala Foundation, Inc.

Ernest has a Bachelor of Science degree in Industrial Management Engineering from De La SalleUniversity in Manila, and an M.B.A. from the J.L. Kellogg Graduate School of Management,Northwestern University.

Johnip Cua, 59, Filipino, Independent Director

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

Mr. Cua is an Independent Director of Philplans First, Inc., BDO Private Bank, Century Pacific Food, Inc.,Philippine Airlines, Inc., PAL Holdings, Inc., Eton Properties Philippines, Inc., MacroAsiaCorporation, MacroAsia Catering Services, MacroAsia Airport Services Corporation, MacroAsiaProperties Development Corporation and Allied Botanical Corporation. He is also the Chairman andPresident of Taibrews Corporation, and a director of Alpha Alleanza Manufacturing, Inc., InterbakeMarketing Corporation, Lartizan Corporation, and Teambake Marketing Corporation.


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Mr. Cua serves as the Chairman of the Board of Trustees of Xavier School, Inc. and P&Gers Fund, Inc. Heis 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 2006and Vice President, Market and Customer Operations from 2000 to 2003 for ASEAN, Australasia andIndia.

Mr. Cua has received the following citations: GK Bayani Nation Builder, Gawad Kalinga (2006); 100Most Outstanding U.P. Alumni Engineers (2009); 2007 Most Distinguished Alumnus, U.P. AlumniEngineers, 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 thePhilippines.

Jesli A. Lapus, 66, Filipino, Independent Director

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

Mr. Lapus is currently Chairman and Independent Director of STI Education Services Group, Inc.;Independent Director of Metropolitan Bank & Trust Company and Philippine Life Financial AssuranceCorporation. He is a Governor of iACADEMY; Chairman of the Trust Banking Group of MetropolitanBank and Trust Company, LBP Service Corporation, and Asian Institute of Management –Center forTourism. He is also a Member of the Investment Committee of Philplans First, Inc. and Advisory BoardMember of Radiowealth Finance Company, Inc.

A multi-awarded executive in the private sector (i.e. manufacturing, financial services and internationaltrade), Mr. Lapus has successfully managed and turned around firms and a universal bank in attainingindustry 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 Presidentsnamely: President Gloria Macapagal-Arroyo, President Fidel Ramos and President Corazon Aquino inthe following capacities: Secretary, Department of Trade and Industry (2010); Secretary, Department ofEducation (2006-2010); President and CEO, The Land Bank of the Philippines (1992-1998); Undersecretary,Department of Agrarian Reform (1987-89)

He was elected member of the Philippine Congress for three (3) consecutive terms in 1998-2006. Duringhis stint in Congress, Mr. Lapus was Chairman of the House Committees on Ways and Means, Trade andIndustry, Suffrage and Electoral Reforms and Vice-Chairman of Appropriations. Mr. Lapus was theformer President of Southeast Asia Ministers of Education Organization; Executive Board Member ofUNESCO-Paris; Chairman of Board of Investments, Philippine Export Zone Authority, CabinetCommittee on Tariff and Related Matters, Export Development Council, MSMED Council (Micro, Smalland Medium Enterprises), and National Development Corporation; Governor of ManagementAssociation 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 (honoris causa) from Polythechnic University ofthe Philippines; Master in Business Management from Asian Institute of Management; InvestmentAppraisal and Management from Harvard University, USA; Management of Transfer of Technology fromINSEAD, France; and Project Management from BITS, Sweden.


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Yolanda M. Bautista, 63, Filipino, Treasurer

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

Ms. Bautista is Chairman 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 InsuranceCo., Inc., Insurance Builders Inc., DLS-STI College, Inc., and Information and CommunicationsTechnology Academy (iAcademy), Inc. She is also the Group Chief Financial Officer of Philippine LifeFinancial Assurance Corporation and Philhealthcare, Inc. as well as the Chief Financial Officer andTreasurer of STI ESG and STI West Negros University. Ms. Bautista is a Director of AttenboroughHoldings Corp., Philippine Healthcare Educators, Inc. and Bloom with Looms Logistics, Inc. (FormerlySouthern Textiles Mills, Inc.) She serves as Treasurer of Aberlour Holding Company, Daven Holdings,Inc., Harbourside Holding Corporation, Maestro Holdings, Inc. (Formerly: STI Investments, Inc.), MorrayHoldings, Inc., Kusang Loob Foundation, Inc., SG Holdings, Inc., Philippines First CondominiumCorporation, Quantum Analytix, Inc., P & O Management Services Phils., Inc., TechGlobal Data Center,Inc., Techzone Condominium Corporation and Techzone Philippines, Inc. She is also Assistant Treasurerof Total Consolidated Asset Management, Inc.

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

Arsenio C. Cabrera, Jr., 56, Filipino, Corporate Secretary

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

Atty. Cabrera is a Managing Partner of Herrera Teehankee & Cabrera Law Offices. He is currentlyGeneral Counsel of STI Education Services Group, Inc. He also serves as Corporate Secretary of Araval,Inc., BOIE Drug, Inc., BOIE, Incorporated, BOIE Prime, Inc., Bountiful Geomines, Inc., Calatagan BayRealty, Inc., Canlubang Golf and Country Club, Inc., Capital Managers and Advisors, Inc., ClassicFinance, Inc., Coinage, Inc., DLS-STI Colleges, Inc., GEOGEN Corporation, GEOGRACE ResourcesPhilippines, Inc., Lorenzo Shipping Corporation, Maestro Holdings, Inc., Masbate13 Philippines, Inc.,Mina Tierra Gracia, Inc., NiHAO Mineral Resources International, Inc., Oregalore, Inc., PhilippineAmerican Drug Company, Philippine First Condominium Corporation, Philippines First Insurance Co.,Inc., Philippine Life Assurance Financial Corporation, Philhealthcare, Inc., Philplans First, Inc.,Renaissance Condominium Corporation, Rosehills Memorial Management Philippines, Inc. SonakHoldings, Inc., STI West Negros University, Inc., Total Consolidated Asset Management, Inc., TrendDevelopers, Inc., Villa Development Corporation and WVC Development Corporation.

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

Anna Carmina S. Herrera, 41, Filipino, Assistant Corporate Secretary

Atty. Anna Carmina S. Herrera was elected Assistant Corporate Secretary of the Company on 17 March2010.


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Atty. Herrera is a Senior Associate of Herrera Teehankee and Cabrera Law Offices. She also performs therole of Corporate Secretary of Dunes and Eagle Land Development Corporation, STI College Batangas,Inc., STI College of Kalookan, Inc., STI Dagupan, Inc., STI Diamond College, Inc. and STI Tuguegarao,Inc. She also serves as Assistant Corporate Secretary in a number of other corporations: AmicaCorporation, Banclife Insurance Co., Inc., Lorenzo Shipping Corporation, Palisades CondominiumCorporation, Philhealthcare, Inc., Philippines First Insurance Co., Inc., Philippine First CondominiumCorporation, Philippine Life Financial Assurance Corporation and Venture Securities, Inc.

Atty. Herrera received her Bachelor of Laws degree from the University of the Philippines in 2000.

(2) Significant Employees

In general, the Company values its human resources. It expects the employees to do their share inachieving the Company’s set objectives. There is no person in the Company who is not an executiveofficer 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 L. Tanco isthe 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 affinityamong the current Directors other than those already disclosed in this report.

(4) Involvement in Certain Legal Proceedings

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

(a) any bankruptcy petition filed by or against any business of which such person was a generalpartner or executive officer either at the time of the bankruptcy or within two years prior tothat time;

(b) any conviction by final judgment;

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

(d) being found by a domestic or foreign court of competent jurisdiction (in a civil action), theCommission or comparable foreign body, or a domestic or foreign Exchange or otherorganized trading market or self-regulatory organization, to have violated a securities orcommodities law or regulation, and the judgment has not been reversed, suspended, orvacated.

Item 10. EXECUTIVE COMPENSATION

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


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From FY 2013-2014 up to 2015-2016, the CEO and top four (4) executive officers as a group, did not receivecompensation from the Company. There is no employment contract between the Company and any of itsexecutive officers.

(2) The following table summarizes the aggregate compensation for the fiscal years ended 31 March 2013-2014, 2014-2015 and 2015-2016. The amounts set forth in the table below have been prepared based onwhat the Company paid its directors and named executive officers as a group and other officers for thefiscal years ended 31 March 2013-2014, 2014-2015 and 2015-2016 and what the Company expects to pay forthe fiscal year ended 31 March 2016-2017.

The compensation for board members comprises per diems.

ANNUAL COMPENSATION

Name and principalPosition

Fiscal YearEnded 31

March

Salary (P) Bonus (P) Other annualcompensation (P)

All other Officers as aGroup

2013-2014 1,551,053.28 - -

2014-2015 2,439,389.95 - -2015-2016 4,757,533.41 - -2016-2017 3,036,656.00 1 -

All Named ExecutiveOfficers2 and Board ofDirectors as a Group

2013-2014 - - 1,735,000.00

2014-2015 - - 1,352,941.232015-2016 - - 564,705.922016-2017 564,705.921

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 ofthe Company will participate.

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

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

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT

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

(a) Security Ownership of Certain Record/Beneficial Owners as of 31 March 2016


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As of 31 March 2016, the following stockholders are the only owners of more than 5% of theCompany’s voting capital stock, whether directly or indirectly, as record owner or beneficialowner.

Title ofClass

Name, Address ofRecord Owner andRelationship with

Issuer

Name of BeneficialOwner and

Relationship withRecord owner

Citizenship No. of SharesHeld

Percent

Common PCD NomineeCorporation37/F Tower I,Enterprise Center, 6766Ayala Avenue cor.Paseo de Roxas,Makati City

Filipino 3,450,192,6722 34.83%

Common Prudent Resources,Inc.7/F STI HoldingsCenter, 6764 AyalaAvenue, Makati City

Mr. Eusebio H.Tanco, theChairman andPresident ofPrudent Resources,Inc. is authorized tovote its shares inthe Company.

Filipino(Direct)

1,614,264,964 16.30%

Common Mr. Eusebio H. Tanco(Chairman of theBoard)(Direct and Indirectshares through PCDNominee Corporation)543 Fordham Street,Wack-Wack Village,Mandaluyong City

Mr. Eusebio H.Tanco

Filipino(Direct)

(Indirect)

Total

1,253,666,793

210,765,082-------------------

1,464,431,875===========

12.66%

2.13%-----------

14.79%======

Common PCD Nominee37/F Tower I,Enterprise Center, 6766Ayala Avenue cor.Paseo de Roxas,Makati City

Non-Filipino 979,909,2383 9.89%

2 Eusebio H. Tanco is the beneficial owner of 210,765,082 shares. Eujo Philippines, Inc. is the beneficial owner of 16,160,000 shares.STI Education Services Group, Inc. is the beneficial owner of 104,399 shares. Insurance Builders, Inc. is the beneficial owner of3,000,000 shares. Biolim Holdings and Management Corp. (formerly Rescom Developers, Inc.) is the beneficial owner of 922,000shares.3Dunross Investment Ltd is the beneficial owner of 528,522,000 shares or 5.34%. Contact Person is Mr. Anders Matson; Address: 17,Neofytou Nikolaidi Ave. & Kilkis Ave. S.P. Business Center, 3rd Floor, Office 307, Paphos, Cyprus


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Title ofClass

Name, Address ofRecord Owner andRelationship with

Issuer

Name of BeneficialOwner and

Relationship withRecord owner

Citizenship No. of SharesHeld

Percent

Common Biolim Holdings andManagement Corp.(formerly RescomDevelopers, Inc.)7/F STI HoldingsCenter, 6764 AyalaAvenue, Makati City

Mr. Eusebio H.Tanco, thePresident of BiolimHoldings andManagement Corp.(formerly RescomDevelopers, Inc.) isauthorized to voteits shares in theCompany.

Filipino(Direct)

(Indirect)

Total

794,343,934

922,000----------------795,265,934

=========

8.02%

.01%---------8.03%

=====

Common Eujo Philippines, Inc.(Direct and Indirectshares through PCDNominee Corporation)7/F STI HoldingsCenter, 6764 AyalaAvenue, Makati City

Mr. Eusebio H.Tanco, thePresident of EujoPhilippines, Inc. isauthorized to voteits shares in theCompany.

Filipino(Direct)

(Indirect)

Total

763,873,130

16,160,000------------------

780,033,130==========

7.71%

0.16%----------

7.87%======

Common Insurance Builders,Inc. (Direct andIndirect sharesthrough PCD NomineeCorporation)7/F STI HoldingsCenter, 6764 AyalaAvenue, Makati City

Mr. Eusebio H.Tanco, thePresident ofInsurance Builders,Inc. is authorized tovote its shares inthe Company.

Filipino(Direct)

(Indirect)

Total

626,776,992

3,000,000------------------

629,776,992===========

6.33%

0.03%-----------

6.36%======

Common STI Education ServicesGroup, Inc.STI Academic CenterOrtigas-Cainta,Ortigas AvenueExtension, Cainta, 1900Rizal

Mr. Monico V.Jacob, the Presidentof STI, is authorizedto vote the shares ofSTI ESG in theCompany

Filipino(Direct)

(Indirect)

Total

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. Theparticipants of the PCD (with respect to securities in the principal accounts) or the clients of suchparticipants (with respect to securities in the participants’ client accounts) are, as far as the PCD and PCDNominee Corporation are concerned, the presumed beneficial owners of such lodged shares. PCDNominee Corporation merely holds legal title (and not beneficial title) to the Company’s lodged shares tofacilitate the book-entry trading and settlement of the Company’s shares. Except as disclosed above, nonatural person or juridical entity whose shares are lodged in the name of PCD Nominee Corporation isknown to the Company to be directly or indirectly the record or beneficial owner of more than fivepercent (5%) of the Company’s voting securities.


83

(b) Security Ownership of Management as of 31 March 2016

The following table sets forth as of 31 March 2016, the beneficial ownership of each director andexecutive officer of the Company:

Title ofClass

Name of Beneficial Owner Amount & Nature ofBeneficial Ownership

Citizenship Percentof Class

Common Eusebio H. Tanco(Director and Chairman of theBoard)

1,253,666,793210,765,082

------------------1,464,431,875

==========

DirectIndirect

Total

Filipino 12.66%2.13%

-----------14.79%

=======Common Monico V. Jacob

(Director, President and CEO)1

33,784,056---------------33,784,057

========

DirectIndirect

Total

Filipino

0.34%

Common Yolanda M. Bautista(Treasurer & Chief Finance Officer)

15,000,000

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

========

DirectIndirect

Total

Filipino

0.05%

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

6,500,000 Indirect Filipino 0.06%

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

12,000,000

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

==========

DirectIndirect

Total

Filipino 0.00%0.02%

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

======Common Paolo Martin Bautista

(Director and Chief InvestmentOfficer and Head of CorporateStrategy)


Common Vanessa Rose L. Tanco(Director)

1 Direct Filipino 0.00%

Common Martin K. Tanco(Director)


Common Rainerio M. Borja(Director)


Common Teodoro L. Locsin, Jr.(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 1,579,492,935 Direct andIndirect

Filipino 15.95%

(c) Voting Trust Holders of 5% or More

As of 31 March 2016, no person holds at least 5% or more of a class under a voting trust or similaragreement.


84

(d) Changes in Control

There is no change of control in the Company since 1 April 2014.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has the following major transactions with related parties:

Land Held for Swap

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

In April 2013, STI ESG and Techzone entered into a real estate mortgage amounting to P800 million withSTI ESG’s land as collateral for Techzone’s loan, to obtain the funds needed for Techzone to develop theproperty.

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

As of March 31, 2015, TechZone has already completed the construction of the condominium units andhas turned-over the units for retrofitting. As a result, the Group applied the “Condominium deposit”amounting to P396.3 million and recognized the total purchase price of the condominium unitsamounting to P560.0 million plus directly attributable costs amounting to P8.4 million, under the“Investment properties” account. The resulting difference, which amounted to P172.1 million, wasaccounted for as “Gain on exchange of land” in the 2015 consolidated statement of comprehensiveincome.

Agreement with Comm & Sense

On 17 February 2015, a Service Level Agreement between the Company and Comm & Sense, Inc. ownedby Mr. Joseph Augustin L. Tanco, Director and Vice President for Investor Relations of STI Holdings, wasexecuted. Comm & Sense is in charge of the conceptualization and execution of media interviews,development of editorial requirements of the Company, media relations strategy, media invitation andfollow-ups, and media monitoring. They are in charge of the Press Releases for the Corporation,development of story angles, writing and editing of articles.

Consultancy Agreement with STI ESG

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

Consultancy Agreement with WNU

The Company entered into an agreement with WNU on the rendering of advisory services starting 01January 2015.

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


85

Transactions with Promoters

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

PART IV – CORPORATE GOVERNANCE

Item 13. CORPORATE GOVERNANCE

Please refer to the attached 2015 Annual Corporate Governance Report (“2015 ACGR”) of STI Holdings.The 2015 ACGR is posted in the Company’s Official Website http://www.stiholdings.com/ as well. Thisis in compliance with the SEC Advisory dated 16 March 2016 directing all publicly-listed companies tosubmit the 2015 ACGR together with their 2015 Annual Report (SEC Form 17-A) to the Commission andto the Philippine Stock Exchange.

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 StatementsReport of Independent AuditorsAudited Financial Statements and Notes for the fiscal year ended 31 March 2014Schedule A. Financial Assets in Equity SecuritiesSchedule B. Amounts Receivable from Directors, Officers, Employees, Related PartiesSchedule C. Amounts Receivable/Payables from and to Related Parties which are eliminated

during the Consolidation of Financial StatementsSchedule D. Intangible Assets – Other AssetsSchedule E. Long term debtSchedule F. Indebtedness to Related Parties (Long Term Loans from Related Companies)Schedule G. Guarantees of Securities of Other IssuersSchedule H. Capital StockSchedule I. Reconciliation of Retained Earnings Available for Dividend DeclarationSchedule J. Map of the Relationships of the Companies within the GroupSchedule K. Schedule of All the Effective Standards and Interpretations as of March 31, 2013Schedule L. Financial Ratios

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

1. Item 9 - Other Events filed with SEC on 02 February 2016

STI Holds Youth Convention for Innovators (Press Release) - Driven to motivate young mindsand future innovators, STI Education Services Group, Inc. (STI) gathered over 28,000 STIers fromMetro Manila and nearby regions during the 21st STI National Youth Convention (STI NYC) fromFebruary 1 to 5, 2016 at the Aliw and Star Theaters, Star City Complex in Pasay City.

2. Item 9 – Other Events filed with SEC on 15 February 2016


86

STI Holdings' Three-month Profit Up 83% (Press Release) - MANILA - STI Holdings, whichoperates one of the largest networks of private schools in the Philippines, capped 2015 on a highnote by posting an impressive P509 million in net income during the three months endingDecember 31, 2015.

3. Item 9 – Other Events filed with SEC on 11 March 2016

STI Education Systems Holdings, Inc. ("STI ESH") was declared today, 10 March 2016, as thewinning bidder in an auction sale involving the following Extra-Judicial Foreclosure proceedings:

(a) EJF-REM Case No. 15,117-15, entitled “STI ESH and Attenborough Holdings Corporation(“AHC”), Creditors/Mortgagees vs. Unlad Resources Development Corporation(“Unlad”), Debtor/Mortgagor”, where STI ESH was declared the highest bidder for aparcel of land located in Davao City covered by Transfer Certificate of Title No. 129545with an area of 40,184 square meters and registered in the name of Unlad (the “DavaoProperty”).

The winning bid of STI ESH was Three Hundred Million Pesos (Php300,000,000.00).

Unlad has one (1) year from the annotation of the Certificate of Sale to redeem the DavaoProperty.

4. Item 9 – Other Events filed with SEC on 16 March 2016

Immersive Learning with Solaire (Press Release) - STI Education Services Group, Inc. (STI) inkeda partnership with one of the country’s famous destination resorts in Manila, the Solaire Resortand Casino, to further the training of STI students in the service industry.

5. Item 9 – Other Events filed with SEC on 01 April 2016

Benitez Family, STI Group End Row Over PWU (Press Release) - The Benitez family and the STIGroup have announced that they have settled their differences through a dacion en pagoarrangement of certain assets of Unlad Resources Development Corporation (“Unlad”).

The family, through Unlad, transferred its Quezon City and Davao properties to STI. Under theterms of the agreement, the Jose Abad Santos Memorial School (“JASMS”) will remain on theQuezon City campus along EDSA until the end of school year 2017 after which it will be moved toa new location.

Philippine Women’s University (“PWU”) will retain its Manila campuses on Taft Avenue andIndiana Street in Manila.

At the same time, STI representatives will resign from PWU, which will remain under the controlof the Benitez family.

PWU President Dr. Francisco B. Benitez heralded the settlement as “a mandate to rebuild PWUand JASMS while remaining true to the educational legacy of our founders.”

He also disclosed that talks are underway to open new campuses outside Metro Manila in timefor PWU’s centennial celebration in 2019.


Settlement of the Outstanding Loan Obligations of Philippine Women’s University and UnladResources Development Corporation


87

STI Education Systems Holdings, Inc. (the “Company”) entered into dacion en pago agreements(“Agreements”) with Unlad Resources Development Corporation (“UNLAD”) for the settlementof the outstanding loan obligations of Philippine Women’s University (“PWU”) and UNLAD tothe Company.

The Agreements provided for the transfer and conveyance of the (a) four (4) parcels of landcovered by (i) Transfer Certificate of Title (“TCT”) Nos. RT-79300(202647)PR-29042, (ii) RT-71871(271024)PR-29615, (iii) RT-71872(271025)PR-29616, and (iv) 0042014005914 with a total area offifteen thousand two hundred seventy five (15,275) square meters located at EDSA, WestTriangle, Quezon City, including all the improvements constructed therein, and (b) one (1) parcelof land covered by TCT No. T-129545 with a total area of forty thousand one hundred eighty four(40,184) square meters located at Juna Subdivision, Matina, Davao City, all registered under thename of UNLAD, to the Company.


STI Holds First Senior High Graduation (Press Release) - YEARS AHEAD of the nationalimplementation of the Enhanced Basic Education Act of 2013 or known as the “K to 12 program”this coming school year, STI Education Services Group, Inc. (STI), the largest pioneer in SeniorHigh School (SHS) in the country, has taken up the challenge, and is paving a brighter path forthe Filipino youth as early as June 2014 during the initial roll-out of its SHS program.

8. Item 9 – Other Events filed with SEC on 19 May 2016

CompTIA, STI Link Up to Promote Global Standards in IT Education (Press Release) - Manila,Philippines – CompTIA, a nonprofit trade association for global information technology (IT)industry, welcomed STI Education Services Group, Inc. (STI) to its CompTIA Academy PartnerProgram.

9. Item 9 – Other Events filed with SEC on 17 June 2016

DepEd Extends Gratitude to Partners (Press Release) - For its leadership in informationtechnology and education, STI Foundation received an award during the Department ofEducation’s (DepEd) Mapping of Partner’s Programs and Adopt-A-School Partners Appreciationheld on Friday, 10 June 2016, at the Meralco Multi-purpose Hall, Ortigas, Pasig City.

C O V E R S H E E T

for

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

1 7 4 6

C O M P A N Y N A M E

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 .

PRINCIPAL OFFICE( No. / Street / Barangay / City / Town / Province )

7 t h F l o o r , S T I H o l d i n g s C e n t e r

, 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

Form Type Department requiring the report Secondary License Type, If Applicable

A A F S

C O M P A N Y I N F O R M A T I O N

Company’s Email Address Company’s Telephone Number Mobile Number

N/A (632) 844 9553 N/A

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

1,256 Last Friday of September 03/31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Arsenio C. Cabrera, Jr. [email protected] (632) 813-7111

CONTACT PERSON’s ADDRESS

5/F SGV-II BUILDING, 6758 AYALA AVENUE, MAKATI CITY

NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated. 2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with the Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for its deficiencies.

STI EDUCATION SYSTEMS HOLDINGS, INC.

PARENT COMPANY STATEMENTS OF COMPREHENSIVE INCOME

Years Ended March 31

2016 2015

REVENUES

Dividend income (Note 7) P=246,653,915 P=246,665,535

Advisory fee (Note 13) 18,000,000 15,300,000

264,653,915 261,965,535

EXPENSES

Outside services (Note 12) 15,706,055 2,582,564

Salaries and allowances 5,611,059 4,059,142

Depreciation and amortization (Note 11) 3,994,603 3,688,485

Rent (Note 13) 2,716,320 2,657,564

Representation and entertainment 1,087,850 1,717,681

Membership fees and dues (Note 13) 1,069,760 1,281,240

Taxes and licenses 985,907 1,620,749

Meetings and conferences 858,256 207,218

Advertising and promotions 729,672 1,726,941

Transportation and travel 642,660 2,557,825

Utilities 483,448 726,581

Supplies 259,142 294,461

Communication 104,621 67,851

Miscellaneous 303,773 247,768

34,553,126 23,436,070

OTHER INCOME

Excess of consideration received from collection of receivables

(Notes 8 and 10) 546,310,864 –

Interest income (Note 4) 378,234 590,446

Others - net 785,012 840,000

547,474,110 1,430,446

INCOME BEFORE INCOME TAX 777,574,899 239,959,911

PROVISION FOR INCOME TAX (Note 16)

Current 44,175,082 322,800

Deferred 110,861,700 –

155,036,782 322,800

NET INCOME (Note 15) 622,538,117 239,637,111

OTHER COMPREHENSIVE LOSS

Item to be reclassified to profit or loss in subsequent years -

Unrealized mark-to-market loss on available-for-sale financial

assets (Note 9) (37,350) (81,340)

TOTAL COMPREHENSIVE INCOME P=622,500,767 P=239,555,771

Basic/Diluted Earnings Per Share (Note 15) P=0.063 P=0.024

See accompanying Notes to Parent Company Financial Statements

A member firm of Ernst & Young Global Limited


PARENT COMPANY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED MARCH 31, 2016 AND 2015

Common

Stock

Additional

Paid-in

Capital

Unrealized

Mark-to-market

Gain on

Available-for-

sale Financial

Assets

Retained

Earnings Total

Balances at April 1, 2015 P=4,952,403,462 P=11,254,677,345 P=404,258 P=147,895,651 P=16,355,380,716

Net income – – – 622,538,117 622,538,117

Other comprehensive loss (Note 9) – – (37,350) – (37,350)

Total comprehensive income – – (37,350) 622,538,117 622,500,767

Dividends declared (Note 14) – – – (198,096,138) (198,096,138)

Balances at March 31, 2016 P=4,952,403,462 P=11,254,677,345 P=366,908 P=572,337,630 P=16,779,785,345

Balances at April 1, 2014 P=4,952,403,462 P=11,254,677,345 P=485,598 P=106,354,678 P=16,313,921,083

Net income – – – 239,637,111 239,637,111

Other comprehensive loss (Note 9) – – (81,340) – (81,340)

Total comprehensive income – – (81,340) 239,637,111 239,555,771

Dividends declared (Note 14) – – – (198,096,138) (198,096,138)

Balances at March 31, 2015 P=4,952,403,462 P=11,254,677,345 P=404,258 P=147,895,651 P=16,355,380,716

See accompanying Notes to Parent Company Financial Statements.

- 2 -

Changes in Accounting Policies and Disclosure

The accounting policies adopted are consistent with those of the previous financial year except that the

Company has adopted the following amended standards as at April 1, 2015. The adoption of these

amendments did not have any significant impact on the parent company financial statements.

Amendments to PAS 19, Defined Benefit Plans: Employee Contributions

Annual Improvements to PFRSs (2010–2012 Cycle)

- PFRS 2, Share-based Payment - Definition of Vesting Condition

- PFRS 3, Business Combinations - Accounting for Contingent Consideration in a Business

Combination

- PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of the Total

of the Reportable Segments’ Assets to the Entity’s Assets

- PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Revaluation Method -

Proportionate Restatement of Accumulated Depreciation and Amortization

- PAS 24, Related Party Disclosures - Key Management Personnel


- PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangements

- PFRS 13, Fair Value Measurement - Portfolio Exception

- PAS 40, Investment Property

The standards and interpretations that are issued, but not yet effective, up to date of issuance of the parent

company financial statements are listed below. The Company intends to adopt these standards when these

become effective. Adoption of these standards and interpretations are not expected to have any significant

impact on the parent company financial statements.

No definite adoption date prescribed by the SEC and FRSC

Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate

Effective January 1, 2016

PFRS 10, Consolidated Financial Statements, and PAS 28, Investments in Associates and Joint

Ventures - Investment Entities: Applying the Consolidation Exception (Amendments)

PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements

(Amendments)

PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests (Amendments)

PAS 1, Presentation of Financial Statements - Disclosure Initiative (Amendments)

PFRS 14, Regulatory Deferral Accounts

PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants

PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification of Acceptable

Methods of Depreciation and Amortization (Amendments)


- PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes in Methods of

Disposal

- PFRS 7, Financial Instruments: Disclosures - Servicing Contracts

- PFRS 7, Financial Instruments: Disclosures - Applicability of the Amendments to PFRS 7 to

Condensed Interim Financial Statements

- PAS 19, Employee Benefits - regional market issue regarding discount rate

- PAS 34, Interim Financial Reporting - disclosure of information ‘elsewhere in the interim financial

report’

- 3 -


PFRS 9, Financial Instruments

International Financial Reporting Standard (IFRS) 15, Revenue from Contracts with Customers


IFRS 16, Leases

The Company has not early adopted the above standards. The Company continues to assess the impact of

the above new, amended and improved accounting standards and interpretations effective subsequent to

March 31, 2016 on the parent company financial statements in the period of initial application. Additional

disclosures required by these amendments will be included in the parent company financial statements when

these amendments are adopted.

Cash and Cash Equivalents

Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that

are readily convertible to known amounts of cash with maturities of up to three months or less from date of

acquisition and are subject to an insignificant risk of change in value.

Financial Instruments - Initial Recognition and Subsequent Measurement

Date of Recognition. The Company recognizes a financial asset or a financial liability in the parent

company statement of financial position when it becomes a party to the contractual provisions of the

instrument. All regular way purchases and sales of financial assets are recognized on the trade date.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets

within the period generally established by regulation or convention in the market place.

Initial Recognition. Financial instruments are recognized initially at fair value. Transaction costs are

included in the initial measurement of all financial assets and liabilities, except for financial instruments

measured at fair value through profit or loss (FVPL).

Fair Value Measurement. The Company measures financial instruments, such as AFS financial assets, at

fair value at every financial reporting date. The Company also discloses the fair values of financial

instruments measured at amortized cost.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date. The fair value measurement is based on

the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset or liability

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

The fair value of an asset or a liability is measured using the assumptions that market participants would use

when pricing the asset or liability, assuming that market participants act in their economic best interest. A

fair value measurement of a non-financial asset takes into account a market participant‟s ability to generate

economic benefits by using the asset in its highest and best use or by selling it to another market participant

that would use the asset in its highest and best use.

- 4 -

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient

data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing

the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the parent company financial

statements are categorized within the fair value hierarchy, described as follows, based on the lowest level

input that is significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable

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 a recurring basis,

the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing

categorization (based on the lowest level input that is significant to the fair value measurement as a whole)

at the end of each reporting period.

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

recurring measurement.

External valuers are involved for valuation of significant assets, such as investment property. Involvement

of external valuers is decided upon annually. Selection criteria include market knowledge, reputation,

independence and whether professional standards are maintained. Management decides, after discussions

with the external valuers, which valuation techniques and inputs to use for each case.

At each reporting date, the management analyzes the movements in the values of assets and liabilities which

are required to be re-measured or re-assessed as per accounting policies. For this analysis, the management

verifies the major inputs applied in the latest valuation by agreeing the information in the valuation

computation to contracts and other relevant documents.

Management, in conjunction with the Company‟s external valuers, also compares each change in the fair

value of each asset and liability with relevant external sources to determine whether the change is

reasonable.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the

basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy

as explained above.

‘Day 1’ Difference. Where the transaction price in a non-active market is different from the fair value from

other observable current market transactions of the same instrument or based on a valuation technique

whose variables include only data from an observable market, the Company recognizes the difference

between the transaction price and fair value (a „Day 1‟ difference) in the profit or loss unless it qualifies for

recognition as some other type of asset or liability. In cases where use is made of data which is not

observable, the difference between the transaction price and model value is only recognized in the parent

company statement of comprehensive income when the inputs become observable or when the instrument is

derecognized. For each transaction, the Company determines the appropriate method of recognizing the

„Day 1‟ difference amount.

Classification. A financial instrument is classified as liability if it provides for a contractual obligation to:

(a) deliver cash or another financial asset to another entity; (b) exchange financial assets or financial

- 5 -

liabilities with another entity under conditions that are potentially unfavorable to the Company; or (c)

satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a

fixed number of the Company‟s own shares. If the Company does not have the unconditional right to avoid

delivering cash or another financial asset to settle its contractual obligation, the obligation meets the

definition of a financial liability.

Financial assets are categorized as either financial assets at FVPL, held-to-maturity (HTM) investments,

loans and receivables or AFS financial assets. Financial liabilities, on the other hand, are categorized either

as financial liabilities at FVPL and other financial liabilities. The Company determines the classification at

initial recognition and re-evaluates this designation at every reporting date, where appropriate.

The Company has no financial assets or financial liabilities at FVPL and HTM investments as at March 31,

2016 and 2015.

a. Loans and Receivables

Loans and receivables are nonderivative financial assets with fixed or determinable payments that are

not quoted in an active market.

After initial recognition, loans and receivables are measured at amortized cost using the effective

interest method less allowance for impairment. Amortized cost is calculated by taking into account any

discount or premium on acquisition, and fees and costs that are an integral part of the effective interest

rate. The amortization is recognized in the parent company statement of comprehensive income under

the “Interest income” account. Losses arising from impairment are recognized as provision for doubtful

accounts in the parent company statement of comprehensive income. Loans and receivables are

included in current assets when the Company expects to realize or collect the assets within 12 months

from the reporting date. Otherwise, these are classified as noncurrent assets.

The Company‟s cash and cash equivalents, receivables and noncurrent receivables are included in this

category.

b. AFS Financial Assets

AFS financial assets are those nonderivative financial assets that are not classified as at FVPL, loans

and receivables or HTM investments. These are purchased and held indefinitely, and maybe sold in

response to liquidity requirements or changes in market conditions.

After initial recognition, AFS financial assets are subsequently measured at fair value with unrealized

gains or losses being recognized under “Unrealized mark-to-market gain on available-for-sale financial

assets” account in other comprehensive income until these are derecognized or determined to be

impaired at which time the cumulative gain or loss previously recognized under “Unrealized mark-to-

market gain on available-for-sale financial assets” account in other comprehensive income is recorded

in profit or loss. Interest earned on the investments is reported as interest income using the effective

interest method. Dividends earned on investments are recognized in the parent company statement of

comprehensive income when the right to receive payment has been established. AFS financial assets

are classified as noncurrent assets unless the intention is to dispose of such assets within 12 months

from reporting date.

The fair value of AFS financial assets consisting of investments that are actively traded in organized

financial markets is determined by reference to quoted market bid prices at the close of business on the

reporting date.

- 6 -

When the fair value of AFS financial assets cannot be measured reliably because of lack of reliable

estimates of future cash flows and discount rates necessary to calculate the fair value of unquoted equity

instruments, these investments are carried at cost.

The 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 their components

that are not classified or designated at FVPL and contain contractual obligations to deliver cash or

another financial asset to the holder as to settle the obligation other than by the exchange of a fixed

amount of cash or another financial asset for a fixed number of own equity shares. Financial liabilities

are classified as current if they are expected to be settled or disposed of within 12 months from

reporting date. Otherwise, these are classified as noncurrent.

Other financial liabilities are initially recognized at fair value of the consideration received, less directly

attributable transaction costs. After initial recognition, other financial liabilities are subsequently

measured at amortized cost using the effective interest method. Amortized cost is calculated by taking

into account any related issue costs and discount or premium.

Gains and losses are recognized in the parent company statement of income when the liabilities are

derecognized, as well as through the amortization process.

This category includes accounts payable and other current liabilities, dividends payable, nontrade

payable and subscription payable.

Impairment of Financial Assets

The Company assesses at each reporting date whether a financial asset or a group of financial assets is

impaired. A financial asset or a group of financial assets is deemed to be impaired if there is objective

evidence of impairment as a result of one or more events that has occurred after the initial recognition of the

asset (an incurred loss event) and that loss event has an impact on the estimated future cash flows of the

financial asset or the group of financial assets that can be reliably estimated. Objective evidence of

impairment may include indications that the debtors or a group of debtors is experiencing significant

financial difficulty, default or delinquency in interest or principal payments, the probability that they will

enter bankruptcy or other financial reorganization and where observable data indicate that there is a

measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions

that correlate with defaults.

Financial Assets Carried at Amortized Cost. The Company first assesses whether an objective evidence of

impairment exists individually for financial assets that are individually significant, or collectively for

financial assets that are not individually significant. If the Company determines that no objective evidence

of impairment exists for an individually assessed financial asset, whether significant or not, the asset is

included in a group of financial assets with similar credit risk characteristics and that group of financial

assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for

which an impairment loss is or continues to be recognized are not included in a collective assessment of

impairment.

The amount of any impairment loss identified is measured as the difference between the asset‟s carrying

amount and the present value of estimated future cash flows (excluding future expected credit losses that

have not yet been incurred). The present value of the estimated future cash flows is discounted at the

financial asset‟s original effective interest rate.

- 7 -

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured

as the difference between the asset‟s carrying amount and the present value of the estimated future cash

flows (excluding future credit losses that have not been incurred). The carrying amount of the asset is

reduced through the use of an allowance account and the loss is recognized in profit or loss. Interest income

continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to

discount the future cash flows for the purpose of measuring the impairment loss. Loans together with the

associated allowance are written off when there is no realistic prospect of future recovery and all collateral

has been realized or has been transferred to the Company.

If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an

event occurring after the impairment was recognized, the previously recognized impairment loss is

increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is

credited to finance costs in profit or loss.

AFS Financial Assets. For AFS financial assets, the Company assesses at each reporting date when there

has been a “significant” or “prolonged” decline in the fair value below its cost or where other objective

evidence of impairment exists. “Significant” is to be evaluated against the original cost of the investment

and “prolonged” against the period in which the fair value has been below its original cost. If an AFS

financial asset is impaired, an amount comprising the difference between its cost (net of any principal

payment and amortization) and its current fair value, less any impairment loss previously recognized in the

parent company statement of comprehensive income, is transferred from equity to the parent company

statement of comprehensive income. Reversals in respect of equity instruments classified as AFS financial

assets are not recognized in the profit or loss but are recognized directly in other comprehensive income.

Derecognition of Financial Assets and Liabilities

Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part of a group of

similar financial assets) is derecognized when:

the rights to receive cash flows from the asset have expired;

the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation

to pay the received cash flows in full without material delay to a third party under a “pass-through”

arrangement; or

the Company has transferred its right to receive cash flows from the asset and either (a) has transferred

substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained

substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its right to receive cash flows from an asset and has neither transferred

nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset

is recognized to the extent of the Company‟s continuing involvement in the asset. In that case, the

Company also recognizes an associated liability. The transferred asset and the associated liability are

measured on a basis that reflects the rights and obligations that the Company has retained.

Financial Liabilities. A financial liability is derecognized when the obligation under the liability is

discharged or cancelled or has expired.

When an existing financial liability is replaced by another from the same lender on substantially different

terms, or the terms of an existing liability are substantially modified, such an exchange or modification is

treated as a derecognition of the original liability and the recognition of a new liability, and the difference in

the respective carrying amounts is recognized in the parent company statement of comprehensive income.

- 8 -

Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of

financial position if there is a currently enforceable legal right to set off the recognized amounts and there is

intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. The Company

assesses that it has a currently enforceable right of offset if the right is not contingent on a future event, and

is legally enforceable in the normal course of business, event of default, and event of insolvency or

bankruptcy of the Company and all of the counterparties.

Creditable Withholding Taxes (CWT)

CWT represents the amount withheld by counterparties from the Company. These are recognized upon

collection and are utilized as tax credits against income tax due as allowed by the Philippine taxation laws

and regulations. CWT is presented as part of “Prepaid taxes” under the “Other current assets” account in

the parent company statement of financial position. CWT is stated at its estimated net realizable value.

Investment in Subsidiaries

The Company‟s investment in subsidiaries (entity which the Company controls) is carried in the parent

company statement of financial position at cost less any accumulated impairment in value.

Investment Properties

Investment properties include land and buildings and improvements held by the Company for capital

appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent

to initial recognition, buildings are carried at cost less accumulated depreciation and any impairment in

value, while land is carried at cost less any impairment in value.

Depreciation of buildings is computed on a straight-line basis over 15–25 years. The asset‟s useful life and

method of depreciation are reviewed and adjusted, if appropriate, at each financial year-end.

Investment properties are derecognized when either they have been disposed of or when the investment

property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

Any gains or losses on the retirement or disposal of an investment property are recognized in the parent

company statement of comprehensive income in the year of retirement or disposal.

Transfers are made to investment property when, and only when, there is a change in use, evidenced by

ending of owner-occupation or commencement of an operating lease to another party. Transfers are made

from investment property when there is a change in use, evidenced by commencement of owner-occupation

or commencement of development with a view to sell.

For a transfer from investment property to owner-occupied property or inventories, the cost of property for

subsequent accounting is its carrying value at the date of change in use. If the property occupied by the

Company as an owner-occupied property becomes an investment property, the Company accounts for such

property in accordance with the policy stated under property and equipment up to the date of change in use.

Property and Equipment

Property and equipment is stated at cost, excluding the costs of day-to-day servicing, less accumulated

depreciation and amortization and any impairment in value.

The initial cost of property and equipment consists of its purchase price, including import duties, taxes, and

any directly attributable costs of bringing the property and equipment to its working condition and location

for its intended use. Expenditures incurred after the property and equipment have been put into operation,

such as repairs and maintenance, are normally charged to the parent company statement of comprehensive

income in the period such costs are incurred. In situations where it can be clearly demonstrated that the

expenditures have resulted in an increase in the future economic benefits expected to be obtained from the

- 9 -

use of an item of property and equipment beyond its original assessed standard of performance, the

expenditures are capitalized as an additional costs of property and equipment.

Depreciation and amortization are computed using the straight-line method over the following estimated

useful lives of property and equipment:

Office equipment 2 years

Leasehold improvements 5 years or term of the lease, whichever is shorter

Furniture and fixtures 2 years

Transportation Equipment 5 years

The estimated useful lives and depreciation and amortization method are reviewed periodically to ensure

that the periods and method of depreciation and amortization are consistent with the expected pattern of

economic benefits from items of property and equipment. The useful lives of property and equipment are

estimated based on the period over which property and equipment are expected to be available for use and

on collective assessment of industry practice, internal technical evaluation and experience with similar

assets. The estimated useful lives of the property and equipment are updated if expectations differ from

previous estimates due to wear and tear, technical or commercial obsolescence and legal or other limits on

the use of the property and equipment. However, it is possible that future financial performance could be

materially affected by changes in the estimates brought about by changes in factors mentioned above. The

amounts and timing of recorded expenses for any period would be affected by changes in these factors and

circumstances.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are

expected from its use or disposal. Any gain or loss arising from derecognition of the asset (calculated as the

difference between the net disposal proceeds and carrying amount of the asset) is included in the parent

company statement of comprehensive income in the year the asset is derecognized.

Property under construction is stated at cost less any impairment in value. This includes cost of

construction, equipment and other direct costs associated to construction of leasehold improvements.

Property under construction is not depreciated until such time that the relevant assets are completed and

available for its intended use.

Property under construction is transferred to leasehold improvements when the construction or installation

and related activities necessary to prepare the leasehold improvements for their intended use have been

completed, and the leasehold improvements are ready for commercial service.

Impairment of Nonfinancial Assets

Investments in Subsidiaries, Investment Properties, Property and Equipment and Software Cost. The

Company assesses at each reporting date whether there is an indication that an asset may be impaired. If

any such indication exists, the Company makes an estimate of the asset‟s recoverable amount. The

recoverable amount of the asset is the greater of fair value less cost to sell and value in use. The fair value

is the amount obtainable from the sale of an asset in arm‟s length transaction between knowledgeable,

willing parties, less cost of disposal. In assessing value in use, the estimated future cash flows are

discounted to their presented value using a pre-tax discount rate that reflects current market assessment of

the time value of money and the risks specific to the asset. For an asset that does not generate largely

independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the

asset belongs. Any impairment loss is charged to the parent company statement of comprehensive income.

An assessment is made at each reporting date as to whether there is any indication that previously

recognized impairment losses may no longer exist or may have decreased. If such indication exists, the

- 10 -

recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has

been a change in the estimates used to determine the asset‟s recoverable amount since the last impairment

loss was recognized. If that is the case, the carrying amount of the assets is increased to its recoverable

amount. That increased amount cannot exceed the carrying amount that would have been determined, net

of depreciation and amortization in the case of property and equipment, had no impairment loss been

recognized for the asset in the prior years. Such reversal is recognized in the parent company statement of

comprehensive income. After such reversal, the depreciation and amortization charges are adjusted in

future periods to allocate the asset‟s revised carrying amount, less any residual value, on a systematic basis

over its remaining useful life.

Equity

Common stock is measured at par value for all shares issued. Incremental costs incurred directly

attributable to the issuance of new shares are shown in equity as a deduction of proceeds, net of tax.

Proceeds and/or fair value of considerations received in excess of par value are recognized as additional

paid-in capital.

Retained earnings represent the Company‟s net accumulated earnings less cumulative dividends declared.

Dividends on common stock are recognized as liability and deducted from equity when approved by the

BOD of the Company. Dividends approved after the financial reporting date are dealt with as an event after

the reporting date.

- 11 -

Revenue Recognition

The Company recognizes revenue when the amount of revenue can be reliably measured, it is possible that

future economic benefits will flow into the entity and specific criteria have been met for each of the

Company‟s activities described below. The amount of revenue is not considered to be reliably measured

until all contingencies relating to the sale have been resolved. The Company bases its estimates on

historical results, taking into consideration the type of customer, the type of transaction and the specifics of

each arrangement.

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

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.

Excess of consideration received from collection of receivables. Excess of consideration received from

collection of receivables is recognized when the consideration has been transferred.

Interest Income. Interest income is recognized as it accrues on a time proportion basis taking into account

the principal amount outstanding and the effective interest rate.

Other Income. Other income is recognized when earned.

Costs and Expenses

Costs and expenses are decreases in economic benefits during the accounting period in the form of outflows

or decrease of assets or incurrence of liabilities that result in decreases in equity, other than those relating to

distributions to equity participants. Costs and expenses are recognized in the parent company statement of

comprehensive income in the period these are incurred.

Provisions

Provisions are recognized when the Company has present obligations, legal or constructive, as a result of

past events, when it is probable that an outflow of resources embodying economic benefits will be required

to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the

Company expects some or all of a provision to be reimbursed, the reimbursement is recognized as a

separate asset but only when the reimbursement is virtually certain. The expense relating to any provision

is presented in the parent company statement of comprehensive income, net of any reimbursements. If the

effect of the time value of money is material, provisions are discounted using a current pre-tax rate that

reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the

provision due to passage of time is recognized as interest expense.

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the

arrangement at the inception date of whether the fulfillment of the arrangement is dependent on the use of a

specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly

specified in an arrangement. A reassessment is made after the inception of the lease only if one of the

following applies: (a) there is a change in contractual terms, other than a renewal or extension of the

agreement; (b) a renewal option is exercised or extension granted, unless the term of the renewal or

extension was initially included in the lease term; (c) there is a change in the determination of whether the

fulfillment is dependent on a specified asset; or (d) there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in

circumstances gave rise to the reassessment for scenarios (a), (c) or (d) and the date of renewal or extension

period for scenario (b).

- 12 -

As a lessee. Leases where the lessor retains substantially all the risks and benefits of ownership of the assets

are classified as operating leases. Operating lease payments are recognized as expense in the parent

company statement of comprehensive income on a straight-line basis over the lease term.

Taxes

Current tax. Current tax assets and liabilities for the current and prior years are measured at the amount

expected to be recovered from or paid to the taxation authority. The tax rates and tax laws used to compute

the amount are those that are enacted or substantively enacted as at reporting date.

Deferred tax. Deferred tax is provided, using the liability method, on all temporary differences at the

reporting date between the tax bases of assets and liabilities and their carrying amounts for financial

reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences except when the deferred tax

liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a

business combination and, at the time of the transaction, affects neither the accounting profit nor taxable

profit or loss.

Deferred tax assets are recognized for all deductible temporary differences, carryforward benefit of unused

tax credits from excess minimum corporate income tax (MCIT) over regular corporate income tax (RCIT)

and unused net operating loss carry-over (NOLCO) to the extent that it is probable that taxable profit will be

available against which the deductible temporary differences and the carry-forward benefit of unused tax

credits and unused tax losses can be utilized except when the deferred tax asset relating to the deductible

temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a

business combination and, at the time of the transaction, affects neither the accounting profit nor taxable

profit or loss.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that

it is no longer probable that sufficient future taxable profit will be available to allow all or part of the

deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and

are recognized to the extent that it has become probable that sufficient future taxable profit will allow the

deferred tax asset, to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when

the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or

substantively enacted at the reporting date.

Deferred tax relating to items recognized directly in equity is also included in equity and not in profit or loss

of the parent company statement of comprehensive income.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to offset current

tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same

taxation authority.

- 13 -

Value-Added Tax (VAT)

Revenue, expenses and assets are recognized net of the amount of VAT, except:

When the VAT incurred on a purchase of assets or services is not recoverable from the taxation

authority, in which case the VAT is recognized as part of the cost of acquisition of the asset or as part of

the expense item as applicable; or

Receivables and payables that are stated with the amount of VAT included.

The net amount of VAT recoverable from/payable to the taxation authority is included as part of “Prepaid

taxes” under the “Other current assets” or “Accounts payable and other current liabilities” accounts in the

parent company statement of financial position.

Contingencies

Contingent liabilities are not recognized in the parent company financial statements but are disclosed in the

notes to the parent company financial statements, unless the possibility of an outflow of resources

embodying economic benefits is remote. Contingent assets are not recognized in the parent company

financial statements but are disclosed in the notes to parent company financial statements when an inflow of

economic benefits is probable.

Events after the Reporting Date

Post year-end events that provide additional information about the parent company financial position at

reporting date (adjusting events) are reflected in the parent company financial statements. Post year-end

events that are not adjusting events, if any, are disclosed in the notes to parent company financial

statements, when material.

Earnings Per Share

The Company presents basic and diluted earnings per share rate for its common shares. Basic Earnings Per

Share (EPS) is calculated by dividing net income for the period by the weighted average number of

common shares outstanding during the period after giving retroactive effect to any stock dividend

declarations.

Diluted EPS is calculated in the same manner, adjusted for the dilutive effect of any potential common

shares. As the Company has no dilutive common shares outstanding, basic and diluted earnings per share

are stated at the same amount.

Segment Reporting

A segment is a distinguishable component of the Company that is engaged either in providing products or

services within a particular economic environment, which is subject to risks and rewards that are different

from those of other segments. Such business segment is the base upon which the Company reports its

operating segment information. The Company operates in one geographical area where it derives its

revenue. The Company did not present segment information in the parent company financial statements as

the Company has only one reportable segment. However, the Company presents segment information in

the consolidated financial statements as the Company‟s subsidiary is organized into business units based on

geographical location of students and assets.

- 14 -

1. Management’s Use of Judgments, Estimates and Assumptions

The preparation of the parent company financial statements in conformity with PFRS requires the Company

to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses,

assets and liabilities and disclosure of contingent liabilities at the reporting date. The uncertainties inherent

in these assumptions and estimates could result in outcomes that could require a material adjustment to the

carrying amount of the assets or liabilities affected in the future years.

Judgments

In the process of applying the Company‟s accounting policies, management has made the following judgments

apart from those including estimations and assumptions, which have the most significant effect on the amounts

recognized in the parent company financial statements.

Evaluating Lease Commitments. The evaluation of whether an arrangement contains a lease is based on its

substance. An arrangement is, or contains a lease when the fulfilment of the arrangement depends on a specific

asset or assets and the arrangement conveys a right to use the asset, even if that right is not explicitly specified

in the arrangement.

The Company has entered into an operating lease arrangement as a lessee. The Company has determined,

based on an evaluation of the terms and conditions of the arrangements, that the lessor retains all the significant

risks and rewards of ownership of these properties because the lease agreements do not transfer to the Company

the ownership over the assets at the end of the lease term and do not provide the Company with a bargain

purchase option over the leased assets and so accounts for the contracts as operating leases. Rent expense

amounted to P=2.7 million for the years ended March 31, 2016 and 2015.

Contingencies. The Company is involved in several cases, including (a) extra-judicial foreclosure of the

mortgaged properties and (b) PWU rehabilitation case involving claims for the settlement of its noncurrent

receivables. As discussed in Notes 8, 10 and 17, these claims have been resolved. The Company‟s estimate of

the probable costs for the resolution of all claims has been developed in consultation with external legal

counsels handling defense in these matters and is based upon an analysis of potential results. Other than as

discussed in Note 17, management and its legal counsels believe that the Company has substantial legal and

factual bases for its position and are of the opinion that losses arising from these legal actions, if any, will not

have a material adverse impact on the consolidated financial statements. It is possible, however, that future

results of operations could be materially affected by changes in the estimates or in the effectiveness of strategies

relating to these proceedings (see Note 17).

Estimates and Assumptions

The key estimates and assumptions concerning the future and other key sources of estimation uncertainty at

reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and

liabilities recognized in the parent company financial statements within the next financial year are discussed as

follows:

Estimating Allowance for Doubtful Accounts. The Company maintains an allowance for doubtful accounts

at a level considered adequate to provide for potential uncollectible receivables. The level of allowance is

evaluated by the Company on the basis of factors that affect the collectability of the accounts. The review

is accomplished using a combination of specific and collective assessment. The factors considered in

specific impairment assessment are the length of the Company‟s relationship with customers, customers‟

current credit status based on known factors, age of the accounts and other available information that will

indicate objective evidence that the customers may be unable to meet their financial obligations. The

collective impairment assessment is based on historical loss experience and deterioration in the market in

which the customers operate. The amounts and timing of recorded provision for doubtful accounts for any

period will differ if the Company made different assumptions or utilized different estimates.

- 15 -

There were no provisions for doubtful accounts recognized for the years ended March 31, 2016 and 2015.

Receivables, including noncurrent receivables, amounted to P=1.1 million and

P=498.2 million as at March 31, 2016 and 2015, respectively (see Notes 5 and 8).

Impairment of AFS financial assets. The Company follows the guidance of PAS 39 to determine when an

AFS financial asset is impaired. This determination requires significant judgment. In making this

judgment, the Company evaluates, among other factors, the duration and extent to which the fair value of an

investment is less than its cost; and the financial health of and near-term business outlook for the investee,

including factors such as industry and sector performance, changes in technology and operational and

financing cash flow.

An AFS financial asset is considered to be impaired when there has been a significant or prolonged decline

in the fair value below its cost or where other objective evidence of impairment exists. The determination

of what is “significant” or “prolonged” requires judgment. The Company treats “significant”, generally as

20% or more decline in the original cost of investment; and “prolonged”, as a period of greater than six

months. In addition, the Company evaluates other factors, including normal volatility in share price for

quoted equities and the future cash flows and the discount factors for unquoted equities.

No impairment loss for investments in equity securities was recognized for the years ended March 31, 2016

and 2015.

Available-for-sale financial assets amounted to P=0.7 million and P=0.8 million as at March 31, 2016 and

2015, respectively (see Note 9).

Impairment of Nonfinancial Assets. An impairment review is performed whenever events or changes in

circumstances indicate that the carrying amount of investments in subsidiaries, investment properties,

property and equipment and software cost may not be recoverable or that the previously recognized

impairment loss may no longer exist or may have decreased. The factors that the Company considers

important which could trigger an impairment review include the following:

significant under performance relative to expected historical or projected future operating results;

significant changes in the manner of use of the acquired assets or the strategy for overall business;

significant negative industry or economic trends;

the dividend exceeds the total comprehensive income of the associate in the period the dividend is

declared; or

the carrying amount of the investment in a subsidiary in the parent company financial statements

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 of impairment.

Only if indicators of impairment are present will the Company perform the impairment testing.

The Company recognizes an impairment loss whenever the carrying amount of an asset exceeds its

recoverable amount. The recoverable amount is computed using the value in use approach.

Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit

to which the asset belongs.

- 16 -

While it is believed that the assumptions used in the estimation of fair values reflected in the parent

company financial statements are appropriate and reasonable, significant changes in these assumptions may

materially affect the assessment of recoverable value and any resulting impairment loss would have a

material adverse impact on the results of operations.

Noncurrent nonfinancial assets that are subject to impairment testing as at March 31, 2016 and 2015 are as

follows:

2016 2015

Investments in subsidiaries (see Note 7) P=16,021,074,967 P=16,021,074,967

Investment properties (see Note 10) 1,280,539,000 –

Property and equipment (see Note 11) 6,362,099 9,073,343

Software cost 300,000 450,000

No impairment loss was recognized for the years ended March 31, 2016 and 2015.

Recognition of Deferred Tax Assets. The Company reviews the carrying amounts of deferred tax assets at

each reporting date and reduced these to the extent that it is no longer probable that sufficient taxable

income will be available to allow all or part of the deferred tax assets to be utilized.

Since the Company is a holding company, management assessed that no sufficient future taxable income

will be generated to allow all or part of its deferred tax assets to be utilized as the Company‟s income

mainly pertains to passive income which are not subject to income tax.

As at March 31, 2016, the Company has no deductible temporary difference, unused NOLCO and MCIT.

Unused NOLCO and MCIT for which no deferred tax assets were recognized amounted to

P=10.5 million and P=1.0 million, respectively, as at March 31, 2015 (see Note 16).

2. Cash and Cash Equivalents

This account consists of:

2016 2015

Cash on hand P=5,000 P=5,000

Cash in banks 14,825,433 4,394,420

Cash equivalents – 26,166,899

P=14,830,433 P=30,566,319

Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are short-term placements

which are made for varying periods of up to three months depending on the immediate cash requirements of

the Company and earn interest at the prevailing short-term investment rates.

Interest income earned from cash in banks and short-term cash placements for the years ended March 31,

2016 and 2015 amounted to P=0.4 million and P=0.6 million, respectively.

3. Receivables


2016 2015

- 17 -

Advances to officers and employees (see Note 13) P=995,865 P=1,283,875

Receivable from a related party (see Note 13) 41,166 1,403,186

Others 94,350 –

P=1,131,381 P=2,687,061

a. Advances to officers and employees are normally liquidated within one month.

b. Receivable from a related party pertains to noninterest-bearing advances which are expected to be settled

within one year.

c. Others primarily pertain to advances for legal services which are noninterest-bearing and are expected to be

settled within one year.

4. Other Current Assets


2016 2015

Prepaid taxes P=6,014,713 P=13,779,674

Others 170,525 170,525

P=6,185,238 P=13,950,199

As at March 31, 2016 and 2015, prepaid taxes include input VAT. As at March 31, 2015, prepaid taxes also

include CWT.

5. Investments in Subsidiaries

The Company carries its investments in shares of stock of the following subsidiaries under the cost method:

Principal Place Percentage of

Ownership Cost of Business

STI Education Services

Group, Inc. (STI ESG) Cainta, Rizal 98.7% P=15,283,676,041

STI West Negros University,

Inc. (STI WNU)

Bacolod City,

Negros Occidental 99.9% 592,398,926

Attenborough Holdings Corp.

(AHC) Pasig 100.0% 145,000,000

P=16,021,074,967

- 18 -

Movement in the investment cost follows:

2016 2015

Balance at beginning of year P=16,021,074,967 P=15,651,120,967

Additions – 369,954,000

Balance at end of year P=16,021,074,967 P=16,021,074,967

STI ESG

STI ESG has investments in several entities which own and operate STI schools. STI ESG is involved in

establishing, maintaining and operating educational institutions to provide pre-elementary, elementary,

secondary, and tertiary as well as post-graduate courses, post-secondary and lower tertiary non-degree

programs. STI ESG also develops, adopts and/or acquires, entirely or in part, such curricula or academic

services as may be necessary in the pursuance of its main activities, relating but not limited to information

technology services, information technology-enabled services, nursing, education, hotel and restaurant

management, engineering, business studies and care-giving. Other activities of STI ESG include computer

services, such as, but not limited to, programming, systems design and analysis, feasibility studies,

installation support, job processing, consultancy, and other related activities.

As at March 31, 2016 and 2015, STI Holdings‟ ownership interest in STI ESG is approximately 99%.

On September 16, 2015 and September 22, 2014, the Company received cash dividends from STI ESG

amounting to P=246.7 million or P=0.08 per STI ESG share.

STI WNU

Movement in investment in shares of stock of STI WNU is as follows:

2016 2015

Balance at beginning of year P=592,398,926 P=367,444,926

Additions – 224,954,000

592,398,926 592,398,926

On September 11, 2013, STI Holdings executed a Share Purchase Agreement with the former shareholders

of STI WNU (the “Agustin Family”). STI WNU owns and operates STI West Negros University in

Bacolod City. It offers pre-elementary, elementary, secondary and tertiary education and graduate courses.

On October 1, 2013, STI Holdings entered into a Deed of Absolute Sale to acquire the shares in STI WNU

constituting 99.45% of the issued and outstanding common stock and 99.93% of the issued and outstanding

preferred stock of STI WNU for an aggregate purchase price of

P=400.0 million, including contingent consideration. The acquisition cost was eventually recorded at P=397.0

million broken down as follows: (a) cash payment of P=238.2 million, including advances amounting to P=

34.4 million; (b) contingent consideration amounting to P=151.5 million and (c) payable to STI WNU on

behalf of STI WNU‟s previous shareholders amounting to

P=7.3 million. Certain acquisition-related expenses amounting to P=4.7 million were capitalized as part of the

cost of acquiring STI WNU.

The Company‟s remaining liability for contingent consideration amounting to P=67.0 million and

P=95.7 million as at March 31, 2016 and 2015, respectively, is separately presented as nontrade payable in

the parent company statements of financial position. In April and September 2015, the Company settled a

portion of its nontrade payable amounting to P=12.7 million and

P=16.0 million, respectively.

- 19 -

On March 12, 2015, the SEC approved the application of STI WNU for the increase in its authorized capital

stock and the reclassification of its preferred shares into common shares. Pursuant to the SEC approval, the

Company‟s deposit for future stock subscription of

P=179.7 million was then applied to its subscription to 2,249,540 common shares of STI WNU.

As at March 31, 2016 and 2015, the Company has unpaid subscription to STI WNU, recognized as

subscription payable under “Accounts payable and other current liabilities” in the parent company

statements of financial position, amounting to P=35.2 million and P=45.2 million, respectively (see Note 12).

AHC

AHC is a holding company which is a party to the Joint Venture Agreement and Shareholders‟ Agreement

with STI Holdings, Philippine Women‟s University (“PWU”) and Unlad Resources Development

Corporation (“Unlad”) (see Note 8).

In May 2014, STI Holdings made a deposit of P=56.0 million for 40% ownership in AHC. In November

2014, the said deposit was converted into P=56.0 million AHC shares following the SEC approval of the

increase in the authorized capital shares of AHC.

On February 11, 2015, the Company acquired the remaining 60% ownership in AHC, including

subscription rights, from various individuals for a consideration of P=25.0 million making AHC a subsidiary

as at March 31, 2015.

