Annual Report (March 2020)
Annual Report (March 2020)
Annual Report (March 2020)
0 0 0 0 0 1 1 3 1 5 6
S T I E D U C A T I O N S E R V I C E S G R O U P ,
I N C . ( A P r i v a t e E d u c a t i o n a l I n
s t i t u t i o n ) a n d S U B S I D I A R I E S
S T I A c a d e m i c C e n t e r O r t i g a s - C a
i n t a , O r t i g a s A v e n u e E x t e n s i o n
, C a i n t a , R i z a l
03 3 1 SEC FORM 17-A For Fiscal Year ended 31 March 2020 1st Thursday of September
M S R D NA
Dept. Requiring this Doc. Amended Article Number/Section
Document ID Cashier
STAMPS
SECURITIES AND EXCHANGE COMMISSION
Yes [ ] No [√ ]
Shares of Common Stock Issued and Outstanding are not listed in any stock exchange.
Fixed Rate Bonds is listed in the Philippine Dealing & Exchange Corp. (PDEx).
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Yes [√ ] No [ ]
(b) has been subject to such filing requirements for the past 90 days.
Yes [√ ] No [ ]
13. State the aggregate market value of the voting stock held by non-affiliates of the registrant.
N/A
14. The Company was not involved in any insolvency/suspension of payments proceedings in the last
five (5) years.
15. The March 31, 2020 Audited Consolidated Financial Statements is incorporated by reference in this
SEC Form 17-A (Item 7)
Page 2 of 105
TABLE OF CONTENTS
Item 5. MARKET FOR ISSUER’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 54
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 95
Established on August 21, 1983, STI ESG began with a goal of training as many Filipinos as possible in
computer programming and addressing the information technology (IT) education needs of the
Philippines. Starting as a training center with only two (2) schools, STI ESG initially offered short-term
computer programming courses that were patterned to satisfy the demand of college graduates and
working professionals who wanted to learn more about the emerging computer technology. Shortly after,
STI ESG’s campuses began to grow as it started granting franchises in other locations within Metro Manila
which soon expanded to other key areas in Luzon, Visayas, Mindanao, as well as sites outside the
Philippines. In 2003, management decided to focus its attention on the domestic market and at the same
time remain open to exploring opportunities of going international once again.
Over the years, STI ESG began shifting its focus from short-term courses to college degree programs to
adjust to the changing business environment. In 1995, STI ESG was granted a permit by the Commission
on Higher Education (CHED) to operate colleges and started to roll out four-year college programs
starting with the Bachelor’s Degree in Computer Science. STI ESG then slowly diversified its programs
beyond Information & Communications Technology by introducing new programs in the fields of
Business and Management, Engineering, Healthcare, Hospitality Management, Tourism Management,
Arts and Sciences, and Education.
STI ESG embarked on strengthening its geographical presence nationwide as it aggressively constructed
improved facilities. More STI ESG schools are now veering away from rented commercial complexes and
have moved to bigger and better school-owned stand-alone campuses in strategic locations. All of the
improved campuses house state-of-the-art facilities, spacious classrooms, top-of-the-line simulation
laboratories, and recreational facilities conducive to high academic delivery. To date, there are nineteen
(19) wholly-owned schools with renovated or newly built facilities. In addition, incentives were offered
to franchisees to upgrade their facilities of which thirteen (13) had responded so far.
STI ESG has centralized its efforts into academic quality and started investing in trainings on awareness,
documentation, and internal quality audit to achieve the ISO 9001:2008 certification on February 5, 2015
and the ISO 9001:2015 certification on February 5, 2018. Awarded by the ISO certifying body TÜV
Rheinland Philippines, Inc., both certifications focus on STI ESG’s Learning Delivery System that covers
courseware development and faculty training and certification for the tertiary level. The ISO 9001:2015
certification has also been extended to senior high school and expanded to include student development
programs.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
When the Department of Education (DepEd) announced the K to 12 Program in 2013, STI ESG capitalized
on its nationwide presence and ample facilities to implement the first-to-market approach of the Senior
High School (SHS) program. In 2014, DepEd granted permit to offer early implementation of SHS to 92
private schools nationwide; 67 out of 92 schools or 73% were STI ESG schools which made STI ESG the
largest pioneer in Senior High School. 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 with various specializations.
In 2018, STI ESG and other educational institutions experienced another monumental change in the
education landscape as the Republic Act (RA) 10931 or the “Universal Access to Quality Tertiary
Education Act” (UAQTEA) was officially implemented nationwide. The law covers four (4) salient points:
(1) free tuition and miscellaneous fees in state universities and colleges (SUCs) and local universities and
colleges (LUCs); (2) free technical-vocational education and training in state-run technical-vocational
institutes; (3) student loan programs for tertiary students; and (4) Tertiary Education Subsidy (TES) in
private higher education institutions (HEIs).
STI ESG fully supports the government’s advocacy to provide equal opportunities to the Filipino youth
by making tertiary education more accessible and encourage them to pursue and complete higher
learning. Thus, STI ESG signed a Memorandum of Agreement on December 17, 2018 with the Commission
on Higher Education (CHED) and the implementing organization Unified Student Financial Assistance
System for Tertiary Education (UniFAST) for the enactment of the tertiary education subsidy and student
loan program. More than 2,000 and close to 1,900 STI students qualified to be TES grantees in SY 2018-
2019 and SY 2019-2020, respectively. According to the UniFAST data in 2019, STI Colleges Caloocan and
Las Piñas were among the top 10 private HEIs with the largest number of TES grantees and both schools
received a combined TES subsidy amounting to ₱111.0 million ₱97.7 million, including the student grants,
for SY 2018-2019 and SY 2019-2020, respectively.
Through the consistent efforts of management, the STI brand has been recognized as a provider of high-
quality real-life education.
As a testament to its growing presence nationwide, the STI ESG network has seventy-six (76) schools spread
across Luzon, Visayas, and Mindanao. It is comprised of seventy (70) STI-Branded Colleges and six (6) STI-
Branded Education Centers. Likewise, of these seventy-six (76) schools, thirty-six (37) college campuses
and one (1) education center are wholly-owned while thirty-three (33) college campuses and five (5)
education centers are operated by franchisees.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Batangas Bacoor
Calamba Balayan
Carmona Dasmariñas
Legazpi Rosario
Lipa Sta. Rosa
Lucena Tagaytay
Southern Luzon (19) Naga Tanay
Ortigas-Cainta
Puerto Princesa
San Pablo
Sta. Cruz
Tanauan
Cebu Bohol
Iloilo Dumaguete
Kalibo Ormoc
Visayas (8) Calbayog
Maasin
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Corporate Structure
STI ESG has a total Authorized Capital Stock (ACS) of Five Billion Pesos (₱5,000,000,000.00) divided into
five billion (5,000,000,000) shares with a par value of One Peso (₱1.00) each. Out of the ACS, three billion
eighty-one million eight hundred seventy-seven thousand one hundred seventy (3,081,877,170) shares have
been subscribed and paid-up. Of the total subscribed and paid-up capital stock, seven million eight
hundred forty-one thousand one hundred eighteen (7,841,118) shares are foreign-owned.
STI ESG is a subsidiary of the STI Education Systems Holdings, Inc. (STI Holdings). As at March 31, 2020
and 2019, STI Holdings owns 98.7% of STI ESG.
On September 5, 2019, the BOD of STI ESG approved the amendment of the following provisions to its By-
Laws: (1) change of the principal address from Makati Metro Manila to STI Academic Center Ortigas-
Cainta, Ortigas Avenue Extension, Cainta, Rizal 1900; (2) change the Nominations Committee to Corporate
Governance Committee; (3) change of the fiscal year from starting April 1 of each year ending on March 31
of the following year to starting July 1 of each year ending on June 30 of the following year; and, (4) change
of the date of its annual stockholders’ meeting from every first Thursday of September of each year to every
first Thursday of November of each year. The SEC approved the amendments on November 4, 2019. The
Bureau of Internal Revenue (BIR) approved the change in accounting period in August 2020.
STI ESG’s ₱3.0 billion bond issue has been assigned by Philippine Rating Services Corporation (PhilRatings)
an Issue Credit Rating of PRS Aa, in its report to the Securities and Exchange Commission (SEC) dated
January 23, 2017, which meant that the Company’s proposed debt issue, as of date of report, is of “high
quality and is subject to very low credit risk.”
According to PhilRatings, “Obligations rated PRS Aa are of high quality and are subject to very low credit
risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. PRS Aa
is the second-highest rating category on PhilRatings’ existing credit rating scale.”
On March 23, 2017, STI ESG listed its ₱3 Billion Series 7-year Bonds due 2024 and Series 10-year Bonds due
2027 on the Philippine Dealing and Exchange Corp. (“PDEx”) secondary market. This is the first tranche of
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
its ₱5 billion fixed-rate bonds program under its 3-year shelf registration with the SEC. The 3-year shelf
registration ended on March 9, 2020. The Bonds carry coupon rates of 5.8085% and 6.3756% for the 7-year
and 10-year tenors, respectively. Interests are payable quarterly in arrears on June 23, September 23,
December 23, and March 23 or the next business day if such dates fall on a non-banking day, of each year
commencing on June 23, 2017, until and including the relevant maturity date. The proceeds of the bonds
have been fully utilized as at March 31, 2019.
The ₱3.0 billion bond issue is the first tranche of its ₱5.0 billion fixed rate bonds program under its 3-year
shelf registration with the SEC. The proceeds of the first tranche of the debt securities program have been
earmarked for the expansion of STI ESG campuses, refinancing of short-term loans incurred for the
acquisition of land, and other general corporate requirements (see Item 2 Properties/Campus Expansion).
Business Development
STI ESG is the largest subsidiary of STI Holdings, a publicly-listed company. STI ESG is engaged in
establishing, maintaining, and operating educational institutions. It derives its main revenues from the
tuition and other school fees of its owned schools, and royalties, and other fees for various educational
services provided to its franchised schools.
At present, STI ESG offers secondary (senior high school) and tertiary (college and TESDA) programs, as
well as post-graduate and associate programs. The colleges of STI ESG offer associate/baccalaureate
degrees and technical-vocational programs in the fields of Information and Communications Technology
(ICT), Business and Management, Hospitality Management, Tourism Management, Arts and Sciences,
Engineering, and Education. These programs are accredited by the Commission on Higher Education
(CHED) and/or the Technical Education and Skills Development Authority (TESDA), as may be
applicable. Also accredited by TESDA, the education centers of STI ESG offer technical-vocational courses
for information and technology, multimedia arts, hospitality and restaurant services and tourism and
events management, among others.
Enrollment
The education landscape in the Philippines has changed with the introduction of the K to 12 program which
in summary adds two (2) years prior to tertiary education. For the schools in the Philippines that offer
tertiary education, similar to STI ESG, this meant two (2) academic years, that is, SY 2016-2017 and SY 2017-
2018, with significantly reduced and minimal incoming college freshmen students. This threat has been
constructively converted into an opportunity by the Company where STI ESG schools sought and were
granted by DepEd permit to offer Senior High School.
STI ESG reported total enrollment of 96,531 and 76,841 at the beginning of SY 2017–2018 and SY 2018-2019,
respectively. For SY 2019-2020, the STI Network reported a total enrollment of 74,798 at the start of the
school year.
The STI Network held the graduation of over 30,000 Grade 12 students who belonged to the first batch of
SHS graduates under the K to 12 program at the end of SY 2017-2018 and received a lower than expected
turnout of college freshmen enrollees in SY 2018-2019. The Group, on the other hand, registered a 44%
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SEC Form 17 – A
As of March 31, 2020
increase in new student count enrolled under the CHED programs in SY 2019-2020, resulting to a 6%
increase in total CHED student count year-on-year. The average percentage of students retained in a
semester in SY 2017-2018 was at 97.8% and slightly went up to 98.2% in SY 2018-2019. Retention rate in SY
2019-2020 is 98.0%. Meanwhile, the average percentage of students who migrated to the succeeding
semester in SY 2017-2018 was 92.6% and 91.2% in both SY 2018-2019 and SY 2019-2020, respectively.
The shares of associate and baccalaureate degree programs, technical-vocational programs, and senior high
school in the enrollment for SY 2017-2018 were at 42%, 2%, and 56%, respectively. Enrollment mix posted
in SY 2018-2019 was 50% for associate and baccalaureate degree programs, 2% for technical-vocational
programs, and 48% for senior high school tracks and specializations. Meanwhile, the enrollment mix in SY
2019–2020 was at 54%, 3%, and 43% for associate and baccalaureate degree programs, technical-vocational
programs, and senior high school tracks and specializations, respectively.
Graduates
In SY 2017–2018, STI ESG generated 12,638 tertiary graduates for the first and second semesters.
Concurrently, the network also witnessed the graduation of 31,386 Grade 12 students who belonged to the
first batch of senior high school graduates under the K to 12 program following the nationwide
implementation of DepEd in 2016. Meanwhile, for SY 2018-2019, there were 13,270 tertiary graduates for
the first and second semesters while 17,514 students graduated from senior high school. In SY 2019-2020,
classes of SHS students were completed as of March 31, 2020 while classes of tertiary students for the second
semester were suspended due to the implementation of the enhanced community quarantine. Tertiary
students were given three options to complete the second term of SY 2019-2020 namely online learning,
offline learning, and face-to-face classes. About 94% of the tertiary population opted for online/offline
learning. These students completed the second term of SY 2019-2020 by taking the final examinations via
STI ESG’s eLearning Management System or eLMS in July 2020. The rest opted for face-to-face classes and
will continue and finish their second term studies with face-to-face classes combined with applicable
learning modes within the next school year. For SY 2019-2020, there were approximately 4,832 tertiary
graduates for the first and second semesters while 15,980 students graduated from senior high school.
An average of 5% increase in the tuition fees and other school fees was applied in SY 2017-2018. No
increases in tuition fees and other school fees were implemented in SY 2018-2019 and SY 2019-2020 for both
college and senior high school.
STI ESG regularly conducts market studies to determine what programs, both degree and technical-
vocational, are needed by the industry and the market. Moreover, revisions to existing programs are
implemented to meet changes in the identified needs, as well as changes in government regulatory
requirements.
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As of March 31, 2020
Existing course offerings are likewise reviewed as needed. The streamlining of program curricula in
response to the needs of the market and developments in the industry drives the rationalization of STI
course offerings. Thirteen programs were revised and five new programs were developed in SY 2017-2018.
Meanwhile, four new programs were developed and one program was revised in SY 2018-2019 and 18
programs were updated for SY 2019-2020.
Standardized Courseware
STI ESG develops courseware to ensure the standard delivery of courses across all campuses in the
STI ESG network. These are sets of teaching materials used by the instructors which include the course
syllabus with the course outline that sets the general objectives of the course, presentation slides, the class
hand-outs and other materials for use throughout the course, with accompanying instructors’ guides. The
instructors’ guides identify the specific objectives of each class session, the appropriate teaching
methodologies to be used, and how the provided materials are to be used to achieve the set objectives. The
courseware materials are suited for delivery using LCD technology and other multimedia devices.
As of this writing, STI ESG has developed courseware for over 500 courses and new courseware materials
are being developed as new courses and programs are offered. Moreover, existing courseware materials
are regularly revised and updated to keep pace with recent developments in the target industries.
In SY 2019–2020, 71 courseware materials were developed and revised for Arts and Sciences, IT and
Engineering, Business and Management, Tourism Management, and Hospitality Management, while 6
courseware materials were developed and updated for Senior High School. These courseware materials
were embedded with activities leading toward the attainment of the STI 4Cs — Character, being Change-
adept, being a good Communicator, and being a Critical Thinker — the required skills and attitude of top
industries worldwide. The materials were also Outcome-Based Education (OBE)-aligned with assessment
tools, rubric, and performance tasks. In addition, 14 courseware materials for SHS were uploaded on the
eLMS in time for the Summer Remedial Program 2019. These are self-paced study versions of the regular
SHS subjects with minimal teacher intervention.
STI ESG’s Academic Research Group or ARG develops the Standardized Periodical Examination for the
preliminary, midterms, pre-finals, and finals period. In SY 2017-2018, the group developed 810 exams in
the first semester and 749 exams in the second semester. The following year, the group developed the STI
Test Bank System and prepared 1,119 exams for the first semester and 692 exams for the second semester.
In SY 2019-2020, 57 more exams were added to the Test Bank.
Milestones
STI ESG remains steadfast in its commitment to strive for academic excellence that is directed towards
the development of the institution and the improvement of the quality of its students and graduates.
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As of March 31, 2020
STI Colleges San Francisco, Iligan, Malaybalay, and Valencia were granted college status by CHED
effective SY 2018-2019. STI College Tagum was also granted college status effective SY 2019-2020.
STI ESG is one of the pioneer institutions who was awarded with the ISO 9001:2015 Quality Management
System (QMS) Certification in SY 2017-2018. This is a certification upgrade for its Learning Delivery
System (LDS) with emphasis on risk-based thinking, improved applicability for services, and increased
leadership requirements. The scope of the LDS was likewise extended to the Senior High School Level and
was expanded with the inclusion of the Student Program Development.
The certificate was granted a year ahead of the required transition period. The transition plan started in
2016 wherein a series of activities were conducted to ensure successful fulfillment of requirements such as
intensive gap analysis, brainstorming sessions, process reviews, process mapping, risk identification,
assessment, and treatment planning, among others.
In SY 2014–2015, STI ESG received its ISO 9001:2008 certification for its Learning Delivery System. This
system covers development of tertiary level courseware and curriculum, faculty training, and faculty
certification. The network worked to fulfill the requirements that included extensive research; training
sessions on proper documentation and internal quality audit; documentation of policies, processes, and
work instructions; and orientations given to STI ESG employees.
The ISO 9001:2008 is an international certification that indicates an institution’s effectiveness and
consistency in managing and carrying out its system regulation. The ISO certification has likewise verified
the institution’s world-class performance in its education delivery.
STI ESG and STI Foundation were recognized in the ASEAN PR Excellence Awards for their mobile school
program known as the Computer Lab on Wheels: Driving Education Where IT Matters on April 29, 2019
at Hilton Kuching Hotel, Malaysia.
The STI Mobile School won Best PR Programme in Southeast Asia after being nominated by the Public
Relations Society of the Philippines (PRSP) and having gone through a series of judging from a panel of
jury across ASEAN countries.
The award-giving body was led by the ASEAN Public Relations Network (APRN) in collaboration with
Institute PR Malaysia, and supported by Sarawak State, and Global Alliance for Public Relations and
Communication Management ― the confederation of the world’s major PR and communication
management associations and institutions around the world.
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As of March 31, 2020
STI ESG bagged two Gold Anvil Awards for the Student’s Career Opportunity and Personality Evaluator
(SCOPE) and two Silver Anvil Awards for the STI Career Camp during the 55th Anvil Awards: Gabi ng
Parangal on February 28, 2020 at the Manila Hotel. Presented annually by the PRSP, the premier
organization of PR professionals in the country, the Anvil is a symbol of excellence in the field of public
relations (PR) and recognizes outstanding and laudable PR programs, tools, and practitioners assessed by
select PR professionals.
The STI SCOPE won two Gold Anvil Awards for providing the youth with knowledge and tools that will
help them arrive at informed decisions for their education and career path. Meanwhile, the STI Career
Camp claimed two Silver Anvil Awards as recognition of the institution’s effort in preparing individuals
for senior high school, college, and employment.
STI ESG and STI Foundation won the highly-coveted Grand Anvil Award and two Gold Anvils for the
mobile school program known as Computer Lab on Wheels: Driving Education Where IT Matters. The
Grand Anvil was awarded to Mobile School for being an outstanding PR program, while the Gold Anvils
were under the specialized PR program advocacy campaign and PR program on a sustained basis
(education/literacy) categories. The awarding ceremony was held at the Marriot Hotel Manila in Pasay
City on January 30, 2019.
STI ESG’s iLearn and Share (iLS) is an exhibition of performance tasks in which s enior h igh s chool
students are assessed based on their products and/or performance. The performance tasks are proof of
how well they understood and learned the task. Students can then apply their learnings to real-life
situations.
In SY 2018-2019, Grade 12 Science, Technology, Engineering & Mathematics (STEM) and Humanities &
Social Sciences (HUMSS) students, among other academic and TVL strands across STI's network of
campuses exhibited their innovative products or services and inventions through the SHS-iLS Expo. The
expo’s culminating activity is a simulation exercise of the real world which allows the Grade 12 students
to become not only employees but also employers and entrepreneurs. Also present during the expo were
representatives from the academe and industry sectors, STI alumni, business owners, government
agencies, parents, and fellow students, many of whom acted as “potential investors.” These “potential
investors” then voted for the best student exhibits, startup enterprises, products, and services.
Some of the standout projects were: STI College San Fernando's electronic biogas digester, solar-powered
grass cutter, solar-powered automated watering system and seed-sowing machine, plastic-recycling and
brick-manufacturing machine, solar-powered animal and insect repellant, floodwater filtration system,
canal waste collector, and charcoal made from water lilies; STI College Global City's survival hiking bag
with water filtration system, sewage waste segregator, thermo-electric stove, solar panel lamp with charger
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As of March 31, 2020
and projector, and 360 monitoring device for classroom; STI College Cubao's portable wind turbine, flood
sensor with alarm, and gold lip balm; STI College Muñoz-EDSA's chicken feathers for bioplastic, concrete
cylinders with sugarcane fiber, soundwaves as power source, malunggay and piperine solution as cockroach
pesticide, and curcin toxin as organic pest control against bedbugs; STI College Pasay-EDSA's neem-based
mosquito repellent; STI College Ortigas-Cainta's pepper spray with flash and alarm system, water-filtering
straw, scar removal cream, paper made from banana stem fiber, and magnet-powered flashlight; STI
College Recto's mosquito repellent candle and coal lipstick and eyeliner; and STI College Quezon Avenue's
whistle-operated anti-theft device and wooden desk organizer with sound amplifier, among many other
creative ideas.
STI senior high school students joined over 150 engineers, hobbyists, and crafters from all over the country
for the third installment of Manila Mini Maker Faire (MMFF) held at The Mind Museum on June 22-23,
2019. During the two-day exhibit, select STI students showcased innovative projects that highlight
sustainable technology which they made for their Senior High School (SHS) Expo for industry
professionals.
These projects are: (1) Portable Wind Turbine from STI College Cubao that shows an alternative source of
electricity by utilizing wind energy with the case and wind panes that were all made from recycled
materials; (2) Flood Detecting Alarm Stand also from STI College Cubao that produces a powerful sound
to alert the community of rising flood levels; (3) WhideSearch from STI College Quezon Avenue that uses
sound recognition technology to locate phones wherein it will emit light and activate an alarm; (4)
WeSurvive Bag from STI College Global City that was designed with waterproof and tear-resistant fabric
and equipped with emergency essentials such as portable water filter and solar-powered charger and
flashlight; (5) Propel from STI College Makati (now Pasay-EDSA) that is made from the extracts of the
Philippine neem tree and other all-natural ingredients which makes it an effective repellant for common
pests; (6) La Naturalez from STI College Recto that is infused with lavender and citronella scents and
housed in a non-flammable holder made of sea salt which makes it an effective aromatherapy and insect
repellant; (7) Concrete Cylinders with Sugar Cane Fiber from STI College Muñoz-EDSA that incorporate
sugar cane fibers into concrete cylinders to encourage recycling and are as strong as the regular concrete
though they are made of biodegradable materials; (8) Kraft Paper from STI College Ortigas-Cainta that is
made from recycled banana stem fibers and offers an excellent alternative to packaging needs; (9) Solar-
powered Grass Cutter from STI College San Fernando that runs on 100% solar energy and can easily help
the farmers with their farm duties through its ergonomic design and metals blades; (10) Flood Water
Filtration Machine from STI College San Fernando that is built with six types of filters and can easily
convert flood water into clean water; (11) Automatic Canal Waste Collector also from STI College San
Fernando that can gather plastic waste from the water systems and runs effectively on solar energy; and
(12) Wooker from STI College Quezon Avenue that is both a functional organizer and a music amplifier
that aids in managing desk space more effectively.
In SY 2019-2020, however, the SHS-iLS Expo was cancelled due to the implementation of the enhanced
community quarantine in key cities nationwide aimed at mitigating the effects of the global COVID-19
pandemic.
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PSCS is a student administration system that facilitates student admission, enrollment, assessment, and
grading, among others. Paired with Report Services, a web-based application hosting the reportorial
requirements of STI ESG, the PSCS was launched in SY 2015–2016 to STI’s network of campuses. It catered
to both the college and senior high school students of STI ESG. The STI schools are able to access numerous
reports that are available real-time and which they can also modify according to their own requirements.
The reports are classified under four categories — Academics, Financials, Enrollment, and Government-
mandated reports — using the SQL Server Reporting Services 2008 R2.
In SY 2018-2019, the PSCS was further enhanced with these functionalities: (1) integrates Microsoft
products to create utilities that increased functionality in Peoplecode application; (2) easily delivers the
required development of reports such as SHS Report Card, SHS Form 9, and more; (3) improves the process
of students’ assessment; and (4) provides a facility for all users to have firsthand information about PSCS
updates or upgrades.
Developed in SY 2018-2019, the Records Management System (RMS) is a recordkeeping application system
that captures or scans, manages, and provides access to student documents. It routinely captures all records
of the students from the admission and graduation to continued engagement with STI. It also organizes
records and protects such from unauthorized alteration, destruction, or transfer. Moreover, the RMS
provides an audit trail of the people who have created and updated the records, and at the same time,
provides ready access to all relevant records. The RMS was rolled-out to all campuses in SY 2019-2020.
STI ESG uses eLMS, a software application running on Amazon cloud, to better manage the delivery of
educational courses and/or training programs to its students. The curricular course materials aim to
augment classroom learning while the extra-curricular course materials are prepared to further nurture
student development. The eLMS features a built-in support for collaboration through various tools such
as wikis, forums, and discussion groups; an internal messaging system with bidirectional support for
emails and text messaging; and a built-in portfolio system which students can use to collect works to
support learning and/or achievements.
STI ESG implemented a blended learning model for the past six years using eLMS for students to continue
their studies at home uninterrupted despite any physical classroom disruptions.
This free mobile app caters to both STI employees and students. Both apps are available for download on
the Android platform only.
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As of March 31, 2020
The One STI App for employees, launched in May 2018, houses major STI applications that perform
coordinated functions, tasks, and activities for the network. For now, the app is running essential HR and
Finance-related transactions for the Head Office.
On the other hand, the One STI Student Portal, is a must-have for both the senior high school and tertiary
students since it allows them access to their respective records such as grades and academic performance
per subject, day-to-day class schedule with room assignments and professors, and updates on any
outstanding school fees and payment schedules. In addition, students will be able to catch up on current
STI news and announcements from various campuses nationwide. The One STI Student Portal may be
accessed via web or by downloading the app. Since its roll-out in December 2018, the app has registered
58,345 active users while there were 21,930 registered users via web.
Leaders Convention
More than a hundred STI leaders attended the 32nd Annual STI Leaders Convention held at the Hue Hotels
and Resorts in Boracay from May 1-3, 2019. Mr. Eduardo Mapa, Jr., an expert in the field of digital
marketing, advertising, strategic planning, public relations, media planning and buying, and publisher
sales, shared with the delegates how digitalization has transformed the playing field in advertising and
marketing and the role of technology in new consumer connections.
STI ESG’s VP for Communications & MIS, Mr. Elbert de Guzman, and VP for School Operations, Mr. Resty
Bundoc, also shared network updates on marketing and operations.
The STI Test Bank System is a repository of test questions that would be used during the periodical
examination period for the entire STI network of schools. This web application and its database are hosted
on Cloud and are seen to hold big data in watertight control.
The system ensures that a pre-determined number of test questions are drawn for each level of difficulty
and each item is used for a specific period to ensure that it is not repeatedly used within a term. The test
bank was likewise designed to follow certain workflows so that editing, correcting, and approvals of the
exam materials are properly controlled and aligned with procedural rules.
The Centralized Printing of Diploma and Transcript of Records (CPDT) System, now anchored on the
PSCS, serves both the tertiary and senior high school graduates. The academic documents, upon request
of the STI campus, are generated at the STI Head Office. These academic documents are then delivered
either to the requesting school or the students’ preferred location. The documents are also printed with
enhanced security features such as the use of check paper prescribed by the Philippine Clearing House
Corporation which is sensitive to 36 falsifying agents, hidden fibers, and unique serial numbers, among
others. This is to ensure that all information on the documents have been authenticated and to prevent
fraud and proliferation of dubious documents.
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Faculty Achievements
STI ESG and UnionBank launched the Blockchain Xcellator Experts Program on October 5, 2019 that is
intended to strengthen the STI faculty members and academic researchers’ knowledge about blockchain.
Blockchain is known as the record-keeping technology behind the most popular digital currency in the
world, Bitcoin. The said technology is a public ledger that records not only the assets but also the
transactions of a business. It is also acknowledged for its capability to change how various industries
manage data and information.
Seventeen (17) participants from the STI Head Office and STI Colleges Global City, Las Piñas, Ortigas-
Cainta, and Pasay-EDSA underwent the extensive mentorship program from industry experts where they
learned about the blockchain technology. At the end of the eight-week course, nine participants
successfully passed the assessment and became Certified Blockchain and Ethereum Experts.
Hackathon
STI College Vigan’s group of ICT faculty members John Carlo Malamug and Victoria Kristen Sison won
in the professional category of Impact Hackathon on October 30-31, 2019. The event is an on-the-spot
coding marathon organized by Impact Hub Manila that aims to tap the best coders and IT professionals
in the Philippines to create new solutions for the social problems of the world. The group created a system
named FIX IT, an online service provider, and went on to represent Vigan City in the grand national event
held on November 19, 2019. For making it to the nationals, the team received a six-month incubation or
training program and a cash prize.
Student Achievements
In SY 2019-2020, the STI ESG community proudly won accolades in different fields from information
technology and culinary to sports competitions. Some students and alumni also competed and won in
international competitions.
International Competitions
With grit and determination, Brandhon Kyrielle Aquino from STI College Caloocan proved that he could
withstand any difficulty in juggling both his school life and training as a member of the Philippine
National Sailing Team. This was proven when he earned a bronze medal in the Sailing Category during
the 2019 Southeast Asian (SEA) Games.
Theresa Diana Pazcoguin, a BS Tourism Management graduate of STI College Tarlac, meanwhile proved
that she has what it takes to be a beauty queen as she took home the 1st Runner-up title in the Miss Tourism
Queen Worldwide 2019. The pageant aims to gather diverse individuals around the world and let them
showcase the splendor of their nation’s citizens and crafts as well as culture and cuisine. It focuses on
promoting diversity and harmony by exhibiting majestic sights, colorful festivities, and exquisite food
from various countries.
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STI College Zamboanga’s BS Business Administration alumna Honey Firmeza, together with her dance
partner Jaime Marcial, also made the Filipinos proud by bagging the Championship title in the Amateur
Rising Star Latin as well as placing 4th in the Asia Amateur Latin and 5th in the Seoulcup Open Amateur
Latin of the 19th Seoulcup International Dance Championship on September 1, 2019 at Seoul Grand Hilton
Hotel in Seoul, South Korea.
International Summit
STI College Cagayan de Oro sent sophomore BS Information Technology student John Carlos Montejo to
the Developers Student Club (DSC) South East Asia Summit in Kuala Lumpur, Malaysia as one of the 90
student representatives from South East Asia on September 9, 2019. The summit aims to assess the issues
faced by IT graduates in the technology industry by immersing the participants in real-life problems so
that they can build action plans to address concerns faced by their universities.
Aaron Jay Quitain, a BS Tourism Management alumnus from STI College San Pablo, represented the
Philippines in the Bali Asia International Model United Nations (BAIMUN) II on January 18-21, 2020 at
the Bali International Convention Centre in Bali, Indonesia. Hosted by International Global Network, the
event is a simulation of an actual United Nations conference where participants were tasked to solve a
global issue through research, drafts, lobbying, and debates to pass a suitable resolution. Together with
243 delegates from 23 countries, Aaron also had the opportunity to also discuss issues such as the
Philippine government’s role in ensuring and promoting sustainable tourism.
Board Exam
With a rating of 89.40%, NAMEI’s Carlo Marasigan topped the 2019 Naval Architecture and Marine
Engineering Licensure Examination out of 89 board passers, while his classmates Adnan Paul Lucero and
Marianne Castor both placed sixth with a rating of 87.20%.
Festivals
Fifteen senior high school Culinary Arts and 30 BS Hospitality Management students from STI College
Balagtas wowed shoppers as they showcased on September 10, 2019 a giant Filipino rice cake, known as
“biko,” during the launch of SM City Marilao’s Bulacan Food & Art BESTival, an annual event that
displays the best in North Luzon. The cooking process of the rice cake took the students a total of 48 hours
to finish, but with the guidance and support of their mentors, they confidently overcame the challenges
encountered along their way and successfully produced the giant biko.
STI College Ormoc likewise dominated the most-anticipated Piña Festival 2019 in Ormoc City for three
consecutive years. The school also received the following recognitions: Best in Ritual Grand Showdown,
Best Festival Costume, Best Choreography, and Best Street Dancing. The Piña Festival is celebrated
annually to promote the city’s agricultural produce, the Ormoc Queen Pineapple, which is said to be one
of the sweetest pineapples in the world.
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Mobile Documentary
Freshman BS Information Technology student from STI College Pasay-EDSA, Gerome Viñas, emerged as
the Grand Winner of Bayan Mo, Ipatrol Mo (BMPM) Digitales: A Mobile Documentary Contest on October
25, 2019. Powered by ABS-CBN’s Integrated News and Current Affairs and in partnership with UNESCO
and the Asian Institute of Journalism, Digitales is a mobile documentary contest that aims to combat
disinformation online. With around 50 entries nationwide, three other STI campuses also made it to the
Top 20 ― STI Colleges Ortigas-Cainta, Novaliches, and Recto.
Hackathon
Students from STI College Caloocan were declared as the Overall Champions in the Coca-Cola
Philippines’ Code Festival 2019, a hackathon competition for college students, held on November 25, 2019.
Team PrograDeation consisted of sophomore BS Information Technology students Katzuki Fushimi and
Justine Santiago as well as freshman BS Business Administration student Rovic Morales.
Using the Microsoft Power Platform, the PrograDeation team came up with a mobile application entitled
“PeraBubot,” an information system that records the transactions of a junkshop. It aims to not only help
junk-shop owners collect garbage but also aid the community in controlling the increase in solid waste.
STI College Vigan’s BS Computer Science students Tristan James Adolfo, Joshua Rosueta, Tristan Joshua
Uniana, and Charrie Rafanan dominated the Impact Hackathon. The Impact Hackathon event was an
official entry to the Guinness World Records as an attempt to land the title, biggest hackathon competition.
The group, which is named Team Hackdogs, created Herbal Plant, an augmented reality that aims to
provide information on herbal plants. The team represented Vigan City in the grand national event where
Team Hackdogs landed in the top 15, qualifying them for a one-year incubation program, intensive
training, access to expert mentors, network and co-working, and a cash prize.
Sports Competitions
Achievers from STI College Ormoc once again participated and brought home recognitions during the
Siglaro 2019 held from August to September 2019. Siglaro is an annual interschool sports competition in
Ormoc that brings together young athletes through various competitions such as basketball, volleyball,
badminton, swimming, archery, wushu, taekwondo, and chess, among others.
The school’s Grade 11 Accounting, Business, and Management student Angel Mia Sesmundo earned gold
in the chess tournament under the girls’ category. Meanwhile, Zen Andre Doria, Grade 11 Science,
Technology, Engineering, and Mathematics student, also bagged a gold medal for the poomsae event in
taekwondo. Poomsae is a Korean term for taekwondo in which an individual is trained in a series of
defined patterns of defense-and-attack motions.
Mhariel Claire Sacayanan, a Grade 12 Tourism Operations student from STI College Global City, also
grabbed a gold medal in the Taekwondo Competition of the APSA-TAPAT (Association of Private School
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Administrators-Taguig City & Pateros) League 2019 held in November 2019 at the Signal Village National
High School in Taguig City.
Students from STI College San Jose likewise made the STI community proud by bringing home different
awards from the Division Meet 2019, organized by DepEd and participated in by both public and private
schools in the city. Grade 11 Culinary Arts student James Nixon Plazo bagged the Championship title in
the Billiards Competition while Grade 12 Culinary Arts student Allen Jhoy Andres emerged as the
Champion in the Pencak Silat Contest. Meanwhile, Grade 12 IT in Mobile App and Web Development
student Joshua Maducdoc placed 1st runner-up in the Table Tennis Competition.
The newbie duo of Al-Hamed Guiamal and Ashraf Isra, both sophomore BS Information Technology
students from STI College Cotabato, meanwhile bagged the first runner-up title in the SHAPERS Beach
Volleyball Tournament 2019 held at Cotabato City State Polytechnic College (CCSPC) on August 3-4, 2019.