As at March 31, 2016 and 2015, the Company has unpaid subscription to AHC, presented as “Subscription

payable” under noncurrent liability in the parent company statements of financial position, amounting to P=

64.0 million.

6. Noncurrent Receivables

As at March 31, 2015, this account consists of:

Amount

Receivable from PWU* P=276,993,776

Receivable from Unlad* 202,499,652

Accrued interest** 15,978,935

P=495,472,363 **Includes P=31.5 million of capitalized expenses relative to the foreclosure proceedings.

**Interest up to December 31, 2012 only

These receivables represent loans extended by the Company to PWU and Unlad when the Company

acceded, in November 2011, to the Joint Venture Agreement and Shareholders‟ Agreement (the

“Agreements”) by and among PWU, Unlad, an Individual and Mr. Eusebio H. Tanco (“EHT”), STI

Holdings‟ BOD Chairman, for the formation of a strategic arrangement with regard to the efficient

management and operation of PWU.

PWU is a private non-stock, non-profit educational institution, which provides basic, secondary and tertiary

education to its students while Unlad is a real estate company controlled by the Benitez Family and has

some assets which are used to support the educational thrust of PWU.

Pursuant to the Agreements, the Company acquired PWU‟s debt from PWU‟s creditor bank, together with

all of the bank‟s rights to the underlying collateral and security, for the amount of

P=223.5 million (the “Acquired Loan”), on a without recourse basis, in November 2011. The terms of the

Acquired Loan are governed by the Facility Agreement dated October 20, 2009 entered into by PWU and

- 20 -

PWU‟s creditor bank (the “Facility Agreement”). The Acquired Loan is secured, among others, by the real

estate mortgage constituted over the PWU Taft Properties and real estate properties of Unlad in Quezon

City.

Likewise in accordance with the Agreements, the Company is obliged to extend: (a) a direct loan to PWU in

the amount of P=26.5 million (the “Loan to PWU”) and (b) a loan to Unlad in the amount of P=198.0 million

(the “Loan to Unlad”).

As stated in the Agreements, the Acquired Loan and Loan to PWU, inclusive of 5% interest per annum,

shall be accrued and paid by way of the assignment by PWU of its shares in Unlad (which PWU will

acquire through a Property-for-Share Swap Transaction). Likewise, the Loan to Unlad, inclusive of 5%

interest per annum, shall be paid by way of conversion of said loan into equity in Unlad to enable the

Company to acquire, together with the shares assigned by PWU to the Company as payment for the

Acquired Loan and Loan to PWU, a total of 40% equity in Unlad.

On May 17, 2012, the Individual, who is a party to the Agreements with the Company, PWU and Unlad,

assigned his rights, title and interest in the Joint Venture Agreement to AHC. AHC thereby assumed the

Individual‟s obligation to grant a loan to Unlad in the principal amount of

P=224.0 million (the “AHC Loan to Unlad”). Pursuant to the agreement, the Company and AHC

(collectively referred to as the “Lenders”) agreed to lend Unlad a principal amount of

P=422.0 million consisting of the Company‟s Loan to Unlad and the AHC Loan to Unlad.

In further pursuance of the Agreements, on June 8, 2012, the Company entered into an Omnibus Agreement

with PWU (“PWU Omnibus Agreement”) consisting of: (1) a prefatory agreement;

(2) a loan agreement; and (3) a real estate mortgage. Under the PWU Omnibus Agreement, the Company

will extend the Loan to PWU, which shall be accrued and paid by way of assignment by PWU of its shares

in Unlad. The Loan to PWU is secured by the real estate mortgage constituted on the PWU Taft Properties

and PWU Indiana Property (“Manila Properties”).

Also, on June 8, 2012, the Company entered into an Omnibus Agreement with Unlad and AHC (“Unlad

Omnibus Agreement”) consisting of: (1) a prefatory agreement; (2) a loan agreement; and (3) a real estate

mortgage.

Under the Unlad Omnibus 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 Acquired Loan and Loan to PWU, 40% of

the issued and outstanding capital stock of Unlad, as discussed above; and (b) AHC to acquire 20% of

Unlad‟s issued and outstanding capital stock. The Loan to Unlad and AHC Loan to Unlad are secured by

the real estate mortgage constituted on real estate properties of Unlad in Quezon City and Davao City.

In June 2012, the Company released the Loan to PWU amounting to P=26.5 million while in August and

October 2012, the Company granted the Loan to Unlad amounting to P=166.0 million and

P=32.0 million, respectively.

In April and August 2013, AHC extended the AHC Loan to Unlad totaling P=65.0 million.

On March 25, 2013, the Joint Venture Agreement, Facility Agreement, PWU Omnibus Agreement and Unlad

Omnibus Agreement have been amended to discontinue imposition of interest on the Acquired Loan, Loan to

PWU, Loan to Unlad and AHC Loan to Unlad effective January 1, 2013.

On November 15, 2014, Mr. Conrado Benitez II, a Trustee of PWU and a Director of Unlad, notified the

Company of his desire to terminate the Joint Venture Agreement.

- 21 -

On November 22, 2014, a Special Joint Meeting of the Board of Trustees of PWU and the Board of Directors

of Unlad was held to discuss the status and future of the Joint Venture Agreement. In this meeting, Dr. Jose

Francisco B. Benitez, the President of PWU, expressed his preference to rescind and terminate the Joint

Venture Agreement. In addition, Mr. Conrado L. Benitez II moved to cancel and/or defer the Annual

Stockholders‟ Meeting of Unlad on December 5, 2014. The Agenda for the Annual Stockholders‟ Meeting of

Unlad included the amendment of Unlad‟s Articles of Incorporation to increase its authorized capital stock to P=

1.5 billion. The increase of the authorized capital stock of Unlad is needed to accommodate the Property-for-

Share Swap Transaction of PWU and Unlad needed for the payment of the Acquired Loan and Loan to PWU,

and to accommodate the Loan to Equity Conversion of the Loan to Unlad and AHC Loan to Unlad. EHT stated

that a cancellation and/or deferment of Unlad‟s Annual Stockholders Meeting on December 5, 2014 equates to

a denial of the increase in the authorized capital stock of Unlad and a refusal of PWU and Unlad to pay their

loans.

On December 5, 2014, during Unlad‟s Annual Stockholders‟ Meeting, Mr. Conrado L. Benitez II, representing

the majority of the quorum present, moved to adjourn the meeting and defer the approval of the amendment of

Unlad‟s Articles of Incorporation to increase the authorized capital stock thereof to P=1.5 billion due to a legal

impediment allegedly imposed by the Bureau of Internal Revenue with respect to the Property-for-Share Swap

Transaction.

On December 9, 2014 and December 16, 2014, the Company and AHC, respectively, served a Notice of

Default to PWU and Unlad demanding payments of the loans, including interest, penalties, VAT and other fees.

At various dates in February 2015, the Company and AHC filed a Petition with the Office of Clerk of Court

and Ex-Officio Sheriff of the Regional Trial Court (“RTC”) of Manila, Quezon City and Davao City for the

extra-judicial foreclosure of real estate mortgage over parcels of land and all improvements located thereon

(see Note 17).

On March 13, 2015, Dr. Helena Z. Benitez (“HZB”) filed a Creditor-Initiated Petition for Rehabilitation of

PWU in RTC Manila (“PWU Rehabilitation Case”). The PWU Rehabilitation Case was raffled to Branch

46 of the RTC Manila (“Rehabilitation Court”) (see Note 17).

On March 26, 2015, the Company filed a Notice of Claim with the Rehabilitation Court.

On August 29, 2015, the Rehabilitation Court rendered a decision dismissing the PWU Rehabilitation Case.

After filing of the Motion for Reconsideration and responsive pleadings thereto, on January 21, 2016, the

Rehabilitation Court denied the respective Motions for Reconsideration filed by HZB and PWU (see further

discussion on Note 17).

On March 1, 2016, the Company and AHC executed a Deed of Assignment wherein AHC assigned its AHC

Loan to Unlad, including capitalized foreclosure expenses, amounting to

P=66.7 million for a cash consideration of P=73.8 million. As a result, the Company recognized additional

receivable from Unlad amounting to P=73.8 million. As of March 31, 2016, the Company has paid P=10.0

million of the consideration.

On March 22, 2016, the Company, PWU, Unlad, and HZB entered into a Memorandum of Agreement

(“MOA”) for the extinguishment and settlement of the outstanding obligations of PWU and Unlad to the

Company. The MOA includes, among others, the execution of the following on March 31, 2016:

Deed of Dacion of Quezon City Properties and Davao Property (collectively referred to as the “Deeds”)

in favor of the Company

Release and cancellation of mortgages over the Manila Properties to be executed by the Company

- 22 -

The MOA also provides that the Company will be committed to fund and advance all taxes, expenses and

fees to the extent of P=150.0 million in order to obtain the BIR Certificate Authorizing Registration (“CAR”)

and the issuance of new Transfer Certificates of Title (“TCT”) and Tax Declarations (“TD”) in favor of the

Company. In the event that such expenses are less than P=150.0 million, the excess shall be given to Unlad.

However, if the P=150.0 million will be insufficient to cover the expenses, the Company will provide the

deficiency without any right of reimbursement from Unlad (see Note 12).

Prior to the settlement, the breakdown of the receivables from PWU and Unlad follows:

PWU Unlad* Total

Principal amount P=250,000,000 P=263,000,000 P=513,000,000

Interest** 12,651,546 10,465,046 23,116,592

Auction expenses 23,195,709 951,876 24,147,585

Foreclosure and legal expenses 18,021,970 5,941,989 23,963,959

P=303,869,225 P=280,358,911 P=584,228,136 **Receivable from Unlad includes assigned receivable from AHC amounting to P=73.8 million

**Interest up to December 31, 2012 only

Pursuant to the MOA, on March 31, 2016, the Company and Unlad entered into the Deeds wherein Unlad

transfers four parcels of land in Quezon City and a parcel of land in Davao to the Company for a total

dacion price of P=611.0 million and P=300.0 million, respectively, for the settlement of the outstanding loans

of PWU and Unlad. This resulted in a gain amounting to

P=546.3 million, after recognition of the properties received at fair value, and is presented as “Excess of

consideration received from collection of receivables” in the 2016 parent company statement of

comprehensive income (see Note 10).

Consequently, the Company recognized the Quezon City and Davao properties as “Investment properties”

in the parent company statement of financial position as at March 31, 2016.

(see Note 10).

- 23 -

7. Available-for-sale Financial Assets

This account represents the Company‟s investment in quoted equity securities amounting to

P=731,375 and P=768,725 as at March 31, 2016 and 2015, respectively.

Movement in unrealized mark-to-market gain on available-for-sale financial assets follows:

2016 2015

Balance at beginning of year P=404,258 P=485,598

Unrealized mark-to-market loss (37,350) (81,340)

Balance at end of year P=366,908 P=404,258

8. Investment Properties

Investment properties comprise parcels of land and buildings and improvements located in Quezon City and

Davao City currently held by the Company for capital appreciation. These properties were obtained by the

Company from Unlad through the Deeds executed on March 31, 2016 for a total dacion price of P=911.0

million as settlement of the outstanding obligations of Unlad and PWU to the Company (see Note 8).

As at March 31, 2016, the fair values of STI ESH‟s investment properties are as follows:

Quezon City properties* P=1,006,724,000

Davao property 273,815,000

P=1,280,539,000 *Includes buildings and improvements valued at P=29.1 million

The fair value of was determined by an independent professionally qualified appraiser. The fair value

represents the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date.

Land

Level 3 fair value of the land was estimated using the sales comparison approach. The sales comparison

approach is a comparative approach to value that considers the sales of similar or substitute properties and

related market data and establishes a value estimate by process involving comparison. Listings and

offerings may also be considered.

The following table shows the valuation technique used in measuring the fair value of the land, as well as

the significant unobservable inputs used:

Fair value at March 31, 2016 P=1,251,415,000

Valuation technique Sales comparison approach

Unobservable input External factors – net price per square meter

Internal factors – Location, size, depth

influence, and time element

Relationship of unobservable inputs to fair value The higher the price per square meter,

the higher the fair value

- 24 -

Buildings and Improvements

Level 3 fair values of buildings and improvements have been derived using the cost approach. The cost

approach is a comparative approach to the value of property or another asset that considers as a substitute

for the purchase of a given property, the possibility of constructing another property that is an equivalent to

the original or one that could furnish equal utility with no undue cost resulting from delay. As of March 31,

2016, the fair value of the buildings and improvements amounted to P=29.1 million.

The highest and best use of the Quezon City properties is a mixed-use, commercial and residential other

than its existing use as institutional. The highest best use of the Davao property is institutional utility

(educational purpose).

The difference between the fair value and the dacion price of these investment properties amounting to P=

369.5 million was recognized as part of “Excess of consideration received from collection of receivables” in

the 2016 parent company statement of comprehensive income

(see Note 8).

9. Property and Equipment

The rollforward analyses of this account follow:

2016

Office

Equipment

Leasehold

Improvements

Furniture

and Fixtures

Transportation

Equipment Total

Cost Balance at beginning of year P=505,187 P=16,154,788 P=300,967 P=– P=16,960,942

Additions 84,195 963,755 1,764 627,343 1,677,057

Disposals – – – (627,343) (627,343)

Balance at end of year 589,382 17,118,543 302,731 – 18,010,656

Accumulated Depreciation

and Amortization*

Balance at beginning of year 432,562 7,229,452 225,585 – 7,887,599

Depreciation and amortization 87,880 3,597,910 75,168 83,645 3,844,603

Disposals – – – (83,645) (83,645)


Net Book Value P=68,940 P=6,291,181 P=1,978 P=– P=6,362,099

2015

Office

Equipment

Leasehold

Improvements

Furniture

and Fixtures

Property

under

Construction Total

Cost

Balance at beginning of year P=502,295 P=16,154,788 P=300,967 P=– P=16,958,050

Additions 2,892 – – – 2,892


Accumulated Depreciation and Amortization

Balance at beginning of year 326,910 3,778,621 93,583 – 4,199,114

Depreciation and amortization 105,652 3,450,831 132,002 – 3,688,485


Net Book Value P=72,625 P=8,925,336 P=75,382 P=– P=9,073,343

Cost of fully depreciated property and equipment that are still in use is not material.

- 25 -

10. Accounts payable and other current liabilities


2016 2015

Accounts payable P=86,247,115 P=605,396

Payable to Unlad 64,396,900 –

Payable to AHC 63,778,000 –

Subscription payable to STI WNU (see Note 7) 35,227,650 45,227,650

Accrued expenses (see Note 13) 13,232,182 1,111,612

Others 221,051 168,658

P=263,102,898 P=47,113,316

a. As discussed in Note 8, the MOA provides that the Company is committed to fund and advance all taxes,

expenses and fees to the extent of P=150.0 million to obtain the BIR CAR and the issuance of new TCTs and

TDs of the investment properties in favor of the Company. As of March 31, 2016, the Company

recognized P=85.6 million payable to BIR as part of “Accounts payable” and P=64.4 million as “Payable to

Unlad”. As at July 12, 2016, the Company has already paid P=85.6 million and P=55.0 million of the payable

to BIR and payable to Unlad, respectively.

b. Payable to AHC pertains to the remaining balance of the considerations relative to the assignment of

AHC‟s receivable from Unlad on March 1, 2016 (see Note 8). The Deed of Assignment provides that the

cash consideration will be payable in cash of P=10.0 million upon execution of the Deed of Assignment and

the remaining balance of P=63.8 million within one year.

c. As of March 31, 2016, accrued expenses primarily pertain to accrual for legal fees relative to the

foreclosure proceedings and execution of the MOA and the Deeds.

11. Related Party Transactions

Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, or are

controlled by, or under common control with the Company, including holding companies, and fellow

subsidiaries are related entities of the Company. Associates and individuals owning, directly or indirectly,

an interest in the voting power of the Company that gives them significant influence over the enterprise, key

management personnel, including directors and officers of the Company and close members of the family of

these individuals and companies associated with these individuals also constitute related entities.

The Company, in the normal course of business, has the following transactions with related parties:

Amount of Transactions

for the Year

Outstanding

Receivable (Payable)

Category 2016 2015 2016 2015 Terms Conditions

Subsidiaries

STI ESG

Advisory fee P=14,400,000 P=14,400,000 P=– P=– 30 days upon receipt

of billings;

Noninterest-bearing

Unsecured

Reimbursements 1,230,838 – – – Within 1 year;

Noninterest-bearing

Unsecured

(Forward)

STI WNU

Advisory fee P=3,600,000 P=900,000 P=– P=– 30 days upon receipt

of billings;

Noninterest-bearing

Unsecured

- 26 -

Amount of Transactions

for the Year

Outstanding

Receivable (Payable)

Category 2016 2015 2016 2015 Terms Conditions

Subscription payable

(see Note 12)

(10,000,000) 45,227,650 (35,227,650) (45,227,650) Noninterest-bearing Unsecured

AHC

Advances (1,403,186) 1,403,186 – 1,403,186 Within 1 year; Noninterest-

bearing

Unsecured;

no impairment

Payable to AHC (see Note 12) 73,778,000 – (63,778,000) – Within 1 year; Noninterest-

bearing

Unsecured

Subscription payable – 64,000,000 (64,000,000) (64,000,000) Noninterest-bearing Unsecured

Affiliates*

Phil First Insurance Co., Inc.

Rental and other charges (see

Note 12)

3,676,080 3,826,304 (949,813) (732,857) Within 1 year; Noninterest-

bearing

Unsecured

Information and

Communications

Technology Academy, Inc.

Advances (see Note 5) 41,166 – 41,166 – Within 1 year; Noninterest-

bearing

Unsecured;

no impairment

Officers and Employees

Advances to officers and

employees (see Note 5)

745,865 1,884,356 995,865 1,283,875 Liquidated with-in 1 month;

Noninterest-bearing

Unsecured

(P=162,918,432) (P=107,273,446)

*Affiliates are entities under common control of a majority Shareholder

a. Business Advisory Agreement with STI ESG and STI WNU

In November 2012, the Company and STI ESG entered into an agreement for the Company to act as an

adviser for the latter with a monthly fee of P=1.2 million.

Further, in January 2015, the Company and STI WNU entered into an agreement for the Company to act as

an adviser for the latter with a monthly fee of P=0.3 million.

Advisory fee earned for the years ended March 31, 2016 and 2015 amounted to P=18.0 million and P=15.3

million, respectively.

b. Compensation and Benefits of Key Management Personnel

The Company‟s directors did not receive any compensation from the Company, except for directors‟ fees

paid for each board meeting attended. Key management compensation for the years ended March 31, 2016

and 2015 amounted to P=5.3 million and P=3.8 million, respectively.

12. Equity

a. Common Stock

Details as at March 31, 2016 and 2015 follow:

Shares Amount

Common stock - P=0.50 par value per share

Authorized 10,000,000,000 P=5,000,000,000

Issued and outstanding 9,904,806,924 4,952,403,462

- 27 -

Set out below is the Company‟s track record of registration of its securities:

Number of Shares Issue/ Offer Price

Date of Approval Authorized Issued

December 4, 2007* 1,103,000,000 307,182,211 P=0.50

November 25, 2011** 1,103,000,000 795,817,789 0.60

September 28, 2012*** 10,000,000,000 5,901,806,924 2.22

November 7, 2012 10,000,000,000 2,627,000,000 0.90

November 28, 2012 10,000,000,000 273,000,000 0.90 *** Date when the registration statement covering such securities was rendered effective by the SEC.

*** Date when the Company filed SEC form 10-1(k) (Notice of Exempt Transaction) with the SEC in accordance with the Securities

Regulation Code and its Implementing Rules and Regulations.

*** Date when the SEC approved the increase in authorized capital stock.

As at March 31, 2016 and 2015, the Company has a total number of shareholders on record of 1,256

and 1,246, respectively.

b. Retained Earnings

On September 25, 2015, cash dividends amounting to P=0.02 per share or the aggregate amount of P=

198.1 million were declared by the Company‟s BOD in favor of all stockholders on record as at

October 12, 2015, payable on November 5, 2015.

On September 26, 2014, cash dividends amounting to P=0.02 per share or the aggregate amount of P=

198.1 million were declared by the Company‟s BOD in favor of all stockholders on record as at

October 17, 2014, payable on November 11, 2014.

As at March 31, 2016 and 2015, long outstanding unclaimed dividends amounting to

P=11.9 million pertain to dividend declarations from 1998 to 2006.

13. Basic/Diluted Earnings Per Share

The table below shows the summary of net income and weighted average number of common shares

outstanding used in the calculation of earnings per share:

2016 2015

Net income P=622,538,117 P=239,637,111

Common shares at beginning and end of year 9,904,806,924 9,904,806,924

P=0.063 P=0.024

The basic and diluted earnings per share are the same as at March 31, 2016 and 2015 as there are no dilutive

potential common shares.

- 28 -

14. Income Taxes

The provision for current income tax in 2016 and 2015 represent RCIT and MCIT, respectively.

The reconciliation between the provision for income tax at the applicable statutory tax rate and the

provision for current income tax as shown in the parent company statements of comprehensive income are

as follows:

2016 2015

Provision for income tax at statutory tax rate P=233,272,470 P=71,987,973

Tax effects of:

Dividend income (73,996,175) (73,999,661)

Change in unrecognized deferred tax assets (4,142,974) 1,939,535

Income subjected to final tax (113,470) (177,134)

Nondeductible expenses 16,931 515,305

Expired MCIT – 56,782

P=155,036,782 P=322,800

As at March 31, 2015, the Company did not recognize the deferred tax assets on the following NOLCO and

MCIT as management believes that future taxable income will not be available to allow all or part of

NOLCO and MCIT to be utilized as the Company‟s income mainly pertains to passive income which are

not subject to income tax:

Year Incurred Expiry Date NOLCO MCIT

2015 2018 P=5,723,993 P=322,800

2014 2017 3,515,286 304,800

2013 2016 1,216,212 378,727

P=10,455,491 P=1,006,327

NOLCO amounting to P=10.5 million and MCIT amounting to P=1.0 million were applied against the taxable

income and income tax due, respectively, for the year ended March 31, 2016.

As at March 31, 2016, the Company has no available NOLCO and MCIT.

As at March 31, 2016, the Company recognized deferred tax liability amounting to P=110.9 million pertaining

to the excess of fair value over the dacion price of the properties received through dacion (see Notes 8 and

10).

15. Commitments and Contingencies

Corporate Surety Granted to STI WNU

On November 25, 2014, the BOD of the Company approved and authorized the execution, delivery and

performance of the Surety Agreement with China Banking Corporation (China Bank) as security for the

following obligations of STI WNU: (a) a credit line of P=5.0 million; (b) a long-term loan in the principal

amount of P=300.0 million; and (c) bridge financing in the amount of

P=20.0 million.

- 29 -

Further, the BOD approved and authorized the execution, delivery and performance, as a conforming party,

of the Amendment and Supplemental Agreement to the P=3,000.0 million Corporate Notes Facility

Agreement, by and among STI WNU, China Bank and STI ESG, relative to the long-term financing of STI

WNU in the amount of P=300.0 million.

In December 2014, the Company issued a Surety Agreement in favor of China Bank to secure STI WNU‟s

P=300.0 million long-term loan and P=5.0 million credit line. As of March 31, 2016, STI WNU‟s outstanding

long-term loan amounted to P=275.0 million.

Petition for Foreclosure against PWU and Unlad

In December 2014, the Company and AHC served notices of default to PWU and Unlad

(see Note 8).

Foreclosure of PWU Indiana Property and Taft Properties. On February 10, 2015, the Company filed two

Petitions for Extra-Judicial Foreclosure of Real Estate Mortgage with the Office of the Clerk of Court and

Ex-Officio Sheriff of the RTC of Manila. The first Petition seeks the foreclosure and sale of the PWU Taft

Properties to satisfy the Acquired Loan in the amount of

P=702.4 million as at December 7, 2014. The second Petition seeks the foreclosure and sale of the PWU

Taft Properties and PWU Indiana Property to satisfy the Loan to PWU in the amount of

P=30.7 million as at December 7, 2014. The extra-judicial foreclosure sale for these two Petitions was

scheduled on March 18, 2015, with March 26, 2015 as the alternative date.

On March 18, 2015, the extra-judicial foreclosure sales for the Taft and Indiana Properties of PWU were

conducted and the Company was declared as the winning bidder for both, with a bid of

P=330.6 million for the PWU Taft Properties and P=5.3 million for the PWU Indiana Property.

The Certificates of Sale for these properties were annotated on March 24, 2015.

The Company, AHC, PWU and Unlad have arrived at a settlement over all claims arising from the

Agreements. Under the settlement, PWU was able to redeem the PWU Taft and Indiana Properties (see

Note 8).

Foreclosure of Unlad Quezon City Property. On February 12, 2015, the Company filed two Petitions for

Extra Judicial Foreclosure of Real Estate Mortgage with the Office of the Clerk of Court and Ex-Officio

Sheriff of the RTC of Quezon City. The first Petition seeks the foreclosure and sale of Unlad‟s real estate

properties securing the Acquired Loan in the amount of

P=702.4 million as at December 7, 2014. The first Petition was later amended by an Amended Petition for

Extra-Judicial Foreclosure of Real Estate Mortgage filed on February 18, 2015. The Amended Petition

added Unlad as a party to the case. The second Petition is a Joint Petition with AHC, which seeks the

foreclosure and sale of Unlad‟s real estate properties securing the Loan to Unlad and AHC Loan to Unlad in

the amount of P=223.7 million as at December 7, 2014 and

P=70.3 million as at December 15, 2014, respectively. The extra-judicial foreclosure sale for these two

Petitions was scheduled on March 24, 2015, with April 7, 2015 as the alternative date.

On March 24, 2015, the Executive Judge of RTC Quezon City temporarily suspended the extra-judicial

foreclosure sales of the Unlad properties on the basis of the Commencement Order in the PWU

Rehabilitation Case, as discussed under “PWU Rehabilitation Case” in this note. The Executive Judge of

RTC Quezon City denied the Company‟s Motion for Reconsideration on April 7 2015.

- 30 -

On October 30, 2015, the extra-judicial foreclosure sale of the Unlad properties in Quezon City was

resumed pursuant to a Disposition of the Executive Judge of RTC Quezon City. The Company was

declared the winning bidder, with an aggregate bid of P=407.8 million for Unlad‟s real estate properties

securing the STI Holdings‟ Acquired Loan, STI Holdings Loan to Unlad, and AHC Loan to Unlad. The

Certificates of Sale for the first Petition and second Petition were annotated on December 1, 2015 and

November 13, 2015, respectively.

Under the settlement discussed in Note 8, Unlad ceded to the Company by way of dacion en pago on March

31, 2016 its foreclosed properties in Quezon City and Davao.

Foreclosure of Unlad Davao Property. On February 18, 2015, the Company and AHC filed a Joint Petition

for Extra Judicial Foreclosure of Real Estate Mortgage with the Office of the Clerk of Court and Ex-Officio

Sheriff of the RTC of Davao City. The Joint Petition seeks the foreclosure and sale of Unlad‟s real estate

property in Davao City securing the Loan to Unlad and AHC Loan to Unlad in the amount of P=223.7

million as at December 7, 2014 and P=70.4 million as at December 15, 2014, respectively. The extra-judicial

foreclosure sale for the Unlad Davao property was scheduled on April 17, 2015, with May 22, 2015 as the

alternative date.

On April 17, 2015, the Vice-Executive Judge of the RTC of Davao City temporarily suspended the extra-

judicial foreclosure sale of the Unlad property in Davao City on the basis of the Commencement Order

issued by the Rehabilitation Court, as discussed under “PWU Rehabilitation Case” in this note. The Vice-

Executive Judge of the RTC of Davao City denied the Company‟s Motion for Reconsideration on April 23,

2015.

On June 18, 2015, the Company with AHC filed a Petition for Certiorari and Mandamus with the Court of

Appeals (“CA”) – Mindanao Station to question the decision of the Vice-Executive Judge of RTC Davao

City to temporarily suspend the extra-judicial foreclosure sale on the basis of the Commencement Order

issued in the PWU Rehabilitation Case.

On August 25 2015, the Company wrote a letter to the Office of the Clerk of Court and Ex-Officio Sheriff

of the RTC of Davao City asking for the resumption of the extra-judicial foreclosure sales of the Unlad

property in Davao City due to the dismissal of the PWU Rehabilitation Case. The said letter was referred to

the Executive Judge of RTC Davao City. The Executive Judge of RTC Davao City denied the request of

the Company in a 2nd Indorsement dated August 26, 2015 due to the pendency of the Petition for Certiorari

and Mandamus with the CA questioning the suspension of the extra-judicial foreclosure sale of the Unlad

Property in Davao City.

On August 28 2015, the Company and AHC filed a Verified Motion to Withdraw the Petition for Certiorari

and Mandamus with the CA because the subject of the matter of the case has been rendered moot and

academic by the dismissal of the PWU Rehabilitation Case.

On January 12, 2016, the Company wrote another letter to the Office of the Clerk of Court and Ex-Officio

Sheriff of the RTC of Davao City asking for the resumption of the extra-judicial foreclosure sale of the

Unlad property in Davao City. The Company informed the Office of the Clerk of Court and Ex-Officio

Sheriff of the RTC of Davao City, in this letter, of the Verified Motion to Withdraw the Petition for

Certiorari and Mandamus that it filed with the CA together with AHC. The subject letter was referred to the

Executive Judge of RTC Davao City. The Executive Judge of RTC Davao City, in a 2nd Indorsement dated

January 27, 2016, granted the request of the Company and ordered the resumption of the extra-judicial

foreclosure sale of the Unlad Property in Davao City. The extra-judicial foreclosure sale was set on

March 10, 2016, with April 7, 2016 as the alternative date.

- 31 -

On January 25, 2016, the CA – Mindanao Station granted the withdrawal of the Petition for Certiorari and

Mandamus filed by the Company and AHC.

On March 10, 2016, the foreclosure sale proceeded where the Company was declared as the highest bidder.

As discussed in Note 8, Unlad ceded to the Company by way of dacion en pago on

March 31, 2016 its foreclosed properties in Quezon City and Davao.

Complaint filed by the Heirs of the Family of Villa-Abrille relative to Unlad’s Davao Property. On October

21, 2015, the Company and AHC each received copies of the Complaint filed by the Heirs of Carlos Villa-

Abrille, Heirs of Luisa Villa-Abrille, Heirs of Candelaria V.A. Tan, Heirs of Adolfo V.A. Lim, Heirs of

Saya V.A. Lim Chiu, Heirs of Guinga V.A. Lim Lu, Heirs of Rosalia V.A. Lim Lua, Heirs of Lorenzo V.A.

Lim, and Heirs of Fermin Abella against the Philippine Women‟s Educational Association (“PWEA”),

Unlad, STI Holdings, and AHC for cancellation of certificate of title, reconveyance of real property,

declaration of nullity of real estate mortgage, damages, and attorney‟s fees. The subject matter of the case

is Unlad‟s property located in Davao City.

The Plaintiffs claim that ownership of Unlad‟s property in Davao City should revert back to them because

PWEA and Unlad violated the restrictions contained in the Deed of Sale covering the property. The

restrictions referred to by the Plaintiffs provide that PWEA shall use the land for educational purposes only

and shall not subdivide the land for purposes of resale or lease to other persons. The Plaintiffs also claim

that the real estate mortgage constituted over Unlad‟s property in Davao City in favor of the Company and

AHC should be declared null and void because PWEA and Unlad have no capacity to mortgage the

property based on the restrictions contained in the Deed of Sale.

On November 20, 2015, the Company and AHC filed the Motion to Dismiss (“First Motion to Dismiss”).

In the First Motion to Dismiss, the Company and AHC asserted that the Plaintiffs‟ cause of action against

PWEA and Unlad has prescribed considering that the alleged violation of the restrictions in the Deed of

Sale occurred in 1987 or more than ten (10) years from the filing of the case. In addition, Plaintiffs cannot

seek the cancellation of the real estate mortgage in favor of the Company and AHC because (a) Plaintiffs

are not privy/real parties in interest to the said mortgage, and (b) the restrictions in the title and Deed of Sale

do not prohibit the mortgage of the subject property. The First Motion to Dismiss was scheduled by the

Trial Court on December 4, 2015.

On December 4, 2015, the Plaintiffs failed to attend the hearing of the Motion to Dismiss. The Trial Court

instead ordered the Plaintiffs to file their comment to the Motion to Dismiss within ten (10) days from

receipt of its order while the Company and AHC are given the same period to file their reply thereto.

The Trial Court also noticed that the records failed to show that PWEA and Unlad received the Summons.

The Trial Court then ordered the branch sheriff to cause the service of the Summons to PWEA and Unlad.

Despite the extensions given to the Plaintiffs, Plaintiffs belatedly filed its Comment/Opposition to the First

Motion to Dismiss. Subsequently, the Company and AHC filed a Second Motion to Dismiss dated March

22, 2016 (“Second Motion to Dismiss”). In the Second Motion to Dismiss, the Company and AHC

informed the Trial Court that they were able to discover that the plaintiffs filed a similar case against PWEA

and Unlad with another Trial Court of Davao City, which was dismissed without qualifications for their

failure to comply with the said Trial Court‟s order. Said dismissal was eventually affirmed with finality by

the Supreme Court. Because of this information, the Company and AHC moved to dismiss the case for res

judicata and willful and deliberate forum shopping for filing the same case to the Trial Court.

On April 22, 2016, Plaintiffs failed to attend the hearing of the aforesaid Motions. The Trial Court instead

ordered the Plaintiffs to file their Comment to the Omnibus Motion within a non-extendible period of five

(5) days, after which, the same shall be submitted for resolution.

- 32 -

Likewise, the Trial Court ordered the Plaintiffs to file their Comment to the Second Motion to Dismiss

within ten (10) days from receipt of its Order. The Company and AHC were likewise given the same period

to file their responsive pleading thereto.

On May 16, 2016, the Company and AHC received the Plaintiffs‟ Comment to the Omnibus Motion,

wherein they sought for liberality of the rules to allow the belated filing of their Comment/Opposition to the

First Motion to Dismiss.

On May 18, 2016, the Company and AHC received Plaintiff‟s Comment/Opposition to the Second Motion

to Dismiss. Plaintiffs asserted that the elements of res judicata are not present in the instant case.

On May 30, 2016, the Company and AHC filed their Reply to the Plaintiffs‟ Court/Opposition to the

Second Motion to Dismiss.

As at July 12, 2016, the First and Second Motion to Dismiss are still pending for resolution by the Trial

Court.

PWU Rehabilitation Case. On March 13, 2015, Dr. Helena Z. Benitez filed a Creditor-Initiated Petition for

Involuntary Rehabilitation of PWU in RTC Manila (the “PWU Rehabilitation Case”). The PWU

Rehabilitation Case was raffled to Branch 46 of the RTC Manila (“Rehabilitation Court”).

On March 20, 2015, the Rehabilitation Court issued a Commencement Order declaring PWU to be under

rehabilitation. The Commencement Order contains a Stay Order, which among others, effectively suspends

all actions or proceedings enforcing all claims against PWU in court or otherwise.

On March 26, 2015, the Company filed a Notice of Claim with the Rehabilitation Court. Under the Notice

of Claim, PWU has outstanding obligations amounting to P=763.6 million as of

March 25, 2015.

On April 8, 2015, the Company filed its Opposition to the PWU Rehabilitation Case.

On May 26, 2015, the Rehabilitation Court referred the PWU Rehabilitation Case to the Rehabilitation

Receiver for evaluation. The Rehabilitation Receiver was given forty days from May 26, 2015 to consider

whether the rehabilitation of PWU is feasible or not.

On August 29, 2015, the Rehabilitation Court rendered the decision to dismiss the PWU Rehabilitation

Case, for being, among others, a sham filing and ordered the lifting of the Stay Order.

After filing of the Motion for Reconsideration and responsive pleadings thereto, on January 21, 2016, the

Rehabilitation Court denied the respective Motion for Reconsideration filed by HZB and PWU.

PWU filed a Petition for Certiorari with Application for Temporary Mandatory/Restraining Order and/or

Writ of Preliminary Injunction dated February 26, 2016 to the CA. Subsequently, HZB filed her Petition for

Certiorari (with Urgent Application for Temporary Restraining Order And/or Writ of Preliminary

Injunction) dated February 29, 2016 to the CA.

Eventually, both PWU and HZB filed their Motion for Withdrawal of their Petition for Certiorari dated

April 11, 2016 to the CA.

On May 13, 2016, the Motion to Withdraw the Petition for Certiorari of PWU was granted by the CA.

- 33 -

As of July 12, 2016, the Motion to Withdraw for Petition for Certiorari of HZB is pending for resolution of

the CA.

Derivative Suit filed by Mr. Conrado Benitez

Mr. Conrado L. Benitez (the “Complainant”) filed a Request for Arbitration, with Philippine Dispute

Resolution Center, Inc. (“PDRCI”), for and on behalf of PWU and Unlad, wherein he requested that the

directors/trustees and stockholders/members of Unlad and PWU, EHT, STI Holdings, Mr. Alfredo Abelardo

B. Benitez (“ABB”) and AHC (collectively, the “Defendants”) submit the alleged dispute over the

settlement of the loan obligations of PWU and Unlad as provided in the arbitration clause of the Joint

Venture Agreement and Omnibus Agreement (the “Loan Documents”). This was done before the

Complainant filed the Civil Case.

On June 29, 2016, the Complainant then filed a derivative suit for himself and on behalf of Unlad and PWU

against the Defendants docketed as Civil Case No. 16-136130 in the RTC of Manila (the “Derivative Suit”).

The Derivative Suit was raffled to Branch 24 of the RTC of Manila presided over by Judge Ma. Victoria A.

Soriano-Villadolid.

In the Derivative Suit, the Complainant primarily asserts that STI Holdings, EHT, ABB and AHC should

submit themselves to the arbitration proceedings filed with the PDRCI because the Loan Documents

required any alleged dispute over the same to be resolved through arbitration. Consequently, the

Complainant alleges that the foreclosure proceedings and settlement of the obligations of PWU and Unlad

as evidenced by the Memorandum of Agreement dated

March 22, 2016 executed by PWU and Unlad with STI Holdings and AHC are null and void for not

complying with the aforesaid arbitration clause. Likewise, the Complainant sought the payment of

attorney‟s fees not less than P=1.0 million, P=0.1 million, and cost of suit.

The Defendants have 15 days from receipt or until July 26, 2016 to file an Answer to the Derivative Suit.

Specific Performance Case filed by the Agustin Family

The Agustin family filed a Specific Performance case against the Parent Company for the payment by the

latter of the remaining balance of the purchase price for the sale of the Agustin Family‟s shares in STI

WNU.

The Agustin family alleges in their Complaint that based on the Share Purchase Agreement and Deed of

Absolute Sale they executed with the Company, the price of their shares in STI WNU has been pegged at P=

400.0 million. Despite these two agreements, the Company refuses to pay the full purchase price for the STI

WNU shares they acquired from the Agustin family.

- 34 -

In its Answer, the Company stated that the Agustin family is not entitled to the full purchase price of their

STI WNU shares because they have not complied with all the requirements for its release. In particular, the

Agustin family has not been able to deliver the Commission on Higher Education permits for the operation

of STI WNU‟s Maritime Program as provided in the MOA, and the Share Purchase Agreement. In addition,

there are other trade receivables in favor of STI WNU wherein full satisfaction of the same entitles the

Agustins a portion of the balance of the purchase price.

On June 2, 2016, the Company received the Agustins' Reply to the Answer. In the Reply, the Agustin

family are asserting that (a) the Memorandum of Agreement, Share Purchase Agreement and Deed of

Absolute Sale (the “STI WNU Contracts”) provide that the Company can withhold the payment of the

remaining balance of P=50.0 million, which alleged to be pursuant to the license to operate the Maritime

Programs of STI WNU, and (b) the Company should be deemed to have agreed on the P=400.0 million

purchase price. Likewise, the allegations in the Answer are also against the Parol Evidence Rule which

provides that the parties to a written agreement cannot change the stipulations provided therein.

The Agustin family also filed and served a Request for Admission to the Company‟s counsel wherein they

sought the Company to submit (a) the existences and authenticity of the STI WNU Contracts, (b) issues of

the instant case are (i) determination of the final purchase price based on the STI WNU Contracts and (ii)

final purchase price should be either the P=400.0 million or the adjusted price of P=350.0 million, and (c) the

STI WNU Contracts constitute the entire written agreement of the parties.

On June 17, 2016, the Company filed its Comment/Opposition to the Agustin family‟s Request for

Admission. In the Comment/Opposition, the Company filed their objections thereto and sought the same to

be denied or deemed ineffectual on the following grounds; (a) defective service because it should have been

served directly to the Company and not to its counsel as required under the Rules of Court, (b) redundant

because the matters raised therein have already been addressed in the Answer, and (c) improper and

irrelevant because it sought admission of issues which are proper during pre-trial and not in a Request for

Admission.

Besides the Trial Court‟s resolutions on the aforesaid objections to the Request for Admission, the case may

be referred to pre-trial and/or court-annexed mediation unless the Agustin family filed any other motions or

pleading.

16. Financial Risk Management Objectives and Policies

The Company‟s principal financial instruments comprise cash and cash equivalents. The main purpose of

these financial assets is to support the Company‟s operations. The Company has various other financial

assets and liabilities such as receivables, available-for-sale financial assets, accounts payable and other

current liabilities, dividends payable, nontrade payable and subscription payable which arise directly from

its operations.

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 are summarized

below.

Credit Risk. Credit risk is the risk that the Company will incur a loss arising from its debtors or

counterparties that fail to discharge their contractual obligations. Credit risk arises from deposits and short-

term placements with banks as well as credit exposure on receivables from its debtors. Cash transactions

are limited to high credit quality financial institutions. Cash in banks and short-term cash placements are

maintained with universal banks. On the other hand, management believes that the debtors have a strong

financial position and ability to settle its payable to the Company upon maturity.

- 35 -

As at March 31, 2016 and 2015, the Company‟s receivables (including noncurrent receivables) are

classified as high grade. As at March 31, 2015, the Company‟s noncurrent receivables are secured by PWU

and Unlad properties located in Manila, Quezon City and Davao with estimated fair values adequate to

cover the settlement of the noncurrent receivables (see Note 8).

The Company‟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, the exposure to credit

risk arises from default of the counterparty, with a maximum exposure to the carrying amount of these

financial instruments.

The table below shows the maximum exposure to credit risk for the components of the parent company

statements of financial position as at March 31:

Gross Maximum Exposure Net Maximum Exposure

*

2016 2015 2016 2015

Cash and cash equivalents:

Cash in banks P=14,825,433 P=4,394,420 P=13,825,433 P=3,149,923

Cash equivalents – 26,166,899 – 25,911,396

Receivables 1,131,381 498,159,424 1,131,381 2,687,061

AFS financial assets 731,375 768,725 731,375 768,725

Total P=16,688,189 P=529,489,468 P=15,688,189 P=32,517,105 *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

Liquidity Risk. Liquidity risk relates to the failure of the Company to settle its obligations/commitments as

they fall due. The Company observes prudent liquidity risk management through the maintenance of

sufficient cash funds and short-term cash placements, and availability of funding in the form of adequate

credit lines.

The tables below summarize the maturity profile of the Company‟s financial assets held for liquidity

purposes and liabilities based on contractual undiscounted payments:

2016

Due within

3 Months

Due from

3 to 6 Months

More than

6 Months Total

Financial assets:

Cash and cash equivalents P=14,830,433 P=– P=– P=14,830,433

Receivables 1,131,381 – - 1,131,381

AFS financial assets – – 731,375 731,375

P=15,961,814 P=– P=731,375 P=16,693,189

Financial liabilities:

Accounts payable P=86,247,115 P=– P=– P=86,247,115

Accrued expenses 13,232,182 – – 13,232,182

Payable to Unlad 64,396,000 – – 64,396,000

Payable to AHC 63,778,000 – – 63,778,000

Nontrade payable 67,000,000 – – 67,000,000

Dividends payable 11,898,945 – – 11,898,945

Subscription payable – – 99,227,650 99,227,650

P=306,552,242 P=– P=99,227,650 P=405,779,892

2015

Due within

3 Months

Due from

3 to 6 Months

More than

6 Months Total

Financial assets:

Cash and cash equivalents P=30,566,319 P=– P=– P=30,566,319

Receivables 2,687,061 – 495,472,363 498,159,424

- 36 -

AFS financial assets – – 768,725 768,725

P=33,253,380 P=– P=496,241,088 P=529,494,468

Financial liabilities:

Accrued expenses P=1,111,612 P=– P=– P=1,111,612

Accounts payable 605,396 – – 605,396

Dividends payable 11,898,945 – – 11,898,945

Nontrade payable 95,650,000 – – 95,650,000

Subscription payable – – 109,227,650 109,227,650

P=109,265,953 P=– P=109,227,650 P=218,493,603

Correspondingly, the financial assets that can be used by the Company to manage its liquidity risk as at

March 31, 2016 and 2015 consist of cash and cash equivalent and receivables.

As at March 31, 2016 and 2015, the Company‟s current ratios are as follows:

2016 2015

Current assets P=22,147,052 P=47,203,579

Current liabilities 376,507,448 154,662,261

Current ratio 0.059:1.000 0.305:1.000

Capital Risk Management

The Company aims to achieve an optimal capital structure in pursuit of its business objectives which include

maintaining healthy capital ratios and strong credit ratings, and maximizing shareholder value.

The Company monitors capital on the basis of the debt-to-equity ratio which is calculated as total debt

divided by total equity. The Company includes all liabilities within debt. The Company defines total

equity as common stock, additional paid-in capital, unrealized mark-to-market gain on AFS financial assets

and retained earnings.

As at March 31, 2016 and 2015, the Company‟s debt-to-equity ratios are as follows:

2016 2015

Total liabilities P=551,369,148 P=218,662,261

Total equity 16,779,785,345 16,355,380,716

Debt-to-equity ratio 0.033:1.000 0.013:1.000

Another approach used by the Company is the asset-to-equity ratios shown below:

2016 2015

Total assets P=17,331,154,493 P=16,574,357,977

Total equity 16,779,785,345 16,355,380,716

Asset-to-equity ratio 1.033:1.000 1.013:1.000

There were no changes in the Company‟s approach to capital risk management for the years ended March

31, 2016 and 2015.

17. Fair Value Information of Financial Instruments

The carrying values of the Company‟s financial assets and liabilities, except for available-for-sale financial

assets and noncurrent receivables, approximate their fair values as at March 31, 2016 and 2015 due to short-

term nature and/or maturities of these financial instruments.

- 37 -

As at March 31, 2016 and 2015, the Company‟s AFS financial assets are measured at fair value based on

quoted market prices under Level 1 fair value hierarchy.

The Company‟s noncurrent receivables are disclosed at an estimated fair value of P=1,284.1 million as of

March 31, 2015 based on discounted present value of expected future cash flows using a credit-adjusted

discount rate under Level 3 fair value hierarchy.

For the years ended March 31, 2016 and 2015, there were no transfers among levels 1, 2 and 3 fair value

measurements.

There were no financial instruments subject to an enforceable master netting arrangement that were not set-

off in the parent company statements of financial position.

18. Notes to Parent Company Statements of Cash Flows

The Company has no material non-cash investing and financing activities except for the following:

a. Assignment of AHC‟s receivable from UNLAD to the Company in March 2016 with remaining unpaid

consideration amounting to P=63.8 million as at March 31, 2016 (see Notes 8 and 12).

b. Acquisition of investment property through dacion amounting to P=1,280.5 million resulted to

recognition of payable to BIR amounting to P=85.6 million and payable to Unlad amounting to P=64.4

million as at March 31, 2016 to fund and advance all taxes, expenses and fees to the extent of P=150.0

million to obtain the BIR CAR and the issuance of new TCTs and TDs of the dacion properties in favor

of the Company, pursuant to the MOA (see Notes 8 and 12).

c. Acquisition of AHC in February 2015 with unpaid subscription amounting to P=54.0 million and P=64.0

million as at March 31, 2016 and 2015, respectively.

19. Events after Reporting Date

On June 29, 2016, Mr. Conrado Benitez filed a derivative suit for himself and on behalf of Unlad and PWU

against the directors/trustees and stockholders/members of Unlad and PWU, EHT, STI Holdings, ABB and

AHC in the RTC of Manila (see Note 17).

- 38 -

20. Supplementary Information Required by Revenue Regulations (RR) No. 15-2010

In compliance with the requirements set forth by RR No. 15-2010, hereunder are the information on taxes,

duties and license fees paid or accrued during the taxable year ended March 31, 2016:

VAT

Output VAT declared for the year ended March 31, 2016 and the receipts upon which the same was based

consist of:

Gross amount Output VAT

Advisory services P=18,000,000 P=2,160,000

Others 833,422 100,011

Total P=18,833,422 P=2,260,011

VAT arising from domestic purchases of goods and services for the year ended March 31, 2016 are detailed

as follows:

Amount

Input VAT

Beginning of year P=5,226,289

Current year‟s domestic purchases / payments for:

Goods other than capital goods 27,381

Domestic purchases of services 1,404,795

Input VAT claimed attributable to purchased capital goods

exceeding P=1.0 million 78,580

6,737,045

Claimed against output VAT and other adjustments (2,260,011)

Balance at the end of year P=4,477,034

Withholding Taxes

The amount of withholding taxes paid/accrued for the year ended March 31, 2016 is as follows:

Amount

Final withholding taxes on dividends P=9,748,061

Expanded withholding taxes 503,403

Withholding taxes on compensation 991,088

P=11,242,552

Other Taxes and Licenses

The breakdown of other taxes and licenses recognized as part of “Taxes and licenses” account for the year

ended March 31, 2016 are as follows:

Amount

Annual listing maintenance fee P=425,907

License and permit fees 559,500

BIR annual registration fee 500

P=985,907

- 39 -

*SGVFS019586*

C O V E R S H E E Tfor

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

1 7 4 6

C O M P A N Y N A M E

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 . A N D S U B S I D I A R I E S

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

7 t h F l o o r , S T I H o l d i n g s C e n t e r

, 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

Form Type Department requiring the report Secondary License Type, If Applicable

1 7 - A C R M D

C O M P A N Y I N F O R M A T I O N

Company’s Email Address Company’s Telephone Number Mobile Number

N/A (632) 844 9553 N/A

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

1,256 Last Friday of September 03/31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Arsenio C. Cabrera, Jr. [email protected] (632) 813-7111

CONTACT PERSON’s ADDRESS

5/F SGV-II BUILDING, 6758 AYALA AVENUE, MAKATI CITY

NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to theCommission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact persondesignated.

2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records withthe Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation fromliability for its deficiencies.

*SGVFS019586*

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsSTI Education Systems Holdings, Inc.7/F STI Holdings Center6764 Ayala AvenueMakati City

We have audited the accompanying consolidated financial statements of STI Education SystemsHoldings, Inc. and Subsidiaries, which comprise the consolidated statements of financial positionas at March 31, 2016 and 2015, and the consolidated statements of comprehensive income, statementsof changes in equity and statements of cash flows for each of the three years in the period endedMarch 31, 2016, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated 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 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018


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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, 2016and 2015, and their financial performance and their cash flows for each of the three years in the periodended March 31, 2016 in accordance with accounting principles generally accepted in the Philippinesas described in Note 2 to the consolidated financial statements.

SYCIP GORRES VELAYO & CO.

Benjamin N. VillacortePartnerCPA Certificate No. 111562SEC Accreditation No. 1539-A (Group A), March 3, 2016, valid until March 3, 2019Tax Identification No. 242-917-987BIR Accreditation No. 08-001998-120-2016, February 15, 2016, valid until February 14, 2019PTR No. 5321710, January 4, 2016, Makati City

July 12, 2016


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March 312016 2015

Total Liabilities (Brought Forward) P=2,269,933,120 P=2,380,341,996Equity Attributable to Equity Holders of the Parent Company

(Note 19)Capital stock 4,952,403,462 4,952,403,462Additional paid-in capital 1,119,079,467 1,119,079,467Cost of shares held by a subsidiary (500,009,337) (500,009,337)Cumulative actuarial gain 15,729,797 20,414,150Unrealized mark-to-market loss on available-for-sale financial assets

(Note 15) (373,642) (937)Other equity reserve (Note 3) (1,658,272,599) (1,653,497,803)Share in associates’:

Unrealized mark-to-market gain on available-for-sale financial assets (Note 12) 120,917,874 418,977,664

Cumulative actuarial loss (Note 12) (18,002,502) (18,556,430)Retained earnings 4,107,181,601 3,233,915,182 Total Equity Attributable to Equity Holders

of the Parent Company 8,138,654,121 7,572,725,418Equity Attributable to Non-controlling Interests 91,649,812 82,980,575

Total Equity 8,230,303,933 7,655,705,993TOTAL LIABILITIES AND EQUITY P=10,500,237,053 P=10,036,047,989

See accompanying Notes to Consolidated Financial Statements.

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STI EDUCATION SYSTEMS HOLDINGS, INC.AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended March 312016 2015 2014

REVENUESSale of services:

Tuition and other school fees P=2,274,860,553 P=1,948,760,825 P=1,643,899,885Educational services 184,262,754 173,963,490 182,182,989Royalty fees 15,935,475 14,795,099 16,294,660Others 28,647,142 23,147,841 17,267,992

Sale of goods -Sale of educational materials and supplies 73,015,944 63,312,828 58,001,750

2,576,721,868 2,223,980,083 1,917,647,276

COSTS AND EXPENSESCost of educational services (Note 21) 728,291,674 655,635,282 553,019,985Cost of educational materials and supplies sold

(Note 22) 69,808,073 59,509,120 53,341,680General and administrative expenses (Note 23) 1,075,808,653 992,208,496 838,510,401

1,873,908,400 1,707,352,898 1,444,872,066

INCOME BEFORE OTHER INCOMEAND INCOME TAX 702,813,468 516,627,185 472,775,210

OTHER INCOME (EXPENSES)Excess of consideration received from collection of

receivables (Note 14) 553,448,521 – –Gain (loss) on:

Sale of property and equipment (466,998) 320,300 706,578Exchange of land (Note 11) – 172,137,167 –

Interest expense (Note 20) (63,223,407) (28,242,405) (10,926,797)Rental income (Notes 11, 26 and 28) 63,152,578 31,601,058 10,792,540Interest income (Note 20) 5,785,710 6,059,784 12,199,579Equity in net earnings of associates and joint ventures

(Note 12) 34,994,156 105,290,495 232,818,520Excess of fair values of net assets acquired over

acquisition cost from a business combination(Note 3) – 2,091,425 32,681,078

Loss on deemed sale and share swap of an associate(Note 15) – – (43,000,287)

Dividend and other income (expense) (Notes 3 and 15) 2,830,674 (6,331,522) 510,329596,521,234 282,926,302 235,781,540

INCOME BEFORE INCOME TAX 1,299,334,702 799,553,487 708,556,750

PROVISION FOR (BENEFIT FROM) INCOMETAX (Note 27)

Current 123,414,765 58,324,106 70,633,909Deferred 103,237,746 9,819,932 (17,275,026)

226,652,511 68,144,038 53,358,883

NET INCOME (Carried Forward) 1,072,682,191 731,409,449 655,197,867

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NET INCOME (Brought Forward) P=1,072,682,191 P=731,409,449 P=655,197,867

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

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

loss on available-for-sale financial assets(Note 12) (302,103,268) (9,401,763) (1,496,110,186)

Unrealized mark-to-market gain (loss) onavailable-for-sale financial assets (Note 15) (377,254) 532,324 (409,190)

(302,480,522) (8,869,439) (1,496,519,376)Items not to be reclassified to profit or loss in

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

on pension liability (Note 12) 561,443 (3,600,870) (8,272,379)Remeasurement gain (loss) on pension liability

(Note 25) (5,306,329) 2,658,744 (3,732,410)Income tax effect 537,225 (265,824) 411,355

(4,207,661) (1,207,950) (11,593,434)

OTHER COMPREHENSIVE LOSS, NET OFTAX (306,688,183) (10,077,389) (1,508,112,810)

TOTAL COMPREHENSIVE INCOME (LOSS) P=765,994,008 P=721,332,060 (P=852,914,943)

Net Income Attributable ToEquity holders of the Parent Company P=1,061,316,401 P=731,701,208 P=681,123,230Non-controlling interests 11,365,790 (291,759) (25,925,363)

P=1,072,682,191 P=731,409,449 P=655,197,867

Total Comprehensive Income (Loss) AttributableTo

Equity holders of the Parent Company P=758,753,481 P=721,796,436 (P=807,556,959)Non-controlling interests 7,240,527 (464,376) (45,357,984)

P=765,994,008 P=721,332,060 (P=852,914,943)

Basic/Diluted Earnings Per Share on Net IncomeAttributable to Equity Holders of the ParentCompany (Note 29) P=0.107 P=0.074 P=0.069


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STI EDUCATION SYSTEMS HOLDINGS, INC.AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED MARCH 31, 2016, 2015 AND 2014

Equity Attributable to Equity Holders of the Parent Company (Note 19)

AdditionalCost of Shares

Held byCumulative

Actuarial

UnrealizedMark-to-market

Loss onAvailable-

for-sale Financial Other Equity

Share inAssociates’Unrealized

Mark-to-marketGain on

Available-for-sale

Financial

Share inAssociates’Cumulative

Actuarial Retained Earnings

EquityAttributable

to Non-controlling

Capital Stock Paid-in Capital a Subsidiary Gain Assets (Note 15) Reserve Assets (Note 12) Loss (Note 12) Appropriated Unappropriated Total Interests Total Equity

Balance at April 1, 2015 P=4,952,403,462 P=1,119,079,467 (P=500,009,337) P=20,414,150 (P=937) (P=1,653,497,803) P=418,977,664 (P=18,556,430) P=– P=3,233,915,182 P=7,572,725,418 P=82,980,575 P=7,655,705,993Net income – – – – – – – – – 1,061,316,401 1,061,316,401 11,365,790 1,072,682,191Other comprehensive income (loss) – – – (4,684,353) (372,705) – (298,059,790) 553,928 – – (302,562,920) (4,125,263) (306,688,183)Total comprehensive income – – – (4,684,353) (372,705) – (298,059,790) 553,928 – 1,061,316,401 758,753,481 7,240,527 765,994,008Dividend declaration (Note 19) – – – – – – – – – (188,049,982) (188,049,982) – (188,049,982)Acquisition of non-controlling interests by a subsidiary – – – – – (4,774,796) – – – – (4,774,796) 4,774,796 –Share of non-controlling interest on dividends declared

by a subsidiary (Note 19) – – – – – – – – – (3,346,086) (3,346,086)

Balance at March 31, 2016 P=4,952,403,462 P=1,119,079,467 (P=500,009,337) P=15,729,797 (P=373,642) (P=1,658,272,599) P=120,917,874 (P=18,002,502) P=– P=4,107,181,601 P=8,138,654,121 P=91,649,812 P=8,230,303,933

Balance at April 1, 2014 P=4,952,403,462 P=1,119,079,467 (P=500,009,337) P=18,014,452 (P=525,048) (P=1,653,497,803) P=428,253,571 (P=15,003,756) P=– P=2,690,263,952 P=7,038,978,960 P=89,191,035 P=7,128,169,995Net income – – – – – – – – – 731,701,208 731,701,208 (291,759) 731,409,449Other comprehensive income (loss) – – – 2,399,698 524,111 – (9,275,907) (3,552,674) – – (9,904,772) (172,617) (10,077,389)Total comprehensive income – – – 2,399,698 524,111 – (9,275,907) (3,552,674) – 731,701,208 721,796,436 (464,376) 721,332,060Dividend declaration (Note 19) – – – – – – – – – (188,049,978) (188,049,978) – (188,049,978)Share of non-controlling interest on dividends declared

by subsidiaries (Note 19) – – – – – – – – – – – (5,746,084) (5,746,084)

Balance at March 31, 2015 P=4,952,403,462 P=1,119,079,467 (P=500,009,337) P=20,414,150 (P=937) (P=1,653,497,803) P=418,977,664 (P=18,556,430) P=– P=3,233,915,182 P=7,572,725,418 P=82,980,575 P=7,655,705,993

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

(Note 19) – – – – – – – (800,000,000) 800,000,000 – – –Dividend declaration (Note 19) – – – – – – – (142,391,445) (142,391,445) – (142,391,445)Reallocation of non-controlling interests (Note 3) – – – (6,481) 609 (4,049,409) (160,649) 8,379 – – (4,207,551) 3,354,426 (853,125)Share of non-controlling interest on dividends declared

by subsidiaries (Note 19) – – – – – – – – – (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=18,014,452 (P=525,048) (P=1,653,497,803) P=428,253,571 (P=15,003,756) P=– P=2,690,263,952 P=7,038,978,960 P=89,191,035 P=7,128,169,995


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STI EDUCATION SYSTEMS HOLDINGS, INC.AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS


CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax P=1,299,334,702 P=799,553,487 P=708,556,750Adjustments to reconcile income before income tax to net cash

flows:Excess of consideration received from collection of receivables (553,448,521) – –Equity in net earnings of associates and joint ventures

(Note 12) (34,994,156) (105,290,495) (232,818,520)Depreciation and amortization (Notes 10, 11 and 16) 358,130,553 295,736,887 205,551,974Gain on exchange of land (Note 11) – (172,137,167) –Interest expense (Note 20) 63,223,407 28,242,405 10,926,797Pension expense (Note 25) 16,574,152 16,458,410 10,133,891Interest income (Notes 20) (5,785,710) (6,059,784) (12,199,579)Dividend income (Note 15) (2,830,674) (1,482,386) (510,329)Loss (gain) on sale of property and equipment 466,998 (320,300) (706,578)Provision for (reversal of) impairment losses on investment in

and advances to an associate (Note 23) 519,414 – (719,873)Excess of acquisition cost over fair value of net assets acquired

(Note 3) – 9,646,137 –Excess of fair values of net assets acquired over acquisition

costs from a business combination (Note 3) – (2,091,425) (32,681,078)Loss on deemed sale and share swap of an associate (Note 15) – – 43,000,287

Operating income before working capital changes 1,141,190,165 862,255,769 698,533,742Decrease (increase) in:

Receivables (23,278,719) 84,006,604 12,319,381Inventories (4,138,069) 3,830,121 (2,949,649)Prepaid expenses and other current assets (128,975) 4,143,703 (4,452,498)

Increase (decrease) in:Accounts payable and other current liabilities (248,891,821) (181,406,317) (108,249,578)Unearned tuition and other school fees 33,521,956 10,961,146 4,279,258Other noncurrent liabilities 31,364,795 – –

Contributions to plan assets (Note 25) (12,717,504) (11,225,481) (20,244,897)Net cash generated from operations 916,921,828 772,565,545 579,235,759Income and other taxes paid (71,122,774) (56,913,890) (134,479,338)Interest received 5,785,710 6,077,016 12,425,355Net cash flows from operating activities 851,584,764 721,728,671 457,181,776

CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of:

Property and equipment (Notes 10 and 34) (335,180,807) (1,226,836,158) (1,049,885,679)Investment properties (Notes 11 and 34) (6,360,205) – (3,981,559)Subsidiary, net of cash acquired (Note 3) – (57,765,926) (200,913,272)Available-for-sale financial assets – – (19,519,759)

Decrease (increase) in:Investments in and advances to associates and joint ventures (52,956,814) (6,986,101) (231,276)Intangible assets and other noncurrent assets (52,144,657) (5,328,978) (65,656,047)Noncurrent receivables (15,214,930) (32,896,614) –

(Forward)

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Dividends received P=2,437,946 P=2,458,436 P=8,117,279Nontrade payable (28,650,000) (55,820,221) –Proceeds from sale of property and equipment 510,210 320,300 1,798,746Net cash flows used in investing activities (487,559,257) (1,382,855,262) (1,330,271,567)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from availments of:

Long-term loans – 1,475,000,000 –Short-term loans – 425,000,000 280,000,000

Payments of:Long-term loans (236,000,000) (196,406,200) (40,677,196)Short-term loans – (605,000,000) (100,000,000)Obligations under finance lease (9,438,557) (8,431,128) (8,291,192)

Interest paid (65,863,875) (17,526,148) (3,090,411)Dividends paid (188,049,982) (188,015,674) (142,367,122)Dividends paid to non-controlling interests (3,346,086) (3,346,086) (18,673,109)Proceeds from deposit for future stock subscription of non-

controlling interest – – 39,475Net cash flows from (used in) financing activities (502,698,500) 881,274,764 (33,059,555)

NET INCREASE (DECREASE) IN CASH AND CASHEQUIVALENTS (138,672,993) 220,148,173 (906,149,346)

CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 803,450,736 583,302,563 1,489,451,909

CASH AND CASH EQUIVALENTSAT END OF YEAR (Note 6) P=664,777,743 P=803,450,736 P=583,302,563


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STI EDUCATION SYSTEMS HOLDINGS, INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

a. General

STI Education Systems Holdings, Inc. (“STI Holdings” or the “Parent Company”) and itssubsidiaries (hereafter collectively referred to as the “Group”) are all incorporated in thePhilippines and registered with the Philippine Securities and Exchange Commission (“SEC”).STI Holdings was originally established in 1928 as the Philippine branch office of Theo H.Davies & Co., a Hawaiian corporation. It was reincorporated as a Philippine corporation andregistered with the SEC on June 28, 1946. STI Holdings’ shares were listed on the PhilippineStock Exchange (“PSE”) on October 12, 1976. On June 25, 1996, the SEC approved theextension of the Parent Company’s corporate life for another 50 years. The primary purposeof the Parent Company is to invest in, purchase or otherwise acquire and own, hold, use, sell,assign, transfer, lease, mortgage, pledge, exchange, or otherwise dispose of real properties aswell as personal and movable property of any kind and description, including shares of stock,bonds, debentures, notes, evidence of indebtedness and other securities or obligations of anycorporation or corporations, association or associations, domestic or foreign and to possess andexercise in respect thereof all the rights, powers and privileges of ownership, including allvoting powers of any stock so owned, but not to act as dealer in securities, and to invest in andmanage any company or institution. STI Holdings aims to focus on education and education-related activities and investments.

STI Holdings’ registered office address, which is also its principal place of business, is7th Floor, STI Holdings Center, 6764 Ayala Avenue, Makati City.

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

On September 28, 2012, the SEC approved the increase in the Parent Company’s authorizedcapital stock from 1,103,000,000 shares with an aggregate par value of P=551.5 million to10,000,000,000 shares with an aggregate par value of P=5,000.0 million and the share-for-shareswap agreement (“Share Swap”) with the shareholders of STI ESG.

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 for 907,970,294STI ESG shares. As a result, immediately after the Share Swap, STI Holdings owned 96% ofSTI ESG.

In November and December 2012, STI Holdings subscribed to 2,100,000,000 STI ESG shares ata consideration price equal to its par value of P=2,100.0 million. In July 2013, STI Holdingsacquired additional 328,125 STI ESG shares. As a result, STI Holdings’ ownership interest inSTI ESG is approximately 99% as at March 31, 2016 and 2015.

STI ESG is involved in establishing, maintaining, and operating educational institutions toprovide pre-elementary, elementary, secondary, and tertiary as well as post-graduate courses,post- secondary and lower tertiary non-degree programs. STI ESG also develops, adopts and/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,

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information technology-enabled services, nursing, education, hotel and restaurant management,engineering, business studies and care-giving. Other activities of STI ESG include computerservices, such as, but not limited to, programming, systems design and analysis, feasibilitystudies, installation support, job processing, consultancy, and other related activities.

STI ESG has investments in several entities which own and operate STI schools. STI schoolsmay be operated either by: (a) STI ESG; (b) its subsidiaries; or (c) independent entrepreneursunder the terms of licensing agreements with STI ESG (referred to as the “franchisees”). AllSTI schools, except for the merged entities, Information and Communications TechnologyAcademy, Inc. (“iACADEMY”), De Los Santos-STI College, Inc. (“De Los Santos-STICollege”) and Philippine Healthcare Educators, Inc. (“PHEI”), are covered by licensingagreements, which require courseware to be obtained from STI ESG.

The establishment, operation, administration and management of schools are subject to theexisting laws, rules and regulations, policies, and standards of the Department of Education(“DepEd”), Technical Education and Skills Development Authority (“TESDA”) and theCommission on Higher Education (“CHED”) pursuant to Batas Pambansa Bilang 232,otherwise known as the “Education Act of 1982,” Republic Act (“RA”) No. 7796, otherwiseknown as the “TESDA Act of 1994,” and RA No. 7722, otherwise known as the “HigherEducation Act of 1994,” respectively.

K to 12 ProgramOn May 15, 2013, Republic Act (“RA”) No. 10533, otherwise known as the “Enhanced BasicEducation Act of 2013” was signed into law. This marked the introduction of the K to 12program, which in summary, adds two (2) years of secondary education, otherwise known asSenior High School, prior to admission to tertiary education. For schools in the Philippinesthat offer tertiary education, similar to STI ESG, this means a substantial reduction inincoming college freshmen students for two (2) academic years.

Seeing the opportunity, STI ESG decided to capitalize on its nationwide presence and amplefacilities to be able to implement the first-to-market approach of the Senior High Schoolprogram. In 2014, DepEd granted permit to offer SHS to sixty-seven (67) STI schools out ofa total of ninety-two (92) schools. As of today, all 77 schools in the STI ESG network havebeen granted the DepEd permit to offer Senior High School.

In June 2014, thirty-two (32) STI schools were able to pilot Senior High School with a total of1,195 students. For SY 2015-16, thirty-six (36) STI schools offered Senior High School withtotal of 1,577 students.

The two (2) program tracks covered by the permit are the Academic and Technical-Vocational-Livelihood tracks. Under the Technical-Vocational-Livelihood Track, STI ESGoffers three strands with various specializations.

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

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· Technical-Vocational-Livelihood TrackInformation and Communications Technology (ICT) StrandSpecializations:§ Computer Programming§ Animation§ Illustration§ Computer Hardware Servicing§ Broadband Installation

Home Economics StrandSpecializations:§ Commercial Cooking§ Cookery§ Bartending§ Food and Beverage Services§ Tour Guiding Services§ Travel Services§ Tourism and Promotion Services§ Front Office Services§ Housekeeping

Industrial Arts StrandSpecialization:§ Consumer Electronics Servicing

The Senior High School offering of STI ESG aims to minimize the impact of the expectedreduction in enrollment since there will be a substantially reduced number of college freshmenduring the transition period from Senior High School to College. Likewise, there is anopportunity for STI ESG to increase its student retention and migration when the studentsgraduate from Senior High School and decide to pursue a Baccalaureate degree.

On August 10, 2015, DepEd granted iACADEMY permit to offer Senior High School.iACADEMY will be offering three tracks as follows:

· Academic Track§ Accountancy, Business and Management§ Humanities and Social Science§ General Academic Strand

· Technical-Vocational TrackICT StrandSpecializations:§ Computer Programming§ Animation

Home Economic StrandSpecialization:§ Fashion Design

· Arts and Design Track

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Merger with Several Majority and Wholly-owned SubsidiariesOn 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 CHED and the SEC on March 15, 2011 and May 6, 2011, respectively.

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

As at July 12, 2016, STI ESG’s request for confirmatory ruling on the tax-free merger from thePhilippine Bureau of Internal Revenue (“BIR”) is still pending.

On September 25, 2013, STI ESG’s Board of Directors (“BOD”) approved the Phase 3merger whereby STI College Taft, Inc. (“STI Taft”) and STI College Dagupan, Inc. (“STIDagupan”) will be merged with STI ESG, with STI ESG as the surviving entity. As at July 12,2016, STI ESG has not filed application for merger with the CHED and the SEC.

Also on September 25, 2013, STI ESG’s BOD approved an amendment to the Phase 1 and 2mergers whereby STI ESG would issue shares at par value, to the stockholders of the non-controlling interests. In 2014, STI ESG issued additional shares at par value to thestockholders of one of the merged schools (see Note 3). As at July 12, 2016, the amendment ispending approval by the SEC.

c. STI West Negros University, Inc. (“STI WNU”, formerly West Negros University Corp.)

STI WNU owns and operates STI West Negros University in Bacolod City. It offers pre-elementary, elementary, secondary and tertiary education and graduate courses. On October 1,2013, the Parent Company acquired 99.45% of the issued and outstanding common shares and99.93% of the issued and outstanding preferred shares of STI WNU. As a result, STI WNUbecame a subsidiary of STI Holdings effective October 1, 2013 (see Note 3).

On May 15, 2015, the amendment of Article I of the Articles of Incorporation (“AOI”) andBy-Laws of STI WNU changing the corporate name from “West Negros University Corp.” to“STI West Negros University, Inc.” was approved by the SEC.

On December 9, 2015, the SEC approved the amendment of STI WNU’s AOI allowing STIWNU to provide maritime training services that will offer and conduct training required by theMaritime Industry Authority (“MARINA”) for officers and crew on board Philippines and/orforeign registered ships operating in the Philippines and/or international waters.

K to 12 ProgramOn October 5, 2015, DepEd granted STI WNU the Permit to Operate Senior High SchoolProgram for all tracks. On May 11, 2016, DepEd also granted STI WNU permit to offer ICTStrand and certain specializations. STI WNU’s Senior High School offering is as follows:

· Academic Track§ Accountancy, Business and Management§ Science and Technology, Engineering and Mathematics

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§ Humanities and Social Sciences§ General Academic Strand

· Technical-Vocational TrackICT StrandSpecializations:§ Computer Programming§ Computer Hardware Servicing§ Broadband Installation§ Contact Center Services

Home EconomicsSpecializations:§ Bread and Pastry Production§ Cookery§ Food and Beverage Services§ Front Office Services§ Housekeeping§ Local Guiding Services§ Tourism Promotion Services§ Travel Services

· Sports Track

· Arts and Design Track

d. Attenborough Holdings Corp. (“AHC”)

AHC is a holding company which is a party to the Joint Venture Agreement and Shareholders’Agreement among the Parent Company, Philippine Women’s University (“PWU”) and UnladResources Development Corporation (“Unlad”) (see Note 14).

In November 2014, the Parent Company subscribed to 56 million of AHC shares, equivalentto 40% ownership interest, following the SEC’s approval of the increase in the authorizedcapital stock of AHC. In February 2015, STI Holdings acquired the remaining 60%ownership in AHC from various individuals making AHC a subsidiary effective February2015 (see Note 3).

The accompanying consolidated financial statements were approved and authorized for issue bythe BOD and the Audit Committee of STI Holdings on July 12, 2016.

2. Basis of Preparation and Summary of the Group’s Accounting Policies

Basis of PreparationThe accompanying consolidated financial statements have been prepared on a historical cost basis,except for quoted available-for-sale (“AFS”) financial assets which have been measured at fairvalue, certain inventories which have been measured at net realizable value, certain investments inassociates and joint ventures which have been measured at recoverable amount and refundabledeposits which are measured at amortized cost. The consolidated financial statements arepresented in Philippine peso (P=), which is the Parent Company’s functional and presentationcurrency, and all values are rounded to the nearest peso, except when otherwise indicated.

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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”) and accounting standards set forthin Pre-Need Rule 31, As Amended: Accounting Standards for Pre-Need Plans and Pre-NeedUniform Chart of Accounts, otherwise known as PNUCA, as required by the SEC for PhilPlansFirst, Inc. (“PhilPlans”). PhilPlans is a pre-need company and is a wholly-owned subsidiary ofMaestro Holdings, Inc. (“Maestro Holdings”, formerly known as STI Investments, Inc.), STIESG’s associate.

PFRS include Philippine Accounting Standards (“PAS”) and Philippine Interpretations based onequivalent interpretations from the International Financial Reporting Interpretations Committee(“IFRIC”) adopted by the Philippine Financial Reporting Standards Council (“FRSC”).

Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Parent Companyand its subsidiaries.

Control is achieved when the Group is exposed, or has rights, to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its power over theinvestee.

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 of Kalookan, Inc.(“STI Caloocan”) and STI Diamond College, Inc. (“STI Diamond”, formerly STI College ofNovaliches, Inc.), which are both non-stock corporations wherein the Parent Company has controlby virtue of management contracts.

The Parent Company re-assesses whether or not it controls an investee if facts andcircumstances indicate that there are changes to one or more of the three elements of control.Consolidation of a subsidiary begins when the Parent Company obtains control over thesubsidiary and ceases when the Parent Company loses control of the subsidiary. Assets,liabilities, income and expenses of a subsidiary acquired or disposed of during the year areincluded in the consolidated statement of comprehensive income from the date the ParentCompany gains control until the date the Parent Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (“OCI”) are attributed to 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 to

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the 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, 2016 and 2015, the subsidiaries of STI Holdings include:

Effective Percentage of Ownership2016 2015

Subsidiary Principal Activities Direct Indirect Direct IndirectSTI ESG Educational Institution 99 – 99 –STI WNU Educational Institution 99 – 99 –AHC Holding Company 100 – 100 –iACADEMY Educational Institution – 100 100STI College Tuguegarao, Inc. (“STI Tuguegarao”) Educational Institution – 100 – 100STI Caloocan(a) Educational Institution – 100 – 100STI Diamond(a) Educational Institution – 100 – 100STI College Batangas, Inc. (“STI Batangas”) Educational Institution – 100 – 100STI College Tanauan, Inc. (“STI Tanauan”) Educational Institution – 100 – 100STI Lipa, Inc. (“STI Lipa”) Educational Institution – 100 – 100STI College Pagadian, Inc. (“STI Pagadian”) Educational Institution – 100 – 100STI College Iloilo, Inc. (“STI Iloilo”) Educational Institution – 100 – 100STI College Novaliches, Inc(b) Educational Institution – 100 – –STI Dagupan(c) Educational Institution – 100 – 77STI 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) A subsidiary of STI ESG through a management contract (See Note 5)(b) Incorporated in February 2016(c) Converted advances to equity through issuance of shares (see Note 3)(d)A wholly-owned subsidiary of De Los Santos - STI College

Accounting Policies of Subsidiaries. The separate financial statements of subsidiaries areprepared using uniform accounting policies for like transactions and other events in similarcircumstances.

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 Diamond, STI Caloocan and STI Iloilo, which financial reporting dates end on December 31.Adjustments are made for the effects of significant transactions or events that occur between thefinancial reporting date of the above-mentioned subsidiaries and the financial reporting date of theGroup’s consolidated financial statements.

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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” withinequity section in the consolidated statement of financial position.

Changes in Accounting Policies and DisclosuresThe 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 1,2015. The adoption of these new standards and amendments did not have any significant impacton the consolidated financial statements:

§ Amendments to PAS 19, Defined Benefit Plans: Employee Contributions

§ Annual Improvements to PFRSs 2010 – 2012 cycle

§ PFRS 2, Share-based Payment – Definition of Vesting Condition§ PFRS 3, Business Combinations – Accounting for Contingent Consideration in a Business

Combination§ PFRS 8, Operating Segments – Aggregation of Operating Segments and Reconciliation of

the Total of the Reportable Segments’ Assets to the Entity’s Assets§ PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets – Revaluation

Method – Proportionate Restatement of Accumulated Depreciation and Amortization§ PAS 24, Related Party Disclosures – Key Management Personnel

§ Annual Improvements to PFRSs 2011 – 2013 cycle

§ PFRS 3, Business Combination – Scope Exceptions for Joint Arrangements§ PFRS 13, Fair Value Measurement – Portfolio Exception§ PAS 40, Investment Property

Standards Issued but Not Yet EffectiveThe standards and interpretations that are issued, but not yet effective as at March 31, 2016 arelisted below. The Group intends to adopt these standards when they become effective. Adoptionof these standards and interpretations are not expected to have any significant impact on theconsolidated financial statements.

Effective April 1, 2016

§ PFRS 10, Consolidated Financial Statements, and PAS 28, Investments in Associates and Joint Ventures – Investment Entities: Applying the Consolidation Exception (Amendments)

§ PFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests (Amendments)§ PAS 1, Presentation of Financial Statements – Disclosure Initiative (Amendments)§ PFRS 14, Regulatory Deferral Accounts§ PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture – Bearer Plants§ PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets – Clarification of

Acceptable Methods of Depreciation and Amortization (Amendments)

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§ Annual Improvements to PFRS (2012 – 2014 cycle)§ PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations – Changes in

Methods of Disposal§ PFRS 7, Financial Instruments: Disclosures – Servicing Contracts§ PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed Interim

Financial Statements§ PAS 19, Employee Benefits – regional market issue regarding discount rate§ PAS 34, Interim Financial Reporting – disclosure of information ‘elsewhere in the interim

financial report’

Effective April 1, 2018

§ PFRS 9, Financial Instruments

Deferred

§ Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate§ PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and Joint

Ventures - Sale or Contribution of Assets between an Investor and its Associate or JointVenture

The following new standards issued by the International Accounting Standards Board have not yetbeen adopted by FRSC.

§ International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers (effective January 1, 2018)

§ IFRS 16, Leases (effective January 1, 2019)

The Group is currently assessing the impact of IFRS 15 and IFRS 16 and plans to adopt the newstandards on their required effective date once adopted locally.

The Group has not early adopted the previously mentioned standards. The Group continues toassess the impact of the above new, amended and improved accounting standards andinterpretations effective subsequent to March 31, 2016 on its consolidated financial statements inthe period of initial application. Additional disclosures required by these amendments will beincluded in the consolidated financial statements when these amendments are adopted.

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., as eithera contribution or distribution of equity. Further, when a subsidiary is disposed in a common

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control 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 that had beenacquired at the beginning of the earliest period presented as if the companies had always beencombined.

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 or lossor 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 acquired in a business combination is initially measured at cost being the excess of thecost of business combination over the interest in the net fair value of the acquiree’s identifiableassets, liabilities and contingent liabilities measured at acquisition date. If the cost of acquisitionis less than the fair value of the net assets of the acquiree, the difference is recognized directly inprofit or loss. If the initial accounting for business combination can be determined onlyprovisionally by the end of the period by which the combination is effected because either the fairvalue to be assigned to the acquiree’s identifiable assets, liabilities or contingent liabilities or thecost of the combination can be determined only provisionally, the Group accounts for thecombination using provisional values. Adjustment to these provisional values as a result ofcompleting the initial accounting shall be made within 12 months from the acquisition date. Thecarrying amount of an identifiable asset, liability, or contingent liability that is recognized fromthat date and goodwill or any gain recognized shall be adjusted from the acquisition date by theamount equal to the adjustment to the fair value at the acquisition date of the identifiable asset,liability or contingent liability being recognized or adjusted.

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After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Forthe 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 are assignedto 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.

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 best use.

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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.

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

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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.

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 another entity;or (b) exchange financial assets or financial liabilities with another entity under conditions that arepotentially unfavorable to the Group; or (c) satisfy the obligation other than by the exchange of afixed amount of cash or another financial asset for a fixed number of the Group’s own shares. Ifthe Group does not have the unconditional right to avoid delivering cash or another financial assetto settle its contractual obligation, the obligation meets the definition of a financial liability.

Financial assets are categorized as either financial assets at FVPL, held-to-maturity (HTM)investments, loans and receivables or AFS financial assets. Financial liabilities, on the other hand,are categorized as financial liabilities at FVPL and other financial liabilities. The 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.

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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.

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” accountunder equity is recycled to profit or loss. Interest earned on the investments is reported asinterest income using the effective interest rate method. Dividends earned on investments arerecognized in profit or loss when the right to receive payment has been established. AFSfinancial assets are classified as noncurrent assets unless the intention is to dispose such assetswithin 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.

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 government and other statutory liabilities), nontrade payable, obligationsunder finance lease, interest-bearing loans and borrowings and other noncurrent liabilities(excluding advance rent).

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Impair ment 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). Thecarrying amount of the asset is reduced through use of an allowance account and the amount of lossis 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 effects ofcurrent conditions that did not affect the period on which the historical loss is based and to removethe effects of conditions in the historical period that do not exist currently. Estimates of changes in

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future cash flows reflect, and are directionally consistent with changes in related observable datafrom period to period (such changes in unemployment rates, property prices, commodity prices,payment status, or other factors that are indicative of incurred losses in the Group and theirmagnitude). The methodology and assumptions used for estimating future cash flows are reviewedregularly by the Group to reduce any difference between loss estimates and actual loss experience.

Quoted AFS Financial Assets. In the case of equity investments classified as AFS financial assets,an objective evidence of impairment would include a significant or prolonged decline in the fairvalue of the investments below its cost. “Significant” is to be evaluated against the original cost ofthe 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.

Der ecognition of Fina ncial Ass ets 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 obligation to paythem 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 control ofthe asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset.

Financial Liabilities. A financial liability is derecognized when the obligation under the 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.

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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 statement offinancial position.

Invent oriesInventories are valued at the lower of cost and net realizable value (“NRV”). Cost is determinedusing the weighted average method. The NRV of educational materials is the selling price in theordinary course of business, less estimated costs necessary to make the sale. The NRV ofpromotional and school materials and supplies is the current replacement cost.

Prepaid Expens esPrepaid 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 input VATover output VAT is presented as part of “Prepaid taxes” under the “Prepaid expenses and othercurrent assets” account in the consolidated statement of financial position. Input VAT is stated atits estimated 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, amortizationand any impairment in value, excluding the costs of day-to-day servicing. Such cost includes thecost of replacing part of such property and equipment when that cost is incurred and therecognition 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.

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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.

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

Investment properties are derecognized when either they have been disposed of or when 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.

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Asset AcquisitionWhen property is acquired, through corporate acquisitions or otherwise, management considersthe substance of the assets and activities of the acquired entity in determining whether theacquisition represents an acquisition of a business.

When such an acquisition is not judged to be an acquisition of a business, it is not treated as abusiness combination. Rather, the cost to acquire the entity is allocated between the identifiableassets and liabilities of the entity based on their relative fair values at the acquisition date.Accordingly, no goodwill or additional deferred tax arises.

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.

The financial statements of the associate or joint venture are prepared for the same reporting periodas the Group. When necessary, adjustments are made to bring the accounting policies in line withthose 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”) which financial reporting dates end 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 of

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the 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 part of “Share in net earnings of associates and joint ventures” inthe consolidated 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, 2016 and 2015:

Effective Percentage of Ownership2016 2015

Associate Principal Activities Direct Indirect Direct IndirectAccent Healthcare/STI Banawe, Inc. (“STI

Accent”)*Medical and related

services 49 – 49 –STI College Alabang, Inc. (“STI Alabang”)Educational Institution 40 – 40 –Synergia* Management Consulting

Services 30 – 30 –STI Marikina Educational Institution 24 – 24 –Maestro Holdings Holding Company 20 – 20 –Global Resource for Outsourced Workers,

Inc. (“GROW”)Recruitment Agency

17 – 17 –*Dormant entities

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

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 impairment wheneverthere is an indication that the intangible asset may be impaired. The amortization period and theamortization method for an intangible asset with a finite useful life are reviewed at least at eachfinancial year-end. Changes in the expected useful life or the expected pattern of consumption offuture economic benefits embodied in the asset is accounted for by changing the amortizationperiod or method, as appropriate, and are treated as changes in accounting estimates. Theamortization 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.

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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 in profitor loss when the asset is derecognized.

Impair ment 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 also recognizedin equity up to the amount of any previous revaluation.

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. Ifthat 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 carrying amount,less any residual value, on a systematic basis over its remaining life.

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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 all 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 theobligation. 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.

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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 recorded atcost. Own equity instruments which are reacquired are deducted from equity. No gain or loss isrecognized in profit or loss on the purchase, sale, issuance or the cancellation of the Group’s ownequity 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 BOD of the ParentCompany. Dividends for the year that are approved after the financial reporting date are dealt withas 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.

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).

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” and presented separately in the consolidated statement of financial position.Unearned tuition and other school fees are amortized over the related school term.

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.

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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.

Excess of consideration received from collection of receivables. Excess of consideration receivedfrom collection of receivables is recognized when the consideration has been transferred.

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

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

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

Costs and Expens esCosts 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:

Entity Type of PlanSTI ESG Funded, noncontributory defined benefit planSTI WNU Funded, noncontributory defined benefit planIndirect Subsidiaries (except De Los Santos -

STI College and STI QA)Unfunded, noncontributory defined benefit plan

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

Defined Benefit Plans. 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.

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

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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 in profitor loss.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in theeffect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in OCI in the period in which they arise. Remeasurements are not reclassified toprofit 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 directlyto the Group. Fair value of plan assets is based on market price information. When no marketprice is available, the fair value of plan assets is estimated by discounting expected future cashflows using a discount rate that reflects both the risk associated with the plan assets and thematurity or expected disposal date of those assets (or, if they have no maturity, the expected perioduntil the settlement 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 the CatholicEducational Association of the Philippines Retirement Plan (“CEAP”). CEAP is a funded,noncontributory, defined contribution plan covering De Los Santos-STI College’s and STI QA’squalified employees under which De Los Santos-STI College and STI QA pay fixed contributionsbased on the employees’ monthly salaries. De Los Santos-STI College and STI QA, however, arecovered under Republic Act No. 7641, the Philippine Retirement Law, which provides for itsqualified employees a defined benefit (“DB”) minimum guarantee. The DB minimum guaranteeis equivalent to a certain percentage of the monthly salary payable to an employee at normalretirement age with the required credited years of service based on the provisions of RA No. 7641.

Accordingly, De Los Santos-STI College and STI QA accounts for its retirement obligation underthe higher of the DB obligation relating to the minimum guarantee and the obligation arising fromthe 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.

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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 a DBplan 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.

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 authority. The tax rates and tax lawsused to compute the amount are those that are enacted or substantially enacted at the financialreporting 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;

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§ 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 thatit is probable that taxable income will be available against which the deductible temporarydifferences and 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 combination and,at the time of the transaction, affects neither the accounting income nor taxable income or loss;

§ in respect of deductible temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, deferred tax assets are recognized only to the 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 and reducedto the extent that it is no longer probable that sufficient future taxable profit will be available toallow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets arereassessed at each financial reporting date and are recognized to the extent that it has becomeprobable 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 tax lawsthat 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 OCI ordirectly in equity.

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 the taxationauthority, in which case the VAT is recognized as part of the cost of acquisition of the asset oras 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 the “Prepaid expenses and other current assets” or “Accounts payable and other currentliabilities” accounts in the consolidated statement of financial position.

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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 is presented inNote 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 financial statements.Post year-end events that are not adjusting events are disclosed in the notes to consolidatedfinancial statements when material.

3. Acquisitions

2016

STI Dagupan. On February 27, 2015, the BOD of STI Dagupan approved the application for anincrease in authorized capital stock from ₱0.5 million to ₱35.0 million and the opening forsubscription of 72,000 common shares with an aggregate par value of ₱7.2 million. Subsequently,in 2016, STI ESG subscribed to 32,000 shares or an aggregate par value of ₱3.2 million. TheBOD of STI Dagupan also approved the equity conversion of STI Dagupan’s advances from STIESG amounting to ₱19.8 million. Consequently, STI ESG acquired the non-controlling interestsof STI Dagupan as a result of the dilution of ownership, which resulted in an adjustment to the“Other equity adjustments” account amounting to ₱4.8 million (net of non-controlling interest inESG). As a result of these transactions, STI ESG’s ownership over STI Dagupan increased form77% to 99.9% as at March 31, 2016.

STI Taft. On December 1, 2015, the BOD of STI Taft approved the application for an increase inauthorized capital stock from 5,000 shares with ₱100 par value per share to 750,000 shares with₱100 par value per share. Subsequently, STI Taft and STI ESG agreed to convert a portion of STITaft’s advances from STI ESG amounting to ₱49.0 million to deposit for future stocksubscriptions. On April 4, 2016, the SEC approved STI Taft’s increase in authorized capital stockto ₱75.0 million.

As at March 31, 2016, there are no changes in STI ESG’s effective ownership over STI Taft.

2015

AHC. In May 2014, STI Holdings made a deposit of P=56.0 million for a 40% ownership of AHC.In November 2014, the SEC approved the increase in the authorized capital stock of AHC and thesubscription of STI Holdings to the 40% equity in AHC.

On February 11, 2015, the Parent Company acquired the remaining 60% ownership in AHC,including subscription rights, from various individuals for a consideration of P=25.0 million makingAHC a subsidiary effective February 2015.

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The acquisition of AHC is accounted for as an asset acquisition. AHC’s assets, which primarilyconsist of noncurrent receivables from Unlad, were assigned its carrying amount based on theirrelative fair values. The excess of the acquisition cost over the assigned carrying amounts to theassets acquired amounting to P=9.7 million was recognized as part of “Dividend and other income(expense)” in the 2015 consolidated statement of comprehensive income.

STI Iloilo. In September 2014, STI ESG established STI Iloilo with an initial capital ofP=5.0 million, which was used to acquire the net assets of an STI school, owned and operated by afranchisee in Jaro, Iloilo, in October 2014, for P=6.0 million. The transaction was accounted for as abusiness combination in the separate financial statements of STI Iloilo.

STI Lipa and STI Tanauan. In October 2014, STI ESG acquired 100% of the outstanding capitalstock of STI schools in Lipa and Tanauan, Batangas, which are owned and operated byfranchisees. The total acquisition cost amounted to P=5.0 million and P=1.0 million, respectively.

STI Pagadian. In October 2014, in exchange for the settlement of the debt of one of STI ESG’sfranchisees, Gillamac Information Technology Center Inc. (“GITEC”) amounting to P=6.3 million,GITEC, the shareholders of GITEC and STI ESG entered into a deed of assignment wherebyGITEC assigned its rights over the outstanding capital stock of STI Pagadian. In addition,STI ESG also assumed the subscriptions payable of the shareholders of GITEC amounting to₱15.0 million.

STI Tagum. Also in October 2014, STI ESG acquired the net assets of a school located in Tagum,Davao del Norte from GITEC in exchange for the settlement of the receivable from GITECamounting to P=2.1 million. The transaction was accounted for as a business combination. Thedifference between the fair value of the net assets acquired and the cost resulted to a gainamounting to P=2.1 million, presented as “Excess of fair value of net assets acquired overacquisition cost from a business combination” in the 2015 consolidated statement ofcomprehensive income.

Effective October 2014, STI ESG gained control over the financial and reporting policies of theabove-mentioned schools.

The purchase price consideration for the above-mentioned schools has been allocated,provisionally, to the assets and liabilities based on the fair values at the date of acquisition and theresulting goodwill amounted to as follows:

STI Lipa P=8,857,790STI Tanauan 4,873,058STI Iloilo 3,806,173STI Pagadian 3,396,880

P=20,933,901

The carrying values of the financial assets and liabilities and other assets recognized at the date ofacquisition approximate their fair values due to the short-term nature of the transactions.

The acquired schools are engaged in the operation of educational institutions offering tertiaryformal education, post-secondary certificate courses and short-term courses. These schools wereacquired to expand the Group’s controlled network of schools and be able to improve itsoperations.

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STI Bacolod. On February 21, 2014, STI WNU’s BOD approved the acquisition of net assets ofBacolod Educational Service and Technology Center, Inc. formerly “STI College Bacolod, Inc.”(“STI Bacolod”), which is owned by a franchisee of STI ESG. On May 13, 2014, the sale wasconsummated and the deed of absolute sale was executed with agreed total purchase price ofP=24.0 million. The transaction was accounted for as an acquisition of a business.

The purchase price consideration has been allocated to the assets and liabilities based on the fairvalues at the date of acquisition resulting in goodwill of P=15.7 million.

Fair Value Recognizedon Acquisition

Cash P=6,718,208Receivables 185,221Inventories 412,241Property and equipment 3,186,396Trade payables (363,519)Other current liabilities (1,819,779)Net assets acquired 8,318,768Goodwill (see Note16) 15,681,232Consideration P=24,000,000

Net cash outflow arising from acquisition amounted to P=17.3 million in 2015.

2014

STI WNU. As discussed in Note 1, on October 1, 2013, STI Holdings acquired 99.45% of theissued and outstanding common shares and 99.93% of the issued and outstanding preferred sharesof STI WNU 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 with corresponding liability amounting to P=67.0 million and P=95.7 million as atMarch 31, 2016 and 2015, respectively.

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

The purchase price consideration has been allocated to the assets and liabilities based on the fairvalues at the date of acquisition 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)

(Forward)

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Fair ValueRecognized on

AcquisitionShort-term loan (P=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 amounting to P=67.0 million and P=95.7 millionas of March 31, 2016 and 2015, respectively.

In September to December 2013, the Parent Company has made several deposits for future stocksubscription in STI WNU for an aggregate amount of P=179.7 million, including advancesconverted into deposit for future stock subscription of P=44.1 million.

On March 12, 2015, the SEC approved the application of STI WNU for the increase in itsauthorized capital stock and the reclassification of its preferred shares into common shares.Pursuant to the SEC approval, the Parent Company’s deposit for future stock subscription wasthen applied to its subscription to 2,249,540 common stocks of STI WNU.

STI Batangas. On June 30, 2013, the stockholders of STI Batangas and STI ESG executed amemorandum of agreement for the transfer of 100.00% of the outstanding shares of STI Batangasto STI ESG with an acquisition cost amounting to P=4.0 million. Effective that date, STI ESGgained control over the financial and reporting policies of STI Batangas.

The purchase price consideration for STI Batangas has been allocated, provisionally, to the assetsand liabilities based on the fair values at the date of acquisition, the resulting goodwill amountedto P=2.6 million. The purchase price allocation was finalized in 2015.

The carrying values of the financial assets and liabilities and other assets recognized at the date ofacquisition approximate their fair values due to the short-term nature of the transactions.

STI Batangas is engaged in the operation of educational institutions offering tertiary formaleducation, post-secondary certificate courses and short-term courses. STI Batangas was acquiredto expand the Group’s controlled network of schools and be able to improve its operations.

Movement in Non-controlling InterestsIn 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 after theacquisition.

In 2014, STI ESG issued 1.9 million additional shares at par value to the to the non-controllinginterests of one of the merged schools, which resulted in dilution of the Parent Company’s interestin STI ESG by 0.06% and corresponding adjustment to the “Other equity reserve” accountamounting to P=1.9 million

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In 2014, the Parent Company recognized a net increase in the non-controlling interests amountingto =P3.4 million and reattributed the non-controlling interest’s share in other comprehensive incometo the equity holders of the Parent Company amounting to =P158,142 with the difference,amounting to =P4.1 million, charged to “Other equity reserve” account (see Note 19).

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

On a consolidated basis, the Group’s performance is evaluated based on net income for the yearand EBITDA defined as earnings before provision for income tax, interest expense, interestincome, depreciation and amortization, equity in net earnings/losses of associates and joint venturesand nonrecurring gains/losses (excess of consideration received from collection of receivables,gain on exchange of land, excess of acquisition cost over fair values of net assets acquired,excess of fair values of net assets acquired over acquisition cost and loss on deemed sale and shareswap of an associate).

The following table shows the reconciliation of the consolidated net income to consolidatedEBITDA in 2016, 2015 and 2014:

2016 2015 2014Consolidated net income P=1,072,682,191 P=731,409,449 P=655,197,867Excess of consideration received

from collection of receivables (553,448,521) – –Depreciation and amortization 358,130,553 295,736,887 205,551,974Provision for income tax 226,652,511 68,144,038 53,358,883Equity in net earnings of associates

and joint ventures (34,994,156) (105,290,495) (232,818,520)Interest expense 63,223,407 28,242,405 10,926,797Interest income (5,785,710) (6,059,784) (12,199,579)Gain on exchange of land – (172,137,167) –Excess of acquisition cost over fair

values of net assets acquired* – 9,646,137 –Excess of fair values of net assets

acquired over acquisition cost – (2,091,425) (32,681,078)Loss on deemed sale and share swap

of an associate – – 43,000,287Consolidated EBITDA P=1,126,460,275 P=847,600,045 P=690,336,631*Recognized as part of “Dividend and other income (expense)” in the 2015 consolidated statement of comprehensiveincome.

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Inter-Segment TransactionsSegment revenue, segment expenses and operating results include transfers among geographicalsegments. The transfers are accounted for at competitive market prices charged to unrelatedcustomers for similar services. Such transfers are eliminated upon consolidation.

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Geographical Segment DataThe following tables present revenue and income information and certain assets and liabilities information regarding geographical segments in 2016, 2015and 2014:

2016Metro Manila Northern Luzon Southern Luzon Visayas Mindanao Consolidated

RevenuesExternal revenue P=1,625,742,978 P=97,832,577 P=487,930,698 P= 279,028,759 P= 86,186,856 P=2,576,721,868

ResultsIncome before other income and income tax P=432,575,558 P=22,486,144 P=172,009,167 P=67,349,126 P=8,393,473 P=702,813,468Equity in net earnings of associates and joint ventures 34,994,156 – – – – 34,994,156Interest income 4,870,649 49,067 153,770 668,171 44,053 5,785,710Interest expense (49,946,774) (2,700) (405,822) (12,868,111) – (63,223,407)Excess of consideration received from collection of receivables 553,448,521 – – – – 553,448,521Other income 64,413,966 7,300 532,642 562,346 – 65,516,254Provision for income tax (221,828,928) – – (4,823,583) – (226,652,511)Net Income P=818,527,148 P=22,539,811 P=172,289,757 P=50,887,949 P=8,437,526 P=1,072,682,191

EBITDA P=1,126,460,275


RevenuesExternal revenue P=1,427,239,423 P=85,541,199 P=355,491,762 P=279,252,038 P=76,455,661 P=2,223,980,083

ResultsIncome before other income and income tax P=299,147,998 P=11,453,731 P=133,302,355 P=67,981,085 P=4,742,016 P=516,627,185Equity in net earnings of associates and joint ventures 105,290,495 – – – – 105,290,495Interest income 5,405,367 34,259 67,308 522,868 29,982 6,059,784Interest expense (21,386,099) – (206,305) (6,648,194) (1,807) (28,242,405)Excess of fair values of net assets acquired over acquisition costs 2,091,425 – – – – 2,091,425Excess of acquisition cost over fair values of net assets acquired (9,646,137) – – – – (9,646,137)Gain on exchange of land 172,137,167 – – – – 172,137,167Other income 31,713,736 – 240,530 3,281,707 – 35,235,973Provision for income tax (62,484,989) – – (5,659,049) – (68,144,038)Net Income P=522,268,963 P=11,487,990 P=133,403,888 P=59,478,417 P=4,770,191 P=731,409,449

EBITDA P=847,600,045

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RevenuesExternal revenue P=1,326,707,980 P=98,553,335 P=290,868,787 P=122,597,660 P=78,919,514 P=1,917,647,276

ResultsIncome before other income and income tax P=326,421,993 P=23,969,327 P=82,776,883 P=21,582,488 P=18,024,519 472,775,210Equity 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 12,199,579Interest expense (4,407,825) – (117) (6,518,855) – (10,926,797)Excess of fair values of net assets acquired over acquisition costs 32,681,078 – – – – 32,681,078Loss on deemed sale and share swap of an associate (43,000,287) – – – – (43,000,287)Other income 10,013,913 188,599 81,630 1,310,978 414,327 12,009,447Provision for income tax (52,078,518) – – (1,280,365) – (53,358,883)Net Income 514,172,055 P=24,271,165 P=83,043,467 P=15,243,626 P=18,467,554 P=655,197,867

EBITDA P=690,336,631

The following tables present certain assets and liabilities information regarding geographical segments as of March 31, 2016 and 2015:


Assets and LiabilitiesSegment assets(a) P=7,048,542,663 P=57,699,104 P=869,719,058 P=712,964,449 P=117,409,166 P=8,806,334,440Investments in and advances to associates and joint ventures 1,424,813,516 – – – – 1,424,813,516Goodwill 223,777,646 – – 15,681,232 – 239,458,878Deferred tax assets - net 21,827,948 336,835 508,392 6,876,357 80,687 29,630,219Total Assets P=8,718,961,773 P=58,035,939 P=870,227,450 P=735,522,038 P=117,489,853 P=10,500,237,053

Segment liabilities(b) P=675,865,275 P=24,127,746 P=36,852,985 P=42,563,338 P=15,962,474 P=795,371,818Interest-bearing loans and borrowings 876,000,000 – 275,000,000 – 1,151,000,000Pension liabilities - net 17,034,422 5,864,394 10,543,625 35,838,927 3,331,062 72,612,430Obligations under finance lease 12,519,965 – 297,392 851,554 – 13,668,911Deferred tax liabilities 237,279,961 – – – – 237,279,961Total Liabilities P=1,818,699,623 P=29,992,140 P=47,694,002 P=354,253,819 P=19,293,536 P=2,269,933,120

Other Segment InformationCapital expenditure -

Property and equipment P=356,405,799Depreciation and amortization 358,130,553Noncash expenses other than depreciation and amortization 87,816,298(a) Segment assets exclude investments in and advances to associates and joint ventures, goodwill and net deferred tax assets.(b) Segment liabilities exclude interest-bearing loans and borrowings, net pension liabilities, obligations under finance lease and deferred tax liabilities.

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Assets and LiabilitiesSegment assets(a) P=7,067,490,128 P=36,315,378 P=241,086,272 P=726,159,147 P=80,890,521 P=8,151,941,446Investments in and advances to associates and joint ventures 1,622,404,035 – – – – 1,622,404,035Goodwill 223,777,646 – – 15,681,232 – 239,458,878Deferred tax assets - net 14,694,495 388,592 159,711 7,000,832 – 22,243,630Total Assets P=8,928,366,304 P=36,703,970 P=241,245,983 P=748,841,211 P=80,890,521 P=10,036,047,989

Segment liabilities(b) P=598,633,983 P=47,874,157 P=43,923,211 80,285,879 P=13,790,561 784,507,791Interest-bearing loans and borrowings 1,092,000,000 – – 295,000,000 – 1,387,000,000Pension liabilities - net 9,805,782 2,820,342 10,200,780 37,310,951 3,311,598 63,449,453Obligations under finance lease 17,270,230 – 505,352 416,319 – 18,191,901Deferred tax liability 127,192,851 – – – – 127,192,851Total Liabilities P=1,844,902,846 P=50,694,499 P=54,629,343 P=413,013,149 P=17,102,159 P=2,380,341,996

Other Segment InformationCapital expenditure - Property and equipment P=1,462,665,085Depreciation and amortization 295,736,887Noncash expenses other than depreciation and amortization 88,773,426

(a) Segment assets exclude investments in and advances to associates and joint ventures, goodwill and net deferred tax assets.(b) Segment liabilities exclude interest-bearing loans and borrowings, net pension liabilities, obligations under finance lease and deferred tax liability.

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5. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements requires management to make judgments,estimates and assumptions that affect the amounts reported in the consolidated financial statementsand related notes. The estimates used are based upon management’s evaluation of relevant factsand circumstances as at the date of the consolidated financial statements, giving due considerationto 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 a bargain purchase option over the leasedassets.

Rental expense amounted to P=143.4 million, P=146.3 million, P=136.6 million in 2016, 2015 and2014, respectively (see Notes 21, 23 and 26).

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.

Rental income amounted to P=63.2 million, PP=31.6 million and PP=10.8 million in 2016, 2015 and2014, respectively (see Notes 11, 26 and 28).

Finance Lease Commitments - Group as Lessee. The Group has entered into finance leaseagreements covering its computer equipment and peripherals and transportation equipment and hasdetermined, that it bears substantially all the risks and benefits incidental to ownership of the saidproperties which are on finance lease agreements.

The carrying value of the obligations under finance lease amounted to P=13.7 million and P=18.2million as at March 31, 2016 and 2015, respectively. Interest incurred amounted to P=1.2 million,=P=1.5 million and P=1.3 million in 2016, 2015 and 2014, respectively (see Notes 20 and 26).

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 orcommencement of an operating lease to another party. Transfers are also made from investmentproperties when there is a change in use, evidenced by commencement of owner-occupation orcommencement of development with a view to sale. These transfers are recorded using thecarrying amount of the investment properties at the date of change in use.

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Transfers to investment properties amounted to nil and P=24.3 million in 2016 and 2015,respectively (see Notes 10 and 11).

Asset Acquisitions. As discussed in Note 1, in November 2014, STI Holdings subscribed to 56million AHC shares through application of its deposit for future stock subscription. In February2015, STI Holdings acquired the remaining 60% ownership in AHC from various individualsmaking AHC a subsidiary as of March 31, 2015. Management considered the substance of theassets and activities of the acquired entity and assessed that the acquisition of a subsidiary doesnot represent a business, but rather an acquisition of the noncurrent receivables, the primary assetof the subsidiary at the date of acquisition (see Note 3). The cost of the acquisition is allocated tothe assets acquired based upon their relative fair values, and no goodwill or deferred tax isrecognized. The excess of the acquisition cost over the fair value of the assets acquired amountingto P=9.7 million is charged to expense and presented as part of “Dividend and other income(expense)” in the 2015 consolidated statement of comprehensive income.

Asset Acquisition Acccounted for as a Business Combination. In May 2014, STI WNU acquiredthe net assets of STI Bacolod, for a total consideration of P=24.0 million. STI Bacolod was ownedby a franchisee of STI ESG. Management considered the substance of the assets and activities ofthe acquired entity and assessed that the acquisition of the net assets represents a business. Thecost of the acquisition is allocated to the assets acquired based upon their fair values, and as aresult, a goodwill of P=15.7 million is recognized (see Note 3).

As a result of the acquisition of STI Bacolod, the net assets and activities were merged with STIWNU. Consequently, the goodwill arising from the acquisition was re-allocated to the entirebusiness of STI WNU.

Determination of Control Arising from a Management Contract. The Group has existingmanagement contracts with STI Caloocan and STI Novaliches. Management has concluded that theGroup in substance has the power to direct the relevant activities and has the means to obtain majorityof the benefits of STI Caloocan and STI Novaliches, both non-stock corporations, through themanagement contract. Thus, management has assessed that it has control over STI Caloocan and STINovaliches and accordingly, consolidates the two entities effective from the date control was obtained.

Classification of Interests in Joint Ventures. Under PFRS 11, the Group classified its interest in 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 party in a number of cases involving claims and disputesrelated to collection of receivables and labor. The Group’s estimate of the probable costs for theresolution of these claims has been developed in consultation with outside legal counsels handlingdefense in these matters and is based upon an analysis of potential results. Management and itslegal counsels believe that the Group has substantial legal and factual bases for its position and areof the 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 31).

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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 statement 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.

The fair value information of financial instruments as at March 31, 2016 and 2015 are disclosed inNote 33.

Estimating Allowance for Impairment Loss on Financial Assets. The Group reviews itsreceivables and advances to associates and joint ventures and other related parties at each reportingdate to assess whether an allowance for impairment loss should be recorded in the consolidatedstatement of financial position. In particular, judgment by management is required in theestimation of the amount and timing of future cash flows when determining the level of allowancerequired. Such estimates are based on assumptions about a number of factors and actual resultsmay differ, resulting in future changes to the allowance.

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.

Total receivables (including noncurrent receivables), net of allowance for doubtful accountsamounted to P=304.4 million and =P840.2 million as at March 31, 2016 and 2015, respectively.Provision for impairment loss on receivables (net of reversals) recognized in the consolidatedfinancial statements amounted to P=70.7 million, P=72.0 million and =P57.6 million in 2016, 2015 and2014, respectively (see Notes 7 and 23).

Advances to associates and joint ventures, net of allowance for impairment loss, amounted toP=20.2 million at March 31, 2016 and 2015. Provision for (reversal of) impairment in value ofadvances recognized in the consolidated financial statements amounted to =P0.5 million, nil and(=P0.7 million) in 2016, 2015 and 2014, respectively (see Notes 12 and 23).

Estimating Allowance for Inventory Obsolescence. The allowance for obsolescence relating toinventories consists of provision based on the aging of inventories and other factors that may affectrecoverability of these assets. The allowance is established based on excess of cost over netrealizable value of inventories.

Inventories at net realizable value amounted to P=39.7 million and =P35.5 million as at March 31,2016 and 2015, respectively. Provision for inventory obsolescence resulting from excess of costover net realizable value of inventories amounted to nil, =P0.3 million and =P2.4 million in 2016,2015 and 2014, respectively (see Notes 8 and 23).

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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 20.0% or more of the original costof investment, and “prolonged,” greater than six months. In addition, the Group 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 AFS financial assets was recognized in profit or loss in 2016, 2015 and2014. The carrying values of AFS financial assets amounted to P=50.8 million and P=51.1 million asat March 31, 2016 and 2015, respectively (see Note 15).

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 industry practice,internal technical evaluation, and experience with similar assets while for intangible assets with afinite life, estimated useful life is based on the contractual term of the intangible assets. Theseestimations are reviewed periodically and could change significantly due to physical wear andtear, technical or commercial obsolescence and legal or other limits on the use of the assets. Areduction in the estimated useful lives of property and equipment, investment properties andintangible assets would increase recorded expenses and decrease noncurrent assets.

The lease contracts covering the land, where the building and improvements and leaseholdimprovements of De Los Santos-STI College were built, were terminated effective March 31,2015. In addition, the lease contract covering the property where the leasehold improvements ofiACADEMY were built, was terminated effective July 31, 2014. Under the lease contracts,ownership of the building and improvements and leasehold improvements will be transferred tothe lessor upon termination of the lease contract. Thus, De Los Santos-STI College andiACADEMY revised the estimated useful lives of their building and improvements and leaseholdimprovements to consider the termination of the lease agreements.

The increase in depreciation expense as a result of the change in the useful life of the assetamounted to P=9.3 million in 2015. The change resulted in a reduction of future yearlydepreciation expense amounting to P=2.2 million in subsequent years.

Consequently, costs of certain fully depreciated leasehold improvements and signage were writtenoff in the books of iACADEMY amounting to P=33.0 million and P=0.9 million, respectively, in2015.

There were no other changes in the estimated useful lives of the Group’s property and equipment,investment properties and intangible assets in 2016, 2015 and 2014.

The carrying values of nonfinancial assets subject to depreciation and amortization are as follows:

2016 2015Property and equipment (see Note 10) 3,369,503,669 3,385,103,046Investment properties (see Note 11) 612,622,842 605,286,338Intangible assets (see Note 16) 36,703,587 34,860,613

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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 and joint venture in theperiod the dividend is declared; or

§ the carrying amount of the investment in an associate and joint venture in the parent companyfinancial statements exceeds the carrying amount in the consolidated financial statements of theinvestee’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:

2016 2015Property and equipment (see Note 10) 5,610,438,481 5,581,290,195Investment properties (see Note 11) 1,888,024,266 629,272,762Investments in associates and joint ventures

(see Note 12) 1,404,647,514 1,602,188,033Intangible assets (see Note 16) 36,703,587 34,860,613Advances to suppliers (see Note 16) 67,734,273 7,764,679Others (see Note 16) 8,701,462 20,703,936

No provision for impairment in value was recognized in 2016, 2015 and 2014.

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 in

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goodwill 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 the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value ofthose 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 of returnfor 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 10.00% was used as at March 31, 2016 and 2015. The Group’s growth rates inextrapolating its cash flows beyond the period covered by its recent budgets ranged from 5.00% to10.00%.

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 in value was recognized in 2016, 2015 and 2014. Goodwill, net ofallowance for impairment loss, amounted to P=239.5 million at March 31, 2016 and 2015,respectively (see Note 16).

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 carryforward benefits of NOLCO and MCIT forwhich no deferred tax assets were recognized by the Group amounted to P=73.4 million andPP=108.3 million at March 31, 2016 and 2015, respectively. Deferred tax assets recognizedamounted to P=29.8 million and P=22.4 million as at March 31, 2016 and 2015, respectively (seeNote 27).

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 discountrates, 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.

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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=72.6 million and P=63.4 million as at March 31, 2016and 2015, respectively (see Note 25).

6. Cash and Cash Equivalents


2016 2015Cash on hand and in banks P=662,703,917 P=530,886,946Cash equivalents 2,073,826 272,563,790

P=664,777,743 P=803,450,736

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=3.8 million, P=2.6 millionand P=11.0 million in 2016, 2015 and 2014, respectively (see Note 20).

7. Receivables


2016 2015Tuition and other school fees P=310,526,670 P=288,087,537Educational services 35,641,080 36,406,609Advances to officers and employees (see Note 28) 22,733,997 27,870,015Current portion of advances to associates, joint

ventures and other related parties (see Note 28) 168,571 679,196Rent and other related receivables (see Note 28) 29,395,914 17,065,215Others 23,703,573 26,286,035

422,169,805 396,394,607Less allowance for doubtful accounts 117,816,241 118,091,730

P=304,353,564 P=278,302,877

The terms and conditions of the above receivables are as follows:

a. Tuition and other school fees receivables are noninterest-bearing and are normally collected onor before the date of major examinations.

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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=1.4 million, P=2.9 million and P=0.3 millionfor the years ended March 31, 2016, 2015 and 2014, respectively (see Note 20).

c. Advances to officers and employees are normally liquidated within one month.

d. For the nature of advances to associates, joint ventures and other related parties, refer toNote 28.

e. Rent and other related receivables are normally collected within the next financial year.

f. Other receivables are expected 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:

2016Tuition

and OtherSchool Fees Others Total

Balance at beginning of year P=109,226,915 P=8,864,815 P=118,091,730Provisions (see Note 23) 67,193,245 3,529,487 70,722,732Write-off (69,487,443) (1,510,778) (70,998,221)Balance at end of year P=106,932,717 P=10,883,524 P=117,816,241

2015Tuition

and OtherSchool Fees Others Total

Balance at beginning of year P=100,994,969 P=4,634,715 P=105,629,684Provisions (see Note 23) 67,788,789 4,230,100 72,018,889Write-off (57,724,614) – (57,724,614)Recoveries (1,832,229) – (1,832,229)Balance at end of year P=109,226,915 P=8,864,815 P=118,091,730

As at March 31, 2016 and 2015, allowance for doubtful accounts amounting to P=10.9 million and=P=8.9 million, respectively, relates to individually significant accounts that were assessed asimpaired. The remaining balance of P=106.9 million and P=109.2 million as at March 31, 2016 and2015, respectively, relates to accounts that were collectively assessed as impaired.

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8. Inventories


2016 2015At net realizable value:

Educational materials P=32,546,286 P=28,910,317Promotional materials 5,383,520 4,478,462School materials and supplies 1,753,895 2,156,853

P=39,683,701 P=35,545,632

The cost of inventories carried at net realizable value amounted to P=50.3 million andP=46.1 million as at March 31, 2016 and 2015, respectively. Allowance for inventoryobsolescence amounted to P=10.6 million as at March 31, 2016 and 2015. Provision forinventory obsolescence resulting from excess of cost over net realizable value of inventoriesamounted to nil, P=0.3 million and P=2.4 million in 2016, 2015 and 2014, respectively(see Note 23).

Inventories charged to cost of educational materials and supplies sold for the years endedMarch 31, 2016, 2015 and 2014 amounted to P=69.8 million, P=59.5 million, and P=53.3 million,respectively (see Note 22).

9. Prepaid Expenses and Other Current Assets


2016 2015Prepaid taxes P=79,866,776 P=89,545,847Prepaid rent 6,228,073 5,305,414Excess contributions to CEAP (see Note 25) 3,153,010 3,032,342Software maintenance cost 2,103,097 2,032,043Prepaid insurance 498,591 1,454,556Deposits 131,299 96,299Others 3,365,426 3,965,088

P=95,346,272 P=105,431,589

Prepaid taxes represent excess creditable withholding tax and input VAT which may be appliedagainst other future internal revenue taxes. Most of the input VAT arose from the acquisition ofoffice condominium units from TechZone Philippines, Inc. (“TechZone”) (see Note 11).

Prepaid rent represents advance rent paid for the lease of land and building spaces which shall beapplied to the monthly rental in accordance with the term of the lease agreements.

Excess contributions to CEAP pertain to contributions made by De Los Santos-STI College andSTI QA to CEAP which are already considered forfeited pension benefits of those employees whocan no longer avail their pension benefits or when De Los Santos-STI College has alreadyadvanced the benefits of qualified employees. These will be recognized as expense depending onthe required future contributions to the fund.

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Prepaid insurance represents fire insurance which was paid in advance and is recognized asexpense over the period of the coverage, which is usually within one year.

Deposits pertain to security deposits made for warehouse and office space rentals which willexpire within one year and will be applied against future lease payments in accordance with therespective lease agreements.

Software maintenance cost represents support and maintenance charges for the Group’saccounting and enrollment systems, which are amortized within one year from date of contract.

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10. Property and Equipment

The rollforward analysis of this account follows:

2016

Land Buildings

Officeand SchoolEquipment

OfficeFurniture

and FixturesLeasehold

Improvements

TransportationEquipment(see Note 26)

ComputerEquipment

andPeripherals

LibraryHoldings

ConstructionIn Progress Total

Cost, Net of Accumulated Depreciation and AmortizationBalance at beginning of year P=2,074,563,995 P=2,948,272,098 P=150,211,484 P=96,746,267 P=95,337,723 P=24,040,269 P=44,874,213 P=25,620,992 P=121,623,154 P=5,581,290,195Additions – 39,440,093 64,844,060 12,857,588 18,188,799 5,935,984 18,554,556 5,151,584 191,433,135 356,405,799Adjustment (1,608,976) – – – – – – – – (1,608,976)Reclassifications – 126,636,979 7,174,268 5,985,077 5,280,172 – – – (145,076,496) –Disposal – (283,200) (113,425) – – (564,460) (16,123) – – (977,208)Depreciation and amortization (see Notes 21

and 23) – (157,139,976) (54,255,006) (28,867,774) (35,232,297) (11,492,658) (27,557,734) (10,125,884) – (324,671,329)Balance at end of year P=2,072,955,019 P=2,956,925,994 P=167,861,381 P=86,721,158 P=83,574,397 P=17,919,135 P=35,854,912 P=20,646,692 P=167,979,793 P=5,610,438,481At March 31, 2016:Cost P=2,072,955,019 P=3,629,584,942 P=516,168,675 P=250,442,020 P=402,262,564 P=75,800,513 P=428,486,336 P=182,684,416 P=167,979,793 P=7,726,364,278Accumulated depreciation and amortization – 672,658,948 348,307,294 163,720,862 318,688,167 57,881,378 392,631,424 162,037,724 – 2,115,925,797Net book value P=2,072,955,019 P=2,956,925,994 P=167,861,381 P=86,721,158 P=83,574,397 P=17,919,135 P=35,854,912 P=20,646,692 P=167,979,793 P=5,610,438,481

2015

Land Buildings

Officeand SchoolEquipment

OfficeFurniture

and FixturesLeasehold

Improvements

TransportationEquipment

(see Note 26)

ComputerEquipment

andPeripherals

LibraryHoldings

ConstructionIn Progress Total

Cost, Net of Accumulated Depreciation andAmortization

Balance at beginning 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=4,421,253,356Additions 173,882,415 917,310,657 80,033,090 62,615,427 9,741,196 9,078,889 34,040,554 9,875,705 166,087,152 1,462,665,085Effect of business combination (see Note 3) – – 1,527,489 669,898 3,531,535 1,964,432 1,249,469 1,040,874 – 9,983,697Reclassifications – 248,475,668 (461,893) 682,324 45,811,596 – 338,617 – (294,846,312) –Reclassification to investment properties (see

Note 11) – (24,250,466) – – – – – – – (24,250,466)Disposal – – – – – – – – – –Depreciation and amortization

(see Notes 21 and 23) – (131,392,365) (41,102,796) (22,524,604) (44,908,292) (12,034,490) (27,080,425) (9,318,505) – (288,361,477)Balance at end of year P=2,074,563,995 P=2,948,272,098 P=150,211,484 P=96,746,267 P=95,337,723 P=24,040,269 P=44,874,213 P=25,620,992 P=121,623,154 P=5,581,290,195At March 31, 2015:Cost P=2,074,563,995 P=3,463,593,970 P=444,484,847 P=231,599,355 P=378,793,593 P=75,884,882 P=410,088,989 P=178,357,122 P=121,623,154 P=7,378,989,907Accumulated depreciation and amortization – 515,321,872 294,273,363 134,853,088 283,455,870 51,844,613 365,214,776 152,736,130 – 1,797,699,712Net book value P=2,074,563,995 P=2,948,272,098 P=150,211,484 P=96,746,267 P=95,337,723 P=24,040,269 P=44,874,213 P=25,620,992 P=121,623,154 P=5,581,290,195

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The cost of fully depreciated property and equipment still being used by the Group amounted toP=980.7 million and P=893.1 million as at March 31, 2016 and 2015, respectively. There were noidle assets as at March 31, 2016 and 2015.

AdditionsAcquisitions. In April 2014, STI ESG purchased two parcels of land in San Jose del Monte,Bulacan with a combined land area of 4,178 square meters for a total cost of P=154.4 million.

In May 2014, STI ESG executed deeds of absolute sale for the purchase of two parcels of land inFairview, Quezon City with a combined land area of 600 square meters for a total cost ofP=17.5 million.

These properties will be the site of the school of STI ESG in the areas mentioned.

Property and Equipment under Construction. As at March 31, 2016, the construction in-progressaccount includes costs incurred for the construction of the STI Las Piñas campus and swimmingpool and firing range of STI WNU. The related costs amounted to P=509.7 million, inclusive ofmaterials, cost of labor and overhead, equipment, furniture and fixtures and all other costsnecessary for the completion of the project. The construction is expected to be completed in July2016.

As at March 31, 2015, the construction in-progress account includes costs incurred for theconstruction of a gymnasium and a warehouse in STI Ortigas-Cainta campus and additionalclassrooms for STI Ortigas-Cainta, STI Diamond and STI Caloocan. The related constructioncontracts amounted to P=98.5 million, inclusive of materials, cost of labor and overhead and allother costs to complete the project. The construction of the gymnasium and warehouse in STIOrtigas-Cainta was completed in September 2015, while the construction of additional classroomswas completed in May 2015.

Capitalized Borrowing Costs. Total borrowing costs capitalized as part of property and equipmentamounted to P=1.3 million and P=12.3 million in 2016 and 2015, respectively. The average interestcapitalization rate is 4.76% and 4.75% for STI WNU and STI ESG, respectively, in 2016; and 4.74%and 4.43% for STI WNU and STI ESG, respectively, in 2015, which were the effective rates of thegeneral borrowings.

Finance LeasesCertain transportation equipment were acquired under finance lease agreements. The net bookvalue of these equipment amounted to P=15.5 million and P=19.1 million as at March 31, 2016 and2015, respectively (see Note 26).

CollateralsTransportation equipment, which were acquired under finance lease, are pledged as security for therelated finance lease liabilities as at March 31, 2016 and 2015.

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11. Investment Properties

The rollforward analysis of this account follows:

2016Land Building Total

Cost:Balance at beginning of year P=23,986,424 P=629,390,918 P=653,377,342Additions 1,251,415,000 35,966,632 1,287,381,632Balance at end of year 1,275,401,424 665,357,550 1,940,758,974

Accumulated depreciation:Balance at beginning of year – 24,104,580 24,104,580Depreciation (see Note 23) – 28,630,128 28,630,128Balance at end of year – 52,734,708 52,734,708

Net book value P=1,275,401,424 P=612,622,842 P=1,888,024,266

2015Land Building Total

Cost:Balance at beginning of year P=23,986,424 P=36,740,452 P=60,726,876Additions – 568,400,000 568,400,000Reclassification from property

and equipment (see Note 10) – 24,250,466 24,250,466Balance at end of year 23,986,424 629,390,918 653,377,342

Accumulated depreciation:Balance at beginning of year – 20,528,981 20,528,981Depreciation (see Note 23) – 3,575,599 3,575,599Balance at end of year – 24,104,580 24,104,580

Net book value P=23,986,424 P=605,286,338 P=629,272,762

In March 2015, the construction of the condominium units acquired through an exchange of acertain land executed in August 2013 has been completed. The total purchase price of thecondominium units amounting to ₱560.0 million plus directly attributable costs amounting to₱8.4 million were capitalized. The resulting difference between the total purchase price and thecost of the land, which amounted to ₱172.1 million, was accounted for as “Gain on exchange ofland” in the 2015 consolidated statement of comprehensive income.