The duo faced the national champions of SCUAA (State Colleges and Universities Athletic Association)
during the semi-finals.
Culinary Competitions
On the other hand, STI College Calamba’s Grade 12 Culinary Arts students Trina Mikaela Java and Mark
Carlo Palacio raised the bar high after being proclaimed as Champions in the 3rd Sweet and Salty
Experience Recipe Cooking Contest which was spearheaded by the Cooperative and Livelihood
Development Department of Calamba City on October 4, 2019. The cooking contest encourages the
participants to create their own recipe incorporating the main ingredients produced by the local farmers.
With this, Trina and Mark decided to use pineapple as the main ingredient of their winning dish called
“Pineapple Pastillas.”
Tourism Competitions
Sophomore BS Tourism Management students Mayuree Bacuño and John Michael Parcero from STI
College Puerto Princesa impressed the audience when they were declared as champions in the Airline
Safety Demonstration category of the 1st Regional MIMAROPA Tourism and Hospitality Skills
Competition on September 18, 2019 at SM City Puerto Princesa. As champions, Mayuree and John received
a scholarship for the 15-day Flight Attendant Training Program courtesy of PTC MIL-COM Aviation
Training Center.
Skills Competition
STI College Koronadal grabbed the coveted Overall Champion title in the T’nalak Skills Competition as
its students reaped awards in different categories: Culinary Skills (Champion), Restaurant Service and
Table Setup with Skirting (Champion), Table Napkin Folding (Silver), Bartending (Silver), Cake
Decorating (Silver), Web Design (Silver), Waiter’s Relay (Bronze), and Flower Arrangement (Bronze).
Fifteen schools within the province participated in the competition.
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Please visit www.sti.edu for prior years’ 17A reports of STI ESG for the list of achievements in previous
years.
STI ESG provides its faculty members development programs that are designed as a system of services,
opportunities, and projects that assist faculty members in acquiring competencies necessary in performing
their respective functions effectively.
The Courseware-based trainings (CBT) are training programs held during semestral and summer breaks
for all faculty members from wholly-owned and franchised schools that aim to improve the teaching
methodologies and content knowledge for specific courses. Courses offered for training vary from year-to-
year depending on the results of the needs analyses of the faculty members of the whole STI ESG network.
Academic Heads and Assistant Principals underwent trainings to better understand and appreciate their
roles within the school operations in SY 2017-2018. There were 132 participants in the said training that was
conducted in May 2017. During the same school year, 154 Program Heads across the network also
participated in a training aimed to strengthen and harmonize OBE implementation, and 237 faculty
members attended the APTIS Advanced assessment in collaboration with the British Council. In this
training, the faculty members’ proficiency in speaking, writing, listening, and reading the English language
was assessed. British Council also sponsored another workshop on English as Medium of Instruction that
was attended by 59 faculty members from select campuses in Metro Manila.
In SY 2018-2019, the institution launched STI aHead: Academic Heads Development Training 2018.
Attended by 76 Academic Heads nationwide, this training intended to re-orient and enhance the
understanding of the duties and responsibilities of an Academic Head in three (3) key areas: academic
program management, faculty development, and student development. Another major training also
conducted within the same school year was the Program Heads Training 2018. With 213 participants, the
training focused on preparing the Program Heads for their roles in academic program management, faculty
supervision and development, and student development and support. This training, moreover, aimed to
sustain STI’s OBE effort by building the Program Heads’ skills in the areas of facilitation and use of various
teaching tools.
The training for Academic Heads continued in SY 2019-2020 focusing on evidence-based problem-solving
and decision-making for academic operations. The three-day training was attended by 71 Academic Heads
from STI campuses nationwide.
During the same school year, a Professional Culinary Arts training was also conducted among 26 faculty
members. The training aimed to assist schools who were planning to offer the new Professional Culinary
Arts (PCA) program. After the training, the participants also applied for and passed TESDA’s National
TVET Trainer Certification in the following areas: Cookery NCII, Commercial Cooking NCII, Commercial
Cooking NCIV, and Bread & Pastry Production NCII. Another training that was held in support of the PCA
program was the Essentials of Culinary Arts training that was attended by 68 faculty members. Rounding
up the trainings for SY 2019-2020 was the SAP Faculty Training attended by 94 faculty members. This was
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conducted to better prepare the faculty members for the integration of SAP in select Accounting and IT
programs.
STI ESG also administers a Faculty Competency Certification program (FCC) which serves to evaluate a
faculty member’s knowledge of a particular course to ascertain that he or she has the minimum level of
competence needed to teach that course. Certification requirements include passing a comprehensive
certification exam and garnering above average faculty evaluation ratings from superiors, peers, and
students.
In SY 2017-2018, 1,513 faculty members were certified and 2,916 certificates were released. The numbers
further increased in SY 2018-2019 with 3,327 FCCs granted and 11,346 certificates released. In SY 2019-2020,
3,824 FCCs were granted and 10,834 certificates were released.
STI ESG also opened the Graduate Studies Assistance Program for Master in Information Technology for
part-time full-load faculty members. This assistance program features a socialized tuition scheme based on
the enrollee’s capacity to pay which would require the faculty member to pay only a portion of the tuition
and other school fees for every semester. For SY 2019-2020, 12 faculty members enrolled in the program.
Student Development
STI ESG believes that learning should not be confined within the four corners of the classroom. To ensure
that its graduates will be equipped with a well-rounded education that will help them reach their highest
potential, STI ESG allows students to explore, enjoy, and learn through a wide array of academic, co-
curricular, and extra-curricular activities. For SY 2019-2020, all sports competitions, which had been set for
March 2020, were cancelled due to the implementation of the enhanced community quarantine in key areas
in the country in response to the COVID-19 pandemic.
Since 1995, the STI NYC has been an annual venue where students are provided with opportunities to learn
the latest trends from industry leaders and motivate them to apply the values and information that they
have gained with the objective of contributing to their school and community. The theme and topics vary
every school year but always focus on alternative and innovative learning to discover the latest trends in
technology, acquiring the most in-demand and job-ready skills, and enhancing specific values anchored on
attributes that a model citizen should exhibit.
On February 21, 2017, CHED issued a memorandum on the imposition of moratorium on field trips and
other similar activities covered under CHED Memorandum series order no. 17. In view of this, certain
activities such as convention of the students, hotel immersion, culinary and tourism exposure, bartending
seminars, and educational tours were cancelled. The moratorium was lifted during SY 2017-2018. The
23rd STI NYC was then held in SY 2018-2019 and attended by 28,511 delegates from 10 legs: Legazpi, San
Fernando, Baguio, Cagayan de Oro, Davao, General Santos, Kalibo, Bacolod, Cebu, and a combined leg for
Metro Manila and South Luzon at Filinvest Alabang. For SY 2019-2020, a total of 14,152 students attended
the convention from eight legs: Cebu, Iloilo, Bacolod, San Fernando, Baguio, Davao, General Santos, and
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Naga. Two legs scheduled in Cagayan de Oro and Metro Manila were cancelled following the nationwide
implementation of community quarantine measures due to the global COVID-19 pandemic.
The TNT is an annual academic competition that tests the competencies of students on impromptu speech,
essay writing, mobile app development, cooking, cake and table design, flairtending, tour guiding, and
general knowledge. Over the years, specific competitions comprising the TNT have been enhanced to
ensure that the competitions’ objectives are met. STIers also witnessed the launch of three new competitions
in SY 2017-2018 ― Codefest, Travelogue, and Mix ‘n Flair.
For SY 2017–2018, 1,022 students participated in the competitions. The number increased to 4,226 in SY
2018-2019 and 5,903 in SY 2019-2020.
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. In SY 2017-2018, 922 students from STI campuses
nationwide participated in the TNS. The number of participants registered in SY 2018-2019 was 1,079 and
1,267 in SY 2019-2020.
Talent Search
The STI Talent Search uncovers the innate talent of STIers nationwide ― from singers and musicians to
dancers and up-and-coming models. Every year, all STI campuses nationwide send a total of over 100
contestants to compete in nine (9) regional sites before advancing to the National Finals in events like the
STI Singing Idol competition, Battle of the Bands, Hataw Sayaw Dance competition, and the search for
Mr. and Ms. STI. The talent search has likewise been shown live on the STI Official Facebook Fan Page
since SY 2016-2017.
To promote sportsmanship, camaraderie, and team spirit amongst students, STI conceptualized the
National Basketball Tournament, a sports program for STI basketball teams nationwide. In SY 2017-2018,
53 schools joined the tournament with STI West Negros University declared as champions. In SY 2018-2019,
STI College Balagtas came out on top and ruled over the different teams from 53 campuses.
Following the success of the Women’s Volleyball Challenge, the sports program was redeveloped and
launched to include all STI-branded campuses nationwide. With the same objectives of instilling in the
students the value of discipline and further strengthening their character, the first National Volleyball
League was staged in SY 2017-2018 with 44 campuses joining the national tournament and STI West Negros
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University claiming the first NVL championship title. In SY 2018-2019, the tournament opened with 42
teams and STI West Negros University successfully defended its championship title for the second year.
The Philippine National eSports League Association introduced the first franchise model eSports circuit,
The Nationals, in the country. Together with five other companies, STI joined the league and became one
of its founding members. In SY 2019-2020, the league launched The Road to The Nationals, a series of open
qualifier tournament games held nationwide. The tournament featured three game titles: DOTA2 for PC,
Mobile Legends for mobile, and Tekken 7 for the console game.
Leaders Enhancement of Attributes Program and Student Engagement and Educational Development
The Leaders Enhancement of Attributes Program (LEAP) is a leadership program for senior high school
students. It aims to empower the student leaders in embracing and establishing a dynamic and concrete
culture of excellence in academics, extra-curricular activities, and also career planning through various
sessions, and activities. In each session, the participants are tasked to create action plans in which the new
information and learnings they gained must be echoed and transferred to their classmates in their
homeroom class through the Student Engagement and Educational Development (SEED).
The program was piloted at STI College Ortigas-Cainta with 72 student leaders as participants. The
program participants received various internal and external awards such as academic honors, leadership
awards, and recognitions during their graduation. Fueled by the positive results of the pilot program, STI
ESG implemented LEAP in select campuses in SY 2018-2019. Eighteen (18) SHS homeroom advisers and
club moderators, also referred to as LEAP and SEED Champions, who came from Calamba, Lipa,
Meycauayan, Global City, Pasay-EDSA, San Pablo, Cubao, Dagupan, and Sta. Maria were invited for a
training held on July 27, 2018.
Post-Graduation Report
The STI Alumni Relations, Placement, and Linkages (STI APL) department conducts a survey of the
graduating class to track employment rate 12 months after graduation. This is facilitated through each STI
School’s Alumni and Placement Office. Based on the most recent reports, 63% of our surveyed graduates
are employed within one year after they graduated.
As part of the job placement assistance of STI, the STI APL institutionalizes partnerships locally and
internationally to help increase the employability of graduates through the Interactive Career Assistance
and Recruitment System.
The ICARES is an exclusive job search system for STI graduates that facilitates the easy dissemination of
information by STI’s partners for their placement opportunities and provision of candidates (STI graduates)
to fill in job openings. Partners for the job placement of STI graduates are enabled to post their job openings
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and request for lists of graduates through www.i-cares.com or the ICARES at no cost. Registration with
ICARES is required for all graduating STI students. In SY 2017-2018, 161 partners utilized the ICARES, 131
of whom were able to post job vacancies on the ICARES website. In SY 2018-2019, there were 51 unique job
postings with 87 partner companies utilizing the ICARES website. For SY 2019-2020, the website registered
84 partner companies with 44 of them posting job opportunities. The recruitment season, which usually
occurs from February to May, was affected by the implementation of the community quarantine which
then led to a decline in the number of job postings.
On-the-ground school activities such as job fairs are conducted for recruitment purposes and to provide
employment preparation seminars to graduating STI ESG students. Forty-two (42) institutional partners
participated in STI ESG job fairs in SY 2017-2018 and 161 joined in SY 2018-2019. Schools nationwide also
have local partnerships within their community to provide graduating students more avenues. For SY 2019-
2020, the job fairs were cancelled as mass gatherings or activities have been disallowed due to the
nationwide implementation of community quarantine measures in response to the COVID-19 pandemic.
The STI Distinguished Alumni Awards (STIDAA) was launched in 2014 in which STI campuses nationwide
were encouraged to nominate their own alumni who have received distinctions and achievements in their
chosen field. Since its inception up to SY 2018-2019, 41 alumni have been awarded and recognized for their
outstanding accomplishments.
In SY 2019-2020, STIDAA added 21 alumni to its list of notable national awardees. This group of alumni
stood out from 89 nominees and will be honored in a virtual ceremony. The 2020 STIDAA National
Awardees are Marlon Lopez, Ralph Rolly Maliwat, Mary Grace Araneta, Sergiris Ortega, Ronnel Ybañez,
Jastine Ann Montilde, Ronnie Arap, Jr., Joseph John Martinez, Ronnie Cabanjin, Niño Algura, Darren
Quijano, John Christian Mirasol, M.D., Roque Louie Aliyas, Clark Ty, James Olarte, Joseph Del Rio, Grace
Jude, Neil Defeo, Greggie Mercado, Allan Jay Dumanhug, and Karen Jane Salutan.
Institutional Linkages
STI ESG establishes, maintains, and promotes partnerships with the legitimate members of the industry to
increase its students and graduates’ employability under the institutional linkages. Through these linkages,
opportunities such as on-the-job training (OJT), employment, courseware enhancements, and faculty
development are made available to STI ESG, its students, and partners. In addition, activities such as mock
interviews, employment preparation seminars, job fairs, granting of scholarships, postings of employment
opportunities, and faculty trainings are also made possible.
STI ESG partnered with JA Philippines, a member of the international organization Junior Achievement
Worldwide, a non-profit group dedicated to educating young business minds about workforce readiness,
entrepreneurship, and providing financial literacy through hands-on programs.
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This collaboration will bring JA Philippines’ Business Skills Pass (BSP) program to select STI campuses for
the ABM students. It is divided into two programs: Be Entrepreneurial for the Grade 11 students and the
JA Company of the Year Program for the Grade 12 students. For SY 2017-2018, the Be Entrepreneurial
program was implemented in select STI ESG campuses. The culminating activity for the Be Entrepreneurial
program is the business plan development and presentation. In the said activity, STI College Novaliches
placed 2nd runner-up in the Business Plan Presentation Competition.
The program continued in SY 2018-2019 where three campuses, namely STI Colleges Ortigas-Cainta,
Novaliches, and Caloocan, successfully passed the first stage of the Company of the Year competition. In
the final round, STI Colleges Ortigas-Cainta and Novaliches earned numerous awards.
For SY 2019-2020, all students who joined the program underwent mentoring sessions with industry
practitioners and participated in the JA and Ortigas Malls Trade Fair held at Estancia Mall in Pasig City.
From the numerous mini-companies who joined the program, three entries from STI Colleges Caloocan,
Fairview, and Las Piñas qualified as finalists.
The Ascott Limited (TAL) is a Singapore-based company that has grown to be one of the world’s leading
international serviced residence owner-operators. It has over 43,000 operating serviced residence units in
key cities of the Americas, Asia Pacific, Europe, the Middle East and Africa, as well as more than 31,000
units which are under development, making a total of more than 75,000 units in over 500 properties. STI
ESG’s partnership with TAL ensured that its students underwent the latter’s formal training program and
let them experience working in a professional environment.
The partnership between STI ESG and Marco Polo Hotel in Ortigas provided STI ESG students with on-
the-job training experience that is relevant to the demands of the industry. Students participated in an
extensive training in housekeeping and front office management that is at par with international standards.
The alliance between STI ESG and IHG provided internship opportunities to qualified STI ESG students in
any 4-year program from any campus nationwide. This program includes the 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. Their performance was monitored by industry
experts through monthly and term-end evaluations. Upon the completion of the program, interns were
granted certificates to recognize their participation and accomplishment. With the promise of providing
students with a memorable and unparalleled internship experience, interns can look forward to gainful
learning at the Holiday Inn and Crowne Plaza.
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Philippine Airlines
Philippine Airlines, owned by PAL Holdings, is the flag carrier of the Philippines and is the first and oldest
commercial airline in Asia. STI ESG’s partnership with PAL allowed students enrolled under the BS
Tourism Management program to participate in an on-the-job training program where they were given
opportunities to familiarize themselves with actual office and technical operations and management to
augment their formal learning.
Accenture, Inc.
The partnership between Accenture and STI ESG launched various collaboration activities that were
intended to train and develop the new generation of information technology professionals through on-the-
job training programs, campus recruitment activities, learning sessions, and workshops or seminars,
among others.
DOLE exempts STI ESG schools from applying for a job fair permit provided that it will be held within the
school premises. In addition, DOLE will provide a speaker to join the schools’ job fair events to educate
graduates on their rights and responsibilities as prospective employees to become productive members of
society. In return, STI ESG extends its assistance by promoting and cascading DOLE’s mandate of ensuring
the jobseeker’s protection in any employment facilitation related activities to its schools nationwide.
Scholarships
STI ESG partnered with various companies to aid in scholarship programs and increase employment
opportunities for STI ESG’s graduates.
Gift of Knowledge
To provide educational opportunities to deserving individuals who have no means of pursuing post-
secondary education, STI ESG, through the STI Foundation for Leadership in Information Technology and
Education, Inc. (STI Foundation), strengthens its partnership with various TV programs from different TV
networks. Sixty-five (65) scholars were registered through the TV programs in SY 2017-2018, 28 scholars in
SY 2018-2019, and 54 scholars in SY 2019-2020.
STI ESG and STI Foundation continually strengthen partnerships with corporations and government
organizations to be able to provide scholarship programs to support the tertiary education of deserving
individuals.
The STI Foundation and its partners were able to support 400 scholars nationwide in SY 2017-2018. The
number of scholars continued to increase, reaching 1,284 in SY 2018-2019 and 1,119 in SY 2019-2020.
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As of March 31, 2020
Capitalizing on STI ESG’s national reach, STI Foundation and STI ESG’s campuses across the country
spearheaded and/or collaborated with other groups to conduct several community involvement programs
that intensified the spirit of camaraderie among employees and the desire to give back to the communities
while developing an environment that will be beneficial to all stakeholders.
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.
STI Foundation responded to the call of DepEd for the private sector’s participation and support in its ALS
program, a non-formal education to help learners who wish to complete their basic education. The ALS
program also aims to address the problem in the growing number of students who drop out of school every
year.
STI ESG then 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 (e-Skwela), and performance-based assessment to prepare and equip the ALS learners
with the knowledge required to pass the Accreditation and Equivalency (A&E) Test given by DepEd. From
SY 2016-2017 to SY 2017-2018, 134 ALS Learners have taken the A&E test with 55 learners passing the test
and receiving certificates equivalent to high school diploma. For SY 2018-2019, 30 ALS learners took the
test in February 2019. However, the results were put on hold since the Department of Education deemed it
better to review the assessment test and align it with the current senior high school curriculum. The
postponement still continued into SY 2019-2020. There are five STI campuses currently offering ALS ― STI
Colleges Ortigas-Cainta, Batangas, Lipa, Muñoz-EDSA, and Rosario.
The STI Mobile School is a fleet of tourist-sized buses that have been converted into roving computer
laboratories. Each bus 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 its inception in 2011 until the end of SY 2019-2020, the STI Mobile School has travelled to 1,230 sites
and trained 172,556 participants nationwide. Today, a total of six mobile school buses travel across Luzon,
Visayas, and Mindanao.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Adopt-a-School Program
STI ESG received a Certificate of Appreciation from DepEd for being one of its active partners in the
implementation of the Adopt-a-School program. With this alliance, STI Mobile School or the computer
laboratory on wheels was utilized to provide alternative learning facilities to DepEd’s high schools in far-
flung communities to teach basic skills on computer concepts, GNU Image Manipulation Program (GIMP),
multimedia animation, audio editing, and movie presentation through ICT-enhanced training sessions.
STI Foundation extended assistance to various special community development projects, outreach
programs, and humanitarian services to help tackle the needs of disadvantaged sectors and other
organizations.
In support of DepEd’s Brigada Eskwela program, STI Foundation and STI ESG went to Taytay National
High School in Taytay, Rizal on June 3 and 10, 2017 to assist in the clean-up and installation of computers
donated by the DepEd Central Office in the school’s computer laboratory. For SY 2019-2020, the STI
Foundation participated in two Brigada Eskwela activities: in Alfonso Central School in Alfonso, Cavite
where 20 ALS learners were taught GIMP animation and in Maria Perpetua E. Brioso National High School
in Masbate where 116 public school teachers were trained on Computer Concepts (MS Office), multimedia
tools, and video editing and layout.
STI Foundation collaborated with Caritas Manila’s Segunda Mana Project in the latter’s goal of generating
in-kind donations such as clothes, toys, shoes, and others to be given away to the beneficiaries of Caritas
Manila. Meanwhile, STI Foundation worked with the Ortigas Library Foundation and turned over English
and Science books to select provincial public schools and libraries. The Foundation also donated uniforms
to the beneficiaries of the Religious Missionaries of the Divine Savior, the victims of the Mayon Volcano
eruption through the DepEd Central Office, and the beneficiaries of the National Youth Commission.
In SY 2017-2018, through STI ESG’s partnership with the National Grid Corporation of the Philippines
(NGCP), a privately-owned corporation in charge of operating, maintaining, and developing the country’s
state-owned power grid, STI Foundation facilitated the installation of computer units donated by NGCP to
34 public elementary and high schools nationwide. Regular maintenance of the computer units for these
public schools continued up to SY 2019-2020. During the same school year, five more computer laboratories
were installed in five public schools.
On April 21, 2017, STI Foundation inked a Memorandum of Agreement with Jollibee Foods Corporation
(JFC) and launched the Agroenterprise Training for Farmer Facilitators. With the help of the courseware
learning materials developed by STI, Jollibee Foundation trained agroentrepreneur-facilitators so the latter
will be able to organize farmer clusters that shall provide the vegetable supply to various JFC distributors,
retailers, and institutional markets. In SY 2019-2020, three faculty members from STI College Ortigas-Cainta
joined the program as co-facilitators and later on passed the TESDA National Certification IV assessment
on Agro-entrepreneurship.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Business of Issuer
The Group, comprised of STI ESG and its subsidiaries, as an educational institution, derives its main
revenues from tuition and other school fees from its own schools and royalties and other fees for various
educational services provided to its franchised schools.
STI ESG offers secondary (senior high school) and tertiary (college and TESDA) programs, as well as post-
graduate and associate programs. The colleges of STI ESG offer associate/baccalaureate degree and
technical-vocational programs in the fields of ICT, Business and Management, Hospitality Management,
Tourism Management, Arts and Sciences, Engineering, and Education. These programs are accredited by
CHED and/or TESDA, as may be applicable. The education centers of STI ESG offer technical-vocational
courses for information technology, multimedia arts, hospitality and restaurant services, culinary, and
tourism and events management, among others. The programs in the education centers are accredited by
TESDA.
BS in Information Systems
BS in Computer Science
BS in Information Technology
BS in Information Technology major in Network Engineering*
BS in Information Technology major in Digital Arts*
BS in Accountancy
BS in Management Accounting
BS in Accounting Information System
BS in Accounting Technology*
BS in Business Administration major in Operations Management
BS in Business Management major in Operations*
BS in Office Administration*
BS in Office Administration with specialization in Customer Relations*
BS in Hospitality Management
BS in Culinary Management*
BS in Hotel and Restaurant Management*
BS in Tourism Management
BS in Travel Management*
BS in Computer Engineering
BA in Communication
Bachelor of Multimedia Arts
BS in Marine Engineering**
BS in Marine Transportation**
BS in Naval Architecture and Marine Engineering**
Bachelor of Secondary Education major in Mathematics
Bachelor of Secondary Education major in Computer Education
Master in Information Technology
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
1. Academic Track
Accountancy, Business and Management
Humanities and Social Sciences
Science, Technology, Engineering, and Mathematics
General Academic Strand
2. Technical-Vocational-Livelihood Track
ICT Strand with specializations in:
o Computer Programming
o Animation
o Illustration
o Broadband Installation
o Computer Hardware Servicing
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Professional Accreditations
On February 5, 2015, STI ESG received the official ISO 9001:2008 Certification for its Learning Delivery
System. The ISO 9001:2008 certification is a milestone for the institution’s thrust towards academic
excellence by reaching global standards in its learning delivery system.
STI ESG was awarded the ISO 9001:2015 certification on February 5, 2018 for its Learning Delivery System.
It is another milestone for STI ESG as it became one of the pioneer institutions in the country to be
recognized as ISO 9001:2015 certified. For the surveillance audit conducted in November 2019, the scope
was expanded to include Placement Assistance and Learning Delivery Compliance. STI ESG likewise
received positive findings on its process improvements and Quality Management System’s awareness
campaign. The re-certification was released in February 2020.
Employees
The Group had 2,050 employees ― 1,336 of whom were faculty members, 479 were non-teaching personnel,
and 235 employees were from the main office as of March 31, 2020. STI ESG provides employees with
development programs that assist them in effectively carrying out their jobs and prepare them for career
advancement.
STI Schools
Teaching Personnel (wholly-owned schools) 1,336
Non-teaching Personnel (wholly-owned schools) 479
Subtotal 1,815
TOTAL 2,050
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Item 2. PROPERTIES
STI ESG has an extensive list of properties, either owned or under long-term lease which serve as sites for
campuses and warehouses. There are also properties which are not yet put to use and are held for
investment. The following table sets forth information on the properties that STI ESG owns.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Listed in the table below is the campus ownership of franchised schools as of SY 2019-2020.
Owned by the School Owned by STI Franchisee Leased from other parties
STI ESG decided to shift its focus to a more organic expansion instead of a geographical expansion. This
direction is part of STI ESG’s commitment to continuously improve the delivery of education to its
students ― by ensuring that its schools house state-of-the-art facilities with spacious classrooms, top-of-
the-line computer laboratories, and recreational facilities.
In recent years, STI ESG embarked on expansion and capital improvement projects as it encouraged schools
to move from rented space into school-owned, stand-alone campuses. Likewise, several franchised schools
started their own facilities expansion programs. To date, STI ESG has 19 wholly-owned campuses with
newly constructed or renovated buildings while 13 of the franchised schools constructed/renovated their
own buildings and upgraded their facilities. STI ESG has a total student capacity of 158,897 students, with
101,532 pertaining to owned schools and 57,365 for franchised schools as at March 31, 2020.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
On April 21, 2017, STI ESG and STI College Tanauan led by Mr. Eusebio H. Tanco, Mr. Tan Caktiong, and
Injap Investments, Inc. led by Edgar “Injap” Sia signed an agreement to transform STI Tanauan into a Joint
Venture Company which shall operate as a farm-to-table school which shall offer courses ranging from
farm production to food service. Designed to accommodate 6,000 senior high school and college students,
the new Academic Center will stand on a 25,202-square-meter property at Soledad Park Subdivision,
Barangay Darasa, Tanauan, Batangas. The six-storey building with roof deck will be located in the main
commercial area of Tanauan, Batangas.
STI Academic Center Legazpi, on the other hand, had its groundbreaking ceremony on April 26, 2018.
Located at Rizal St., Cabangon East in Legazpi City, the four-storey school building will stand on a 4,149-
square-meter property with an estimated capacity of 2,500 senior high school and college students. The
new STI Academic Center Legazpi was completed in September 2020, in time for the start of classes for
SY 2020-2021.
Meanwhile, STI ESG inaugurated on February 20, 2019 another prime hub of world-class education. An
eight-storey structure with roof deck built on a 3,222-square-meter property at CM Recto Avenue, Barangay
6, Lipa City in Batangas, the new STI Academic Center Lipa is expected to accommodate as many as 6,000
students.
The nine-storey STI Academic Center San Jose del Monte, with roof deck, sits on a 4,178-square-meter lot
area within the Altaraza Town Center, a 109-hectare master planned urban community by Ayala Land,
located along Quirino Highway, San Jose del Monte City, Bulacan. The school had its groundbreaking
ceremony on May 23, 2017 and was inaugurated on March 4, 2019. The new campus is set to accommodate
up to 6,000 senior high school and college students.
The new STI Academic Center Sta. Mesa is located at P. Sanchez Street, Sta. Mesa in the City of Manila. The
11-storey academic center, with roof deck, broke ground on May 23, 2017. The school which can
accommodate 9,000 senior high school and college students opened its doors on March 11, 2019.
Located on P. Celle corner EDSA, Pasay City is the nine-storey, with roof deck, STI Academic Center Pasay-
EDSA. The structure stands on a 3,911-square-meter property. It can accommodate up to 9,000 senior high
school and college students. STI ESG marked the construction of the new STI Academic Center on May 9,
2017 in a groundbreaking ceremony. The campus was inaugurated on February 26, 2020.
STI ESG, driven by its desire to provide relevant education and world-class opportunities to youth across
the country, announced in February 2019 its acquisition of NAMEI Polytechnic Institute, Inc., an
educational institution that offers courses in Marine Transportation, Marine Engineering, and Naval
Architecture and Marine Engineering. STI ESG also acquired NAMEI Polytechnic Institute of
Mandaluyong Inc. which operates, manages and maintains an educational institution that offers basic
education up to Senior High School. NAMEI is based in the newly constructed STI Academic Center Sta.
Mesa.
Likewise, a number of franchised schools embarked on facilities expansion programs. STI College Tanay
constructed additional classrooms which were completed in time for the 1st semester of SY 2017-2018. This
resulted in an increase in the school’s capacity from 1,800 to 2,640 students or an additional capacity of
840 students. STI College Santa Rosa also constructed additional classrooms which were completed in
time for the opening of SY 2017-2018; hence, the school’s capacity increased to approximately 1,600
students. Meanwhile, STI College General Santos gave up the annex building, which it used to lease, as
the school completed the construction of its additional four-storey building, with a total floor area of 3,593
square meters and an incremental capacity of almost 800 students, on September 15, 2017. Meanwhile, on
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SEC Form 17 – A
As of March 31, 2020
March 27, 2019, the assets of STI Tagum, a former branch of STI ESG, were assigned to STI College Tagum,
Inc. STI Tagum became a franchised school effective on April 1, 2019. It was granted a college status by
CHED effective SY 2019-2020 and has an increased capacity of 1,800 students.
The expansion of these campuses is part of STI’s commitment to continuously improve the delivery of
education to its students and, at the same time, increase the total capacity of STI for further expansion of
its enrollment base in the years ahead.
A former employee filed a Petition with the Supreme Court after the Court of Appeals denied the former
employee’s claims and rendered prior decisions in favor of the Parent Company. On August 13, 2014, the
Parent Company received the Supreme Court’s decision dated July 9, 2014 annulling the decision of the
Court of Appeals and ordered that the Parent Company reinstate the former employee to her former
position and pay the exact salary, benefits, privileges and emoluments which the current holder of the
position is receiving and should be paid backwages from the date of the former employee’s dismissal until
fully paid, with legal interest.
On November 17, 2014, the Supreme Court issued a resolution which denied with finality the Parent
Company’s Motion for Reconsideration. As a result of the decision, the Parent Company recognized a
provision amounting to P
=3.0 million representing the estimated compensation to be made to the former
employee.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
On October 20, 2015, a Bank Order to release was issued to one of Parent Company’s depository banks for
the release of the garnished amount of P =2.2 million. The bank released the garnished amount to the
National Labor Relations Commission (NLRC).
The garnished amount was put on hold for fifteen (15) days because of the filing of the Parent Company’s
Petition questioning, among others, the Writ of Execution issued by the labor arbiter, which was docketed
as LER-CN-10291-15.
While the Petition was pending for resolution by the NLRC and without any injunction order being issued
by the said Commission, the garnished amount of = P2.2 million was released to the former employee.
On March 1, 2016, the former employee filed an Entry of Appearance with Manifestation/Motion for
Computation dated February 24, 2016. In the said motion, the former employee sought for computation of
her backwages, inclusive of monetary equivalent of 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, 2016 decision of labor
arbiter, and sought the payment of separation pay.
On October 28, 2015, the Parent Company filed another Petition with the NLRC, which sought to inhibit
the labor arbiter from continuing the execution proceedings for the former employee’s judgment award. In
the said Petition, the Parent Company alleged that the actions of the labor arbiter showed partiality and
bias in favor of the former employee.
On October 29, 2015, the Parent Company filed a Motion to Consolidate with the NLRC. In the said Motion,
the Parent Company moved that the aforesaid Petitions would be consolidated and resolved by the same
Division of the NLRC.
The former employee, thru her new counsel, filed two (2) Entry of Appearance with Motion for Leave (To
Admit Attached Answer with Comment/Opposition) for the two (2) Petitions of the Parent Company. In
the said Comment/Opposition, the former employee averred that (a) the Writ of Execution was issued
pursuant to the Supreme Court’s Decision dated July 9, 2014 and (b) the acts of labor arbiter were above-
board.
Before the NLRC resolved the pending Petitions filed by the Parent Company, the garnished amount was
released to the former employee as partial payment for the judgment award. Based on the record of the
NLRC, the amount of = P2.2 million was released for the partial execution of the judgment award of the
former employee.
On February 29, 2016, the Sixth Division of the NLRC issued a Decision wherein it, among others, nullified
the Writ of Execution, and ordered the inhibition of labor arbiter. In the same Decision, the Sixth Division
of the NLRC also set a guide for the enforcement of the judgment award in favor of the former employee,
which provides, among others, that the computation of the backwages of the former employee shall be
from May 18, 2004 until October 30, 2006.
After the denial of the former employee’s Motion for Reconsideration on the aforesaid Decision, STI ESG
received on September 6, 2016 the former employee’s Petition for Certiorari filed with the Court of Appeals.
Said Petition questioned the aforesaid decision of the NLRC.
After the filing of their respective pleadings in relation to the former employee’s Petition for Certiorari,
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As of March 31, 2020
STI ESG received on June 6, 2017 the Court of Appeals’ Decision wherein it determined that there is no
need to resolve the issue on the nullification of the Partial Writ of Execution because both parties agreed
that the funds garnished by virtue of said Writ to the former employee shall be considered as partial
satisfaction of her judgment award.
The Court of Appeals likewise clarified that the issue on the former employee’s waiver of reinstatement
pending appeal should have been resolved by the new labor arbiter, and not the NLRC. Contrary to the
former employee’s assertion that the former labor arbiter resolved the said issue, the Court of Appeals took
into consideration that the NLRC validly ordered the re-raffle of the case to a new labor arbiter who should
resolve all pending incidents and issues.
Without making any findings and/or rulings contrary to STI ESG’s claim that the former employee waived
her reinstatement pending appeal in October 2006 and consequently invalidated her assertion that her
backwages should be computed from May 2004 until present day, the Court of Appeals affirmed the re-
raffle of the execution proceedings of the former employee’s judgment award to a new labor arbiter to
make an independent determination of all pending incidents and issues.
Considering the aforesaid Decision did not prejudice STI ESG’s position, STI ESG decided to refer all
pending issues on the execution of the judgment award of the former employee, including the waiver of
backwages pending appeal, to the new labor arbiter.
On September 19, 2017, STI ESG received the former employee’s Manifestation with Omnibus Motion filed
with the new labor arbiter. In the said Manifestation with Omnibus Motion, the former employee sought
for (a) computation of the updated judgment award, (b) resolution of the issue on waiver of reinstatement
by the former employee raised by STI ESG and (c) issuance of Writ of Execution based on the updated
judgment award.
The new labor arbiter set the pre-execution hearing on January 31, 2018. During the said hearing, STI ESG
filed its Comment with Manifestation. In the Comment with Manifestation, STI ESG asserted that the only
issues to be resolved are the computations of the (a) backwages, (b) legal interest and (c) separation pay.
STI ESG further reiterated that the former employee is entitled to receive backwages from May 2004 until
October 2006 and separation pay from November 1999 until February 2016. Based on said premises, STI
ESG paid the former employee P =2.0 million in January 2018.
Based on the record, STI ESG has paid the total amount of =
P4.2 million, exclusive of withholding taxes, to
the former employee. STI ESG then moved for the new labor arbiter to issue a resolution that STI ESG has
fully paid the judgment award of the former employee. While the former employee accepted the aforesaid
amount, she manifested that the same is only partial payment of the judgment award, and moved that she
would be given ten (10) days to file her reply to the Comment with Manifestation.
In the hearing on February 13, 2018, the former employee filed her Reply dated February 12, 2018. In the
Reply, it was argued that the alleged waiver of reinstatement pending appeal in October 2006 did not
interrupt the running of backwages until present day. She insisted that the return to work order of
Corporation was (a) vague, (b) served only through her former counsel and (c) belatedly served or after
four (4) months from the Corporation’s receipt of the former labor arbiter’s order to reinstate her. Based on
the foregoing the former employee presented her computation of her judgment award to date, which
amounted to P=11.0 million, less payments already made by STI ESG.