As at March 31, 2016, investment properties include parcels of land and buildings andimprovements located in Quezon City and Davao City currently held by the Parent Company forcapital appreciation. These properties were obtained by the Parent Company from Unlad throughthe Deeds of Dacion executed on March 31, 2016 for a total dacion price of P=911.0 million assettlement of the outstanding obligations of Unlad and PWU to the Parent Company (see Note 14).The difference between the fair value and the dacion price of these investment propertiesamounting to P=369.5 million was recognized as part of “Excess of consideration received fromcollection of receivables” in the 2016 consolidated statement of comprehensive income(see Note 14).

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As at March 31, 2016, the fair values of the Parent Company’s investment properties are asfollows:

Quezon City properties* P=1,006,724,000Davao property 273,815,000

P=1,280,539,000*Includes buildings and improvements valued at P=29.1 million

The fair values of investment properties were determined by an independent professionallyqualified appraiser. The fair value represents the price that would be received to sell an asset orpaid to transfer a liability in an orderly transaction between market participants at themeasurement date.

LandLevel 3 fair value of land has 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, 2016 P=1,298,275,000Valuation technique Sales comparison approachUnobservable input Net price per square meterRelationship of unobservable inputs to fair value The higher the price per square

meter, the higher the fair value

The highest and best use of the Parent Company’s land is mixed-use, commercial and residentialother than its existing use as institutional utility (educational purpose) while STI ESG’s land iscommercial utility.

BuildingsLevel 3 fair values of buildings have also been derived using the sales comparison approach.

The following table shows the valuation technique used in measuring the fair value of the building,as well as the significant unobservable inputs used:

Fair value at March 31, 2016 P=920,858,000Valuation technique Sales comparison approachUnobservable input Net price per square meterRelationship of unobservable inputs to fair value The higher the price per square

meter, the higher the fair value

The highest and best use of STI ESG’s building is commercial utility (commercial/officecondominium).

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RentalRental income earned from investment properties amounted to P=33.7 million, P=6.5 million andP=3.3 million in 2016, 2015 and 2014, respectively (see Note 26). Direct operating expenses,including repairs and maintenance, arising from investment properties amounted to P=1.0 million,P=1.6 million and P=4.2 in 2016, 2015 and 2014, respectively.

12. Investments in and Advances to Associates and Joint Ventures

The details and movements in this account follow:

2016 2015Investments at EquityAcquisition cost:

Balance at beginning of year P=173,252,600 P=173,252,600Acquisition 69,983,200 –Balance at end of year 243,235,800 173,252,600

Accumulated equity in net earnings:Balance at beginning of year 1,023,081,836 918,766,882Equity in net earnings 34,994,156 105,290,495Dividends received (976,050) (975,541)Balance at end of year 1,057,099,942 1,023,081,836

Accumulated share in associates’ othercomprehensive income:Balance at beginning of year 405,853,597 418,856,230Unrealized mark-to-market loss on AFS financial assets (302,103,268) (9,401,763)Remeasurement loss on pension liability 561,443 (3,600,870)Balance at end of year 104,311,772 405,853,597

1,404,647,514 1,602,188,033Advances (see Note 28) 35,633,303 35,163,889Less allowance for impairment loss 15,467,301 14,947,887

20,166,002 20,216,002P=1,424,813,516 P=1,622,404,035

The associates and joint ventures of the Group are all incorporated in the Philippines.

Movements in the allowance for impairment in value of investments and advances are asfollows:

2016 2015Balance at beginning of year P=14,947,887 P=14,947,887Provision (see Note 23) 519,414 –Balance at end of year P=15,467,301 P=14,947,887

The associates and joint ventures of the Group are all incorporated in the Philippines.

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The carrying values of the Group’s investments in and advances to associates and joint venturesare as follows:

2016 2015Associates:

Maestro Holdings P=1,389,114,547 P=1,592,101,596STI Alabang 18,365,648 15,306,669STI Accent 15,467,301 14,947,887GROW 12,111,456 9,879,660STI Marikina 144,045 674,917Synergia 46,969 46,969

Joint venture -PHEI (see Note 13) 5,030,851 4,394,224

1,440,280,817 1,637,351,922Allowance for impairment loss 15,467,301 14,947,887

P=1,424,813,516 P=1,622,404,035

Information about the significant associates and their major transactions are discussed below:

Maestro Holdings. Maestro Holdings is a holding company that holds investments in PhilPlans,PhilhealthCare, Inc. (“PhilCare”), Philippine Life Financial Assurance Corporation (“PhilLife”)and Banclife Insurance Co. Inc. (“Banclife”). PhilPlans is a leading pre-need company, providinginnovative pension, education and life plans. It owns 65% of Rosehills Memorial Management,Inc. (“RMMI”), a company engaged in the operation and management of a memorial park,memorial and interment services and sale of memorial products. PhilCare is a HealthMaintenance Organization (HMO) that provides effective and quality health services and operatesthrough its own clinics and through nationwide accredited clinics and hospitals. PhilLife providesfinancial services, such as individual, family and group life insurance, investment plans and loanprivilege programs. Banclife is formerly engaged in life insurance business in the Philippines. Itceased operations in March 2013.

On December 7, 2015, the BOD of Maestro Holdings approved the opening for subscription of437,500 common shares out of its authorized but unissued common stock at a subscription price of₱800 per share or an aggregate subscription price of ₱350.0 million to all stockholders of recordMaestro Holdings in accordance with their existing shareholdings, subject to the conditions that:(a) each stockholder shall pay 50% of the stockholder’s subscription on or before December 18,2015; and (b) the balance of each stockholder’s subscription shall be payable upon call by theBOD. The purpose of the said capital call is to raise funds for capital infusion in PhilLife and forfuture investments. In 2016, STI ESG subscribed to 87,479 shares of Maestro Holdingsamounting to ₱70.0 million. As at March 31, 2016, STI ESG’s outstanding subscriptions payableamounted to ₱17.5 million. On June 10, 2016, the BOD of Maestro cancelled the balance of thesubscription due from its stockholders.

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Condensed financial information for Maestro Holdings is as follows:

2016 2015Current assets P=4,534,835,461 P=9,609,142,851Noncurrent assets 40,895,899,440 36,107,355,841Current liabilities (4,574,914,973) (1,308,173,698)Noncurrent liabilities (33,586,087,750) (36,141,119,694)Total equity 7,269,732,178 8,267,205,300Less equity attributable to equity holders of non-

controlling interests 324,159,443 306,697,322Equity attributable to equity holders of the parent

company 6,945,572,735 7,960,507,978Proportion of the Group’s ownership 20% 20%Carrying amount of the investment P=1,389,114,547 P=1,592,101,596Revenues P=9,031,836,809 P=8,092,366,742Income from operations P=163,542,588 P=537,593,533Other comprehensive loss (1,510,330,615) (63,921,622)Total comprehensive income (loss) (1,346,788,027) 473,671,911Less total comprehensive income attributable to

equity holders of non-controlling interests 18,390,859 53,131,598Total comprehensive income (loss) attributable to

equity holders of the parent company (1,365,178,886) 420,540,313Proportion of the Group’s ownership 20% 20%Share in total comprehensive income (loss) (P=273,035,777) P=84,108,063

In December 2015, Maestro Holdings subscribed to 1,629,682,642 additional shares in PhilLifefor P=39.0 million. The additional subscription increased Maestro Holding’s interest in PhilLifefrom 70.0% to 70.6%. In January 2016, Maestro Holdings entered into a Contract to Sell withEujo Philippines, Inc.’s for the latter’s sale of its equity interest in PhilLife. The contract price isset at P=195.0 million subject to an adjustment based on 1.5x the audited book value per share ofPhilLife as at December 31, 2015. Upon consummation of the sale, Maestro Holdings willincrease its interest in PhilLife from 70.60% to 90.7%. As at July 12, 2016, the Deed of Sale ofthe shares has not been executed.

STI Accent. STI Accent is engaged in providing medical and other related services. It ceasedoperations on June 20, 2012 after the contract of usufruct between STI Accent and Dr. Fe DelMundo Medical Center Foundation Philippines, Inc. to operate the hospital and its relatedhealthcare service businesses was rescinded in May 2012. Thus, the Group ceased the recognitionof its share in the losses of STI Accent. As at March 31, 2016 and 2015, the Group providedallowance for impairment loss on its investments in STI Accent and related advances amountingto P=15.5 million and P=14.9 million.

The Group’s share in the net earnings of its associates, which are individually immaterial,amounted to P=5.7 million, =P=0.5 million and P0.1 million in 2016, 2015 and 2014, respectively.

For terms and conditions relating to advances to associates and joint ventures, refer to Note 28.

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13. Interests in Joint Ventures

PHEIOn March 19, 2004, STI ESG, together with the University of Makati (UMak) and anothershareholder, incorporated PHEI in the Philippines. STI ESG and UMak each owns 40.00% of theequity of PHEI with the balance owned by another shareholder. PHEI is envisioned as theCollege of Nursing of UMak. The following are certain key terms under the agreement signed in2003 by STI ESG and UMak:

a. STI ESG shall be primarily responsible for the design of the curriculum for the Bachelor’sDegree in Nursing (“BSN”) and Master’s Degree in Nursing Informatics, with suchcurriculum duly approved by the University Council of UMak;

b. UMak will allow the use of its premises as a campus of BSN while the premises ofiACADEMY will be the campus of the post graduate degree; and

c. STI ESG will recruit the nursing faculty while UMak will provide the faculty for basiccourses that 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 Joint Venture Agreement (“JVA”). Under the JVA, theparties have agreed to incorporate a joint venture company in the Philippines and set certainterms with regards to capitalization, organization, conduct of business and the extent of theirparticipation in the management of affairs of the joint venture company for the primary purposeof engaging, directly or indirectly, in the business of medical transcription and other relatedbusiness in the Philippines. In relation to the incorporation of a joint venture company, theparties incorporated STI-PHNS. The parties each have a 50.00% ownership of the outstandingcapital stock of STI-PHNS.

A Deed of Assignment between GROW and STI ESG was executed on May 5, 2006 to transferall the rights of GROW in the JVA to the latter.

STI-PHNS ceased operations in 2014. On April 7, 2016, the BOD and the stockholders of STI-PHNS approved the shortening of the corporate life of the company such that its corporateexistence will end on June 30, 2017.

The Group’s share in the net earnings of its joint ventures, which are individually immaterialamounted to P=0.7 million, P=0.4 million and P=4.0 million in 2016, 2015 and 2014, respectively.

The unrecognized share in the net losses of the joint ventures, which are individually immaterial,amounted to P=4.1 million as at March 31, 2016 and 2015.

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14. Noncurrent Receivables

As at March 31, 2015, this account consists of:

AmountReceivable from PWU* P=276,993,776Receivable from Unlad* 268,902,838Accrued interest** 15,978,935

P=561,875,549*Includes P=32.9 million of capitalized expenses relative to the foreclosure proceedings.**Interest up to December 31, 2012 only

These receivables represent loans extended by the Parent Company to PWU and Unlad, includingloans extended by AHC, when the Parent Company acceded, in November 2011, to the JointVenture Agreement and Shareholders’ Agreement (the “Agreements”) by and among PWU,Unlad, an Individual and Mr. Eusebio H. Tanco (“EHT”), STI Holdings’ BOD Chairman, for theformation of a strategic arrangement with regard to the efficient management and operation ofPWU.

PWU is a private non-stock, non-profit educational institution, which provides basic, secondaryand tertiary education to its students while Unlad is a real estate company controlled by theBenitez Family and has some assets which are used to support the educational thrust of PWU.

Pursuant to the Agreements, the Parent Company acquired PWU’s debt from PWU’s creditorbank, together with all of the bank’s rights to the underlying collateral and security, for the amountof P=223.5 million (the “Acquired Loan”), on a without recourse basis, in November 2011. Theterms of the Acquired Loan are governed by the Facility Agreement dated October 20, 2009entered into by PWU and PWU’s creditor bank (the “Facility Agreement”). The Acquired Loan issecured, among others, by the real estate mortgage constituted over the PWU Taft Properties andreal estate properties of Unlad in Quezon City.

Likewise in accordance with the Agreements, the Parent 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 to Unladin the amount of P=198.0 million (the “Loan to Unlad”).

As stated in the Agreements, the Acquired Loan and Loan to PWU, inclusive of 5% interest perannum, shall be accrued and paid by way of the assignment by PWU of its shares in Unlad (whichPWU 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 inUnlad to enable the Parent Company to acquire, together with the shares assigned by PWU to theParent Company as payment for the Acquired Loan and Loan to PWU, a total of 40% equity inUnlad.

On May 17, 2012, the Individual, who is a party to the Agreements with the Parent Company,PWU and Unlad, assigned his rights, title and interest in the Joint Venture Agreement to AHC.AHC thereby assumed the Individual’s obligation to grant a loan to Unlad in the principal amountof P=224.0 million (the “AHC Loan to Unlad”). Pursuant to the agreement, the Parent Companyand AHC (collectively referred to as the “Lenders”) agreed to lend Unlad a principal amount ofP=422.0 million consisting of the Parent Company’s Loan to Unlad and the AHC Loan to Unlad.

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In further pursuance of the Agreements, on June 8, 2012, the Parent Company entered into anOmnibus Agreement with PWU (“PWU Omnibus Agreement”) consisting of: (1) a prefatoryagreement; (2) a loan agreement; and (3) a real estate mortgage. Under the PWU OmnibusAgreement, the Parent Company will extend a loan the Loan to PWU, which shall be accrued andpaid by way of assignment by PWU of its shares in Unlad. The Loan to PWU is secured by thereal estate mortgage constituted on the PWU Taft Properties and PWU Indiana Property (“ManilaProperties”).

Also, on June 8, 2012, the Parent Company entered into an Omnibus Agreement with Unlad andAHC (“Unlad Omnibus Agreement”) consisting of: (1) a prefatory agreement; (2) a loanagreement; and (3) a real estate mortgage.

Under the Unlad Omnibus Agreement, the Lenders will extend a loan to Unlad which is payableby way of conversion into equity in Unlad. Said conversion into equity in Unlad must enable: (a)the Parent Company to acquire, together with the shares acquired by it as payment of the AcquiredLoan and Loan to PWU, 40% of the issued and outstanding capital stock of Unlad, as discussedabove; and (b) AHC to acquire 20% of Unlad’s issued and outstanding capital stock. The Loan toUnlad and AHC Loan to Unlad are secured by the real estate mortgage constituted on real estateproperties of Unlad in Quezon City and Davao City.

In June 2012, the Parent Company released the Loan to PWU amounting to P=26.5 million while inAugust and October 2012, the Parent Company granted the Loan to Unlad amounting to P=166.0million and P=32.0 million, respectively.

In April and August 2013, AHC extended the AHC Loan to Unlad totaling P=65.0 million.

On March 25, 2013, the Joint Venture Agreement, Facility Agreement, PWU Omnibus Agreementand Unlad Omnibus Agreement have been amended to discontinue imposition of interest on theAcquired Loan, Loan to PWU, Loan to Unlad and AHC Loan to Unlad effective January 1, 2013.

On November 15, 2014, Mr. Conrado Benitez II, a Trustee of PWU and a Director of Unlad, notifiedthe Parent Company of his desire to terminate the Joint Venture Agreement.

On November 22, 2014, a Special Joint Meeting of the Board of Trustees of PWU and the Board ofDirectors of Unlad was held to discuss the status and future of the Joint Venture Agreement. In thismeeting, Dr. Jose Francisco B. Benitez, the President of PWU, expressed his preference to rescindand terminate the Joint Venture Agreement. In addition, Mr. Conrado L. Benitez II moved to canceland/or defer the Annual Stockholders’ Meeting of Unlad on December 5, 2014. The Agenda for theAnnual Stockholders’ Meeting of Unlad included the amendment of Unlad’s Articles of Incorporationto increase its authorized capital stock to P=1.5 billion. The increase of the authorized capital stock ofUnlad is needed to accommodate the Property-for-Share Swap Transaction of PWU and Unladneeded for the payment of the Acquired Loan and Loan to PWU, and to accommodate the Loan toEquity Conversion of the Loan to Unlad and AHC Loan to Unlad. EHT stated that a cancellationand/or deferment of Unlad’s Annual Stockholders Meeting on December 5, 2014 equates to a denialof the increase in the authorized capital stock of Unlad and a refusal of PWU and Unlad to pay theirloans.

On December 5, 2014, during Unlad’s Annual Stockholders’ Meeting, Mr. Conrado L. Benitez II,representing the majority of the quorum present, moved to adjourn the meeting and defer the approvalof the amendment of Unlad’s Articles of Incorporation to increase the authorized capital stock thereofto P=1.5 billion due to a legal impediment allegedly imposed by the Bureau of Internal Revenue withrespect to the Property-for-Share Swap Transaction.

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On December 9, 2014 and December 16, 2014, the Parent Company and AHC, respectively, served aNotice of Default to PWU and Unlad demanding payments of the loans, including interest, penalties,VAT and other fees.

At various dates in February 2015, the Parent Company and AHC filed a Petition with the Officeof Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court (“RTC”) of Manila, QuezonCity and Davao City for the extra-judicial foreclosure of real estate mortgage over parcels of landand all improvements located thereon (see Note 31).

On March 13, 2015, Dr. Helena Z. Benitez (“HZB”) filed a Creditor-Initiated Petition forRehabilitation of PWU in RTC Manila (“PWU Rehabilitation Case”). The PWU RehabilitationCase was raffled to Branch 46 of the RTC Manila (“Rehabilitation Court”) (see Note 31).

On March 26, 2015, the Parent Company filed a Notice of Claim with the Rehabilitation Court.

On August 29, 2015, the Rehabilitation Court rendered a decision dismissing the PWURehabilitation Case.

After filing of the Motion for Reconsideration and responsive pleadings thereto, on January 21,2016, the Rehabilitation Court denied the respective Motions for Reconsideration filed by HZBand PWU (see further discussion on Note 31).

On March 1, 2016, the Parent Company and AHC executed a Deed of Assignment wherein AHCassigned its AHC Loan to Unlad, including capitalized foreclosure expenses, amounting toP=66.7 million for a cash consideration of P=73.8 million.

On March 22, 2016, the Parent Company, PWU, Unlad, and HZB entered into a Memorandum ofAgreement (“MOA”) for the extinguishment and settlement of the outstanding obligations ofPWU and Unlad to the Parent Company. The MOA includes, among others, the execution of thefollowing on March 31, 2016:

· Deed of Dacion of Quezon City Properties and Davao Property (collectively referred toas the “Deeds”) in favor of the Parent Company

· Release and cancellation of mortgages over the Manila Properties to be executed by theParent Company

The MOA also provides that the Parent Company will be committed to fund and advance all taxes,expenses and fees to the extent of P=150.0 million in order to obtain the BIR CertificateAuthorizing Registration (“CAR”) and the issuance of new Transfer Certificates of Title (“TCT”)and Tax Declarations (“TD”) in favor of the Parent Company. In the event that such expenses areless than P=150.0 million, the excess shall be given to Unlad. However, if the P=150.0 million willbe insufficient to cover the expenses, the Parent Company will provide the deficiency without anyright of reimbursement from Unlad (see Note 17).

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Prior to the settlement, the breakdown of the receivables from PWU and Unlad follows:

PWU Unlad TotalPrincipal amount P=250,000,000 P=263,000,000 P=513,000,000Interest* 12,651,546 3,327,389 15,978,935Auction expenses 23,195,709 951,876 24,147,585Foreclosure and legal expenses 18,021,970 5,941,989 23,963,959

P=303,869,225 P=273,221,254 P=577,090,479*Interest up to December 31, 2012 only

Pursuant to the MOA, on March 31, 2016, the Parent Company and Unlad entered into the Deedswherein Unlad transfers four parcels of land in Quezon City and a parcel of land in Davao to theParent Company for a total dacion price of P=611.0 million and P=300.0 million, respectively, forthe settlement of the outstanding loans of PWU and Unlad. This resulted to a gain amounting toP=553.4 million, after recognition of the properties received at fair value, and is presented as“Excess of consideration received from collection of receivables” in the 2016 consolidatedstatement of comprehensive income (see Note 11).

Consequently, the Parent Company recognized the Quezon City and Davao properties as“Investment properties” in the March 31, 2016 consolidated statement of financial position (seeNote 11).

15. Available-for-sale Financial Assets


2016 2015Quoted equity shares - at fair value P=3,692,495 P=3,919,749Unquoted equity shares - at cost 47,062,515 47,212,515

P=50,755,010 P=51,132,264

a. Quoted Equity Shares

The quoted equity shares above pertain to listed shares in the PSE, as well as trade clubshares. These are carried at fair value with cumulative changes in fair values presented as aseparate component in equity under the “Unrealized mark-to-market loss on available-for-salefinancial assets” account in the consolidated statements of financial position. The fair valuesof these shares are based on the quoted market price as at financial reporting date.

The rollforward analysis of the “Unrealized mark-to-market loss on available-for-sale financialassets” account as shown in the equity section of the consolidated statements of financial position,follows:

2016 2015Balance at beginning of year (P=8,055) (P=540,379)Unrealized mark-to-market gain (loss) on AFS

financial assets (377,254) 532,324Balance at end of year (see Note 19) (P=385,309) (P=8,055)

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Dividend income earned from AFS financial assets amounted to P=2.8 million, P=1.5 million,=P0.5 million in 2016, 2015 and 2014, respectively.

b. Unquoted Equity Shares

Unquoted equity shares pertain to unlisted shares of stocks. The fair value of these unquotedequity shares is not reasonably determinable due to the unpredictable nature of future cashflows and the lack of suitable method of arriving at a reliable fair value, hence, these arecarried at cost less impairment, if any.

c. Pledged Shares

On June 3, 2013, STI ESG executed a deed of pledge on all of its De Los Medical Centershares in favor of Neptune Stroika Holdings, Inc., a wholly owned subsidiary of MetroPacific Investments Corporation (“MPIC”), to cover the indemnity obligations of STI ESGenumerated in its investment agreement entered into in 2013 with MPIC. The completion ofMPIC’s subscription resulted to the cessation of De Los Santos-STI Megaclinic and De LosSantos Medical Center as associates of the Group effective June 2013. Consequently, theGroup’s effective percentage ownership in De Los Santos Medical Center was diluted andsuch was reclassified to AFS financial assets. The Group then recognized a loss arisingfrom the dilution amounting to =P43.0 million presented as “Loss on deemed sale and shareswap of an associate” in the 2014 consolidated statement of comprehensive income. Thecarrying value of the investment in De Los Santos Medical Center amounted to₱25.9 million as at March 31, 2016 and 2015.

16. Goodwill, Intangible and Other Noncurrent Assets


2016 2015Goodwill P=239,458,878 P=239,458,878Deposits (see Note 26) 39,816,081 42,310,614Intangible assets 36,703,587 34,860,613Advances to suppliers 67,734,273 7,764,679Others 8,701,462 20,703,936

P=392,414,281 P=345,098,720

Goodwill

The rollforward analyses of this account follow:2016 2015

Balance at beginning of year P=239,458,878 P=202,843,745Additions due to business combinations (see Note 3) – 36,615,133Balance at end of year P=239,458,878 P=239,458,878

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Goodwill acquired through business combinations have been allocated to the following entitieswhich are considered as separate CGU as at March 31, 2016 and 2015:

STI Caloocan P=64,147,877STI Novaliches 21,803,322STI Taft 19,030,844STI Bacolod (see Note 3) 15,681,232STI Tuguegarao 13,638,360STI Lipa (see Note 3) 8,857,790STI Dagupan 6,835,818STI Tanauan (see Note 3) 4,873,058STI Iloilo (see Note 3) 3,806,173STI Pagadian (see Note 3) 3,396,880STI Batangas (see Note 3) 2,585,492Merged entities (see Note 1):

STI Cubao 28,327,670STI Global City 11,360,085STI Edsa Crossing 11,213,342STI Ortigas-Cainta 7,476,448STI Meycauayan 5,460,587STI Makati 3,261,786STI Las Piñas 2,922,530STI Kalibo 2,474,216STI Naga 2,305,368

P=239,458,878

Management performs its annual impairment test every last quarter of the year for each CGU,particularly STI Caloocan. The recoverable amount of STI Caloocan is based on value-in-use. Future cash flows are discounted using the weighted average cost of capital of 10%, adjustedfor the entity-specific inflation risk of 5%. The cash flow projections are based on a five-yearfinancial planning period approved by senior management. Management has determined, basedon this analysis, that there are no impairment loss in 2016 and 2015 since the value-in-use exceedsthe carrying value of STI Caloocan.

DepositsThis account includes security deposits paid to utility companies and for warehouse and officespace rentals to be applied against future lease payments in accordance with the respective leaseagreements (see Note 26).

Intangible AssetsIntangible assets represent the Group’s accounting and school management software. The SchoolManagement Software was partially implemented in April 2016. STI ESG expects fullimplementation of the software in April 2017.

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The rollforward analyses of this account follow:

2016 2015Cost, net of accumulated amortization:Balance at beginning of year P=34,860,613 P=30,348,142Additions 6,672,070 8,312,282Amortization (see Note 23) (4,829,096) (3,799,811)Balance at end of year P=36,703,587 P=34,860,613

2016 2015Cost P=59,414,181 P=52,742,111Accumulated amortization 22,710,594 17,881,498Net carrying amount P=36,703,587 P=34,860,613

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.

17. Accounts Payable and Other Current Liabilities


2016 2015Accounts payable P=306,850,128 P=446,394,648Payable to UNLAD (see Note 14) 64,396,900 –Dividends payable (see Note 19) 11,898,945 11,898,945Accrued expenses:

Rent 36,041,503 37,938,510Contracted services 35,112,260 24,056,960School-related expenses 30,040,506 23,703,643Salaries, wages and benefits 22,501,617 21,144,380Utilities 5,310,722 3,326,449Advertising and promotion 2,335,010 6,736,225Interest 9,374,348 10,716,257Others 10,229,839 7,908,510

Subscriptions payable (see Notes 12 and 28) 17,495,800 –Statutory payables 11,411,779 13,490,839Network events fund 5,305,788 6,665,340Current portion of refundable deposits 2,452,697 436,751Others 25,643,697 49,434,508

P=596,401,539 P=663,851,965

The terms and conditions of the above liabilities are as follows:

a. As discussed in Note 14, the MOA provides that the Parent Company is committed to fund andadvance all taxes, expenses and fees to the extent of P=150.0 million to obtain the BIR CAR andthe issuance of new TCTs and TDs of the investment properties in favor of the Parent Company.As at March 31, 2016, the Parent Company recognized P=85.6 million payable to BIR as part of“Accounts payable” and P=64.4 million as “Payable to Unlad”. As at July 12, 2016, the Parent

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Company has already paid P=85.6 million and P=55.0 million of the payable to BIR and payable toUnlad, respectively.

b. Accounts payable are noninterest-bearing and are normally settled within a 30 to 60-day term.

c. Accrued expenses and withholding taxes payable are expected to be settled within the nextfinancial year.

d. Subscriptions payable pertains to the balance of the subscription price that shall be paid upon call bythe BOD of Maestro Holdings (see Note 12).

e. Statutory payables primarily include taxes payable, remittances to government agencies.These are normally settled within the first month of the next financial year.

f. Refundable deposits pertain to security deposits received from existing lease agreements andare expected to be settled within the next financial year.

g. For terms and conditions with related parties, refer to Note 28.

18. Interest-bearing Loans and Borrowings


2016 2015Noncurrent P=1,034,200,000 P=1,151,000,000Current portion 116,800,000 236,000,000

P=1,151,000,000 P=1,387,000,000

Corporate Notes FacilityOn March 20, 2014, STI ESG entered into a Corporate Notes Facility Agreement (“Credit FacilityAgreement”) with China Banking Corporation (“China Bank”) granting STI ESG a credit facilityamounting to P=3.0 billion with a term of either 5 or 7 years. The facility is available in twotranches of P=1.5 billion each. The net proceeds from the issuance of the notes shall be used forcapital expenditures and other general corporate purposes.

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 of three-fourths percent (0.75%) per annum, which is subject to repricing.

In 2015, STI ESG availed a total of ₱1,200.0 million loan with interest ranging from 4.34% to4.75%. STI ESG made payments totaling to ₱216.0 million and ₱108.0 million in 2016 and 2015,respectively.

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These loans are unsecured and are due based on the following schedule.

Fiscal Year Amount2017 100,800,0002018 40,800,0002019 134,400,0002020 240,000,0002021 240,000,0002022 120,000,000

₱876,000,000

An Accession Agreement to the Credit Facility Agreement was executed on December 16, 2014among STI ESG, STI WNU and China Bank whereby STI WNU acceded to the Credit Facilityentered into by STI ESG with China Bank in March 2014. In addition, an Amendment andSupplemental Agreement was also executed by the parties on the same date. By virtue of theAccession Agreement, a sub limit of P=500.0 million was made available to STI WNU andUNLAD. The Amendment and Supplemental Agreement allowed STI WNU to draw up to P=300.0million from the facility.

On December 19, 2014, STI ESG advised China Bank that it will not be availing of tranche 2 ofthe Credit Facility Agreement thus limiting the facility available to STI ESG to P=1.5 billion. Onthe same date, STI WNU availed the amount of P=300.0 million under the same terms andconditions as that of STI ESG Credit Facility. The loan is for a term of seven (7) years 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 of three-fourths percent (0.75%) per annum. Said interest rate shall be repriced and determined on therelevant interest rate repricing date, and thereafter, such repriced interest rate shall be theapplicable interest rate for the immediately succeeding two (2) interest periods. The lastinstallment of the loan is due on July 31, 2021 and is payable in semi-annual payments ofprincipal and interest starting January 31, 2015. This loan is secured by a Comprehensive Suretyissued by the Parent Company.

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 in loss of control over the overall resulting entity and sale, lease, transfer orotherwise disposal of all or substantially all of its assets. The Credit Facility Agreement alsocontains, among others, covenants regarding incurring additional debt and declaration ofdividends, to the extent that such will result in a breach of the required debt-to-equity and debtservice cover ratios. As at March 31, 2016 and 2015, STI ESG and STI WNU have complied withthe above covenants. STI ESG also complied with the notice requirement under the loanagreements with the other creditor banks.

Future repayment of the principal under the Credit Facility Agreement follows:

Within one year P=116,800,000After one year but not more than five years 874,400,000Beyond five years 159,800,000

P=1,151,000,000

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On December 19, 2014, STI WNU fully settled its outstanding term loans with China Bankamounting to P=67.0 million out of the net proceeds of the long term loan of P=300.0 million. Theseterm loans from China Bank were originally secured by land on which STI WNU is situated. Themortgage on the properties was cancelled and the land titles were released in January 2015.

Short-term LoansIn addition to the Credit Facility Agreement, STI ESG entered into an Omnibus Loan Agreementwith China Bank for a P=200.0 million credit line in March 2014. In April 2014, STI ESG availedof short-term loans amounting to P=125.0 million. These unsecured loans are due in 358 to 360days. Another P=25.0 million was drawn from this facility on October 13, 2014. On December 22,2014, STI ESG settled the full amount of P=150.0 million.

On July 30, 2014, Security Bank Corporation (“Security Bank”) granted STI ESG an unsecuredcredit line facility amounting to P=300.0 million. The outstanding loan of P=180.0 million wastreated as an availment of this facility thus releasing the mortgage on STI ESG’s assets. OnSeptember 18, 2014, STI ESG settled the balance of P=180.0 million. On September 19, 2014, STIESG availed of loans from Security Bank amounting to P=250.0 million. The proceeds from theseloans were used for working capital purposes. On December 22, 2014, STI ESG fully paidthe P=250.0 million loan.

On November 27, 2014, STI WNU availed of a short-term loan from China Bank in the amount ofP=25.0 million. The loan had an interest rate of 3.875% and was on a clean basis. As at March 31,2015, the short-term loan was fully settled out of the net proceeds of the long-term loan ofP=300.0 million.

Other LoansIn July 2014, STI WNU has fully settled the loans from previous shareholders amounting toP=19.5 million and certain loans from China Bank amounting to P=21.8 million.

In 2014, STI ESG availed of short-term loans from Security Bank amounting to P=280.0 millionwith an interest rate of 3.75% and maturing in September 2014. The proceeds from these short-term loans were used for working capital purposes. The loan was fully settled in 2014.

Interest ExpenseStarting with the interest period February 1, 2016, the one-year PDST-F was changed to PDST-R2as the basis for determining the interest rate for both STI ESG and STI WNU loans.

Interest incurred from loans amounted to P=61.7 million, P=26.7 million and P=9.6 million in 2016,2015 and 2014, respectively (see Note 20).

19. Equity

Common Stock and Additional Paid-in Capital

Details as of March 31, 2016 and 2015 follow:

Shares AmountCommon stock - P=0.50 par value per shareAuthorized 10,000,000,000 P=5,000,000,000Issued and outstanding 9,904,806,924 4,952,403,462

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Set out below is the Parent 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 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 at March 31, 2016 and 2015, the Parent Company has a total number of shareholders on recordof 1,256 and 1,246, respectively.

Cost of Shares Held by a SubsidiaryThis account includes 502,308,895 STI Holdings shares owned by STI ESG as at March 31, 2016and 2015 amounting to =P500.0 million which are treated as treasury shares in the consolidatedstatements of financial position. Dividends related to these shares, amounting to P=10.0 million,P=10.0 million and P=7.6 million were offset against the dividends declared in 2016, 2015 and2014, respectively, as shown in the consolidated statements of changes in equity.

Other Comprehensive Income (Loss)

2016Attributable toEquity Holders

of the ParentCompany

Non-controlling interests Total

Unrealized mark-to-market loss on AFS financialassets (see Note 15) (P=373,642) (P=11,667) (P=385,309)

Share in associates’ unrealized mark-to-marketgain on AFS financial assets (see Note 12) 120,917,874 1,640,620 122,558,494

Cumulative actuarial gain 15,729,797 189,099 15,918,896Share in associates’ cumulative actuarial loss

(see Note 12) (18,002,502) (251,735) (18,254,237)P=118,271,527 P=1,566,317 P=119,837,844




Unrealized mark-to-market loss on AFS financialassets (see Note 15) (P=937) (P=7,118) (P=8,055)

Share in associates’ unrealized mark-to-marketgain on AFS financial assets (Note 12) 418,977,664 5,684,098 424,661,762


(see Note 12) (18,556,430) (251,735) (18,808,165)P=420,834,447 P=5,614,344 P=426,448,791

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Unrealized mark-to-market loss on AFS financialassets (see Note 15) (P=525,048) (P=15,331) (P=540,379)

Share in associates’ unrealized mark-to-marketgain on AFS financial assets (see Note 12) 428,253,571 5,809,954 434,063,525


(see Note 12) (15,003,756) (203,539) (15,207,295)P=430,739,219 P=5,786,961 P=436,526,180

Other Equity ReserveThis account consists of:

i. Equity adjustment resulting from the Parent Company’s Share Swap transaction with STIESG in September 2012 amounting to P=1,718.5 million (see Note 1);

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-controlling interests’share in other comprehensive income to the equity holders of the Parent Company; and STIESG’s other equity adjustments, which include the difference between the equity of thenon-controlling interests and the fair value of the consideration given in exchange forSTI ESG’s acquisition of the non-controlling interests, totaling to P=60.2 million andP=65.0 million as of March 31, 2016 and 2015, respectively (see Note 3).

Retained EarningsConsolidated retained earnings represent STI ESG and other subsidiaries’ retained earnings, net ofamount attributable to NCI, and STI Holdings’ accumulated earnings, net of dividends declaredfrom 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=3,553.4 million and P=3,137.1 million as at March 31, 2016 and 2015, respectively.The Parent Company’s retained earnings available for dividend declaration, computed based on theguidelines provided in the SEC Memorandum Circular No. 11, amounted to P=572.3 million andP=147.9 million as at March 31, 2016 and 2015, respectively.

STI ESG’s BOD approved the appropriation amounting to =P800.0 million out of its unappropriatedretained earnings balance on December 7, 2011 for the Group’s future expansion of nine schoolswithin the next two years. On August 29, 2013, STI ESG’s BOD approved the reversal of theamount to unappropriated retained earnings.

On September 25, 2015, cash dividends amounting to P=0.02 per share or the aggregate amount ofP=198.1 million were declared by the Parent Company’s BOD in favor of all stockholders on recordas at October 12, 2015, payable on November 5, 2015.

On September 26, 2014, cash dividends amounting to P=0.02 per share or the aggregate amount ofP=198.1 million were declared by the Parent Company’s BOD in favor of all stockholders on recordas at October 17, 2014, payable on November 11, 2014.

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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.

As at March 31, 2016 and 2015, long outstanding unclaimed dividends amounting to =P11.8 millionpertains to dividend declarations from 1998 to 2006 (see Note 17).

Dividends Declared by Subsidiaries to Noncontrolling InterestsDividends declared by subsidiaries to non-controlling interest owners amounted toP=3.3 million, P P=5.7 million and =P11.0 million in 2016, 2015 and 2014, respectively.

20. Interest Income and Interest Expense

Interest income is derived from the following sources:

2016 2015 2014Cash and cash equivalents

(see Note 6) P=3,796,712 P=2,591,472 P=10,997,206Past due accounts receivables

(see Note 7) 1,406,303 2,932,047 277,259Others 582,695 536,265 925,114

P=5,785,710 P=6,059,784 P=12,199,579

Interest expense is incurred from the following sources:

2016 2015 2014Interest-bearing loans and

borrowings (see Note 18) P=61,728,023 P=26,700,935 P=9,609,266Obligations under finance lease

(see Note 26) 1,194,458 1,541,470 1,317,531Others 300,926 – –

P=63,223,407 P=28,242,405 P=10,926,797

21. Cost of Educational Services


2016 2015 2014Faculty salaries and benefits

(see Notes 24 and 25) P=307,125,042 P=281,183,889 P=238,054,539Depreciation and amortization

(see Note 10) 187,569,647 153,943,984 110,553,121Student activities and programs 127,724,741 108,101,741 92,718,562Rental (see Note 26) 91,951,494 93,814,670 87,691,656Courseware development costs 4,383,111 4,774,173 6,444,628Others 9,537,639 13,816,825 17,557,479

P=728,291,674 P=655,635,282 P=553,019,985

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22. Cost of Educational Materials and Supplies Sold


2016 2015 2014Educational materials P=40,693,912 P=30,801,718 P=32,565,707School materials and supplies 14,874,271 14,214,442 7,557,627Promotional materials 12,565,817 12,760,523 11,837,412Others 1,674,073 1,732,437 1,380,934

P=69,808,073 P=59,509,120 P=53,341,680

23. General and Administrative Expenses


2016 2015 2014Salaries, wages and benefits

(see Notes 24, 25 and 28) P=290,501,085 P=279,108,023 P=242,730,816Depreciation and amortization

(see Notes 10, 11 and 16) 170,560,906 141,792,903 94,998,853Light and water 110,419,040 116,621,364 99,131,497Provision for (reversal of)

impairment loss on:Receivables (see Note 7) 70,722,732 72,018,889 57,648,376Investments in and advances to

associates and joint ventures(see Note 12) 519,414 – (719,873)

Outside services 80,275,811 74,742,381 58,037,324Professional fees 70,677,003 48,614,868 48,854,457Advertising and promotions 59,579,821 34,307,783 23,092,713Rental (see Note 26) 51,427,680 52,512,922 48,869,422Transportation 27,245,215 28,466,612 25,204,879Taxes and licenses 25,353,485 43,222,697 34,939,382Repairs and maintenance 17,779,724 13,893,519 10,532,983Meetings and conferences 17,412,689 16,145,784 15,874,352Entertainment, amusement and

recreation 14,750,373 14,782,474 14,997,531Office supplies 14,246,507 12,238,151 13,029,334Communication 11,097,991 10,989,949 9,812,693Insurance 11,108,908 7,298,022 5,450,574Software maintenance 8,837,571 3,037,107 1,253,771Purchased services and utilities 1,271,002 4,450,997 6,049,955Excess of cost over net realizable

value of inventories (see Note 8) – 296,127 2,420,456Others 22,021,696 17,667,924 26,300,906

P=1,075,808,653 P=992,208,496 P=838,510,401

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24. Personnel Costs


2016 2015 2014Salaries and wages P=523,402,404 P=485,549,886 P=414,814,263Pension expense (see Note 25) 16,574,152 16,458,410 10,133,891Other employee benefits 57,649,571 58,283,616 55,837,201

P=597,626,127 P=560,291,912 P=480,785,355

25. Pension Plans

Defined Benefit Plans The Group (except De Los Santos-STI College and STI QA) has separate, noncontributory, defined

benefit pension plans covering substantially all of its faculty and regular employees. The benefitsare based on the faculties’ and employees’ salaries and length of service.

Under the existing regulatory framework, RA No. 7641 (Retirement Pay Law) requires a provisionfor retirement pay to qualified private sector employees in the absence of any retirement plan inthe entity, provided however that the employee’s retirement benefits under any collectivebargaining and other agreements shall not be less than those provided under the law. The law doesnot require minimum funding of the plan.

Retirement benefits are payable in the event of termination of employment due to: (i) early,normal, or late retirement; (ii) physical disability; (iii) voluntary resignation; or (iv) 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 implements the Investment policy in accordance with the investment strategy aswell as various principles and objectives.

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The following tables summarize the components of the Group’s net pension expense recognized inthe consolidated statements of comprehensive income and the pension liability recognized in theconsolidated statements of financial position:

2016 2015 2014Pension expense (recognized under

the “Salaries, wages andbenefits” account):Current service cost P=13,551,312 P=12,828,442 P=10,382,377Net interest cost (income) 2,962,660 2,868,437 (627,573)

P=16,513,972 P=15,696,879 P=9,754,804

March 312016 2015

Pension liabilities (recognized in the consolidatedstatements of financial position):Present value of defined benefit obligations P=158,196,309 P=149,996,619Fair value of plan assets (85,583,879) (86,547,166)

P=72,612,430 P=63,449,453

Changes in the present value of defined benefitobligations:Balance at beginning of year P=149,996,619 P=137,381,189Current service cost 13,551,312 12,828,442Interest cost 7,211,831 6,374,203Benefits paid (5,577,617) (3,545,474)Actuarial gain on obligations (6,985,836) (3,041,741)Balance at end of year P=158,196,309 P=149,996,619

Changes in the fair value of plan assets:Balance at beginning of year P=86,547,166 P=76,505,921Contributions 12,657,324 10,463,950Interest income 4,249,171 3,505,766Benefits paid (5,577,617) (3,545,474)Actuarial loss on plan assets (12,292,165) (382,997)Balance at end of year P=85,583,879 P=86,547,166

Actual return (loss) on plan assets (P=8,092,127) P=3,044,650

The principal assumptions used in determining pension liabilities are shown below:

April 1, 2016 April 1, 2015 April 1, 2014Discount rate 4.00%–6.00% 4.76–7.90% 3.04–7.90%Future salary increases 4.00%–6.00% 4.00–8.00% 5.00–8.00%

The maximum economic benefit available is a combination of expected refunds from the plan andreductions in future contributions.

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The major categories of the Group’s total plan assets as a percentage of the fair value of the totalplan assets are as follows:

2016 2015Cash and cash equivalents 37% 36%Investment in debt securities 6% 6%Investments in equity securities 57% 58%

100% 100%

The plan assets of the Group are maintained by Union Bank of the Philippines, United CoconutPlanters Bank and Rizal Commercial Banking Corporation and Investments Group (“RCBC Trust”).

Details of the Group’s net assets available for plan benefits and their related market values are asfollows:

2016 2015Cash P=29,781,242 P=29,527,543Short-term fixed income 2,278,205 1,736,401Investments in:

Equity securities 48,627,116 50,388,198Government securities 4,860,528 4,867,856

Others 36,788 27,168P=85,583,879 P=86,547,166

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 3.25% 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.

Investments in Equity Securities. Investments in equity securities pertain to ESG’s RetirementFund investment in the shares of the Parent Company which has a fair value of P=0.57 and P=0.71per share as at March 31, 2016 and 2015, respectively.

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.

Management performs Asset-Liability Matching Study annually. The overall investment policyand strategy of the Group’s defined benefit plans is guided by the objective of achieving aninvestment return which, together with contributions, ensures that there will be sufficient assets topay pension benefits as they fall due while also mitigating the various risk of the plans. TheGroup’s current strategic investment strategy consists of 57% of equity instruments, 6% of debtinstruments and 37% of cash and cash equivalents as at March 31, 2016.

The average duration of the defined benefit obligation at the end of the period is 18 years.

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Shown below is the maturity analysis of the undiscounted benefit payments as at March 31,2016:

AmountLess than one year P=27,820,066More than one year to five years 31,207,860More than five years to 10 years 78,622,268More than 10 years to 15 years 114,386,103More than 15 years to 20 years 213,366,976

The expected contribution of the Group in 2017 is =P12.9 million. On November 7, 2013, RCBCTrust filed an application for the BIR approval of the retirement plan of STI WNU. BIR approvalwas issued on March 28, 2016.

The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the defined benefit obligation (DBO) as at the end of the reportingperiod, assuming all other assumptions were held constant:

2016

Increase(Decrease)

Effect onPresent Value

of DBODiscount rates 1.00% (P=15,323,198)

(1.00%) 18,459,764Future salary increases 1.00% 18,222,965

(1.00%) (15,562,118)Employee turnover 10.00% (2,682,082)

(10.00%) 2,682,082

2015Increase

(Decrease)Effect on Present

Value of DBODiscount rates 1.00% (P=14,850,986)

(1.00%) 15,075,669Future salary increases 1.00% 15,053,675

(1.00%) (14,929,474)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-

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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 the employee met the requirementsfor membership 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 QA thenprovide an additional contribution of 1.00% of the employee’s contribution based on the latter’syears of tenure. Although the De Los Santos Plan has a defined contribution format, the Groupregularly monitors compliance with RA No. 7641. As at March 31, 2016 and 2015, the Group isin compliance with the requirements of RA No. 7641.

As at March 31, 2016 and 2015, De Los Santos-STI College and STI QA have excesscontributions to CEAP amounting to P=3.2 million and P=3.0 million, respectively. These excesscontributions are classified as prepaid expense and will be offset against De Los Santos-STICollege and STI QA’s future required contributions to CEAP (see Note 9).

PIC Q&A No. 2013-03 requires De Los Santos-STI College’s defined contribution plan to beaccounted for as defined benefit plan due to the minimum retirement benefits mandated under RANo. 7641. Actuarial valuation of De Los Santos-STI College’s pension is performed every year-end. Based on the latest actuarial valuation, the minimum retirement benefit provided under RANo. 7641 exceeded the accumulated contribution and earnings under the Plan, however, theamount is not significant.

Pension expense recognized by De Los Santos-STI College and STI QA in 2016, 2015 and 2014amounted to P=0.06 million, P=0.8 million and P=0.4 million, respectively.

Total pension expense recognized in profit or loss follows:

2016 2015 2014Defined benefit plans P=16,513,972 P=15,696,879 P=9,754,804Defined contribution plans 60,180 761,531 379,087

P=16,574,152 P=16,458,410 P=10,133,891

26. 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.

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Future annual minimum lease payments under the lease agreements, together with the presentvalue of the minimum lease payments follow:

2016 2015Within one year P=7,062,160 P=11,146,830After one year but not more than five years 7,775,264 10,716,873Total minimum lease payments 14,837,424 21,863,703Less amount representing interest 1,168,513 3,671,802Present value of lease payments 13,668,911 18,191,901Less current portion of obligations under finance

lease 5,910,450 7,545,495Noncurrent portion of obligations under finance

lease P=7,758,461 P=10,646,406

Interest incurred from finance lease amounted to P=1.2 million, =P1.5 million and =P1.3 millionin 2016, 2015 and 2014, respectively (see Note 20).

b. Operating Lease

As LessorThe Group entered into several lease agreements, as lessors, on their buildings underoperating lease agreements with varying terms and periods. All leases are subject to annualrepricing based on a pre-agreed rate.

On September 17, 2014, iACADEMY entered into a sublease agreement, as lessor, on theirleased building with PhilLife, for a period of five years subject to renewal upon mutualagreement by the parties.The Group also earns rental income from concessionaires and for the occasional use of someof the Group’s properties primarily used for school operations such as gymnasiums.

Total rental income amounted to =P63.2 million, =P31.6 million and =P10.8 million in 2016,2015 and 2014, respectively (see Notes 11 and 28).

Future minimum rental receivable for the remaining lease terms follow:

2016 2015 2014Within one year P=95,468,050 P=23,124,153 P=3,888,786After one year but not more than five

years 421,012,632 73,956,839 2,714,374More than five years 168,112,875 – –Total P=684,593,557 P=97,080,992 P=6,603,160

Other noncurrent liabilities presented in the 2016 consolidated statement of financial positionarise from the Group’s rental income from Techzone. As at March 31, 2016, the breakdownof other noncurrent liabilities account is as follows:

Advance rent P=18,132,912Refundable deposit - net of current portion 11,036,239Deferred lease liabilities 2,195,644

P=31,364,795

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Advance rent pertains to the advance rentals which have not yet been earned by the Group asthese collections apply to periods beyond the reporting date.

The refundable deposits are held by the Group throughout the term of the lease and arerefunded in full to the lessee at the end of the lease term if the lessee has performed fully andobserved all of the conditions and provisions in the lease.

The refundable deposits are presented in the statements of financial position at amortizedcost. The difference between the fair value at initial recognition and the notional amount ofthe refundable deposit is charged to “Deferred lease liability” and amortized on a straight linebasis over the respective lease term.

As LesseeThe Group leases land and building spaces, where the corporate office, schools, andwarehouse are located, under operating lease agreements with varying terms andperiods. The lease rates are subject to annual repricing based on a pre-agreed rate. Totalrental expense charged to operations amounted to P=143.4 million, P=146.3 million andP=136.6 million in March 31, 2016, 2015 and 2014, respectively (see Notes 21 and 23).

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 16).

The lease arrangement related to the land leased by De Los Santos-STI College for its schooloperations was terminated effective March 31, 2015. Thus, accrued rent related to the leaseamounting to P=1.4 million was reversed and De Los Santos-STI College no longer expectsany future minimum lease payments on the lease agreement.

On July 31, 2014, the lease agreements related to the property where the school operations ofiACADEMY were terminated. As a result, accrued rent related to the leases amounting toP=0.3 million was reversed.

Future minimum rental payables under the lease agreements as at financial reporting datefollow:

2016 2015 2014Within one year P=78,580,743 P=120,145,461 P=184,313,624After one year but not more than five

years 261,065,421 269,116,594 435,951,409More than five years 343,158,277 352,726,097 345,719,361Total P=682,804,441 P=741,988,152 P=965,984,394

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27. Income Tax

All domestic subsidiaries qualifying as private educational institutions are subject to tax under RANo. 8424, “An Act Amending the National Internal Revenue Code, as amended, and For OtherPurposes” which was passed into law effective January 1, 1998. Title II Chapter IV - Tax onCorporation - Sec 27(B) of the said Act defines and provides that: a “Proprietary EducationalInstitution” is any private school maintained and administered by private individuals or groupswith an issued permit to operate from DepEd, or CHED, or TESDA, as the case may be, inaccordance with the existing laws and regulations and shall pay a tax of ten percent (10.00%) onits taxable income.

The components of recognized net deferred tax assets and deferred tax liabilities are as follows:

2016 2015Deferred tax assets:

Allowance for doubtful accounts P=11,695,747 P=10,659,614Pension liabilities 7,261,243 6,052,711Excess of:

Rental under operating lease computed on astraight-line basis 2,593,014 2,770,944

Cost over net realizable value of inventories 1,065,590 1,065,590Unearned tuition and other school fees 5,410,478 1,894,750Advance rent 1,813,291 –Others – 9,165

Deferred tax liability -Excess of fair value over carrying value of netassets acquired in business combination (209,144) (209,144)

Net deferred tax assets P=29,630,219 P=22,243,630

Deferred tax liabilities:Excess of fair values over carrying values of netassets acquired in business combination(see Note 3) P=126,418,261 P=127,192,851Excess of fair value over dacion price(see Note 14) 110,861,700 –

P=237,279,961 P=127,192,851

Certain deferred tax assets of the Group were not recognized as at March 31, 2016 and 2015 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:

2016 2015NOLCO P=67,808,506 P=86,315,578Allowance for doubtful accounts 858,771 11,495,591Acquisition-related expenses 4,773,584 4,773,584Pension liabilities – 2,922,344Unearned tuition and other school fees – 1,635,310MCIT – 1,006,327Excess of cost over net realizable value of inventories – 199,603

P=73,440,861 P=108,348,337

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As at March 31, 2016 and 2015, the Group also did not recognize any deferred tax assets on theprovision for impairment losses on investment in and advances to a subsidiary and associates andgoodwill aggregating to P=1.9 million and P=1.8 million, respectively, because management doesnot expect to generate enough capital gains against which these capital losses can be offset.

The details of the Group’s NOLCO, which can be claimed as deduction from future taxableincome, are as follows:

Year Incurred Expiry Dates Beginning AdditionApplied/Expired End

December 31, 2012 December 31, 2015 P=4,010,474 P=– (P=4,010,474) P=–March 31, 2013 March 31, 2016 28,339,236 – (28,339,236) –December 31, 2013 December 31, 2016 2,831,165 – (1,449,083) 1,382,082March 31, 2014 March 31, 2017 24,058,096 – (3,515,285) 20,542,811December 31, 2014 December 31, 2015 2,932,726 – (2,932,726) –March 31, 2015 March 31, 2018 24,143,881 – (7,505,553) 16,638,328December 31, 2015 December 31, 2018 – 350,714 (350,714) –March 31, 2016 March 31, 2019 – 29,245,285 – 29,245,285

P=86,315,578 P=29,595,999 (P=48,103,071) P=67,808,506

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:

2016 2015 2014Provision for income tax at statutory

income tax rate P=389,800,411 P=239,866,046 P=212,567,025Income tax effects of:

Equity in net earnings of associates andjoint ventures (10,498,247) (31,587,149) (69,845,556)

Nondeductible expenses 245,960 627,119 17,906,494Interest income already subjected to final

tax (1,139,014) (698,998) (2,434,345)Excess of fair values of net assets

acquired over acquisition costs – (627,428) (9,804,323)Loss on deemed sale of an investment in

an associate – – 12,900,087Others (9,825,405) (4,360,350) (1,697,562)

Difference in 10% and 30% tax rate (141,931,194) (135,075,202) (106,232,937)P=226,652,511 P=68,144,038 P=53,358,883

Others pertain to the income tax effects of change in unrecognized deferred tax assets, expiredNOLCO and MCIT and other items.

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28. 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 with the Parent Company; (b)associates; and (c) enterprises or individuals owning, directly or indirectly, an interest in the votingpower of the company that gives them significant influence over the company, key managementpersonnel, including directors and officers of the Group and close members of the family of anysuch enterprise or individual.

The following are the Group’s transactions with its related parties:Amount of Transactions

During the YearOutstanding

Receivable (Payable)Related Party 2016 2015 2016 2015 Terms ConditionsAssociates

STI AccentAdvances for various expenses

and other chargesP=519,414 P=– P=35,633,303 P=35,113,889 30 days upon receipt

of billings; noninterest-bearing

Unsecured;withimpairment

Maestro HoldingsSubscription 69,983,200 – (17,495,800) – Due and demandable;

noninterest-bearingUnsecured

GROWRental income and other charges 6,967,634 2,099,753 7,239,094 7,359,094 30 days upon receipt

of billingsUnsecured;

no impairmentAdvances for various expenses – – 143,571 143,571 30 days upon receipt


Unsecured;no impairment

Joint VenturePHEIAdvances for various expenses 575,000 600,000 – 50,000 30 days upon receipt

of billings noninterest-bearing


Affiliates*

PhilCareRental income and other charges 17,284,807 12,849,711 3,135,109 3,690,738 30 days upon receipt



HMO coverage 3,514,745 3,302,331 – – 30 days upon receiptof billings; noninterest-bearing

–

Phil First Insurance Co., Inc.Utilities and other charges 221,243 146,122 491,823 283,173 30 days upon receipt



Rental and other charges 3,676,080 3,826,304 (949,813) (732,857) Within 1 year; Noninterest-bearing

Unsecured

Insurance 3,594,606 1,519,795 (8,707) (8,707) 30 days upon receiptof billings; noninterest-bearing

Unsecured

Philippines FirstCondominium Corporation

Association dues and othercharges

11,317,782 11,584,664 (376,179) (337,520) 30 days upon receiptof billings; noninterest-bearing

Unsecured

PhilLifeRental income and other charges 14,367,302 12,525,507 1,127,989 (401,704) 30 days upon receipt



(Forward)

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Amount of TransactionsDuring the Year

OutstandingReceivable (Payable)

Related Party 2016 2015 2016 2015 Terms Conditions

Officers and employeesAdvances for various expenses P=17,393,879 P=19,917,097 P=22,733,997 P=27,870,015 Liquidated within one

month; noninterest-bearing


OthersRental income and other charges 641,286 2,294,199 1,406,655 1,469,271 30 days upon receipt



Advances for various expenses 535,625 3,271,859 – 535,625 30 days upon receiptof billings; noninterest-bearing


P=53,081,042 P=75,034,588*Affiliates are entities under common control of a majority Shareholder

Outstanding receivables from related parties, before any allowance for impairment, and payablesarising from these transactions are summarized below:

2016 2015Advances to associates and joint ventures

(see Note 12) P=35,633,303 P=35,163,889Advances to officers and employees (see Note 7) 22,733,997 27,870,015Current portion of advances to associates, joint

ventures and other related parties (see Note 7) 168,571 679,196Rent and other related receivables (see Note 7) 13,375,670 12,400,572Accounts payable (see Note 17) (18,830,499) (1,079,084)

P=53,081,042 P=75,034,588

Compensation and Benefits of Key Management Personnel

Compensation and benefits of key management personnel of the Group are as follows:

2016 2015 2014Short-term employee benefits P=42,987,063 P=39,502,749 P=28,970,705Post-employment benefits 1,724,890 1,473,432 1,436,336

P=44,711,953 P=40,976,181 P=30,407,041

29. Basic and Diluted Earnings Per Share on Net Income Attributable 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 years ended March 31,2016, 2015 and 2014:

2016 2015 2014Net income attributable to equity

holders of STI Holdings P=1,061,316,401 P=731,701,208 P=681,123,230Common shares outstanding at

beginning and end of year(see Note 19) 9,904,806,924 9,904,806,924 9,904,806,924

Basic and diluted earnings per share onnet income attributable to equityholders of STI Holdings P=0.107 P=0.074 P=0.069

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The basic and diluted earnings per share are the same for the years ended March 31, 2016, 2015and 2014 as there are no dilutive potential common shares.

30. STI Gift of Knowledge Certificates (GOKs)

On December 9, 2002, the BOD of STI ESG approved the offer for sale and issue of up to ₱2.0billion worth of GOKs.

The STI GOKs are noninterest-bearing certificates that entitle the holders or any designatedscholars to redeem academic units in any member of the STI Group or equivalent academic unitsin any STI school on certain designated redemption dates or, to require STI to pay in cash the parvalue of the outstanding STI GOKs on designated graduation dates. The redemption dates rangefrom the school year 2004–2005 to six years from date of issue of the STI GOKs. The graduationdates range from between four to ten years from issue date. A total offer size of 2,409,600academic units for the entire STI College Group or its equivalent units in any STI school will beoffered at serial redemption dates at their corresponding par values.

In 2003, the SEC issued an Order of Registration and a Certificate of Permit to Sell Securities forthe said STI GOKs.

STI ESG is planning to amend the terms of the GOKs to conform with future business strategies.

As at July 12, 2016, there has been no sale nor issuance of GOKs. Hence, pursuant toSection 17.2 (a) of the Securities Regulation Code (SRC), STI ESG is not required to file thereports required under Section 17 of the SRC.

31. Contingencies and Commitments

Contingencies

a. In December 2014, the Parent Company and AHC served notices of default to PWU andUnlad (see Note 14).

Foreclosure of PWU Indiana Property and Taft Properties. On February 10, 2015, the ParentCompany filed two Petitions for Extra-Judicial Foreclosure of Real Estate Mortgage with theOffice of the Clerk of Court and Ex-Officio Sheriff of the RTC of Manila. The first Petitionseeks the foreclosure and sale of the PWU Taft Properties to satisfy the Acquired Loan in theamount of P=702.4 million as at December 7, 2014. The second Petition seeks the foreclosureand sale of the PWU Taft Properties and PWU Indiana Property to satisfy the Loan to PWU inthe amount of P=30.7 million as at December 7, 2014. The extra-judicial foreclosure sale forthese two Petitions was scheduled on March 18, 2015, with March 26, 2015 as the alternativedate.

On March 18, 2015, the extra-judicial foreclosure sales for the Taft and Indiana Properties ofPWU were conducted and the Parent Company was declared as the winning bidder for both,with a bid of P=330.6 million for the PWU Taft Properties and P=5.3 million for the PWUIndiana Property. The Certificates of Sale for these properties were annotated on March 24,2015.

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The Parent Company, AHC, PWU and Unlad have arrived at a settlement over all claimsarising from the Agreements. Under the settlement, PWU was able to redeem the PWU Taftand Indiana Properties (see Note 8).

Foreclosure of Unlad Quezon City Property. On February 12, 2015, the Parent Companyfiled two Petitions for Extra Judicial Foreclosure of Real Estate Mortgage with the Office ofthe Clerk of Court and Ex-Officio Sheriff of the RTC of Quezon City. The first Petition seeksthe foreclosure and sale of Unlad’s real estate properties securing the Acquired Loan in theamount of P=702.4 million as at December 7, 2014. The first Petition was later amended by anAmended Petition for Extra-Judicial Foreclosure of Real Estate Mortgage filed onFebruary 18, 2015. The Amended Petition added Unlad as a party to the case. The secondPetition is a Joint Petition with AHC, which seeks the foreclosure and sale of Unlad’s realestate properties securing the Loan to Unlad and AHC Loan to Unlad in the amount ofP=223.7 million as at December 7, 2014 and P=70.3 million as at December 15, 2014,respectively. The extra-judicial foreclosure sale for these two Petitions was scheduled onMarch 24, 2015, with April 7, 2015 as the alternative date.

On March 24, 2015, the Executive Judge of RTC Quezon City temporarily suspended theextra-judicial foreclosure sales of the Unlad properties on the basis of the CommencementOrder in the PWU Rehabilitation Case, as discussed under “PWU Rehabilitation Case” in thisnote. The Executive Judge of RTC Quezon City denied the Parent Company’s Motion forReconsideration on April 7 2015.

On October 30, 2015, the extra-judicial foreclosure sale of the Unlad properties in QuezonCity was resumed pursuant to a Disposition of the Executive Judge of RTC Quezon City. TheParent Company was declared the winning bidder, with an aggregate bid of P=407.8 million forUnlad’s real estate properties securing the STI Holdings’ Acquired Loan, STI Holdings Loanto Unlad, and AHC Loan to Unlad. The Certificates of Sale for the first Petition and secondPetition were annotated on December 1, 2015 and November 13, 2015, respectively.