On February 28, 2018, STI ESG filed and served the Rejoinder. In the Rejoinder, STI ESG reiterated that the
notice to return to work was (a) clear and (b) duly received by her through her former counsel. It was
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As of March 31, 2020
asserted that the former employee was fully aware of said return to work order because she refused the
same by filing a counter-manifestation with the former labor arbiter. Moreover, the belated service of said
return to work order does not prevent STI ESG to choose actual reinstatement pending appeal as provided
in the Labor Code.
After the parties filed their respective Rejoinder and Sur-Rejoinder, the new labor arbiter granted STI ESG’s
motion to submit the pending issues on the computation of the former employee’s judgment award for
resolution.
As at September 24, 2020, the new labor arbiter has not issued any resolution on the aforesaid computation
of the former employee’s judgment award.
A former IT Instructor who eventually became the IT Program Head of STI College Cagayan de Oro, a
school owned by STI ESG, filed an illegal dismissal case against STI College Cagayan de Oro on the ground
that she was constructively dismissed when upon returning from preventive suspension, she allegedly no
longer had any work to go back to because the STI ESG-owned company purportedly removed her
workplace from the school premises. For its part, STI ESG countered the complainant's claim that she was
dismissed by presenting the complainant's one-liner resignation letter.
The Labor Arbiter decided that there was neither an illegal dismissal nor resignation to speak of in this
case, hence, the parties were ordered to return to status quo, which meant reinstatement of complainant to
her former position but without backwages, separation pay, or similar benefits. Nevertheless, STI was
ordered to pay complainant the amount of = P7.4 thousand representing her unpaid salary for the period
March 10-30, 2014. However, the NLRC overturned the Labor Arbiter’s decision upon a dubious motion
for partial reconsideration declaring complainant to have been illegally dismissed and ordering STI ESG
not only to reinstate her but also to pay her full backwages computed from the time compensation was
withheld up to the date of actual reinstatement. STI ESG moved to reconsider the NLRC's decision but to
no avail. A Petition for Certiorari questioning the decision of the NLRC was filed before the Court of
Appeals.
On May 12, 2017, STI ESG received a copy of a Motion for Execution with Prayer for Payment of Separation
Pay in Lieu of Reinstatement filed by Complainant-Appellant seeking the issuance of a writ of execution
for the implementation of the Resolution dated June 30, 2016 issued by the Honorable Eight Division,
National Labor Relations Commission, Cagayan de Oro City. On May 22, 2017, STI ESG filed its Opposition
to the Motion for Execution with Prayer for Payment of Separation Pay in Lieu of Reinstatement.
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As of March 31, 2020
Subsequently, a hearing on the motion for execution was set on June 5, 2017. In the said hearing, STI ESG
reiterated that it is amenable to reinstating complainant but as a Part-time Full Load faculty member.
Complainant countered that she is not interested in reinstatement but would rather be paid her backwages
and separation pay. When we asked for how much is she willing to settle the matter amicably, she insisted
that she be paid the total amount of her backwages and separation pay. When asked if STI ESG has any
counter-offer on the payment of backwages and separation pay, STI ESG manifested that it already filed its
opposition thereto and that there is still a need for the official computation of the same. At that point, the
hearing officer showed STI ESG a computation of the backwages which amounted to = P0.5 million. STI ESG
then manifested that it will bring the matter to management. On the part of complainant, she manifested
that she will file her reply to our opposition. The hearing officer then said that upon submission of said
reply, the motion for execution is deemed submitted for resolution.
Also, in the motion for execution, it was also alleged that the Court of Appeals already denied the Petition
for Certiorari of STI ESG. However, STI ESG did not receive any copy of said resolution by the Court of
Appeals. Upon inquiry with the Court of Appeals, it appeared that the copy of the resolution dismissing
the petition for certiorari was returned to sender due to “RTS-UNKNOWN ADDRESS”. Apparently, the
indicated address of counsel of record simply states Ortigas Ave., Extension, Cainta, Rizal. STI ESG then
filed a manifestation with the Court of Appeals manifesting that it has yet to receive a copy of their minute
resolution and clarifying that the complete address where a copy of the said resolution may be sent is “3rd
Flr. STI Academic Center, Ortigas Avenue Extension, Cainta, Rizal 1900”.
On June 2, 2017, STI ESG received a copy of the Minute Resolution dated January 12, 2017 dismissing its
Petition for Certiorari based on the following grounds: a) failure to attach a copy of the Resolution dated
June 30, 2017 of the NLRC; b) failure to attach the Secretary Certificate authorizing Mario Malferrari, Jr. as
representative for STI ESG to file the petition for certiorari; c) failure to verify the petition; and d) failure to
attach affidavit of service.
On June 21, 2017, STI ESG filed its Motion for Reconsideration.
Meanwhile, on July 12, 2017, STI ESG received an Order from the Office of the Labor Arbiter granting the
Motion for Execution filed by Complainant. On July 21, 2017, STI ESG received a copy of the Writ of
Execution issued by Office of the Labor Arbiter directing the payment of =
P0.5 million to Complainant and
her immediate reinstatement. In compliance with the Writ of Execution, Complainant was paid the amount
of P
=0.5 million and was reinstated to her former position.
On November 7, 2017, STI ESG received a copy of the Resolution of the Court of Appeals dated September
25, 2017 on its motion for reconsideration. The Court of Appeals resolved to grant the motion for
reconsideration and reinstated STI ESG’s petition for certiorari. Complainant was then directed to file her
comment to the petition within ten (10) days from receipt of the said resolution and STI ESG was given five
(5) days to file its reply to Complainant’s comment.
On January 31, 2018, STI ESG received a copy of a Minute Resolution dated January 15, 2018 issued by the
Court of Appeals which resolved that Complainant is deemed to have waived her filing of a comment to
the petition for certiorari and directed the parties to file their respective memorandum within fifteen (15)
days from receipt of said minute resolution. Thereafter, the petition for certiorari is deemed submitted for
decision.
On February 15, 2018, STI ESG filed through registered mail its Memorandum with the 22nd Division, Court
of Appeals, CDO. On April 25, 2018, STI ESG received a copy of Complainant’s Memorandum. In a
resolution of the Court of Appeals dated April 19, 2018, with the filing of the parties’ respective
memorandum, the Court declared the petition submitted for decision.
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As of March 31, 2020
On July 11, 2018, STI ESG received a copy of the Decision of the 21st Division, Court of Appeals, CDO,
setting aside the resolution of the NLRC declaring complainant to have been illegally dismissed and
awarding the payment of backwages. In the same decision, the Court of Appeals dismissed the charge of
illegal dismissal for lack of merit. However, STI College CDO was directed to pay complainant the sum of
=7.4 thousand representing her unpaid salary for the period March 10-30, 2014.
P
On September 5, 2018, STI ESG received a copy of the Motion for Reconsideration filed the complainant
with the Court of Appeals (Special Former Twenty-First [21st] Division). On October 31, 2018, STI ESG
received the resolution of the said court directing STI ESG to file its Comment to the Motion for
Reconsideration filed by complainant within ten (10) days from notice. On November 12, 2018, STI ESG
filed its Comment to the Motion for Reconsideration of complainant. With the filing of the Comment, the
Motion for Reconsideration is deemed submitted for resolution.
On January 24, 2019, STI ESG received a copy of the Resolution of the Court of Appeals (Special Former
Twenty-First [21st] Division) denying the Motion for Reconsideration filed by the complainant. On April
22, 2019, STI ESG received a copy of the Entry of Judgment of the Decision dated June 29, 2018. With this
development, STI ESG will now initiate proceedings to recover the amount of = P0.5 million, more or less
given to the complainant based on the overturned decision of the NLRC.
As at September 24, 2020, STI ESG is preparing the necessary motion for the recovery of the =
P0.5 million.
Former part-time faculty members of STI College Legazpi who were erroneously issued employment
contracts for regular employees filed an illegal dismissal case against STI College Legazpi, a school owned
by STI ESG, following their stubborn refusal to sign their respective job offers as required by CHED. The
labor arbiter rendered a Decision finding the complainants as regular employees of STI ESG; declaring the
Parent Company as guilty of illegal dismissal; and ordering the Company to pay them separation pay of
=0.22 million, P
P =0.18 million, P
=0.15 million, respectively, plus backwages, moral and exemplary damages of
=0.2 million each, plus 10% attorney's fees.
P
Page 40 of 105
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As of March 31, 2020
Upon appeal to the NLRC, the case filed by one of the faculty members was dropped, while the rest of the
Decision was affirmed. Accordingly, a Motion for Reconsideration of the NLRC Decision was filed wherein
it prayed for the dismissal of the complaints of Brazil and Garcera as well, invoking well-settled cases as
jurisprudential authorities to persuade the NLRC to dismiss the cases against the Company.
As it developed, STI ESG prevailed at the NLRC, and the complaint was dismissed. The former faculty
members assailed said Decision of the NLRC at the Court of Appeals which denied the Petition.
Both parties here may have been mistaken in believing that the former faculty members have become
regular faculty members by their length of service and seemingly satisfactory performance. Because of such
incorrect grant of regular employment status, STI ESG, for years, have paid to complainants the salaries
and benefits ought to be received by regular faculty members, which they did not deserve considering their
failure to meet the qualifications set out in the Manual of Regulations for Private Schools (MORPS) and
Manual of Regulations for Private Higher Education (MORPHE). To punish STI ESG for such act of giving
Petitioners more than what they deserve would run contrary to the basic tenets of equity and justice. In
fact, STI sought to remedy its mistake by formulating its two-year compliance consideration program,
wherein affected teachers such as complainants shall continue to receive the same benefits they are
currently enjoying, subject to the completion of their master's degree within a period of two (2) years. Even
complainants admitted that their job offers stipulated a higher monthly salary. In spite of all these,
complainants chose not to sign the said job offers.
The former faculty members filed a motion for reconsideration of the said decision of the Court of Appeals.
STI ESG filed its Comment on the motion for reconsideration emphasizing the following points: (1) that the
instant motion for reconsideration is pro-forma and should be denied outright; and (2) that the petitioners
failed to raise any substantial argument to warrant a modification of the Court’s decision considering that
(a) the Court of Appeals did not err in finding that the NLRC did not commit grave abuse of discretion in
dismissing petitioner’s complaint for illegal constructive dismissal; and (b) the Court of Appeals did not
err in upholding the NLRC’s finding that petitioners were mere part-time teaching personnel of STI. In a
Resolution dated June 30, 2017, the Court of Appeals denied the Motion for Reconsideration filed by the
former faculty members.
On September 6, 2017, STI ESG received a copy of the Petition for Review on Certiorari of the Decision of
the Court of Appeals dismissing the complaint for illegal dismissal of the former faculty members with the
Supreme Court. STI ESG filed its Comment to the petition on November 10, 2017.
In a decision dated November 21, 2018, the First Division of the Supreme Court denied the petition filed
by petitioners and affirmed the November 9, 2016 Decision as well as the June 30, 2017 Resolution of the
Court of Appeals.
As at September 24, 2020, STI ESG has yet to receive a motion for reconsideration by the petitioners of the
decision dated November 21, 2018.
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As of March 31, 2020
A complaint for qualified theft was filed by the Parent Company against its former school accounting
supervisor and acting school accountant (former supervisor/accountant). In the complaint, the Parent
Company alleged that said former supervisor/accountant manipulated the payroll registers of STI College
Global City by including the name of a former faculty member of STI College Global City in the payroll
registers and placing a corresponding salary and 13th month pay beside said faculty member’s name. The
salary of said former faculty member was deposited in a bank account belonging to the former
supervisor/accountant. The total amount deposited to the bank account of the former
supervisor/accountant through this scheme amounted to P =0.2 million.
The complaint for qualified theft was filed with Office of the City Prosecutor of Taguig City. Summons to
the former supervisor/accountant was returned undelivered despite the Company providing additional
addresses of the former supervisor/accountant where the summons could be served.
After the former supervisor/accountant failed to appear on two preliminary investigations, the complaint
was submitted for resolution.
On September 8, 2016, STI ESG filed an Ex-Parte Motion for Early Resolution to resolve the case pointing
out that more than sixteen (16) months have elapsed since the matter was submitted for resolution.
As at September 24, 2020, the Office of the City Prosecutor of Taguig City has yet to issue a resolution in
the instant case.
Complainant was cited in several instances for her excessive tardiness, negligence, and other violations of
the school’s Code of Conduct. On January 15, 2016, she submitted her resignation letter effective
immediately and processed her clearance. On the same day, she proceeded to the NLRC and filed a request
for assistance.
Complainant claimed that she was forced to resign when her benefits were reduced, she was deliberately
given difficult work assignments, she was cited for several violations of the company’s code of conduct to
build-up a case against her and was given poor working conditions.
The labor arbiter dismissed her complaint for lack of merit saying that resignation due to the enforcement
of disciplinary measures for violations does not constitute unbearable working condition, hence, her
resignation does not constitute constructive dismissal.
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As of March 31, 2020
On April 21, 2017, STI College Fairview received the Decision dated March 31, 2017 of the 4th Division,
NLRC, denying her appeal and affirming the labor arbiter’s decision but with modification by awarding
₱75.0 thousand as financial assistance based on the higher interest of equity, social and compassionate
justice.
On May 2, 2017, STI ESG filed its Motion for Partial Reconsideration of the decision of the NLRC,
particularly, on the award of financial assistance in the amount of ₱75.0 thousand on the basis that she is
not entitled to any financial assistance since there was no dismissal to speak of. Moreover, her failure to
comply with the 30-day notice requirement in case of resignation makes her even liable for damages instead
of financial assistance.
However, on June 1, 2017, STI ESG received a copy of the resolution dated May 30, 2017 of the 4th Division,
NLRC denying the motion for reconsideration.
On July 28, 2017, STI ESG filed its Petition for Certiorari with prayer for the issuance of a restraining order
and a writ of preliminary injunction with the Court of Appeals. On August 19, 2017, STI ESG received a
copy of the resolution of the Court of Appeals dated August 9, 2017 directing complainant to comment on
STI ESG’s petition while holding in abeyance the action on the prayer for injunctive relief. Pending
resolution of the STI ESG’s prayer for the issuance of a restraining order and a writ of preliminary
injunction with the Court of Appeals, on August 31, 2017, STI ESG received a copy of the Motion for
Execution filed by complainant. On September 4, 2017, a notice of pre-execution conference was received
by STI ESG setting the same on September 14, 2017 before the labor arbiter. On September 11, 2017,
STI ESG filed an Opposition to the Motion for Execution. STI ESG, likewise, filed an Omnibus Motion for
Immediate Resolution of Application for Issuance of a Restraining Order and Writ of Preliminary
Injunction. In the pre-execution conference, STI ESG reiterated its opposition to the motion for execution
of complainant and manifested that it has a pending application for the issuance of a restraining order and
a writ of preliminary injunction with the Court of Appeals. In a Notice of Order of Execution dated October
11, 2017, the labor arbiter issued a Writ of Execution against STI ESG since no temporary restraining order
was issued by the Court of Appeals for the amount of ₱76.2 thousand. On November 2, 2017, a check in the
said amount was then deposited to the account of the National Labor Relations Commission for the
satisfaction of the writ of execution. As per Order dated November 17, 2017 of the labor arbiter, the said
amount was released to Complainant as full satisfaction of the judgment award.
On February 28, 2018, STI ESG received a Resolution dated January 5, 2018 of the Court of Appeals noting
STI ESG’s Omnibus Motion for Immediate Resolution of Application for Issuance of a Restraining Order
and Writ of Preliminary Injunction and informing STI ESG that its Resolution dated August 9, 2017
addressed to complainant returned to the court with the annotation “RTS-No One to Receive” and directed
STI ESG to inform the court of complainant’s correct and current complete address. In a manifestation of
compliance dated April 12, 2018, STI ESG informed the Court of Appeals that the only record of
complainant’s address in its possession is that which is stated in its petition which is the same as what is
found in the pleadings filed relative to the case. In a Resolution dated June 21, 2018 received by STI ESG on
July 5, 2018, the Court of Appeals dismissed the petition of STI ESG on the ground that it failed to include
in its petition the current address of complainant.
A motion for reconsideration of the subject resolution of the Court of Appeals was filed by STI ESG on
July 20, 2018. On October 31, 2018, STI ESG received a copy of the Resolution of the Court of Appeals
(Former Eleventh Division) granting the motion for reconsideration. However, STI ESG is given a period
of ten (10) days from notice to submit proof of actual receipt by complainant of its petition and to furnish
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the court with her correct, actual and present address, otherwise, the petition will be dismissed. On
November 12, 2018, STI ESG filed its manifestation with the Court of Appeals and Motion for Extension to
Submit Proof of Service.
On February 20, 2019, STI ESG received a copy of the Resolution of the Court of Appeals (Fifth Division)
dated January 29, 2019 granting the Motion for Extension to Submit Proof of Service. However, STI ESG
was also required to show cause why its petition shall not be dismissed for failure to comply with the
Resolution dated October 18, 2018. On March 4, 2019, STI ESG filed its Manifestation of Compliance
manifesting that it was able to serve a copy of the petition to complainant by personal service.
On May 27, 2019, STI ESG received a copy of the Resolution dated April 29, 2019 of the Court of Appeals
(Fifth Division) finding the Manifestation of Compliance filed by STI ESG to be sufficient and directed the
complainant to file her comment to STI ESG’s petition.
As at September 24, 2020, STI ESG has yet to receive any copy of the comment of the complainant to STI
ESG’s petition.
The case stemmed from a Complaint for illegal dismissal filed by former employees of STI Davao. They
were formerly the Chief Executive Officer (CEO) and Chief Operating Officer (COO), respectively, of STI
Davao, until they were separated from service effective June 23, 2009.
On September 03, 2009, STI Davao filed a Motion to Dismiss before the Labor Arbiter and prayed for the
dismissal of the Complaint for illegal dismissal on the ground that the Labor Arbiter and the NLRC have
no jurisdiction over the case. STI Davao argued that Complainants are not mere employees, but are rather
corporate officers, of STI Davao. As such, the controversy involving their removal involves an intra-
corporate dispute which falls within the jurisdiction of the regular courts.
On December 16, 2009, the Labor Arbiter issued an Order which granted the Motion to Dismiss filed by
STI Davao. The Labor Arbiter ruled that Complainants are corporate officers, and are not mere employees,
of STI Davao.
Not satisfied with the ruling of the Labor Arbiter, Complainants filed an appeal before the NLRC. On
September 30, 2010, the NLRC issued a Resolution affirming the Labor Arbiter’s Order dated December 16,
2009 finding that Complainants are corporate officers whose removal from office is not within the ambit of
the jurisdiction of the NLRC. While they subsequently filed a Motion for Reconsideration, such motion was
denied by the NLRC.
Complainants then elevated the case to the Court of Appeals via a Petition for Certiorari. On February 14,
2014, the Court of Appeals rendered a Decision annulling the assailed Resolutions of the NLRC and found
that Complainants are not corporate officers, but are rather mere employees, of STI Davao. The case was
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thus ordered to be remanded to the Labor Arbiter for reception of evidence. While STI Davao filed a Motion
for Reconsideration, such motion was denied by the Court of Appeals.
STI Davao eventually elevated the case to the Supreme Court via a Petition for Review on Certiorari.
Unfortunately, through a Resolution dated August 19, 2015, the Supreme Court denied the Petition. STI
Davao’s Motion for Reconsideration was likewise denied by the Supreme Court.
On August 23, 2017, STI Davao received a Notice of Hearing from the Office of Labor Arbiter for a
preliminary conference set on September 18, 2017. STI Davao attended the said hearing. During the hearing,
Complainants proposed for the amicable settlement of their claims the payment of their separation pay,
backwages, monetary benefits, as well as damages with attorney’s fees. STI Davao requested that
Complainants provide the exact amount of what they are asking for the amicable settlement of their claims.
Another hearing was made on October 26, 2017 for the continuation of the preliminary conference.
In the October 26, 2017 hearing, Complainants provided STI Davao with a computation of what they are
willing to accept for the amicable settlement of the case with total amount of =
P33.2 million.
In the December 5, 2017 hearing, considering the substantial amount being demanded by Complainants
for the amicable settlement of their claims, no amicable settlement was reached by the parties, hence, they
were directed to file their respective position papers within ten days from the receipt of the order from the
Office of the Labor Arbiter. The last day of the ten-day period to file STI Davao’s position paper was on
February 5, 2018. However, a Motion for Extension of Time to File Position Paper was filed by STI Davao
on February 5, 2018.
On February 19, 2018, STI ESG filed its position paper by registered mail. In the Position Paper, the
following important points were raised: (1) the complainants’ termination from employment is clearly legal
having been grounded on just and valid causes since (a) the adoption of the Company’s Basic Operations
Manual and Code of Conduct providing, among others, disciplinary rules and regulations on willful
disobedience of the lawful orders, instructions, policies and procedure of the Company, is well within the
ambit of management prerogative, (b) complainants’ willful disregard and violation of the Company’s
Basic Operations Manual and Code of Conduct providing guidelines and standards for employees to
effectively go about their roles and prohibiting willful disobedience as well as failure to perform assigned
tasks, constitute sufficient bases for termination of employment, (c) complainants’ acts or omissions in
willful disregard of the Company’s general work policies and procedures, amounted to gross and habitual
neglect of duties, (d) complainants’ willful disregard of the Company’s operating procedures and systems
amounted to serious misconduct, and (e) the Company’s evidence sufficiently established facts and
incidents upon which the loss of confidence in the complainants may fairly be made to rest considering
that (i) complainants held a position of trust and confidence, and (ii) complainants’ termination was based
on willful breach of trust and founded on clearly established facts; (2) the School observed the requirements
of due process before effecting complainants’ dismissal from employment; (3) complainants are not entitled
to their claims for reinstatement and the payment of monetary benefits, such as allowance, as well as
damages and attorney’s fees; and (4) complainants have no cause of action for illegal suspension and
against individual respondent of STI ESG.
On March 14, 2018, STI ESG received a copy of the Position Paper of complainants. On April 5, 2018, STI
ESG filed its Reply to the Position Paper of complainants. In said reply, STI ESG emphasized the following
important points: (1) the Company’s prerogative to terminate the complainants’ employment on just and
valid causes does not run afoul with the enshrined right to security of tenure; (2) complainants’ termination
from employment was warranted by just and valid grounds as (a) the just and valid causes were proven
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As of March 31, 2020
with substantial evidence, and (b) the penalty of dismissal is warranted under the circumstances; (3) there
is no necessity to dwell on the issue of whether the respondents observed and complied with the
requirements of due process before effecting complainants’ dismissal from employment; and (4)
complainants are not entitled to their claim for reinstatement with payment of full backwages, and other
monetary claims such as damages and attorney’s fees.
In a decision dated June 28, 2018, the labor arbiter dismissed the complaint for lack of merit. On August 2,
2018, STI ESG received a copy of the Memorandum of Appeal filed by complainants with the NLRC. On
August 28, 2018, STI ESG filed its Answer to Appeal with the Eighth Division of the NLRC in Cagayan De
Oro City where it was emphasized that the complainants had failed to show that the Arbiter a quo
committed grave abuse of discretion and/or serious errors in rendering the assailed Decision, particularly
in declaring that the complainants were lawfully terminated on the ground of loss of trust and confidence.
In support of STI ESG’s counter-arguments to the complainants’ arguments, STI ESG stressed on the
following important points: (a) the Appeal is just a 90% verbatim reproduction of the facts, arguments and
discussion in their Position Paper; and (b) there was no such grave error shown in the case at bar
considering that there is more than sufficient basis for the School to lose the trust and confidence it
bestowed upon the complainants (i) as one of the complainants demonstrated, through repeated
infractions, that complainant is not fit to continue undertaking the serious task and heavy responsibility of
a CEO, and this holds true for the other complainant, being the COO of STI Davao, (ii) the willful act of
disregarding the Operating Procedures and Systems equates to abuse of authority and, therefore, is
sufficient basis for STI to lose its trust and confidence on the complainants, and (iii) the task of ensuring the
integrity of the RFA by warranting the completeness and accuracy of the information and required
supporting documents thereto, definitely falls within the complainants’ scope of responsibilities.
In a Decision dated February 13, 2019, the Eighth Division of the NLRC in Cagayan De Oro City dismissed
the Appeal filed by the complainants and hereby affirmed the earlier Decision of Labor Arbiter dated June
28, 2018. A motion for reconsideration dated March 4, 2019 was filed by the complainants. On March 25,
2019, STI ESG filed its Opposition to the Motion for Reconsideration filed by the complainants. In a
Resolution dated March 26, 2019, the Eighth Division of the NLRC in Cagayan De Oro City denied the
Motion for Reconsideration filed by the complainants.
On June 10, 2019, STI ESG received a copy of the Petition for Certiorari filed by complainants with the Court
of Appeals in Cagayan De Oro City. On July 4, 2019, STI ESG received a copy of the Resolution dated June
25, 2019 of the Court of Appeals in Cagayan De Oro City dismissing the Petition for Certiorari filed by
complainants for failure to comply with the requirements for filing said petition.
A motion for reconsideration dated July 18, 2019 on the said resolution of the Court of Appeals in Cagayan
De Oro City dismissing the Petition for Certiorari was filed by complainants. As at September 11, 2019, STI
ESG filed its Comment to the motion for reconsideration of the complainants.
Without having received the resolution of the Court of Appeals on the motion for reconsideration filed by
complainant, as at August 03, 2020, STI ESG received a copy of petitioner Belinda Torres’ Petition for
Review on Certiorari filed before the Supreme Court. As at September 24, 2020, STI ESG has yet to receive
any action by the Court of Appeals on the motion for reconsideration filed by complainants. The Supreme
Court likewise has yet to render its initial action on the Petition.
Page 46 of 105
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As of March 31, 2020
STI ESG engaged the services of Mobeelity Innovations, Inc. (MOBEELITY) to deploy its digital classroom
pilot, also known as e-Learning Management System (eLMS) and MOBEELITY committed to provide the
necessary applications suite of the intended learning management system of STI ESG.
MOBEELITY undertook to provide STI ESG with access to the EDU 2.0 LMS (now known as NEO) and
iMEET virtual classroom. MOBEELITY committed to provide STI ESG with online and on-site technical
support for the implementation of the EDU 2.0 LMS and iMEET virtual classroom. Furthermore,
MOBEELITY committed to provide STI ESG with all updates and modifications to EDU 2.0 LMS and
iMEET virtual classroom free of charge. Out of these two platforms, STI ESG was only able to avail of and
utilize the EDU 2.0 LMS under the agreement.
MOBEELITY provided STI ESG access to the EDU 2.0 LMS. EDU 2.0 LMS is a product of Cypher Learning,
and MOBEELITY was an authorized reseller of this product. In accordance with the terms of the
Agreement, STI ESG paid MOBEELITY the sum of P =3.3 million as downpayment for services to be rendered
by MOBEELITY for the First Semester of SY2016-2017 or from June to November 2016.
On June 12, 2016, it came to the attention of STI ESG that Cypher Learning had terminated its relationship
with MOBEELITY due to the fraudulent acts committed by MOBEELITY against Cypher Learning.
Pursuant to the arbitration clause of the Memorandum dated September 8, 2014 (Memorandum) executed
by STI ESG and MOBEELITY, STI ESG initiated the instant ad hoc arbitration to settle a dispute involving
the reimbursement of P =3.3 million by MOBEELITY due to a breach of its obligations under the
Memorandum.
After due proceedings, the Arbitral Tribunal issued the arbitral award dated August 9, 2018 wherein
MOBEELITY is required to pay STI ESG the amount of = P3.3 million and arbitration cost of
=0.9 million.
P
STI ESG, through counsel, will be filing the appropriate petition before the Regional Trial Court of Makati
City for the execution of the aforesaid arbitral award as required by law.
STI College Cebu, Inc. (STI Cebu) was named defendant in a case filed by certain individuals for specific
performance and damages. In their Complaint, the Plaintiffs sought the execution of Deed of Absolute Sale
over a parcel of land situated in Cebu City on the bases of an alleged perfected contract to sell.
On March 15, 2016, STI ESG, as the surviving corporation in the merger between STI ESG and STI Cebu,
filed a Motion to Dismiss.
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As of March 31, 2020
After the filing of their respective pleadings to the said Motion(s) to Dismiss, the Defendants received on
February 28, 2017 the Resolution of the Trial Court wherein it denied the Defendants’ Motion(s) to
Dismiss.
On March 6, 2017, the Defendants filed their Joint Motion for Reconsideration Ad Cautelam in relation to
the Resolution.
On March 14, 2017, the Defendants received the Plaintiffs’ Comment/Opposition to Joint Motion
Reconsideration Ad Cautelam and/or Motion to Declare Defendants in Default dated March 11, 2017
(Comment with Motion). In the Comment with Motion, Plaintiffs alleged that the Defendants should have
filed their Answer instead of the Joint Motion for Reconsideration Ad Cautelam after the denial of their
Motions to Dismiss. Considering that the Defendants did not file their Answer, Plaintiffs moved to declare
the Defendants in default.
After due proceedings and filing of their respective responsive pleadings to the aforesaid (a) Joint Motion
and (b) Motion to Declare in Default, the Trial Court issued the Resolution dated
August 16, 2017, which denied the said Motions.
After seeking an extension to file the Answer to the Plaintiffs’ Amended Complaint, the Defendants filed
the Consolidated Answer to the Amended Complaint on August 30, 2017. In the Consolidated Answer,
Defendants asserted that there is no perfected contract to sell or of sale between STI ESG and the Plaintiffs
considering that (a) there is no Board approval on the sale of the Subject Property; (b) lack of definite terms
and conditions thereof; and (c) the Finance Officer of STI ESG has no authority to bind STI ESG on the
alleged contract to sell or sale of the Subject Property.
While Plaintiffs opposed the (a) motion for extension and (b) subsequent filing of the Consolidated Answer,
the Trial Court affirmed the admission of the Consolidated Answer and set the case for pre-trial.
While both parties were referred to court-annexed mediation and judicial dispute resolution as required
under the relevant rules, the parties failed to reach an amicable settlement of the case.
As required by the rules, the case was re-raffled to a new presiding judge who will handle the trial and
disposition of the case.
On August 3, 2018, STI ESG received a Notice from the new Presiding Judge setting the case for pre-trial
on August 14, 2018.
After the unsuccessful judicial dispute resolution, the case was re-raffled from Branch 6 to Branch 42 of the
Regional Trial Court of Manila
On August 14, 2018, Plaintiffs filed a Motion for Leave to Admit Second Amended Complaint, whereby
they sought the substitution of STI ESG as one of the Defendants.
After the filing of opposition thereto, STI ESG received the Summons dated September 26, 2018, directing
it to file its Answer to the Plaintiff’s Second Amended Complaint.
On October 17, 2018, the Defendants filed their Amended Consolidated Answer with Compulsory
Counterclaims.
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On November 8, 2018, the Defendants received the Order dated October 26, 2018 of the Trial Court. In the
Order, the Trial Court set the pre-trial conference on November 14, 2018 and required the parties to file not
later than five (5) days before pre-trial their respective Judicial Affidavit(s) of their witnesses.
On November 9, 2018, the Defendants filed their Amended Pre-Trial Brief and Judicial Affidavit(s) of their
witnesses.
On November 14, 2018, the parties attended and participated in the scheduled pre-trial conference Based
on the plaintiffs’ pre-trial brief and manifestation during said hearing, the Plaintiffs intended to include in
their list of witnesses two senior officers of STI ESG. While there were no interrogatories sent to said
adverse witnesses as required by the Rules of Court, the Defendants reserve their right to file the
appropriate pleading on said matter.
The Trial Court then gave the Plaintiffs six (6) hearing dates to present their witnesses. Within the said
period, the Plaintiffs presented four (4) witnesses. Based on their respective testimonies, the said witnesses
testified the discussions and/or communications between the Plaintiffs and STI ESG’s Finance Officer
regarding the sale of the subject property.
During their respective cross-examination, the said witnesses failed to provide any document and/or
evidence showing (a) the authority of the Finance Officer to bind STI ESG on said negotiations and
(b) approval of the BOD of STI ESG on the terms and conditions discussed during said negotiations.
After the Plaintiffs presented their fourth (4th) witness, the Plaintiffs orally moved for the issuance of
Subpoena to two Senior Officers of STI ESG.
In relation to said subpoena and to comply with the relevant provisions of the Rules of Court, the Plaintiffs
served written interrogatories to the said Senior Officers.
After STI ESG objected on the same, the Trial Court ordered the Senior Officers to file their respective
Answer(s) to the written interrogatories.
After the filing and admission of their Answer(s) to the written interrogatories of the Plaintiffs, the case
was set for continuation of the Plaintiffs’ presentation of evidence June 19, 2019.
Despite being allowed by the Trial Court to propound additional oral interrogatories to the Senior Officers,
the Plaintiffs waived the same before the scheduled hearing.
Consequently, the Trial Court required the Plaintiffs to file their Formal Offer of Evidence in order to
terminate the presentation of their evidence.
On August 6, 2019, the Defendants received the Formal Offer of Evidence of the Plaintiffs.
After the Defendants filed its Objections to the Formal Offer of Evidence, the Trial Court issued its Order
dated September 27, 2019. In the Order, the Trial Court denied the admission of, among others, the SMS
messages relating to the communications between certain officers of STI ESG and Plaintiffs, and a
certification issued by the Finance Officer on the receipt of an earnest money from the Plaintiffs marked as
Exhibit “G-2”.
On October 21, 2019, the parties appeared before the Trial Court to set the schedule for the presentation of
the testimonies of the witnesses of STI ESG. Upon agreement of the parties, the same is set for hearing on
November 12, 19, 29 and December 3, 2019.
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On October 23, 2019, STI ESG received the Plaintiffs’ Motion for Partial Reconsideration of the Order dated
September 27, 2019. In the said Motion, the Plaintiffs sought for the admission of the evidence excluded by
the Trial Court except Exhibit “G-2”.
After filing the Comment to the Plaintiffs’ Motion for Partial Reconsideration on November 8, 2019, the
Trial Court issued its Omnibus Order dated November 11, 2019. In the Omnibus Order, the Trial Court
admitted the exhibits enumerated in the Motion for Partial Reconsideration except the SMS messages.
However, the Trial Court also admitted Exhibit “G-2” despite (a) the Defendant’s valid objections and (b)
the same was not included in the exhibits sought to be admitted in the Motion for Partial Reconsideration.
On November 12, 2019, the Defendants presented their first witness, Defendant Finance Officer, to testify,
among others, that (a) he acted as liaison of the STI Cebu and STI ESG on the negotiations for the sale of
the subject property and (b) the Boards of Directors of STI Cebu and STI ESG did not approve the
proposal/offer to purchase of the Plaintiffs.
After cross-examination, the Defendants terminated the presentation of said witness’ testimony.
On November 29, 2019, the Defendants presented their external counsel’s accountant who testified on their
counterclaim against the Plaintiffs for legal cost/fees incurred for the case.
On January 17, 2020, the Defendants terminated the presentation of their evidence.
After due proceedings on the Defendants’ Formal Offer of Evidence, the Trial Court issued the Order dated
February 13, 2020, which admitted all the documentary evidence of the Defendants.
After both parties completed the presentation of evidence and filed their respective Memoranda, the
Defendants received the Decision of the Trial Court on June 22, 2020.
In the Decision dated June 18, 2020, the Trial Court determined that there was no perfected contract to sell
over the Property. The Trial Court affirmed that the Plaintiffs failed to obtain the consent of STI ESG. There
was no evidence showing that STI ESG, through its Board of Directors, (a) gave its consent to the sale or (b)
authorized Defendant Finance Officer to sell the Property in favor of the Plaintiffs.
However, the Trial Court determined that Defendant Finance Officer is liable to pay the Plaintiffs the total
amount of Php0.2 million representing temperate and exemplary damages (“Damages”). The Trial Court
determined that the actions of Mr. Sangalang insofar as (a) receipt of the earnest money, (b) lack of written
authority from STI ESG during the negotiation and (c) continued assurances to the Plaintiffs in relation to
the BIR ruling on the tax-free exchange and then sudden withdrawal from the transaction constitute bad
faith.
Lastly, the Trial Court ordered STI ESG to return the amount of Php0.3 million it received from the Plaintiffs
as “earnest money” with interest rate of six percent (6%) per annum from receipt thereof on March 30, 2011
until latter’s tender of the same to the Plaintiffs on July 2, 2015.
Both parties filed their respective Partial Motion for Reconsideration insofar as the (a) dismissal of the
Complaint and (b) award of Damages.
On August 25, 2020, the Trial Court issued its Order, which modified the Decision only insofar as requiring
STI ESG’s Finance Officer to pay an additional ₱50.0 thousand as attorney’s fees in favor of the Plaintiffs.
The rest of the findings in the Decision is affirmed.
Page 50 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Consequently, the parties will comply with the appeal procedures required under the Rules of Court.