Under the settlement discussed in Note 14, Unlad ceded to the Parent Company by way ofdacion en pago on March 31, 2016, its foreclosed properties in Quezon City and Davao.

Foreclosure of Unlad Davao Property. On February 18, 2015, the Parent Company and AHCfiled a Joint Petition for Extra Judicial Foreclosure of Real Estate Mortgage with the Office ofthe Clerk of Court and Ex-Officio Sheriff of the RTC of Davao City. The Joint Petition seeksthe foreclosure and sale of Unlad’s real estate property in Davao City securing the Loan toUnlad and AHC Loan to Unlad in the amount of P=223.7 million as at December 7, 2014 andP=70.4 million as at December 15, 2014, respectively. The extra-judicial foreclosure sale forthe Unlad Davao property was scheduled on April 17, 2015, with May 22, 2015 as thealternative date.

On April 17, 2015, the Vice-Executive Judge of the RTC of Davao City temporarilysuspended the extra-judicial foreclosure sale of the Unlad property in Davao City on the basisof the Commencement Order issued by the Rehabilitation Court, as discussed under “PWURehabilitation Case” in this note. The Vice-Executive Judge of the RTC of Davao City deniedthe Parent Company’s Motion for Reconsideration on April 23, 2015.

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On June 18, 2015, the Parent Company with AHC filed a Petition for Certiorari andMandamus with the Court of Appeals (“CA”) – Mindanao Station to question the decision ofthe Vice-Executive Judge of RTC Davao City to temporarily suspend the extra-judicialforeclosure sale on the basis of the Commencement Order issued in the PWU RehabilitationCase.

On August 25 2015, the Parent Company wrote a letter to the Office of the Clerk of Court andEx-Officio Sheriff of the RTC of Davao City asking for the resumption of the extra-judicialforeclosure sales of the Unlad property in Davao City due to the dismissal of the PWURehabilitation Case. The said letter was referred to the Executive Judge of RTC Davao City.The Executive Judge of RTC Davao City denied the request of the Parent Company in a 2ndIndorsement dated August 26, 2015 due to the pendency of the Petition for Certiorari andMandamus with the CA questioning the suspension of the extra-judicial foreclosure sale of theUnlad Property in Davao City.

On August 28 2015, the Parent Company and AHC filed a Verified Motion to Withdraw thePetition for Certiorari and Mandamus with the CA because the subject of the matter of thecase has been rendered moot and academic by the dismissal of the PWU Rehabilitation Case.

On January 12, 2016, the Parent Company wrote another letter to the Office of the Clerk ofCourt and Ex-Officio Sheriff of the RTC of Davao City asking for the resumption of the extra-judicial foreclosure sale of the Unlad property in Davao City. The Parent Company informedthe Office of the Clerk of Court and Ex-Officio Sheriff of the RTC of Davao City, in thisletter, of the Verified Motion to Withdraw the Petition for Certiorari and Mandamus that itfiled with the CA together with AHC. The subject letter was referred to the Executive Judgeof RTC Davao City. The Executive Judge of RTC Davao City, in a 2nd Indorsement datedJanuary 27, 2016, granted the request of the Parent Company and ordered the resumption ofthe extra-judicial foreclosure sale of the Unlad Property in Davao City. The extra-judicialforeclosure sale was set on March 10, 2016, with April 7, 2016 as the alternative date.

On January 25, 2016, the CA – Mindanao Station granted the withdrawal of the Petition forCertiorari and Mandamus filed by the Parent Company and AHC.

On March 10, 2016, the foreclosure sale proceeded where the Parent Company was declaredas the highest bidder. As discussed in Note 14, Unlad ceded to the Parent Company by way ofdacion en pago on March 31, 2016 its foreclosed properties in Quezon City and Davao.

Complaint filed by the Heirs of the Family of Villa-Abrille relative to Unlad’s DavaoProperty. On October 21, 2015, the Parent Company and AHC each received copies of theComplaint filed by the Heirs of Carlos Villa-Abrille, Heirs of Luisa Villa-Abrille, Heirs ofCandelaria V.A. Tan, Heirs of Adolfo V.A. Lim, Heirs of Saya V.A. Lim Chiu, Heirs ofGuinga V.A. Lim Lu, Heirs of Rosalia V.A. Lim Lua, Heirs of Lorenzo V.A. Lim, and Heirsof Fermin Abella against the Philippine Women’s Educational Association (“PWEA”), Unlad,STI Holdings, and AHC for cancellation of certificate of title, reconveyance of real property,declaration of nullity of real estate mortgage, damages, and attorney’s fees. The subjectmatter of the case is Unlad’s property located in Davao City.

The Plaintiffs claim that ownership of Unlad’s property in Davao City should revert back tothem because PWEA and Unlad violated the restrictions contained in the Deed of Salecovering the property. The restrictions referred to by the Plaintiffs provide that PWEA shalluse the land for educational purposes only and shall not subdivide the land for purposes ofresale or lease to other persons. The Plaintiffs also claim that the real estate mortgage

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constituted over Unlad’s property in Davao City in favor of the Parent Company and AHCshould be declared null and void because PWEA and Unlad have no capacity to mortgage theproperty based on the restrictions contained in the Deed of Sale.

On November 20, 2015, the Parent Company and AHC filed the Motion to Dismiss (“FirstMotion to Dismiss”). In the First Motion to Dismiss, the Parent Company and AHC assertedthat the Plaintiffs’ cause of action against PWEA and Unlad has prescribed considering thatthe alleged violation of the restrictions in the Deed of Sale occurred in 1987 or more than ten(10) years from the filing of the case. In addition, Plaintiffs cannot seek the cancellation ofthe real estate mortgage in favor of the Parent Company and AHC because (a) Plaintiffs arenot privy/real parties in interest to the said mortgage, and (b) the restrictions in the title andDeed of Sale do not prohibit the mortgage of the subject property. The First Motion toDismiss was scheduled by the Trial Court on December 4, 2015.

On December 4, 2015, the Plaintiffs failed to attend the hearing of the Motion to Dismiss.The Trial Court instead ordered the Plaintiffs to file their comment to the Motion to Dismisswithin ten (10) days from receipt of its order while the Parent Company and AHC are giventhe same period to file their reply thereto.

The Trial Court also noticed that the records failed to show that PWEA and Unlad receivedthe Summons. The Trial Court then ordered the branch sheriff to cause the service of theSummons to PWEA and Unlad.

Despite the extensions given to the Plaintiffs, Plaintiffs belatedly filed itsComment/Opposition to the First Motion to Dismiss. Subsequently, the Parent Company andAHC filed a Second Motion to Dismiss dated March 22, 2016 (“Second Motion to Dismiss”).In the Second Motion to Dismiss, the Parent Company and AHC informed the Trial Court thatthey were able to discover that the plaintiffs filed a similar case against PWEA and Unlad withanother Trial Court of Davao City, which was dismissed without qualifications for their failureto comply with the said Trial Court’s order. Said dismissal was eventually affirmed withfinality by the Supreme Court. Because of this information, the Parent Company and AHCmoved to dismiss the case for res judicata and willful and deliberate forum shopping for filingthe same case to the Trial Court.

On April 22, 2016, Plaintiffs failed to attend the hearing of the aforesaid Motions. The TrialCourt instead ordered the Plaintiffs to file their Comment to the Omnibus Motion within anon-extendible period of five (5) days, after which, the same shall be submitted for resolution.

Likewise, the Trial Court ordered the Plaintiffs to file their Comment to the Second Motion toDismiss within ten (10) days from receipt of its Order. The Parent Company and AHC werelikewise given the same period to file their responsive pleading thereto.

On May 16, 2016, the Parent Company and AHC received the Plaintiffs’ Comment to theOmnibus Motion, wherein they sought for liberality of the rules to allow the belated filing oftheir Comment/Opposition to the First Motion to Dismiss.

On May 18, 2016, the Parent Company and AHC received Plaintiff’s Comment/Opposition tothe Second Motion to Dismiss. Plaintiffs asserted that the elements of res judicata are notpresent in the instant case.

On May 30, 2016, the Parent Company and AHC filed their Reply to the Plaintiffs’Court/Opposition to the Second Motion to Dismiss.

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As at July 12, 2016, the First and Second Motion to Dismiss are still pending for resolution bythe Trial Court.

PWU Rehabilitation Case. On March 13, 2015, Dr. Helena Z. Benitez filed a Creditor-Initiated Petition for Involuntary Rehabilitation of PWU in RTC Manila (the “PWURehabilitation Case”). The PWU Rehabilitation Case was raffled to Branch 46 of the RTCManila (“Rehabilitation Court”).

On March 20, 2015, the Rehabilitation Court issued a Commencement Order declaring PWUto be under rehabilitation. The Commencement Order contains a Stay Order, which amongothers, effectively suspends all actions or proceedings enforcing all claims against PWU incourt or otherwise.

On March 26, 2015, the Parent Company filed a Notice of Claim with the RehabilitationCourt. Under the Notice of Claim, PWU has outstanding obligations amounting to P=763.6million as of March 25, 2015.

On April 8, 2015, the Parent Company filed its Opposition to the PWU Rehabilitation Case.

On May 26, 2015, the Rehabilitation Court referred the PWU Rehabilitation Case to theRehabilitation Receiver for evaluation. The Rehabilitation Receiver was given forty daysfrom May 26, 2015 to consider whether the rehabilitation of PWU is feasible or not.

On August 29, 2015, the Rehabilitation Court rendered the decision to dismiss the PWURehabilitation Case, for being, among others, a sham filing and ordered the lifting of the StayOrder.

After filing of the Motion for Reconsideration and responsive pleadings thereto, onJanuary 21, 2016, the Rehabilitation Court denied the respective Motion for Reconsiderationfiled by HZB and PWU.

PWU filed a Petition for Certiorari with Application for Temporary Mandatory/RestrainingOrder and/or Writ of Preliminary Injunction dated February 26, 2016 to the CA. Subsequently,HZB filed her Petition for Certiorari (with Urgent Application for Temporary RestrainingOrder And/or Writ of Preliminary Injunction) dated February 29, 2016 to the CA.

Eventually, both PWU and HZB filed their Motion for Withdrawal of their Petition forCertiorari dated April 11, 2016 to the CA.

On May 13, 2016, the Motion to Withdraw the Petition for Certiorari of PWU was granted bythe CA.

As of July 12, 2016, the Motion to Withdraw the Petition for Certiorari of HZB is pending forresolution of the CA.

b. Derivative Suit filed by Mr. Conrado Benitez. Mr. Conrado L. Benitez (the “Complainant”)filed a Request for Arbitration, with Philippine Dispute Resolution Center, Inc. (“PDRCI”),for and on behalf of PWU and Unlad, wherein he requested that the directors/trustees andstockholders/members of Unlad and PWU, EHT, STI Holdings, Mr. Alfredo Abelardo B.Benitez (“ABB”) and AHC (collectively, the “Defendants”) submit the alleged dispute over

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the settlement of the loan obligations of PWU and Unlad as provided in the arbitration clauseof the Joint Venture Agreement and Omnibus Agreement (the “Loan Documents”). This wasdone before the Complainant filed the Civil Case.

On June 29, 2016, the Complainant then filed a derivative suit for himself and on behalf ofUnlad and PWU against the Defendants docketed as Civil Case No. 16-136130 in the RTC ofManila (the “Derivative Suit”). The Derivative Suit was raffled to Branch 24 of the RTC ofManila presided over by Judge Ma. Victoria A. Soriano-Villadolid.

In the Derivative Suit, the Complainant primarily asserts that STI Holdings, EHT, ABB andAHC should submit themselves to the arbitration proceedings filed with the PDRCI becausethe Loan Documents required any alleged dispute over the same to be resolved througharbitration. Consequently, the Complainant alleges that the foreclosure proceedings andsettlement of the obligations of PWU and Unlad as evidenced by the Memorandum ofAgreement dated March 22, 2016 executed by PWU and Unlad with STI Holdings and AHCare null and void for not complying with the aforesaid arbitration clause. Likewise, theComplainant sought the payment of attorney’s fees not less than P=1.0 million, P=0.1 million,and cost of suit.

The Defendants have 15 days from receipt or until July 26, 2016 to file an Answer to theDerivative Suit.

c. Specific Performance Case filed by the Agustin Family. The Agustin family filed a SpecificPerformance case against the Parent Company for the payment by the latter of the remainingbalance of the purchase price for the sale of the Agustin Family’s shares in STI WNU.

The Agustin family alleges in their Complaint that based on the Share Purchase Agreementand Deed of Absolute Sale they executed with the Parent Company, the price of their shares inSTI WNU has been pegged at P=400.0 million. Despite these two agreements, the ParentCompany refuses to pay the full purchase price for the STI WNU shares they acquired fromthe Agustin family.

In its Answer, the Parent Company stated that the Agustin family is not entitled to the fullpurchase price of their STI WNU shares because they have not complied with all therequirements for its release. In particular, the Agustin family has not been able to deliver theCommission on Higher Education permits for the operation of STI WNU’s Maritime Programas provided in the MOA, and the Share Purchase Agreement. In addition, there are other tradereceivables in favor of STI WNU wherein full satisfaction of the same entitles the Agustins aportion of the balance of the purchase price.

On June 2, 2016, the Parent Company received the Agustins' Reply to the Answer. In theReply, the Agustin family are asserting that (a) the Memorandum of Agreement, SharePurchase Agreement and Deed of Absolute Sale (the “STI WNU Contracts”) provide that theParent Company can withhold the payment of the remaining balance of P=50.0 million, whichalleged to be pursuant to the license to operate the Maritime Programs of STI WNU, and (b)the Parent Company should be deemed to have agreed on the P=400.0 million purchase price.Likewise, the allegations in the Answer are also against the Parol Evidence Rule whichprovides that the parties to a written agreement cannot change the stipulations providedtherein.

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The Agustin family also filed and served a Request for Admission to the Parent Company’scounsel wherein they sought the Parent Company to submit (a) the existences and authenticityof the STI WNU Contracts, (b) issues of the instant case are (i) determination of the finalpurchase price based on the STI WNU Contracts and (ii) final purchase price should be eitherthe P=400.0 million or the adjusted price of P=350.0 million, and (c) the STI WNU Contractsconstitute the entire written agreement of the parties.

On June 17, 2016, the Parent Company filed its Comment/Opposition to the Agustin family’sRequest for Admission. In the Comment/Opposition, the Parent Company filed theirobjections thereto and sought the same to be denied or deemed ineffectual on the followinggrounds; (a) defective service because it should have been served directly to the ParentCompany and not to its counsel as required under the Rules of Court, (b) redundant becausethe matters raised therein have already been addressed in the Answer, and (c) improper andirrelevant because it sought admission of issues which are proper during pre-trial and not in aRequest for Admission.

Besides the Trial Court’s resolutions on the aforesaid objections to the Request for Admission,the case may be referred to pre-trial and/or court-annexed mediation unless the Agustin familyfiled any other motions or pleading.

d. Tax Assessment Case. 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 Assessmentissued by the BIR assessing STI ESG for deficiencies on income tax, and expandedwithholding tax for the year ended March 31, 2003 amounting to ₱124.3 million. OnFebruary 20, 2012, STI ESG rested its case and its evidence has been admitted into therecords.

On June 27, 2012, the BIR rested its case and has formally offered its evidence. OnApril 17, 2013, the CTA issued a Decision which granted STI ESG’s petition for review andordered a cancellation of the said BIR’s assessment since the right to issue an assessment forthe alleged deficiency taxes had already prescribed. On May 16, 2013, STI ESG received acopy of the Commissioner of Internal Revenue’s (“CIR”) Motion for Reconsideration datedMay 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, withthe CTA En Banc. On October 29, 2013, STI ESG filed its Comment to the CIR’s Petition forReview. The CTA En Banc deemed the case submitted for decision on May 19, 2014,considering the CIR’s failure to file its memorandum. On March 24, 2015, the CTA En Bancaffirmed the decision dated April 17, 2013 and the resolution dated July 17, 2013 whichgranted STI ESG’s Petition for Review and ordered the cancellation of the BIR assessment forthe fiscal year ending March 31, 2003. On April 21, 2015, the CIR filed a Motion forReconsideration with the CTA En Banc. On July 3, 2015, STI ESG filed its Comment on theMotion for Reconsideration. On September 2, 2015, the CTA En Banc denied the CIR’sMotion for Reconsideration. On October 30, 2015, the CIR filed a Petition for Review withthe Supreme Court. On January 26, 2016, STI ESG received a notice from the Supreme Courtrequiring it to file its Comment on the Petition for Review filed by the CIR. On February 5,2016, STI ESG filed a Motion for Extension of Time to File Comment on the Petition forReview requesting an additional period of twenty (20) days from February 5, 2016, or untilFebruary 25, 2016, within which to file the Comment. On February 25, 2016, STI ESG filedanother Motion for Extension of Time to File Comment on the Petition for Review requestingan additional period of fifteen (15) days from February 25, 2016, or until March 11, 2016,

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within which to file the Comment. On March 11, 2016, STI ESG, through its counsel, filed itsComment on the Petition. As at July 12, 2016, the case is pending resolution by the SupremeCourt.

e. Labor Case. A former employee of STI ESG filed a Petition with the Supreme Court after theCourt of Appeals denied the former employee’s claims and rendered prior decisions in favorof STI ESG. On August 13, 2014, STI ESG received the Supreme Court’s decision dated July9, 2014 annulling the decision of the Court of Appeals and ordered that STI ESG reinstate theformer employee to her former position and pay the exact salary, benefits, privileges andemoluments which the current holder of the position is receiving and should be paidbackwages from the date of the former employee’s dismissal until fully paid, with legalinterest. On August 28, 2014, STI ESG filed its Motion for Reconsideration and onNovember 17, 2014, the Supreme Court issued a resolution which denied with finality STIESG’s Motion for Reconsideration. On January 5, 2015, STI ESG filed an Omnibus Motionand requested to move the case for review by the Supreme Court En Banc. On May 22, 2015,STI ESG received a notice from the Supreme Court which denied STI ESG’s OmnibusMotion. As a result of the decision, STI ESG recognized provision amounting to P=3.0 millionrepresenting the estimated compensation to be made to the former employee. On October 20,2015, a Bank Order to release was issued to one of STI ESG’s depository banks for the releaseof the garnished amount of ₱2.2 million. The bank released the garnished amount to theNational Labor Relations Commission (NLRC).

The garnished amount was put on hold for fifteen (15) days because of the filing of STI ESG’sPetition questioning, among others, the Writ of Execution issued by Labor Arbiter, which wasdocketed as LER-CN-10291-15.

While the Petition was pending for resolution by the NLRC and without any injunction orderbeing issued by the said Commission, the garnished amount of ₱2.2 million was released tothe former employee.

On March 1, 2016, the former employee filed an Entry of Appearance withManifestation/Motion for Computation dated February 24, 2016. In the said motion, theformer employee sought for computation of her backwages, inclusive of monetary equivalentof leaves and 13th month pay from July 22, 2004 until the same is actually paid. In addition,the former employee waived the reinstatement aspect of the March 31, 2006 Decision ofLabor Arbiter, and sought the payment of separation pay.

As mentioned in an earlier paragraph, the Company on October 19, 2015, STI ESG filed aPetition with the NLRC, docketed as LER-CN-10291-15, to (1) annul the Writ of Executionissued by the Labor Arbiter for the amount of ₱2.2 million, and (2) order the payment ofseparation pay in favor of the former employee instead of reinstatement as Chief OperatingOfficer of STI-Makati.

In the said Petition, STI ESG asserted that the Writ of Execution was issued with undue hastewhen there were pending issues to be resolved by Labor Arbiter with respect to thecomputation of the judgment award of the former employee. In addition, Labor Arbiter cannotorder the former employee to be reinstated as Chief Operating Officer of STI-Makati becausesaid position no longer exists. STI ESG averred that an order of separation pay in lieu ofreinstatement should be issued in favor of the former employee.

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On October 28, 2015, STI ESG filed another Petition with the NLRC, which sought to inhibitLabor Arbiter from continuing the execution proceedings for the former employee’s judgmentaward. In the said Petition, STI ESG alleged that the actions of Labor Arbiter showedpartiality and bias in favor of the former employee.

On October 29, 2015, STI ESG filed a Motion to Consolidate with the NLRC. In the saidMotion, STI ESG moved that the aforesaid Petitions would be consolidated and resolved bythe same Division of the NLRC.

The former employee, thru her new counsel, filed two (2) Entry of Appearance with Motionfor Leave (To Admit Attached Answer with Comment/Opposition) for the two (2) Petitions ofSTI ESG. In the said Comment/Opposition, the former employee averred that (a) the Writ ofExecution was issued pursuant to the Supreme Court’s Decision dated July 9, 2014 and (b) theacts of Labor Arbiter were above-board.

On February 29, 2016, the Sixth Division of the NLRC issued a Decision wherein it, amongothers, nullified the Writ of Execution, and ordered the inhibition of Labor Arbiter. In thesame Decision, the Sixth Division of the NLRC also set a guide for the enforcement of thejudgment award in favor of the former employee, which provides, among others, that thecomputation of the backwages of the former employee shall be from May 18, 2004 untilOctober 30, 2006.

On March 29, 2016, STI ESG received the former employee’s Motion for Reconsideration. Inthe Motion for Reconsideration, the former employee questioned the guide issued by theNLRC and the inhibition of the Labor Arbiter.

On April 19, 2016, the Company filed a Motion for Leave (To Admit Comment and/orOpposition with Manifestation). In the Comment and/or Opposition, STI ESG defended theguide issued by the Sixth Division of the NLRC and the inhibition on the Labor Arbiter by,among others, asserting that the former employee’s grounds for reconsideration of theDecision are based on misleading allegations, and misquoted orders and pleadings of theCorporation. STI ESG also manifested to that (1) it would no longer seek the cancellation ofthe Writ of Execution provided that any legal effect thereof on the judgment award shall berecognized and applied therein, and (2) the appropriate labor arbiter commence with thecomputation of the separation pay in lieu of reinstatement.

f. Civil Action Case. On April 25, 2006, STI ESG filed a civil action against one of itsfranchisees, and its sureties for the collection of unpaid royalties, reimbursements for the costsand expenses of the education services rendered by STI ESG and the share of the franchisee,in the cost and expenses for national advertising and promotion undertaken by STI ESG for itsnetwork of schools, in the aggregate amount of P=3.5 million. On September 16, 2014, theparties informed the Trial Court that they are pursuing a possible settlement of the case. OnMarch 3, 2015, the parties informed the Court that they have agreed on the terms of theCompromise Agreement. On May 15, 2015, the parties entered into a CompromiseAgreement and in the said agreement, defendants agreed to pay the Parent Company theamount of P=1.5 million on or before May 2020 and the said amount represents the full andfinal settlements of all claims, demands and causes of action of the parties against each otherin connection with and arising from the case. On May 21, 2015, the parties filed a JointMotion to Approve Compromise Agreement with the Trial Court. On May 25, 2015, the TrialCourt issued a “Decision” approving the “Compromise Agreement” dated May 15, 2015.

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g. Specific Performance Case. STI College Cebu, Inc. (“STI Cebu”) was named defendant in acase filed by certain individuals for specific performance and damages. In their Complaint, theplaintiffs sought the execution of Deed of Absolute Sale over a parcel of land situated in CebuCity on the bases of an alleged perfected contract to sell. On March 15, 2016, STI ESG, as thesurviving corporation in the merger between STI ESG and STI Cebu (see Note 1), filed aMotion to Dismiss. On March 31, STI ESG received the plaintiffs’ Comment/Opposition toMotion to Dismiss with Motion to Declare Defendant in Default (“Motion”). On April 8, theCourt required STI ESG and the plaintiffs to file their respective Position Papers to the Motionto Dismiss and the plaintiffs’ Motion until April 13, 2016. On April 12, 2016, STI ESGreceived the plaintiff’s Position Paper. STI ESG, on April 13, 2016, filed its Position Paper.On April 14, 2016, STI ESG filed a Manifestation with an attached Position Paper. As at July12, 2016, STI ESG’s Motion to Dismiss and the plaintiffs’ Motion are submitted for theCourt’s resolution.

h. CHED Case. On April 21, 2014, STI WNU filed a Petition for Certiorari with an applicationfor the issuance of temporary restraining order and preliminary injunction against theCommission on Higher Education (“CHED”) with the Regional Trial Court of Quezon City.

The Petition was filed in response to the Order dated January 6, 2014 issued by Atty. JulitoVitriolo, CHED’s Executive Director, which affirmed/executed the Closure Order(s) datedJuly 19, 2011 and April 26, 2013 of STI WNU’s Bachelor of Science in MarineTransportation (“BS MT”) and Bachelor of Science in Maritime Engineering (“BS MarE”)degrees.

In the said Order, CHED resolved: (1) to allow STI WNU’s existing students enrolled prior tothe issuance of the denial of its Motion for Reconsideration for 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 STI WNU; (2) STIWNU shall be directed to submit a complete list of the students enrolled as of AY 2012-2013;and (3) effective AY 2013-2014, STI WNU offering of maritime programs shall be consideredto have shifted to a rating school and shall be recognized as a pilot maritime technical schoolin Western Visayas with 2-3 year “non-officer maritime program” and that students admittedin STI WNU’s maritime programs effective AY 2013-2014 shall not be considered to haveenrolled in degree program but only in a “non-officer maritime program” of STI WNU.

The issues presented in the Petition filed by STI WNU are as follows: (a) the April 26, 2013Order denying STI WNU’s Motion for Reconsideration of the July 11, 2011 Closure Orderwas issued despite full compliance by STI WNU on the required areas for evaluation of STIWNU’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 STI 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 of Regulationsfor Private Higher Education, the January 6, 2014 Order should be effected at the end of theacademic 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) dayperiod from receipt of the April 26, 2013 Order of CHED and (b) the Court of Appeals hasjurisdiction over petition for certiorari against quasi- judicial agencies such as CHED.

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On June 11, 2014, STI WNU filed a Motion for Reconsideration of the May 23, 2014 Order ofthe Trial Court. In the said Motion for Reconsideration, STI WNU asserted that (a) the sixty(60) day period to file the petition for certiorari should be counted from the time of the receiptof the assailed order, January 6, 2014 Order of CHED and (b) the Regional Trial Court ofQuezon City has jurisdiction over the said case.

On September 2, 2014, the Trial Court denied STI WNU’s Motion for Reconsiderationseeking to reverse the Resolution dismissing the above-captioned case on the ground that (a)the period to file the petition for certiorari lapsed on July 28, 2013 or after the sixty (60) dayperiod from receipt of the April 26, 2014 Order of CHED and (b) the Court of Appeals hasjurisdiction over petition for certiorari against quasi-judicial agencies such as CHED.

On September 16, 2014, STI WNU filed its Notice of Appeal to elevate the records of the caseto the Court of Appeals as provided under Rule 41 of the Rules of Court. On October 7, 2014,STI WNU received the Trial Court’s Order dated September 22, 2014 which gave due courseto STI WNU’s Notice of Appeal and ordering the Clerk of Court to transmit the entire recordsto the Court of Appeals.

On January 12, 2015, a Notice dated November 12, 2014 from the Trial Court was received,stating that the entire records of the case was transmitted to the Clerk of Division of the Courtof Appeals.

On February 27, 2015, a notice from the Court of Appeals was received that required STIWNU to file its Appellant’s brief. On March 30, 2015, STI WNU submitted the Appellant’sbrief.

On March 30, 2015, STI WNU and CHED filed their respective Memorandum. Upon filingof their respective Memorandum, the appeal was submitted for resolution.

On August 17, 2015, STI WNU, through counsel, received the Decision dated July 29, 2015of the Court of Appeals. In the Decision, the Court of Appeals affirmed the Trial Court’sOrders, and reiterated that STI WNU’s failure to timely file the Petition with the Court ofAppeals from its receipt on April 26, 2013 Closure Order caused the said Closure Orders tobecome final and executory.

On September 1, 2015, STI WNU filed its Motion for Reconsideration on the Court ofAppeal’s Decision dated July 29, 2015.

After CHED filed its opposition thereto, a Resolution dated February 24, 2016 was issued bythe Court of Appeals. In the Resolution, the Court of Appeals denied the Motion forReconsideration because there were no new matters of substance raised by STI WNU tojustify the reversal of the Court of Appeals’ Decision dated July 29, 2015.

After filing a motion for extension to file a Petition for Review, STI WNU filed a Petition forReview on April 18, 2016 to the Supreme Court. In the Petition for Review, STI WNUreiterated that (a) the period to file a Petition for Certiorari has not expired, and (b) the TrialCourt has jurisdiction over the Closure Orders of CHED. STI WNU also asked the SupremeCourt that, if it deems proper, allow STI WNU to continue to offer the Maritime Programsconsidering that it has fully complied with the requirements of the CHED to offer the same.

Under the Rules of Court, the Supreme Court may, among others, require CHED to file itsComment and/or Opposition to the Petition for Review.

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i. Due to the nature of their business, STI ESG and STI WNU are involved in various legalproceedings, both as plaintiff and defendant, from time to time. The majority of outstandinglitigation involves illegal dismissal cases under which faculty members have brought claimsagainst STI ESG and STI WNU by reason of their faculty contract. Except as discussed in (c)and (d), STI ESG and STI WNU are not engaged in any legal or arbitration proceedings(either as plaintiff or defendant), including those which are pending or known to becontemplated and its BODs have no knowledge of any proceedings pending or threatenedagainst STI ESG or its franchisees and STI WNU 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 and STI WNU havesubstantial legal and factual bases for its position and are of the opinion that losses arisingfrom these legal actions and proceedings, if any, will not have a material adverse impact onSTI ESG’s consolidated financial position and STI WNU’s financial position as well and theresults of operations of both companies.

j. STI ESG and STI WNU are likewise contingently liable for lawsuits or claims filed by thirdparties, including labor-related cases, which are pending decision by the courts, the outcomeof which are not presently determinable.

k. 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 12, 2016, 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.

Commitments

a. Financial Commitments

STI ESG has a P=115.0 million domestic bills purchase lines from various local banksspecifically for the purchase of local and regional clearing checks. Interest on drawdown fromsuch facility is waived except when drawn against returned checks, to which the interest shallbe the prevailing lending rate of such local bank. This facility is substantially on a clean basisexcept for a P=5.0 million line which calls for the surety of a major shareholder.

In December 2014, the Parent Company issued a Surety Agreement in favor of China Bank tosecure STI WNU’s P=300.0 million long-term loan and P=5.0 million credit line. As atMarch 31, 2016 and 2015, STI WNU’s long-term loan amounted to P=275.0 million andP=295.0 million, respectively.

b. Capital Commitments

As at March 31, 2016, STI ESG has contractual commitments and obligations for theconstruction of STI Las Piñas aggregating P=290.0 million of which P=193.2 million has beenpaid. As at March 31, 2015, STI ESG has contractual commitments and obligations for theconstruction of a gymnasium, a warehouse and additional classrooms in Ortigas-Cainta, andthe construction of additional classrooms in campuses located in Novaliches and Caloocanaggregating P=98.5 million of which P=41.4 million has been paid.

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STI WNU likewise has contractual commitments and obligations for the construction ofschool buildings and upgrade of its facilities aggregating to P=200.9 million and ₱195.9 millionas at March 31, 2016 and 2015. Of these, P=195.7 million and P=175.5 million have alreadybeen paid as at March 31, 2016 and 2015, respectively.

c. Others

The Group, as an educational institution, is subject to CHED Memorandum Order No. 13,Series of 1998, otherwise known as the “Guidelines on the Procedure to be Followed byHigher Education Institutions (HEIs) Intending to Increase their Tuition Fees, EffectiveBeginning School Year 1998–1999,” which states that 70.00% of the proceeds derived fromthe tuition 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.

32. Financial Risk Management Objectives and Policies

The principal financial instruments of the Group comprise cash and cash equivalents and interest-bearing loans and borrowings. The main purpose of these financial instruments is to raise workingcapital and major capital investment financing for the Group’s school operations. The Group hasvarious other financial assets and liabilities such as receivables, AFS financial assets, accountspayable and other current liabilities, nontrade payable, interest-bearing loans and borrowings,obligations under finance lease and other noncurrent liabilities which arise directly from itsoperations.

The main risks arising from the Group’s financial instruments are liquidity risk, credit risk andinterest rate risk. The Group’s BOD and management reviews and agrees on the policies formanaging each of these risks as summarized below.

Liquidity RiskLiquidity risk arises from the possibility that the Group may encounter difficulties in raising fundsto meet its currently maturing commitments. The Group’s liquidity profile is managed to be ableto finance its operations and capital expenditures and other financial obligations. To cover itsfinancing requirements, the Group uses internally-generated funds and interest-bearing loans andborrowings. As part of its liquidity risk management program, the Group regularly evaluates theprojected and actual cash flow information and continuously assesses conditions in the financialmarkets for opportunities to pursue fund-raising initiatives.

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, current portion of interest-bearing loans and borrowings that are expected to mature withinone year after reporting date. On the other hand, the biggest components of the Group’s currentassets are cash and cash equivalents, receivables from students and franchisees and advances toassociates and joint ventures with credit terms of 30 days.

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As at March 31, 2016 and 2015, the Group’s current assets amounted to =P1,104.2 million and=P1,222.7 million, respectively, while current liabilities amounted to =P886.7 million and=P1,028.1 million, respectively.

As part of the Group’s liquidity risk management program, management regularly evaluates theprojected and actual cash flow information. In relation to the Group’s long-term loan, the debtservice coverage ratio, based on the consolidated financial statements of the Group is alsomonitored on a regular basis. The debt service coverage ratio is equivalent to the consolidatedEBITDA divided by total principal and interests due for the next twelve months. The Groupmonitors its debt service coverage ratio to keep it at a level acceptable to the Group and the lenderbank. The Group’s policy is to keep the debt service coverage ratio not lower than 1.1:1

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, 2016Due 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=662,703,917 P=– P=2,073,826 P=– P=– P=664,777,743Receivables* 58,664,428 38,759,265 21,612,188 158,633,076 3,950,610 281,619,567Advances to associates and joint ventures

(included as part of “Investments inand advances to associates and jointventures” account) – – – – 20,166,002 20,166,002

Deposits (included as part of “Prepaidexpenses and other current assets”and “Goodwill, intangible and othernoncurrent assets” accounts) – – – 131,299 39,816,081 39,947,380

AFS financial assets – – – – 50,755,010 50,755,010P=721,368,345 P=38,759,265 P=23,686,014 P=158,764,375 P=114,687,703 P=1,057,265,702

Financial LiabilitiesOther financial liabilities-

Accounts payable and other currentliabilities** P=175,829,799 P=10,759,654 P=188,730,249 P=162,924,724 P=46,745,334 P=584,989,760

Nontrade payable 67,000,000 – – – – 67,000,000Interest-bearing loans and borrowings:

Principal – – – 116,800,000 1,034,200,000 1,151,000,000Interest – – 55,109,668 155,940,135 211,049,803

Obligations under finance lease Principal – – – 5,910,450 7,758,461 13,668,911 Interest – – – 684,444 484,069 1,168,513

Other noncurrent liabilities – – – – 31,364,795 31,364,795P=242,829,799 P=10,759,654 P=188,730,249 P=341,429,286 P=1,276,492,794 P=2,060,241,782

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March 31, 2015Due and

DemandableLess than2 Months 2 to 3 Months 3 to 12 Months

More than1 Year Total


Cash and cash equivalents P=766,663,288 P=– P=36,787,448 P=– P=– P=803,450,736Receivables (current and noncurrent)* 70,646,140 61,920,829 40,806,601 77,059,292 561,875,549 812,308,411Advances to associates and joint ventures

(included as part of “Investments inand advances to associates and jointventures” account) – – – – 20,216,002 20,216,002

Deposits (included as part of “Prepaidexpenses and other current assets”and “Goodwill, intangible and othernoncurrent assets” accounts) – – – 96,299 42,310,614 42,406,913

AFS financial assets – – – – 51,132,264 51,132,264P=837,309,428 P=61,920,829 P=77,594,049 P=77,155,591 P=675,534,429 P=1,729,514,326

Financial LiabilitiesOther financial liabilities-

Accounts payable and other currentliabilities** P=248,093,661 P=70,967,678 P=2,284,852 P=329,014,935 P=– P=650,361,126

Nontrade payable 95,650,000 95,650,000Interest-bearing loans and borrowings:

Principal – – – 236,000,000 1,151,000,000 1,387,000,000Interest – – – 55,176,963 282,403,213 337,580,176

Obligations under finance lease:Principal – – – 7,545,495 10,646,406 18,191,901

Interest – – – 3,601,335 70,467 3,671,802P=343,743,661 P=70,967,678 P=2,284,852 P=631,338,728 P=1,444,120,086 P=2,492,455,005

** Excluding advances to officers and employees amounting to P=22.7 million and =P27.9 million as at March 31, 2016 and 2015, respectively.** Excluding taxes payable, SSS, Philhealth and Pag-ibig benefits payable amounting to P=11.4 million and =P13.5 million as at

March 31, 2016 and 2015, respectively.

As at March 31, 2016 and 2015, the Group’s current ratios are as follows:

2016 2015Current assets P=1,104,161,280 P=1,222,730,834Current liabilities 886,717,473 1,028,053,286Current ratios 1.245:1.000 1.189:1.000

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 and controlscredit risk by setting limits on the amount of risk that the Group is willing to accept for individualcounterparties 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.

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Credit Risk Exposures. The table below shows the maximum exposure to credit risk for thecomponents of the consolidated statements of financial position:

2016Gross

MaximumExposure(1)

Net MaximumExposure(2)


Cash and cash equivalents (excluding cash on hand) P=663,441,391 P=645,446,391Receivables* 281,619,567 281,619,567Advances to associates and joint ventures** 20,166,002 20,166,002Deposits*** 39,947,380 39,947,380

AFS financial assets 50,755,010 50,755,010P=1,055,929,350 P=1,037,934,350

2015Gross

MaximumExposure(1)

Net MaximumExposure(2)


Cash and cash equivalents (excluding cash on hand) P=800,831,626 P=776,610,497Receivables (current and noncurrent)* 812,308,411 250,432,862Advances to associates and joint ventures** 20,216,002 20,216,002Deposits*** 42,406,913 42,406,913

AFS financial assets 51,132,264 51,132,264P=1,726,895,216 P=1,140,798,538

* Excluding advances to officers and employees amounting to P=22.7 million and =P27.9 million as at March 31, 2016 and 2015, respectively.**Included as part of “Investments in and advances to associates and joint ventures” account***Included as part of “Prepaid expenses and other current assets” and “Goodwill, intangible and other noncurrent assets” account(1) Gross financial assets before taking into account any collateral held or other credit enhancements or offsetting arrangements.

(2) Gross financial assets after taking into account any collateral held or other credit enhancements or offsetting arrangements or insurance in caseof bank deposits.

The credit quality of neither past due nor impaired financial assets were determined asfollows:a. Cash and cash equivalents. These financial assets are classified based on the nature of the

counterparty and the Group’s internal rating system. Cash and cash equivalents are heldby banks that have good reputation and low probability of insolvency.

b. Receivables. These are current receivables with no default in payment.c. Advances to associates and joint ventures and Deposits. These financial assets are

classified as high grade since the counterparties are not expected to default in settling theirobligations.

The table below shows the aging analysis of financial assets that are past due but not impaired:

2016Neither

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=663,441,391 P=– P=– P=– P=– P=663,441,391

Receivables* 59,050,938 50,375,498 172,193,131 – 117,816,241 399,435,808Advances to associates and joint

ventures 20,166,002 – – – 15,467,301 35,633,303Deposits 39,947,380 – – – – 39,947,380

AFS financial assets 50,755,010 – – – – 50,755,010P=833,360,721 P=50,375,498 P=172,193,131 P=– P=133,283,542 P=1,189,212,892

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2015Neither

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=800,831,626 P=– P=– P=– P=– P=800,831,626

Receivables (current andnoncurrent)* 77,947,946 22,245,084 32,148,102 679,967,279 118,091,730 930,400,141

Advances to associates and jointventures 20,216,002 – – – 14,947,887 35,163,889

Deposits 42,406,913 – – – – 42,406,913AFS financial assets 51,132,264 – – – – 51,132,264

P=992,534,751 P=22,245,084 P=32,148,102 P=679,967,279 P=133,039,617 P=1,859,934,833

* Excluding advances to officers and employees amounting to P=22.7million and =P27.9 million as at March 31, 2016 and 2015, respectively.

Interest Rate Risk. Interest rate risk is the risk that the fair value or future cash flows of a financialinstrument will fluctuate because of changes in market interest rates. Fixed rate financialinstruments are subject to fair value interest rate risk while floating rate financial instruments aresubject to cash flow interest rate risk. The Group’s interest rate risk management policy centerson reducing the overall interest expense and exposure to changes in interest rates. Changes inmarket interest rates relate primarily to the Group’s long-term loans with floating interest rate as itcan cause a change in the amount of interest payments.

The Group manages its interest rate risk by maintaining a debt portfolio mix of both fixed andfloating interest rates. As at March 31, 2016 and 2015, the Group has no debt with fixed interestrates. While the Group’s long-term loan is subject to floating interest rate, the interest repricing isevery year, thus minimizing the exposure to market changes in interest rates.

The Group’s exposure to interest rate risk also includes its cash and cash equivalents balance.Interest rates for the Group’s cash deposits are at prevailing interest rates. Due to the magnitudeof the deposits, significant change in interest rate may also affect the consolidated statements ofcomprehensive income.

The following table demonstrates the sensitivity, to a reasonably possible change in interest rates,with all other variables held constant, of the consolidated statements of comprehensive incomeand statements of changes in equity as at March 31:

Increase/decrease inBasis Points (bps)

Effect on Income BeforeIncome Tax

2016 +100 bps (P=11,510,000)-100 bps 11,510,000

2015 +100 bps (P=13,870,000)-100 bps 13,870,000

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 provide returns for stockholders andbenefits for other stakeholders and to maintain an optimal capital structure to reduce the cost ofcapital.

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.

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STI ESG monitors capital using the debt-to-equity ratio, which is computed as the total of currentand noncurrent liabilities divided by total equity. STI ESG monitors its debt-to-equity ratio tokeep it at a level acceptable to STI ESG and the lender bank. STI ESG’s policy is to keep thedebt-to-equity ratio at a level not exceeding 1:1.

STI WNU. STI WNU’s objective when managing fund risk is to ensure that cash is available tosupport its operations and all other projects undertaken by it and to maintain funds on a long-termbasis.

STI WNU monitors capital using the debt-to-equity ratio, which is computed as the total of currentand noncurrent liabilities divided by total equity. STI WNU monitors its debt-to-equity ratio tokeep it at a level acceptable to STI WNU and the lender bank. Its policy is to keep the debt-to-equity ratio at a level not exceeding 1.5:1.

The Group considers its equity contributed by stockholders as capital.

2016 2015Capital stock P=4,952,403,462 P=4,952,403,462Additional paid-in capital 1,119,079,467 1,119,079,467Cost of shares held by a subsidiary (500,009,337) (500,009,337)Retained earnings 4,107,181,601 3,233,915,182

P=9,678,655,193 P=8,805,388,774

As at March 31, 2016 and 2015, the Group’s debt-to-equity ratios are as follows:

2016 2015Total liabilities P=2,269,933,120 P=2,380,341,996Total equity 8,230,303,933 7,655,705,993Debt-to-equity ratio 0.276:1.000 0.311:1.000

Another approach used by the Group is the asset-to-equity ratios shown below:

2016 2015Total assets P=10,500,237,053 P=10,036,047,989Total equity 8,230,303,933 7,655,705,993Asset-to-equity ratio 1.276:1.000 1.311:1.000

No changes were made in the objectives, policies or processes in 2016, 2015 and 2014.

33. Fair Value Information of Financial Instruments

The Group’s financial instruments consist of cash and cash equivalents, receivables, advances toassociates and joint ventures, deposits, interest-bearing loans and borrowings, accounts payable andother current liabilities, obligations under finance lease and nontrade payable. The primarypurpose of these financial instruments, except for nontrade payable, is to finance the Group’soperations.

There are no material unrecognized financial assets and liabilities as at March 31, 2016 and 2015.

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Due to the short-term nature of cash and cash equivalents, receivables, accounts payable and othercurrent liabilities, and nontrade payable, their carrying values reasonably approximate their fairvalues 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 values of these instruments arecomputed by discounting the face amount using PDST-R2 rate of 1.77%-5.04% and 1.25%-4.84%as at March 31, 2016 and 2015, respectively.

The fair value of advances to associates and joint ventures, classified under Level 3, amounted to=P20.2 million as at March 31, 2016 and 2015.

The fair value of rental deposits, classified under Level 3, amounted to =P36.2 million and=P39.0 million as at March 31, 2016 and 2015, respectively.

AFS Financial Assets. The fair values of publicly-traded AFS financial assets, classified underLevel 1, are determined by reference to market bid quotes as of financial reporting date.Investments in unquoted equity securities for which no reliable basis for fair value measurement isavailable are carried at cost, net of impairment.

Noncurrent Receivables. The Group’s noncurrent receivables are disclosed at an estimated fairvalue of P=1,284.1 million as at March 31, 2015 based on discounted present value of expectedfuture cash flows using a credit-adjusted discount rate of 5% under Level 3 fair value hierarchy.

Interest-bearing Loans and Borrowings. The carrying value approximates fair value because ofrecent and regular repricing based on market conditions.

Obligation under finance lease. The fair values of obligations under finance lease, classifiedunder Level 3, amounting to P=10.2 million and P=11.6 million as at March 31, 2016 and 2015,respectively, are computed based on discounted present value of lease payments using 1.76%-9.50% as at March 31, 2016 and 2.40%-9.50% as at March 31, 2015.

In 2016 and 2015, there were no transfers between Level 1 and 2 fair value measurements, and notransfers into and out of Level 3 fair value measurements.

34. Note to Consolidated Statements of Cash Flows

The Group’s material non-cash investing and financing activities follow:

a. Acquisition of investment properties through dacion amounting to P=1,280.5 million, whichinvolves the recognition of payable to BIR amounting to P=85.6 million and payable to Unladamounting to P=64.4 million as at March 31, 2016 to fund and advance all taxes, expenses andfees to the extent of P=150.0 million to obtain the BIR CAR and the issuance of new TCTs andTDs of the dacion properties in favor of the Parent Company, pursuant to the MOA (see Notes14 and 17).

- 99 -

*SGVFS019586*

b. Acquisitions of property and equipment under finance lease recorded under the “Property andequipment” account amounting to P=5.0 million, P=7.3 million and P=6.1 million in 2016, 2015and 2014, respectively (see Note 10).

c. Unpaid progress billing for construction in-progress amounting to P=15.0 million andP=228.6 million as at March 31, 2016 and 2015, respectively (see Note 10).

d. Unpaid additions to investment properties for the construction of school buildings amountingto P=0.5 million as at March 31, 2016 (see Note 11).

e. Uncollected dividends from De Los Santos Medical Center amounting to P=1.4 million as atMarch 31, 2016 (see Note 15 and 35).

f. Unpaid subscriptions to Maestro Holdings amounting to P=17.5 million as at March 31, 2016(see Note 17).

g. Acquisition of net assets of STI Tagum in exchange for the settlement of receivable fromGITEC amounting to P=2.1 million in 2015 (see Note 3).

h. Acquisition of the outstanding capital stock of STI Pagadian in exchange for the settlement ofthe debt of GITEC amounting to P=6.3 million in 2015 (see Note 3).

i. Acquisitions of property and equipment and additions to construction in progress with unpaidpurchase price aggregating to P=5.2 million in 2016 (see Note 8).

j. Issuance of additional shares at par value to the non-controlling interests of one of the mergedschools amounting to P=1.9 million in 2014 (see Note 19).

35. Events after the Reporting Period

a. On December 1, 2015, the BOD of STI Taft approved the application for an increase inauthorized capital stock from 5,000 shares with P=100 par value per share to 750,000 shareswith P=100 par value per share. Subsequently, STI Taft and STI ESG agreed to convert aportion of STI Taft’s advances from STI ESG amounting to P=49.0 million to deposit for futurestock subscriptions. On April 4, 2016, the SEC approved STI Taft’s increase in authorizedcapital stock to P=75.0 million.

b. Relative to the case filed against STI Cebu, the Court required STI ESG and the plaintiffs onApril 8, 2016 to file their respective Position Papers to the Motion to Dismiss and theplaintiffs’ Motion until April 13, 2016. On April 12, 2016, STI ESG received the plaintiff’sPosition Paper. STI ESG, on April 13, 2016, filed its Position Paper. On April 14, 2016, STIESG filed a Manifestation with an attached Position Paper (see Note 31).

c. On May 13, 2016, STI ESG and BDO Unibank, Inc. (BDO Unibank), the trustee bank ofPhilPlans, entered into an agreement for the lease of a property in Calamba, Laguna. The termof the lease is 25 years starting July 2016 with a monthly rental of P=0.4 million. The annualrental shall be subject to a 3% escalation every three years starting on the fourth year of thelease term. Under the terms of the lease agreement, STI ESG is required to make an upfrontpayment of P=7.4 million as well as one year advance rent.

- 100 -

*SGVFS019586*

d. On May 18, 2016, STI ESG entered into a Memorandum of Agreement to acquire forP=20.0 million the net assets of STI College Sta. Maria, Inc. (“STI Sta. Maria”), a schoollocated in Sta. Maria, Bulacan, which is operated by a franchisee of STI ESG. On May 31,2016, STI ESG made an initial deposit of P=10.0 million for the planned acquisition of the netassets of STI Sta. Maria.

e. On June 10, 2016, the BOD of Maestro Holdings cancelled the balance of the subscription duefrom its stockholders. Thus, the subscriptions payable of STI ESG amounting to P=17.5million has been cancelled and the corresponding investment in Maestro Holdings has beenreduced by the same amount.

f. On June 20, 2016, MARINA issued a Provisional Authority, valid for six months, to STIWNU for the offering of the following training courses:

§ Ship Security Officer§ Shipboard Security Awareness Training and Seafarer with Designated Security Duties§ Consolidated Marine Pollution 73/78 Annexes I-VI

g. On June 28, 2016, De Los Santos-STI College wrote the CHED advising the latter of thesuspension of its operations for school years 2016-2017 and 2017-2018 as a result of theimplementation of the Government’s K to 12 program. In the same letter, De Los Santos-STICollege requested that it be allowed to keep all of its existing permits and licenses for itsacademic programs. It also mentioned that the grant of such request would allow De LosSantos-STI College to immediately resume offering its academic programs to incomingfreshmen students for its planned resumption of operation in SY 2018-2019. These academicprograms are: BS Nursing, BS Radiologic Technology, BS Psychology, BS Physical Therapy,BS Hotel and Restaurant Management and BS Tourism.

h. On June 29, 2016, Mr. Conrado Benitez filed a derivative suit for himself and on behalf ofUnlad and PWU against the directors/trustees and stockholders/members of Unlad and PWU,EHT, STI Holdings, ABB and AHC in the RTC of Manila (see Note 31).

*SGVFS019586*

INDEPENDENT AUDITORS’ REPORTON SUPPLEMENTARY SCHEDULES

The Stockholders and the Board of DirectorsSTI Education Systems Holdings, Inc.7/F STI Holdings Center6764 Ayala AvenueMakati City

We have audited in accordance with Philippine Standards on Auditing, the consolidated financialstatements of STI Education Systems Holdings, Inc. and its subsidiaries as at March 31, 2016 and2015 and for each of the three years in the period ended March 31, 2016, included in this Form 17-A,and have issued our report thereon dated July 12, 2016. Our audits were made for the purpose offorming an opinion on the basic financial statements taken as a whole. The schedules listed in theIndex to Consolidated Financial Statements and Supplementary Schedules are the responsibility of theCompany’s management. These schedules are not part of the basic financial statements. Theseschedules have been subjected to the auditing procedures applied in the audit of the basic financialstatements and, in our opinion, fairly states, in all material respects, the information required to be setforth therein in relation to the basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Benjamin N. VillacortePartnerCPA Certificate No. 111562SEC Accreditation No. 1539-A (Group A), March 3, 2016, valid until March 3, 2019Tax Identification No. 242-917-987BIR Accreditation No. 08-001998-120-2016, February 15, 2016, valid until February 14, 2019PTR No. 5321710, January 4, 2016, Makati City

July 12, 2016

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

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

BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018


SCHEDULE A – FINANCIAL ASSETS

March 31, 2016 (Amount in Pesos)


7/F STI Holdings Center 6764 Ayala Avenue

Makati City

Name of Issuing Entity and

Description of Each Issue

Number of Shares

or Principal

Amount of Bonds

and Notes

Amount Shown in

the Balance Sheet

Value Based on

Market Quotations at

Balance Sheet Date

Income

Received and

Accrued

The Group has no financial

assets at FVPL as of March

31, 2016

SCHEDULE B – AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS, EMPLOYEES, RELATED PARTIES, AND PRINCIPAL STOCKHOLDERS (Other than Related Parties)

March 31, 2016

(Amount in Pesos)


7/F STI Holdings Center

6764 Ayala Avenue Makati City

Name and Designation of Debtor

Balance at beginning of

year Additions Collections / Liquidations

Balance at end of year

Agudo, Redjer Senior School Administrator 309,278 425,420 388,978 345,720

Bautista, Teodoro VP – Academics 193,541 1,370,672 1,444,712 119,501

Bundoc, Restituto O. VP - School Operations 309,476 2,961,990 2,743,722 527,744

Dantes, Ferdinand Academic Quality Manager 157,061 76,535 124,885 108,711

Dimain, Stanley HR and Training Manager 224,107 120,720 149,926 194,901

Dy, Joel School Operations Manager 416,756 31,100 94,861 352,995

Fabro, Ferdinand AVP - Campus Development 149,720 30,774 84,757 95,737

Jacob, Monico V. President 855,843 420,839 1,186,419 90,263

Joson, Harry Alfonso AVP - Learning Management, 135,523 174,495 232,195 77,823

Luza, Juven Senior School Administrator 423,989 280,297 349,692 354,594

Magano, Shiela AVP - School Management 164,080 86,618 146,210 104,488

Ortega, Ferdie Creative Manager 228,103 27,283 78,407 176,979

Pebenito, Vanessa Senior High School Development Manager

141,592 28,175 64,283 105,484

Racadio, Wilfred VP - Legal 217,684 30,895 75,897 172,682

Sangalang, Amiel VP - Comptrollership 132,794 191,344 256,278 67,860

Santos, Merliza AVP - Finance 234,645 39,366 101,248 172,763

Tabije, Karen Precious Brand Manager 206,007 556,424 762,431 0

Torres, Erwin Purchasing Manager 102,519 571,309 623,679 50,149

Tubongbanua, John VP – CIS 287,970 36,124 74,480 249,614

4,890,688 7,460,380 8,983,060 3,368,008

The above schedule of advances to officers and employees of the Group with balances above P100,000 as

of March 31, 2016 substantially pertain to car plan agreements. Such advances are non-interest bearing

and are liquidated on a semi-monthly basis. There were no amounts written off during the year.

SCHEDULE C – AMOUNTS RECEIVABLE FROM/PAYABLE TO RELATED PARTIES WHICH ARE

ELIMINATED DURING THE CONSOLIDATION OF THE FINANCIAL STATEMENTS

March 31, 2016

(Amount in Pesos)




Name and

Designation of

Debtor

Balance at

beginning of

year

Additions Collections/

Liquidations

Balance at end

of year

Description Terms

Receivable of

AHC from

STI Holdings

Receivable of

AHC from

STI Holdings

Receivable of

STI Holdings

from AHC

Receivable of

STI Holdings

from

iACADEMY

Receivable of

STI ESG

from STI

WNU

Receivable of

STI WNU

from STI

Holdings

-

64,000,000

1,403,186

-

0

45,227,650

73,778,000

-

237,157

41,166

22,896,069

10,000,000

-

1,640,343

-

22,786,873

10,000,000

63,778,000

64,000,000.00

-

41,166

109,196

35,227,650

Assignment of

receivable from

Unlad Resources

Development Corporation

Subscription

Advances

Advances

Advances

Subscription

Non-interest

bearing and to

be settled

within the year

Non-interest

bearing and to

be settled

within the year

Non-interest

bearing and to

be settled

within the year

Non-interest

bearing and to

be settled

within the year

Non-interest

bearing and to

be settled

within the year

Non-interest

bearing and to

be settled

within the year

The above-mentioned receivables are current and to be settled within the year.

SCHEDULE D – INTANGIBLE ASSETS – OTHER ASSETS




Makati City

Description Beginning

balance

Additions at

cost Reclassifications

Charged to cost

and expenses Ending balance

Goodwill

239,458,878

- - - 239,458,878

Deposits

42,310,614

1,544,285 3,205,724

833,094 39,816,081

Intangible assets

34,860,613 6,549,966 -

4,706,992 36,703,587

Advances to

suppliers

7,764,679 407,639,735 347,670,141 - 67,734,273

Other noncurrent

assets

20,703,936

- 12,002,474

-

8,701,462

345,098,720 415,733,986 362,878,339

5,540,086 392,414,281

SCHEDULE E – LONG TERM DEBT




Makati City

Title of issue and type of

obligation

Amount authorized by

indenture

Amount shown under caption

“Current portion of long-term

debt” in related balance sheet

Amount shown under

caption “Long-Term

Debt” in related balance

sheet

China Banking Corporation - Bank loans:

Maturity Date / Interest Rate

July 31, 2021 / 4.75%

1,151,000,000

116,800,000

1,034,200,000

1,387,000,000 236,000,000 1,151,000,000

SCHEDULE F – INDEBTEDNESS TO RELATED PARTIES

(LONG-TERM LOANS FROM RELATED COMPANIES) March 31, 2016

(Amount in Pesos)

STI EDUCATION SYSTEMS HOLDINGS, INC. 7/F STI Holdings Center

6764 Ayala Avenue

Makati City

Name of Related Party

Beginning balance

Additions at cost

Ending balance

The Group has no long-

term loans from related

parties as of March 31,

2016

SCHEDULE G - GUARANTEES OF SECURITIES OF OTHER ISSUERS




Makati City

Name of Issuing Entity of

Securities Guaranteed by

the Company

Title of Issue of

Each Class of

Securities

Guaranteed

Total Amount

Guaranteed and

Outstanding

Amount Owed

by Person for

which Statement

is Filed

Nature of

Guarantee

Not applicable

SCHEDULE H – CAPITAL STOCK

March 31, 2016

(Amount in Pesos)




Number of Shares Held By

Title of

Issue

Number of

Shares

Authorized

Number of

Shares Issued

Stock

Dividen

ds

declared

Number of

Shares

Outstanding

Numbe

r of

Treasur

y

Shares

Number of

Shares

Reserved

for Options

Warrants,

Conversion

s, and

Other

Rights

Related Parties

Directors,

Officers and

Employees

Others

Common

Stock 10,000,000,000 9,904,806,924 - 9,904,806,924 None None 4,661,275,999* 1,650,443,901** 3,593,087,024

*Related Parties

Prudent Resources, Inc. 1,614,264,964

Biolim Holdings and Management Corp. (Formerly: Rescom Developers, Inc.)

795,265,934

Eujo Philippines, Inc. 780,033,130

Insurance Builders, Inc. 629,776,992

STI Education Services Group

502,307,895

Capital Managers and

Advisors, Inc. 304,460,332

Venture Securities, Inc. 2,430,000 Philippines First Insurance Co., Inc.

3,722,000

First Optima Realty Corporation

29,014,752

T O T A L 4,661,275,999

**Directors, Officers, and Employees:

Eusebio H.Tanco 1,464,431,875

Monico V. Jacob 33,784,057

Maria Vanessa Rose L. Tanco 1

Joseph Augustin L. Tanco 2,000,001

Martin K. Tanco 43,619,000

Paolo Martin O. Bautista 3.250,000

Rainerio M. Borja 1,000,000

Teodoro L. Locsin, Jr. 1,000

Jesli A. Lapus 6,500,000

Ernest Lawrence Cu 14,406,000

Johnip G. Cua 1,000

Yolanda M. Bautista 5,000,001

Arsenio C. Cabrera, Jr. 6 500 000

Franchini Vina Z. Cordova 65,000

STI Employees Retirement Plan 69,885,966

TOTAL

1,650,443,901

STI EDUCATION SYSTEMS

HOLDINGS, INC.

USE OF PROCEEDS MARCH 31, 2015

Not applicable

SCHEDULE I – RETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATION March 31, 2016

(Amount in Pesos)



6764 Ayala Avenue

Unappropriated retained earnings, beginning 147,895,651

Adjustments: –

Unappropriated retained earnings as adjusted, beginning 147,895,651

Net income based on the face of the AFS 622,538,117

Less: Non-actual/unrealized income net of tax

Equity in net income of associate/joint venture

Unrealized foreign exchange gain - net (except those attributable to Cash

and Cash equivalents) Unrealized actuarial gain

Fair Value adjustment (M2M gains)

Fair Value adjustment of Investment Property resulting to gain

Adjustment due to deviation from PFRS/GAAP-gain Other unrealized gains or adjustments to the retained earnings as a result

of certain transactions accounted for under the PFRS

Less: Non-actual/unrealized income net of tax Equity in net income of associate/joint venture

Add: Non-actual losses

Depreciation on revaluation increment (after tax) Adjustments due to deviation from PFRS/GAAP-loss

Loss on fair value adjustment of Investment property (after tax)

Net income actual/realized 770,433,768

Add (Less):

Dividend declarations during the period (198,096,138) Appropriation of Retained Earnings during the period

Reversals of appropriations

Effects of prior period adjustments Treasury shares

TOTAL RETAINED EARNINGS

AVAILABLE FOR DIVIDEND, MARCH 31, 2016 572,337,630


MAP OF RELATIONSHIPS BETWEEN AND AMONG THE COMPANY AND ITS

ULTIMATE PARENT COMPANY,

MIDDLE PARENT, SUBSIDIARIES OR CO-SUBSIDIARIES, AND ASSOCIATES

MARCH 31, 2016

* STI Education Services Group, Inc. owns 5% equity interest in STI Holdings as at March 31, 2016.

** Formerly West Negros University Corp.

*** A subsidiary through a management contract.

STI College Quezon

Avenue, Inc. 100%

99%

STI EDUCATION

SERVICES GROUP, INC.* STI WEST NEGROS

UNIVERSITY INC.**

99%

STI EDUCATION SYSTEMS

HOLDINGS, INC.*

ATTENBOROUGH

HOLDINGS CORP.

100%

Information and Communications

Technology Academy, Inc.

100%

STI College

Tuguegarao, Inc.

100%

STI College

Alabang, Inc.

40%

Maestro Holdings, Inc.

20%

STI College Batangas, Inc.

100%

STI College

Iloilo, Inc. 100%

STI College Marikina, Inc.

24%

Global Resource for Outsourced

Workers, Inc.

17%

STI College Tanauan, Inc.

100%

STI Lipa, Inc.

100%

STI College Novaliches,

Inc. 100%

STI College Pagadian, Inc.

100%

STI College Taft, Inc.

75%

SUBSIDIARIES ASSOCIATES

De Los Santos – STI College

52%

STI Dagupan,

Inc. 99.87%

STI College of

Kalookan,

Inc. ***

STI Diamond College,

Inc. ***

STI EDUCATION SYSTEM HOLDINGS, INC.

SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS March 31, 2016

PHILIPPINE FINANCIAL REPORTING STANDARDS

AND INTERPRETATIONS

Effective as at March 31, 2016 Adopted

Not

Adopted

Not

Applicable

Not

Early

Adopted

Framework for the Preparation and Presentation of Financial

Statements Conceptual Framework Phase A: Objectives and qualitative characteristics

PFRSs Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1

(Revised)

First-time Adoption of Philippine Financial Reporting Standards

Amendments to PFRS 1 and PAS 27: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

Amendments to PFRS 1: Additional Exemptions for First-time Adopters

Amendment to PFRS 1: Limited Exemption from Comparative PFRS 7 Disclosures for First-time Adopters

Amendments to PFRS 1: Severe Hyperinflation and Removal of Fixed Date for First-time Adopters

Amendments to PFRS 1: Government Loans

Amendment to PFRS 1: First-time Adoption of Philippine Financial Reporting Standards - Meaning

of ‘Effective PFRSs’

PFRS 2 Share-based Payment

Amendments to PFRS 2: Vesting Conditions and Cancellations

Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions

Amendments to PFRS 2: Share-based Payment –

Definition of Vesting Condition

PFRS 3

(Revised)

Business Combinations

Business Combinations – Accounting for Contingent Consideration in a Business Combination

Business Combinations – Scope Exceptions for Joint

Arrangements

PFRS 4 Insurance Contracts

Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts

PFRS 5 Non-current Assets Held for Sale and Discontinued


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted

Operations

Amendment to PFRS 5: Changes in Methods of

Disposal

PFRS 6 Exploration for and Evaluation of Mineral Resources

PFRS 7 Financial Instruments: Disclosures

Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets

Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets - Effective Date and Transition

Amendments to PFRS 7: Improving Disclosures about Financial Instruments

Amendments to PFRS 7: Disclosures - Transfers of Financial Assets

Amendments to PFRS 7: Disclosures – Offsetting Financial Assets and Financial Liabilities

Amendments to PFRS 7: Mandatory Effective Date of PFRS 9 and Transition Disclosures

Amendments to PFRS 7: Disclosures - Servicing

Contracts

Amendments to PFRS 7: Applicability of the Amendments to PFRS 7 to Condensed Interim

Financial Statements

PFRS 8 Operating Segments

Amendments to PFRS 8: Aggregation of Operating Segments and Reconciliation of the Total of the

Reportable Segments’ Assets to the Entity’s Assets

PFRS 9* Financial Instruments

Amendments to PFRS 9: Mandatory Effective Date of PFRS 9 and Transition Disclosures

Financial Instruments – New hedge accounting

requirements

PFRS 10* Consolidated Financial Statements

Amendments to PFRS 10: Investment Entities

Amendments to PFRS 10: Sale or Contribution of

Assets between an Investor and its Associate or Joint Venture

Amendments to PFRS 10: Applying the Consolidated Exception

PFRS 11* Joint Arrangements


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted

Amendments to PFRS 11: Accounting for

Acquisitions of Interests in Joint Operations

PFRS 12* Disclosure of Interests in Other Entities

Amendments to PFRS 12: Investment Entities

PFRS 13* Fair Value Measurement

Amendment to PFRS 13: Short-term Receivables and

Payables

Amendment to PFRS 13: Fair Value Measurement -

Portfolio Exception

PFRS 14 Regulatory Deferral Accounts

PFRS 15 Revenue from Contracts with Customers

PFRS 16 Leases

Philippine Accounting Standards

PAS 1

(Revised)

Presentation of Financial Statements

Amendment to PAS 1: Capital Disclosures

Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation

Amendments to PAS 1: Presentation of Items of Other Comprehensive Income

Amendments to PAS 1: Presentation of Financial Statements – Disclosure Initiative

PAS 2 Inventories

PAS 7 Statement of Cash Flows

PAS 8 Accounting Policies, Changes in Accounting Estimates

and Errors

PAS 10 Events after the Reporting Period

PAS 11 Construction Contracts

PAS 12 Income Taxes

Amendment to PAS 12 - Deferred Tax: Recovery of Underlying Assets

PAS 16 Property, Plant and Equipment

Amendment to PAS 16: Property, Plant and

Equipment - Revaluation Method - Proportionate Restatement of Accumulated Depreciation

Amendment to PAS 16: Clarification of Acceptable Methods of Depreciation and Amortization


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted

Amendment to PAS 16: Agriculture - Bearer Plants

PAS 17 Leases

PAS 18 Revenue

PAS 19

(Revised)

Amendments to PAS 19: Actuarial Gains and Losses, Group Plans and Disclosures

Employee Benefits (Amended)

Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments)

PAS 20 Accounting for Government Grants and Disclosure of Government Assistance

PAS 21 The Effects of Changes in Foreign Exchange Rates

Amendment: Net Investment in a Foreign Operation

PAS 23

(Revised)

Borrowing Costs

PAS 24

(Revised)

Related Party Disclosures

Amendments to PAS 24: Key Management Personnel

PAS 26 Accounting and Reporting by Retirement Benefit Plans

PAS 27

(Amended)*

Separate Financial Statements

Amendments to PAS 27: Investment Entities

Amendments to PAS 27: Equity Method in Separate

Financial Statements

PAS 28

(Amended)*

Investments in Associates and Joint Ventures

Amendments to PAS 28: Sale or Contribution of

Assets between an Investor and its Associate or Joint Venture

Amendments to PAS 28: Investment Entities: Applying Consolidation Exception

PAS 29 Financial Reporting in Hyperinflationary Economies

PAS 31 Interests in Joint Ventures

PAS 32 Financial Instruments: Disclosure and Presentation

Amendments to PAS 32 and PAS 1: Puttable Financial Instruments and Obligations Arising on Liquidation

Amendment to PAS 32: Classification of Rights Issues

Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted

PAS 33 Earnings per Share

PAS 34 Interim Financial Reporting

Amendments to PAS 34: Disclosure of Information

‘Elsewhere in the Interim Financial Report

PAS 36 Impairment of Assets

Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets (Amendments)

PAS 37 Provisions, Contingent Liabilities and Contingent Assets

PAS 38 Intangible Assets

Amendments to PAS 38: Revaluation Method -

Proportionate Restatement of Accumulated Amortization

Amendments to PAS 38: Clarification of Acceptable Methods of Depreciation and Amortization

PAS 39 Financial Instruments: Recognition and Measurement

Amendments to PAS 39: Transition and Initial

Recognition of Financial Assets and Financial Liabilities

Amendments to PAS 39: Cash Flow Hedge Accounting of Forecast Intragroup Transactions

Amendments to PAS 39: The Fair Value Option

Amendments to PAS 39 and PFRS 4: Financial Guarantee Contracts

Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets

Amendments to PAS 39 and PFRS 7: Reclassification of Financial Assets – Effective Date and Transition

Amendments to Philippine Interpretation IFRIC–9 and PAS 39: Embedded Derivatives

Amendment to PAS 39: Eligible Hedged Items

Financial Instruments: Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting (Amendments)

PAS 40 Investment Property

Amendments to PAS 40

PAS 41 Agriculture

Amendments to PAS 41: Bearer Plants


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities

IFRIC 2 Members' Share in Co-operative Entities and Similar

Instruments

IFRIC 4 Determining Whether an Arrangement Contains a Lease

IFRIC 5 Rights to Interests arising from Decommissioning,

Restoration and Environmental Rehabilitation Funds

IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment

IFRIC 7 Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies

IFRIC 8 Scope of PFRS 2

IFRIC 9 Reassessment of Embedded Derivatives

Amendments to Philippine Interpretation IFRIC–9 and PAS 39: Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 11 PFRS 2- Group and Treasury Share Transactions

IFRIC 12 Service Concession Arrangements

IFRIC 13 Customer Loyalty Programmes

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

Amendments to Philippine Interpretations IFRIC- 14, Prepayments of a Minimum Funding Requirement

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

IFRIC 17 Distributions of Non-cash Assets to Owners

IFRIC 18 Transfers of Assets from Customers

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

IFRIC 21 Levies

SIC-7 Introduction of the Euro

SIC-10 Government Assistance - No Specific Relation to Operating Activities

SIC-12 Consolidation - Special Purpose Entities


AND INTERPRETATIONS


Not

Adopted

Not

Applicable

Not

Early

Adopted

Amendment to SIC - 12: Scope of SIC 12

SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers

SIC-15 Operating Leases – Incentives

SIC-25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders

SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease

SIC-29 Service Concession Arrangements: Disclosures.

SIC-31 Revenue - Barter Transactions Involving Advertising Services

SIC-32 Intangible Assets - Web Site Costs

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Consolidated Changes in ACGR for 2015

Note: Highlighted in blue font are the updates for 2015

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TABLE OF CONTENTS

A. BOARD MATTERS……………………………………………………………………………………………………………………………….. 4 1) BOARD OF DIRECTORS

(a) Composition of the Board……………………………………………………………………………………………………. 4 (b) Directorship in Other Companies…………………………………………………………………………………………. 5 (c) Shareholding in the Company………………………………………………………………………………………………. 8

2) CHAIRMAN AND CEO…………………………………………………………………………………………………………………… 8 3) OTHER EXECUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS………………………………………….. 9 4) CHANGES IN THE BOARD OF DIRECTORS……………………………………………………………………………………… 10 5) ORIENTATION AND EDUCATION PROGRAM…………………………………………………………………………………. 13

B. CODE OF BUSINESS CONDUCT & ETHICS……………………………………………………………………………………………. 14

1) POLICIES………………………………………………………………………………………………………………………………………. 14 2) DISSEMINATION OF CODE……………………………………………………………………………………………………………. 18 3) COMPLIANCE WITH CODE……………………………………………………………………………………………………………. 18 4) RELATED PARTY TRANSACTIONS………………………………………………………………………………………………….. 18

(a) Policies and Procedures………………………………………………………………………………………………………... 18 (b) Conflict of Interest………………………………………………………………………………………………………………… 19

5) FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS………………………………………………………………. 20 6) ALTERNATIVE DISPUTE RESOLUTION……………………………………………………………………………………………. 27

C. BOARD MEETINGS AND ATTENDANCE……………………………………………………………………………………………….. 27

1) SCHEDULE OF MEETINGS……………………………………………………………………………………………………………… 27 2) DETAILS OF ATTENDANCE OF DIRECTORS…………………………………………………………………………………….. 28 3) SEPARATE MEETING OF NON-EXECUTIVE DIRECTORS…………………………………………………………………… 28 4) ACCESS TO INFORMATION……………………………………………………………………………………………………………. 28 5) EXTERNAL ADVICE………………………………………………………………………………………………………………………… 29 6) CHANGES IN EXISTING POLICIES…………………………………………………………………………………………………… 29

D. REMUNERATION MATTERS…………………………………………………………………………………………………………………. 29

1) REMUNERATION PROCESS……………………………………………………………………………………………………………. 29 2) REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS…………………………………………………………. 29 3) AGGREGATE REMUNERATION……………………………………………………………………………………………………… 30 4) STOCK RIGHTS, OPTIONS AND WARRANTS…………………………………………………………………………………… 30 5) REMUNERATION OF MANAGEMENT……………………………………………………………………………………………. 31

E. BOARD COMMITTEES…………………………………………………………………………………………………………………………. 31

1) NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES……………………………………………………….. 31 2) COMMITTEE MEMBERS……………………………………………………………………………………………………………….. 32 3) CHANGES IN COMMITTEE MEMBERS…………………………………………………………………………………………… 34 4) WORK DONE AND ISSUES ADDRESSED…………………………………………………………………………………………. 34 5) COMMITTEE PROGRAM………………………………………………………………………………………………………………. 34

F. RISK MANAGEMENT SYSTEM…………………………………………………………………………………………………………….. 35

1) STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM……………………………………………… 35 2) RISK POLICY………………………………………………………………………………………………………………………………… 36 3) CONTROL SYSTEM………………………………………………………………………………………………………………………. 36

G. INTERNAL AUDIT AND CONTROL………………………………………………………………………………………………………. 37

1) STATEMENT OF EFFECTIVENESS OF INTERNAL CONTROL SYSTEM………………………………………………. 38 2) INTERNAL AUDIT

(a) Roles, Scope and Internal Audit Function…………………………………………………………………………… 38 (b) Appointment/Removal of Internal Auditor………………………………………………………………………… 38 (c) Reporting Relationship with the Audit Committee…………………………………………………………….. 38 (d) Resignation, Re-assignment and Reasons…………………………………………………………………………… 39 (e) Progress against Plans, Issues, Findings and Examination Trends…………………………………….. 39

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(f) Audit Control Policies and Procedures……………………………………………………………………………….. 39 (g) Mechanisms and Safeguards………………………………………………………………………………………………. 39

H. ROLE OF STOCKHOLDERS……………………………………………………………………………………………………………… 40 I. DISCLOSURE AND TRANSPARENCY................................................................................................. 42 J. RIGHTS OF STOCKHOLDERS………………………………………………………………………………………………………….. 44

1) RIGHT TO PARTICIPATE EFFECTIVELY IN STOCKHOLDERS’ MEETINGS………………………………………… 44 2) TREATMENT OF MINORITY STOCKHOLDRS………………………………………………………………………………… 49

K. INVESTORS RELATIONS PROGRAM………………………………………………………………………………………………….. 49 L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES......................................................................... 50 M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL…………………………………………………………………… 52 N. INTERNAL BREACHES AND SANCTIONS……………………………………………………………………………………………. 53

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A. BOARD MATTERS 1) Board of Directors

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(a) Composition of the Board Complete the table with information on the Board of Directors: Director’s Name Type

[Executive (ED), Non-Executive (NED) or Independent Director (ID)

If Nominee, identify the principal

Nominator in the last election (if ID, state the relationship with the nominator)

Date first elected Date last elected (if ID, state the number of years served as ID)1

Elected when (Annual/Special Meeting)

No. of years served as director

Eusebio H. Tanco ED N/A Capital Managers & Advisors, Inc.

17 March 2010 25 September 2015

Annual Stockholders’ Meeting

5 years and 5 months

Monico V. Jacob ED N/A Capital Managers & Advisors, Inc.

17 March 2010 25 September 2015



Joseph Augustin L. Tanco

ED N/A Capital Managers & Advisors, Inc.

27 October 2010

25 September 2015


5 years

Ma. Vanessa Rose L. Tanco

NED N/A Capital Managers & Advisors, Inc.

27 October 2010

25 September 2015


5 years

Martin K. Tanco ED N/A Capital Managers & Advisors, Inc.

19 December 2012

25 September 2015



Paolo Martin O. Bautista


19 December 2012

25 September 2015



Rainerio M. Borja


19 December 2012

25 September 2015



Jesli A. Lapus ID N/A Capital Managers & Advisors, Inc. (No relationship)

March 21, 2013

25 September 2015; 1 year and 11 months as ID



Johnip G. Cua ID N/A Capital Managers & Advisors, Inc. (No relationship)

19 December 2012

25 September 2015; 2 years and 9 months as ID



Ernest Lawrence L. Cu

ID N/A Capital Managers & Advisors, Inc. (No relationship)

19 December 2012




Teodoro L. Locsin, Jr.


2 February 2015

25 September 2015


1 year and 7 months

Updated based on SEC Form 17 – C, Item 4 Election of Directors filed with the SEC on 3 February 2015; SEC Form 17 – C, Items 4 Election of Directors and Officers filed with SEC on 28 September 2015.

(b) Provide a brief summary of the corporate governance policy that the board of directors has adopted. Please emphasize the

policy/ies relative to the treatment of all shareholders, respect for the rights of minority shareholders and other stakeholders, disclosure duties, and board responsibilities. The Corporation recognizes that the most convincing proof of good corporate governance is that which is visible to the eyes of its shareholders. The Corporation treats all its shareholders equally by allowing them to exercise the following rights: 1) Voting Right – Shareholders have the right to elect, remove and replace directors and vote on certain corporate acts in accordance with the Corporation Code. Cumulative voting shall be used in the election of directors. 2) Power of Inspection – Shareholders shall be allowed to inspect corporate books and records, including the minutes of Board meetings and stock registries, for a legitimate purpose within reasonable business hours and in accordance with the Corporation Code. They will be furnished Annual reports including financial statements, without cost or restrictions. 3) Right to information – Shareholders shall be entitled, upon request, to receive reports submitted to the SEC and PSE. 4) Right to Dividends – Shareholders shall have the right to receive dividends subject to the discretion of the Board and the compliance with requirements under the Corporation Code.

1 Reckoned as of date of election as ID (J.A. Lapus – 4 October 2013; J. G. Cua – 19 Dec 2012 and E. L. Cu – 19 Dec 2012)

Number of Directors per Articles of Incorporation Eleven (11)

Actual Number of Directors for the year

Eleven (11)

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5) Appraisal Right – Shareholders shall have the right to dissent and demand payment of the fair value of their shares in the manner provided for under Section 82 of the Corporation Code of the Philippines. It shall be the duty of the directors of the Corporation to promote shareholders’ rights, remove impediments to the exercise of shareholders’ rights and allow opportunities for them to seek redress for violation of their rights. In respect to the rights of the minority shareholders, a director representing them in the board shall not be removed without cause if it will deny minority shareholders representation in the Board. Reports or disclosures required under the regulations of the SEC and PSE shall be prepared and submitted by the Corporation’s Compliance Officer. Material information that could potentially affect the corporation’s share price shall be publicly disclosed. Material information includes earning results, the acquisition or disposal of all or substantially all of the assets of the Corporation, changes in the composition of the Board, related party transactions, shareholdings of directors and change of control. All such material information about the Corporation shall not be disclosed to any person, unless proper and simultaneous disclosures are made to the SEC and PSE. This shall not apply to disclosures made to (i) a person who is bound by duty not to disclose confidential information such as but not limited to the Corporation’s auditors and legal counsels, investment bankers, fund or plan trustees and financial advisers; and (ii) a person who agrees in writing to maintain in strict confidence the disclosed material information and will not take advantage of it for his personal gain. A board member shall have the following duties and responsibilities: 1) Act with fairness in all his dealings with the Corporation and ensure that his own personal interests do not affect his decisions

at the Board level or conflict with the interests of the Corporation; 2) Act judiciously and exercise independent judgment; 3) Have a working knowledge of the statutory and regulatory requirements affecting the Corporation, including the contents of its

Articles of Incorporation and By-Laws, the rules, regulations and requirements of the SEC, and where applicable, the requirements of other regulatory agencies;

4) Observe confidentiality except in matters already disclosed publicly; and 5) Ensure the continuing soundness, effectiveness and adequacy of the Corporation’s control environment.

(c) How often does the Board review and approve the vision and mission?

The vision and mission of the Corporation is subject to annual review by the Board of Directors or as needed.

(d) Directorship in Other Companies Directorship in the Company’s Group 2

(i) Identify, as and if applicable, the members of the company’s Board of directors who hold the office of director in other companies within its Group:

Director’s Name Corporate Name of the Group Company Type of Directorship (Executive, Non-Executive, Independent). Indicate if director is also the

Chairman

Eusebio H. Tanco Prudent Resources, Inc. Executive Director/President

Rescom Developers Inc. Executive Director/Chairman of the Board

Insurance Builders, Inc. Executive Director/Chairman of the Board

Eujo Phils., Incorporated Executive Director/President

Classic Finance Inc. Executive Director/President

Capital Managers & Advisors, Inc. Executive Director/Chairman of the Board

STI Education Services Group, Inc. Executive Director/Ex-Com Chairman

i-ACADEMY Non-Executive Director

DeLos Santos-STI College Executive Director/Chairman of the Board

PhilhealthCare, Inc. Executive Director

PhilPlans First, Inc. Executive Director

Philippine Life Financial Assurance Corporation

Executive Director

STI Investments, Inc. Executive Director/Chairman of the Board

STI West Negros University Non-Executive Director/Chairman of the Board

Monico V. Jacob Classic Finance Inc. Executive Director/Chairman of the Board

Insurance Builders, Inc. Executive Director/President

Capital Managers & Advisors, Inc. Executive Director/President

STI Education Services Group, Inc. Executive Director/President & CEO


STI West Negros University Executive Director/President


PhilPlans First, Inc. Executive Director/Chairman of the Board


Executive Director/Chairman of the Board

STI Investments, Inc. Executive Director/President

De Los Santos-STI College Non-Executive Director

2 The Group is composed of the parent, subsidiaries, associates and joint ventures of the Company

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Joseph Augustin L. Tanco PhilhealthCare, Inc. Executive Director/Chairman of the Board



Executive Director/President and CEO

STI Education Services Group, Inc. Non-Executive Director

STI West Negros University Non-Executive Director

Insurance Builders, Inc. Non-Executive Director


Eujo Phils., Incorporated Non-Executive Director

Capital Managers and Advisors, Inc. Non-Executive Director

STI Investments, Inc. Non-Executive Director

Prudent Resources, Inc. Executive Director

Rescom Developers, Inc. Executive Director

Ma. Vanessa Rose L. Tanco i-ACADEMY Executive Director/President


PhilhealthCare, Inc. Non-Executive Director

PhilPlans First, Inc. Non-Executive Director


Classic Finance Inc. Non-Executive Director




Paolo Martin O. Bautista Classic Finance Inc. Non-Executive Director

Johnip G. Cua PhilPlans, First, Inc. Independent Director

Rainerio M. Borja PhilPlans, First, Inc. Non-Executive Director

STI Education Services Group, Inc. Executive Director

Jesli A. Lapus Philippine Life Financial Assurance Corporation

Independent Director


STI Education Services Group, Inc. Independent Director/Chairman of the Board

Ernest Lawrence Cu Philippine Life Financial Assurance Corporation


STI Education Services Group, Inc. Independent Director

Teodoro L. Locsin, Jr. iACADEMY Non-Executive Director

Updated based on SEC Form 17-C Resignation of STI Holdings Nominees – Messrs. E. H. Tanco and M. V. Jacob and Ms. M. V. R. L. Tanco and Y. M. Bautista in the Board of Trustees of Philippine Women’s University filed with SEC on 12 Feb 2015 and PSE on 11 Feb 2015. Also, SEC Form 17-A as of Fiscal Year Ended 31 March 2015 filed with SEC and PSE on 14 July 2015. Certification of Independent Director for Messrs. J. A. Lapus, J. G. Cua and E. L. Cu filed with SEC on 28 September 2015.

(ii) Directorship in Other Listed Companies

Identify, as and if applicable, the members of the company’s Board of Directors who are also directors of publicly-listed companies outside of its Group:

Director’s Name Name of the Listed Company Type of Directorship (Executive, Non-Executive, Independent). Indicate if

director is also the Chairman

Eusebio H. Tanco Asian Terminals Inc. Executive Director/Vice-Chairman and President

Philippine Racing Club, Inc. Non-Executive Director

Leisure and Resorts World, Inc. Non-Executive Director

The Philippine Stock Exchange, Inc. Non-Executive Director

Monico V. Jacob Asian Terminals Inc. Non-Executive Director

Jollibee Foods Corporation Independent Director

Phoenix Petroleum Philippines, Inc. Independent Director

2Go Group, Inc. Independent Director

Century Properties Group, Inc. Independent Director

DFNN, Inc. Independent Director

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Johnip G. Cua MacroAsia Corporation Independent Director

Ernest Lawrence L. Cu Globe Telecom, Inc. Executive Director

Globe Telecom, Inc. – Preferred A Executive Director

Jesli A. Lapus Metropolitan Bank & Trust Company Independent Director

Teodoro L. Locsin, Jr. Asian Terminals, Inc. Independent Director

Updated based on SEC Form 17-A for the Fiscal Year Ended 31 March 2015 filed with SEC and PSE on 14 July 2015.

Certification of Independent Director for Messrs. J. A. Lapus, J. G. Cua and E. L. Cu filed with SEC on 28 September 2015.

(iii) Relationship within the Company and its Group Provide details, as and if applicable, of any relation among the members of the Board of Directors which links them to

significant shareholders in the company and/or in its group:

Director’s Name Name of the Significant Shareholder Description of the relationship

Eusebio H. Tanco Prudent Resources, Inc. Rescom Developers, Inc. Eujo Philippines, Inc. Capital Managers & Advisors, Inc. STI Education Services Group, Inc. Insurance Builders, Inc.

Director/President Director/Chairman/President Director/President Director/Chairman Director/Ex-Com Chairman Director/Chairman

Monico V. Jacob Insurance Builders, Inc. Capital Managers & Advisors, Inc. STI Education Services Group, Inc.

Director/President Director/President Director/President

Joseph Augustin L. Tanco Eusebio H. Tanco Prudent Resources, Inc. Rescom Developers, Inc. Eujo Philippines, Inc. Capital Managers & Advisors, Inc. STI Education Services Group, Inc. Insurance Builders, Inc.

Father Director Director Director Director Director Director

Ma. Vanessa Rose T. Cualoping Eusebio H. Tanco Prudent Resources, Inc. Rescom Developers, Inc. STI Education Services Group, Inc. Insurance Builders, Inc.

Father Director Director Director Director

(iv) Has the Company set a limit on the number of board seats in other companies (publicly listed, ordinary and companies with secondary license) that an individual director or CEO may hold simultaneously? In particular, is the limit of five board seats in other publicly listed companies imposed and observed? If yes briefly describe other guidelines:

Guidelines Maximum Number of Directorships in other Companies

Executive Director Executive Directors shall limit the number of directorships and officerships held outside the Corporation or its subsidiaries and affiliates. In any case, the capacity of directors to serve the Corporation with diligence shall not be compromised.

STI Holdings did not set any limit on the number of board seats in other companies (publicly-listed, ordinary and companies with secondary license) that an Executive Director may hold simultaneously.

Non-Executive Director Non-executive directors who serve as full-time executives in other corporations shall limit the number of directorships and officerships held outside the Corporation or its subsidiaries and affiliates. In any case, the capacity of directors to serve the Corporation with diligence shall not be compromised.

STI Holdings did not set any limit on the number of board seats in other companies (publicly-listed, ordinary and companies with secondary license) that an Non-Executive Director may hold simultaneously.

CEO The Chief Executive Officer shall limit the number of directorships and officerships held outside the Corporation or its subsidiaries and affiliates. In any case, the capacity of

STI Holdings did not set any limit on the number of board seats in other companies (publicly-listed, ordinary and companies with secondary license) that a CEO may hold simultaneously.

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CEO to serve the Corporation with diligence shall not be compromised.

(e) Shareholding in the Company Complete the following table on the members of the Company’s Board of Directors who directly and indirectly own shares in the Company:

Name of Director Number of Direct Shares Number of Indirect Shares/through (name of

record owner)

% of Capital Stock

Eusebio H. Tanco 1,157,913,875 291,618,000 through PCD (Venture Securities, Inc.)

14.635%

Monico V. Jacob 1 33,784,056 through PCD (Venture Securities, Inc.)

.34%

Teodoro L. Locsin 1,000 N/A -

Ma. Vanessa Rose L. Tanco 1 N/A -

Joseph Augustin L. Tanco 1 2,000,000 through PCD (Venture Securities, Inc.)

.02%

Martin K. Tanco 43,619,000 through PCD (Venture Securities, Inc. and Tower Securities, Inc.)

.44%

Rainerio M. Borja 1,000,000 through PCD (Venture Securities, Inc.)

.01%

Paolo Martin O. Bautista 3,250,000 through PCD (Venture Securities, Inc.)

.03%

Jesli A. Lapus 6,500,000 through PCD (Venture Securities, Inc.)

.07%

Ernest Lawrence L. Cu 14,406,000 through PCD (Venture Securities, Inc.)

.14%

Johnip G. Cua 1,000 through PCD (Venture Securities, Inc.)

-

Updated based on SEC Form 23-B filed with the SEC on 27 February 2015 for Mr. T. L. Locsin; Mr. R. M. Borja – SEC Form 23–B filed with the SEC on 11 August 2015; Mr. E. H. Tanco – SEC Form 23-B filed with the SEC on 16 November 2015, 22 and 23 December 2015.

2) Chairman (a) Do different persons assume the role of Chairman of the Board of Directors and CEO? If no, describe the checks and balances laid

down to ensure that the Board gets the benefit of independent views.

Yes No Identify the Chair and CEO

Chairman of the Board Eusebio H. Tanco

CEO/President Monico V. Jacob

(b) Roles, Accountabilities and Deliverables

Define and clarify the roles, accountabilities and deliverables of the Chairman and CEO. The roles of Chairman and CEO should, as much as practicable, be separate to foster an appropriate balance of power, increased accountability and better capacity for independent decision-making by the Board. A clear delineation of functions should be made between the Chairman and CEO upon their election.

Chairman Chief Executive Officer

Role The Chairman shall: (1) preside at all meetings of stockholders and the Board of Directors; (2) He shall ensure that the meetings of the Board are held in accordance with the By-Laws; (3) supervise the preparation of the agenda of the

The Chief Executive Officer shall manage the affairs of the Corporation and have general supervision and control of its day-to-day business activities and its officers and employees. He shall see to it that all orders and resolutions of the Board of Directors are carried into effect. He shall also initiate and develop corporate objectives and policies and formulate long range projects, plans and programs for the approval of the Board of Directors. He shall oversee the

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meetings in coordination the Corporate Secretary, taking into consideration the suggestions of the CEO, Management and the Directors; and (4) maintain qualitative and timely lines of communication and information between the Board and Management. The Chairman may, at his own discretion, also call meetings of stockholders.

preparation of budgets and statements of accounts, represent the Corporation at all functions and proceedings and execute on behalf of the Corporation all contracts, agreements and other instruments affecting the interests of the Corporation. He shall sign with the Corporate Secretary any and all stock certificates of the Corporation.

Accountabilities The Chairman shall be accountable to the Board of Directors and the shareholders of the Corporation.

The Chief Executive Officer shall submit a complete report on the operations of the Corporation at the annual meeting to the Board of Directors and shareholders of the Corporation.

Deliverables The Chairman shall preside over the Annual Stockholders’ Meeting as well as the meetings of the Board of Directors.

The Chief Executive Officer shall ensure that the corporate objectives, policies, long range projects, plans and programs as formulated and approved by the Board of Directors of the Corporation are implemented. He shall also oversee the preparation of the Corporation’s budgets and financial statements. .

3) Explain how the board of directors plans for the succession of the CEO/Managing Director/President and the top key management

positions?

The Board of Directors identifies high-potential employees capable of rapid advancement to positions of higher responsibility than those they presently occupy, ensures the systematic and long-term development of individuals to replace key job incumbents as the need arises due to deaths, disabilities, retirements, and other unexpected losses and provides a continuous flow of talented people to meet the organization’s management needs.

4). Other Executive, Non-Executive and Independent Directors Does the Company have a policy of ensuring diversity of experience and background of directors in the board? Please explain.

The Company does not have a set policy of ensuring diversity of experience and background of directors in the board. However, the directors of the Company must possess qualifications for membership in the board as prescribed by the Corporation Code, Securities Regulation Code and other relevant laws, rules and regulations. Moreover, each director shall at least be a college graduate, with proven integrity and probity and of good moral character. The Independent Directors are required to submit a Certification on their affiliations with other business organizations and must possess all the qualifications and none of the disqualifications to serve as an Independent Director of the Company, as provided in Section 38 of the Corporation Code. The non-executive directors should possess qualifications and stature that would enable them to effectively participate in the deliberations of the Board.

Does it ensure that at least one non-executive director has an experience in the sector or industry the company belongs to? Please

explain. Yes, the Company has more than one non-executive director with experience in the sector or industry the Company belongs to.

Define and clarify the roles, accountabilities and deliverables of the Executive, Non-Executive and Independent Directors:

Executive Non-Executive Independent Director

Role Shall be responsible for fostering the success of the Corporation and securing its sustained, competitiveness in a manner consistent with his fiduciary responsibility.

Shall act with fairness in all his dealings with the Corporation and ensure that his own personal interests do not affect his decisions at the Board level or conflict with the interest of the Corporation. Observe confidentiality except in matters already disclosed publicly and ensure the continuing soundness, effectiveness and adequacy of the Corporation’s control environment.

Person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director of the Corporation.

Accountabilities Company, shareholders, management and staff.

Company, shareholders and management.

Company, shareholders and management.

Deliverables Formulation of the Corporation’s vision, mission, strategic objectives, policies and procedures that shall guide its activities, including the means to effectively monitor Management’s performance.

Shall be able to effectively participate in the deliberations of the Board.

Shall be able to effectively participate in the deliberations of the Board.

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Provide the company’s definition of “independence” and describe the company’s compliance to the definition.

The Company’s definition of “independence” is that an independent director is a person who, apart from his fees and shareholdings, is

independent of management and free from any business or relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his duties as a director of the Corporation. The term “independent director” includes, among others, any person who: (a) is not a director or officer of the Corporation or of its related companies or any of its substantial shareholders, except when an independent director of any of the foregoing; (b) does not own more than 2% of the shares of the Corporation and/or its related companies or any of its substantial shareholders; (c) is not related to any director, officer or substantial shareholder of the Corporation (i.e., spouse, parent, child, sibling or spouse of such child or sibling) or any of its related companies or any of its substantial shareholders; (d) is not acting as a nominee or representative of any director or substantial shareholder of the Corporation, and/or any of its related companies and/or any of its substantial shareholders, pursuant to any contract or arrangement; (e) has not been employed in any executive capacity by the Corporation, any of its related companies and/or by any of its substantial shareholders within the last 2 years; (f) is not retained, either personally or through his firm or any similar entity, as professional adviser by the Corporation, any of its related companies and/or any of its substantial shareholders, within the last 2 years; or (g) has not engaged and does not engage in any transaction with the Corporation and/or with any of its related companies and/or substantial shareholders, whether by himself and/or with other persons and/or through a firm of which he is a partner and/or a company of which he is a director or substantial shareholder, other than transactions which are conducted at arms’ length and are immaterial. A “related company” means another company which is: (a) a holding company; (b) subsidiary; or (c) subsidiary of the holding company of the Corporation. A “substantial shareholder” means any person who is, directly or indirectly, the beneficial owner of more than 10% of any class of the Corporation’s equity security.

The Corporation has complied with the foregoing definition of ‘independence.” The independent directors of the Corporation are free

from any business or relationship which could, or could reasonably be perceived to, materially interfere with their exercise of independent judgment in carrying out their duties as directors.

Does the Company have a term limit of five consecutive years for independent directors? If after two years, the company wishes to

bring back an independent director who had served for five years, does it limit the term for no more than four additional years? Please explain.

The Company has a term limit of five (5) consecutive years for independent directors. An independent director will be eligible again for

election as independent director for another five (5) years term after a two (2) year cooling-off period, provided that he has not engaged in any activity that under existing rules disqualifies him from being elected as such.

5) Changes in the Board of Directors (Executive, Non-Executive and Independent Directors)

(a) Resignation/Death/Removal

Indicate any changes in the composition of the Board of Directors that happened during the period:

Name Position Date of Cessation Reason

Arsenio N. Tanco Non-Executive Director 19 December 2012 Declined nomination as director for the 2013

Elpidio C. Jamora Independent Director 19 December 2012 - do -

Pete N. Prado Independent Director 19 December 2012 - do -

Arsenio C. Cabrera, Jr. Non-Executive Director 21 March 2012 Resignation

Yolanda M.Bautista Executive-Director 10 December 2013 Resignation

Maulik R. Parekh Non-Executive Director 20 January 2015 Resignation

Updated based on SEC Form 17 – C, Item 4. Resignation of Director filed with SEC on 21 January 2015

(b) Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement and Suspension Describe the procedures for the selection/appointment, re-election, disqualification, removal, reinstatement and suspension of the members of the Board of Directors. Provide details of the processes adopted (including the frequency of election) and the criteria employed in each procedure:

Procedure Process Adopted Criteria

a. Selection/Appointment (i) Executive Directors (ii) Non-Executive Directors (iii) Independent Directors

The Nominations Committee (NC) shall pre-screen and shortlist all candidates nominated to become a member of the board of directors. Nominees shall be submitted to the NC and the Corporate Secretary at least 45 days prior to the date of the annual meeting of the stockholders or a special meeting called for the purpose of electing the Company’s Directors. The NC shall review the qualifications of the nominees for directors and prepare a Final List of Candidates containing all the information about the background and experience of the

The Directors shall possess such qualifications for membership in the Board as prescribed by the Corporation Code, Securities Regulation Code and other relevant laws, rules and regulations. Each Director of the Corporation must meet all the following qualifications: (1) be a holder of at least one (1) share of stock of the Corporation; (2) be at least a college graduate; (3) be At least twenty one (21) years of age; (4)possess proven integrity and probity; and

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nominees. Only nominees whose names appear on the Final List of Candidates shall be eligible for election as directors. No other nomination shall be entertained after the Final List of Candidates shall have been prepared and during the Annual Stockholders’ Meeting. Specific slots for Independent Directors (ID) shall not be filled up by unqualified nominees. Any controversy or issue arising from the selection, nomination or election of IDs shall be resolved by the SEC by appointing IDs from the list of nominees submitted by the stockholders. In the event of a failure of election, resignation, disqualification or cessation of ID, the vacancy shall be filled by the vote of at least a majority of the remaining directors, if still constituting a quorum. Otherwise, said vacancy shall be filled only by candidates approved by the NC. An ID so elected/appointed to fill a vacancy shall serve only for the unexpired term of predecessor in office

(5) be of good moral character The Non-executive directors should possess such qualifications and stature that would enable them to effectively participate in the deliberations of the Board. The ID shall possess such qualifications for membership in the Board as prescribed by the SEC, its implementing rules and regulations and other relevant laws, rules and regulations.

b. Re-appointment (i) Executive Directors (ii) Non-Executive Directors (iii) Independent Directors

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. Prior to the next Annual Stockholders’ Meeting or special meeting called for the purpose of electing/appointing the Company’s Directors, all the names of the nominee directors shall be submitted to the NC for consideration by the latter. The NC shall review the qualifications of the nominees for directors and prepare a Final List of Candidates containing all the information about the background and experience of the nominees. Only nominees whose names appear on the Final List of Candidates shall be eligible for election as directors. No other nomination shall be entertained after the Final List of Candidates shall have been prepared and during the Annual Stockholders’ Meeting.

Same as the above

c. Permanent Disqualification (i) Executive Directors (ii) Non-Executive Directors (iii) Independent Directors

If the director is found be involved in any of the grounds stated for permanent disqualification, he will automatically be considered resigned/removed from the board.

Any of the following shall be a ground for permanent disqualification of a director of the Corporation: (1) conviction by final judgment of a crime involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts; (2) conviction by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of the Corporation Code, committed within five (5) years prior to the date of his election or appointment; (3)willfully violating, or aiding, abetting, counseling, inducing or procuring the violation of any provision of the Securities Regulation Code (SRC), the Corporation Code or any government agency having jurisdiction; (4) Insolvency, receivership, or assignment of assets for the benefit of creditors; (5) conviction by final judgment or order by a competent judicial or administrative body of

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any crime that (a) involves the purchase or sale of securities as defined in the SRC; (b) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal, mutual fund or floor broker; or (c) arises out of his fiduciary relationship with the bank, quasi-bank, trust company or as an affiliated person of any of them; or (6) in the case of IDs, upon employment with the Corporation, which shall be a ground for disqualification as ID.

d. Temporary Disqualification

A temporarily disqualified director shall, within sixty (60) business days from such disqualification, take appropriate action to remedy or correct the disqualification. If he fails or refuses to do so for unjustified reasons, the disqualification shall become permanent.

Any of the following shall be a ground for the temporary disqualification of a Director of the Corporation: (1) Refusal to fully disclose the extent of his business interest as required under the SRC and its Implementing Rules and Regulations. This disqualification shall be in effect as long as his refusal persists; (2) Absence or non-participation for whatever reason/s for more than fifty percent (50)% of all meetings, both regular and special, of the Board of Directors during his incumbency or any twelve (12) month period during said incumbency, unless the absence is due to illness, death in the immediate family or serious accident. This disqualification applies for purposes of the succeeding election; (3) Dismissal/termination from directorship in another listed corporation for cause. This disqualification shall be in effect until he has cleared himself of any involvement in the alleged irregularity; (4) Being under preventive suspension by the Corporation, if an executive Director, during the period of suspension; (5)Conviction at first instance of any crime constituting grounds for the disqualification of a director, and during the pendency of any appeal; (6) For ID, if his beneficial equity ownership in the Corporation or its subsidiaries or affiliates exceeds two percent (2%) of its subscribed capital stock. The disqualification shall be lifted if the limit is later complied with.

e. Removal (i) Executive Directors (ii) Non-Executive Directors (iii) Independent Directors

If a director is found be involved in any of the grounds stated for permanent disqualification, he shall be removed from office by a majority vote of the Board and in the manner provided by law. His removal from office shall be without prejudice to the Corporation’s right to file the appropriate civil or criminal case against the corporate director or officer involved.

Same as the grounds for permanent disqualification.

f. Re-instatement (i) Executive Directors (ii) Non-Executive Directors (iii) Independent Directors

This applies only to directors who are found to be involved in any of the grounds stated for temporary disqualification. This disqualification shall be in effect as long as his refusal persists. This disqualification applies for purposes of the succeeding election.

- Refusal to fully disclose the extent of his business interest as required under the SRC and its Implementing Rules and Regulations. - Absence or non-participation for whatever reason/s for more than fifty percent (50)% of all meetings, both regular and special, of the

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This disqualification shall be in effect until he has cleared himself of any involvement in the alleged irregularity. The disqualification shall be lifted if the limit is later complied with.

Board of Directors during his incumbency or any twelve (12) month period during said incumbency, unless the absence is due to illness, death in the immediate family or serious accident. - Dismissal/termination from directorship in another listed corporation for cause - For ID, if his beneficial equity ownership in the Corporation or its subsidiaries or affiliates exceeds two percent (2%) of its subscribed capital stock.

g. Suspension (i) Executive Directors (ii) Non-Executive Directors (iii) Independent Directors

This applies only to directors who are found to be involved in any of the grounds stated for temporary disqualification. The disqualification or suspension shall be in effect as long as the concerned director has not cleared himself of the said grounds.

Same as the grounds for temporary disqualification.

Voting Result of the last Annual General Meeting

Name of Director Votes Received

Eusebio H. Tanco 73.98% or 7,327,556,259

Monico V. Jacob 73.98% or 7,327,556,259

Joseph Augustin L. Tanco 73.98% or 7,327,556,259

Ma. Vanessa Rose Tanco 73.98% or 7,327,556,259

Martin K. Tanco 73.98% or 7,327,556,259

Paolo Martin O. Bautista 73.98% or 7,327,556,259

Rainerio M. Borja 73.98% or 7,327,556,259

Teodoro L. Locsin 73.98% or 7,327,556,259

Jesli A. Lapus 73.98% or 7,327,556,259

Johnip G. Cua 73.98% or 7,327,556,259

Ernest Lawrence L. Cu 73.98% or 7,327,556,259

STI Holdings Annual Stockholders’ Meeting was held on 25 September 2015. Minutes of ASM posted in STI Holdings website on 29 September 2015.

6) Orientation and Education Program

(a) Disclose details of the company’s orientation program for new directors, if any. The Company has an orientation program for new Directors. New directors may request individual meetings with senior management and receive materials on each of the Company's different business units. The senior management meetings cover a corporate overview, the Company's strategic plans, its significant financial, accounting and risk management issues, its compliance programs, and its business conduct policies. The other Directors may be invited to attend each orientation program as well. The Directors are given additional educational materials and presentations from Company and/or third party experts on subjects that would enable them to perform better their duties and to recognize and deal appropriately with issues that arise. They shall be required to attend a seminar on corporate governance which shall be conducted by a duly recognized private or government institution.

(b) State any in-house training and external courses attended by Directors and Senior Management3 for the past three (3) years:

Corporate Governance Seminar held on 22 October 2015 Corporate Governance Seminar held on 14 November 2014 SEC and PSE Disclosure Briefing held in the last quarter of 2012

(c) Continuing education program for directors: programs and seminars and roundtables attended during the year

Name of Director/Officer Date of Training

Program Name of Training Institution

Eusebio H. Tanco Chairman

22 October 2015

Corporate Governance Seminar (Updates on Philippine Practices on Corporate Governance & Enterprise Risk Management)

Sycip Gorres Velayo & Co.

3 Senior Management refers to the CEO and other persons having authority and responsibility for planning, directing and controlling the activities of the Company.

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Monico V. Jacob Director/President & CEO

22 October 2015



Yolanda M. Bautista Treasurer/CFO

22 October 2015



Joseph Augustin L. Tanco Director/VP for Investor Relations

22 October 2015



Ma. Vanessa Rose L. Tanco Director

22 October 2015



Martin K. Tanco Director

22 October 2015



Paolo Martin O. Bautista Director/Chielf Investment Officer and Head, Corporate Stategy

22 October 2015



Rainerio M. Borja Director

14 November 2014

Corporate Governance Seminar Sycip Gorres Velayo & Co.

Ernest Lawrence L. Cu Independent Director

18 February 2015

Corporate Governance Seminar

The Institute of Corporate Directors

Johnip G. Cua Independent Director

9 December 2015


Arsenio C. Cabrera Corporate Secretary/Corporate Information Officer

22 October 2015



Jesli A. Lapus Independent Director

11 September 2015


Teodoro L. Locsin Director

Franchini Vina Z. Cordova Investor Relations Officer

22 October 2015



Anna Carmina S. Herrera Assistant Corporate Secretary

22 October 2015



Elizabeth M. Guerrero Alternate Corporate Information Officer

22 October 2015



The above-mentioned amendments were included in STI Holdings letter advisement filed with SEC and PSE on 30 October 2015 re Compliance with SEC Memorandum Circular No. 20, Series of 2013 and for Mr. J. G. Cua on 14 December 2015.

B. CODE OF BUSINESS CONDUCT AND ETHICS

1) Discuss briefly the company’s policies on the following business conduct or ethics affecting directors, senior management and

employees:

Business Conduct & Ethics Directors Senior Management Employees

(a) Conflict of Interest Directors should not have any financial or other business relationship with suppliers, customers or competitors that could reasonably be expected to impair, or even appear to impair, their independence or cloud any judgment they may need to make on behalf of the Company. They should not engage in activities that compete with the Company. If a director is aware of a possible or actual conflict of interest regarding himself or another director, or concerned that one

Senior Management Officers (SMO) should not have any financial or other business relationship with suppliers, customers or competitors that could reasonably be expected to impair, or even appear to impair, their independence or cloud any judgment they may need to make on behalf of the Company. They should not engage in activities that compete with the Company. If an officer is aware of a possible or actual conflict of interest concerning himself or another

Employees should not have any financial or other business relationship with suppliers, customers or competitors that could reasonably be expected to impair, or even appear to impair, their independence or cloud any judgment they may need to make on behalf of the Company. They should not engage in activities that compete with the Company. If an employee is aware of a possible or actual conflict of interest concerning himself or another officer, or is concerned

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might develop, he or she should discuss it with the Chairman of the Audit Committee. The Audit Committee has the ultimate responsibility for the review and resolution of conflicts of interest.

officer, or is concerned that one might develop, he should bring the matter to the Board. An officer may not engage in employment outside the Company without the Company’s approval. Any request should be directed to the Board.

that one might develop, he should bring the matter to the CEO. An employee may not engage in employment outside the Company without the Company’s approval. Any request should be directed to the CEO.

(b) Conduct of Business and Fair Dealings

Directors shall conduct themselves in a fair, ethical, legal and honest manner. In conducting the Company’s business, trust and integrity must be the foundation in all of the business dealings and relationships they establish with stockholders, vendors, government officials, customers, competitors, communities, the media and the general public, as well as each other. They shall not engage in conduct or activity that could raise questions as to the Company’s honesty or reputation or otherwise cause embarrassment to the Company or its stakeholders. There should be careful observance of laws and regulations, as well as high regard for appropriate standards of conduct and personal integrity.

SMO shall conduct themselves in a fair, ethical, legal and honest manner. In conducting the Company’s business, trust and integrity must be the foundation in all of the business dealings and relationships they establish with stockholders, vendors, government officials, customers, competitors, communities, the media and the general public, as well as each other. They shall not engage in conduct or activity that could raise questions as to the Company’s honesty or reputation or otherwise cause embarrassment to the Company or its stakeholders. There should be careful observance of laws and regulations, as well as high regard for appropriate standards of conduct and personal integrity.

Employees shall conduct themselves in a fair, ethical, legal and honest manner. In conducting the Company’s business, trust and integrity must be the foundation in all of the business dealings and relationships they establish with stockholders, vendors, government officials, customers, competitors, communities, the media and the general public, as well as each other. They shall not engage in conduct or activity that could raise questions as to the Company’s honesty or reputation or otherwise cause embarrassment to the Company or its stakeholders. There should be careful observance of laws and regulations, as well as high regard for appropriate standards of conduct and personal integrity.

(c) Receipt of gifts from third parties

Directors should not accept or provide a gift, favor or entertainment to a customer, vendor, or other person or organization in connection with the Company’s business unless all of the following criteria are met: 1)it is reasonable and not excessive in relation to customary industry practices; 2)it cannot be reasonably interpreted as a bribe, payoff or kickback; 3) public disclosure of it will not embarrass the Company; 4) the item is consistent with the normal and accepted business ethics of the industry; and 5) it is not in the form of cash or cash equivalents, other than cash bonuses to employees or consultants.

SMO should not accept or provide a gift, favor or entertainment to a customer, vendor, or other person or organization in connection with the Company’s business unless all of the following criteria are met: 1)it is reasonable and not excessive in relation to customary industry practices; 2)it cannot be reasonably interpreted as a bribe, payoff or kickback; 3) public disclosure of it will not embarrass the Company; 4) the item is consistent with the normal and accepted business ethics of the industry; and 5) it is not in the form of cash or cash equivalents, other than cash bonuses to employees or consultants.

Employees should not accept or provide a gift, favor or entertainment to a customer, vendor, or other person or organization in connection with the Company’s business unless all of the following criteria are met: 1)it is reasonable and not excessive in relation to customary industry practices; 2)it cannot be reasonably interpreted as a bribe, payoff or kickback; 3) public disclosure of it will not embarrass the Company; 4) the item is consistent with the normal and accepted business ethics of the industry; and 5) it is not in the form of cash or cash equivalents, other than cash bonuses to employees or consultants.

(d) Compliance with Laws and Regulations

All directors shall comply in all material respects with all laws, rules and regulations applicable in the country and local jurisdictions where the business is conducted. RA No. 3019 – Anti-Graft and Corrupt Practices Act prohibits directors from paying or offering to pay anything of value to any government official, government employee, or public officer, including elective and appointive officials

All SMO shall comply in all material respects with all laws, rules and regulations applicable in the country and local jurisdictions where the business is conducted. RA No. 3019 – Anti-Graft and Corrupt Practices Act prohibits SMO from paying or offering to pay anything of value to any government official, government employee, or public officer, including elective and appointive officials and

All employees shall comply in all material respects with all laws, rules and regulations applicable in the country and local jurisdictions where the business is conducted. RA No. 3019 – Anti-Graft and Corrupt Practices Act prohibits employees from paying or offering to pay anything of value to any government official, government employee, or public officer, including elective and appointive officials

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and employees, permanent or temporary, whether in the classified or unclassified or exempt service receiving compensation, even nominal, from the government. Insider Trading – Directors are prohibited from trading the Company’s securities, or those of other companies (i.e. a vendor or the subject of a possible acquisition), while that individual is in the possession of material, non-public information regarding the company.

employees, permanent or temporary, whether in the classified or unclassified or exempt service receiving compensation, even nominal, from the government. Insider Trading – SMO are prohibited from trading the Company’s securities, or those of other companies (i.e. a vendor or the subject of a possible acquisition), while that individual is in the possession of material, non-public information regarding the company.

and employees, permanent or temporary, whether in the classified or unclassified or exempt service receiving compensation, even nominal, from the government.

(e) Respect for Trade Secrets/Use of Non-public information

No director shall knowingly make false or defamatory public remarks about a competitor or improperly, unethically or illegally obtain or use proprietary information, intellectual property or trade secrets of a competitor, collaborator or any other third party.

No SMO shall knowingly make false or defamatory public remarks about a competitor or improperly, unethically or illegally obtain or use proprietary information, intellectual property or trade secrets of a competitor, collaborator or any other third party.

No Employee shall knowingly make false or defamatory public remarks about a competitor or improperly, unethically or illegally obtain or use proprietary information, intellectual property or trade secrets of a competitor, collaborator or any other third party.

(f) Use of Company Funds, Assets and information

Company Funds: No Corporate funds, merchandise or service may be paid or furnished, directly or indirectly, to a political party, committee, organization, political candidate or incumbent, government official or employee, except if legally permissible and approved in advance in writing. Any assistance or entertainment provided to any government official or office should never, in form or substance, compromise the Company’s arm’s-length business relationship with the government agency or official involved.

Company Funds: No Corporate funds, merchandise or service may be paid or furnished, directly or indirectly, to a political party, committee, organization, political candidate or incumbent, government official or employee, except if legally permissible and approved in advance in writing. Any assistance or entertainment provided to any government official or office should never, in form or substance, compromise the Company’s arm’s-length business relationship with the government agency or official involved. Any request for such approval should be directed to the Board.

Company Funds: No Corporate funds, merchandise or service may be paid or furnished, directly or indirectly, to a political party, committee, organization, political candidate or incumbent, government official or employee, except if legally permissible and approved in advance in writing. Any assistance or entertainment provided to any government official or office should never, in form or substance, compromise the Company’s arm’s-length business relationship with the government agency or official involved. Any request for such approval should be directed to the CEO.

Company Assets: The directors are responsible for the proper and efficient use of the Company’s physical resources and properties as well as its proprietary information. The Company’s offices, equipment, supplies and other resources may not be used for personal use or activities that are not related to the employment or responsibilities of its directors.

Company Assets: The SMO are responsible for the proper and efficient use of the Company’s physical resources and properties as well as its proprietary information. The Company’s offices, equipment, supplies and other resources may not be used for personal use or activities that are not related to the employment or responsibilities of its SMO.

Company Assets: The Employees are responsible for the proper and efficient use of the Company’s physical resources and properties as well as its proprietary information. The Company’s offices, equipment, supplies and other resources may not be used for personal use or activities that are not related to the employment or responsibilities of an employee, except for any activities that have been approved in advance by the supervisor or by the CEO if the request involves a material use.

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Company Information: Directors must maintain the confidentiality of information entrusted to them by the Company or its customers, except when disclosure is authorized by the Company's legal counsel or required by laws or regulations. Whenever possible, directors should consult with the Company’s legal counsel if they believe they have a legal obligation to disclose confidential information. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its customers, if disclosed. The obligation to preserve confidential information continues even after term ends.

Company Information: SMO must maintain the confidentiality of information entrusted to them by the Company or its customers, except when disclosure is authorized by the Company's legal counsel or required by laws or regulations. Whenever possible, SMO should consult with the Company’s legal counsel if they believe they have a legal obligation to disclose confidential information. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its customers, if disclosed. The obligation to preserve confidential information continues even after employment ends.

Company Information: Employees must maintain the confidentiality of information entrusted to them by the Company or its customers, except when disclosure is authorized by the Company's legal counsel or required by laws or regulations. Whenever possible, employees should consult with the Company’s legal counsel if they believe they have a legal obligation to disclose confidential information. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its customers, if disclosed. The obligation to preserve confidential information continues even after employment ends.

(g) Employment and Labor Laws and Policies

N/A Except for intermittent activities on behalf of recognized and legitimate not-for-profit or charitable organizations, an officer (other than an officer who works without compensation) or employee may not engage in employment outside the Company without the Company's approval. Any request for such approval should be directed to the CEO.

Except for intermittent activities on behalf of recognized and legitimate not-for-profit or charitable organizations, an officer (other than an officer who works without compensation) or employee may not engage in employment outside the Company without the Company's approval. Any request for such approval should be directed to the CEO.

(h) Disciplinary Action A violation of the Code may result in disciplinary action, including removal from office or termination of directorship. Legal proceedings may also be commenced, if necessary, to recover the amount of any improper expenditures, any profits realized by the offending director and any financial harm sustained by the Company. In certain circumstances, violations of the Code will be reported by the Company to the applicable authority if such violations likely violate Philippine criminal laws.

A violation of the Code may result in disciplinary action, including removal from office or termination of employment. Legal proceedings may also be commenced, if necessary, to recover the amount of any improper expenditures, any profits realized by the offending SMO and any financial harm sustained by the Company. In certain circumstances, violations of the Code will be reported by the Company to the applicable authority if such violations likely violate Philippine criminal laws.

A violation of the Code may result in disciplinary action, including removal from office or termination of employment. Legal proceedings may also be commenced, if necessary, to recover the amount of any improper expenditures, any profits realized by the offending employee and any financial harm sustained by the Company. In certain circumstances, violations of the Code will be reported by the Company to the applicable authority if such violations likely violate Philippine criminal laws.

(i) Whistle Blower In order for the Code to be effective, directors must feel free to bring forth their good faith concerns without the fear of retribution or retaliation from the Company or any other director. The Company does not condone nor will it not tolerate any retaliation against an individual who lawfully and in good faith reports any misconduct or violations of the Code.

In order for the Code to be effective, SMO must feel free to bring forth their good faith concerns without the fear of retribution or retaliation from the Company or any other SMO. The Company does not condone nor will it not tolerate any retaliation against an individual who lawfully and in good faith reports any misconduct or violations of this Code. Further, an SMO who provides information regarding any conduct the SMO reasonably believes constitutes a violation

In order for this Code to be effective, employees must feel free to bring forth their good faith concerns without the fear of retribution or retaliation from the Company or any other employee. The Company does not condone nor will it not tolerate any retaliation against an individual who lawfully and in good faith reports any misconduct or violations of this Code. Further, an employee who provides information regarding any conduct the employee

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of the securities laws or financial fraud statutes (1) to any government authority, (2) by testimony or otherwise in any proceeding pending or about to be commenced concerning such violation or (3) to any person with supervisory authority over the employee or authorized by the Company to investigate such conduct, may not be discharged, demoted, discriminated or otherwise retaliated against based upon the information they have provided.

reasonably believes constitutes a violation of the securities laws or financial fraud statutes (1) to any government authority, (2) by testimony or otherwise in any proceeding pending or about to be commenced concerning such violation or (3) to any person with supervisory authority over the employee or authorized by the Company to investigate such conduct, may not be discharged, demoted, discriminated or otherwise retaliated against based upon the information they have provided.

(j) Conflict Resolution When practical and appropriate under the circumstances, and in order to protect the privacy of the persons involved, those individuals investigating a suspected violation will attempt to keep confidential the identity of the individuals who report a suspected violation or who participate in an investigation. There may be situations, however, when this information, or the identity of the individuals involved, must be disclosed as part of the investigation process.

When practical and appropriate under the circumstances, and in order to protect the privacy of the persons involved, those individuals investigating a suspected violation will attempt to keep confidential the identity of the individuals who report a suspected violation or who participate in an investigation. There may be situations, however, when this information, or the identity of the individuals involved, must be disclosed as part of the investigation process.

When practical and appropriate under the circumstances, and in order to protect the privacy of the persons involved, those individuals investigating a suspected violation will attempt to keep confidential the identity of the individuals who report a suspected violation or who participate in an investigation. There may be situations, however, when this information, or the identity of the individuals involved, must be disclosed as part of the investigation process.

2) Has the code of ethics or conduct been disseminated to all directors, senior management and employees? Yes. 3) Discuss how the Company implements and monitors compliance with the code of ethics or conduct. The CEO shall regularly report to the Audit Committee all matters or issues arising under the Code (including resolution of such matters or

issues) that are brought to his or her attention. The Chairman of the Audit Committee will provide a report to the Board of Directors, at least once per year, or more often if the circumstances dictate, that summarizes any matters arising under the Code.

Suspected violations will be investigated under the supervision of the Chairman and upon consultation with the Board, if necessary. Each

director, SMO and Employee of the Company is expected to cooperate in the investigation of reported or alleged violations. 4) Related Party Transactions (a) Policies and Procedures

Describe the company’s policies and procedures for the review, approval or ratification, monitoring and recording of related party transactions between and among the company and its parent, joint ventures, subsidiaries, associates, affiliates, substantial stockholders, officers and directors, including their spouses, children and dependent siblings and parents and of interlocking director relationships of members of the Board.

Related Party Transactions Policies and Procedures

(1) Parent Company (2) Joint Ventures (3) Subsidiaries (4) Entities Under Common Control (5) Substantial Stockholders (6) Officers including spouse/children/siblings/parents (7) Directors including spouse/children/siblings/parents (8) Interlocking director relationship of Board of Directors

Every probable Related Party Transaction (RPT) should be reported for evaluation to the Corporation’s Board of Directors in consultation with management and with the Corporation’s external advisor, as appropriate, to determine whether the transaction or relationship does, in fact, constitute a RPT requiring compliance with this policy. The Audit Committee shall be provided with the material facts of all new, existing, or proposed RPTs including the terms of the transaction, whether those terms are on arm’s length basis or if such transaction shall be deemed pre-approved as described below in “Pre-Approved Transactions.” It shall also determine whether to refer the RPT to the Board of Directors for consideration.

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In assessing a RPT, the Board of Directors shall consider such factors as it deems appropriate: including without limitation the following: (i) The business reasons for the Corporation to enter into the RPT; (ii) The commercial reasonableness of the terms of the RPT; (iii) The materiality of the RPT to the Corporation; (iv) Whether the terms of the RPT are fair to the Corporation and on the same basis as would apply if the transaction did not involve a Related Party; (v) The extent of the Related Party’s interest in the RPT; (vi) If applicable, the impact of the RPT on a non-employee director’s independence; and (vii) The actual or apparent conflict of interest of the Related Party participating in the RPT. In the event that the Corporation’s s Board of Directors becomes aware of a RPT that was not previously approved or ratified under this policy, the Board of Directors will consider whether the RPT should be ratified or rescinded or if any other action should be taken. No director shall participate in the evaluation or approval of any RPT for which he or she is a Related Party and will abstain from voting on the approval of the RPT, except that the director shall provide all material information concerning the RPT to the Board of Directors and may otherwise participate in some or all of the Board of Directors’ discussions if so requested by the Board of Directors. If a RPT will be ongoing, the Board of Directors may, in its discretion, establish guidelines for the management of the Corporation to follow in its ongoing dealings with the Related Party. Thereafter, the Board of Directors shall periodically review and assess ongoing relationships with the Related Party to see that they are in compliance with the Board of Directors’ guidelines. The following transactions will be deemed pre-approved by the Board of Directors. These transactions will not be reviewed by the Board of Directors and do not require approval or ratification: (1) transactions in the ordinary course of business that do not exceed Php 200,000.00 in any fiscal year; (2) transactions in which the Related Party’s interest is derived solely from the fact that he or she serves as director or another corporation or organization that is a party to the transaction; (3) transactions in which the Related Party’s interest is derived solely from his or her direct or indirect ownership of an entity (other than a general partnership) that is a party to the transaction when such ownership interest is less than ten percent (10%) of the equity interest of such entity; and (4) transactions available to all employees generally.

(b) Conflict of Interest

(i) Directors/Officers and 5% or more Shareholders Identify any actual or probable conflict of interest to which directors/officers/5% or more shareholders may be involved.

Details of Conflict of Interest (Actual or Probable)

Name of Director/s Joseph Augustin L. Tanco

Agreement* of the company with Comm & Sense owned by Mr. Joseph Augustin L. Tanco 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. *This agreement was reported to the Audit Committee and approved by the Board of Directors.

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Name of Officer/s Yolanda M. Bautista

Retainer Agreement* between the Company and Corporate Reference, Inc. (CRI) on the accounting and finance related work for the Company. Ms. Yolanda M. Bautista is the Chairman/President and Director of CRI. *This agreement was reported to the Audit Committee and approved by the Board of Directors.

Atty. Arsenio C. Cabrera, Jr.

Retainer Agreement* between the Company and Herrera Teehankee & Cabrera as legal counsel and corporate secretary of STI Holdings. Atty. Cabrera is a senior partner of the firm. *This agreement was reported to the Audit Committee and approved by the Board of Directors.