Global Academy of Technology and Entrepreneurship, Inc. (GATE) filed a complaint for Damages against
STI ESG for its non-renewal of the Licensing Agreement despite the former’s alleged compliance of the
latter’s audit recommendations. On the basis of such alleged invalid non-renewal of the Licensing
Agreement, GATE seeks for (a) moral damages in the amount of = P0.5 million, (b) exemplary damages in
the amount of P=0.5 million and (c) attorney’s fees in the amount of 15% of the amount to be awarded and
=3.0 thousand per court appearance.
P
On January 23, 2017, STI ESG filed its Motion to Dismiss Ad Cautelam. In the said Motion, STI ESG asserted
that the dismissal of the case was warranted on the following grounds; (a) lack of jurisdiction over STI ESG
due to improper service of Summons to a Human Relations Officer (HR Officer), and (b) failure to state a
cause of action because GATE has no right for the renewal of the Licensing Agreement when (i) the same
already expired and (ii) it clearly provides that it may be renewed by mutual agreement of the parties. The
Motion to Dismiss Ad Cautelam was set for hearing on February 3, 2017.
On February 3, 2017, STI ESG received GATE’s Comment /Opposition. In the said Comment/Opposition,
GATE alleged that (a) the HR Officer was allegedly authorized by its in-house counsel to receive the
Summons, and (b) the decision of STI ESG not to renew the Licensing Agreement was not based on its
mutual agreement provision but the violations of GATE. Consequently, such decision of STI ESG to cancel
the Licensing Agreement was allegedly in bad faith.
Upon the filing of all the pleadings in relation to the Motion to Dismiss Ad Cautelam of STI ESG, the Trial
Court issued its Resolution dated May 16, 2017, which denied the said Motion. The Trial Court also
required STI ESG to file its Answer to the Complaint within the non-extendible fifteen (15) days from
receipt of said Resolution on May 25, 2017 or until June 9, 2017.
On June 9, 2017, STI ESG filed its Answer to the Complaint. In the Answer, STI ESG reiterated its position
that GATE has no cause of action against it because its decision not to renew the Licensing Agreement is in
accordance with contractual stipulations therein that its renewal is upon mutual agreement of both parties.
Considering the effectivity period of the Licensing Agreement expired on March 31, 2016 without being
renewed by both parties, GATE cannot claim any damages for STI ESG’s lawful exercise of its rights under
the Licensing Agreement.
Both parties have been required to attend and participate in the court-annexed mediation, and
subsequently, the judicial dispute resolution with the Trial Court. After the aforesaid proceedings, the
parties failed to reach an amicable settlement and terminated the judicial dispute resolution on October 27,
2017. As mandated by the relevant rules, the case was raffled to a new presiding judge.
Page 51 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
The new presiding judge issued an Order setting the case for pre-trial hearing on May 11, 2018.
The pre-trial proper was re-scheduled by the Trial Court in order for the parties to pre-mark their
documentary evidence before the branch clerk of court on May 23, 2018.
On May 23, 2018, both parties attended and caused the pre-marking of their respective documentary
exhibits.
Meanwhile, the pre-trial was set by the Trial Court and upon agreement of the parties on August 31, 2018.
On August 31, 2018, the pre-trial conference commenced and terminated on the same day. The Trial Court
then scheduled the presentation of the testimony of the Plaintiffs’ witnesses on October 9 and 30, 2018.
On October 9 and 30, 2018, the Plaintiff presented its two witnesses.
Thereafter, the Plaintiff terminated their presentation of evidence and filed their Formal Offer of Evidence.
On December 11, 2018, STI ESG filed the Comment and Objections to the said Formal Offer of Evidence.
On February 6, 2019, the Trial Court issued the Order dated January 10, 2019. In the Order, the Trial Court
denied the admission of two (2) letters issued by both parties as part of the evidence of the Plaintiff.
After the Plaintiffs filed the Motion for Reconsideration, the Trial Court admitted the aforesaid two (2)
letters, and set the presentation of evidence by STI ESG.
STI ESG presented three (3) witnesses in relation to its defense that the decision not to renew the Licensing
Agreement was (a) in accordance with the contractual stipulations therein, and (b) devoid of any bad faith.
Moreover, STI ESG presented evidence to show the attorney’s fees it incurred in the instant case.
After the presentation of the last witness, STI ESG formally offered its evidence by filing its Formal Offer
of Evidence on May 22, 2019.
After the Plaintiffs filed their Comment/Objections to the Formal Offer of Evidence, the Trial Court issued
its Order dated July 18, 2019. In the Order, the Trial Court denied the admission of only one (1) exhibit,
which was the letter of Plaintiff’ counsel to STI ESG insisting that the cancellation of the Licensing
Agreement was erroneous and in bad faith.
In the same Order, the Trial Court required the parties to file their respective Memoranda. After the filing
of said Memoranda, the case was submitted for decision by the Trial Court.
On February 4, 2020, STI ESG received the Decision dated January 16, 2020. In the Decision, the Trial Court
dismissed the instant case because the Plaintiffs failed to establish that STI ESG acted in abuse of rights
when it refused to renew the Licensing Agreement with the Plaintiffs. The Trial Court confirmed that said
Agreement clearly provided that the same can only be renewed by mutual agreement of the parties.
The Trial Court also ordered the payment by the Plaintiffs of STI ESG’s counterclaim in the amount of =
P0.3
million as attorney’s fees plus cost of suit.
Despite filing a Motion for Reconsideration, the Trial Court affirmed its dismissal of the Plaintiff’s claim
and the award of litigation cost in favor of STI ESG in an Order dated July 6, 2020.
Page 52 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
On August 3, 2020, STI ESG received the Notice of Appeal filed by the Plaintiff.
The Parent Company filed a petition for review with the Court of Tax Appeals (CTA) on October 12, 2009.
This is to contest the Final Decision on Disputed Assessment issued by the BIR assessing the Parent
Company for deficiencies on income tax and expanded withholding tax for the year ended March 31, 2003
amounting to = P124.3 million. On April 17, 2013, the CTA issued a Decision which granted the Parent
Company’s petition for review and ordered the cancellation of the BIR’s assessment since its right to issue
an assessment for the alleged deficiency taxes had already prescribed. The Commissioner of Internal
Revenue’s (“CIR”) filed a Motion for Reconsideration which was later denied by the CTA. On August 22,
2013, the CIR filed its Petition for Review with the CTA En Banc. On March 24, 2015, the CTA En Banc
affirmed the decision dated April 17, 2013 and ordered the cancellation of the BIR assessment for the fiscal
year ended March 31, 2003. On April 21, 2015, the CIR filed a Motion for Reconsideration with the CTA En
Banc, which was denied by the CTA En Banc on September 2, 2015. On October 30, 2015, the CIR filed a
Petition for Review with the Supreme Court. STI ESG filed its Comment on the Petition and, subsequently,
the CIR filed its reply to STI ESG’s Comment.
On October 4, 2017, STI ESG received the decision from the Supreme Court dated July 26, 2017. In its
decision, the Supreme Court denied the petition for review filed by the CIR and affirmed the Decision
dated March 24, 2015 and Resolution dated September 2, 2015 of the Court of Tax Appeals En Banc in CTA
EB No. 1050. On October 25, 2017, the CIR has filed a Motion for Reconsideration of the Supreme Court’s
decision dated July 26, 2017.
On December 14, 2017 the Supreme Court denied with finality the Motion for Reconsideration filed by the
CIR and affirmed the Decision dated July 26, 2017.
The Supreme Court also ordered the immediate issuance of the Entry of Judgment.
On July 2, 2018, STI ESG received the Entry of Judgment issued by the Supreme Court dated
May 7, 2018 which certified that its decision dated December 14, 2017 became final and executory and was
recorded in the Book of Entries of Judgments on the said date.
Page 53 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Except for matters taken up during the annual meeting of stockholders held on October 30, 2019 there was
no other matter submitted to a vote of security holders during the period covered by this report.
Market Price and Dividends of Registrant’s Common Equity and Related Stockholder Matters
The Company has a total Authorized Capital Stock (ACS) of Five Billion Pesos (₱5,000,000,000.00) divided
into five billion (5,000,000,000) shares with a par value of One Peso (₱1.00) each. Out of the ACS, three
billion eighty-seven million eight hundred twenty-nine thousand four hundred forty-three (3,087,829,443)
shares have been subscribed and paid-up. Out of the total issued shares, five million nine hundred fifty-
two thousand and two hundred seventy-three (5,952,273) shares pertain to treasury shares. The common
shares of the Company are not traded in any market, nor are they subject to outstanding warrants to
purchase, or securities convertible into common shares of the Company.
(2) Holders
Foreign ownership limit for STI ESG is forty percent (40%) of the issued and outstanding common shares,
equivalent to 1,232,750,868 common shares. Total shares owned by foreign shareholders as of March 31,
2020 was 7,841,118, equivalent to 0.25% of the outstanding common shares of the Company.
As of March 31, 2020, there were sixty-four (64) shareholders of the Company’s outstanding capital stock.
The Company has common shares only.
The following table sets forth the top 20 shareholders of the Company’s common stock, the number of
shares held, and the percentage of total shares outstanding held by each as of March 31, 2020.
Page 54 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
On September 19, 2017, the BOD of STI ESG adopted a policy on the declaration of dividends starting
with Fiscal Year 2017-2018.
The BOD approved a dividend declaration policy equivalent to 25% to 40% of the core income of the
Group from the previous fiscal year, subject to compliance with the requirements of applicable laws
and regulations, statutory limitations and/or restrictions, terms and conditions which may be imposed
on the Group by lenders or other financial institutions, and the Group’s investment plans and financial
condition.
Core income is defined as consolidated net income after tax derived from the Group’s main business-
which is education and other recurring income.
The amount of dividends will be reviewed periodically by the BOD in light of the earnings, financial
conditions, cash flows, capital requirements and other considerations, while maintaining a level of
capitalization that is commercially sound and sufficient to ensure that the Group can operate on a
standalone basis.
Dividends shall be declared and paid out of the Parent Company’s unrestricted retained earnings
which shall be payable in cash, property or stock to all shareholders on the basis of outstanding stock
held by them. Unless otherwise required by law, the BOD, at its sole discretion, shall determine the
amount, type and date of payment of the dividends to the shareholders, taking into account various
factors, including:
Page 55 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
the level of the Group’s earnings, cash flow, return on equity and retained earnings;
its results for and its financial condition at the end of the year in respect of which the dividend is
to be paid and its expected financial performance;
the projected levels of capital expenditures and other investment programs;
restrictions on payments of dividends that may be imposed on it by any of its financing
arrangements and current or prospective debt service requirements; and such other factors as the
BOD deems appropriate.
Dividend History:
On September 19, 2017, STI ESG’s BOD approved the cash dividends declaration of ₱0.08 per share for a
total amount of ₱246.5 million, in favor of the stockholders of record as at September 30, 2017. Such
dividends were paid on October 19, 2017.
On September 27, 2018, the Parent Company’s BOD approved the cash dividends declaration of ₱0.06 per
share for a total amount of ₱184.9 million, in favor of the stockholders of record as at September 30, 2018.
Such dividends were paid on October 10, 2018.
On September 20, 2019, the Parent Company’s BOD approved the cash dividends declaration of
=0.06 per share for a total amount of =
P P184.9 million, in favor of the stockholders of record as at September
30, 2019. Such dividends were paid on November 5, 2019.
There is no sale of unregistered or exempt securities for the past three (3) years.
Page 56 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
This discussion summarizes the significant factors affecting the financial condition and operating results
of STI Education Services Group, Inc. (“STI ESG” or the “Parent Company”) and its subsidiaries (hereafter
collectively referred to as the “Group”) for the fiscal years ended March 31, 2020, 2019 and 2018. The
following discussion should be read in conjunction with the attached audited consolidated financial
statements of the Group as of and for the years ended March 31, 2020, and 2019 and for all the other periods
presented.
Financial Condition
The Group posted consolidated total assets amounting to = P11,492.4 million as at March 31, 2020, vs.
=11,058.1 million as at March 31, 2019. This amount was substantially driven by the increase in cash and
P
cash equivalents, receivables, and property and equipment. These increases were partially offset by the
decline in the carrying value of the noncurrent asset held for sale.
Cash and cash equivalents increased by 54% or P =216.5 million from P=401.2 million to P
=617.7 million as at
March 31, 2019, and March 31, 2020, respectively. STI ESG generated net cash from operations amounting
to P
=608.3 million during the year ended March 31, 2020. The net investment outlays of STI ESG as at March
31, 2020 is P
=432.0 million, which include payments to contractors for the recently completed buildings,
acquisition of simulator and other maritime equipment for NAMEI Polytechnic Institute, Inc., purchase of
school equipment and furniture and construction of a new academic center in Legazpi City. STI ESG’s
drawdown from its seven-year term loan facility amounted to ₱800.0 million. The loan proceeds were
primarily used to pay the amounts due to contractors and fund working capital requirements.
Receivables amounted to = P636.7 million as at March 31, 2020, an increase by = P215.9 million from P =420.8
million as at March 31, 2019, representing mainly receivables from the students, Department of Education
(DepEd) and Commission on Higher Education (CHED) for the remaining months of the school year and
the consideration paid for the assignment of the loan of STI Tanay with the Development Bank of the
Philippines (DBP) amounting to P =75.5 million. Receivables from students increased by P =53.7 million from
=275.3 million to P
P =329.0 million, largely on tuition and other school fees that are expected to be collected
over the remaining month of the school year. Outstanding receivables from DepEd for the SHS qualified
voucher recipients amounted to = P175.1 million as at March 31, 2020, posting an increase of P =31.7 million
from =P143.4 million as at March 31, 2019. Accounts receivable from CHED amounted to P =42.1 million and
=34.8 million as at March 31, 2019 and 2020, respectively. On November 4, 2019, DBP assigned, transferred,
P
and conveyed, without recourse, all its collectibles from STI Tanay to STI ESG for a consideration of = P75.5
million. DBP likewise granted to STI ESG all the rights, title and interests in and to the loans, the Promissory
Notes and the underlying collaterals and security covering the loan and Promissory Notes, as well as full
power and authority to demand, collect and receive payment on the said loan and Promissory Notes.
Page 57 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Prepaid expenses decreased by P =18.7 million, or 25%, from = P73.9 million to P =55.2 million as at
March 31, 2020 due to a decline in STI ESG’s Input VAT as at March 31, 2020. This represents the portion
of Input VAT, which were claimed as deduction from Output VAT for the year ended March 31, 2020.
The noncurrent asset held for sale amounting to P =419.1 million and =
P716.6 million as at March 31, 2020 and
2019, respectively, represents the carrying value of STI ESG’s 20% ownership in Maestro Holdings, Inc
(Maestro Holdings). The operating subsidiaries of Maestro Holdings are PhilPlans First, Inc. (PhilPlans),
PhilhealthCare, Inc. (PhilCare), and Philippine Life Financial Assurance Corporation (PhilLife). On June
27, 2017, STI ESG’s Board of Directors (BOD) has approved the disposal of this 20% stake in Maestro
Holdings. As such, said investment account has been reclassified from noncurrent to a current asset.
Further, with the reclassification as a noncurrent asset held for sale, STI ESG has ceased the use of the equity
method of accounting for the investment in Maestro Holdings as at June 30, 2017 and was carried at the
lower of its carrying amount and fair value less cost to sell. Since then, management had discussions with
potential buyers but no final agreements were reached. For the year ended March 31, 2020, STI ESG has
recognized a provision for impairment of its investment in Maestro Holdings amounting to P =297.5 million
to bring it to its fair value less cost to sell to the amount of ₱419.1 million as at March 31, 2020. The lower
fair value as at March 31, 2020 is an impact of the COVID-19 pandemic and the ensuing economic and
market disruptions across markets and industries. The fair value was estimated using adjusted
consolidated net assets value which consists significantly of investments in listed equity instruments,
government bonds, other fixed-income securities and pre-need reserves for PhilPlans, and discounted cash
flows from the financial budget covering five years approved by management of PhilLife and PhilCare.
No provision for impairment was recognized for the year ended March 31, 2019. On September 24, 2020,
STI ESG’s BOD has approved the sale of its 20% stake in Maestro Holdings to a third-party investor for a
consideration higher than its present carrying value, subject to completion of certain closing conditions.
Property and equipment increased by 4% or P =332.5 million, from =P7,670.5 million to =P8,003.0 million, net
of depreciation recorded for the period, substantially attributed to the recognition of the right-of-use (ROU)
assets with carrying value of = P333.0 million as at March 31, 2020. This is in accordance with the adoption
of Philippine Financial Reporting Standard (PFRS) 16, Leases, which requires lessees to recognize most
leases in the consolidated statement of financial position and apply a single accounting model for all leases,
with certain exemptions. The Group leases land and building spaces, where the schools are located, under
operating lease agreements with varying terms and periods. Before the adoption of PFRS 16, the Group
classified each of these leases (as lessee) at the inception date as operating lease under Philippine
Accounting Standards (PAS) 17, Leases. Upon adoption of PFRS 16, the Group applied a single recognition
and measurement approach for all leases, using the modified retrospective method of adoption with the
date of initial application of April 1, 2019, except for short-term leases and leases of low-value assets. The
Group recognized ROU assets and lease liabilities for those leases previously classified as operating leases.
The ROU assets were initially recognized based on the amount equal to the present value of lease payments
determined at the lessee's incremental borrowing rate, adjusted for any prepaid and accrued lease
previously recognized. Subsequently, ROU assets are measured at carrying amount less accumulated
depreciation. The ROU assets are depreciated on a straight-line basis over the shorter of its remaining
estimated useful life or the lease term. The increase likewise includes the costs related to the construction
of STI Academic Center Legazpi, a four-storey building with an estimated student capacity of
approximately 2,500 students, built on a 4,149 square meter property along Rizal Street, Legazpi City. The
school building has been completed in September 2020, in time for the start of classes for SY 2020-2021.
Equity instruments designated at fair value through other comprehensive income (FVOCI) increased by
=17.8 million from =
P P49.8 million to P=67.6 million as at March 31, 2020. In January 2019, First Pacific
Page 58 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Investment Ltd., PLDT, Inc., Benpro Inc., Pilipinas Global Network Limited, Cignal TV, Inc., Suha-PH, Inc.,
Happyfeet Esports team and STI ESG entered into an investment and shareholders’ agreement whereby
the parties agreed to form Philippine Online Sports League Inc., a stock association which will establish,
operate and maintain a national multi-game Esports league in the Philippines with the aim to promote and
develop Esports in the country. Esports is a growing sport internationally and in the Philippines. With this,
Philippine Online Sports League Inc. was incorporated on September 30, 2019 with the Philippine Securities
and Exchange Commission (SEC). It has an authorized capital stock of = P155.0 million divided into 1.25
million common shares and 200.0 thousand preferred shares with a par value of P =100.0 per common share
and P=150.0 per preferred share. The initial subscribed and paid-up capital of Philippine Online Sports
League Inc. is =
P90.0 million, of which STI ESG subscribed to and paid P =10.0 million for 100.0 thousand
common shares at P =100.0 par value per share. STI ESG also recognized unrealized fair value adjustment
amounting to =P8.0 million on its unquoted equity instrument at FVOCI due to the increase in its fair market
value as at March 31, 2020.
Deferred tax assets (DTA) increased by = P1.3 million from P =32.1 million to P =33.4 million as at
March 31, 2019 and March 31, 2020, respectively, substantially representing taxes applicable to tuition and
other school fees collected in advance and the tax impact of the adjustments related to the adoption of PFRS
16.
Goodwill, intangible, and other noncurrent assets increased by P =19.4 million from = P511.1 million to
=530.5 million as at March 31, 2019 and March 31, 2020, respectively. In January 2018, STI ESG entered into
P
a contract to sell with a real estate developer for the acquisition of a lot in Iloilo City with a total area of
2,615 sq. m. for the price of ₱183.0 million plus value-added tax, less other applicable taxes. STI ESG made
a down payment amounting to ₱67.5 million in January 2018, net of the ₱0.2 million reservation fee paid
on November 29, 2017. The remaining balance in the amount of ₱128.1 million was paid without interest
in eighteen (18) equal monthly installments of ₱7.1 million starting January 2018 up to June 2019.
Consequently, STI ESG recognized an aggregate amount of P =21.3 million deposit for asset acquisitions,
which represent the remaining equal monthly installments from April to June 30, 2019 for the acquisition
of a lot in Iloilo City in January 2018. The last installment for this Iloilo property was paid in June 2019.
Documents for the transfer of ownership to STI ESG are being processed. The lot will be the future site of
STI Iloilo. On April 1, 2019, Deeds of Assignment were executed by the shareholders of NAMEI transferring
and conveying ownership of 94% of NAMEI Polytechnic Institute, Inc. and 100% ownership of NAMEI
Polytechnic Institute of Mandaluyong, Inc. (hereafter collectively referred to as “NAMEI”) to STI ESG.
NAMEI thus became a subsidiary of STI ESG effective April 1, 2019. In view of this, STI ESG started
consolidating the assets, liabilities and results of operations of NAMEI beginning April 1, 2019. Thus, the
deposits for asset acquisitions pertaining to NAMEI in the amount of P =70.0 million as at March 31, 2019
was reversed. The identifiable assets and liabilities recognized in the consolidated financial statements as
at March 31, 2020 were based on the purchase price allocation report of the fair value of these assets and
liabilities at the time of acquisition resulting to goodwill amounting to P
=21.2 million. STI ESG identified the
license to operate a maritime school and related agreements as an intangible asset, for purposes of
estimating the fair value of the net assets acquired. Intangible assets amounting to = P27.6 million represents
fair value of the license and agreements. Deferred tax liability (DTL) amounting to P =2.8 million is calculated
based on the estimated fair value of the license to operate a maritime school, its related agreements, and a
10.0% income tax rate for educational institutions. The carrying values of other accounts such as cash,
receivables, and property and equipment, among others, approximate their fair values. STI ESG conducts
annual impairment testing of goodwill recognized through business combinations. Impairment testing
showed that the Group’s cash-generating units’ (CGUs) recoverable amounts were higher than their
carrying amounts as at March 31, 2020, except for the goodwill related to STI Tuguegarao and STI Pagadian
as at March 31, 2019. Hence, the Group recognized provision for impairment of goodwill aggregating to = P
17.0 million and nil, for the years ended March 31, 2019 and 2020, respectively. Noncurrent advances to
Page 59 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
suppliers increased by = P39.4 million, which is substantially attributed to advance payments made in
relation to the acquisition of simulator and other maritime equipment for NAMEI Polytechnic Institute,
Inc. and construction of STI Legazpi Academic Center including the necessary school furniture and
equipment. These advances will be reclassified to the “Property and equipment” account when the goods
are received or the services are rendered.
Unearned tuition and other school fees increased substantially by P =113.6 million from P=81.4 million as at
March 31, 2019 to =P195.0 million as of March 31, 2020, mostly representing tuition and other school fees of
tertiary students that will be recognized as income over the remaining months of the related school term.
Current portion of obligations under finance lease amounting to P =6.2 million as at March 31, 2019 was
settled during the year ended March 31, 2020. The remaining portion of obligations under finance lease is
now reclassified as part of lease liability. This change in the presentation was made following the adoption
of PFRS 16.
The current and noncurrent portion of lease liability amounted to = P66.1 million and =
P329.8 million,
respectively. Lease liabilities were recognized based on the present value of the remaining lease payments,
discounted using the incremental borrowing rate at the date of the initial application. The amount of lease
liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. The
measurement and presentation of lease liabilities were recognized in the consolidated statements of
financial position of the Group in accordance with the adoption of PFRS 16.
Interest-bearing loans and borrowings, net of the current portion, increased by P =554.3 million from
=360.0 million to P
P =914.3 million as at March 31, 2019 and March 31, 2020, respectively. STI ESG made
drawdowns from its short-term loan facility aggregating to P =468.0 million during the year ended March
31, 2020. These loans are subject to interest rates ranging from 4.75% to 5.75% and have been fully settled
as at March 31, 2020. STI ESG also made drawdowns from its new term loan facility aggregating to = P800.0
million during the year ended March 31, 2020, subject to interest rates ranging from 5.81% to 6.31%. The
proceeds from these loans were used for capital expenditures and working capital requirements. The loan
proceeds were partially offset by STI ESG’s principal payments aggregating to P =240.0 million on its
Corporate Notes Facility in July 2019 and January 2020.
STI ESG listed its P=3.0 billion Series 7-year Bonds due 2024 and Series 10-year Bonds due 2027 (collectively,
the “Bonds”) on the Philippine Dealing and Exchange Corp. (PDEx) secondary market on March 23, 2017.
This is the first tranche of its =
P5,000.0 million fixed-rate bonds program under its 3-year shelf registration
with the SEC. The 3-year shelf registration ended on March 9, 2020. The Bonds carry coupon rates of
5.8085% and 6.3756% for the 7-year and 10-year tenors, respectively. Interests are payable quarterly in
arrears on June 23, September 23, December 23, and March 23, or the next business day if such dates fall on
non-banking days, of each year commencing on June 23, 2017, until and including the relevant maturity
date. The Bonds Payable is carried in the books at = P2,964.4 million and P
=2,958.0 million as at March 31,
Page 60 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
2020, and March 31, 2019, respectively, net of deferred finance charges, representing bond issue costs with
carrying value of P
=35.6 million and P
=42.0 million, as at March 31, 2020, and March 31, 2019, respectively.
The proceeds of the bonds have been fully utilized as at March 31, 2019.
Other noncurrent liabilities decreased by ₱30.4 million representing payments made by STI Novaliches to
STI Diamond amounting to ₱14.0 million as a result of the conveyance of the latter’s net assets to the former
in August 2016 and due to reclassification from noncurrent to the current portion of advance rent/rental
deposits aggregating to ₱16.1 million for lease agreements with a remaining term of one year or less.
STI ESG’s cumulative actuarial gain decreased by P =9.3 million, net of related tax, from P
=8.2 million to
negative P=1.1 million, as at March 31, 2019 and 2020, respectively, due to the impact of unrealized
remeasurement loss recognized from the decline in the market value of the investment in equity securities
of the pension plan assets.
STI ESG’s fair value adjustment on equity instruments designated at FVOCI is up by P =7.8 million due to
the increase in the fair market value of STI ESG’s investment in unquoted equity instrument as at March
31, 2020.
STI ESG’s share in associate’s cumulative actuarial gain likewise decreased by P =68.0 thousand, net of
related tax, due to the impact of unrealized remeasurement loss recognized from the decline in the market
value of the investment in equity securities of one of its associates.
On December 12, 2018, De Los Santos-STI College, Inc. (De Los Santos-STI College) and Metro Pacific
Hospital Holdings, Inc. (MPHHI) entered into a Deed of Absolute Sale wherein De Los Santos-STI College
sold its 79,399 common shares of stock in De Los Santos Medical Center, Inc. (DLSMC), formerly De Los
Santos General Hospital, to MPHHI for a total consideration of = P39.7 million. The 79,399 DLSMC shares
had a carrying value of P
=8.6 million at the time of the sale. The transaction resulted in a realized fair value
gain on equity instruments designated at FVOCI amounting to P =31.1 million, which is presented as an
addition to Retained Earnings as at March 31, 2019. The disposition of De Los Santos-STI College shares in
DLSMC was made to enable the Group to focus on its core business of offering educational services.
Page 61 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
The Group posted consolidated total assets amounting to = P11,058.1 million as at March 31, 2019, vs.
=10,890.9 million as at March 31, 2018. Property and equipment increased by =
P P1,472.9 million driven by
the construction of the new school buildings while cash balances decreased by P =1,216.2 million, net of
collections received for the period, due to payments made to suppliers and contractors and purchase of
equipment, furniture and fixtures for all construction projects.
Receivables, which consist mainly of receivables for tuition and other school fees, increased by = P7.6 million
or 2% to =P420.8 million, net of estimated credit losses (ECLs) recognized in relation to the adoption of PFRS
9, Financial Instruments. The balance is composed mostly of amounts expected to be collected from students,
DepEd and CHED, which amounted to = P273.9 million, =P107.9 million, and nil as at March 31, 2018,
respectively, and = P275.3 million, = P143.4 million and P =42.1 million as at March 31, 2019, respectively.
Students who qualified for the DepEd Voucher Program are entitled to the government subsidy in amounts
ranging from P =8,750 to P
=22,500 per student per year. On December 17, 2018, the CHED, Unified Student
Financial Assistance System for Tertiary Education Board (UniFAST) and STI ESG signed a memorandum
of agreement to avail of the Tertiary Education Subsidy (TES) and Student Loan Program (SLP) for its
students under the “Universal Access to Quality Tertiary Education Act (UAQTEA) and its Implementing
Rules and Regulations (IRR). Republic Act No. 10931 or the UAQTEA and its IRR provide, among others,
that to support the cost of tertiary education or any part or portion thereof, TES and SLP are established for
all Filipino students who enroll in undergraduate and post-secondary programs of private Higher
Education Institutions (HEIs). Accordingly, the TES and the SLP shall be administered by the UniFAST
Board. The annual TES for students, subject to guidelines and implementing rules and regulations on the
release of TES, enrolled in State Universities and Colleges (SUCs) or CHED recognized Local Universities
and Colleges (LUCs) is = P40,000. Students enrolled in select HEIs who are qualified to receive the TES, are
entitled to =P60,000. The subsidy is for tuition and other related school fees and should cover the living
allowance, books, supplies, transportation, and miscellaneous expense. Additional benefits are likewise
given to Persons with Disabilities (PWDs) and graduates of programs with licensure exams amounting to
=30,000 per annum and P
P =10,000, respectively. Under the Voucher and TES Programs, DepEd and CHED,
respectively, pay directly to the schools where these students enrolled.
Page 62 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Property and equipment, net of accumulated depreciation, climbed by 24% or = P1,472.9 million from
=6,197.6 million to =
P P7,670.5 million as at March 31, 2018, and 2019, respectively, driven by the expansion
projects. The construction works in STI San Jose del Monte had been completed as at March 31, 2019, while
the newly constructed buildings of STI Sta. Mesa and STI Pasay-EDSA had been substantially completed
as at March 31, 2019. These schools already accepted tertiary and senior high school students for the first
semester of SY 2019-2020. Meanwhile, STI Lipa started operations in the new building in August 2018,
specifically from the ground up to the fourth floor. The remaining works from the 5th floor up to the roof
deck and the basketball gymnasium at the 7th floor were completed in March 2019.
Investments in and advances to associates and joint ventures decreased by P =6.3 million from = P514.9 million
to P
=508.6 million as at March 31, 2018, and 2019, respectively, net of the share in associates’ income, due to
dividends received from an associate for the year ended March 31, 2019.
Equity investments in listed and non-listed companies classified as Available-For-Sale (AFS) financial
assets as at March 31, 2018, were classified and measured as Equity instruments designated at FVOCI
beginning April 1, 2018. The Group recognized an increase in the unrealized fair value adjustment on
equity instruments designated at FVOCI, amounting to P =40.2 million on April 1, 2018, as part of the
transition adjustments resulting from the effect of the adoption of PFRS 9. On December 12, 2018, De Los
Santos-STI College and MPHHI entered into a deed of absolute sale wherein De Los Santos-STI College
sold its 79,399 common shares of stock in DLSMC, formerly De Los Santos General Hospital, to MPHHI for
a total consideration of P
=39.7 million. On February 7, 2019, De Los Santos-STI College and MPHHI entered
into another deed of absolute sale wherein De Los Santos-STI College sold its remaining 35,674 common
shares of stock in DLSMC to MPHHI for a total consideration of P =17.8 million. At the time of sale, the fair
value of the shares was equal to the total consideration. Consequently, the equity instruments designated
at FVOCI declined from = P68.1 million to P
=50.5 million as at March 31, 2019. These transactions resulted in
a realized fair value gain on equity instruments designated at FVOCI, amounting to P =37.1 million, which
is presented as an addition to Retained Earnings. The disposition of De Los Santos-STI College shares in
DLSMC was made to enable the Group to focus on its core business of offering educational services.
DTA rose by P =18.1 million substantially due to taxes applicable to remeasurement loss in pension liability,
tuition, and other school fees collected in advance and adjustments resulting from the adoption of PFRS 9.
Following statutory regulations, tuition and other school fees which are collected in advance are subject to
income tax upon receipt. Remeasurement loss, related to pension expense, is presented net of taxes, as the
component of the current year’s other comprehensive loss while bad debts ascertained to be worthless and
uncollectible are considered as deductible for tax purposes when these receivables are written off.
Pension assets amounted to P =53.5 million and nil as at March 2018 and 2019, respectively. This is due to
the computed actuarial loss on pension assets arising from the decline in value of equity shares, forming
part of pension assets. The Group offsets its pension assets and liabilities on a per company basis for
presentation in the consolidated statements of financial position since pension assets are restricted for the
settlement of pension liabilities only.
Page 63 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Goodwill, intangible, and other noncurrent assets decreased by P =3.5 million from P =514.6 million to
=511.1 million as at March 31, 2019. In January 2018, STI ESG entered into a contract to sell with a real
P
estate developer for the acquisition of a lot in Iloilo City with a total area of 2,615 sq. m. for a price of
=183.0 million plus value-added tax, less other applicable taxes. STI ESG made a down payment
P
amounting to = P67.5 million in January 2018, net of the P
=200.0 thousand reservation fee paid on November
29, 2017. The remaining balance in the amount of P =128.1 million is being paid without interest, in eighteen
(18) equal monthly installments of P =7.1 million starting January 2018 up to June 2019. The lot will be the
future site of STI Iloilo. Also, on February 15, 2019, STI ESG and the shareholders of NAMEI, entered into
a share purchase agreement for the sale of approximately 92% of the 50,000 outstanding shares of NAMEI
Polytechnic Institute, Inc. and 99% of the 10,000 outstanding shares of NAMEI Polytechnic Institute of
Mandaluyong, Inc. Both shares are with a par value of P =10.0 each. In January 2019, STI ESG made a deposit
of =
P14.0 million, which was held in escrow with a law firm. This amount was treated as part of the purchase
price at the closing date. Another = P36.0 million was paid on February 15, 2019. On the same date, STI ESG
paid P=10.0 million to NAMEI as a deposit for future subscriptions in shares of NAMEI and another = P10.0
million representing STI ESG’s share in the transaction costs and all other fees and expenses incurred under
the agreement. In relation to this, STI ESG recognized P =70.0 million as a deposit for the purchase of shares
of NAMEI. Consequently, the deposit for asset acquisition increased by P =155.5 million, representing
payments made for the acquisition of a lot in Iloilo City and deposits made for the purchase of shares of
NAMEI, as discussed above. STI ESG conducts annual impairment testing of goodwill recognized through
business combinations. Impairment testing as at March 31, 2019 showed that the Group’s CGUs’
recoverable amounts were higher than their carrying amounts except for the goodwill related to STI
Tuguegarao and STI Pagadian. For the year ended March 31, 2019, the Group recognized provision for
impairment of goodwill aggregating to = P17.0 million related to these schools since their recoverable
amounts were lower compared to their carrying values. Noncurrent advances to suppliers decreased by P =
145.6 million due to reclassification to “Property and Equipment” as STI ESG recognized the cost of
construction works based on the percentage of completion of the projects as at March 31, 2019.
Accounts payable and other current liabilities increased by = P297.3 million substantially due to obligations
to contractors in relation to construction and repairs in various STI ESG campuses.
The noncurrent portion of interest-bearing loans and borrowings decreased by P =240.0 million while the
current portion of interest-bearing loans and borrowings, net of principal payments made aggregating to
=134.4 million in July 2018 and January 2019, increased by P
P =105.6 million to =
P240.0 million representing the
amount due within one year.
Unearned tuition and other school fees increased by P=27.4 million from P=54.0 million to P
=81.4 million as at
March 31, 2018, and 2019, respectively, substantially attributed to advance payments of tuition fees and
other school fees of incoming students for SY 2019-2020 and the portion of the assessment fees of the August
batch of tertiary students for SY 2018-2019 with the second semester ending in May 2019. The unearned
tuition and other school fees were recognized as income over the related term.
The current and noncurrent portions of obligations under finance lease declined by P
=0.2 million and
=2.4 million, respectively, due to payments made during the period.
P
Page 64 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Other noncurrent liabilities decreased by P =1.7 million, net of the advance rent and security deposits
received from new lease agreements, due to payments made by STI Novaliches to STI Diamond amounting
to P
=8.0 million as a result of the conveyance of the latter’s net assets to the former in August 2016.
STI ESG’s cumulative actuarial gain decreased by P =74.4 million, net of related tax, from =
P82.6 million to
=8.2 million, as at March 31, 2018, and 2019, respectively, due to the impact of unrealized remeasurement
P
loss recognized from the decline in the market value of the investment in equity securities of the pension
plan assets.
Results of Operations
The student enrollment of the schools under STI ESG at the start of the SY are as follows:
Page 65 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Grouping of the students in terms of government regulatory agencies supervising the programs is as
follows:
CHED - students under this group are enrolled in tertiary and post-graduate programs;
Technical Education and Skills Development Authority (TESDA) - students under this group are
enrolled in technical-vocational programs; and
DepEd – pertains to primary and secondary education, including SHS.
SY 2019-2020 % SY 2018-2019 %
*DepEd count includes SHS students and 454 students of NAMEI who are enrolled in basic education in
SY 2019-2020.
The Group registered a 44% increase in new student count enrolled under the CHED programs in SY 2019-
2020, resulting in a 6% increase in total CHED student count year-on-year. This is despite the fact that there
are mainly two year levels in college in relation to the implementation of the K to 12 program.
Prior to SY2018-2019, the schools in the STI Network formally open every June of each year. On June 14,
2018, STI ESG informed CHED of the decision of its BOD to admit two batches of incoming college
freshmen students for SY 2018-2019. STI ESG requested CHED for endorsement of this move to accept the
second batch of college freshmen enrollees. On June 29, 2018, CHED noted the decision of STI ESG, citing
that the decision to move the school calendar is part of the institution’s academic freedom, provided that it
would not violate existing rules on the same. CHED also advised STI ESG to coordinate with the respective
CHED Regional Offices on the usual guidance and procedures in implementing the planned school
calendar.
This decision is in line with STI ESG’s thrust to continue providing an opportunity for fresh Grade 12
graduates to pursue their tertiary education. Classes for the first and second batch started in June and
August 2018, respectively. The number of students in SY 2018-2019, which is reported in the foregoing
tables, represents the total enrollment for the June and August 2018 batches.
In February 2019, the BOD of STI ESG approved the shift in the school calendar for tertiary classes from
the usual June of each year to mid-July beginning SY 2019-2020 while the opening of SHS classes remained
in June.
STI ESG’s implementation of two freshmen batches in SY 2018-2019 and the shift in the tertiary school
calendar in SY 2019-2020 of its schools are in accordance with the guiding policy on the academic calendar
year which is stipulated in Section 3 of Republic Act (RA) 7797 or the School Calendar Act, which states
that the school year shall start on the first Monday of June but not later than the last day of August. This is
also in consonance with RA 7722, which provides some leeway for HEIs to establish their own academic
Page 66 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
calendars and set their opening days in order to encourage innovation and the exercise of academic
freedom among institutions of higher learning.
On September 5, 2019, the BOD of STI ESG approved several amendments in its By-Laws, including among
others: (1) change of the fiscal year from starting April 1 of each year ending on March 31 of the following
year to starting July 1 of each year ending on June 30 of the following year; and, (2) change of the date of
its annual stockholders’ meeting from every first Thursday of September of each year to every first
Thursday of November of each year. The SEC approved the amendments on November 4, 2019. The BIR
approved the Parent Company’s application for change in accounting period on August 27, 2020.
Tuition and other school fees amounted to P =1,707.2 million for the year ended March 31, 2020, a decline of
=94.0 million or 5% from the same period last year. This is due to the shift of STI ESG in the start of the
P
school calendar for tertiary classes from June of each year to July this school year. The revenue stream of
the Group, which is mainly from tuition and other school fees, is recognized as income over the
corresponding school term(s) to which they pertain. Accordingly, revenues related to the tertiary enrollees
were recognized beginning July 2019 compared to last year when both SHS and tertiary classes commenced
in June 2018 and thus related revenues were recognized beginning June 2018. In addition, classes were
suspended starting March 17, 2020 with the imposition of the Enhanced Community Quarantine (ECQ)
throughout the island of Luzon, as part of the government’s move to contain the outbreak of COVID 19.
With this, graduation ceremonies, the convention of students in select areas and some student activities
and programs, scheduled in March 2020, were completely cancelled.
Revenues from educational services and royalty fees decreased by 16% and 18%, respectively. Revenues
from educational services are derived as a percentage of the tuition and other school fees actually collected
by the franchised schools from their students, DepEd and CHED.
Sale of educational materials and supplies went down from P =149.6 million to =
P135.9 million, a 9%, or
P13.7 million decrease substantially due to the lower sale of uniforms. STI ESG introduced new designs of
=
tertiary uniforms in SY2018-2019, which contributed to the higher sale of tertiary uniforms for the year
ended March 31, 2019. The cost of educational materials and supplies sold decreased likewise concomitant
with the decrease in the sale of educational materials and supplies.
Page 67 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
recognized ROU assets for these leases previously classified as an operating lease. The ROU assets were
recognized based on the amount equal to the lease liabilities, adjusted for any related prepaid, and accrued
lease payments previously recognized. ROU assets are depreciated on a straight-line basis over the shorter
of its estimated useful life and the lease term. The direct portion of depreciation expense of ROU assets
amounting to = P41.4 million was recognized for the year ended March 31, 2020. Other direct expenses
decreased by P=41.3 million substantially because of the school activities and programs which were canceled
due to the implementation of the ECQ.
General and administrative expenses decreased by P =16.9 million from =P1,044.8 million to P
=1027.9 million
for the year ended March 31, 2019, and 2020, respectively. The operating expense portion of Rent expense
decreased by P =36.8 million due to the adoption of PFRS 16 aggregating to P =23.9 million and savings
generated from the transfer of STI Shaw to STI Sta. Mesa, and STI Taft and STI Makati to STI Pasay-EDSA.
Costs of security, janitorial, and other outside services increased by P
=12.0 million due to the costs of NAMEI
and STI San Jose del Monte, which were consolidated to the Group beginning April 1, 2019, and increase
in security and janitorial personnel in some schools. Depreciation expense went up by = P43.3 million due
to the adoption of PFRS 16 and due to depreciation expense recognized for the newly completed
buildings of STI Lipa, STI San Jose del Monte, STI Sta. Mesa and STI Pasay-EDSA. Insurance expenses
likewise increased by P =3.2 million in line with the completion of the aforementioned school buildings. The
Group recognized a provision for ECL amounting to = P52.1 million from the year ended March 31, 2020.
This is lower by = P9.4 million compared to P =61.6 million for the year ended March 31, 2019. While
receivables from students for tuition and other school fees increased, these are substantially recent accounts
that were assigned lower loss rates. The Group recognized ECLs based on the Group’s historical credit
loss experience adjusted with forward-looking information. The most recent receivables were assigned
lower loss rates. Estimated loss rates vary over time and increase as receivables age and as credit risks
increase, with the likelihood of the receivables becoming impaired. Receivables pertaining to SY 2018-2019
likewise registered an improvement in 2020 due to subsequent collections received from the students.
Provision for inventory obsolescence of = P4.8 million representing impairment of old tertiary uniforms was
recognized for the year ended March 31, 2020. STI ESG conducts annual impairment testing of goodwill
recognized through business combinations. Impairment testing showed that the Group’s CGUs’
recoverable amounts were higher than their carrying values except for the goodwill related to STI
Tuguegarao and STI Pagadian as at March 31, 2019. For the year ended March 31, 2019, the Group
recognized provision for impairment of goodwill related to these schools aggregating to P =17.0 million since
their recoverable amounts were lower compared to their carrying amounts. Advertising and promotions
decreased by =P11.8 million as STI ESG transitioned from its traditional television advertisements to online
or digital advertising which is more specifically directed to its target market at a lower cost.
The Group posted an operating income of = P218.8 million for the year ended March 31, 2020, compared to
the same period last year’s operating income of P
=344.7 million, largely because of the shift in the academic
year this SY2019-2020.
For the year ended March 31, 2020, STI ESG recognized a provision for impairment of its investment in
Maestro Holdings in the amount of = P297.5 million to bring it to its fair value less cost to sell of ₱419.1
million. The decline in fair value as at March 31, 2020 is an impact of the COVID-19 pandemic and the
ensuing economic and market disruptions across markets and industries. The fair value was estimated
using Maestro Holdings’ adjusted consolidated net assets value which consists significantly of investments
in listed equity instruments, government bonds and other fixed-income securities and pre-need reserves
for PhilPlans and discounted cash flows from the financial budget covering five years approved by
Page 68 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
management of PhilLife and PhilCare. No provision for impairment was recognized for the year ended
March 31, 2019.
STI ESG recognized dividend income from its associate, STI Marikina, and its equity share in DLSMC
accounted for at FVOCI, aggregating to =
P1.8 million for the year ended March 31, 2020. STI ESG recognized
a dividend income amounting to P =7.5 million for the year ended March 31, 2019, substantially from the
dividends received by De Los Santos-STI College from DLSMC amounting to = P3.1 million. As at March
31, 2019, De Los Santos-STI College sold its common shares of stock in DLSMC to MPHHI.
On March 27, 2019, STI ESG and STI College Tagum, Inc., the assignee, entered into a deed of assignment
to assign, sell, transfer and set over unto the assignee, the assets of STI Tagum, a former branch of STI ESG
for a sum of P=7.0 million. The sale was effective on April 1, 2019. In relation to this, gain on sale amounting
=4.4 million was recognized for the year ended March 31, 2020.
to P
Provision for income tax amounting to P=13.3 million was recognized as at March 31, 2020, associated with
the taxable income recognized for the year.
The unrealized fair value adjustments on equity instruments designated at FVOCI amounted to = P7.8
million for the year ended March 31, 2020, an improvement from last year’s negative P =0.26 million. The
increase represents fair value adjustment in the market value of STI ESG’s unquoted equity instrument
which increased by P=8.0 million which was slightly reduced by the lower fair market value of the quoted
equity shares held by STI ESG.
Page 69 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
STI ESG recognized remeasurement losses amounting to P =9.3 million and P =74.4 million, net of taxes, for
the years ended March 31, 2020, and 2019, respectively, due to the decline in value of equity shares forming
part of pension assets.
Total comprehensive income for the year ended March 31, 2020, amounted to negative = P232.9 million
compared to total comprehensive income of P =179.9 million for the year ended March 31, 2019, driven
primarily by the provision for impairment of STI ESG’s investment in Maestro Holdings and decline in
revenues due to the shift in the school calendar of tertiary students for the year ended March 31, 2020.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) which is defined as earnings (loss)
before interest expense, interest income, provision for income tax, depreciation and amortization, equity in
net earnings of associates and joint ventures, provision for impairment of noncurrent asset held for sale
and nonrecurring gains(losses) such as gain on disposal of net assets decreased from = P806.1 million to
=748.8 million for the year ended March 31, 2020. Depreciation and interest expenses for purposes of this
P
computation exclude those related to ROU assets and lease liabilities, respectively. EBITDA margin for
the year ended March 31, 2020 is 36%, slightly lower than the 37% for the year ended March 31, 2019.
Core income, computed as the consolidated income after income tax derived from the Group’s main
business of education and other recurring income, amounted` to = P56.8 million for the year ended March
31, 2020, compared to core income for the same period last year of =
P249.3 million.
The student enrollment of the schools under STI ESG at the start of the SY are as follows:
Grouping of the students in terms of government regulatory agencies supervising the programs is as
follows:
CHED - students under this group are enrolled in tertiary and post-graduate programs;
TESDA - students under this group are enrolled in technical-vocational programs; and
DepEd – students under this group are enrolled in SHS programs.
Page 70 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
SY 2018-2019 % SY 2017-2018 %
STI ESG posted gross revenues amounting to P =2,191.2 million for the year ended March 31, 2019, a 16%
decrease from P
=2,596.0 million from the same period last year.
Tuition and other school fees reached P =1,801.2 million for the year ended March 31, 2019, down by 16%
from the same period last year. This was due to the lower than expected turnout of college freshmen
enrollees. Meanwhile, SHS enrollment dipped as the STI Network held the graduation of over 30,000 Grade
12 students who belonged to the first batch of SHS graduates under the K to 12 program of the government.
Revenues from educational services and royalty fees decreased by = P41.4 million and =
P4.8 million or by 20%
and 24%, respectively. Revenues from educational services are derived as a percentage of the tuition and
other school fees collected by the franchised schools from their students and DepEd.
Sale of educational materials and supplies similarly posted a decline from =P161.9 million to =
P149.6 million.
The sale of uniforms scaled up with the entry of the freshmen college students. On the other hand, the sale
of textbooks and uniforms for SHS went down due to the decline in the number of SHS enrollees. The cost
of educational materials and supplies sold decreased likewise by P =5.4 million from =P119.3 million to
=113.9 million for the years ended March 31, 2018 and 2019, respectively, concomitant with the decrease in
P
the sale of educational materials and supplies.
The cost of educational services for the year ended March 31, 2019, amounting to P =687.8 million is lower
compared to P =694.0 million recognized in the same period last year. The cost of instructors’ salaries and
benefits decreased by P =33.5 million substantially due to the reduced number of part-time faculty members
concomitant with the lower turn out of enrollees, as discussed in the preceding paragraphs. This was
partially offset by the increase in depreciation expense, which increased by =P17.1 million due to completed
renovation and construction projects. The building renovation of STI Sta. Maria and the newly constructed
building, which was leased to be the new site of STI Malaybalay, were completed in August 2017.
Meanwhile, STI Lipa started operations in the new building in August 2018, specifically from the ground
up to the fourth floor. The remaining works from the 5th floor up to the roof deck and the basketball
gymnasium at the 7th floor were completed in March 2019. The related depreciation on these floors was
recorded during the current period and contributed to the increase in the said expense. Similarly, other
direct expenses increased by 11% or P =12.5 million from P
=118.2 million to P
=130.7.2 million for the year ended
March 31, 2019, largely attributed to the cost of student activities and programs related to the convention
of the students, hotel immersion, culinary and tourism exposure, bartending seminars and educational
tours. In February 2017, CHED issued a memorandum on the imposition of a moratorium on field trips
and other similar activities covered under CHED Memorandum series order no. 17. In view of this, the
aforementioned student activities were canceled in SY 2017-2018. The moratorium was lifted during SY
2018-2019. The direct expense ratio went up from 31% to 37% year-on-year.
Page 71 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
General and administrative expenses increased by 6% or = P61.4 million from = P983.4 million to P
=1,044.8
million for the year ended March 31, 2019. The highest increase was registered by advertising and
promotion costs, which increased year-on-year by P =41.7 million as the marketing campaign for both SHS
and tertiary programs were intensified in time for the opening of classes for SY 2018-2019. Salaries and
benefits increased by P =12.4 million due to filling up of vacancies and merit increases given to deserving
employees. Depreciation expense likewise increased by P =11.3 million due to depreciation expense
recognized with the completion of the renovation and newly constructed buildings, as mentioned in the
preceding paragraphs. Goodwill previously recognized through business combinations allocated to STI
Tuguegarao and STI Pagadian aggregating to P =17.0 million was impaired for the year ended
March 31, 2019. The Group recognized ECL resulting from the adoption of PFRS 9 based on the Group’s
historical credit loss experience adjusted with forward-looking information. The most recent receivables
were assigned lower loss rates. Estimated loss rates vary over time and increase as the receivables ages
and as credit risks increase with the likelihood of the receivables becoming impaired. The Group
recognized a provision for ECL amounting to P =61.6 million for the year ended March 31, 2019. The Group’s
receivables pertaining to SY 2018-2019 were higher compared to the receivables from students pertaining
to the previous period. Receivables pertaining to SY 2017-2018 likewise registered an improvement in 2019
due to subsequent collections received from the students. Thus, the Group recognized a lower provision
for ECL for the year ended March 31, 2019, compared with the provision for doubtful accounts for the year
ended March 31, 2018 amounting to P =76.9 million or an improvement of = P15.3 million.
The Group posted an operating income, that is, income before other income and expenses and income tax,
amounting to = P344.7 million for the year ended March 31, 2019, lower than the results of the same period
last year of P
=799.3 million, substantially due to lower revenues.
Equity in net losses of associates and joint ventures amounting to = P218.2 million for the year ended
March 31, 2018 pertains largely to the share of STI ESG in the loss of PhilPlans up to June 30, 2017, arising
from the latter’s full recognition of the mandated discount interest rate imposed by the Insurance
Commission (IC) on the reserves of pre-need companies. The IC is the government regulatory agency
supervising pre-need companies. In November 2012, the IC issued Circular Letter 23-2012 relating to the
Valuation of Transitory Pre-need Reserves. The IC mandated a gradual decrease in the discount interest
rate to be used for valuing the reserves to provide regulatory leeway for the compliance to this circular.
The old basket of plans previously approved by the SEC when the pre-need companies were under its
supervision were using a higher discount rate. The circular mandated that for the years 2012-2016, the
discount interest rate shall be 8%; for 2017, 7.25%; for 2018, 6.5% and for 2019 onwards, 6%. In July 2017,
PhilPlans opted to have an early adoption of the 6% discount interest rate starting January 2017. This means
a bigger allocation to pre-need reserves from its trust funds, thus recognizing a higher expense item.
Further, Maestro Holdings had restated its prior year financial statements to reflect, among others, the
following adjustments: (a) with the completion of the correction in its system process, PhilPlans has
recognized the plan benefits expense pertaining to education plan contracts with maturity dates from July
to December on their proper maturity dates; (b) in compliance with IC Circular Letters 2016-66 and 2017-
36, PhilLife changed the methodology in the determination of legal policy reserves in its life insurance
Page 72 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
contracts from net premium valuation to gross premium valuation; (c) recognition of fair value decline
below cost of certain AFS equity securities to profit or loss.
Accordingly, the Group made the necessary adjustments to recognize its share in the restated net earnings
and comprehensive income of Maestro Holdings.
Rental income increased by =P9.3 million, or 9%, due to the substantial occupancy of the investment
properties owned by STI ESG.
Dividend income is up by P
=3.1 million, representing an increase in dividends received from De Los Santos
Medical Center and dividends received from STI Marikina, an associate of STI ESG, for the year ended
March 31, 2019.
The gain on sale of property and equipment amounting to P =0.7 million represents mainly the disposal of
fully depreciated air conditioning units of STI Global City, which were replaced by inverter air conditioners
to save on the cost of electricity.
Provision for income tax amounting to P=37.4 million was recognized as at March 31, 2019, associated with
the net income recognized for the period.
STI ESG reported a lower net income amounting to P =254.6 million for the year ended March 31, 2019,
compared to P =433.1 million of the same period last year. Also, STI ESG posted a Total Comprehensive
Income of =
P179.9 million for the year ended March 31, 2019, compared to = P606.1 million for the year ended
March 31, 2018, driven primarily by the decline in operating income due to lower revenues. The report as
of the same period last year includes the share on STI ESG’s associate’s unrealized mark-to-market gain on
AFS financial assets amounting to P =125.1 million. Meanwhile, STI ESG recognized a remeasurement loss
amounting to = P74.4 million, net of taxes, for the year ended March 31, 2019, due to the decline in value of
equity shares forming part of pension assets.
Page 73 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
EBITDA decreased from = P1,219.4 million for the year ended March 31, 2018 to P
=806.1 million for the year
ended March 31, 2019. EBITDA margin likewise decreased from 47% last year to 37% this year.
Core income, computed as the consolidated income after income tax derived from the Group’s main
business of education and other recurring income, amounted to = P249.3 million for the year ended March
31, 2019, compared to the same period last year of P
=651.3 million.
Liquidity risk –Liquidity risk arises from the possibility that the Group may encounter difficulties in raising
funds to meet its currently maturing commitments. The Group’s liquidity profile is managed to be able to
finance its operations and capital expenditures and other financial obligations. To cover its financing
requirements, the Group uses internally-generated funds and interest-bearing loans and borrowings. As
part of its liquidity risk management program, the Group regularly evaluates the projected and actual cash
flow information and continuously assesses conditions in the financial markets for opportunities to pursue
fund-raising initiatives.
In relation to the Group’s interest-bearing loans and borrowings, the debt service cover ratio (DSCR) is also
monitored on a regular basis. The DSCR is equivalent to the consolidated EBITDA for the last twelve
months divided by total principal and interests due in the next twelve months. The Group monitors its
DSCR to keep it at a level acceptable to the Group, the lender bank, and the STI ESG bondholders. The
Group’s policy is to keep the DSCR not lower than 1.05:1.00. Related events due to the outbreak and the
economic effects of COVID 19 are discussed in Note 39 of the Notes to the Audited Consolidated Financial
Statements as at and for the year ending March 31, 2020 attached as part of “Exhibits and Schedules”.
As at March 31, 2020 and March 31, 2019, the Group’s DSCR is 1:52:1.00 and 1:74:1.00, respectively.
Credit risk – Credit risk is the risk that the Group will incur a loss arising from students, franchisees, or
counterparties that fail to discharge their contractual obligations. The Group manages and controls credit
risk by setting limits on the amount of risk that the Group is willing to accept for each counterparty and by
monitoring expenses in relation to such limits.
It is the Group’s policy to require the students to pay all their tuition and other school fees before they can
get their report cards and other credentials. In addition, receivable balances are monitored on an ongoing
basis with the result that the Group’s exposure to bad debts is not significant.
Interest rate risk - Interest rate risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market interest rates. While the Group’s long-term debt has a floating
interest rate, the Group elected to have the interest rate repriced every year, thus minimizing the exposure
to market changes in interest rates. The interest rates for the STI ESG bonds are, however, fixed for the 7-
year bonds and the 10-year bonds.
Capital Risk- The Group’s objectives when managing capital are to provide returns for stockholders and
benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
Page 74 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
The Group manages its capital structure and makes adjustments to it in light of changes in economic
conditions. The Group is not subject to externally imposed capital requirements.
The Group monitors capital using the debt-to-equity ratio, which is computed as the total of current and
noncurrent liabilities, net of unearned tuition, and other school fees, divided by total equity. The Group
monitors its debt-to-equity ratio to keep it at a level acceptable to the Group, the lender bank, and its
bondholders. The Group’s policy is to keep the debt-to-equity ratio at a level not exceeding 1.50:1.00.
As at March 31, 2020, and March 31, 2019, the Group’s debt-to-equity ratio is 0.85:1.00 and 0.67:1.00,
respectively.
a. There are no changes in accounting estimates used in the preparation of the audited consolidated
financial statements for the current and prior financial periods.
b. Except as provided in Note 33 of the Notes to Audited Consolidated Financial Statements attached as
part of “Exhibits and schedules,” the Group has no other financial and capital commitments.
c. There are no material events and uncertainties known to management that would address the past and
would have an impact on future operations of STI ESG.
d. There are no known trends, demands, commitments, events of uncertainties that will have an impact
on STI ESG’s liquidity except for the contingencies and commitments enumerated in Note 33 of the
Notes to the Consolidated Financial Statements attached as part of “Exhibits and schedules.”
e. There are no material off-balance sheet transactions, arrangements, obligations (including contingent
obligations) and other relationships of the Group with unconsolidated entities or other persons created
during the reporting period.
f. The various loan agreements entered into by STI ESG and the issuance of fixed-rate bonds provide
certain restrictions and conditions with respect to, among others, change in majority ownership and
management and maintenance of financial ratios. STI ESG is fully compliant with all the covenants of
the respective loan agreements. See Notes 17, 18, and 34 of the Notes to the Audited Consolidated
Financial Statements of the Company attached as part of “Exhibits and schedules” for a more detailed
discussion. There are no other events that will trigger direct or contingent financial obligations that
are material to the Group, including any default or acceleration of an obligation.
g. There are no known trends, events or uncertainties that have had or that are reasonably expected to
have a material favorable or unfavorable impact on net revenues/sales/income from continuing
operations except for the contingencies and commitments enumerated in Note 33 of the Notes to the
Audited Consolidated Financial Statements attached as part of “Exhibits and schedules.”
h. There are no significant elements of income or loss that did not arise from the Group’s continuing
operations.
Page 75 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
i. The Group’s business is linked to the academic cycle. The academic cycle, which is one academic year,
starts in June and ends in March for SHS and begins in July and ends in April for Tertiary. As discussed
in Note 1 of the Notes to the Audited Condensed Consolidated Financial Statements attached as part
of “Exhibits and schedules,” STI ESG has notified CHED of its change in its school calendar. The core
business and revenues of the Group, which are mainly from tuition and other school fees, are
recognized as income over the corresponding academic year to which they pertain. Accordingly,
revenue is expected to be lower during the first quarter of its fiscal year as compared to the other
quarters if the number of enrollees remains constant. This information is provided to allow for a proper
appreciation of the results of operations of the Group.
j. On March 23, 2017, STI ESG listed its ₱3.0 billion Series 7-year Bonds due 2024 and Series 10-year Bonds
due 2027 on the PDEx secondary market. The ₱3.0 billion bond issue is the first tranche of STI ESG’s
₱5.0 billion fixed-rate bonds program under its 3-year shelf registration with the SEC. The 3-year shelf
registration ended on March 9, 2020. The Bonds carry coupon rates of 5.8085% and 6.3756% for the 7-
year and 10-year tenors, respectively. Interests are payable quarterly in arrears on June 23, September
23, December 23, and March 23 or the next business day if such dates fall on non-banking days, of each
year commencing on June 23, 2017, until and including the relevant maturity dates (see Note 18 of the
Audited Consolidated Financial Statements ).
k. On April 21, 2017, STI ESG, Mr. Tony Tan Caktiong (TTC), STI Tanauan and Injap Investments, Inc.
(Injap), referred collectively as the Joint Venture Parties, entered into an agreement to transform STI
Tanauan into a Joint Venture Company which shall operate a farm-to-table school that offers courses
ranging from farm production to food services.
The Joint Venture Parties also agreed to increase STI Tanauan’s authorized capital stock to an amount
that will be agreed upon by the Joint Venture Parties in a separate agreement. As agreed by the Joint
Venture Parties, the increase in the authorized capital stock will be made through STI Tanauan’s
declaration of stock dividends to STI ESG based on STI Tanauan’s unrestricted retained earnings as of
March 31, 2017, and cash payments by the Joint Venture Parties.
The equity sharing in the Joint Venture Company will be 60%, 25%, and 15% for STI ESG, TTC, and
Injap, respectively.
On June 21, 2017, in separate meetings, the stockholders and the BOD of STI Tanauan approved the
increase in the authorized capital stock of the corporation from P=1.0 million divided into 10,000 shares
have a par value of P=100.0 to P
=75.0 million divided into 750,000 shares with a par value of P =100.0. The
increase will be funded through the declaration of stock dividends and cash subscriptions by the
shareholders. In the same meeting, the stockholders and the BOD approved the declaration of 150,000
shares as stock dividends with an aggregate par value of P =15.0 million to be distributed to stockholders
of record as of March 31, 2017, based on the unrestricted retained earnings of STI Tanauan as shown in
its audited financial statements as of March 31, 2017.
On January 24, 2018, STI ESG subscribed to and fully paid for 35,000 shares at a subscription price of
=495.0 per share for a total of =
P P17.3 million.
Page 76 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
On February 26, 2018, STI Tanauan applied with the SEC to increase its authorized capital stock from
=1.0 million to P
P =75.0 million.
On March 2, 2018, the SEC approved the increase and issued the Certificate of Approval on the increase
of Capital Stock.
On March 3, 2018, STI Tanauan issued to STI ESG stock dividends of 150,000 shares and 35,000 shares
as subscribed by the latter (see Note 33 of the Notes to the Audited Consolidated Financial Statements
attached as part of “Exhibits and schedules”).
l. On December 17, 2018, the CHED, UniFAST, and STI ESG signed a memorandum of agreement to avail
of the TES and SLP for its students under the UAQTEA and its IRR. Republic Act No. 10931 or the
UAQTEA and its IRR provide, among others, that to support the cost of tertiary education or any part
or portion thereof, TES and SLP are established for all Filipino students who enroll in undergraduate
and post-secondary programs of private HEIs. Accordingly, the TES and the SLP shall be administered
by the UniFAST Board. The annual TES for students, subject to guidelines and implementing rules and
regulations on the release of TES, enrolled in SUCs or CHED recognized LUCs is = P40,000. Students
enrolled in select HEIs who are qualified to receive the TES, are entitled to =
P60,000. The subsidy is for
tuition and other related school fees and should cover the living allowance, books, supplies,
transportation, and miscellaneous expense. Additional benefits are likewise given to PWDs and
graduates of programs with licensure exams amounting to = P30,000 per annum and = P10,000,
respectively.
m. On February 15, 2019, STI ESG and the shareholders of NAMEI, entered into a share purchase
agreement for the sale of approximately 92% of the 50,000 outstanding shares of NAMEI Polytechnic
Institute, Inc. and 99% of the 10,000 outstanding shares of NAMEI Polytechnic Institute of
Mandaluyong, Inc. Both shares are with a par value of P =10.0 each. In January 2019, STI ESG made a
deposit of = P14.0 million, which was held in escrow with a law firm. This amount was treated as part of
the purchase price at the closing date. Another P =36.0 million was paid on February 15, 2019. On the
same date, STI ESG paid P =10.0 million to NAMEI as a deposit for future subscription in shares of
NAMEI and another P =10.0 million representing STI ESG’s share in the transaction costs and all other
fees and expenses incurred under the agreement. In relation to this, STI ESG recognized
=70.0 million as a deposit for the purchase of shares of NAMEI. On April 1, 2019, Deeds of Assignment
P
were executed by the shareholders of NAMEI, transferring and conveying ownership of 94% of NAMEI
Polytechnic Institute, Inc. and 100% ownership of NAMEI Polytechnic Institute of Mandaluyong, Inc.
to STI ESG. NAMEI became a subsidiary of STI ESG effective April 1, 2019. The identifiable assets and
liabilities recognized in the consolidated financial statements as at March 31, 2020 were based on the
purchase price allocation report of the fair value of these assets and liabilities at the time of acquisition
resulting in goodwill amounting to P =21.2 million. STI ESG identified the license to operate a maritime
school and related agreements as an intangible asset, for purposes of estimating the fair value of the
net assets acquired. Intangible assets amounting to = P27.6 million represents the fair value of the license
and agreements. DTL amounting to = P2.8 million is calculated based on the estimated fair value of the
license to operate a maritime school, its related agreements and a 10.0% income tax rate for educational
institutions. The carrying values of other accounts such as cash, receivables, and property and
equipment, among others, approximate their fair values.
Page 77 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
n. On May 7, 2019, STI ESG and China Bank entered into a seven-year term loan agreement up to the
amount of P =1,200.0 million. The credit facility is available for a period of one year from May 7, 2019,
the date of signing of the loan agreement. This availability period was subsequently extended up to
July 31, 2020 upon execution of an amendment dated July 3, 2020. The proceeds of this loan have been
used for the (i) financing of campus expansion projects (ii) acquisition of schools (iii) refinancing of
short-term loans incurred for projects and (iv) other general corporate purposes. As at September 24,
2020, STI ESG has fully drawn the amount provided in the credit facility.
o. On June 23, 2020, STI ESG requested China Bank for waivers on certain covenants in connection with
its availment of the Land Bank of the Philippines (LandBank) ACcess to Academic Development to
Empower the Masses towards Endless Opportunities (ACADEME) Program. On July 23, 2020, China
Bank approved the waiver of the following covenants:
Further, China Bank approved the temporary waiver of the debt service cover ratio requirement
covering the period ending September 30, 2020 and March 31, 2021.
p. On July 3, 2020, STI ESG and China Bank executed the amendment to the Term Loan Agreement dated
May 7, 2019, to amend the availability period of the Term Loan Facility. The Term Loan Facility shall
be available to the Borrower on any Business day for the period beginning on the date of this
Agreement and ending on the earliest of: (a) July 31, 2020; (b) the date the Term Loan Facility is fully
drawn; or (c) the date the Lender’s commitment to extend the Term Loan Facility to the Borrower is
canceled or terminated in accordance with this Agreement. Any amount undrawn at the end of the
Availability Period shall be automatically canceled and may not be reinstated. On July 3, 2020 and July
30, 2020, STI ESG made drawdowns aggregating to P =400.0 million from this Term Loan Facility. As at
July 31, 2020, the Term Loan Facility is fully drawn at P
=1,200.0 million.
q. On July 20, 2020, STI ESG delivered to China Banking Corporation – Trust and Asset Management
Group, in its capacity as trustee (the “Trustee”) for the Series 7Y Bonds due 2024 and the Series 10Y
Bonds due 2027 (collectively, the “Bonds”) a Consent Solicitation Statement (the “Consent Solicitation
Page 78 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Statement”) and the annexed Consent Form (the “Consent Form”) in connection with the proposed
amendments to the Trust Agreement dated March 10, 2017 (the “Trust Agreement”) governing the
Bonds issued by STI ESG. Pursuant to the Consent Solicitation Statement, STI ESG sought the consent
of the holders of the Bonds (the “Record Bondholders”) to certain proposed amendments to the Trust
Agreement. The Proposed Amendments are (1) the waiver of Section 7.02(a) of the Trust Agreement
which prohibits the Issuer from incurring or suffering to exist any Lien upon any assets or revenues,
present and future, of the Issuer in relation to the requirement of Land Bank to assign the sub-
promissory notes to be executed by the parents or benefactors of the Issuer’s students in favor of
LandBank as security for the ACADEME Lending Program (2) the waiver of Section 7.02(b) of the Trust
Agreement which prohibits the Issuer from incurring Indebtedness or entering into any loan facility
agreement secured by or to be secured by a lien upon any assets and revenues, present and future,
whether registered or unregistered, of the Issuer, unless the Issuer has made or will make effective
provisions, satisfactory to the Bondholders in the latter’s absolute discretion, whereby the Lien thereby
created will secure, on an equal first ranking and ratable basis, any and all obligations of the Issuer
under the Trust Agreement and such other Indebtedness which the Lien purports to secure; (3) the
waiver of Section 7.02(f) of the Trust Agreement which prohibits the Issuer from assigning, transferring
or conveying its right to receive income or revenues insofar as such assignment relates to the
requirement of LandBank to assign the sub-promissory notes to be executed by the parents or
benefactors of STI ESG’s students in favor of LandBank as security for the ACADEME Lending
Program; and (4) the waiver of the Debt Service Coverage Ratio up to June 30, 2023, as provided under
Section 7.01(k) of the Trust Agreement. The Proposed Amendments will not alter the interest rate or
maturity date of the Bonds, the Issuer’s obligation to make principal and interest payments on the
Bonds, or the substantive effect of any other covenant or provision of the Bonds. The Trustee certified
as of August 15, 2020, that it has obtained the required consent of the Record Bondholders holding or
representing at least fifty percent (50%) plus one peso (Php1.00) of the aggregate principal amount of
the Bonds to the Proposed Amendments to the Trust Agreement governing the Bonds. On August 19,
2020, pursuant to the Consent Solicitation Statement, STI ESG and the Trustee executed the
Supplemental Trust Agreement incorporating the Proposed Amendments, as follows:
Effective as of Execution Date, the following amendments shall be deemed to have been
made to Section 7.02 (Negative Covenants of the Issuer) of the Trust Agreement:
(a) Section 7.02(a) of the Trust Agreement is hereby amended to read as follows:
(b) Section 7.02(b) of the Trust Agreement is hereby amended to read as follows:
“incur Indebtedness or enter into, or permit any Subsidiary to enter into, any loan facility
agreement secured by or to be secured by a Lien upon any assets and revenues, present
Page 79 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
and future, whether registered or unregistered, of the Issuer or any Subsidiary, as the
case may be, xxx except for the assignment by the Issuer to LandBank of sub-promissory
notes to be executed by the parents or benefactors of the Issuer’s students as security for
the ACADEME Lending Program of LandBank”;
(c) Section 7.02(f) of the Trust Agreement is hereby amended to read as follows:
“assign, transfer or otherwise convey any right to receive any of its income or revenues
unless in the ordinary course of business, or unless otherwise required by applicable law,
except for the assignment by the Issuer to LandBank of sub-promissory notes to be
executed by the parents or benefactors of the Issuer’s students as security for the
ACADEME Lending Program of LandBank”;
Effective as of the date stated in the Majority Bondholders’ Consent, the following
amendment shall be deemed to have been made to Section 7.01(k) of the Trust
Agreement:
(i) a Debt Service Coverage Ratio of not less than 1.05:1, provided that this Debt
Service Coverage Ratio shall be waived up to 30 June 2023.
r. On July 22, 2020, LandBank approved a P =250.0 million Term Loan/Rediscounting Line Facility under
its ACADEME Lending Program in favor of STI ESG to finance the ‘study now, pay later’ program of
the government for students amid the financial difficulties facing families due to the COVID-19
pandemic. The LandBank ACADEME Program is a Refinancing/rediscounting facility for Promissory
Notes issued by the parents or benefactors of students to enable said students to enroll, continue and
complete their studies. The school can borrow up to 70% of the amount stated in the Promissory Note
issued by the parents/benefactors of the students. This loan from LandBank is subject to 3% interest
per annum. Interest and principal are payable annually in arrears. The term of the borrowing is
coterminous with the promissory note to be issued by the parent/benefactor/student, which in no case
shall exceed three (3) years. The loans covered by these promissory notes to be issued by the
parents/benefactors/students are interest free.
This =
P250-million Term Loan/Rediscounting Line Facility approved for STI ESG is secured by a
Comprehensive Surety issued by STI Holdings.