Name of Significant Shareholders STI Education Systems Group, Inc. (“STI ESG”)

Consultancy Agreement* between the Company and STI ESG on the rendering of consultancy services by the Company to STI ESG and the payment by STI ESG of the corresponding consultancy fee. *This agreement was reported to the Audit Committee and approved by the Board of Directors.

STI West Negros University

Consultancy Agreement * between the Company and STI WNU on the rendering of advisory services starting 01 January 2015 *This agreement was reported to the Audit Committee and approved by the Board of Directors.

Updated based on SEC Form 17-A for the Fiscal Year Ended 31 March 2015 filed with SEC and PSE on 14 July 2015

(ii) Mechanism

Describe the mechanism laid down to detect, determine and resolve any possible conflict of interest between the company and/or its group and their directors, officers and significant shareholders.

Directors/Officers/Significant Shareholders

Company The Company adheres to high levels of professional and ethical standards of conduct. The policy is adopted to avoid public perceptions and financial consequences detrimental to the Company arising from the misuse of an individual’s position or influence. It also provides the procedures to appropriately manage conflicts in accordance with the legal requirements and the goals of accountability and transparency in the organization. Although it is designed to govern standards of relationship in dealing with third parties, it is not designed to eliminate or exclude all forms of relationships and activities that might create a duality of interest. Its goal is to encourage transparency and careful deliberation in those cases where conflicts may arise. The employee having a conflict of interest must disclose all information material to it. There must be full disclosure. With all interests disclosed, the management shall determine whether the Company should take action or disclose the situation more broadly and solicit resolution of conflicts elevated to them. Disclosure of Conflict of Interest must be documented and reported to the Audit Committee.

Group The Group adheres to high levels of professional and ethical standards of conduct. The policy is adopted to avoid public perceptions and financial consequences detrimental to the Group arising from the misuse of an individual’s position or influence. It also provides the procedures to appropriately manage conflicts in accordance with the legal requirements and the goals of accountability and transparency in the organization. Although it is designed to govern standards of relationship in dealing with third parties, it is not designed to eliminate or exclude all forms of relationships and activities that might create a duality of interest. Its goal is to encourage transparency and careful deliberation in those cases where conflicts may arise. The Company having a conflict of interest must disclose all information material to it. There must be full disclosure. With all interests disclosed, the parent company, shall determine whether the Company having a conflict of interest should take action or disclose the situation more broadly and solicit resolution of conflicts elevated to them. Disclosure of Conflict of Interest must be documented and reported to the Audit Committee of the Parent Company.

5) Family, Commercial and Contractual Relations

(a) Indicate, if applicable, any relation of a family4, commercial, contractual or business nature that exists between the holders of significant equity (5% or more), to the extent that they are known to the Company:

4 Family relationship up to the fourth civil degree either by consanguinity or affinity.

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Names of Related Significant Shareholders Type of Relationship Brief Description of the Relationship

Eusebio H. Tanco (EHT) and Prudent Resources, Inc. EHT and Rescom Developers, Inc. EHT and Eujo Philippines, Inc. EHT and Capital Managers & Advisors, Inc. EHT and STI Education Services Group, Inc. EHT and Insurance Builders, Inc.

] ] ] Business ] ] ]

Director/President Director/Chairman Director/President Director/Chairman Director/Ex-Com Chairman Director/Chairman

(b) Indicate, if applicable, any relation of a commercial, contractual or business nature that exists between the holders of significant

equity (5% or more) and the company:

Names of Related Significant Shareholders Type of Relationship Brief Description of the Relationship

Eusebio H. Tanco and STI Holdings Prudent Resources, Inc. and STI Holdings Rescom Developers, Inc. and STI Holdings Eujo Philippines, Inc. and STI Holdings STI Education Services Group, Inc. and STI Holdings Insurance Builders, Inc. and STI Holdings

] ] ] ] Business ] ]

] ] ] ] Principal Stockholders ] ]

(c) Indicate any shareholder agreements that may impact on the control, ownership and strategic direction of the Company:

Name of Shareholders % of Capital Stock affected (Parties) Brief Description of the Transaction

Eusebio H. Tanco A total of forty percent (40%) equity in UNLAD

On 9 December 2014, STI Education Systems Holdings, Inc. served notices of default to the following:

1. Philippine Women’s University (“PWU”) under the (a) Omnibus Agreement dated 8 June 2012 executed by and between STI Holdings and PWU; and (b) Facility Agreement executed between PWU and Banco De Oro Unibank, Inc. (“BDO”) (now, STI Holdings as assignee and successor-in-interest of BDO); and

2. Unlad Resources Development Corporation (“Unlad”) under the Omnibus Agreement dated 8 June 2012 executed by and among STI Holdings, Attenborough Holdings Corporation (“AHC”) and Unlad.

Updated based on SEC Form 17-C filed with the SEC on 10 Dec 2014 and PSE on 9 Dec 2014

On 22 December 2014, STI Holdings Enforces Its Creditor Rights in PWU - In the exercise of its rights as creditor and subrogee of Banco De Oro to the P223 million debt (the “BDO Loan Facility”) of PWU, and as a consequence of the default of PWU and Unlad in the payment of their obligations to STI Holdings in the aggregate amount of P926 million [as of 7 December 2014], STI Holdings enforced the security arrangements under the BDO Loan Facility and acquired: (a) ¾ Membership in PWU, or 11 out of the 14 Members in PWU; and (b) ¾ of the seats in the Board of Trustees of PWU or 8 out of the 10 Trustees. Updated based on SEC Form 17-C filed with SEC on 23 December 2014 and PSE on 22 December 2014.

On 10 February 2015, STI Holdings filed with the Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial

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Court of Manila, the following:

(a) Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, entitled “STI Education Systems Holdings, Inc. vs. Philippine Women’s University”, over parcels of land covered by Transfer Certificate of Title Nos. 227390, 227391, 227392, 227393 and 227394 registered under the name of PWU where the school of PWU is located at Taft Avenue, Manila, and all improvements located thereon, which properties were mortgaged in favor of STI Holdings as security under the Facility Agreement executed between PWU and STI Holdings (as assignee of Banco de Oro Unibank, Inc.); and

(b) Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, entitled “STI Education Systems Holdings, Inc. vs. Philippine Women’s University” over parcels of land covered by: (i) Transfer Certificate of Title Nos. 227390, 227391, 227392, 227393 and 227394 registered under the name of PWU where the school of PWU is located at Taft Avenue, Manila, and (ii) Transfer Certificate of Title No. 112932 registered under the name of PWU located at P. Hidalgo Lim Street (formerly Indiana), Manila, and all improvements located thereon, which properties were mortgaged in favor of STI Holdings as security under the Omnibus Agreement dated 8 June 2012 executed between PWU and STI Holdings. Updated based on SEC Form 17-C filed with the SEC on 11 Feb 2015 and PSE on 10 Feb 2015

On 12 February 2015, STI Holdings filed with the Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Quezon City, the following: (a) Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, entitled “STI Education Systems Holdings, Inc. vs. Philippine Women’s University”, over parcels of land covered by Transfer Certificate of Title Nos. RT-71871(271024)PR-29615 and RT-71872(271025)PR-29616 registered under the name of Unlad Resources Development Corporation (“UNLAD”) located at Quezon City, and all improvements located thereon, which properties were mortgaged in favor of STI Holdings as security under the Facility Agreement executed between PWU, as debtor and STI Holdings (as assignee of Banco de Oro Unibank, Inc.), as creditor; and (b) Petition for the extra-judicial

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foreclosure of real estate mortgage under Act 3135, as amended, entitled “STI Education Systems Holdings, Inc. and Attenborough Holdings Corporation vs. Unlad Resources Development Corporation”, over parcels of land covered by Transfer Certificate of Title Nos. RT-79300(202647)PR-29042, RT-71871(271024)PR-29615 and RT-71872(271025)PR-29616 registered under the name of UNLAD located at Quezon City, and all improvements located thereon, which properties were mortgaged in favor of Attenborough Holdings Corporation (“AHC”) as security under the Omnibus Agreement dated 1 June 2012 executed among UNLAD, as debtor and STI Holdings and AHC, as creditors. Updated based on SEC Form 17-C filed with SEC on 16 February 2015 and PSE on 12 Feb 2015

On 18 February 2015, STI Educations Systems Holdings, Inc. filed the following: (1) Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, with the Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Davao City, entitled STI Education Systems Holdings, Inc. and Attenborough Holdings Corporation vs. Unlad Resources Development Corporation (the “Davao Petition”). The Davao Petition prays for the extra-judicial foreclosure of a parcel of land covered by Transfer Certificate of Title No. T-129545 registered under the name of Unlad Resources Development Corporation (“UNLAD”) located at Davao City, and all improvements located thereon, which properties were mortgaged in favor of STI Holdings and Attenborough Holdings Corporation (“AHC”) as security under the Omnibus Agreement dated 8 June 2012 executed among UNLAD, as debtor, and STI Holdings and AHC, as creditors. (2) Amended Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, with the Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Quezon City, entitled STI Education Systems Holdings, Inc. vs. Philippine Women’s University, Inc. and Unlad Resources Development Corporation (the “Quezon City Petition”). The Quezon City Petition prays for the extra-judicial foreclosure of parcels of land covered by Transfer Certificate of Title Nos. RT-71871(271024)PR-29615 and RT-71872(271025)PR-29616

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registered under the name of UNLAD located at Quezon City, and all improvements located thereon, which properties were mortgaged in favor of STI Holdings as security under the Facility Agreement executed between Philippine Women’s University (“PWU”), as debtor and STI Holdings (as assignee of Banco de Oro Unibank, Inc.), as creditor; The Davao Petition is the last petition initiated by STI Holdings, on its own or together with AHC, for the satisfaction of UNLAD’s obligations to STI Holdings and AHC in the aggregate amount of P294,073,466.68, and PWU’s obligations to STI Holdings in the aggregate amount of P702,446,308.08. Updated based on SEC Form 17-C filed with SEC on 23 February 2015 and PSE on 18 Feb 2015.

On 13 March 2015, STI Education Systems Holdings, Inc. ("STI Holdings") received a copy of the Decision dated 4 March 2015 (the "Decision") of Branch 47 of the Regional Trial Court of Manila (the "RTC") dismissing the election contest filed by Philippine Women's University ("PWU"), Dr. Helena Z. Benitez, and Dr. Jose Francisco B. Benitez docketed as Civil Case No. 15132872. The Election Contest was filed by PWU, Dr. Helena Z. Benitez, and Dr. Jose Francisco B. Benitez (the "Benitez Group") against Mr. Eusebio H. Tanco, Mr. Monico V. Jacob, Ms. Maria Vanessa Rose L. Tanco, Mr. Joseph Augustin L. Tanco, Mr. Martin K. Tanco, Ms. Yolanda M. Bautista, Mr. Jesli A. Lapus, Mr. Teodoro L. Locsin, Jr., Mr. Paolo Martin O. Bautista, Mr. Wilfred S. Racadio, and Mr. Arsenio C. Cabrera (the "Defendants") to annul the election of PWU Members and Trustees held on 22 December 2014 by virtue of the step-in rights of STI Holdings as assignee of BDO Unibank, Inc. In the Decision, the RTC dismissed the election contest filed by PWU and affirmed the position of STI Holdings that the composition of the PWU Members and Trustees have not been changed and the results of the supposed election held on 22 December 2014 were withdrawn. The RTC also noted that the Benitez Group never controverted the aforesaid allegations of STI Holdings when the opportunity was presented by the court in a clarificatory hearing due to the absence of Dr. Jose Francisco B. Benitez. As previously disclosed by STI Holdings on 5 January 2015, the withdrawal of the step-in rights in PWU was to protect the

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welfare of the PWU students and faculty considering that in the morning of said date (5 January 2015), the PWU community was confronted with a university that was locked down by the Benitez family. Updated based on SEC Form 17-C filed with SEC on 13 Mar 2015 and PSE on 12 Mar 2015.

On 18 March 2015, STI Education Systems Holdings, Inc. ("STI Holdings") was declared as the winning bidder in the auction sales involving the following Extra-Judicial Foreclosures: (1) Foreclosure No. 15-3285, entitled STI Holdings, Creditor/Mortgagee vs. Philippine Women's University (PWU), Debtor/Mortgagor, where STI Holdings was the winning bidder for properties along Taft Avenue, Malate, Manila where the PWU school is located covered by TCT Nos. 227390, 227391, 227392, 227393 and 227394 and registered under the name of PWU; and (2) Foreclosure No. 15-3284, entitled STI Holdings, Creditor/Mortgagee vs. PWU, Debtor/Mortgagor, where STI Holdings was the winning bidder for a property located at Pilar Hidalgo Lim Street, Malate, Manila covered by TCT No. 112932 registered in the name of PWU. Updated based on SEC Form 17-C filed with SEC on 20 Mar 2015 and PSE on 18 Mar 2015.

On 24 August 2015, STI Education Systems Holdings, Inc. (the Company") received an Order dated 20 August 2015 (“Order of Dismissal”) issued by Branch 46 of the Regional Trial Court of Manila (“Rehabilitation Court”), which dismissed the Petition for Involuntary Rehabilitation (“Petition”) of Philippine Women’s University (“PWU”). In addition, an Order dated 19 August 2015 was also issued by the Rehabilitation Court, which denied the Motion to Join Unlad Resources Development Corp. (“UNLAD”) as a party to the Petition. The Petition was filed by Dr. Helena Z. Benitez (“Dr. Benitez”), as an alleged creditor of PWU, to seek the suspension of all actions for the enforcement of claims against PWU, and rehabilitation of PWU. The Commencement/Stay Order was used to suspend the extra-judicial foreclosure proceedings initiated by the Company against PWU and UNLAD to satisfy their outstanding obligations in the amount of P926,146,885.86 as of 7 December 2014. The Rehabilitation Court dismissed the Petition on the following grounds: 1. The Petition, the Rehabilitation Plan and the attachments thereto contain

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materially false and misleading statements. The Rehabilitation Court materially considered the Rehabilitation Receiver’s Report (“Report”), which provided, among others, that PWU’s insolvency is due to debts not incurred in the ordinary course of business. The Report further stated that PWU entered into transactions outside the nature of PWU, as an educational institution. Moreover, acquisition of properties and agreements that appear for the school did not materialize and yet money was already spent causing PWU to be in debt. Lastly, unauthorized advances by its then President and unaccounted money for the school formed part of liabilities NOT in the ordinary course of business; and 2. The Petition is a sham filing intended to delay the enforcement of the rights of creditors. The Rehabilitation Court questioned the right of Dr. Benitez as an alleged creditor to file the Petition considering that she (a) is the “brand name, epitome and embodiment” of PWU, (b) has unsubstantiated claims and (c) claims against PWU are for personal expenses. The Rehabilitation Court was convinced that the Petition was executed for the primary purpose of delaying the enforcement of the rights of the Company as creditor. Under Section 4, Rule 1 of the Financial Rehabilitation Rules of Procedure, the Order of Dismissal is immediately executory. With the outright dismissal of the Rehabilitation case, the Petition(s) dated 18 February 2015 initiated by the Company against PWU and UNLAD for the extra judicial foreclosure of the real estate mortgages over their Quezon City and Davao properties can proceed in order to satisfy PWU and UNLAD's unpaid loan obligations to the Company in the amount of P926,146,885.86 as of 7 December 2014. Updated based on SEC Form 17-C filed with SEC on 25 Aug 2015 and PSE on 24 Aug 2015.

Pursuant to the Agreement, in Nov 2011, the Company acquired PWU’s debt from PWU’s creditor bank, together with all of the bank’s rights to the underlying collateral and security, for the amount of P223.5 million, on a without recourse basis. Likewise in accordance with the Agreement, the Company is obliged to extend: (1) a direct loan to PWU in the amount of PP26.5 million and (2) a loan to UNLAD in the amount of P198.0 million. The receivable from PWU and UNLAD aggregating to P250.0 million shall be secured by the PWU Indiana Property and PWU Taft Property while the loan to UNLAD shall be secured by the PWU

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Quezon City, UNLAD Davao Property and UNLAD Quezon City Property. The receivable from PWU and UNLAD 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 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.

6) Alternative Dispute Resolution Describe the alternative dispute resolution system adopted by the Company for the last three (3) years in amicably settling conflicts or

differences between the corporation and its stockholders, and the corporation and third parties, including regulatory authorities.

Alternative Dispute Resolution System

Corporation & Stockholders Appraisal Right – Shareholders shall have appraisal right or the right to dissent and demand payment of the fair value of their shares in the manner provided for under Sec 82 of the Corporation Code of the Philippines in case of the following (a) any amendment to the Articles of Incorporation, which has the effect of changing or restricting the rights of shareholder or any class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of the Corporation’s corporate existence; (b) of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Corporation Code; and (c) of merger or consolidation of the Corporation with another corporation.

Corporation & Third Parties STI Holdings combines court litigation with alternative dispute resolution options to resolve client or third party cases.

Corporation & Regulatory Authorities 1. Negotiation is the statement upon which all consensual ADR activity is established. It is a consensual procedure intended to allow parties to arrive at a mutually agreeable solution. Negotiation is intended to aim at compromise. 2. Mediation is a consensual process involving a neutral third party whose role is to facilitate resolution of the dispute. Both regulators and private individuals not involved in the regulatory process may act as mediators. In discharging its duties, the mediator must initially solicit the views of the parties on the nature of the dispute and its key issues. 3. Conciliation is closely related to mediation, but involves more formal processes. Here, the parties do not meet together, as the conciliator assumes the role of an intermediary or liaison. The conciliator’s primary task is to communicate each disputant’s position to the other, relay settlement options, and sometimes offer nonbinding recommendation in an effort to bring the sides closer to settlement.

C. BOARD MEETINGS AND ATTENDANCE 1) Are Board of Directors’ meetings scheduled before or at the beginning of the year? At the beginning the year 2) Attendance of Directors

Board Name Date of Election No of Meetings Held during the year

No. of Meetings Attended

%

Chairman Eusebio H. Tanco 17 March 2010 4 4 100%

Member Monico V. Jacob 17 March 2010 4 4 100%

Member Joseph Augustin L. Tanco 27 October 2010 4 4 100%

Member Ma. Vanessa Rose L. Tanco

27 October 2010 4 4 100%

Member Martin K. Tanco 19 December 2012 4 4 100%

Member Rainerio M. Borja 19 December 2012 4 3 75%

Member Paolo Martin O. Bautista 19 December 2012 4 4 100%

Independent Johnip G. Cua 19 December 2012 4 4 100%

Independent Ernest Lawrence L. Cu 19 December 2012 4 2 50%

Independent Jesli A. Lapus 21 March 2013 4 4 100%

Member Teodoro L. Locsin 2 February 2015 4 3 75%

Updated based on the Advisement letter on the Attendance of Board of Directors filed with SEC and PSE on 4 January 2016

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3) Do non-executive directors have a separate meeting during the year without the presence of any executive? If yes, how many times? The non-executive directors do not have separate meetings during the year without the presence of any executive. 4) Is the minimum quorum requirement for Board decisions set at two thirds of board members? Please explain The minimum quorum requirement for board decisions is set at the majority (50% + 1) of board members. 5) Access to Information (a) How many days in advance are board papers5 for board of directors meetings provided to the board?

The board papers are provided to the directors five (5) days before the date of the meeting.

(b) Do board members have independent access to Management and the Corporate Secretary? Yes.

(c) State the policy of the role of the company secretary. Does such role include assisting the Chairman in preparing the board

agenda, facilitating training of directors, keeping directors updated regarding any relevant statutory and regulatory changes, etc?

The Company Secretary shall be responsible for the safekeeping and preservation of the integrity of the minutes of the meetings of the Board and its committees as well as the other documents, records and information essential to the conduct of his duties and responsibilities to the Corporation as set out in the By-Laws. The Corporate Secretary also prepares the agenda in coordination with the Chairman and send out notices for all Shareholders and Board meetings. He ensures that the members of the Board have accurate information that will enable them to arrive at intelligent decisions on matters that require their approval and sees to it that all Board procedures, rules and regulations are strictly followed. Whenever required, the Corporate Secretary shall assist the Board in making business judgments in good faith and in the performance of its responsibilities and obligations. The Corporate Secretary is also responsible for submitting and filing all required periodic reports and disclosures of material events with the SEC and the Philippine Stock Exchange.

(d) Is the Company Secretary trained in legal, accountancy or company secretarial practices?

Yes.

(e) Committee Procedures

Disclose whether there is a procedure that Directors can avail of to enable them to get information necessary to be able to prepare in advance for the meetings of different committee: Yes No

Committee Details of the procedures

Executive Committee The Company’s Corporate Secretary sends the notice of each meeting confirming the date, time, venue and agenda to each member of the Committee at least two (2) working days prior to the date of the meeting. Full minutes of the proceedings of, and resolutions made during Committee meetings shall be kept by the Corporate Secretary. Draft minutes shall be sent to the Committee members for their comment. Notices, minutes, agenda and supporting papers will be made available to any Director upon request to the Corporate Secretary.

Audit Committee The Company’s Corporate Secretary sends the notice of each meeting confirming the date, time, venue and agenda to each member of the Committee at least two (2) working days prior to the date of the meeting. Full minutes of the proceedings of, and resolutions made during, Committee meetings, shall be kept by the Corporate Secretary. Draft minutes shall be sent to the Committee members for their comment. Notices, minutes, agenda and supporting papers will be made available to any Director upon request to the Corporate Secretary.

Nominations Committee The Company’s Corporate Secretary sends the notice of each meeting confirming the date, time, venue and agenda to each member of the Committee at least two (2) working days prior to the date of the meeting. Full minutes of the proceedings of, and resolutions made during, Committee meetings, shall be kept by the Corporate Secretary. Draft minutes shall be sent to the Committee members for their comment. Notices, minutes, agenda and supporting papers will be made available to any Director upon request to the Corporate Secretary.

Compliance Committee The Company’s Corporate Secretary sends the notice of each meeting confirming the date, time, venue, and agenda to each member of the Committee at least two (2) working days prior to the date of the meeting for the members to have a significant evaluation. Full minutes of the proceedings of,

5 Board papers consist of complete and adequate information about the matters to be taken in the board meeting. Information includes the background of

explanation on matters brought before the Board, disclosures, budgets, forecasts and internal financial documents.

/

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and resolutions made during, Committee meetings, shall be kept by the Corporate Secretary. Draft minutes shall be sent to the Committee members for their comment. Notices, minute, agenda and supporting papers will be made available to any Director upon request to the Corporate Secretary.

Compensation Committee The Company’s Corporate Secretary sends the notice of each meeting confirming the date, time, venue, and agenda to each member of the Committee at least two (2) working days prior to the date of the meeting for the members to have a significant evaluation. Full minutes of the proceedings of, and resolutions made during, Committee meetings, shall be kept by the Corporate Secretary. Draft minutes shall be sent to the Committee members for their comment. Notices, minutes, agenda and supporting papers will be made available to any Director upon request to the Corporate Secretary.

(6) External Advice Indicate whether or not a procedure exists whereby directors can receive external advice and, if so provide details:

Procedures Details

The Audit Committee may obtain external legal counsel or independent professional advice if it considers it necessary in the performance of its functions. It shall be provided with sufficient resources by the Company to discharge its duties. The Nominations Committee may secure independent expert advice as it may deem desirable or appropriate.

The Committees shall have full access to management, personnel and records for the purpose of performing their duties and responsibilities.

(7) Change/s in existing policies Indicate, if applicable, any change/s introduced by the Board of Directors (during its most recent term) on existing policies that may

have an effect on the business of the company and the reason/s for the change:

Existing Policies Changes Reason

There is no change in the existing policies of the Corporation

N/A N/A

D. REMUNERATION MATTERS

1) Remuneration process Disclose the process used for determining the remuneration of the CEO and four (4) most highly compensated management officers:

Process CEO Top 4 Highest Paid Management Officers

(1) Fixed remuneration N/A N/A

(2) Variable remuneration N/A N/A

(3) Per Diem allowance Board Resolution N/A

(4) Bonus N/A N/A

(5) Stock Option and other financial instruments

N/A N/A

(6) Other (specify) N/A N/A

For 2015, the 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. Remuneration Policy and Structure for Executive and Non-Executive Directors

Disclose the Company’s policy on remuneration and the structure of its compensation package. Explain how the compensation of Executive and Non-Executive Directors is calculated.

Remuneration Policy Structure of Compensation Packages

How Compensation is Calculated

Executive Directors N/A N/A N/A

Non-Executive Directors N/A N/A N/A

Do stockholders have the opportunity to approve the decision on total remuneration (fees, allowances, benefits-in-kind and other emoluments) of board of directors? Provide details for the last three (3) years. The corporation’s annual reports and information statements shall contain a clear and understandable disclosure of all fixed and variable compensation that may be paid, directly or indirectly, to its directors and top four (4) management officers during the preceding fiscal year.

Remuneration Scheme Date of Stockholders’ Approval

There is no remuneration scheme formulated yet for the Board N/A

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of Directors. They only receive per diems for every meeting they attended. The levels of remuneration of the Corporation should be sufficient to be able to attract and retain the services of qualified and competent directors and officers.

2) Aggregate remuneration

Complete the following table on the aggregate remuneration accrued during the most recent year:

Remuneration Item Executive Directors Non-Executive Directors (other than independent

directors)

Independent Directors

(1) Fixed remuneration N/A N/A N/A

(2) Variable remuneration N/A N/A N/A

(3) Per Diem allowance P264,705.90 (January to December 2015)

P123,529.42 (January to December 2015)

P123,529.42 (January to December 2015)

(4) Bonus N/A N/A N/A

(5) Stock Option and other financial instruments

N/A N/A N/A

(6) Other (specify) N/A N/A N/A

Total

Other Benefits Executive Directors Non-Executive Directors (other than independent

directors)


(1) Advances N/A N/A N/A

(2) Credit granted N/A N/A N/A

(3) Pension Plan/s Contributions

N/A N/A N/A

(4) Pension Plans, Obligations incurred

N/A N/A N/A

(5) Life Insurance Premium N/A N/A N/A

(6) Hospitalization Plan N/A N/A N/A

(7) Car Plan N/A N/A N/A

(8) Other (specify) N/A N/A N/A

Total N/A N/A N/A

The above-mentioned amendments were included in the SEC Form 17 A for the Fiscal Year Ending 31 March 2015 filed with the SEC and PSE on 14 July 2015.

3) Stock Rights, Options and Warrants

(a) Board of Directors

Complete the following table, on the members of the company’s Board of Directors who own or are entitled to stock rights, options or warrants over the company’s shares:

Director’s Name Number of Direct/Option/Rights/

Warrants

Number of Indirect Option/Rights/Warrants

Number of Equivalent

Shares

Total % from Capital Stock

Eusebio H. Tanco 0 0 0 0

Monico V. Jacob 0 0 0 0

Martin K. Tanco 0 0 0 0

Paolo Martin O. Bautista 0 0 0 0

Rainerio M. Borja 0 0 0 0

Ernest Lawrence L. Cu 0 0 0 0

Jesli A. Lapus 0 0 0 0

Joseph Augustin L. Tanco 0 0 0 0

Ma. Vanessa Rose L. Tanco 0 0 0 0

Johnip G. Cua 0 0 0 0

Teodoro L. Locsin 0 0 0 0

(b) Amendments of Incentive Programs Indicate any amendments and discontinuation of any incentive programs introduced, including the criteria used in the creation of the program. Disclose whether these are subject to approval during the Annual Stockholder’s Meeting:

Incentive Program Amendments Date of Stockholders’ Approval

Promotion is an upward movement across levels within a single rank but one has to meet certain criteria.

There are no amendments and discontinuation of any incentive programs introduced, including the

If there will be amendments in the incentive programs, these amendments will not be subject to approval during

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Merit increases are granted to employees who display commendable performance as reflected in the regular Performance Appraisal exercise for a given fiscal year. Bonuses are management-driven initiatives granted to employees depending on the overall business performance of the company. The granting of a bonus shall not be interpreted, in and of itself, as a permanent benefit.

criteria used in the creation of the program.

the Annual Stockholder’s Meeting.

4) Remuneration of Management Identify the five (5) members of management who are not at the same time executive directors and indicate the total remuneration received during the financial year:

Name of Officer/Position Total Remuneration

There is no member of management who is not at the same time an executive director.

N/A

E. BOARD COMMITTEES

1) Number of Members, Functions and Responsibilities Provide details on the number of members of each committee, its functions, key responsibilities and the power/authority delegated to it by the Board:

Committee No of Members

Committee Charter

Functions Key Responsibilities

Power

Executive Director

(ED)

Non-Executive Director

(NED)

Independent Director (ID)

Executive 4 1 - / In the absence of the Board, the Executive Committee shall act by majority vote of all its members on such specific matters within the competence of the Board of Directors.

The Executive Committee shall have and may exercise all the powers which may be lawfully delegated to them, subject to such limitations as may be provided by resolution of the Board.

All powers which may be lawfully delegated to them, subject to such limitations as may be provided by resolution of the Board.

Audit

2 - 2 / To assist the Board in fulfilling its oversight responsibility of the Company’s corporate governance processes relating to the: (1) FS and Financial reporting process; (2) Internal Control Systems; (3) Internal and External Audit; (4) Compliance by the Company with accounting standards, legal and regulatory

1.Financial Reporting and Disclosures; 2.Risk Management; 3. Internal Control; 4. Internal Audit; 5. External Audit;

Power to perform oversight financial and risk management; Power to improve the stakeholder’s confidence and corporate governance by bringing out better internal control systems, better monitoring and oversight, and better disclosures and quality of

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requirements; (5) Risk Management Policies and Processes and (6) Business practices and ethical standards.

internal and external reporting.

Nominations

1 2 1 / The Nominations Committee is responsible for reviewing the qualifications of the nominees for directors and preparing the Final List of Candidates.

The Nominations Committee is responsible for reviewing the qualifications of the nominees for directors and preparing the Final List of Candidates.

Power to pre-screen and shortlist candidates for election to the Board.

Compensation

4 - - / Establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of corporate officers and directors.

Review the structure and competitiveness of the Corporation’s executive officer compensation programs considering the following factors (1) the retention of executive officers (2) motivation of executive officers to achieve the Corporation’s business goals and (3) alignment of the interest of executive officers with the long-term interests of the corporation’s shareholders.

Power to establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of corporate officers and directors. Provide oversight over remuneration of senior management and other key personnel ensuring that compensation is consistent with the Corporation’s culture, strategy and control environment

2) Committee Members (a) Executive Committee (New)

Office Name Date of Appointment

No. of Meetings

Held


% Length of Service in the Committee

Chairman Eusebio H. Tanco 19 Dec. 2012 0 0 0 2 years and 10 months Member (ED) Monico V. Jacob 19 Dec. 2012 0 0 0 2 years and 10 months Member (ED) Yolanda M.

Bautista 19 Dec. 2012 0 0 0 2 years and 10 months

Member (ED) Martin K. Tanco 19 Dec. 2012 0 0 0 2 years and 10 months Member (NED) Rainerio M. Borja 19 Dec. 2012 0 0 0 2 years and 10 months Updated based on SEC Form 17 – C, Item 4. Election of Directors, Officers and Committee Members filed with SEC on 28 September 2015 and PSE on 25 September 2015

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(b) Audit Committee


No. of Meetings Held



Chairman (ID) Johnip G. Cua 19 Dec. 2012 1 1 100% 2 years and 10 months Member (ED) Martin K. Tanco 19 Dec. 2012 1 1 100% 2 years and 10 months Member (ED) Paolo Martin O.

Bautista 19 Dec. 2012 1 1 100% 2 years and 10 months

Member (ID) Ernest L. Cu 19 Dec. 2012 1 1 100% 2 years and 10 months Updated based on SEC Form 17 – C, Item 4. Election of Directors, Officers and Committee Members filed with SEC on 28 September 2015 and PSE on 25 September 2015 Disclose the profile or qualifications of the Audit Committee members. Audit Committee members shall preferably have accounting and finance backgrounds. Each member should have at least an adequate understanding or competence of most of the financial management systems and environment of STI Holdings. Describe the Audit Committee’s responsibility relative to the external auditor. The Audit Committee performs oversight functions over the external auditors. The Audit Committee should ensure that external auditors act independently and that they have unrestricted access to all records, properties and personnel to enable them to perform their respective audit functions. Prior to the commencement of the audit, the Audit Committee shall discuss with the external auditor the nature, scope and expenses of the audit, and ensure proper coordination if more than one audit firm is involved in the activity to secure proper coverage and minimize duplication of efforts. The Audit Committee shall evaluate and determine the non-audit work, if any, of the external auditor, and review periodically the non-audit fees paid to the external auditor in relation to their significance to the annual income of the external auditor and to the Corporation’s overall consultancy expenses. The Audit Committee shall disallow any non-audit work that may conflict with the duties of the external auditor as such or may pose a threat to his independence.

(c) Nomination Committee


No. of Meetings

Held



Chairman Eusebio H. Tanco 8 Dec. 2011 1 1 100% 3 years and 10 months Member (ID) Ernest Lawrence Cu 19 Dec. 2012 1 1 100% 2 years and 10 months Member (NED) Ma. Vanessa Rose L.

Tanco 19 Dec 2012 1 1 100% 2 years and 10 months

Member (NED) Rainerio M. Borja 19 Dec. 2012 1 1 100% 2 years and 10 months Updated based on SEC Form 17 – C, Item 4. Election of Directors, Officers and Committee Members filed with SEC on 28 September 2015 and PSE on 25 September 2015

(d) Remuneration/Compensation Committee (New)




% Length of Service in the

Committee

Chairman Eusebio H. Tanco

19 Dec. 2012 0 0 0 2 years and 10 months

Member (ED) Monico V. Jacob


Member Yolanda M. Bautista


Member (ED) Joseph Augustin L. Tanco


Updated based on SEC Form 17 – C, Item 4. Election of Directors, Officers and Committee Members filed with SEC on 28 September 2015 and PSE on 25 September 2015

(e) Compliance Committee





Committee

Chairman Arsenio C. Cabrera, Jr.

19 Dec. 2012 1 1 100% 2 years and 10 months

Member (ED) Monico V. Jacob


Member Yolanda M. 19 Dec. 2012 1 1 100% 2 years and 10

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Bautista months Member (ED) Paolo Martin

O. Bautista 19 Dec. 2012 1 1 100% 2 years and 10

months Updated based on SEC Form 17 – C, Item 4. Election of Directors, Officers and Committee Members filed with SEC on 28 September 2015 and PSE on 25 September 2015

3) Changes in Committee Members

Indicate any changes in committee membership that occurred during the year and the reason for the changes:

Name of Committee Name Reason

Executive No change N/A

Audit No change N/A Nomination No change N/A Remuneration/Compensation No change N/A Compliance No change N/A

4) Work Done and Issues Addressed Describe the work done by each committee and the significant issues addressed during the year

Name of Committee Work Done Issues Addressed

Audit Reviewed/Approved/Submitted the Final Draft FS for the Fiscal Year ending 31 March 2015 to the Board for approval on 13 July 2015

There were no issues addressed by the Audit Committee.

Nominations Pre-screened, shortlisted, and presented to the Board on 27 July 2015 for their acceptance and approval, the names of the candidates for election to the Board of Directors and Independent Directors in the Annual Meeting of the Stockholders held on 25 September 2015.

There were no issues addressed by the Nominations Committee.

Compliance STI Holdings is included in the list of top 50 Philippine-listed companies evaluated under the ASEAN Corporate Governance Scorecard in 2014. The top listed companies from six participating ASEAN member-countries were evaluated based on the international standards of corporate governance, including the five Organization for Economic Cooperation and Development principles of corporate governance.

The company is one of the 60 publicly-listed companies that have made it to the latest cut of the PSE Shariah-compliant firms, as of end-March 2015, following a screening of 260 listed firms assessed for their compliance with the rules, regulations, teachings, and values that govern the lives of Muslims.

There were no issues addressed by the Compliance Committee.

Remuneration N/A There were no issues addressed by the Remuneration Committee

Updated based on: Audit – SEC Form 17A for the FY ended 31 March 2015 filed with SEC and PSE on 14 July 2015; Nomination – SEC Form 17 –C, Item 9, Other Matters – Other Events filed with SEC and PSE on 27 July 2015; Compliance - SEC Form 17 – C, Item 9. Other Matters – Press Release “STI Holdings breaks P2 billion mark as enrollments drive more students” filed with SEC on 16 July 2015

5) Committee Program Provide a list of programs that each committee plans to undertake to address relevant issues in the improvement or enforcement of effective governance for the coming year.

Name of Committee Planned Programs Issues to be addressed

Executive To ensure that the Group is accurately identifying synergies and that it is implementing plans and utilizing common resources in the best interest of the Group as a whole and that no company in

Identification of synergies, plans and common resources of the group.

35

the Group is disadvantaged by transactions with another affiliate or by sharing of resources.

Audit To ensure that the internal audit examinations cover the evaluation of adequacy and effectiveness of controls encompassing the Company's governance, operations, information system, reliability and integrity of financial and operational information, effectiveness and efficiency of operations, safeguarding of assets and compliance with laws, rules and regulations.

Formulation and implementation of controls encompassing the company’s governance, operations, information system, reliability and integrity of financial and operational information.

Nomination To make sure that there is a mix of competent nominees, each of whom can add value and contribute independent judgment to the formulation of sound corporate strategies and policies.

Selection of qualified nominees to the Board for election by the stockholders in accordance with the By-laws, Manual of Corporate Governance and relevant laws, rules and regulations.

Compensation To ensure that a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of corporate officers and directors, and provide oversight over remuneration of senior management and other key personnel ensuring that compensation is consistent with the Corporation's culture, strategy and control environment.

Formulation of the Corporation's executive officer compensation programs considering the following factors: (i) the attraction and retention of executive officers; (ii) the motivation of executive officers to achieve the Corporation's business objectives, and (iii) the alignment of the interest of executive officers with the long-term interests of the Corporation's shareholders.

Compliance To ensure that all material information, corporate acts and development of events will be disclosed properly and that it shall have the oversight responsibility for matters of non-financial compliance, including the Company’s overall compliance programs, policies and procedures; significant legal or regulatory compliance exposure; and material reports or inquiries from government or regulatory agencies.

Overseeing of the Company’s compliance efforts with respect to relevant Company policies, the Company’s Code of Business Conduct, and other relevant laws and regulations and monitoring the implementation of compliance programs, policies and procedures that are designed to be responsive to the various compliance and regulatory risks facing the Company.

F. RISK MANAGEMENT SYSTEM

1) Disclose the following: (a) Overall risk management philosophy of the Company

Risk management is the process of making and carrying out decisions that will minimize the adverse effect of probable losses upon the Company. The Board of Directors should satisfy themselves that the risk management policies and procedures designed and implemented by the Company’s senior executives are consistent with the Company’s corporate strategy and risk appetite and are functioning as directed, and that necessary steps are taken to adopt a culture of risk-aware and risk-adjusted decision-making throughout the organization.

(b) A statement that the directors have reviewed the effectiveness of the risk management system and commenting on the adequacy thereof; A Certification on the adequacy and effectiveness of the risk management system signed by the President and CEO and Corporate Secretary.

(c) Period covered by the review; January 1 – December 31, 2012

(d) How often the risk management system is reviewed and the directors’ criteria for assessing its effectiveness; and The risk management systems are reviewed annually. The approval of the Board of Directors must be secured for any revisions thereto or for any case where external organizations may recommend a change. Recommendations by such external organizations are subject to the approval of the Audit Committee.

(e) Where no review was conducted during the year, an explanation why not.

36

The Risk Management System was reviewed, formulated and approved only in 2012.

2) Risk Policy (a) Company

Give a general description of the company’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

Risk Exposure Risk Management Policy Objective

Strategic Risk Risks that may have a positive or negative effect on achieving the corporation’s strategic purpose and objectives.

Effectiveness of process.

Corporate Risks Risks or opportunities that may affect achieving the objectives of the planned outcomes of performance identified through divisional operational plans, specific purpose plans, portfolio plans or programs of change.

To safeguard assets.

Operational Risks Risks or opportunities that affect plans cascading from the SBU operational plan and achieving the deliverables of projects.

To minimize the adverse effect of probable losses upon the Company

(b) Group

Give a general description of the Group’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

Risk Exposure Risk Management Policy Objective

Strategic Risk Risks that may have a positive or negative effect on achieving the corporation’s strategic purpose and objectives.

Effectiveness of process.

Corporate Risks Risks or opportunities that may affect achieving the objectives of the planned outcomes of performance identified through divisional operational plans, specific purpose plans, portfolio plans or programs of change.

To safeguard assets.

Operational Risks Risks or opportunities that affect plans cascading from the operational plan and achieving the deliverables of projects.

To minimize the adverse effect of probable losses upon the company

(c) Minority Shareholders Indicate the principal risk of the exercise of controlling shareholders’ voting power.

Risk to Minority Shareholders

Approval of a Related-party transaction

3) Control System Set Up

(a) Company Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the Company:

Risk Exposure Risk Assessment (Monitoring and Measurement Process)

Risk Management and Control (Structures, Procedures, Actions Taken)

Strategic Risk Risks at this level affect the decisions made regarding organizational priorities, resource allocation, and tolerance and acceptance of risk.

The various people and groups involved in the risk governance structure shall be given full access to management, personnel and records for the purpose of performing their duties and responsibilities. The Company shall provide these individuals and groups with sufficient resources to discharge their duties.

Corporate Risks At the program level, risks may eventually transition into ‘business as usual’ upon program completion.

The officers or employees concerned may obtain external legal counsel or independent professional advice if they

37

considers this necessary in the performance of their functions.

Operations Risk Risks at this level relate to a department’s systems, resources and processes.


(b) Group

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the Group:

Risk Exposure Risk Assessment (Monitoring and Measurement Process)

Risk Management and Control (Structures, Procedures, Actions Taken)

Strategic Risk Risks at this level affect the decisions made regarding the organizational priorities, resource allocation, and tolerance and acceptance of risk.


Corporate Risks At the program level, risks may eventually transition into ‘business as usual’ upon program completion.

The officers or employees concerned may obtain external legal counsel or independent professional advice if they consider this necessary in the performance of their functions.

Operations Risk Risks at this level relate to department’s systems, resources and processes.


(c) Committee Identify the committee or any other body of corporate governance in charge of laying down and supervising these control mechanisms, and give details of its functions:

Committee/Unit Control Mechanism Details of its Functions

Audit Committee 1. Rotation of Audit Partner; 2. Restrictions on non-audit services; 3. Continuous review of the effectiveness of corporate governance processes; 4. Maintain the integrity of the audit

process as a whole.

To assist the Board in fulfilling its oversight responsibility of the Company’s corporate governance processes relating to the: (1) FS and Financial reporting process; (2) Internal Control Systems; (3) Internal and External Audit; (4) Compliance by the Company with accounting standards, legal and regulatory requirements; (5) Risk Management Policies and Processes and (6) Business practices and ethical standards.

G. INTERNAL AUDIT AND CONTROL 1) Internal Control System

Disclose the following information pertaining to the internal control system of the Company: (a) Explain how the internal control system is defined for the company;

38

The Corporation shall have in place an independent internal audit function which shall be performed by an Internal Auditor, through which it’s Board, senior management, and stockholders shall be provided with reasonable assurance that its key organizational and procedural controls are effective, appropriate and complied with. The minimum internal control mechanisms for management’s operational responsibility shall center on the President, being ultimately accountable for the Corporation’s organizational and procedural controls. The scope and particulars of a system of effective organizational and procedural controls shall be based on the following factors: (1) the nature and complexity of the business and business culture; (2) the volume, size and complexity of transactions; (3) the degree of risk; (4) the centralization and delegation of authority; (5) the extent and effectiveness of information technology; and 6) the extent of regulatory compliance.

(b) A statement that the directors have reviewed the effectiveness of the internal control system and whether they consider them

effective and adequate; A Certification signed by the Compliance Officer and President of STI Holdings that the company has substantially adopted all the provisions of the Manual on Corporate Governance for 2012 was filed with the Securities and Exchange Commission on 2 January 2013.

(c) Period covered by the review; January 1 – December 21, 2014

(d) How often internal controls are reviewed and the directors’ criteria for assessing the effectiveness of the internal control system;

Internal controls are reviewed annually. The scope and particulars of a system of effective organizational and procedural controls shall be based on the following factors: (1) the nature and complexity of the business and business culture; (2) the volume, size and complexity of transactions; (3) the degree of risk; (4) the centralization and delegation of authority; (5) the extent and effectiveness of information technology; and 6) the extent of regulatory compliance.

(e) Where no review was conducted during the year, an explanation why not.

A review was conducted during the year.

2) Internal Audit

(a) Role, Scope and Internal Audit Function Give a general description of the role, scope of internal audit work and other details of the internal audit function.

Role Scope Indicate whether in-house or Outsource

Internal Audit Function

Name of Chief Internal

Auditor/Auditing Firm

Reporting process

The Internal Auditor is expected to support the corporate governance process of the Company.

The Internal Auditor shall: (1) perform oversight functions over the Company’s internal audit team; and (2) review the audit plan to ensure its conformity with the objectives of the Company.

Outsourced Mr. Jun Sagcal The Internal Auditor shall report to the Audit Committee (AC). He shall submit to the AC and Management an annual report on the internal audit department’s activities, responsibilities and performance relative to the audit plans and strategies as approved by the AC.

(b) Do the appointment and/or removal of the Internal Auditor or the accounting/auditing firm or corporation to which the internal

audit function is outsourced require the approval of the audit committee? Yes.

(c) Discuss the internal auditor’s reporting relationship with the audit committee. Does the internal auditor have direct and unfettered access to the board of directors and the audit committee and to all records, properties and personnel?

The Internal Auditor shall report to the Audit Committee (AC). He shall submit to the AC and Management an annual report on the

internal audit department’s activities, responsibilities and performance relative to the audit plans and strategies as approved by the

AC.

The Internal Auditor has direct, free and full access to all the Company's records, properties and personnel relevant to and required by his functions.

39

(d) Resignation, Re-assignment and Reasons

Disclose any resignation/s or re-assignment of the internal audit staff (including those employed by the third-party auditing firm) and the reason/s for them.

Name of Audit Staff Reason

There is no resignation from the audit staff. There is no resignation from the audit staff.

(e) Progress against Plans, Issues, Findings and Examination Trends

State the internal audit’s progress against plans, significant issues, significant findings and examination trends.

Progress Against Plans The Company was able to improve the effectiveness of the systems of internal controls and to align the internal audit activities in accordance with the international Standards on the Professional Practice of Internal Auditing.

Issues6 There are no compliance matters that arise from adopting different interpretations.

Findings7 There are no findings with concrete basis under the Company’s policies and rules.

Examination Trends The Company has developed a structure that facilitates healthy environment.

[The relationship among progress, plans, issues and findings should be viewed as an internal control review cycle which involves the following step-by-step activities:

1) Preparation of an audit plan inclusive of as timeline and milestones; 2) Conduct of examination based on the plan; 3) Evaluating of the progress in the implementation of the plan; 4) Documentation of issues and findings as a result of the examination; 5) Determination of the pervasive issues and findings (“examination trends”) based on single year result and/or year-to-

year results; 6) Conduct of the foregoing procedures on a regular basis.

(f) Audit Control Policies and Procedures Disclose all internal audit controls, policies and procedures that have been established by the company and the result of an assessment as to whether the established controls, policies and procedures have been implemented under the column “Implementation”.

Policies and procedures Implementation

The integrity of the Company's financial statements and the financial reporting process; Implemented

The appointment, remuneration, qualifications, independence and performance of the internal auditors and the integrity of the audit process as a whole;

Implemented

The effectiveness of the systems of internal control and the risk management process; Implemented

The performance and leadership of the internal audit function; Implemented

The company's compliance with applicable legal, regulatory and corporate governance requirements; and

Implemented

The preparation of year-end report of the Committee for approval of the Board. Implemented

(g) Mechanism and Safeguards State the mechanism established by the company to safeguard the independence of the auditors, financial analysts, investment banks and rating agencies (example, restrictions on trading in the company’s shares and imposition of internal approval procedures for these transactions, limitation on the non-audit services that an external auditor may provide to the company):

Auditors (Internal and External)

Financial Analysts Investment Banks Rating Agencies

Established an Audit Committee




Rotation of Audit Partner Enhancement of the value of organization

Enhancement of the value of organization

Continuous review of the effectiveness of corporate governance processes

Restrictions on non-audit services

Ensure the integrity of the Company’s Financial Statements

Ensure the integrity of the Company’s Financial Statements

Maintain the integrity of the audit process as a whole

(h) State the officers (preferably the Chairman and the CEO) who will have to attest to the company’s full compliance with the SEC

Code of Corporate Governance. Such confirmation must state that all directors, officers and employees of the Company have been given proper instruction on their respective duties as mandated by the Code and that internal mechanisms are in place to ensure compliance.

6 “Issues” are compliance matters that arise from adopting different interpretations. 7 “Findings” are those with concrete basis under the Company’s policies and rules

40

Mr. Eusebio H. Tanco - Chairman Mr. Monico V. Jacob - President and CEO

H. ROLE OF STAKEHOLDERS 1) Disclose the company’s policy and activities relative to the following:

Policy Activities

Customers’ welfare 1. The Company's directors, officers and employees shall conduct themselves in a fair, ethical, legal and honest manner. Trust and integrity are the cornerstones of all of the business dealings and relationships these individuals establish with stockholders, customers, vendors, creditors, competitors, government officials, communities, the media and the general public, as well as each other. 2. The Company's directors, officers and employees shall not engage in conduct or activity that could raise questions as to the Company's honesty or reputation or otherwise cause embarrassment to the Company or its stakeholders.

Filling up of survey forms

Supplier/Contractor selection practice To achieve cost-effective purchases for the advantage/optimum benefit of the organization; To ensure that the right quality and quantity of materials, supplies, properties, and/or services are available at the right time and place to meet the needs of the organization; and, To preserve the integrity of the purchasing/selection process

Purchase of materials, supplies, properties and or services

Environmentally friendly value-chain The company, through its subsidiaries, has in place an environment – related programs. Following the success of the previous advocacy runs for the Pasig River, Team STI once again unfolded its solid support to the environmental cause as it sends the largest school contingent

1. ABS-CBN Foundation's Kapit Bisig para sa Ilog Pasig (KBPIP) run on September 30, 2012 in Quezon City. Dubbed "09.30.2012 Run, Ride & Roll for the Pasig River," - STI Sends Largest Contingent to Run for Pasig.

Community interaction The Company, through its subsidiary, has in place a community involvement program. STI Foundation’s core programs of advocacy provide educational opportunities to public school teachers, students, and disadvantaged youths. Beneath its extensive operations, it takes pride in changing landscapes. It is only in truly transforming the lives of many that STI Foundation’s achievements are made significant.

1. "Driving Education Where IT Matters" aims to contribute to nation building and economic development of the country by providing applicable ICT-enhanced training to the youth. Using a “classroom on wheels” model, the project will be able to visit schools nationwide and train students for free. 2. STI Foundation partnered with the National Youth Commission (NYC) and the Department of Education (DepEd) for the Voice of the Youth National Oratorical Competition (VOTY), a nationwide competition participated by fourth year high school students from almost 600 public and private schools. This advocacy serves as platform to encourage students to fluently express their views in English for global competency, as well as to develop critical thinking through the art of public speaking. 3. Beyond education, the Foundation also focuses its efforts in community and civic engagement. STI Foundation forged a partnership with GMA 7’s leading variety show Eat Bulaga for the Plastic ni Juan: Sa Plastic at Basura may DalangPag-asa. A proactive project that does not only aim to provide public school students with recycled arm chairs, but is also geared towards addressing the waste management issues of various

41

communities through the collection of plastic wastes at the barangay level. Collected plastic wastes are recycled into mono block armchairs and donated to select public schools. This plastic collection drive was implemented with the support of 16 STI campuses in Metro Manila.

Anti-corruption programmes and procedures?

Among other restrictions, the Anti-Graft and Corrupt Practices Act prohibits companies from paying or offering to pay anything of value to any government official, government employee, political party or political candidate to obtain or retain business or to influence a person working in an official capacity. Violations of this act can result in significant penalties to the Company and any individual involved.

The company has no activity yet on Anti-corruption.

Safeguarding creditors’ rights The Company's directors, officers and employees shall conduct themselves in a fair, ethical, legal and honest manner. Trust and integrity are the cornerstones of all of the business dealings and relationships these individuals establish with stockholders, customers, vendors, creditors, competitors, government officials, communities, the media and the general public, as well as each other.

The Company's directors, officers and employees shall not engage in conduct or activity that could raise questions as to the Company's honesty or reputation or otherwise cause embarrassment to the Company or its stakeholders.

The company has no activity yet on safeguarding creditors’ rights.

2) Does the company have a separate corporate responsibility (CR) report/section or sustainability report/section?

Yes. 3) Performance-enhancing mechanisms for employee participating.

(a) What are the company’s policy for its employees’ safety, health and welfare?

Employees are provided medical health card/insurance.

(b) Show data relating to health, safety and welfare of its employees. 100% of our employees are covered with health, safety and welfare in the company.

(c) State the company’s training and development programs for its employees. Show the data.

The Company, through its subsidiaries and associate companies, has in place training and development programs for its employees.

The Faculty members are distinguished professionals in the fields of Information Technology, Engineering, Education, Business

Management and Healthcare. They are recognized in their fields of profession nationwide.

To assist the faculty members in their profession and to continuously improve their technical and instructional competencies and

skills, our subsidiaries offers a broad range of academic development programs and activities. These programs aim to improve the

quality of faculty, academic instruction, academic services, and the quality of students. These programs focus on three areas:

Faculty Development; Instructional Development and Organizational Development

(d) State the company’s reward/compensation policy that accounts for the performance of the company beyond short-term financial measures. The Company implements a performance evaluation policy. Every employee faces performance evaluations in their workplace. Managers base these evaluations on the goals and performance of the employee. Together, the manager and employee create performance measures to use in future evaluations. This allows an employee to understand exactly how his performance will be judged.

4) What are the company’s procedures for handling complaints by employees concerning illegal (including corruption) and unethical behavior? Explain how employees are protected from retaliation.

42

In order for the Code to be effective, employees must feel free to bring forth their good faith concerns without the fear of retribution or retaliation from the Company or any other employee. The Company does not condone nor will it not tolerate any retaliation against an individual who lawfully and in good faith reports any misconduct or violations of this Code. Further, an employee who provides information regarding any conduct the employee reasonably believes constitutes a violation of the securities laws or financial fraud statutes (1) to any government authority, (2) by testimony or otherwise in any proceeding pending or about to be commenced concerning such violation or (3) to any person with supervisory authority over the employee or authorized by the Company to investigate such conduct, may not be discharged, demoted, discriminated or otherwise retaliated against based upon the information they have provided. When practical and appropriate under the circumstances, and in order to protect the privacy of the persons involved, those individuals investigating a suspected violation will attempt to keep confidential the identity of the individuals who report a suspected violation or who participates in an investigation. There may be situations, however, when this information, or the identity of the individuals involved, must be disclosed as part of the investigation process.

I. DISCLOSURE AND TRANSPARENCY 1) Ownership Structure

(a) Holding 5% shareholding or more

Shareholder Number of Shares Percent Beneficial Owner

Eusebio H. Tanco 1,449,531,875 14.635% Eusebio H. Tanco

Prudent Resources, Inc. 1,614,264,964 16.30% Various Beneficial Owners

Rescom Developers, Inc. 795,265,934 8.03% Various Beneficial Owners

Eujo Philippines, Inc. 763,873,130 7.71% Various Beneficial Owners

Insurance Builders, Inc. 629,776,992 6.36% Various Beneficial Owners

STI Education Services Group, Inc.

502,307,895 5.07% Various Beneficial Owners

Morgan Stanley Investment Management Corporation

816,264,000 8.24% Morgan Stanley Investment Management Corporation

Dunross Investment Ltd. 528,522,000 5.34% Dunross Investment Ltd.

Updated based on SEC Form 23-B filed with SEC and PSE on 9 Nov 2015 for Insurance Builders, Inc.; SEC Form 23-B filed with SEC and PSE on 16 Nov 2015, 22 and 23 Dec 2015 for Mr. E. H. Tanco.

Name of Senior Management Number of Direct Shares

Number of Indirect shares/through (name of record owner)

% of Capital Stock

Monico V. Jacob 1 33,784,056/Venture Securities, Inc. 0.34%

Yolanda M. Bautista 1 5,000,000/Venture Securities, Inc. 0.05%

Joseph Augustin L. Tanco 1 2,000,000/Venture Securities, Inc. 0.02%

Paulo Martin O. Bautista - 3,250,000/Venture Securities, Inc. 0.03%

Arsenio C. Cabrera, Jr. - 6,500,000/Venture Securities, Inc. 0.065%

2) Does the Annual Report disclose the following:

Key risks Yes

Corporate Objective Yes

Financial performance indicators Yes

Non-Financial performance indicators Yes

Dividend policy Yes

Details of whistle-blowing policy No, filed under a separate report

Biographical details (at least age, qualifications, date of first appointment, relevant experience, and any other directorships of listed companies) of directors/commissioners

Yes

Training and/or continuing education programme attended by each director/commissioner No, filed under a separate report

Number of board of directors/commissioners meetings held during the year No, filed under a separate report

Attendance details of each director/commissioners in respect of meetings held No, filed under a separate report

Details of remuneration of the CEO and each member of the board of directors/commissioners Yes

3) External Auditor’s fee

Name of Auditor Audit Fee Non-audit Fee

SGV & Co. P850,000.00 (2014-15) P102,000.00 (2015-2015)

The above-mentioned amendments were included in the SEC Form 17 A for the Fiscal Year Ending 31 March 2015 filed with the SEC and PSE on 14 July 2015.) 4) Medium of Communication

43

List down the mode/s of communication that the company is using for dissemination information.

(a) Email; (b) Website (c) General Assemblies

5) Date of release of audited financial report: 105 days after the fiscal year or on or before 14 July 2015 6) Company Website Does the company have a website disclosing up-to-date information about the following?

Business operations Yes

Financial Statements/reports (current and prior years) Yes

Materials provided in briefings to analysts and media Yes

Shareholding Structure Yes

Group Corporate Structure Yes

Downloadable annual report Yes

Notice of AGM and/or EGM Yes

Company’s constitution (company’s by-laws, memorandum and articles of association) Yes

Should any of the foregoing information be not disclosed, please indicate reason thereto.

All the foregoing information is disclosed.

7) Disclosure of RPT

RPT Relationship Nature Value

*Philippine Women’s University (PWU) – an entity under common management

Affiliate Company *Entities under common management until November 14, 2014.

Outstanding Receivable – Principal: To be settled by way of assignment of investment in shares Interest

P250,000,000

12,651,546

*UNLAD Resources Development Corporation (UNLAD) an entity under common management



198,000,000

3,327,389

STI ESG Subsidiary 2015: Advisory Fee – 30 days upon receipt of billings; Noninterest-bearing Reimbursement – 30 days upon receipt of billings; Noninterest-bearing 2014: Reimbursement

14,400,000

5,838,668

(10,248,915)

West Negros University (Now: STI West Negros University)

Subsidiary

2015: Advisory Fee – 30 days upon receipt of billings; Noninterest-bearing Subscription Payable – Noninterest bearing Deposit for future stock subscription Assignment of liability

900,000

45,227,650

179,726,350

(7,321,342)

Attenborough Holdings Corporation

Subsidiary

2015: Advances – within one (1) year; Noninterest-bearing Subscription payable – Noninterest-bearing Officers and Employees subscription

1,403,186

64,000,000

179,726,350

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Assignment of liability

(7,321,342)

Officers and Employees

Employees Advances to officers and employees – Liquidated within one (1) month; Noninterest-bearing Outstanding Receivable

( 2015) 1,884,356 ( 2014) 728,167

(2015) 1,283,875 (2014) 270,909

*Entities under common management until November 14, 2014. The above-mentioned amendments were included in the SEC Form 17 A for the Fiscal Year Ending 31 March 2015 filed with the SEC and PSE on 14 July 2015.

When RPTs are involved, what processes are in place to address them in the manner that will safeguard the interest of the company and in particular of its minority shareholders and other stakeholders?

Related party transactions are accounted at arm’s length prices or on terms similar to those reflected to those offered to non-related entities in an economically comparable market, so that there is no question of a conflict of interest.

J. RIGHTS OF STOCKHOLDERS 1) Right to participate effectively in and vote in Annual/Special Stockholders’ Meetings

(a) Quorum Give details on the quorum required to convene the Annual/Special Stockholders’ Meeting as set forth in its By-Laws

Quorum Required Stockholders owning a majority of all the shares of the capital stock of the Corporation present or by proxy and entitled to vote, shall form a quorum for the transaction of business; subject thereto and except as otherwise required by law, the Articles of Incorporation or By-Laws, the vote of a majority of all the shares present or represented at any meeting of the stockholders shall be sufficient but necessary for the passing of any resolution.

(b) System Used to Approve Corporate Acts Explain the system used to approve corporate acts

System Used By Voting

Description The By-Laws provide that the voting must be by ballot or viva voce in the event no contest is raised at the sole discretion of the Chairman of the meeting. Moreover, “every question [except the election of Director] submitted to a meeting shall be decided in the first instance by a show of hands, and in the case of an equality of votes, whether for the election of Directors, or otherwise, the same shall be decided by drawing of lots or in such other lawful manner as may be agreed upon in such meeting. Any person may demand a poll, and such poll shall be taken in such manner as the Chairman of the meeting directs.” The Secretary of the meeting, upon motion duly made and seconded, is instructed to count all votes represented at the meeting in favor of the nominees. Cumulative voting shall be followed.

(c) Stockholders’ Rights

List any Stockholders’ Rights concerning Annual/Special Stockholders’ Meeting that differ from those laid down in the Corporation Code.

Stockholders’ Rights under The Corporation Code Stockholders’ Rights not in The Corporation Code

Right to attend and vote in person or by proxy at stockholders’ meetings

There is no other stockholders’ right not in the Corporation Code

Right to elect and remove directors

Right to approve certain corporate acts

Right to compel the calling of meetings of stockholders when for any cause there is no person authorized to call a meeting

Right to issuance of certificate of stock or other evidence of stock ownership and be registered as shareholder

Right to receive dividends when declared

Right to participate in the distribution of corporate assets upon dissolution

Right to transfer of stock on the corporate books

Right to inspect corporate books and records

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Right to be furnished the most recent financial statement upon request and to receive a financial report of the corporation’s operations

Right to bring individual and representative or derivative suits

Right to recover stock unlawfully sold for delinquency

Right to enter into a voting trust agreement

Right to demand payment of the value of his shares and withdraw from the corporation in certain cases; and

Right to have the corporation voluntarily dissolved

Dividends

Declaration Date Record Date Payment Date

28 June 2010 2 August 2010 27 August 2010

13 October 2011 11 November 2011 8 December 2011

5 December 2012 19 December 2012 28 December 2012

4 September 2013 18 September 2013 30 September 2013

26 September 2014 17 October 2014 11 November 2014


Updated based on SEC Form 17-C - Cash Dividend filed with SEC on 28 September 2015 and PSE on 25 September 2015.

(d) Stockholders’ Participation 1. State, if any, the measures adopted to promote stockholder participation in the Annual/Special Stockholders’ Meeting, including

the procedure on how stockholders and other parties interested may communicate directly with the Chairman of the Board, individual directors or board committees. Include in the discussion the steps the Board has taken to solicit and understand the views of the stockholders as well as procedures for putting forward proposals at stockholders’ meetings.

2. Measures Adopted 3. Communication Procedure

4. Each common share entitles the holder to one vote. At each meeting of the stockholders, each stockholder entitled to vote on a particular question or matter shall be entitled to vote for each share of stock standing in his name in the books of the Corporation as of record date.