On September 16, 2020, the Rediscounting Agreement with Landbank was executed by STI ESG in
relation to this loan arrangement. Further, on the same date, the Comprehensive Surety Agreement
was executed by STI Holdings in favor of LandBank.
s. In September 2020, STI ESG wrote CHED, TESDA and DepEd of its decision to suspend the operations
of some of its owned schools namely: STI Cebu, STI Iloilo, STI Quezon Avenue and STI Tuguegarao
for SY 2020-2021 and to cease the operations of STI Pagadian effective SY 2020-2021. Similarly, the
respective franchisees also informed CHED, TESDA and DepEd of the cessation of operations of some
Page 80 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
of STI ESG’s franchised schools namely: STI College Bohol, Inc. (STI Bohol), STI College Recto, Inc. (STI
Recto), Sungold Technologies, Inc. (STI Zamboanga), STI College Pasay Inc. (STI Pasay), STI College
Dipolog, Inc. (STI Dipolog), STI College San Francisco, Inc. (STI San Francisco) and suspension of
operations of STI College Parañaque, Inc. (STI Parañaque) effective SY 2020-2021.
t. For SY 2019-2020, the school calendar for tertiary students was from July 2019 to April 2020. Classes
of tertiary students was suspended since the implementation of the ECQ in March 2020. Online classes
of those who opted online and offline studies resumed beginning the 3rd week of May 2020 and were
completed as at July 30, 2020. For SY 2020-2021, STI ESG is introducing the ONline and ONsite
Education (ONE) STI Learning Model. The ONE STI Learning Model is an innovative approach to
student development that uses digital tools and online technology combined with invaluable hands-
on practice and onsite engagements to achieve the students’ academic objectives through a responsive
learning experience. Onsite refers to school activities to be conducted on-campus. Onsite activities
follow the latest regulations issued by the Inter-Agency Task Force (IATF), DepEd for SHS, and CHED
for College. In the event that onsite activities are prohibited by a government agency, activities or
modules are to be delivered 100% online until onsite sessions are allowed.
Management continues to monitor the COVID-19 situation and will take further actions as necessary
and appropriate in response to the economic disruptions, government regulations and other COVID-
19 consequences
u. On September 24, 2020, STI ESG’s BOD approved the sale of its 20% stake in Maestro Holdings to a
third-party investor for a consideration higher than its present carrying value, subject to completion of
certain closing conditions.
Page 81 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Financial Ratios
Debt to equity ratio (1) 0.85 0.67 0.18 27
Current ratio (2) 1.78 1.72 0.06 3
Asset to equity ratio (3) 1.88 1.68 0.20 12
Page 82 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Solvency ratios
Debt to equity ratio (1) 0.85 0.67 0.18 27
Asset to equity ratio (3)
1.88 1.68 0.20 12
Debt service coverage ratio (10)
1.52 1.74 (0.22) (13)
Interest coverage ratio (11)
0.20 2.54 (2.34) (92)
Profitability ratios
EBITDA margin (12) 36.0% 37.0% (1.0) (3)
Gross profit margin (13) 60.0% 63.0% (3.0) (5)
Operating profit margin (14) 11.0% 16.0% (5.0) (31)
Net profit (loss) margin (15) -11.0% 12.0% (23.0) (192)
(1) Debt-to-equity ratio is measured as total liabilities, net of unearned tuition and other school fees, divided by total equity.
(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 materials and supplies sold.
EBITDA is net income (loss) excluding provision for income tax, interest expense, interest income, depreciation and
amortization, equity in net earnings (losses) of associates and joint ventures, provision for impairment of noncurrent
(5) asset held for sale and nonrecurring gains/losses such as gain on sale of net assets. Depreciation and interest expenses
for purposes of this computation exclude those related to ROU assets and lease liabilities, respectively.
Core income is computed as consolidated income (loss) after tax derived from the Group’s main business – education
(6)
and other recurring income.
Earnings per share is measured as net income (loss) attributable to equity holders of the Parent company divided by the
(7)
weighted average number of outstanding common shares
Quick ratio is measured as current assets less inventories, prepayments and noncurrent asset held for sale divided by
(8)
current liabilities.
(9) Cash ratio is measured as cash and cash equivalents divided by current liabilities.
Page 83 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Debt service cover ratio is measured as EBITDA for the last twelve months divided by total principal and interest due for
(10)
the next twelve months.
Interest coverage ratio is measured as net income (loss) before income tax and interest expense divided by interest
(11)
expense.
(13) Gross profit margin is measured as gross profit divided by total revenues.
(14) Operating profit margin is measured as operating profit divided by total revenues.
(15) Net profit (loss) margin is measured as net income after income tax divided by total revenues.
Return on equity is measured as net income (loss) attributable to equity holders of the Parent Company divided by
(16)
average equity attributable to equity holders of the parent company.
(17) Return on assets is measured as net income (loss) divided by average total assets.
The March 31, 2020 Audited Consolidated Financial Statements and schedules listed in the accompanying
index to Supplementary Schedules are incorporated by reference to this SEC Form 17-A.
1. The accounting firm of Sycip Gorres Velayo & Co. (SGV) has been the Company’s External Auditors
for the past years. They were reappointed in the Annual Stockholders’ Meeting held on October 30, 2019,
as external auditors for the ensuing fiscal year.
A representative of SGV is expected to be present at the Annual Meeting of the Stockholders and will have
the opportunity to make a statement if he or she so desires. The representative will also be available to
respond to appropriate questions from the stockholders.
Pursuant to SRC Rule 68 (3) (b) (iv), as amended (Rotation of External Auditors), the Company has engaged
Mr. Benjamin N. Villacorte of SGV as the Partner-in-charge of the Company. This is his fifth year of
engagement for STI ESG.
2. There has not been any disagreement between the Company and said accounting firm with regard to
any matter relating to accounting principles or practices, financial statement disclosures or auditing scope
or procedure.
As stated in the March 31, 2020 “Statement of Management Responsibility for Financial Statements”, SGV
is the appointed independent auditor of STI ESG. They have examined the financial statements of the
Company in accordance with Philippine Standards on Auditing and have expressed their opinion on the
fairness of presentation upon completion of such examination, in its report to the Board of Directors and
stockholders.
The Company’s Audit Committee reviews and approves the scope of audit work of the external auditor
and the amount of audit fees for a given year. With respect to services rendered by the external auditor
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
other than the audit of financial statements, the scope of and payment for the same are subject to review
and approval by the management.
Mr. Jesli A. Lapus is currently the Chairman of the Audit Committee while Messrs. Eusebio H. Tanco, Raul
B. De Mesa and Mr. Robert G. Vergara are its members.
The aggregate fees for the services rendered by SGV to the Company, particularly for the audit of the
financial statements for the years ended March 31, 2020, 2019 and 2018 are shown below:
March 2020
Audit Fees OPE VAT TOTAL
AUDIT 8,718,900 871,890 1,150,895 10,741,685
OTHERS ‐
8,718,900 871,890 1,150,895 10,741,685
March 2019
Audit Fees OPE VAT TOTAL
AUDIT 7,829,200 782,920 1,033,454 9,645,574
OTHERS ‐
7,829,200 782,920 1,033,454 9,645,574
March 2018
Audit Fees OPE VAT TOTAL
AUDIT 7,292,000 692,805 958,177 8,942,982
OTHERS ‐
7,292,000 692,805 958,177 8,942,982
The Company has no disagreements with its independent auditors on any matter relating to accounting
principles or practices, financial statement disclosure, or auditing scope or procedure.
Page 85 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
The Company’s Articles of Incorporation provide for eleven (11) members of the Board.
The term of office of the directors of the Company is one (1) year and they are to serve as such until the
election and qualification of their successors.
Messrs. Jesli A. Lapus and Robert G. Vergara have been nominated as independent directors by the
Nomination Committee.
The Company has adopted and complied with Rule 38 of the Securities Regulation Code on the
nomination of independent directors and the required number of independent directors.
The corresponding ages, citizenships, business experiences and directorships held for the past five (5)
years of the incumbent directors who have been nominated to the Board for the ensuing year are set
forth below:
Mr. Lapus is currently the Chairman and Independent Director of STI ESG. He is also a member of the
Executive Committee and Nomination Committee and the Chairman of the Audit Committee of STI
ESG. He was first elected as Chairman and Independent Director on September 25, 2013.
Mr. Lapus is also an Independent Director of STI Education Systems Holdings, Inc. (STI Holdings),
Metropolitan Bank & Trust Company and Philippine Life Financial Assurance Corporation (PhilLife).
He is a Governor of Information and Communications Technology Inc. (iACADEMY); Chairman of the
Trust Banking Group of Metropolitan Bank and Trust Company, LBP Service Corporation, and Asian
Institute of Management–Center for Tourism. He is also a Member of the Investment Committee of
PhilPlans First, Inc. (PhilPlans) and Advisory Board Member of Radiowealth Finance Company, Inc.
Page 86 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
A multi-awarded executive in the private sector (i.e., manufacturing, financial services and
international trade), Mr. Lapus has successfully managed and turned around firms and a universal
bank in attaining industry leaderships. He was Managing Director of Triumph International (Phils.)
Inc., President of Pacific Products, Inc., CFO of the RAMCAR Group of Companies and formerly
connected with Sycip Gorres Velayo & Co.
With a solid track record as a prominent professional executive in the private sector behind him, Mr.
Lapus has the distinction of having served in the cabinets of three (3) Philippine Presidents namely:
President Gloria Macapagal-Arroyo, President Fidel Ramos and President Corazon Aquino in the
following capacities: Secretary, Department of Trade and Industry (2010); Secretary, Department of
Education (2006-2010); President and CEO, The Land Bank of the Philippines (1992-1998);
Undersecretary, Department of Agrarian Reform (1987-89).
The Polytechnic University of the Philippines conferred Mr. Lapus the Doctor of Public Administration
(honoris causa); Mr. Lapus also earned his Master in Business Management from the Asian Institute of
Management; Investment Appraisal and Management from Harvard University, USA; Management
of Transfer of Technology from INSEAD, France; Project Management from BITS, Sweden and Personal
Financial Planning in UCLA, USA.
Mr. Jacob is the Vice Chairman and CEO of STI ESG and a member of the Executive Committee,
Compensation Committee, Nomination Committee and Retirement Committee.
Mr. Jacob is also the President and CEO of STI Holdings, and a member of its Executive, Compensation
and Compliance Committees.
Mr. Jacob is the President of Eximious Holdings, Inc. (Formerly, Capital Managers and Advisors, Inc.),
Maestro Holdings, Inc. (Maestro Holdings), formerly STI Investments, Inc. and Tantivy Holdings, Inc.
(Formerly, Insurance Builders, Inc.)
Mr. Jacob is the Chairman of PhilLife, Philhealthcare, Inc. (PhilCare), Total Consolidated Asset
Management, Inc., Global Resource for Outsourced Workers, Inc. (GROW), GROW Vite Staffing
Services, Inc., and Rosehills Memorial Phils., Inc.
Mr. Jacob is also a non-Executive Director in Asian Terminals, Inc., and an Independent Director in
Jollibee Foods Corp., Rockwell Land Corp., Phoenix Petroleum Philippines, Inc., and Lopez Holdings
Corp., all publicly-listed companies. He also serves as a member of the board of directors of De Los
Santos Medical Center and iACADEMY.
Prior to his present positions, Mr. Jacob was the Chairman and CEO of Petron Corporation, and the
Philippine National Oil Company (PNOC) and all of its subsidiaries. He also served as the General
Manager of the National Housing Authority (NHA), and Chief Executive Officer of the Home
Development Mutual Fund. He was also an Associate Commissioner for the Securities and Exchange
Commission in 1986.
Prior to government, he was a Partner of the law firm Jacob Acaban Corvera Valdez and Del Castillo
and was an active trial lawyer. Today, he is a partner in the law firm of Jacob & Jacob. His areas of
specialization are energy, corporate law, corporate recovery and rehabilitation work, including
receivership and restructuring advisory for companies.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Mr. Jacob is a member of the Management Association of the Philippines (MAP) of which he was
President for 1998. He is also a member of the Integrated Bar of the Philippines.
Mr. Jacob finished his Bachelor of Arts degree with a Major in Liberal Arts from the Ateneo de Naga
University in 1966 and his Bachelor of Laws degree from the Ateneo de Manila University in 1971.
Mr. Tanco is the Chairman of the Executive Committee, and Compensation Committee, and is a
Director of STI ESG. He is also a member of the Audit Committee and the Retirement Committee.
Mr. Tanco is also Chairman of STI Holdings, and the Chairman of its Executive, Nomination and
Compensation Committees.
Mr. Tanco is Chairman of the Board and President of Prudent Resources, Inc., and Prime Power
Holdings Corporation. He is the Chairman of Mactan Electric Company, Philippines First Insurance
Co. Inc.(PhilsFirst), Venture Securities Inc., GROW Vite, Inc., Delos Santos-STI College, STI West
Negros University (STI WNU), and Eximious Holdings, Inc. He is Vice-Chairman and President of
Asian Terminals, Inc.
Mr. Tanco is President of Total Consolidated Asset Management, Inc., EujoPhils, Inc., Cement Center
Inc., First Optima Realty Corp, Biolim Holdings and Management Corp (formerly Rescom Developers
Inc.), Tantivy Holdings, Inc., Bloom with Looms Logistics, Inc. (formerly Southern Textiles Mills, Inc.),
Marbay Homes Inc., Global Resource for Outsourced Workers, Inc., Amina, Inc., International
Hardwood & Veneer Corp., and CEO of Classic Finance Inc.
Mr. Tanco is also a director in PhilPlans, Maestro Holdings, PhilLife, Manila Bay Spinning Mills, Inc.,
United Coconut Chemicals, Inc., MB Paseo, Philippine Health Educators, Inc., iACADEMY, PhilCare,
Philippine Racing Club, Inc. and Leisure and Resorts World Corporation.
Mr. Tanco is a director of the Philippine Stock Exchange. He is also Chairman of the Philippine-
Thailand Business Council and the Philippines-UAE Business Council. He likewise sits as a member
of the Board of Trustees of Philippines, Inc. and member of the Philippine Chamber of Commerce and
Industry.
Mr. Tanco earned his Master of Science in Economics degree from the London School of Economics
and Political Science and his Bachelor of Science degree in Economics from the Ateneo de Manila
University. The Palawan State University also conferred a Doctorate of Humanities degree, honoris
causa to Mr. Tanco
Mr. Fernandez is the President and Chief Operating Officer of STI ESG. Prior to this appointment, Mr.
Fernandez served as Executive Vice President and Chief Operating Officer of STI ESG from 2004-2016..
Prior to joining STI ESG, Mr. Fernandez was a member of the Asian Institute of Management faculty
for four and a half years. Before joining AIM, Mr. Fernandez was a faculty member of the College of
Computer Studies at the De La Salle University. Mr. Fernandez is also the President of STI WNU.
Mr. Fernandez earned his Bachelor of Science degree in Electronics and Communications Engineering
and Master of Business Administration degree from the De La Salle University.
Page 88 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Mr. Borja serves as a Director of STI ESG and a member of the Executive Committee and Retirement
Committee.
He is also a Director of STI Holdings and a member of its Executive and Nomination Committees.
Mr. Borja is also a Director of PhilPlans. 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 the Asia region for Alorica, comprising more than 34,0000 people in the
Philippines, as well as delivery centers in Australia and China Japan, for a total of 25 sites. Under Mr.
Borja’s leadership, the Asia teams provide distinct capabilities to offer low-cost, high quality solutions
to clients across the globe.
Prior to this role, Mr. Borja was President of the Philippines and Australia for Expert Global Solutions,
Inc. (EGS) for four years prior to EGS’ acquisition by Alorica in June 2016.
Before joining EGS in 2012, he spent 12 years as President of Aegis PeopleSupport Philippines, a start-
up company that he helped grow to more than 13,000 employees. In 2004, People Support achieved a
major milestone by doing an Initial Public Offering (IPO) in the United States, and being listed in
NASDAQ as the only Business Process Outsourcing (BPO) company with its entire operations handled
in the Philippines. Mr. Borja also established the expansion of BPO to Philippine provinces, as well as
to other regions, such as San Jose, Costa Rica.
Often credited as the “man behind the success of the call center and BPO industry” in the country, Mr.
Borja is one of the founders and former chairman of the Information Technology and Business Process
Association of the Philippines (IBPAP), formerly the Business Processing Association of the Philippines
(BPA/P). He continues to support the industry by taking on leadership roles and sitting on the Board
of Directors for both IBPAP and the Contact Center Association of the Philippines (CCAP). His
opinions and contributions are highly valued by government and industry officials in the formulation
of legislations and policies that govern the country's Information and Communications Technology
(ICT) and BPO industry. Being one of the country's BPO industry ambassadors who supported the
industry's phenomenal growth to now being one of the country's major economic contributors, Mr.
Borja was the first recipient of the Individual ICT Contributor Award in the Philippines in 2007.
Mr. Borja obtained his Bachelor’s degree at the De La Salle University and Masters of Science in
Economics units from the De La Salle Graduate School of Business and Economics.
Mr. De Mesa is a Director of STI ESG and a member of the Compensation and Audit Committees.
Mr. De Mesa served as the President and Chief Executive Officer of Bank of Commerce. Mr. De Mesa
is a distinguished banker with substantial years of experience in the financial industry. Prior to Bank
of Commerce, he has 37 years of banking experience, having occupied various positions in several
banking institutions such as Security Bank, Manila Banking Corporation, Far East Bank & Trust
Company. Mr. De Mesa is a Director at CAP Life Insurance Corporation. He served as a Director of
Bank of Commerce.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Mr. De Mesa is presently the Chairman of the boards of Abacore Capital Holdings, Inc. and Prime Star
Development Bank; and Chairman and President of RBM Holdings, Inc. and Pampanga Auto Sales,
Inc. He is an independent director of Pride Resources Infrastructure Development Corporation, and
Montemaria Asia Pilgrims, Inc. He is a Director of Bancommerce Investment Corporation.
Mr. Tanco is a Director and a member of the Nomination Committee and Executive Committee of STI
ESG.
Mr. Tanco is a Director of STI Holdings since October 27, 2010. He is likewise the Vice President for
Investor Relations and a member of the Compensation Committee.
Mr. Tanco is currently the President and Chief Executive Officer of Maestro Holdings, PhilLife,
PhilCare, and Comm&Sense, Inc. He founded Comm&Sense, Inc., an integrated marketing and
communications agency offering comprehensive services in the areas of creative design, event
conceptualization and management, public relations and promotions, in 2005.
Mr. Tanco serves as the Director and Treasurer of PhilPlans, Director and Director and Vice President
of Eujo Phils. Inc., Director of Maestro Holdings, iACADEMY, PhilsFirst Insurance Corporation, STI
WNU, Capital Managers and Advisors, Inc., Prime Power Holdings Corporation, GROW, Venture
Securities, Inc., Bloom with Looms Logistics, Inc. and Biolim Holdings & Management Corporation.
Furthermore, Mr. Tanco is an active member of the Junior Chamber International Philippines (JCI)
where he was Chapter President of JCI Ortigas in 2012. He was Area Director for Individual for Metro
Area 2 and National Chairman for Nothing but Nets in 2013 and National Chairman for The
Outstanding Young Men (TOYM) in 2015. He also became a mentor for BS Entrepreneurship at the
University of Asia and the Pacific in 2012.
Mr. Tanco is a graduate of the University of Asia and the Pacific with a Bachelor of Science degree in
Entrepreneurial Management. He obtained his Master in Business Administration from the Ateneo
Graduate School of Business.
Ms. Tanco is also a Director and a member of the Nomination Committee of STI Holdings.
She also holds directorships at STI WNU, PhilPlans, and PhilCare. Currently, she is the President and
CEO of iACADEMY.
Ms. Tanco obtained her Master in Business Administration degree at the University of Southern
California, and her Bachelor of Science degree in Legal Management at Ateneo de Manila University.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
He is also a Director of STI Holdings and is likewise a member of its Executive Committee and Audit
Committees.
Mr. Tanco is the Director for Investment of PhilPlans. He is the President of the Philfirst Condominium
Association. Mr. Tanco is also the Vice-President of Manila Bay Thread Corporation (Formerly: Coats
Manila Bay).
Mr. Tanco earned his Bachelor of Science Degree in Electrical Engineering from the University of
Southern California. He obtained his Master of Science degree in Electrical Engineering and Master in
Business Administration from the University of Southern California.
Mr. Bautista was elected as an Independent Director of STI ESG on May 23, 2018.
He is likewise a Director of STI Holdings since December 2012. Mr. Bautista is also the Chief Investment
Officer, Head of Corporate Strategy and a member of the Audit Committee of STI Holdings.
Mr. Bautista is an advisor to the Investment Committee of PhilPlans. He has over 20-year experience
in the areas of corporate finance, mergers and acquisition, debt and equity capital markets, credit risk
management and securities law. Prior to joining STI Holdings, he was a director at Citigroup Global
Markets and a Vice President at Investment Banking Division of Credit Suisse.
Mr. Bautista obtained his Bachelor of Arts degree, Bachelor of Laws degree and Juris Doctor from the
Ateneo de Manila University and obtained his Master of Science degree in Management from the
Arthur D. Little School of Management, Cambridge, MA.
Mr. Vergara was elected as an Independent Director of STI ESG on July 27, 2017.
He served as the President and General Manager and Vice-Chairman of the Board of Trustees of the
Government Service Insurance System (GSIS) from September 2010 to October 2016. As President and
General Manager of GSIS, Mr. Vergara also served as Vice Chairman and Director of National
Reinsurance Corporation of the Philippines, Manila Hotel Corporation, and Member of the Board of
Directors of Philippine Stock Exchange, Philippine Health Insurance Corporation, Philippine National
Construction Corporation and Housing and Urban Development Coordinating Council. Currently, he
is a Director of Cabanatuan Electric Corporation and SEA Crest Master Fund Ltd.
Prior to his stint in GSIS, he was the Managing Director and Founding Partner of Cannizaro (Hong
Kong) Limited and was a Limited Partner at Cannizaro Capital Partners LLP (United Kingdom) from
2006 to 2010. From 2002 to 2006, he was a Director of Lionhart (Hong Kong) Ltd. He previously served
as a Principal at Morgan Stanley Asia Ltd from 1997 to 2001 and was Managing Director of IFM Asia
Ltd from 1990.
Mr. Vergara obtained his Master in Business Administration from the Harvard Business School in 1986.
He graduated Magna Cum Laude with a Bachelor of Science in Management Engineering and
Mathematics degree from Ateneo de Manila University in 1982.
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Ms. Bautista has served as the Chief Finance Officer and Treasurer of STI ESG since 2003. She is likewise
a member of the Compensation and Retirement Committees of STI ESG.
Ms. Bautista is also the Treasurer of STI Holdings and a member of its Executive, Compensation and
Compliance Committees.
Ms. Bautista is the Chairman and President of Corporate Reference, Inc., Lakeview Realty, Inc. and
Yellow Meadows Business Ventures, Inc.
Ms. Bautista serves as Director and Treasurer of Eximious Holdings, Inc., Banclife Insurance Co., Inc.,
Tantivy Holdings, Inc., DLS-STI College, Inc., and iACADEMY. She is also the Group Chief Finance
Officer of PhilLife and PhilCare as well as the Chief Finance Officer and Treasurer of STI WNU and
Maestro Holdings. Ms. Bautista is a Director of Attenborough Holdings Corp., Philippine Healthcare
Educators, Inc., GROW Inc., Grow Vite Staffing Services, Inc. and Bloom with Looms Logistics, Inc. She
serves as Treasurer of PhilPlans, Aberlour Holding Company, Daven Holdings, Inc., Harbourside
Holding Corporation, Morray Holdings, Inc., Kusang Loob Foundation, Inc., SG Holdings, Inc.,
Philippines First Condominium Corporation, Quantum Analytix, Inc., P & O Management Services
Phils., Inc., TechGlobal Data Center, Inc., Techzone Condominium Corporation and Techzone
Philippines, Inc.. She is also Assistant Treasurer of Total Consolidated Asset Management, Inc.
Ms. Bautista is a Certified Public Accountant. She graduated Magna Cum Laude from the University
of Sto. Tomas with a Bachelor of Science degree in Commerce, major in Accounting.
Arsenio C. Cabrera, Jr., 59, Filipino, Corporate Secretary, General Counsel, and Corporate
Information Officer
Atty. Arsenio C. Cabrera, Jr. is the Corporate Secretary, General Counsel, and Corporate Information
Officer of STI ESG.
He was also elected Corporate Secretary and Member of the Corporate Governance Committee of STI
Holdings and is also its current Corporate Information Officer.
Atty. Cabrera is a Managing Partner of Herrera Teehankee & Cabrera Law Offices. He also serves as
Corporate Secretary of Agustin Tanco Foundation, Inc., Amina, Inc., Arani Realty Corporation,
Asiateleservices, Inc., BOIE Drug, Inc., BOIE, Incorporated, BOIE Prime, Inc., Bountiful Geomines, Inc.,
Calatagan Bay Realty, Inc., Canlubang Golf and Country Club, Inc., Cement Center, Inc., Classic
Finance, Inc., Comm & Sense, Inc., Digitalme Services, Inc., Drysor, Inc., DLS-STI Colleges, Inc., DLS-
STI College Quezon Avenue, Inc., Eximious Holdings, Inc., EUJO Phils. Incorporated, First Optima
Realty Corporation, GEOGRACE Resources Philippines, Inc., Gurango Software Corporation, Heritage
Park Management, Inc., iACADEMY, International Hardwood & Veneer Company of the Philippines,
Juska, Inc., Lasik Surgery, Inc., Lorenzo Shipping Corporation, Maestro Holdings, Inc., Manila Bay
Hosiery Mills, Inc., Masbate13 Philippines, Inc., Metropolitan City Train Systems, Inc., Mina Tierra
Gracia, Inc., NiHAO Mineral Resources International, Inc., Oregalore, Inc., Palisades Condominium
Corporation, Pay Philexchange, Inc., Philippine American Drug Company, Philippine First
Condominium Corporation, PhilsFirst, PhilLife, PhilCare, Inc., Philplans., Renaissance Condominium
Corporation, Rosehills Memorial Management Philippines, Inc., Sinoma Energy Conservation
(Philippines) Waste Heat Recovery Co., Inc., Sinoma Energy Conservation (Cebu) Waste Heat
Recovery Co., Inc., Sonak Holdings, Inc., STI WNU, Tantivy Holdings, Inc., Techglobal Data Center,
Page 92 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
Inc., TechZone Philippines, Inc., Total Consolidated Asset Management, Inc., Trend Developers, Inc.,
Venture Securities, Inc., Villa Development Corporation, Vital Ventures Management Corp. and WVC
Development Corporation.
He was also elected as Chairman of Excelsior Holdings, Inc. and Grand Monaco Estate Developers,
Inc..
Atty. Cabrera holds degrees in Bachelor of Laws (Second Honors) and Bachelor of Science in Legal
Management from the Ateneo De Manila University.
Atty. Herrera is a Senior Associate of Herrera Teehankee and Cabrera Law Offices. She also performs
the role 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:
Amica Corporation, Banclife Insurance Co., Inc., Coastal Bay Chemicals, Inc., Palisades Condominium
Corporation, PhilCare, PhilsFirst, Philippine First Condominium Corporation, PhilLife, STI Holdings
and Venture Securities, Inc.
Atty. Herrera received her Bachelor of Laws degree from the University of the Philippines in 2000.
In general, the Company values its human resources. It expects the employees to do their share in
achieving the Company’s set objectives.
Mr. Joseph Augustin L. Tanco and Ms. Ma. Vanessa Rose L. Tanco are children of Mr. Eusebio H. Tanco.
There are no other family relationships up to the 4th civil degree, either by consanguinity or affinity
among the current Directors other than those already disclosed in this report.
None of the abovementioned directors and executive officers of the Company have been involved
in any of the following events for the past five (5) years and up to the date of this SEC Form 17-A:
(a) any bankruptcy petition filed by or against any business of which such person was a general
partner or executive officer either at the time of the bankruptcy or within two years prior to
that time;
(c) being subject to any order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, domestic or foreign, permanently or
Page 93 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities, commodities or banking activities; and
(d) being found by a domestic or foreign court of competent jurisdiction (in a civil action), the
Commission or comparable foreign body, or a domestic or foreign Exchange or other organized
trading market or self-regulatory organization, to have violated a securities or commodities
law or regulation, and the judgment has not been reversed, suspended, or vacated.
(1) The directors each receive per diems amounting to ₱15,000, gross of all taxes, for their attendance to
board and committee meetings. There is no arrangement for compensation of directors.
(2) The following table summarizes the aggregate compensation for the fiscal years ended March 31, 2018,
2019, and 2020. The amounts set forth in the table below have been prepared based on what the
Company paid its directors and named executive officers as a group and other officers for the fiscal
years ended March 31, 2018, 2019, and 2020 and what the Company expects to pay for the fiscal year
ending March 31, 2020.
ANNUAL COMPENSATION
Notes:
1 Figure is an estimated amount.
2 Executives namely: Monico V. Jacob (Vice Chairman and CEO), Peter K. Fernandez (President and
COO), Engelbert L. De Guzman (VP for Communications and MIS), Wilfred S. Racadio (VP for Legal
Affairs) and Juan Luis Fausto B. Tubongbanua (VP for Corporate and Information Services).
Page 94 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
(3) There are no actions to be taken regarding any bonus, profit sharing, or other compensation plan,
contract or arrangement in which any director, nominee for election as a director, or executive officer of the
Company will participate.
(4) There are no actions to be taken regarding any pension or retirement plan in which any such person
will participate.
(5) There are no actions to be taken regarding the granting or extension to any such person of any option,
warrant or right to purchase any securities.
(1) Security Ownership of Certain Record and Beneficial Owners and Management
As of March 31, 2020, the following stockholders are the only owners of more than 5% of the
Company’s voting capital stock, whether directly or indirectly, as record owner or beneficial owner.
Name, Address of
Class of Name of
Record Owner and %
Shares Beneficial Nationality Shares Owned
Relationship with Ownership
Owner
Issuer
The following table sets forth as of March 31, 2020, the beneficial ownership of each director and
executive officer of the Company:
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STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
As of March 31, 2020, no person holds at least 5% or more of a class under a voting trust or similar
agreement.
There is no arrangements entered into by STI ESG or any of its stockholders which may result in
a change of control of STI ESG.
The Company has the following major transactions with related parties:
The Company entered into an agreement with STI Holdings on the rendering of advisory services starting
January 01, 2013.
Contract of Lease
STI ESG entered into a Contract of Lease with First Optima Realty Corporation on January 7, 2014. The
contract covers lease of three (3) parcels of land in Poblacion, Lucena City, Quezon for a period of 25 years
commencing on January 1, 2014 and expiring on January 1, 2039 for ₱2.1 million per annum, exclusive of
taxes.
STI Taft
On December 1, 2015, the BOD of STI Taft approved the application for an increase in authorized 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 the Company agreed to convert a portion of STI Taft’s advances from
STI ESG amounting to ₱49.0 million to deposit for future stock subscriptions. On April 4, 2016, the SEC
approved STI Taft’s increase in authorized capital stock to ₱75.0 million. As at September 30, 2016, STI Taft
became a 99.9%-owned subsidiary of STI ESG. On August 30, 2017, the SEC approved the application for
merger of STI Taft with STI ESG, with STI ESG as the surviving entity. In December 2017, STI ESG
Page 96 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
subscribed to 5,287,836 shares and issued a total of 4,446 of its own shares to minority holders with par
value of P
=1.0 per share, at a price of P
=1.82 per share or an aggregate cost of P
=9.6 million.
STI Dagupan
On February 27, 2015, the BOD of STI Dagupan approved the application for an increase in authorized
capital stock from ₱0.5 million to ₱35.0 million and the opening for subscription of 72,000 common shares
with an aggregate par value of ₱7.2 million. Subsequently, STI ESG subscribed to 32,000 shares or an
aggregate par value of ₱3.2 million. The BOD of STI Dagupan also approved the equity conversion of STI
Dagupan’s advances from STI ESG amounting to ₱19.8 million. As at March 31, 2017, STI ESG’s ownership
over STI Dagupan increased from 77% to 99.9%. On August 30, 2017, the SEC approved the application for
merger of STI Dagupan with STI ESG, with STI ESG as the surviving entity. In December 2017, STI ESG
subscribed to 664,437 shares and issued a total of 865 of its own shares to minority holders with par value
of P
=1.0 per share, at a price of P
=1.82 per share or an aggregate cost of P
=1.2 million.
On May 18, 2016, STI ESG entered into a Memorandum of Agreement to acquire for ₱20.0 million the net
assets of an STI franchised school located in Santa Maria, Bulacan. On May 31, 2016, STI ESG made an
initial deposit of ₱10.0 million for the planned acquisition. On February 8, 2017, STI ESG made an
additional deposit of ₱8.0 million.
On April 4, 2017, STI ESG established STI College of Santa Maria, Inc. (STI Sta. Maria). On May 23, 2017,
STI Sta. Maria entered into a Deed of Assignment with Halili Reyes Educational Institution, Inc. (HREI)
where HREI assigned, transferred and conveyed in a manner absolute and irrevocable, and free and clear
of all liens and encumbrances, to STI Sta. Maria all its rights, title and interest in its assets and liabilities for
a price of ₱20.0 million. The assignment of the net assets shall retroact to April 1, 2017. On the same date,
STI Sta. Maria paid the remaining balance of ₱2.0 million (see Note 36).
On April 21, 2017, STI ESG, Mr. Tony Tan Caktiong (TTC), STI Tanauan, and Injap Investments, Inc. (Injap),
referred collectively as the Joint Venture Parties, entered into an agreement to transform STI Tanauan into
a Joint Venture Company which shall operate as a farm-to-table school that offers courses ranging from
farm production to food services.
The Joint Venture Parties also agreed to increase STI Tanauan’s authorized capital stock to be formalized
on a separate agreement. As agreed by the Joint Venture Parties, the increase in the authorized capital
stock will be made through STI Tanauan’s declaration of stock dividends to STI ESG based on STI
Tanauan’s unrestricted retained earnings as of March 31, 2017 and cash payments by the Joint Venture
Parties.
The equity sharing of the Joint Venture Company will be 60%, 25% and 15% for STI ESG, TTC and Injap,
respectively.
On June 21, 2017, in separate meetings, the stockholders and the BOD of STI Tanauan approved the increase
in the authorized capital stock of the corporation from ₱1.0 million divided into 10,000 shares with a par
value of ₱100 to ₱75.0 million divided into 750,000 shares with a par value of ₱100. The increase will be
funded through the declaration of stock dividends and cash subscriptions by the shareholders. In the same
meeting, the stockholders and the BOD approved the declaration of 150,000 shares as stock dividends with
an aggregate par value of ₱15.0 million to be distributed to stockholders of record as of March 31, 2017
Page 97 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
based on the unrestricted retained earnings of STI Tanauan as shown in its audited financial statements as
of March 31, 2017.
On January 24, 2018 STI ESG subscribed to and fully paid for 35,000 shares at a subscription price of ₱495
per share for a total of ₱17.3 million.
On February 26, 2018, STI Tanauan applied with the SEC to increase its authorized capital stock from ₱1.0
million to ₱75.0 million.
On March 2, 2018, the SEC approved the increase and issued the Certificate of Approval on Increase of
Capital Stock.
On March 3, 2018, STI Tanauan issued to STI ESG stock dividends of 150,000 shares and 35,000 shares as
subscribed by the latter.
Contract of Lease
STI ESG entered into a Contract of Lease with Cement Center Inc. on August 15, 2017. The lease contract
covers the rental of the lessor’s property in Sta. Mesa with an area of 3,690.6 sqms for a period of 25 years
commencing on the possession of STI ESG upon delivery of the leased premises. The term of the lease shall
be renewable for another 25 years upon terms and conditions mutually agreed upon by the parties.
STI ESG shall pay a monthly rent of ₱50.0 per sqm or ₱184,000 per month, exclusive of taxes. STI ESG shall
also pay an additional variable rent equivalent to 3% of the Divisible Gross Revenue (DGR), exclusive of
taxes. DGR refers to Tuition and Other School Fees received by STI ESG on the school that it intends to set
up on the leased premises, excluding miscellaneous and other pass-on revenues that STI ESG may receive.
Cooperation Agreement
On October 21, 2019, STI ESG, acting on its own and in behalf of NAMEI Polytechnic Institute Inc.
(collectively referred to as “STI”) and Raft Shore People, Inc. (RAFT), entered into a Cooperation
Agreement (the “Agreement”) to work together to ensure that the seafarers of the Philippines continue to
be the preferred employees of international shipping companies. In summary, the parties agree as follows:
a. Establish a culinary school offering modular culinary courses which shall prepare the students to
work on board cruise vessels and to jointly oversee the preparation and implementation of modular
culinary and catering courses.
b. To jointly oversee the preparation and implementation of the curriculum for courses such as
Bachelor of Science in Marine Transportation, Bachelor of Science in Marine Engineering, Senior
High School Maritime track and Maritime Information Technology Programs. The parties likewise
endeavor to enhance the curriculum with electives or additional modular courses in keeping with
the requirements of the international shipping industry and the International Convention on
Standards of Training, Certification and Watchkeeping for Seafarers (STCW).
c. To engage the Dean and other administrators as well as the members of the faculty who are
professionals and are highly qualified to provide the students with the requisite education and
training which will prepare them for work on board vessels.