5. Definitive Information Statement sent to the stockholders.

6.Website – www.stiholdings.com 7. The stockholders can send their inquiries to our company email address: [email protected]

8. State the company policy of asking shareholders to actively participate in corporate decisions regarding:

a. Amendments to the company’s constitution

The By-Laws may be amended or repealed by the affirmative vote of at least a majority of the Board of Directors and the stockholders representing a majority of the outstanding capital stock at any stockholders’ meeting called for that purpose. However, the power to amend, modify, repeal or adopt new by-laws may be delegated to the Board of Directors by the affirmative vote of the stockholders representing not less than two-thirds of the outstanding capital stock; provided, however, that any such delegation of powers to the Board of Directors to amend, repeal or adopt new by-laws may be revoked only by the vote of stockholders representing a majority of the outstanding capital stock at a regular or special meeting. Any amendments to the Company’s constitution are presented in the Definitive Information Statement. Every question (except the election of Directors) submitted to a meeting shall be decided in the first instance by a show of hands, and in the case of an equality of votes, whether for the election of Directors, or otherwise, the same shall be decided by drawing of lots or in such other lawful manner as may be agreed upon in such meeting. Any person may demand a poll, and such poll shall be taken in such manner as the Chairman of the meeting directs.

b. Authorization of additional shares

The authorization of additional shares is presented in the Definitive Information Statement which is sent to the stockholders at least 15 business days prior to the meeting. The authorization of additional shares shall be decided at the Annual or Special Stockholders’ meeting, wherein the stockholders are being asked to decide in the first instance by a show of hands, and in the case of an equality of votes, whether for the election of Directors, or otherwise, the same shall be decided by drawing of lots or in such other lawful manner as may be agreed upon in such meeting. Any person may demand a poll, and such poll shall be taken in such manner as the Chairman of the meeting directs.

c. Transfer of all or substantially all assets, which in effect results in the sale of the company

The transfer of all or substantially all assets, which in effect results in the sale of the Company is presented in the Definitive Information Statement which is sent to the stockholders at least 15 business days prior to the meeting. Said transfer shall be decided at the Annual or Special Stockholders’ meeting, wherein the stockholders are being asked to decide in the first instance by a show of hands, and in the case of an equality of votes, whether for the election of

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Directors, or otherwise, the same shall be decided by drawing of lots or in such other lawful manner as may be agreed upon in such meeting. Any person may demand a poll, and such poll shall be taken in such manner as the Chairman of the meeting directs.

9. Does the company observe a minimum of 21 business days for giving out of notices to the AGM where items to be resolved by shareholders are taken up? 15 business days only

a. Date of Sending out notices: No Special Stockholders’ Meeting for 2015;

Annual Stockholders’ Meeting – 4 September 2015 b. Date of the Annual/Special Stockholders’ Meeting: No Special Stockholders’ meeting for 2015;

Annual Stockholders’ Meeting – 25 September 2015

10. State, if any, questions and answers during the Annual/Special Stockholders’ Meeting None 11. Result of Annual/Special Stockholders’ Meeting’s Resolutions

12. Resolution 13. Approving 14. Dissenting 15. Abstaining

Special Stockholders’ Meeting (No Special Stockholders’ Meeting held for 2015) (No Special Stockholders’ Meeting held for 2014) (No Special Stockholders’ Meeting held for 2013) (Special Stockholders’ Meeting held on 13 August 2012)

16. Approval of Issuance and Listing of Private Placement Shares

17. N/A 18. N/A 19. N/A

20.Waiver of the requirement to conduct a rights or public offering in connection with the Private Placement Shares

21. N/A 22. N/A 23. N/A

24. Approval of the Share Swap transaction between the Corporation and the shareholders of STI ESG and the issuance of the Share Swap Shares

25. N/A 26. N/A 27. N/A

28. Waiver of the requirement to conduct a rights or public offering in connection with the Share Swap Shares

29. N/A 30. N/A 31. N/A

32. Increase in Authorized Capital Stock to 10 Billion Shares with an aggregate par value of P 5 Billion

33. N/A 34. N/A 35. N/A

36. Change of Corporate Name to STI Education Systems Holdings, Inc.

37. N/A 38. N/A 39. N/A

40. Approval of Follow-On Offering 41. N/A 42. N/A 43. N/A

Annual Stockholders’ Meeting (25 September 2015) Annual Stockholders’ Meeting (26 September 2014)

44. Approval of Management Report for the FY ended 31 March 2015 Approval of Management Report for the FY ended 31 March 2014

45. 73.98% 66.00%

46. N/A 47. N/A

45. Approval of Audited Financial Statements for FY ending 31 March 2015 Approval of Audited Financial Statements for FY ending 31 March 2014

46. 73.98% 66.00%

47. N/A 48. N/A

49. Ratification of all legal acts, resolutions and proceedings of the Board of Directors and of Management, done in the ordinary course of business from 26 September 2014 to 25 September 2015 Ratification of Acts of the Board of Directors

50. 73.98% 66.00%

51. N/A 52. N/A

53. Ratification of: (a) The execution, delivery and performance of the Comprehensive Surety Agreement with China Banking Corporation as security for the obligations of STI West Negros University, namely: (1) A credit line of P5 million; (2) A long-term loan of P300 million; and, (3) Bridge financing of P20 million, (b) The execution, delivery and performance, as a conforming party of the Amendment and Supplemental Agreement to the P3 Billion Corporate Notes Facility Agreement (the Agreement) by and among STI Education Services Group, Inc., STI West Negros University Corporation and China Banking Corporation,

54. 73.98% 55. N/A 56. N/A

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and; (c) The authority of Mr. Monico V. Jacob, the President and CEO of the Corporation to execute and deliver the Comprehensive Surety Agreement and the Agreement on behalf of the Corporation.

57. Appointment of SGV & Co. as external auditor Appointment of SGV & Co. as external auditor

58. 73.98% 66.00%

59. N/A 60. N/A

Minutes of ASM posted in STI Holdings’ website on 29 September 2015 – www.stiholdings.com Minutes of ASM posted in STI Holdings’ website on 2 October 2014 – www.stiholdings.com

61. Date of publishing of the result of the votes taken during the most recent AGM for all resolutions: The results of the Annual Stockholders’ meeting in a current report (SEC Form 17-C) shall be disclosed to the Commission within five

(5) days after said meeting and to the Philippine Stock Exchange right after the Organizational meeting of the Board of Directors. (e) Modifications

State if any, the modifications made in the Annual/Special Stockholders’ Meeting regulations during the most recent year and the reason for such modification:

Modifications Reason for Modification

There is no modification made in the Annual Meeting regulations during the most recent year

N/A

(f) Stockholders’ Attendance

(h) Details of attendance in the Annual/Special stockholders’ Meeting Held:

Type of Meeting

Names of Board members/Officers present

Date of Meeting

Voting Procedure

(by poll, show of hands,

etc.)

% of SH Attending in

Person

% of SH in proxy

Total % of SH attendance

Annual Eusebio H. Tanco Monico V. Jacob Joseph Augustin L. Tanco Ma. Vanessa Rose L. Tanco Martin K. Tanco Paulo Martin O. Bautista Teodoro L. Locsin, Jr. Rainerio M. Borja Jesli A. Lapus – ID Johnip G. Cua – ID Ernest Lawrence L. Cu – ID Officers: Yolanda M. Bautista -Treasurer Arsenio C. Cabrera – Corporate Secretary Ana Carmina S. Herrera – Asst. Corporate Secretary _________________________ Eusebio H. Tanco Monico V. Jacob Joseph Augustin L. Tanco Ma. Vanessa Rose L. Tanco Martin K. Tanco Jesli A. Lapus – ID Johnip G. Cua - ID Officers: Yolanda M. Bautista -Treasurer Arsenio C. Cabrera – Corporate Secretary Ana Carmina S. Herrera – Asst. Corporate Secretary

25 September 2015 ____________ 26 Sept 2014

Show of hands

13.66%

____________ 15.22%

60.32%

_________ 50.78%

73.98%

___________ 66.00%

Special N/A N/A N/A N/A N/A N/A

http://www.stiholdings.com/

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Minutes of ASM posted in STI Holdings’ website on 29 September 2015 – www.stiholdings.com Minutes of ASM posted in STI Holdings’ website on 2 Oct 2014 – www.stiholdings.com

(ii) Does the Company appoint an independent party (inspectors) to count and/or validate the votes at the ASM/SSMs? Yes.

The Secretary of the meeting, upon motion duly made and seconded, is instructed to count all votes represented at the meeting

with the assistance of SGV, the external auditor of the Company.

(iii) Do the company’s common shares carry one vote for one share? If not, disclose and give reasons for any divergence to this

standard. Where the Company has more than one class of shares, describe the voting rights attached to each class of shares.

The Company has only common shares that carry one vote for one share.

(g) Proxy Voting Policies

State the policies followed by the company regarding proxy voting in the Annual/Special Stockholders’ Meeting.

Company’s Policies

Execution and acceptance of proxies The instrument appointing a proxy shall be signed in writing by the appointer. If such appointer is a corporation, its proxy will be signed by the proper corporate officers using specimen signatures on file with the Corporate Secretary or Transfer Agent. No special form of proxy shall be required.

Notary The proxy form for local residents is not required to be notarized.

Submission of Proxy All proxies shall be submitted to the Secretary of the Corporation for validation at such dates as the Board of Directors may fix, which in no case shall be less than five (5) days prior to the meeting date of the stockholders

Several Proxies A stockholder can appoint several proxies to represent him/her in the stockholders meeting.

Validity of Proxy The proxy is valid only for the meeting for which it is intended.

Proxies executed abroad Proxies executed abroad should be duly authenticated/notarized by the Philippine Consul’s Office in the state or country where he resides.

Invalidated Proxy Oral proxies, no signature of the stockholder and undated proxies are not valid proxies

Validation of Proxy Validation of proxies shall be held at the office of the Corporate Secretary five (5) days prior to the meeting date of the stockholders.

Violation of Proxy There is violation of proxy on the following conditions: 1. If it is not made in accordance with the rules and regulations issued by the Commission; 2. If it is not signed by the stockholder or his duly authorized representative and filed before the scheduled meeting with the Corporate Secretary; and 3. If the broker or dealer issued a proxy to a person other than the customer, without the express written authorization of such customer.

(h) Sending of Notices

State the company’s policies and procedure on the sending of notices of Annual/Special Stockholders’ Meeting.

Policies Procedure

Annual meetings of the Corporation shall be held on the last Friday of September of each year, upon proper notice which shall not be less than thirty (30) days prior to the annual meeting and shall be given in the manner provided for in the By-Laws.

Notice of meetings to stockholders herein provided for, or which may be ordered by the Directors, except such as are by these By-Laws specifically provided for, shall be in writing, and shall be served upon the stockholders personally or by sending through the mail such notices addressed to such stockholders at the place of residence registered with or last known to the Secretary of the Corporation, and if the Board of Directors so determine by advertisement for not less than three times in a newspaper published in Metro Manila

Special meetings of the stockholders shall be held at any time upon the call of the Chairman, or in his absence upon the call of the President, or upon the request of two of the Directors, or of the holders of not less than one-fourth of the capital stock of the Corporation. Not less than ten days’ notice of any special meeting of stockholders shall be given as provided in the By-Laws.

Notice of meetings to stockholders herein provided for, or which may be ordered by the Directors, except such as are by these By-Laws specifically provided for, shall be in writing, and shall be served upon the stockholders personally or by sending through the mail such notices addressed to such stockholders at the place of residence registered with or last known to the Secretary of the Corporation, and if the Board of Directors so determine by advertisement for not less than three times in a newspaper published in Metro Manila

(i) Definitive Information Statements and Management Report

Number of Stockholders entitled to receive Definitive Information Statements and Management Report and Other Materials

25 September 2015 – 1,247 26 September 2014 - 1,244

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by market

25 September 2015 – 4 September 2015 26 September 2014 ASM - 1 September 2014

http://www.stiholdings.com/

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participants/certain beneficial owners

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by stockholders

25 September 2015 – 4 September 2015 26 September 2014 ASM - 1 September 2014

State whether CD format or hard copies were distributed CD Format were distributed to the stockholders for the past four (4) years

If yes, indicate whether requesting stockholders were provided hard copies

Yes, it was actually stated in the report that we will provide without charge, upon written request from the stockholder, a copy of the Definitive Information Statement, Management Report and Other materials that are being attached to the CD.

Updated based on the Definitive Information Statement filed with SEC and PSE on 19 August 2015

(j) Does the Notice of Annual/Special Stockholders’ Meeting include the following:

Each Resolution to be taken up deals with only one item. Yes

Profiles of directors (at least age, qualification, date of first appointment, experience, and directorships in other listed companies) nominated for election/re-election

Yes

The auditors to be appointed or re-appointed Yes

An explanation of the dividend policy, if any dividend is to be declared.

Yes

The amount payable for final dividends Yes

Documents required for proxy vote. No, because we did not request the stockholders to send us a proxy.

Should any the foregoing information be not disclosed, please indicate the reason thereto.

2) Treatment of Minority Stockholders

(a) State the company’s policies with respect to the treatment of minority stockholders.

Policies Implementation

In respect to the rights of the minority shareholders, a director shall not be removed without cause if it will deny minority shareholders representation in the Board.

Cumulative voting is the manner of voting used by the Corporation.

Minority Shareholders shall have the right to information Availability of the website; Sent out to all the stockholders copies of all reports submitted to the SEC and PSE;

It shall be the duty of the directors of the Corporation to promote shareholders’ rights, remove impediments to the exercise of shareholders’ rights and allow opportunities for them to seek redress for violation of their rights. They shall encourage the exercise of shareholders’ voting rights and the solution of collective action problems through appropriate mechanisms. They shall employ all possible means to minimize costs and other administrative or practical impediments to shareholders participating in meetings and/or voting in person. The directors shall also pave the way for the electronic filing and distribution of shareholder information necessary to make informed decisions subject to legal constraints.

Included in the Manual on Corporate Governance the duties of the directors in protecting the shareholder’s rights.

(b) Do minority stockholders have a right to nominate candidates for board of directors? Yes.

K. INVESTORS RELATIONS PROGRAM 1) Discuss the Company’s external and internal communications policies and how frequently they are reviewed. Disclose who reviews

and approves major company announcements. Identify the committee with this responsibility, if it has been assigned to a committee. The Investor Relations Division is a strategic, executive function of corporate management. It combines the disciplines of marketing, finance and communication to provide present and potential investors with an accurate portrayal of the Company’s performance and prospects. It aims to preserve and enhance the Company’s credibility while positively affecting the Company’s value relative to that of the over-all market and cost of capital. Its responsibilities include the development and maintenance of its leadership image in the industry.

2) Describe the company’s investor relations program including its communications strategy to promote effective communication with its

stockholders, other stakeholders and the public in general. Disclose the contact details (e.g. telephone, fax and email) of the officer responsible for investor relations.

Details

(1) Objectives 1. To promote sustained investor interest in the company’s stock – a. Valuation; b. Liquidity and c. Access to capital markets; 2. To ensure consistency and strengthen the credibility of the messages of each company in the

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Group by highlighting their successes and how STI Holdings is instrumental in helping the companies under its umbrella flourish; and 3. To have “ear-to-ground” access to financial market developments and industry performance

(2) Principles To reach out to all shareholders and fully inform them of corporate activities, and to formulate a clear policy for accurately, effectively and sufficiently communicating and relating relevant information to the Company’s stakeholders as well as to the broader investor community.

(3) Modes of Communications Corporate Advertising, Corporate Publications, Internet, Market Intelligence, Media Relations and Website

(4) Investor Relations Officer Franchini Vina Z. Cordova, Investor Relations Office Telefax: 844-9553; Email address: [email protected] [email protected]

Updated based on SEC Form 23-A filed with the SEC on 7 July 2015 3) What are the Company’s rules and procedures governing the acquisition of corporate control in the capital markets, and extraordinary

transactions such as mergers, and sale of substantial portions of corporate assets? The Board of Directors shall have the following express powers governing the acquisition of corporate control in the capital markets, and

extraordinary transactions such as mergers, and sale of substantial portions of corporate assets:

- To purchase, receive, take or otherwise acquire for and in the name of the corporation, any and all properties, rights, interest or privileges, including securities and bonds of other corporations, for such consideration and upon such terms and conditions as the Board may deem proper or convenient;

- To invest funds of the Corporation in another corporation or for any other purposes other than those for which the corporation was

organized, subject to such stockholders’ approval as may be required by law;

- To incur such indebtedness as the Board may deem necessary to issue evidence of such indebtedness including, without limitation, notes, deeds of trust, bonds, debentures, or other securities, subject to such stockholders approval as may be required by law, and/or pledge, mortgage, or otherwise encumber all or part of the properties of the corporation.

Name of the independent party the board of directors of the company appointed to evaluate the fairness of the transaction price.

Punongbayan&Araullo

L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Discuss any initiative undertaken or proposed to be undertaken by the Company

Initiative Beneficiary

CFC ANCOP – Tekton Foundation Inc. - STI will actively participate in a life changing intervention providing sustainable access to education to the poor and marginalized children in Makati, Pasay and Manila through the Child Sponsorship Program of CFC Ancop Tekton Foundation, Inc., a BIR registered donee institution.

Ancop Scholars

JCI Philippines, Inc. - STI Holdings supported the community outreach program of the Junior Chamber International Philippines (JCIP) Ortigas, which will benefit the underprivileged children under the care of The Orange Project. The Orange Project supports deserving underprivileged children of Angono, Rizal. The project’s goal is to forge partnerships with organizations and raise P500.00 for every child, which will give them access to education, healthcare, and character formation. The project currently cares for around 800 children from the indigent families in Angono. JCIP Ortigas Chapter has always been involved in community building activities through various programs and has always put focus in education and health. They solicited the support of several private organizations to help The Orange Project’s education, health, and livelihood activities. STI Holdings and its affiliate companies, STI Education Systems Group and PhilCare, were among the first to pitch in their support. STI led the Project: Library, Education & Skills Enhancement (P.L.E.A.S.E) program where it donated the first four computers for The Orange Project’s computer laboratory, while PhilCare led the Dengue prevention efforts. The advocacy is aligned with what STI Holdings believes in – that every Filipino should be empowered through Education. Through this project, STI Holdings and its affiliate companies were able to

Deserving underprivileged children of Angono, Rizal under the care of The Orange Project

mailto:[email protected]


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do their share for the community by paving the way for some underprivileged children to access education and healthcare. STI Holdings also supported the “Fund Raising to Combat Malaria” Project of JCI Philippines, Inc.

Community Extension and Outreach Programs STI ESG 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. Alternative Learning System (“ALS”) STI Foundation responded to the call of DepEd for private sector’s participation and support in their ALS program. STI reached out to out-of-school youth aged 15 and above who still have not finished their secondary education and cannot afford to go through formal schooling. The ALS sessions are conducted every Saturday and employ blended and collaborative modes of instruction (face-to-face instructions), e-learning materials (eSkwela), and performance-based assessment in order to prepare and equip the ALS learners with the knowledge required to pass the Accreditation and Equivalency Test given by DepEd. 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 2014-15, the STI Mobile School has travelled to 947 sites and trained 126,716 participants nationwide. Today, a total of six mobile school buses travel across Luzon, Visayas, and Mindanao. STI Foundation conducted special community development projects, outreach programs, and humanitarian services, in SY 2014-15, that aimed to address the needs of the disadvantaged sectors. In coordination with the League of Corporate Foundation, a lecture-seminar on Corporate Social Responsibility (“CSR”) was conducted to 200 students where they learned about the Basic Concepts and Principles and Best Practices of Corporate Social Responsibility. The seminar aimed to promote awareness to students on the importance of CSR. STI Foundation likewise donated 946 pieces of assorted proware items and 1,768 pieces of Basic Education books to the residents of Tahanang Walang Hagdanan. 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, Vista Alegre Granada Relocation Elementary School (VAGRES). 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 P3 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. From SY 2013-14 until SY 2014-15, over 93 houses were built and turned over; materials for 40 partially damaged houses were turned over; and 43 partially damaged houses were repaired. Trainings were also conducted to the locals on various topics such as Home Stay Project: Spiritual Development, Basic Tips on How to Start a Business, and Costing and Basic Recording. (The above-mentioned amendments were included in the SEC Form 17 A for the Fiscal Year Ending 31 March 2015 filed with the SEC and PSE on 14 July 2015.)

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M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL Discuss the process followed and criteria used in assessing the annual performance of the Board and its committees, individual

director, and the CEO/President.

Process Criteria

Board of Directors

Step 1 Each director completes an evaluation form of the Board using set evaluation criteria. The form allows the director to make further comments and make recommendations for improvement. Step 2 The Board discusses its ability to meet its objectives and makes recommendations. Step 3 The results of the evaluation are processed by an independent external advisor and are communicated to the Board. Step 4 Any issues that need to be resolved are put before the Board for discussion.

(i) Board role: adequacy of the processes which monitor business performance, board member interaction with management, adequacy of board knowledge, adequacy of business strategy, board being informed, evaluation process for executives and directors. (ii) Board membership: appropriateness of balance and combination of skills, size of board, input of individual board members, adequacy on performance feedback to board members, adequacy of procedures dealing with inadequate performance by a board member. (iii) Procedure and practice: board’s effectiveness in use of time, if board allows sufficient opportunity to adequately assess management performance, board’s ability to keep abreast of developments in wider environment which may affect STI Holdings, discussion of values at board level, focus on community issues and adequacy of meeting frequency and duration of meetings. (iv) Committee structure: sufficiency and effectiveness of current committee structure and membership, availability of resources to committees to enable them to reach objectives. (v) Partnership and style: working relationship between chairman and chief executive officer, segregation of duties between board and management, capacity of directors to express views on each other and to management in constructive manner, adequacy of board discussions. (vi) Personal: concerns with position as director and own performance, ability to raise issues at board level, availability of resources. (vii) STI Holdings may also consider involving independent external advisors in the performance evaluation process.

Board Committees

Step 1 The committee completes self-assessment form using evaluation forms with set evaluation criteria. The form allows for the committee to comment on how it meets specified requirements and also make recommendations for improvement. Step 2 The committee discusses the ability of the committee to meet its objectives and makes recommendations. Step 3 Any issues that need to be resolved are put before the Board for discussion.

(i) Committee role: correctness of balance and combination of skills, size of committee, contribution of individual committee members, adequacy on performance feedback to committee members, adequacy of procedures dealing with inadequate performance by committee member. (ii) Committee membership: the balance and combination of skills and member contribution. (iii) Procedure and practice: use of committee time, competence of committee papers and frequency of meetings, ability to access resources, ability to keep informed in relevant area, provision for continued development. (iv) Committee structure: sufficiency and value of current committee structure and membership, availability of resources to committees to enable them to reach goals. (v) Partnership and style: working relationship between chairman and chief executive officer, segregation of duties between committee and management, ability of directors to express opinions on each other and to management in a positive manner, adequacy of committee deliberations. (vi) Personal: individual members of the Committee have an opportunity to comment on the systems about their own participation to the Committee, any concerns they may have about the Committee including the member’s ability to canvass issues with the Committee.

Individual Directors

Step 1 Individual director performs self-assessment on a form using agreed ratings and evaluation criteria. Step 2 Directors provide comments on the performance of individual director using the same form. Step 3 Meeting is held between individual director and the Board to discuss issues raised and any discrepancies between the self-assessment rating and the peer review.

(i) Effective governance: ability of director to contribute to STI Holdings’ performance while observing the values of good governance. (ii) Leading through vision and mission: ability of director to inspire commitment to STI Holdings’ vision and mission. (iii) Strategic thinking and decision making: capacity of director to analyze and evaluate the impact of contingencies on STI Holdings and identify best responses based on the business’ capacity. (iv) Commercial/business judgment: director’s ability to contribute to the increase in the wealth of stockholders. (v) Teamwork: capacity of director to interrelate with fellow Board members and the senior executives in a manner that is consistent

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with achieving shared business goals.

CEO/President Step 1 CEO/President accomplishes self-assessment on a form using agreed ratings and evaluation criteria. Step 2 The Board provides comments on the performance of CEO/President using the same form. Step 3 Meeting is held between CEO/President and the Board to discuss issues raised and any discrepancies between the self-assessment rating and the peer review.

(i) Effective governance: ability of CEO/President to have general supervision and control of STI Holdings’ day-to-day business activities and its officers and employees and to see to it that all orders and resolutions of the Board of Directors are carried into effect. He should be able to contribute to STI Holdings’ performance while observing the values of good governance. (ii) Leading through vision and mission: ability of CEO/President to motivate commitment to STI Holdings’ vision and mission. (iii) Strategic thinking and decision making: capacity of CEO/President to execute on behalf of STI Holdings all contracts, agreements and other instruments affecting the interests of STI Holdings and to analyze and evaluate the impact of contingencies on STI Holdings and identify best responses based on the business’ capacity. (iv) Commercial/business judgment: CEO/President’s ability to contribute to the increase in the wealth of stockholders.

N. INTERNAL BREACHES AND SANCTIONS Discuss the internal policies on sanctions imposed for any violation or breach of the corporate governance manual involving directors,

officers, management and employees. To strictly observe and implement the provisions of the Corporate Governance Manual, the following penalties shall be imposed, after

notice and hearing, on the Corporation’s directors, officers and management and employees in case of violation of any of the provisions of the Manual:

Violations Sanctions

First violation Subject person shall be reprimanded.

Second violation Subject person shall be suspended. Duration of suspension shall depend on the gravity of the violation.

Third violation Maximum penalty of removal from office shall be imposed

This Consolidated Changes in ACGR for 2015 is hereby compiled and published in the Company website, in compliance with the Securities and Exchange Commission (SEC) Memorandum No. 12, Series of 2014 released May 26, 2014 requiring all publicly listed companies to consolidate all the ACGR updates and changes for the year and label the consolidated changes as “Consolidated Changes in ACGR for (year) for posting in the company website. In lieu of the notarized signature page, the Consolidated Changes in the ACGR shall be accompanied by a Secretary’s Certificate with excerpts of Board Resolution or Minutes of meetings regarding said updates and changes in the ACGR.

SECRETARY’S CERTIFICATE

I, ARSENIO C. CABRERA, JR., of legal age, Filipino, with office address at the 5/F SGV II Building, 6758 Ayala Avenue, Makati City, after having been duly sworn to in accordance with law, hereby depose and state that:

1. I am the Corporate Secretary of STI EDUCATION SYSTEMS

HOLDINGS, INC., a corporation duly organized and existing, under and by virtue of Philippine laws with office address at 7TH Floor, STI Holdings Center, 6764 Ayala Avenue, Makati City (the “Corporation”).

2. I am issuing this certification with respect to the following consolidated

changes in the Annual Corporate Governance Report for 2015:

(a) Based on Item 4 of SEC Form 17-C that was filed on 28 September 2015 and SEC Form 17-C that was filed on 3 February 2015, the Corporation provided the following information on the Board of Directors:

Director’s Name

Type [Executive (ED), Non-Executive (NED) or Independent Director (ID)

If Nominee, identify the principal

Nominator in the last election (if ID, state the relationship with the nominator)

Date first elected

Date last elected (if ID, state the number of years served as ID)1

Elected when (Annual/Special Meeting)

No. of years served as director

Eusebio H. Tanco


17 March 2010

25 September 2015



Monico V. Jacob


17 March 2010

25 September 2015





27 October 2010

25 September 2015


5 years



27 October 2010

25 September 2015


5 years

Martin K. Tanco


19 December 2012

25 September 2015





19 December 2012

25 September 2015



Rainerio M. Borja


19 December 2012

25 September 2015



Jesli A. Lapus ID N/A Capital Managers & Advisors, Inc. (No relationship)

March 21, 2013

25 September 2015; 1 year and 11 months as ID



Johnip G. Cua

ID N/A Capital Managers & Advisors, Inc.

19 December 2012

25 September 2015; 2



1 Reckoned as of date of election as ID (J.A. Lapus – 4 October 2013; J. G. Cua – 19 Dec 2012 and E. L. Cu – 19 Dec 2012)

2

(No relationship)

years and 9 months as ID

Ernest Lawrence L. Cu

ID N/A Capital Managers & Advisors, Inc. (No relationship)

19 December 2012




Teodoro L. Locsin, Jr.


2 February 2015

25 September 2015


1 year and 7 months

(b) Based on SEC Form 17-A for the fiscal year ending 31 March 2015,

SEC Form 17-C filed on 12 February 2015 and the Certifications of Independent Directors for Mr. Jesli A. Lapus and Mr. Ernest L. Cu, the following changes were indicated in the part on “Directorship in the Company’s Group”:

Director’s Name Corporate Name of the Group Company

Type of Directorship (Executive, Non-Executive, Independent). Indicate if

director is also the Chairman

Eusebio H. Tanco Prudent Resources, Inc. Executive Director/President

Rescom Developers Inc. Executive Director/Chairman of the Board

Insurance Builders, Inc. Executive Director/Chairman of the Board

Eujo Phils., Incorporated Executive Director/President

Classic Finance Inc. Executive Director/President

Capital Managers & Advisors, Inc. Executive Director/Chairman of the Board

STI Education Services Group, Inc. Executive Director/Ex-Com Chairman


DeLos Santos-STI College Executive Director/Chairman of the Board




Executive Director

STI Investments, Inc. Executive Director/Chairman of the Board

STI West Negros University Non-Executive Director/Chairman of the Board

Monico V. Jacob Classic Finance Inc. Executive Director/Chairman of the Board

Insurance Builders, Inc. Executive Director/President

Capital Managers & Advisors, Inc. Executive Director/President

STI Education Services Group, Inc. Executive Director/President & CEO


STI West Negros University Executive Director/President


PhilPlans First, Inc. Executive Director/Chairman of the Board


Executive Director/Chairman of the Board

STI Investments, Inc. Executive Director/President

De Los Santos-STI College Non-Executive Director

Joseph Augustin L. Tanco PhilhealthCare, Inc. Executive Director/Chairman of the Board



Executive Director/President and CEO





Eujo Phils., Incorporated Non-Executive Director

Capital Managers and Advisors, Inc. Non-Executive Director

STI Investments, Inc. Non-Executive Director



Ma. Vanessa Rose L. Tanco i-ACADEMY Executive Director/President


3

PhilhealthCare, Inc. Non-Executive Director

PhilPlans First, Inc. Non-Executive Director


Classic Finance Inc. Non-Executive Director




Paolo Martin O. Bautista Classic Finance Inc. Non-Executive Director

Johnip G. Cua PhilPlans, First, Inc. Independent Director

Rainerio M. Borja PhilPlans, First, Inc. Non-Executive Director

STI Education Services Group, Inc. Executive Director

Jesli A. Lapus Philippine Life Financial Assurance Corporation



STI Education Services Group, Inc. Independent Director/Chairman of the Board

Ernest Lawrence Cu Philippine Life Financial Assurance Corporation


STI Education Services Group, Inc. Independent Director

Teodoro L. Locsin, Jr. iACADEMY Non-Executive Director

(c) Based on SEC Form 17-A for the fiscal year ending 31 March 2015 and the Certifications of Independent Directors for Mr. Jesli A. Lapus and Mr. Ernest L. Cu, the following changes were indicated in the part on “Directorship in other Listed Companies”:

Director’s Name Name of the Listed Company Type of Directorship (Executive, Non-Executive, Independent). Indicate if director is also the

Chairman

Eusebio H. Tanco Asian Terminals Inc. Executive Director/Vice-Chairman and President

Philippine Racing Club, Inc. Non-Executive Director

Leisure and Resorts World, Inc. Non-Executive Director

The Philippine Stock Exchange, Inc. Non-Executive Director

Monico V. Jacob Asian Terminals Inc. Non-Executive Director

Jollibee Foods Corporation Independent Director

Phoenix Petroleum Philippines, Inc. Independent Director

2Go Group, Inc. Independent Director

Century Properties Group, Inc. Independent Director

DFNN, Inc. Independent Director

Johnip G. Cua MacroAsia Corporation Independent Director

Ernest Lawrence L. Cu Globe Telecom, Inc. Executive Director

Globe Telecom, Inc. – Preferred A Executive Director

Jesli A. Lapus Metropolitan Bank & Trust Company


Teodoro L. Locsin, Jr. Asian Terminals, Inc. Independent Director

(d) Based on the various SEC Forms 23-B filed by Messrs. Teodoro L.

Locsin, Jr. on 27 February 2015, Rainerio M. Borja on 11 August 2015, and Eusebio H. Tanco on 16 November 2015, 22 December 2015 and 23 December 2015, the shareholdings of Messrs. Teodoro L. Locsin, Jr., Rainerio M. Borja and Eusebio H. Tanco in the Corporation are as follows:

4

Name of Director Number of

Direct Shares Number of Indirect Shares/through (name of record

owner) % of

Capital Stock

Eusebio H. Tanco 1,157,913,875 291,618,000 through PCD (Venture Securities, Inc.) 14.635%

Teodoro L. Locsin, Jr. 1,000 N/A -

Rainerio M. Borja 1,000,000 through PCD (Venture Securities, Inc.) .01%

(e) Based on SEC Form 17-C filed on 21 January 2015, the following

change was indicated in the part on “Resignation/Death/Removal” of directors:

Name Position Date of Cessation Reason

Arsenio N. Tanco Non-Executive Director 19 December 2012 Declined nomination as director for the 2013

Elpidio C. Jamora Independent Director 19 December 2012 - do -

Pete N. Prado Independent Director 19 December 2012 - do -

Arsenio C. Cabrera, Jr. Non-Executive Director 21 March 2012 Resignation

Yolanda M.Bautista Executive-Director 10 December 2013 Resignation

Maulik R. Parekh Non-Executive Director 20 January 2015 Resignation

(f) Based on the Minutes of the 25 September 2015 Annual Stockholders’ Meeting posted on the website of the Corporation, the voting results of said meeting are as follows:

Name of Director Votes Received

Eusebio H. Tanco 73.98% or 7,327,556,259

Monico V. Jacob 73.98% or 7,327,556,259

Joseph Augustin L. Tanco 73.98% or 7,327,556,259

Ma. Vanessa Rose Tanco 73.98% or 7,327,556,259

Martin K. Tanco 73.98% or 7,327,556,259

Paolo Martin O. Bautista 73.98% or 7,327,556,259

Rainerio M. Borja 73.98% or 7,327,556,259

Teodoro L. Locsin, Jr. 73.98% or 7,327,556,259

Jesli A. Lapus 73.98% or 7,327,556,259

Johnip G. Cua 73.98% or 7,327,556,259

Ernest Lawrence L. Cu 73.98% or 7,327,556,259

(g) Based on Advisement Letters filed on 30 October 2015 and 14 December 2015 for Mr. Johnip G. Cua, the directors and executive officers of the Corporation attended the following Corporate Governance Seminars:

Name of Director/Officer Date of Training Program Name of Training

Institution

Eusebio H. Tanco Chairman

22 October 2015 Corporate Governance Seminar (Updates on Philippine Practices on Corporate Governance & Enterprise Risk Management)


Monico V. Jacob Director/President & CEO



Yolanda M. Bautista Treasurer/CFO



Joseph Augustin L. Tanco Director/VP for Investor Relations



Ma. Vanessa Rose L. Tanco Director



5

Martin K. Tanco Director



Paolo Martin O. Bautista Director/Chief Investment Officer and Head, Corporate Strategy



Rainerio M. Borja Director

14 November 2014


Ernest Lawrence L. Cu Independent Director

18 February 2015 Corporate Governance Seminar

The Institute of Corporate Directors

Johnip G. Cua Independent Director

9 December 2015 Corporate Governance Seminar Sycip Gorres Velayo & Co.

Arsenio C. Cabrera Corporate Secretary / Corporate Information Officer



Jesli A. Lapus Independent Director

11 September 2015


Teodoro L. Locsin, Jr. Director

Franchini Vina Z. Cordova Investor Relations Officer



Anna Carmina S. Herrera Assistant Corporate Secretary



Elizabeth M. Guerrero Alternate Corporate Information Officer



(h) Based on SEC Form 17-A for the fiscal year ended 31 March 2015,

the following change was made to the part on “Conflict of Interest”:

Name of Significant Shareholders

STI West Negros University

Consultancy Agreement * between the Company and STI WNU on the rendering of advisory services starting 01 January 2015 *This agreement was reported to the Audit Committee and approved by the Board of Directors.

(i) Based on various SEC Forms 17-C filed on 10 December 2015, 23

December 20125, 11 February 2015, 16 February 2015, 23 February 2015, 13 March 2015, 20 March 2015 and 25 August 2015, the following changes were made to the part on “Family, Commercial and Contractual Relations”:

Name of Shareholders % of Capital Stock affected (Parties)

Brief Description of the Transaction

Eusebio H. Tanco A total of forty percent (40%) equity in UNLAD

On 9 December 2014, STI Education Systems Holdings, Inc. served notices of default to the following:

1. Philippine Women’s University (“PWU”) under the (a) Omnibus Agreement dated 8 June 2012 executed by and between STI Holdings and PWU; and (b) Facility Agreement executed between PWU and Banco De Oro Unibank, Inc. (“BDO”) (now, STI Holdings as assignee and successor-in-

6

interest of BDO); and 2. Unlad Resources Development Corporation

(“Unlad”) under the Omnibus Agreement dated 8 June 2012 executed by and among STI Holdings, Attenborough Holdings Corporation (“AHC”) and Unlad.

Updated based on SEC Form 17-C filed with the SEC on 10 Dec 2014 and PSE on 9 Dec 2014

On 22 December 2014, STI Holdings Enforces Its Creditor Rights in PWU - In the exercise of its rights as creditor and subrogee of Banco De Oro to the P223 million debt (the “BDO Loan Facility”) of PWU, and as a consequence of the default of PWU and Unlad in the payment of their obligations to STI Holdings in the aggregate amount of P926 million [as of 7 December 2014], STI Holdings enforced the security arrangements under the BDO Loan Facility and acquired: (a) ¾ Membership in PWU, or 11 out of the 14 Members in PWU; and (b) ¾ of the seats in the Board of Trustees of PWU or 8 out of the 10 Trustees. Updated based on SEC Form 17-C filed with SEC on 23 December 2014 and PSE on 22 December 2014.

On 10 February 2015, STI Holdings filed with the Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Manila, the following:

(a) Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, entitled “STI Education Systems Holdings, Inc. vs. Philippine Women’s University”, over parcels of land covered by Transfer Certificate of Title Nos. 227390, 227391, 227392, 227393 and 227394 registered under the name of PWU where the school of PWU is located at Taft Avenue, Manila, and all improvements located thereon, which properties were mortgaged in favor of STI Holdings as security under the Facility Agreement executed between PWU and STI Holdings (as assignee of Banco de Oro Unibank, Inc.); and

(b) Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, entitled “STI Education Systems Holdings, Inc. vs. Philippine Women’s University” over parcels of land covered by: (i) Transfer Certificate of Title Nos. 227390, 227391, 227392, 227393 and 227394 registered under the name of PWU where the school of PWU is located at Taft Avenue, Manila, and (ii) Transfer Certificate of Title No. 112932 registered under the name of PWU located at P. Hidalgo Lim Street (formerly Indiana), Manila, and all improvements located thereon, which properties were mortgaged in favor of STI Holdings as security under the Omnibus Agreement dated 8 June 2012 executed between PWU and STI Holdings.

7

Updated based on SEC Form 17-C filed with the SEC on 11 Feb 2015 and PSE on 10 Feb 2015

On 12 February 2015, STI Holdings filed with the Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Quezon City, the following: (a) Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, entitled “STI Education Systems Holdings, Inc. vs. Philippine Women’s University”, over parcels of land covered by Transfer Certificate of Title Nos. RT-71871(271024)PR-29615 and RT-71872(271025)PR-29616 registered under the name of Unlad Resources Development Corporation (“UNLAD”) located at Quezon City, and all improvements located thereon, which properties were mortgaged in favor of STI Holdings as security under the Facility Agreement executed between PWU, as debtor and STI Holdings (as assignee of Banco de Oro Unibank, Inc.), as creditor; and (b) Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, entitled “STI Education Systems Holdings, Inc. and Attenborough Holdings Corporation vs. Unlad Resources Development Corporation”, over parcels of land covered by Transfer Certificate of Title Nos. RT-79300(202647)PR-29042, RT-71871(271024)PR-29615 and RT-71872(271025)PR-29616 registered under the name of UNLAD located at Quezon City, and all improvements located thereon, which properties were mortgaged in favor of Attenborough Holdings Corporation (“AHC”) as security under the Omnibus Agreement dated 1 June 2012 executed among UNLAD, as debtor and STI Holdings and AHC, as creditors. Updated based on SEC Form 17-C filed with SEC on 16 February 2015 and PSE on 12 Feb 2015

On 18 February 2015, STI Educations Systems Holdings, Inc. filed the following: (1) Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, with the Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Davao City, entitled STI Education Systems Holdings, Inc. and Attenborough Holdings Corporation vs. Unlad Resources Development Corporation (the “Davao Petition”). The Davao Petition prays for the extra-judicial foreclosure of a parcel of land covered by Transfer Certificate of Title No. T-129545 registered under the name of Unlad Resources Development Corporation (“UNLAD”) located at Davao City, and all improvements located thereon, which properties were mortgaged in favor of STI

8

Holdings and Attenborough Holdings Corporation (“AHC”) as security under the Omnibus Agreement dated 8 June 2012 executed among UNLAD, as debtor, and STI Holdings and AHC, as creditors. (2) Amended Petition for the extra-judicial foreclosure of real estate mortgage under Act 3135, as amended, with the Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Quezon City, entitled STI Education Systems Holdings, Inc. vs. Philippine Women’s University, Inc. and Unlad Resources Development Corporation (the “Quezon City Petition”). The Quezon City Petition prays for the extra-judicial foreclosure of parcels of land covered by Transfer Certificate of Title Nos. RT-71871(271024)PR-29615 and RT-71872(271025)PR-29616 registered under the name of UNLAD located at Quezon City, and all improvements located thereon, which properties were mortgaged in favor of STI Holdings as security under the Facility Agreement executed between Philippine Women’s University (“PWU”), as debtor and STI Holdings (as assignee of Banco de Oro Unibank, Inc.), as creditor; The Davao Petition is the last petition initiated by STI Holdings, on its own or together with AHC, for the satisfaction of UNLAD’s obligations to STI Holdings and AHC in the aggregate amount of P294,073,466.68, and PWU’s obligations to STI Holdings in the aggregate amount of P702,446,308.08. Updated based on SEC Form 17-C filed with SEC on 23 February 2015 and PSE on 18 Feb 2015.

On 13 March 2015, STI Education Systems Holdings, Inc. ("STI Holdings") received a copy of the Decision dated 4 March 2015 (the "Decision") of Branch 47 of the Regional Trial Court of Manila (the "RTC") dismissing the election contest filed by Philippine Women's University ("PWU"), Dr. Helena Z. Benitez, and Dr. Jose Francisco B. Benitez docketed as Civil Case No. 15132872. The Election Contest was filed by PWU, Dr. Helena Z. Benitez, and Dr. Jose Francisco B. Benitez (the "Benitez Group") against Mr. Eusebio H. Tanco, Mr. Monico V. Jacob, Ms. Maria Vanessa Rose L. Tanco, Mr. Joseph Augustin L. Tanco, Mr. Martin K. Tanco, Ms. Yolanda M. Bautista, Mr. Jesli A. Lapus, Mr. Teodoro L. Locsin, Jr., Mr. Paolo Martin O. Bautista, Mr. Wilfred S. Racadio, and Mr. Arsenio C. Cabrera (the "Defendants") to annul the election of PWU Members and Trustees held on 22 December 2014 by virtue of the step-in rights of STI Holdings as assignee of BDO Unibank, Inc. In the Decision, the RTC dismissed the election contest filed by PWU and affirmed

9

the position of STI Holdings that the composition of the PWU Members and Trustees have not been changed and the results of the supposed election held on 22 December 2014 were withdrawn. The RTC also noted that the Benitez Group never controverted the aforesaid allegations of STI Holdings when the opportunity was presented by the court in a clarificatory hearing due to the absence of Dr. Jose Francisco B. Benitez. As previously disclosed by STI Holdings on 5 January 2015, the withdrawal of the step-in rights in PWU was to protect the welfare of the PWU students and faculty considering that in the morning of said date (5 January 2015), the PWU community was confronted with a university that was locked down by the Benitez family. Updated based on SEC Form 17-C filed with SEC on 13 Mar 2015 and PSE on 12 Mar 2015.

On 18 March 2015, STI Education Systems Holdings, Inc. ("STI Holdings") was declared as the winning bidder in the auction sales involving the following Extra-Judicial Foreclosures: (1) Foreclosure No. 15-3285, entitled STI Holdings, Creditor/Mortgagee vs. Philippine Women's University (PWU), Debtor/Mortgagor, where STI Holdings was the winning bidder for properties along Taft Avenue, Malate, Manila where the PWU school is located covered by TCT Nos. 227390, 227391, 227392, 227393 and 227394 and registered under the name of PWU; and (2) Foreclosure No. 15-3284, entitled STI Holdings, Creditor/Mortgagee vs. PWU, Debtor/Mortgagor, where STI Holdings was the winning bidder for a property located at Pilar Hidalgo Lim Street, Malate, Manila covered by TCT No. 112932 registered in the name of PWU. Updated based on SEC Form 17-C filed with SEC on 20 Mar 2015 and PSE on 18 Mar 2015.

On 24 August 2015, STI Education Systems Holdings, Inc. (the Company") received an Order dated 20 August 2015 (“Order of Dismissal”) issued by Branch 46 of the Regional Trial Court of Manila (“Rehabilitation Court”), which dismissed the Petition for Involuntary Rehabilitation (“Petition”) of Philippine Women’s University (“PWU”). In addition, an Order dated 19 August 2015 was also issued by the Rehabilitation Court, which denied the Motion to Join Unlad Resources Development Corp. (“UNLAD”) as a party to the Petition. The Petition was filed by Dr. Helena Z. Benitez (“Dr. Benitez”), as an alleged creditor of PWU, to seek the suspension of all actions

10

for the enforcement of claims against PWU, and rehabilitation of PWU. The Commencement/Stay Order was used to suspend the extra-judicial foreclosure proceedings initiated by the Company against PWU and UNLAD to satisfy their outstanding obligations in the amount of P926,146,885.86 as of 7 December 2014. The Rehabilitation Court dismissed the Petition on the following grounds: 1. The Petition, the Rehabilitation Plan and the attachments thereto contain materially false and misleading statements. The Rehabilitation Court materially considered the Rehabilitation Receiver’s Report (“Report”), which provided, among others, that PWU’s insolvency is due to debts not incurred in the ordinary course of business. The Report further stated that PWU entered into transactions outside the nature of PWU, as an educational institution. Moreover, acquisition of properties and agreements that appear for the school did not materialize and yet money was already spent causing PWU to be in debt. Lastly, unauthorized advances by its then President and unaccounted money for the school formed part of liabilities NOT in the ordinary course of business; and 2. The Petition is a sham filing intended to delay the enforcement of the rights of creditors. The Rehabilitation Court questioned the right of Dr. Benitez as an alleged creditor to file the Petition considering that she (a) is the “brand name, epitome and embodiment” of PWU, (b) has unsubstantiated claims and (c) claims against PWU are for personal expenses. The Rehabilitation Court was convinced that the Petition was executed for the primary purpose of delaying the enforcement of the rights of the Company as creditor. Under Section 4, Rule 1 of the Financial Rehabilitation Rules of Procedure, the Order of Dismissal is immediately executory. With the outright dismissal of the Rehabilitation case, the Petition(s) dated 18 February 2015 initiated by the Company against PWU and UNLAD for the extra judicial foreclosure of the real estate mortgages over their Quezon City and Davao properties can proceed in order to satisfy PWU and UNLAD's unpaid loan obligations to the Company in the amount of P926,146,885.86 as of 7 December 2014. Updated based on SEC Form 17-C filed with SEC on 25 Aug 2015 and PSE on 24 Aug 2015.

Pursuant to the Agreement, in Nov 2011, the Company acquired PWU’s debt from PWU’s creditor bank, together with all of the bank’s rights to the underlying collateral and security, for the amount of P223.5 million, on a without recourse basis. Likewise in accordance with the Agreement, the Company is obliged to extend: (1) a direct loan to PWU in the amount of PP26.5 million

11

and (2) a loan to UNLAD in the amount of P198.0 million. The receivable from PWU and UNLAD aggregating to P250.0 million shall be secured by the PWU Indiana Property and PWU Taft Property while the loan to UNLAD shall be secured by the PWU Quezon City, UNLAD Davao Property and UNLAD Quezon City Property. The receivable from PWU and UNLAD 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 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.

(j) Based on the Advisement Letter filed on 4 January 2016 on

Attendance of Board of Directors, the attendance of directors at the meetings of the Corporation is set forth below:

Board Name Date of Election No of Meetings Held during the year


%

Chairman Eusebio H. Tanco 17 March 2010 4 4 100%

Member Monico V. Jacob 17 March 2010 4 4 100%

Member Joseph Augustin L. Tanco 27 October 2010 4 4 100%

Member Ma. Vanessa Rose L. Tanco 27 October 2010 4 4 100%

Member Martin K. Tanco 19 December 2012 4 4 100%

Member Rainerio M. Borja 19 December 2012 4 3 75%

Member Paolo Martin O. Bautista 19 December 2012 4 4 100%

Independent Johnip G. Cua 19 December 2012 4 4 100%

Independent Ernest Lawrence L. Cu 19 December 2012 4 2 50%

Independent Jesli A. Lapus 21 March 2013 4 4 100%

Member Teodoro L. Locsin 2 February 2015 4 3 75%

(k) Based on SEC Form 17-A for the fiscal year ending 31 March 2015, the executive directors, non-executive directors and independent directors were granted the following per diem allowances:

Remuneration Item Executive Directors Non-Executive Directors

(other than independent directors)


Per Diem allowance P264,705.90 P123,529.42 P123,529.42

(l) Based on SEC Form 17-C filed on 28 September 2015, the

Corporation updated the membership of its committees as follows:

Executive Committee


No. of

Meetings

Held

No. of

Meetings

Attended


Committee

Chairman Eusebio H. Tanco 19 Dec. 2012 0 0 0 2 years and 10 months

Member (ED)

Monico V. Jacob 19 Dec. 2012 0 0 0 2 years and 10 months

Member (ED)

Yolanda M. Bautista


Member (ED)

Martin K. Tanco 19 Dec. 2012 0 0 0 2 years and 10 months

Member Rainerio M. Borja 19 Dec. 2012 0 0 0 2 years and 10 months

12

(NED)

Audit Committee


No. of Meetings

Held



Chairman (ID)

Johnip G. Cua 19 Dec. 2012 1 1 100% 2 years and 10 months

Member (ED) Martin K. Tanco 19 Dec. 2012 1 1 100% 2 years and 10 months

Member (ED) Paolo Martin O. Bautista


Member (ID) Ernest L. Cu 19 Dec. 2012 1 1 100% 2 years and 10 months

Nomination Committee


No. of

Meetings

Held

No. of

Meetings

Attended

% Length of Service

in the Committee

Chairman Eusebio H. Tanco 8 Dec. 2011 1 1 100% 2 years and 10 months

Member (ID)

Ernest Lawrence Cu 19 Dec. 2012 1 1 100% 2 years and 10 months

Member (NED)


19 Dec 2012 1 1 100% 2 years and 10 months

Member (NED)

Rainerio M. Borja 19 Dec. 2012 1 1 100% 2 years and 10 months

Remuneration/Compensation Committee


No. of

Meetings

Held

No. of

Meetings

Attended

% Length of Service in

the Committee

Chairman Eusebio H. Tanco 19 Dec. 2012 0 0 0 2 years and 10 months

Member (ED)

Monico V. Jacob 19 Dec. 2012 0 0 0 2 years and 10 months

Member Yolanda M. Bautista 19 Dec. 2012 0 0 0 2 years and 10 months

Member (ED)



Compliance Committee

Office Name Date of

Appointment

No. of

Meetings

Held

No. of

Meetings

Attended

% Length of Service in

the Committee

Chairman Arsenio C. Cabrera, Jr.


Member (ED)

Monico V. Jacob 19 Dec. 2012 1 1 100% 2 years and 10 months

Member Yolanda M. Bautista 19 Dec. 2012 1 1 100% 2 years and 10 months

Member (ED)



(m) Based on SEC Form 17-A for the period ended 31 March 2015 and

SEC Forms 17-C filed on 27 July 2015 and 16 July 2015, the committees of the Corporation performed the following work:

Name of Committee Work Done Issues Addressed

Audit Reviewed/Approved/Submitted the Final Draft FS for the Fiscal Year ending 31 March 2015 to the

There were no issues addressed by the Audit

13

Board for approval on 13 July 2015 Committee.

Nominations Pre-screened, shortlisted, and presented to the Board on 27 July 2015 for their acceptance and approval, the names of the candidates for election to the Board of Directors and Independent Directors in the Annual Meeting of the Stockholders held on 25 September 2015.

There were no issues addressed by the Nominations Committee.

Compliance STI Holdings is included in the list of top 50 Philippine-listed companies evaluated under the ASEAN Corporate Governance Scorecard in 2014. The top listed companies from six participating ASEAN member-countries were evaluated based on the international standards of corporate governance, including the five Organization for Economic Cooperation and Development principles of corporate governance. The company is one of the 60 publicly-listed companies that have made it to the latest cut of the PSE Shariah-compliant firms, as of end-March 2015, following a screening of 260 listed firms assessed for their compliance with the rules, regulations, teachings, and values that govern the lives of Muslims.

There were no issues addressed by the Compliance Committee.

Remuneration N/A There were no issues addressed by the Remuneration Committee

(n) Based on SEC Forms 23-B filed on 9 November 2015 for Insurance Builders, Inc. and 16 November 2015 as well as SEC Forms 23-B filed on 22 and 23 December 2015 for Mr. Eusebio H. Tanco, the ownership structure of stockholders owning 5% or more shareholdings is as follows:

Shareholder Number of

Shares Percent Beneficial Owner

Eusebio H. Tanco 1,449,531,875 14.635% Eusebio H. Tanco

Prudent Resources, Inc. 1,614,264,964 16.30% Various Beneficial Owners

Rescom Developers, Inc. 795,265,934 8.03% Various Beneficial Owners

Eujo Philippines, Inc. 763,873,130 7.71% Various Beneficial Owners

Insurance Builders, Inc. 629,776,992 6.36% Various Beneficial Owners

STI Education Services Group, Inc. 502,307,895 5.07% Various Beneficial Owners

Morgan Stanley Investment Management Corporation 816,264,000 8.24% Morgan Stanley Investment Management Corporation

Dunross Investment Ltd. 528,522,000 5.34% Dunross Investment Ltd.

(o) Based on SEC Form 17-A for the fiscal year ending 31 March 2015, the Corporation paid the following external auditor’s fees:

Name of Auditor Audit Fee Non-audit Fee

SGV & Co. P850,000.00 (2014-15) P102,000.00 (2015)

(p) Based on SEC Form 17-A for the fiscal year ending 31 March 2015,

the Corporation disclosed the following related party transactions:

RPT Relationship Nature Value

*Philippine Women’s University (PWU) – an entity under common management



P250,000,000

12,651,546

*UNLAD Resources Development Corporation (UNLAD) an entity under common management



198,000,000

3,327,389

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STI ESG Subsidiary 2015: Advisory Fee – 30 days upon receipt of billings; Noninterest-bearing Reimbursement – 30 days upon receipt of billings; Noninterest-bearing 2014: Reimbursement

14,400,000

5,838,668

(10,248,915)

West Negros University (Now: STI West Negros University)

Subsidiary

2015: Advisory Fee – 30 days upon receipt of billings; Noninterest-bearing Subscription Payable – Noninterest bearing Deposit for future stock subscription Assignment of liability

900,000

45,227,650

179,726,350

(7,321,342)

Attenborough Holdings Corporation Subsidiary

2015: Advances – within one (1) year; Noninterest-bearing Subscription payable – Noninterest-bearing Officers and Employees subscription Assignment of liability

1,403,186

64,000,000

179,726,350

(7,321,342)

Officers and Employees Employees Advances to officers and employees – Liquidated within one (1) month; Noninterest-bearing Outstanding Receivable

( 2015) 1,884,356

( 2014) 728,167

(2015)

1,283,875 (2014)

270,909

(q) Based on SEC Form 17-C filed on 28 September 2015, the Corporation declared cash dividends as follows:

Declaration Date Record Date Payment Date


(r) Based on the Minutes of the 25 September 2015 Annual Stockholders’ Meeting posted in the website of the Corporation, the results of the resolutions taken up during said meeting are as follows:

12. Resolution 13. Approving 14. Dissenting 15. Abstaining

44. Approval of Management Report for the FY ended 31 March 2015 Approval of Management Report for the FY ended 31 March 2014

45. 73.98% 66.00%

46. N/A 47. N/A

45. Approval of Audited Financial Statements for FY ending 31 March 2015 Approval of Audited Financial Statements for FY ending 31 March 2014

46. 73.98% 66.00%

47. N/A 48. N/A

49. Ratification of all legal acts, resolutions and proceedings of the Board of Directors and of Management, done in the ordinary course of business from 26 September 2014 to 25 September 2015 Ratification of Acts of the Board of Directors

50. 73.98% 66.00%

51. N/A 52. N/A

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53. Ratification of: (a) The execution, delivery and performance of the Comprehensive Surety Agreement with China Banking Corporation as security for the obligations of STI West Negros University, namely: (1) A credit line of P5 million; (2) A long-term loan of P300 million; and, (3) Bridge financing of P20 million, (b) The execution, delivery and performance, as a conforming party of the Amendment and Supplemental Agreement to the P3 Billion Corporate Notes Facility Agreement (the Agreement) by and among STI Education Services Group, Inc., STI West Negros University Corporation and China Banking Corporation, and; (c) The authority of Mr. Monico V. Jacob, the President and CEO of the Corporation to execute and deliver the Comprehensive Surety Agreement and the Agreement on behalf of the Corporation.

54. 73.98% 55. N/A 56. N/A

57. Appointment of SGV & Co. as external auditor 2015 Appointment of SGV & Co. as external auditor 2014

58. 73.98% 66.00%

59. N/A 60. N/A

(s) Based on the Minutes of the 25 September 2015 Annual

Stockholders’ Meeting posted in the website of the Corporation, the details of attendance in said meeting are as follows:

Type of Meeting

Names of Board members/Officers

present

Date of Meeting

Voting Procedure

(by poll, show of

hands, etc.)

% of SH Attending in Person

% of SH in proxy

Total % of SH

attendance

Annual Eusebio H. Tanco Monico V. Jacob Joseph Augustin L. Tanco Ma. Vanessa Rose L. Tanco Martin K. Tanco Paulo Martin O. Bautista Teodoro L. Locsin, Jr. Rainerio M. Borja Jesli A. Lapus – ID Johnip G. Cua – ID Ernest Lawrence L. Cu Officers: Yolanda M. Bautista -Treasurer Arsenio C. Cabrera – Corporate Secretary Ana Carmina S. Herrera – Asst. Corporate Secretary

25 September 2015

Show of hands

13.66%

60.32% 73.98%

(t) Based on the Definitive Information Statement filed on 19 August

2015, the Corporation disclosed the following information with respect to the Definitive Information Statement and Management Report:

16

Number of Stockholders entitled to receive Definitive Information Statements and Management Report and Other Materials

1,247

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by market participants/certain beneficial owners

4 September 2015

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by stockholders

4 September 2015

State whether CD format or hard copies were distributed CD Format were distributed to the stockholders for the past four (4) years

If yes, indicate whether requesting stockholders were provided hard copies

Yes, it was actually stated in the report that we will provide without charge, upon written request from the stockholder, a copy of the Definitive Information Statement, Management Report and Other materials that are being attached to the CD.

(u) Based on SEC Form 23-A filed on 7 July 2015, the Corporation

updated the part on “Investor Relations Program” as follows:

(4) Investor Relations Officer

Franchini Vina Z. Cordova, Investor Relations Office Telefax: 844-9553; Email address: [email protected] [email protected]

(v) Based on SEC Form 17-A for the fiscal year ending 31 March 2015, the Company disclosed the following corporate social responsibility initiatives:

Initiative Beneficiary

CFC ANCOP – Tekton Foundation Inc. - STI will actively participate in a life changing intervention providing sustainable access to education to the poor and marginalized children in Makati, Pasay and Manila through the Child Sponsorship Program of CFC Ancop Tekton Foundation, Inc., a BIR registered donee institution.

Ancop Scholars

JCI Philippines, Inc. - STI Holdings supported the community outreach program of the Junior Chamber International Philippines (JCIP) Ortigas, which will benefit the underprivileged children under the care of The Orange Project. The Orange Project supports deserving underprivileged children of Angono, Rizal. The project’s goal is to forge partnerships with organizations and raise P500.00 for every child, which will give them access to education, healthcare, and character formation. The project currently cares for around 800 children from the indigent families in Angono. JCIP Ortigas Chapter has always been involved in community building activities through various programs and has always put focus in education and health. They solicited the support of several private organizations to help The Orange Project’s education, health, and livelihood activities. STI Holdings and its affiliate companies, STI Education Systems Group and PhilCare, were among the first to pitch in their support. STI led the Project: Library, Education & Skills Enhancement (P.L.E.A.S.E) program where it donated the first four computers for The Orange Project’s computer laboratory, while PhilCare led the Dengue prevention efforts. The advocacy is aligned with what STI Holdings believes in – that every Filipino should be empowered through Education. Through this project, STI Holdings and its affiliate companies were able to do their share for the community by paving the way for some underprivileged children to access education and healthcare. STI Holdings also supported the “Fund Raising to Combat Malaria” Project of JCI Philippines, Inc.

Deserving underprivileged children of Angono, Rizal under the care of The Orange Project



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Community Extension and Outreach Programs STI ESG 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. Alternative Learning System (“ALS”) STI Foundation responded to the call of DepEd for private sector’s participation and support in their ALS program. STI reached out to out-of-school youth aged 15 and above who still have not finished their secondary education and cannot afford to go through formal schooling. The ALS sessions are conducted every Saturday and employ blended and collaborative modes of instruction (face-to-face instructions), e-learning materials (eSkwela), and performance-based assessment in order to prepare and equip the ALS learners with the knowledge required to pass the Accreditation and Equivalency Test given by DepEd. 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 2014-15, the STI Mobile School has travelled to 947 sites and trained 126,716 participants nationwide. Today, a total of six mobile school buses travel across Luzon, Visayas, and Mindanao. STI Foundation conducted special community development projects, outreach programs, and humanitarian services, in SY 2014-15, that aimed to address the needs of the disadvantaged sectors. In coordination with the League of Corporate Foundation, a lecture-seminar on Corporate Social Responsibility (“CSR”) was conducted to 200 students where they learned about the Basic Concepts and Principles and Best Practices of Corporate Social Responsibility. The seminar aimed to promote awareness to students on the importance of CSR. STI Foundation likewise donated 946 pieces of assorted proware items and 1,768 pieces of Basic Education books to the residents of Tahanang Walang Hagdanan. 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, Vista Alegre Granada Relocation Elementary School (VAGRES). 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 P3 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. From SY 2013-14 until SY 2014-15, over 93 houses were built and turned over; materials for 40 partially damaged houses were turned over; and 43 partially damaged houses were repaired. Trainings were also conducted to the locals on various topics such as Home Stay Project: Spiritual Development, Basic Tips on How to Start a Business, and Costing and Basic Recording.

3. The foregoing is in accordance with the records of the Corporation in my possession.

COVER SHEET - STI Education Systems Holdings, Inc

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