The parties recognize that RAFT has already incurred expenses, including faculty costs in preparation for
this cooperation agreement. As such, STI will reimburse RAFT US$150,000, with 50% payable upon signing
Page 98 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
of the agreement while the remaining 50% will be payable within calendar year 2020. Additionally, and as
compensation for jointly overseeing and providing academic governance, selection and management of
faculty, as well as curriculum and courseware preparation and implementation for the courses agreed
upon, STI shall pay RAFT the sum of US$10,000 per month beginning January 2020. The parties also agreed
that a variable compensation of 5% of the tuition fee shall be paid to RAFT when the student population
reaches 2,000 plus an additional 1% variable compensation for every 1,000 enrollees while RAFT shall
receive 5% of tuition fee for the culinary/hospitality programs upon reaching a student population of 2,000
plus 1% variable compensation for every 1,000 enrollees. Said variable compensation may be increased
from year to year at the discretion of the governing board.
There are no transactions with promoters in the past five (5) years.
The Company adheres to the principles and practices of good corporate governance, as embodied in its
Manual of Corporate Governance and related SEC Circulars.
On March 9, 2011, the Company submitted to the SEC its Amended Manual on Corporate Governance
dated February 22, 2011 incorporating the directory provisions of the Revised Code of Corporate
Governance in order to comply with the adopted leading practices on good corporate governance.
On July 18, 2014, the Company submitted the Amended Manual on Corporate Governance dated July 15,
2014 in compliance with SEC Memorandum Circular No. 9.
There have been no deviations from the Company’s Manual of Corporate Governance.
To ensure that the Company observes good corporate governance and management practices and assure
shareholders that the Company conducts its business in accordance with the highest level of accountability,
transparency and integrity, the Company has undertaken the continuous improvement and monitoring of
its governance and management policies. The Company submits a Certificate of Compliance with the
Manual on Corporate Governance on an annual basis to the SEC. The Company likewise ensures that its
officers and members of the Board of Directors attend the mandatory Corporate Governance Seminar
annually in compliance with the SEC Memorandum Circular No. 20, series of 2013.
The Company ensures that it has at least two (2) independent directors, or such number of independent
directors that constitutes twenty percent (20%) of the members of the Board, whichever is higher, but in no
case less than two (2). Presently, there are three (3) incumbent independent directors on the Board.
The Company, through its Nominations Committee, ensures that all the nominees to the Board possess all
the qualifications and none of the disqualifications provided for in the Company By-Laws and Manual, the
Corporation Code, Securities Regulation Code and other relevant laws, rules and regulations.
The Company also has an Audit Committee, which is tasked to review the Audited Financial Statements
of the Company. The Chairman of the Audit Committee is an independent director, and each member
Page 99 of 105
STI Education Services Group, Inc.
SEC Form 17 – A
As of March 31, 2020
thereof has at least an adequate understanding or competence of most of the Company’s financial
management systems and environment.
The Company consistently strives to raise its financial reporting standards by adopting and implementing
prescribed Philippine Financial Reporting Standards.
1. Other events: STI College Enrollment Increases for SY 2019-2020 filed with the SEC on
August 14, 2019
MANILA - STI Holdings, owner of one of the largest networks of private schools in the
Philippines, registered a 41 % increase in new students in college for school year 2019-2020. As
a result, the number of students in college at 45,902 is a 6 percent increase in total college
population. This, despite the fact that there are only two year levels in college as a consequence
of the full implementation of the K to 12 program.
In its quarterly report submitted to the Philippine Stock Exchange, the group said that STI also
moved its school opening from June to July 15, hence the revenues to be generated will be
recognized in July after the close of the quarter subject of the report. SHS classes of STI ESG
and STI WNU as well as STI WNU' s classes for its School of Basic Education (SBE) still start in
June. The academic year for iACADEMY starts in July for the tertiary level and August for the
SHS and ends in June and May, respectively.
The increase in college enrollment comes as the group goes full throttle with its campus
expansion program in and around Metro Manila. This is in response to the need to provide
quality education among Filipinos in this era of globalization.
Three new campuses with state-of-the-art facilities, namely STI Sta. Mesa in Manila, STI Pasay-
EDSA, and STI San Jose Del Monte in Bulacan, were completed under the wing of STI Holdings
subsidiary STI Education Services Group (STI ESG) last March. This follows the completion of
the eight-story STI Lipa building which began operations on its first 4 floors in August 2018.
The building was likewise completed in March.
The opening of the new campuses further supports the requirements of the Company's total
enrollment of 83,967, composed mostly of college and senior high school students including
those from other subsidiaries STI WNU and iACADEMY for the current school year.
It also contributed to the increase in the group's total assets to P15.2 billion as of June 30, 2019
or P439.4 million higher than the P14.8 billion it had as of March 31, 2019.
2. Change in Fiscal Year and Other Events: Annual Stockholders Meeting Notice and
Amendment of By-laws filed with the SEC on September 5, 2019
The last day to submit nominations for the Board of Directors of the Corporation is on
9 September 2019. The Corporate Governance Committee shall pre-screen the
qualifications and prepare a Final List of all Candidates for directors. Only nominees
whose names appear on the Final List of Candidates shall be eligible for election as
directors.
b) Amendment of By-Laws
The Board approved the amendment of Article II, Sections 13, 14 and 15 of the By-
Law to change the Nomination Committee to Corporate Governance Committee.
3. Other Event: Corporate Governance Committee filed with the SEC on September 10, 2019
During the September 2019 meeting of the Corporation’s Corporate Governance Committee,
the following individuals were pre-screened and determined to possess the qualifications
required and none of the disqualifications provided for by law, relevant rules and regulations
and the Company’s Manual on Corporate Governance to become members of the Company’s
Board of Directors:
1. Monico V. Jacob
2. Eusebio H. Tanco
3. Peter K. Fernandez
4. Raul B. De Mesa
5. Maria Vanessa Rose L. Tanco
6. Joseph Augustin Eusebio L. Tanco
7. Rainerio M. Borja
8. Martin K. Tanco
9. Paolo Martin O. Bautista
Independent Directors:
1. Jesli A. Lapus
2. Robert G. Vergara
4. Other Events: Declaration of Cash Dividends filed with the SEC on September 20, 2019
In the meeting of the Board of Directors of STI ESG held on 20 September 2019, the Board
approved the declaration of cash dividends in the amount of Php0.06 per share or an aggregate
amount of One Hundred Eighty-Four Million Nine Hundred Twelve Thousand Six Hundred
Thirty Pesos (Php184,912,630.00) (the "Cash Dividends") from the unrestricted retained
earnings of the Company as of March 31, 2019 based on the Parent Audited Financial
Statements as of March 31, 2019.
The Cash Dividends are payable to stockholders of record as of September 30, 2019 and shall
be payable on November 8, 2019.
5. Other Event: Election of Directors and officers filed with the SEC on October 30, 2019
Please be advised that in the Annual Stockholders' Meeting of STI ESG held on October 30,
2019, the stockholders elected the following Directors of the Company to serve as such for the
ensuing year and until the election and qualification of their successors:
1. MonicoV.Jacob
2. Eusebio H. Tanco
3. Peter K. Fernandez
4. Raul B.DeMesa
5. Maria Vanessa RoseL. Tanco
6. Joseph Augustin Eusebio L. Tanco
7. Rainerio M.Borja
8. Martin K. Tanco
9. Paolo Martin O. Bautista
Independent Directors:
10. Jesli A. Lapus
11. Robert G. Vergara
In the Organizational Meeting of the Board of Directors immediately succeeding the Annual
Stockholders' Meeting, the following were elected officers of the Company to serve as such for the
ensuing year and until the election and qualification of their successors:
Executive Committee:
Chairman Eusebio H. Tanco
Members Jesli A. Lapus
Monico V. Jacob
Rainerio M. Borja
Maria Vanessa Rose L. Tanco
Joseph Augustin Eusebio L. Tanco
Audit Committee:
Chairman Jesli A. Lapus
Members Eusebio H. Tanco
Raul B. De Mesa
Robert G. Vergara
Compensation Committee
Chairman Eusebio H. Tanco
Members Monico V. Jacob
Raul B. De Mesa
Yolanda M. Bautista
Retirement Committee:
Chairman Eusebio H. Tanco
6. Other Events: SEC approval of the Amendments on STI ESG’s By-Laws filed with the SEC
on November 7, 2019
The Securities and Exchange Commission (SEC) has approved the application of STI ESG for
the amendment of the following provisions to the By-Laws:
i. amendment of the Article I to change the address from Makati, Metro Manila to STI
Academic Center Ortigas-Cainta, Ortigas Avenue Extension, Cainta, Rizal 1900;
ii. Amendment of the Article II, Sections 13, 14 and 15 to change the Nomination
Committee to Corporate Governance Committee
iii. Amendment of the Article IV, Section 1 to change the date of the Annual Stockholders’
Meeting from Frist Thursday of September to First Thursday of November; and
iv. Amendment of the Article VI, Section 1 to change the fiscal year which shall commence
on the first day of July of each year and end on the last day of June of the following
year.
The Group has no financial assets at Fair Value Through Profit or Loss as at March 31, 2020
STI EDUCATION SERVICES GROUP, INC. AND SUBSIDIARIES
Annex J | Schedule B - Amounts Receivable from Directors, Officers, Employees, Related Parties and Principal Stockholders (Other than Related parties)
This schedule shall be filed with respect to each person among the directors, officers, employees, and principal stockholders (other than related parties) from whom an aggregate
indebtedness of more than P100,000 or one percent of total assets, whichever is less, is owed. For the purposes of this schedule, exclude in the determination of the amount of
indebtedness all amounts receivable from such persons for purchases subject to usual terms, for ordinary travel and expense advances and for other such items arising in the
ordinary course of business.
Balance at
beginning of Amounts Amounts Balance at end
Name and Designation of debtor period Additions collected Written-off Current Not Current of period
The Group does not have receivables from individual directors, officers, employees and principal stockholders aggregating above P1,000,000 or 1% of total assets, whichever is
less, as at March 31, 2020.
STI EDUCATION SERVICES GROUP, INC. AND SUBSIDIARIES
Annex J | Schedule C - Amounts Receivable from Related Parties which are eliminated during the consolidation of financial statements
This schedule shall be filed with respect to each related party (e.g., subsidiary) the balances of receivable from which are eliminated during the
consolidation of the financial statements.
Balance at
Name and beginning of Amounts Amounts Balance at end of
Designation of debtor period Additions collected written off Current Not Current period
*presented net of bond issue costs with carrying value of ₱35.6 million in the Statements of Financial Position
STI EDUCATION SERVICES GROUP, INC. AND SUBSIDIARIES
Annex J | Schedule E - Indebtedness to Related Parties (Long-Term Loans from Related Companies)
This schedule shall be filed to list the total of all noncurrent Indebtedness to Related Parties included in the balance sheet. This schedule
may be omitted if:
(i) The total Indebtedness to Related Parties included in such balance sheet does not exceed five percent of total assets as shown in the
related balance sheet at either the beginning or end of the period; or
(ii) There have been no changes in the information required to be filed from that last previously reported.
Balance at beginning of
Name of related party Balance at end of period
period
The Group has no long-term loans from related parties as at March 31, 2020
STI EDUCATION SERVICES GROUP, INC. AND SUBSIDIARIES
Annex J | Schedule F - Guarantees of Securities of Other Issuers
This schedule shall be filed with respect to any guarantees of securities of other issuing entities by the issuer for which the
statement is filed.
The Group does not have guarantees of securities of other issuing entities as at March 31, 2020
STI EDUCATION SERVICES GROUP, INC. AND SUBSIDIARIES
Annex 68-J | Schedule G - Capital Stock
This schedule shall be filed in support of caption Capital Stock in the balance sheet.
Number of shares
issued and
outstanding at Number of shares Number of
Number of shown under related reserved for options, shares held Directors,
Title of Shares balance sheet warrants, conversion by related officers and
Issue authorized caption and other rights parties employees Others
STI EDUCATION SYSTEMS HOLDINGS, INC.*
INFORMATION AND
STI EDUCATION SERVICES STI WEST NEGROS ATTENBOROUGH HOLDINGS
NESCHESTER CORPORATION COMMUNICATIONS
GROUP, INC.1 UNIVERSITY, INC. CORP.
TECHNOLOGY ACADEMY, INC.
SUBSIDIARIES ASSOCIATES
Global Resource for
STI College Batangas, STI College Outsourced STI College
Inc. Tuguegarao, Workers, Inc. Alabang, Inc. 40%
100% Inc.100% 17%
STI College
STI Lipa, Inc.
Pagadian, Inc.
100%
100% 1 STI Education Systems Holdings, Inc. is an associate of STI Education Services Group, Inc. (STI ESG).
STI ESG owns 5% equity interest in STI Holdings as at March 31, 2019
2
A subsidiary through a management contract.
STI College of STI College
3
Kalookan, Inc.2 Novaliches, Inc. Investment is classified as noncurrent asset held for sale effective June 30, 2017.
100% 100%
NAMEI Polytechnic
NAMEI Polytechnic
Institute of
Institute, Inc.
Mandaluyong, Inc.
94%
100%
STI College of Santa STI Training
Maria Academy, Inc.
100% 100%
De Los Santos – STI
College, Inc.
52%
Solvency ratios
Debt to equity ratio (4) 0.85 0.67 0.18 27
(5)
Asset to equity ratio 1.88 1.68 0.20 12
(6)
Debt service coverage ratio 1.52 1.74 (0.22) (13)
(7)
Interest coverage ratio 0.20 2.54 (2.34) (92)
Profitability ratios
EBITDA margin (8) 36.0% 37.0% (1.0) (3)
(9)
Gross profit margin 60.0% 63.0% (3.0) (5)
(10)
Operating profit margin 11.0% 16.0% (5.0) (31)
(11)
Net profit margin -11.0% 12.0% (23.0) (192)
Return on equity (12) -3.6% 3.9% (7.5) (192)
(1)
Current ratio is measured as current assets divided by current liabilities.
(2) Quick ratio is measured as current assets less inventories, prepayments and noncurrent asset held for sale divided by
current liabilities.
(3)
Cash ratio is measured as cash and cash equivalents divided by current liabilities.
(4)
Debt-to-equity ratio is measured as total liabilities, net of unearned tuition and other school fees, divided by total equity.
(5)
Asset to equity ratio is measured as total assets divided by total equity.
(6) Debt service cover ratio is measured as EBITDA for the last twelve months divided by total principal and interest due for the
next twelve months.
(7)
Interest coverage ratio is measured as net income before income tax and interest expense divided by interest expense.
(8)
EBITDA margin is measured as EBITDA divided by total revenues.
(9)
Gross profit margin is measured as gross profit divided by total revenues.
(10)
Operating profit margin is measured as operating profit divided by total revenues.
(11)
Net profit margin is measured as net income after income tax divided by total revenues.
(12) Return on equity is measured as net income (loss) attributable to equity holders of the parent Company divided by average
equity attributable to equity holders of the parent company.
(13)
Return on assets is measured as net income (loss) divided by average total assets.
EBITDA or earnings (loss) before interest expense, interest income, provision for income tax, depreciation and amortization,
equity in net losses (earnings) of associates and joint ventures, provision for impairment of noncurrent
asset held for sale and nonrecurring gains(losses) such as gain on disposal of net assets. Depreciation and interest expenses
for purposes of this computation exclude those related to ROU assets and lease liabilities, respectively.
COVER SHEET
for
AUDITED FINANCIAL STATEMENTS
0 0 0 0 0 1 1 3 1 5 6
COMPANY NAME
S T I E D U C A T I O N S E R V I C E S G R O U P ,
I N C . ( A P r i v a t e E d u c a t i o n a l I n
s t i t u t i o n ) A N D S U B S I D I A R I E S
S T I A c a d e m i c C e n t e r O r t i g a s - C a
i n t a , O r t i g a s A v e n u e E x t e n s i o n
, C a i n t a , R i z a l
Form Type Department requiring the report Secondary License Type, If Applicable
A A F S C R M D N A
COMPANY INFORMATION
Company’s Email Address Company’s Telephone Number Mobile Number
– (632) 8812-1784 –
No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)
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.
*SGVFSM004069*
SyCip Gorres Velayo & Co. Tel: (632) 8891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 8819 0872 October 4, 2018, valid until August 24, 2021
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-5 (Group A),
Philippines November 6, 2018, valid until November 5, 2021
Opinion
We have audited the consolidated financial statements of STI Education Services Group, Inc. and its
subsidiaries (the Group), which comprise the consolidated statements of financial position as at
March 31, 2020 and 2019, and the consolidated statements of comprehensive income, consolidated
statements of changes in equity and consolidated statements of cash flows for each of the three years in
the period ended March 31, 2020, and notes to the consolidated financial statements, including a summary
of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the consolidated financial position of the Group as at March 31, 2020 and 2019, and its consolidated
financial performance and its consolidated cash flows for each of the three years in the period ended
March 31, 2020 in accordance with accounting principles generally accepted in the Philippines as
described in Note 2 to the consolidated financial statements.
*SGVFSM004069*
A member firm of Ernst & Young Global Limited
-2-
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our assessment of
the risks of material misstatement of the consolidated financial statements. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis for our
audit opinion on the accompanying consolidated financial statements.
Adoption of PFRS 16, Leases
Effective April 1, 2019, the Group adopted Philippine Financial Reporting Standard (PFRS) 16, Leases,
under the modified retrospective approach which resulted in significant changes in the Group’s
accounting policy for leases.
The Group’s adoption of PFRS 16 is significant to our audit because the Group has high volume of lease
agreements; the recorded amounts are material to the consolidated financial statements; and adoption
involves application of significant judgment and estimation in determining the lease term, including
evaluating whether the Group is reasonably certain to exercise options to extend or terminate the lease,
and in determining the incremental borrowing rate.
This resulted in the recognition of right of use assets, presented under “Property and equipment” account
in the consolidated statement of financial position, and lease liability amounting to =
P323.9 million and
=391.8 million, respectively, as of April 1, 2019, and the recognition of depreciation expense and interest
P
expense of P=65.3 million and P=28.6 million, respectively, for the year ended March 31, 2020.
The disclosures related to the adoption of PFRS 16 are included in Notes 2 and 28 to the consolidated
financial statements.
Audit response
We obtained an understanding of the Group’s process in implementing the new standard on leases,
including the determination of the population of the lease contracts covered by PFRS 16, the application
of the short-term exemption, the selection of the transition approach and any election of available
practical expedients.
On a test basis, we inspected lease agreements, identified the contractual terms and conditions, and traced
these contractual terms and conditions to the lease calculation prepared by management, which covers the
calculation of financial impact of PFRS 16, including the transition adjustments. We tested the
parameters used in the determination of the incremental borrowing rate by reference to market data.
We computed the lease calculation prepared by management on a sample basis, including the transition
adjustments.
We also reviewed the Group’s disclosures related to the transition adjustments based on the requirements
of PFRS 16 and PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.
*SGVFSM004069*
A member firm of Ernst & Young Global Limited
-3-
Audit response
We obtained an understanding of the methodologies and models used for the Group’s different credit
exposures and assessed whether these considered the requirements of PFRS 9, Financial Instruments, to
reflect an unbiased and probability-weighted outcome, the time value of money, and the best available
forward-looking information.
We (a) assessed the Group’s segmentation of its credit risk exposures based on homogeneity of credit risk
characteristics; (b) tested the definition of default against historical analysis of accounts and credit risk
management policies and practices in place, (c) tested historical loss rates by inspecting historical
recoveries and write-offs; (d) checked the classification of outstanding exposures to their corresponding
aging buckets; and (e) checked the forward-looking information used for overlay through statistical test
and corroboration using publicly available information and our understanding of the Group’s receivable
portfolios.
Further, we checked the data used in the ECL models, such as the historical aging analysis and default
and recovery data, by reconciling data from source system reports to the loss allowance analysis/models
and financial reporting systems. To the extent that the loss allowance analysis is based on credit
exposures that have been disaggregated into subsets with similar risk characteristics, we traced or
re-performed the disaggregation from source systems to the loss allowance analysis.
We recalculated impairment provisions on a sample basis. We reviewed the disclosures made in the
consolidated financial statements based on the requirements of PFRS 9.
The Group classified its 20%-investment in Maestro Holdings, Inc. (Maestro Holdings) as noncurrent
asset held for sale in accordance with PFRS 5, Noncurrent Asset Held for Sale and Discontinued
Operation, effective June 30, 2017. Such noncurrent asset classified as held for sale is measured at the
lower of its carrying amount and fair value less costs to sell. In 2020, the Group recognized a provision
for impairment amounting to = P297.5 million, and continued to classify its investment amounting to
=419.1 million as held for sale as at March 31, 2020. This matter is significant to our audit because the
P
classification of the investment as asset held for sale and the determination of its fair value involve
significant management judgment and estimate.
*SGVFSM004069*
A member firm of Ernst & Young Global Limited
-4-
The disclosures on the investment in Maestro Holdings are included in Notes 4, 9 and 12 to the
consolidated financial statements.
Audit response
Our audit procedures include, among others, evaluation of management’s assessment of the requirements
under PFRS 5 for the classification of the investment as held for sale, by inspecting supporting documents
such as correspondences with interested buyers, inquiries of management and reading of minutes of
meetings.
We also involved our internal specialist in evaluating the methodology and assumptions used in
determining the investment’s fair value less costs to sell. The significant assumptions include growth
rates, long-term growth rate, discount rates, discount on lack of control, discount on lack of marketability
and estimated costs to sell. We tested the parameters used in the determination of the average forecasted
growth rates against historical performance; and the long-term growth rate, discount rates, discount on
lack of control, discount on lack of marketability and estimated costs to sell against relevant market and
industry data. For accounts valued at Level 1 and Level 2, we compared the recorded prices as of the
reporting date with the observable prices in the market. We also reviewed the Group’s disclosures
relative to the investment in Maestro Holdings in the consolidated financial statements.
Recoverability of Goodwill
Under PFRS, the Group is required to annually test the amount of goodwill for impairment. As at
March 31, 2020, the Group’s goodwill attributable to each of the Group’s cash-generating units (CGUs)
that are expected to benefit from the business combination (i.e., each school operation) amounted to
=229.8 million, which is considered significant to the consolidated financial statements. In addition,
P
management’s assessment process requires significant judgments and is based on assumptions,
specifically discount rate, forecasted revenue growth, earnings before interest, taxes, depreciation and
amortization (EBITDA) margins and long-term growth rate.
The Group’s disclosures about goodwill are included in Notes 4 and 15 to the consolidated financial
statements.
Audit response
We involved our internal specialist in evaluating the methodology and assumptions used. These
assumptions include discount rate, forecasted revenue growth, EBITDA margins and long-term growth
rate. We compared the key assumptions used, such as forecasted revenue growth, EBITDA margins, and
long-term growth rate against the historical performance of the CGUs and other relevant external data.
We tested the parameters used in the determination of the discount rate against market data. We also
reviewed the Group’s disclosures about those assumptions to which the outcome of the impairment test is
most sensitive, specifically those that have the most significant effect on the determination of the
recoverable amount of the goodwill.
*SGVFSM004069*
A member firm of Ernst & Young Global Limited
-5-
Other Information
Management is responsible for the other information. The other information comprises the
SEC Form 17-A for the year ended March 31, 2020 but does not include the consolidated financial
statements and our auditor’s report thereon, which we obtained prior to the date of this auditor’s report,
and the SEC Form 20-IS (Definitive Information Statement) and Annual Report for the year ended
March 31, 2020, which are expected to be made available to us after the date of the auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audits, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with PFRSs, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the Group or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with PSAs will always detect a material misstatement when it exists.
*SGVFSM004069*
A member firm of Ernst & Young Global Limited
-6-
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
· Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
· Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group to cease
to continue as a going concern.
· Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the audit. We remain solely
responsible for our audit opinion.
*SGVFSM004069*
A member firm of Ernst & Young Global Limited
-7-
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is
Benjamin N. Villacorte.
Benjamin N. Villacorte
Partner
CPA Certificate No. 111562
SEC Accreditation No. 1539-AR-1 (Group A),
March 26, 2019, valid until March 25, 2022
Tax Identification No. 242-917-987
BIR Accreditation No. 08-001998-120-2019,
January 28, 2019, valid until January 27, 2022
PTR No. 8125320, January 7, 2020, Makati City
*SGVFSM004069*
A member firm of Ernst & Young Global Limited
STI EDUCATION SERVICES GROUP, INC.
(A Private Educational Institution)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
March 31
2020 2019
ASSETS
Current Assets
Cash and cash equivalents (Note 5) P617,682,038
= P401,238,061
=
Receivables (Note 6) 636,656,144 420,843,658
Inventories (Note 7) 132,396,802 151,758,784
Prepaid expenses and other current assets (Note 8) 55,184,740 73,913,098
1,441,919,724 1,047,753,601
Noncurrent asset held for sale (Note 9) 419,115,894 716,586,558
Total Current Assets 1,861,035,618 1,764,340,159
Noncurrent Assets
Property and equipment - net (Note 10) 8,002,960,313 7,670,479,466
Investment properties - net (Note 11) 493,220,076 521,697,012
Investments in and advances to associates and joint ventures (Note 12) 503,626,787 508,609,775
Equity instruments designated at fair value through other comprehensive
income (FVOCI) (Note 14) 67,599,307 49,777,643
Deferred tax assets - net (Note 29) 33,380,981 32,117,933
Goodwill, intangible and other noncurrent assets (Note 15) 530,536,013 511,096,656
Total Noncurrent Assets 9,631,323,477 9,293,778,485
Current Liabilities
Accounts payable and other current liabilities (Note 16) P539,689,082
= P683,892,234
=
Current portion of interest-bearing loans and borrowings (Note 17) 240,000,000 240,000,000
Unearned tuition and other school fees 195,013,267 81,379,657
Current portion of lease liabilities (Note 28) 66,111,807 –
Current portion of obligations under finance lease (Note 28) – 6,208,432
Income tax payable 2,884,770 12,087,573
Total Current Liabilities 1,043,698,926 1,023,567,896
Noncurrent Liabilities
Interest-bearing loans and borrowings - net of current portion (Note 17) 914,262,208 360,000,000
Bonds payable (Note 18) 2,964,418,162 2,957,954,254
Lease liabilities - net of current portion (Note 28) 329,796,679 –
Pension liabilities - net (Note 27) 56,144,234 33,341,457
Obligations under finance lease - net of current portion (Note 28) – 11,643,614
Other noncurrent liabilities (Note 19) 71,539,574 101,903,936
Total Noncurrent Liabilities 4,336,160,857 3,464,843,261
Total Liabilities (Carried Forward) 5,379,859,783 4,488,411,157
*SGVFSM004069*
-2-
March 31
2020 2019
Total Liabilities (Brought Forward) =5,379,859,783
P =4,488,411,157
P
Equity Attributable to Equity Holders of the Parent Company
Capital stock (Notes 1 and 20) 3,087,829,443 3,087,829,443
Additional paid-in capital 386,916,479 386,916,479
Treasury stock (Note 20) (10,833,137) (10,833,137)
Cumulative actuarial gain (loss) (Note 27) (1,092,511) 8,190,682
Other comprehensive income associated with noncurrent asset held for sale
(Note 20) 91,876,446 91,876,446
Unrealized fair value adjustment on equity instruments designated at
FVOCI (Note 14) 11,006,834 3,185,170
Other equity reserve (30,941,455) (30,941,455)
Share in associates’:
Cumulative actuarial gain (Note 12) 468,522 536,478
Unrealized fair value loss on equity instruments designated at FVOCI
(Note 12) (30,387) (30,429)
Retained earnings 2,572,194,979 3,023,825,683
Total Equity Attributable to Equity Holders of the Parent
Company 6,107,395,213 6,560,555,360
Equity Attributable to Non-Controlling Interests 5,104,099 9,152,127
Total Equity 6,112,499,312 6,569,707,487
*SGVFSM004069*
STI EDUCATION SERVICES GROUP, INC.
(A Private Educational Institution)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
*SGVFSM004069*
-2-
*SGVFSM004069*
STI EDUCATION SERVICES GROUP, INC.
(A Private Educational Institution)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
*SGVFSM004069*
STI EDUCATION SERVICES GROUP, INC.
(A Private Educational Institution)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
*SGVFSM004069*
-2-
*SGVFSM004069*
STI EDUCATION SERVICES GROUP, INC.
(A Private Educational Institution)
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
a. General
STI Education Services Group, Inc. (STI ESG or the Parent Company) and its subsidiaries
(hereafter collectively referred to as the “Group”) are all incorporated in the Philippines and
registered with the Philippine Securities and Exchange Commission (SEC). The Parent Company
was incorporated on June 2, 1983 and 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. The Group 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, education, hotel and restaurant management,
engineering and business studies. The Group is also offering Senior High School (SHS).
The registered office address of the Parent Company is STI Academic Center Ortigas-Cainta,
Ortigas Avenue Extension, Cainta, Rizal.
On March 23, 2017, the Parent Company issued the first tranche of its =P5,000.0 million fixed-rate
bonds program under its three-year shelf registration with the SEC which ended on
March 9, 2020. The bonds, amounting to an aggregate of = P3,000.0 million were listed through the
Philippine Dealing and Exchange Corp. (PDEx), with interest payable quarterly and were issued
with a fixed rate of 5.8085% for the 7-year series, due 2024, and 6.3756% for the 10-year series,
due 2027. The bonds were rated ‘PRS Aa’ by Philippine Rating Services Corporation (PhilRatings)
in 2017. Proceeds of the issuance were used to finance the campus expansion projects, refinancing
of the short-term loans incurred for the acquisition of land, and for other general corporate
requirements of the Group.
STI ESG is 98.7%-owned by STI Education Systems Holdings, Inc. (STI Holdings) which is the
ultimate parent company of the Group. STI Holdings is a company incorporated in the Philippines
and is listed in the Philippine Stock Exchange (PSE).
The Parent Company has investments in several entities which own and operate STI schools. STI
schools may be operated either by: (a) the Parent Company; (b) its subsidiaries; or (c) independent
entrepreneurs (referred to as “franchisees”) under the terms of licensing agreements with the Parent
Company. Other features of the licensing agreements are as follows:
§ Exclusive right to use proprietary marks and information such as but not limited to courseware
programs, operational manuals, methods, standards, systems, that are used exclusively in the
STI network of schools;
§ Continuing programs for faculty and personnel development, including evaluation and audit of
pertinent staff;
§ Development and adoption of the enrollment and registration system;
§ Assistance on matters pertaining to financial and accounting procedures, faculty recruitment and
selection, marketing and promotion, record keeping and others.
*SGVFSM004069*
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Prior to School Year (SY) 2018-2019, STI schools start the school calendar every June of
each year.
On June 14, 2018, STI ESG informed the Commission on Higher Education (CHED) of the
decision of its Board of Directors (BOD) to admit two batches of incoming college freshmen
students for SY 2018-2019. The Group requested CHED for endorsement of this move to accept
the second batch of college freshmen enrollees that would start in August 2018. On June 29, 2018,
CHED noted the decision of STI ESG citing that the decision to move the school calendar is part
of the institution’s academic freedom, provided that it would not violate existing rules on the same.
CHED also advised STI ESG to coordinate with the respective CHED Regional Offices on the
usual guidance and procedures in implementing the planned school calendar.
With this development, STI ESG made adjustments in its school calendar. For SY 2019-2020,
classes for the basic education and SHS still start in June while classes for tertiary start in July.
Related events after the reporting period are discussed in Note 39.
§ Phase 1: The merger of three (3) majority owned schools and fourteen (14) wholly-owned
schools with STI ESG, with STI ESG as the surviving entity. The Phase 1 merger was approved
by the CHED and the SEC on March 15, 2011 and May 6, 2011, respectively.
§ Phase 2: The merger of one (1) majority owned school and eight (8) wholly-owned pre-
operating schools with STI ESG, with STI ESG as the surviving entity. The Phase 2 merger
was approved by the CHED and the SEC on July 18, 2011 and August 31, 2011, respectively.
On September 25, 2013, STI ESG’s BOD approved an amendment to the Phase 1 and 2 mergers
whereby STI ESG would issue shares at par value, to the stockholders of the non-controlling
interests. In 2014, STI ESG issued 1.9 million additional shares at par value to the stockholders of
one of the merged schools. As at September 24, 2020, the amendment is pending approval by the
SEC.
As at report date, STI ESG’s request for confirmatory ruling on the tax-free merger from the Bureau
of Internal Revenue (BIR) is still pending.
On September 5, 2019, the BOD of STI ESG approved the amendment of the following provisions
to its By-Laws: (1) change of the principal address from Makati Metro Manila to STI Academic
Center Ortigas-Cainta, Ortigas Avenue Extension, Cainta, Rizal 1900; (2) change the Nominations
Committee to Corporate Governance Committee; (3) change of the fiscal year from starting
April 1 of each year ending on March 31 of the following year to starting July 1 of each year ending
on June 30 of the following year; and, (4) change of the date of its annual stockholders’ meeting
from every first Thursday of September of each year to every first Thursday of November of each
year. The SEC approved the amendments on November 4, 2019. The BIR approved STI ESG’s
application for the change in accounting period on August 27, 2020.
On November 11, 2019, the SEC approved the incorporation of STI Training Academy, Inc.
(STI Training Academy) with STI ESG owning 100% of the subscribed and issued capital stock.
STI Training Academy is established to operate a Technical Vocational Educational Institution,
*SGVFSM004069*
-3-
assessment center, and training center which shall provide courses of study to seafarers, officers,
cadets and other individuals involved or interested in maritime operations, subject to laws of the
Philippines and various international regulations that regulate maritime operations, including
training programs with Technical Education and Skills Development Authority (TESDA); and to
provide other professional courses and training, such as tanked courses, allied and security courses,
stewarding and culinary courses.
The establishment, operation, administration and management of schools are subject to the existing
laws, rules and regulations, policies, and standards of the Department of Education (DepEd),
TESDA and CHED pursuant to Batas Pambansa Bilang 232, otherwise known as the “Education
Act of 1982,” Republic Act (RA) No. 7796, otherwise known as the “TESDA Act of 1994,” and
RA No. 7722, otherwise known as the “Higher Education Act of 1994,” respectively.
The accompanying consolidated financial statements were approved and authorized for issue by
the BOD on September 24, 2020.
Basis of Preparation
The accompanying consolidated financial statements have been prepared on a historical cost basis,
except for noncurrent asset held for sale which has been measured at fair value less costs to sell and equity
instruments designated at FVOCI which have been measured at fair value. The consolidated financial
statements are presented in Philippine Peso (P =), which is the Parent Company’s functional and
presentation currency, and all values are rounded to the nearest peso, except when otherwise indicated.
Statement of Compliance
As at and for the years ended March 31, 2020 and 2019, the accompanying consolidated financial
statements, which were prepared for submission to the SEC and BIR, have been prepared in accordance
with Philippine Financial Reporting Standards (PFRSs).
For the year ended March 31, 2018, the accompanying consolidated financial statements of the Group
have been prepared in accordance with accounting principles generally accepted in the Philippines
which includes all applicable PFRS and accounting standards set forth in Pre-Need
Rule 31, As Amended: Accounting Standards for Pre-Need Plans and Pre-Need Uniform Chart of
Accounts, otherwise known as PNUCA, as required by the SEC for PhilPlans First, Inc. (PhilPlans).
PhilPlans is a pre-need company and is a wholly-owned subsidiary of Maestro Holdings, Inc. (Maestro
Holdings, formerly known as STI Investments, Inc.), an associate of the Parent Company until
June 2017.
PFRS 16 supersedes Philippine Accounting Standards (PAS) 17, Leases, Philippine Interpretation
International Financial Reporting Interpretations Committee (IFRIC) 4, Determining whether an
Arrangement contains a Lease, Philippine Interpretation Standard Interpretations Committee
(SIC)-15 Operating Leases-Incentives and SIC-27, Evaluating the Substance of Transactions
*SGVFSM004069*
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Involving the Legal Form of a Lease. The standard sets out the principles for the recognition,
measurement, presentation and disclosure of leases and requires lessees to account for all leases
under a single on-balance sheet model.
Lessor accounting under PFRS 16 is substantially unchanged under PAS 17. Lessors will continue
to classify leases as either operating or finance leases using similar principles as in PAS 17.
Therefore, PFRS 16 did not have an impact for leases where the Group is the lessor.
The Group adopted PFRS 16 using the modified retrospective method of adoption with the date of
initial application of April 1, 2019. Under this method, the standard is applied retrospectively with
the cumulative effect of initially applying the standard recognized at the date of initial application.
The Group elected to use the transition practical expedient allowing the standard to be applied only
to contracts that were previously identified as leases applying PAS 17 and IFRIC 4 at the date of
initial application. The Group also elected to use the recognition exemptions for lease contracts
that, at the commencement date, have a lease term of 12 months or less and do not contain a
purchase option (‘short-term leases’).
Increase (decrease)
Assets
Property and equipment =323,874,119
P
Prepaid expenses and other current assets (3,796,127)
Deferred tax assets 35,347,900
Other noncurrent assets (10,000,048)
Total Assets P
=345,425,844
Liabilities
Accounts payable and other current liabilities (P
=20,485,350)
Lease liabilities - current 52,845,620
Lease liabilities - net of current portion 338,970,775
Current portion of obligations under finance lease (6,208,432)
Obligations under finance lease - net of current portion (11,643,614)
Deferred tax liabilities 32,387,412
385,866,411
Equity
Retained earnings (40,440,567)
Total Liabilities and Equity P
=345,425,844
As at April 1, 2019:
§ Property and equipment was recognized amounting to P =323.9 million, representing the amount
of right-of-use (ROU) assets set up on transition date. Lease assets recognized previously
under finance leases, which were included under “Property and equipment” account, were
reclassified.
§ Deferred rent previously classified under “Other noncurrent assets” of P =10.0 million was
reclassified and included as part of ROU assets under “Property and equipment” account.
§ Lease liabilities of =
P391.8 million were recognized.
§ Accounts payable and other current liabilities of P
=20.5 million was reclassified to “Retained
earnings” account to derecognize accrued rent expense arising from straight-lining under
PAS 17.
*SGVFSM004069*
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§ Current portion of obligation under finance lease and obligation under finance lease - net of
current portion of P=6.2 million and P=11.6 million, respectively, were reclassified to “Lease
liabilities” account.
§ Deferred tax assets and deferred tax liabilities increased by =
P35.3 million and =P32.4 million,
respectively, because of the deferred tax impact of the changes in assets and liabilities.
§ The net effect of these adjustments had been adjusted to retained earnings amounting to
=40.4 million.
P
The Group leases land and building spaces, where the corporate office and schools are located,
under operating lease agreements with varying terms and periods.
Before the adoption of PFRS 16, the Group classified each of these leases (as lessee) at the inception
date as either a finance lease or an operating lease.
Upon adoption of PFRS 16, the Group applied a single recognition and measurement approach for
all leases, except for short-term leases. The standard provides specific transition requirements and
practical expedients, which have been applied by the Group.
The Group did not change the initial carrying amounts of recognized assets and liabilities at
the date of initial application for leases previously classified as finance leases (i.e., the ROU
assets and lease liabilities equal the lease assets and liabilities recognized under PAS 17). The
requirements of PFRS 16 were applied to these leases from April 1, 2019. The finance lease
liabilities reclassified to lease liabilities amounted to =
P17.9 million.
The Group recognized ROU assets and lease liabilities for those leases previously classified as
operating leases, except for short-term leases and leases of low-value assets. The ROU assets
for most leases were recognized based on the carrying amount as if the standard had always
been applied, apart from the use of incremental borrowing rate (IBR) at the date of initial
application. In some leases, the ROU assets were recognized based on the amount equal to the
lease liabilities, adjusted for any related prepaid and accrued lease payments previously
recognized. Lease liabilities were recognized based on the present value of the remaining lease
payments, discounted using the IBR at the date of initial application.
The Group also applied the following practical expedients provided by the standard:
a. Relied on its assessment of whether leases are onerous immediately before the date of
initial application;
b. Exclusion of initial direct costs from the measurement of the ROU assets at the date of
initial application; and
c. Use of hindsight in determining the lease term where the contract contains options to
extend or terminate the lease.
*SGVFSM004069*
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The lease liabilities at as April 1, 2019 reconciled to the operating lease commitment as of
March 31, 2019 follows:
The interpretation addresses the accounting for income taxes when tax treatments involve
uncertainty that affects the application of PAS 12, Income Taxes, and does not apply to taxes or
levies outside the scope of PAS 12, nor does it specifically include requirements relating to interest
and penalties associated with uncertain tax treatments.
The entity is required to determine whether to consider each uncertain tax treatment separately or
together with one or more other uncertain tax treatments and use the approach that better predicts
the resolution of the uncertainty. The entity shall assume that the taxation authority will examine
amounts that it has a right to examine and have full knowledge of all related information when
making those examinations. If an entity concludes that it is not probable that the taxation authority
will accept an uncertain tax treatment, it shall reflect the effect of the uncertainty for each uncertain
tax treatment using the method the entity expects to better predict the resolution of the uncertainty.
Upon adoption of the interpretation, the Group assessed whether it has any uncertain tax
position. The Group applies significant judgement in identifying uncertainties over its income tax
treatments. The Group determined, based on its assessment, that it is probable that its income tax
treatments will be accepted by the taxation authorities. Accordingly, the interpretation did not have
an impact on the consolidated financial statements.
Under PFRS 9, a debt instrument can be measured at amortized cost or at FVOCI, provided that
the contractual cash flows are solely payments of principal and interest (SPPI) on the principal
amount outstanding and the instrument is held within the appropriate business model for that
classification. The amendments to PFRS 9 clarify that a financial asset passes the SPPI criterion
regardless of the event or circumstance that causes the early termination of the contract and
irrespective of which party pays or receives reasonable compensation for the early termination of
the contract.
These amendments have no impact on the consolidated financial statements of the Group.
*SGVFSM004069*
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The amendments to PAS 19 address the accounting when a plan amendment, curtailment or
settlement occurs during a reporting period. The amendments specify that when a plan amendment,
curtailment or settlement occurs during the annual reporting period, an entity is required to:
§ Determine current service cost for the remainder of the period after the plan amendment,
curtailment or settlement, using the actuarial assumptions used to remeasure the net defined
benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after
that event.
§ Determine net interest for the remainder of the period after the plan amendment, curtailment
or settlement using: the net defined benefit liability (asset) reflecting the benefits offered under
the plan and the plan assets after that event; and the discount rate used to remeasure that net
defined benefit liability (asset).
The amendments also clarify that an entity first determines any past service cost, or a gain or loss
on the settlement, without considering the effect of the asset ceiling. This amount is recognized in
profit or loss. An entity then determines the effect of the asset ceiling after the plan amendment,
curtailment or settlement. Any change in that effect, excluding amounts included in the net interest,
is recognized in other comprehensive income (OCI).
The amendments have no impact on the consolidated financial statements of the Group as it did not
have any plan amendments, curtailments, or settlements during the period.
The amendments clarify that an entity applies PFRS 9 to long-term interests in an associate or joint
venture to which the equity method is not applied but that, in substance, form part of the net
investment in the associate or joint venture (long-term interests). This clarification is relevant
because it implies that the Expected Credit Loss (ECL) model in PFRS 9 applies to such long-term
interests.
The amendments also clarified that, in applying PFRS 9, an entity does not take account of any
losses of the associate or joint venture, or any impairment losses on the net investment, recognized
as adjustments to the net investment in the associate or joint venture that arise from applying
PAS 28, Investments in Associates and Joint Ventures.
These amendments have no impact on the consolidated financial statements as the Group does not
have long-term interests in its associate and joint venture.
The amendments clarify that, when an entity obtains control of a business that is a joint
operation, it applies the requirements for a business combination achieved in stages, including
remeasuring previously held interests in the assets and liabilities of the joint operation at fair
value. In doing so, the acquirer remeasures its entire previously held interest in the joint
operation.
*SGVFSM004069*
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A party that participates in, but does not have joint control of, a joint operation might obtain
joint control of the joint operation in which the activity of the joint operation constitutes a
business as defined in PFRS 3. The amendments clarify that the previously held interests in
that joint operation are not remeasured.
An entity applies those amendments to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or after
January 1, 2019 and to transactions in which it obtains joint control on or after the beginning
of the first annual reporting period beginning on or after January 1, 2019, with early application
permitted.
These amendments have no impact on the consolidated financial statements of the Group as
there is no transaction where joint control is obtained.
The amendments clarify that the income tax consequences of dividends are linked more directly
to past transactions or events that generated distributable profits than to distributions to owners.
Therefore, an entity recognizes the income tax consequences of dividends in profit or loss, OCI
or equity according to where the entity originally recognized those past transactions or events.
An entity applies those amendments for annual reporting periods beginning on or after
January 1, 2019, with early application, permitted.
These amendments are not relevant to the Group because dividends declared by the Group do
not give rise to tax obligations under the current tax laws.
§ Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization
The amendments clarify that an entity treats as part of general borrowings any borrowing
originally made to develop a qualifying asset when substantially all of the activities necessary
to prepare that asset for its intended use or sale are complete.
An entity applies those amendments to borrowing costs incurred on or after the beginning of
the annual reporting period in which the entity first applies those amendments. An entity
applies those amendments for annual reporting periods beginning on or after January 1, 2019,
with early application permitted.
These amendments have no impact on the consolidated financial statements of the Group as
the Group’s current practice is in line with these amendments.
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The amendments to PFRS 3 clarify the minimum requirements to be a business, remove the
assessment of a market participant’s ability to replace missing elements, and narrow the definition
of outputs. The amendments also add guidance to assess whether an acquired process is substantive
and add illustrative examples. An optional fair value concentration test is introduced which permits
a simplified assessment of whether an acquired set of activities and assets is not a business.
An entity applies those amendments prospectively for annual reporting periods beginning on or
after January 1, 2020, with earlier application permitted.
The amendments refine the definition of material in PAS 1 and align the definitions used across
PFRSs and other pronouncements. They are intended to improve the understanding of the existing
requirements rather than to significantly impact an entity’s materiality judgements.
An entity applies those amendments prospectively for annual reporting periods beginning on or
after January 1, 2020, with earlier application permitted.
PFRS 17 is a comprehensive new accounting standard for insurance contracts covering recognition
and measurement, presentation and disclosure. Once effective, PFRS 17 will replace PFRS 4,
Insurance Contracts. This new standard on insurance contracts applies to all types of insurance
contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities
that issue them, as well as to certain guarantees and financial instruments with discretionary
participation features. A few scope exceptions will apply.
The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that is
more useful and consistent for insurers. In contrast to the requirements in PFRS 4, which are largely
based on grandfathering previous local accounting policies, PFRS 17 provides a comprehensive
model for insurance contracts, covering all relevant accounting aspects. The core of PFRS 17 is the
general model, supplemented by:
§ A specific adaptation for contracts with direct participation features (the variable fee approach)
§ A simplified approach (the premium allocation approach) mainly for short-duration contracts
PFRS 17 is effective for reporting periods beginning on or after January 1, 2021, with comparative
figures required. Early application is permitted.
The amendments are not applicable to the Group since none of the entities within the Group have
activities that are predominantly connected with insurance or issuance of insurance contracts.
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Deferred effectivity
§ Amendments to PFRS 10, Consolidated Financial Statements and PAS 28, Sale or Contribution
of Assets between an Investor and its Associate or Joint Venture
The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of
control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments
clarify that a full gain or loss is recognized when a transfer to an associate or joint venture involves
a business as defined in PFRS 3. Any gain or loss resulting from the sale or contribution of assets
that does not constitute a business, however, is recognized only to the extent of unrelated investors’
interests in the associate or joint venture.
On January 13, 2016, the Financial Reporting Standards Council (FRSC) deferred the original
effective date of April 1, 2016 of the said amendments until the International Accounting Standards
Board (IASB) has completed its broader review of the research project on equity accounting that
may result in the simplification of accounting for such transactions and of other aspects of
accounting for associates and joint ventures.
The Group has not early adopted the previously mentioned standards. The Group continues to assess
the impact of the above new, amended and improved accounting standards and interpretations that are
effective subsequent to March 31, 2020 on its consolidated financial statements in the period of initial
application. Additional disclosures required by these amendments will be included in the consolidated
financial statements when these amendments are adopted.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities, respectively.
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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:
The principal or the most advantageous market must be accessible to the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming that market participants act in their economic best
interest. A fair value measurement of a non-financial asset takes into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximizing the use of relevant observable inputs and
minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial
statements are categorized within the fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a whole:
§ Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
§ Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
§ 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 recurring
basis, the Group determines whether transfers have occurred between levels in the hierarchy by
reassessing 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 in the valuation of significant assets, such as investment property. Every
year, the Group decides whether to involve an external valuer in determining the fair value of these
assets. The current practice of the Group is to involve external valuers every two to three years
depending on the circumstances including market conditions and requirements. 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.
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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 on the information in
the valuation computation to contracts and other relevant documents.
Management, in conjunction with the Group’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 Group has determined classes of assets and liabilities on
the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value
hierarchy as explained above.
Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Parent Company and its
subsidiaries.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Parent Company controls an investee, if and only if, the Parent Company has:
§ Power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee)
§ Exposure, or rights, to variable returns from its involvement with the investee, and
§ The ability to use its power over the investee to affect its returns
When the Parent Company has less than a majority of the voting or similar rights of an investee, the
Parent Company considers all relevant facts and circumstances in assessing whether it has power over
an investee, including:
§ The contractual arrangement with the other vote holders of the investee
§ Rights arising from other contractual arrangements
§ The Parent Company’s voting rights and potential voting rights
The Parent Company re-assesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control. Consolidation of a
subsidiary begins when the Parent Company obtains control over the subsidiary and ceases when the
Parent Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated statement of comprehensive
income from the date the Parent Company gains control until the date the Parent Company ceases to
control the subsidiary.
Profit or loss and each component of OCI are attributed to the equity holders of the Parent Company
and to the non-controlling interests, even if this results in the noncontrolling interests having a deficit
balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities,
equity, income, expenses and cash flows relating to transactions between members of the Group are
eliminated in full on consolidation.
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A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction. If the Parent Company loses control over a subsidiary, it:
The subsidiaries of the Parent Company, which are all incorporated in the Philippines, are as follows:
Accounting Policies of Subsidiaries. The separate financial statements of the subsidiaries are prepared
using uniform accounting policies for similar transactions and other events in similar circumstances.
The consolidated financial statements include the accounts of the Parent Company and its subsidiaries
as at March 31 of each year, except for the accounts of STI Tuguegarao, STI Caloocan, STI Iloilo and
NAMEI whose financial reporting dates end on December 31. Adjustments are made for the effects of
significant transactions or events that occur between the financial reporting date of the above-
*SGVFSM004069*
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mentioned subsidiaries and the financial reporting date of the Group’s consolidated financial
statements.
Non-Controlling Interests. Non-controlling interests represent the portion of profit or loss and net assets
in the subsidiaries not held by the Parent Company and are presented in profit or loss and within equity
in the consolidated statement of financial position, separately from equity attributable to equity holders
of the Parent Company.
On transactions with non-controlling interests without loss of control, the difference between the fair
value of the consideration and the book value of the share in the net assets acquired or disposed of is
treated as an equity transaction and is presented as “Other equity reserve” within the equity section of
the consolidated statement of financial position.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, any previously held equity interest in the acquiree is
remeasured at its acquisition date fair value and any resulting gain or loss is recognized in profit or loss.
It is then considered in the determination of goodwill. Any contingent consideration to be transferred
by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration
classified as an asset or liability that is a financial instrument and within the scope of PFRS 9, Financial
Instruments, is measured at fair value with the changes in fair value recognized in profit or loss in
accordance with PFRS 9. Other contingent consideration that is not within the scope of PFRS 9 is
measured at fair value at each reporting date with changes in fair value recognized in profit or loss.
Goodwill acquired in a business combination is initially measured at cost (being the excess of the
aggregate of the consideration transferred and the amount recognized for non-controlling interests and
any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair
value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-
assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed
and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the
reassessment still results in an excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the
purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition
date, allocated to each of the Group’s cash-generating unit (CGU) that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those
units.
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Where goodwill has been allocated to a CGU and part of the operation within that unit is disposed of,
the goodwill associated with the operation disposed of is included in the carrying amount of the
operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this
circumstance is measured based on the relative values of the operation disposed of and the portion of
the CGU retained.
Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
a. Financial assets
The classification of financial assets at initial recognition depends on the financial asset’s
contractual cash flow characteristics and the Group’s business model for managing them. The
Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at
FVTPL, transaction costs.
In order for a financial asset to be classified and measured at amortized cost or FVOCI, it needs to
give rise to cash flows that are SPPI on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an instrument level. In making this assessment, the
Group determines whether the contractual cash flows are consistent with a basic lending
arrangement, i.e., interest includes consideration only for the time value of money, credit risk and
other basic lending risks and costs associated with holding the financial asset for a particular period
of time. In addition, interest can include a profit margin that is consistent with a basic lending
arrangement. The assessment as to whether the cash flows meet the test is made in the currency in
which the financial asset is denominated. Any other contractual terms that introduce exposure to
risks or volatility in the contractual cash flows that is unrelated to a basic lending arrangement,
such as exposure to changes in equity prices or commodity prices, do not give rise to contractual
cash flows that are SPPI on the principal amount outstanding.
The Group’s business model for managing financial assets refers to how it manages its financial
assets in order to generate cash flows. The business model determines whether cash flows will
result from collecting contractual cash flows, selling the financial assets, or both. It is determined
at a level that reflects how groups of financial assets are managed together to achieve a particular
business objective. The Group’s business model does not depend on management’s intentions for
an individual instrument.
Subsequent Measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
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§ Financial assets at FVOCI with recycling of cumulative gains and losses (debt instruments)
§ Financial assets designated at FVOCI with no recycling of cumulative gains and losses upon
derecognition (equity instruments), and
§ Financial assets at FVTPL
Financial assets at amortized cost (debt instruments). This category is the most relevant to the
Group. The Group measures financial assets at amortized cost if both of the following conditions
are met:
§ The financial asset is held within a business model with the objective to hold financial assets
in order to collect contractual cash flows; and
§ The contractual terms of the financial asset give rise on specified dates to cash flows that are
SPPI on the principal amount outstanding
Financial assets at amortized cost are subsequently measured at amortized cost using the effective
interest rate (EIR) method, less any impairment in value. Gains and losses are recognized in profit
or loss when the asset is derecognized, modified or impaired.
As at March 31, 2020 and 2019, the Group’s financial assets at amortized cost include:
Cash and cash equivalents, Receivables (except for advances to officers and employees) and rental
and utility deposits under Goodwill, intangible and other noncurrent assets account.
Financial assets designated at FVOCI with no recycling of cumulative gains and losses upon
derecognition (equity instruments). Upon initial recognition, the Group can elect to classify
irrevocably its equity investments as equity instruments designated at FVOCI when they meet the
definition of equity under PAS 32, Financial Instruments: Presentation and are not held for trading
nor are contingent consideration recognized in a business combination in accordance with PFRS 3.
The classification is determined on an instrument-by-instrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. However, the Group
may transfer the cumulative gain or loss within equity. Dividends are recognized as other income
in the consolidated statement of comprehensive income when the right of payment has been
established, except when the Group benefits from such proceeds as a recovery of part of the cost
of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated
at FVOCI are not subject to impairment assessment.
As at March 31, 2020 and 2019, the Group’s listed and non-listed equity investments are classified
as financial assets at FVOCI (see Note 14).
Financial assets at FVTPL include financial assets held for trading, financial assets designated
upon initial recognition at FVTPL, or financial assets mandatorily required to be measured at fair
value. Financial assets are classified as held for trading if they are acquired for the purpose of
selling or repurchasing in the near term. Derivatives, including separated embedded derivatives,
are also classified as held for trading unless they are designated as effective hedging instruments.
Financial assets with cash flows that are not SPPI are classified and measured at FVTPL,
irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified
at amortized cost or at FVOCI, as described above, debt instruments may be designated at FVTPL
on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.
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Financial assets at FVTPL are carried in the consolidated statement of financial position at fair
value with net changes in fair value recognized in the consolidated statement of comprehensive
income.
The Group has no financial assets at FVTPL as at March 31, 2020 and 2019.
Financial assets migrate through the following three stages based on the change in credit quality
since initial recognition:
Financial assets are credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of those financial assets have occurred. For these credit exposures,
lifetime ECLs are recognized and interest revenue is calculated by applying the credit-adjusted
effective interest rate to the amortized cost of the financial asset.
Loss allowances are recognized based on 12-month ECL for debt investment securities that are
assessed to have low credit risk at the reporting date. A financial asset is considered to have low
credit risk if:
The Group considers a debt investment security to have low credit risk when its credit risk rating
is equivalent to the globally understood definition of ‘investment grade’, or when the exposure is
less than 30 days past due. However, when there has been a significant increase in credit risk since
origination, the allowance will be based on the lifetime ECL. The Group uses external credit ratings
both to determine whether the debt instrument has significantly increased in credit risk and to
estimate ECL. For exposures without external credit ratings, if contractual payments are more than
30 days past due, the credit risk is deemed to have increased significantly since initial recognition.
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For receivable from students, the Group applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit risk but instead recognizes a loss allowance
based on lifetime ECLs at each reporting date. As for the other financial assets, the Group applied
a general approach in the calculation since these accounts had no significant deterioration in credit
risk since their initial recognition.
Write-off Policy
The Group writes off a financial asset after a certain period since the time the receivable has been
determined to be impaired. Receivables are written off when the bad debts are likely to be
irrecoverable and or it is uneconomic to pursue further the collection of the receivable after efforts
made by the Group.
Financial assets written off may still be subject to enforcement activities under the Group’s
recovery procedures, taking into account legal advice where appropriate. Any recoveries made are
recognized in profit or loss.
A change in the objective of the Group's business model must be effected before the reclassification
date. The reclassification date is the beginning of the next reporting period following the change
in the business model.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognized when:
§ The rights to receive cash flows from the asset have expired, or
§ The Group 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;
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§ 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 ownership of the asset, or (b) the Group
has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of
ownership. When it has neither transferred nor retained substantially all of the risks and rewards of
ownership of the asset nor transferred control of the asset, the Group continues to recognize the
transferred asset to the extent of the Group’s continuing involvement. In that case, the Group 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 Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured
at the lower of the original carrying amount of the asset and the maximum amount of consideration
that the Group could be required to repay.
Initial Recognition
Financial assets are classified as financial assets at FVTPL, loans and receivables, held-to-maturity
(HTM) investments, AFS financial assets, or as derivatives designated as hedging instruments in
an effective hedge, as appropriate. The Group determines the classification of its financial assets at
initial recognition and, where allowed and appropriate, re-evaluates the designation of such assets
at each financial year-end.
Financial assets are recognized initially at fair value plus, in the case of financial assets not at
FVTPL, directly attributable transaction costs.
Purchases or sales of financial assets that require delivery of assets within a time frame established
by regulation or convention in the market place (regular way purchases) are recognized on the trade
date, i.e., the date that the Group commits to purchase or sell the asset.
Subsequent Measurement
Loans and Receivables. Loans and receivables are non-derivative financial assets with fixed or
determinable payments and are not quoted in an active market. Such financial assets are carried at
amortized cost using the effective interest rate, or EIR, method. This method uses an EIR that
exactly discounts estimated future cash receipts through the expected life of the financial asset to
the net carrying amount of the financial asset. Gains and losses are recognized in the consolidated
statement of comprehensive income when the loans and receivables are derecognized or impaired,
as well as through the amortization process. Interest earned is recognized as “Interest income” in
consolidated statement of comprehensive income. Assets in the category are included in the current
assets except for maturities greater than 12 months after the end of the reporting period, which are
classified as noncurrent assets.
The Group’s cash and cash equivalents, receivables, and deposits (included under the “Goodwill,
intangible and other noncurrent assets” account) are classified in this category.
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AFS Financial Assets. AFS financial assets are those non-derivative financial assets that are not
classified as financial assets at FVTPL, loans and receivables or HTM investments. They are
purchased and held indefinitely, and maybe sold in response to liquidity requirements or changes
in market conditions.
After initial measurement, AFS financial assets are subsequently measured at fair value with
unrealized gains or losses being recognized under “Unrealized mark-to-market gain (loss) on
available-for-sale financial assets” account in OCI until the investment is derecognized or
determined to be impaired, at which time the cumulative gain or loss previously recorded in OCI
is included in profit or loss. Interest earned on the investments is reported as interest income using
the effective interest rate method. Dividends earned on investments are recognized in the
consolidated 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 the financial reporting date.
The fair value of AFS financial assets consisting of any investments that are actively traded in
organized financial markets is determined by reference to market closing quotes as at 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 other reliable
sources of their fair values are available, are carried at cost.
Financial Assets Carried at Amortized Cost. The Group assesses, at each reporting date, whether
there is any objective evidence that a financial asset or a group of financial assets is impaired. An
impairment exists if one or more events that has/have occurred since the initial recognition of the
asset (an incurred ‘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. 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 observable data indicating that there is a
measurable decrease in the estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
For financial assets carried at amortized cost, the Group first assesses whether impairment exists
individually for financial assets that are individually significant, or collectively for financial assets
that are not individually significant.
If the Group determines that no objective evidence of impairment exists for an individually assessed
financial asset, whether significant or not, it includes the asset in a group of financial assets with
similar credit risk characteristics and collectively assesses them 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 ECLs 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.
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The carrying amount of the asset is reduced through the use of an allowance account and the loss
is recognized in the consolidated statement of comprehensive income. 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 Group. 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, any amounts formerly charged
are credited to profit or loss.
Quoted AFS Financial Assets. In the case of equity investments classified as AFS financial assets,
an objective evidence of impairment would include a significant or prolonged decline in the fair
value of the investments below its cost. “Significant” is to be evaluated against the original cost of
the investment and “prolonged” against the period in which the fair value has been below its
original cost. When there is evidence of impairment, the cumulative loss which is measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognized in OCI under the “Unrealized mark-to-market gain (loss) on
available-for-sale financial assets” account, is removed from equity and recognized in profit or loss.
Impairment losses on equity investments are not reversed in profit or loss; increases in fair value
after impairment are recognized directly in OCI.
Unquoted AFS Financial Assets. If there is objective evidence that an impairment loss has been
incurred in an unquoted equity instrument that is not carried at fair value because its fair value
cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery
of such an unquoted equity instrument, the amount of loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows discounted at the
current market rate of return for a similar financial asset.
b. Financial liabilities
Initial Recognition
Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, or as other
financial liabilities.
The Group determines the classification of its financial liabilities at initial recognition.
Financial liabilities are recognized initially at fair value and in the case of other financial liabilities,
net of directly attributable transaction costs which include the Parent Company’s bond issuance
costs, such as, taxes and various fees paid to investment banks, law firms, auditors, regulators, and
so on.
The Group does not have financial liabilities at FVTPL. The Group’s financial liabilities as at
March 31, 2020 and 2019 are measured at amortized cost.
Subsequent Measurement
Other Financial Liabilities. After initial recognition, other financial liabilities are subsequently
measured at amortized cost using the EIR method.
Gains and losses are recognized in the consolidated statement of comprehensive income when the
liabilities are derecognized as well as through the EIR amortization process. Amortized cost is
calculated by taking into account any discount or premium on acquisition and fees or costs that are
*SGVFSM004069*
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an integral part of the EIR. The EIR amortization is included in the consolidated statement of
comprehensive income.
Other financial liabilities include interest-bearing loans and borrowings, bonds payable, accounts
payable and other current liabilities (excluding government and other statutory liabilities), lease
liabilities/obligations under finance lease, and other noncurrent liabilities (excluding advance rent
and deferred lease liability).
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or
canceled 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 the derecognition of the original liability
and the recognition of a new liability. The difference in the respective carrying amounts is
recognized in the consolidated statement of comprehensive income.
Creditable Withholding Taxes (CWT). CWT represents the amount of tax withheld by counterparties
from the Group. These are recognized upon collection and are utilized as tax credits against income tax
due as allowed by Philippine taxation laws and regulations. CWT is presented as part of “Prepaid taxes”
under the “Prepaid expenses and other current assets” account in the consolidated statement of financial
position. CWT is stated at its estimated net realizable value.
The criteria for held for sale classification are regarded as met only when the asset is available for
immediate sale in its present condition and the sale is highly probable. Management must be committed
to a plan to sell, which is expected to be completed within one year from the date of the classification,
and an active program to locate a buyer and complete the plan must have been initiated. Further, the
asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value.
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Actions required to complete the plan to sell should indicate that it is unlikely that significant changes
to the plan will be made or that the plan will be withdrawn.
Equity method of accounting for investment in shares of an associate ceases upon classification of the
investment as a noncurrent asset held for sale. Noncurrent asset held for sale is presented separately as
part of current assets in the consolidated statement of financial position.
An item of property and equipment is derecognized upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the carrying amount of the asset) is included in
the consolidated statement of comprehensive income in the year the asset is derecognized.
Depreciation and amortization are computed using the straight-line method over the following
estimated useful lives:
Buildings 20 to 25 years
Office and school equipment 5 years
Office furniture and fixtures 5 years
Leasehold improvements 5 years or terms of the lease agreement,
whichever is shorter
Transportation equipment 5 years or terms of the lease agreement,
whichever is shorter
Computer equipment and peripherals 3 years
Library holdings 5 years
The estimated useful lives and the depreciation and amortization method are reviewed periodically to
ensure that the periods and depreciation and amortization method are consistent with the expected
pattern of economic benefits from items of property and equipment.
Fully depreciated assets are retained in the accounts until they are no longer in use and no further
depreciation or amortization is charged to current operations.
Construction-in-progress represents structures under construction and is stated at cost less any
impairment in value. This includes the cost of construction and other direct costs, including any interest
on borrowed funds during the construction period. Construction-in-progress is not depreciated until the
relevant assets are completed and become available for operational use.
Investment Properties
Investment properties include land and buildings held by the Group for capital appreciation and rental
purposes. Buildings are carried at cost less accumulated depreciation and any impairment in value,
while land is carried at cost less any impairment in value. The carrying amount includes the cost of
constructing a significant portion of an existing investment property if the recognition criteria are met,
and excludes the costs of day-to-day servicing of an investment property.
*SGVFSM004069*
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Depreciation of buildings is computed on a straight-line basis over 20-25 years. The asset’s useful life
and method of depreciation are reviewed and adjusted, if appropriate, at each financial year-end.
Investment properties are derecognized when either they have been disposed of or when the investment
property is permanently withdrawn from use and no future economic benefit is expected from its
disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in
the consolidated 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 the
property for subsequent accounting is its carrying value at the date of the change in use. If the property
occupied by Group as an owner-occupied property becomes an investment property, the Group
accounts for such property in accordance with the policy stated under property and equipment up to the
date of the change in use.
Construction-in-progress represents structures under construction and is stated at cost less any
impairment in value. This includes the cost of construction and other direct costs, including any interest
on borrowed funds during the construction period. Construction-in-progress is not depreciated until
the relevant assets are completed and become available for use, capital appreciation and or rental
purposes.
Borrowing Costs
Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or
production of a qualifying asset. Qualifying assets are assets that necessarily take a substantial period
of time to get ready for its intended use or sale. To the extent that funds are borrowed specifically for
the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization on
that asset shall be determined as the actual borrowing costs incurred on that borrowing during the year
less any investment income on the temporary investment of those borrowings. To the extent that funds
are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of
borrowing costs eligible for capitalization shall be determined by applying a capitalizable rate to the
expenditures on that asset. The capitalization rate shall be the weighted average of the borrowing costs
applicable to borrowings that are outstanding during the year, other than borrowings made specifically
for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalized during the
year shall not exceed the amount of borrowing costs incurred during that year.
Capitalization of borrowing costs commences when the activities necessary to prepare the asset for
intended use are in progress and expenditures and borrowing costs are being incurred. Borrowing costs
are capitalized until the asset is available for their intended use. If the resulting carrying amount of the
asset exceeds its recoverable amount, an impairment loss is recognized. Borrowing costs include
interest charges and other costs incurred in connection with the borrowing of funds, as well as exchange
differences arising from foreign currency borrowings used to finance these projects, to the extent that
they are regarded as an adjustment to interest costs.
All other borrowing costs are expensed as incurred in the year in which they occur.
*SGVFSM004069*
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The Group has interests in Philippine Healthcare Educators, Inc. (PHEI) and STI-PHNS Outsourcing
Corporation (STI-PHNS), both joint ventures. A joint venture is a type of joint arrangement whereby
the parties that have joint control of the arrangement have rights to the net assets of the joint venture.
Joint control is the contractually agreed sharing of control of an arrangement which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those
necessary to determine control over subsidiaries.
The Group’s interests in associates and joint ventures are accounted for using the equity method.
Under the equity method, the investment in an associate or a joint venture is initially recognized at cost.
The carrying amount of the investment is adjusted to recognize changes in the Group’s share of net
assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or
joint venture is included in the carrying amount of the investment and is neither amortized nor
individually tested for impairment.
The consolidated statement of comprehensive income reflects the Group’s share of the results of
operations of the associate or joint venture. Any change in OCI of those investees is presented as part
of the Group’s OCI. In addition, when there is a change recognized directly in the equity of the associate
or joint venture, the Group recognizes its share of any changes, when applicable, in the consolidated
statement of changes in equity. Unrealized gains and losses resulting from transactions between the
Group and the associate or joint venture are eliminated to the extent of the interest in the associate or
joint venture.
The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the
face of the consolidated statement of comprehensive income outside operating profit and represents
profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.
The financial reporting dates of the associates, joint ventures and the Parent Company are identical,
except for Synergia Human Capital Solutions, Inc. (Synergia), Global Resource for Outsourced
Workers, Inc. (GROW) and Maestro Holdings which have December 31 as their financial reporting
date, and the associates’ and joint ventures’ accounting policies conform to those used by the Group
for like transactions and events in similar circumstances. Adjustments are made for the Group’s share
in the effects of significant transactions or events that occur between the financial reporting date of the
above-mentioned associates and joint ventures and the financial reporting date of the Group’s
consolidated financial statements.
After application of the equity method, the Group determines whether it is necessary to recognize any
impairment loss on its investment in associates and joint ventures. The Group determines at each
financial reporting date whether there is any objective evidence that the investment in associates and
joint ventures is impaired. If this is the case, the Group calculates the amount of impairment as the
difference between the recoverable amount of the associate and joint venture and its carrying value and
recognizes the amount in profit or loss.
*SGVFSM004069*
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Upon loss of significant influence over the associate or joint control over the joint venture, the Group
measures and recognizes any retained investment at its fair value. Any difference between the carrying
amount of the associate or joint venture upon loss of significant influence or joint control and the fair
value of the retained investment and proceeds from disposal is recognized in profit or loss.
The associates of the Group, which are all incorporated in the Philippines, are as follows:
Effective Percentage of Ownership
2020 2019 2018
Associate Principal Activities Direct Indirect Direct Indirect Direct Indirect
Accent Healthcare/STI- Medical and related
Banawe, Inc. (STI Accent) (a) services 49 – 49 – 49 –
STI College Alabang, Inc. Educational Institution 40 – 40 – 40 –
(STI Alabang)
Synergia (a) Management Consulting 30 – 30 – 30 –
Services
STI Marikina Educational Institution 24 – 24 – 24 –
Maestro Holdings (b) Holding Company 20 – 20 – 20 –
GROW Recruitment Agency 17 3 17 3 17 3
STI Holdings (see Note 4) Holding Company 5 – 5 – 5 –
(a)
Dormant entities
(b)
Reclassified as asset held for sale on June 30, 2017.
Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortization in the case of
intangible assets with finite lives, and any accumulated impairment losses.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with
finite lives are amortized over the economic useful life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The amortization period and the amortization
method for an intangible asset with a finite useful life are reviewed at least at each financial year-end.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset are accounted for by changing the amortization period or method, as appropriate,
and are treated as changes in accounting estimates. The amortization expense on intangible assets with
finite lives is recognized in the consolidated statement of comprehensive income in the expense
category consistent with the function of the intangible asset.
Intangible assets with indefinite useful lives are not amortized but are tested for impairment annually,
either individually or at the CGU level. The assessment of indefinite life is reviewed annually to
determine whether indefinite life continues to be supportable. If not, the change in useful life from
indefinite to finite is made on a prospective basis.
The Group has assessed the intangible assets as having a finite useful life which is the shorter of its
contractual term or economic life. Amortization is on a straight-line basis over the estimated useful
lives of three years.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognized in the consolidated
statement of comprehensive income when the asset is derecognized.
*SGVFSM004069*
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is required, the Group makes a formal estimate of recoverable amount. Recoverable amount is the
higher of an asset’s (or CGU’s) fair value less costs to sell and its value in use and is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those
from other assets or groups of assets, in which case the recoverable amount is assessed as part of the
CGU to which it belongs. Where the carrying amount of an asset (or CGU) exceeds its recoverable
amount, the asset (or CGU) is considered impaired and is written down to its recoverable amount. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset (or CGU). In determining fair value less costs to sell, an appropriate valuation
model is used. These calculations are corroborated by valuation multiples, quoted share prices for
publicly traded securities or other available fair value indicators.
Provisions for impairment are recognized in the consolidated statement of comprehensive income in
those expense categories consistent with the function of the impaired asset, except for assets previously
revalued where the revaluation was taken to equity. In this case, the impairment is also recognized in
equity up to the amount of any previous revaluation.
For nonfinancial assets, excluding goodwill, an assessment is made at each reporting date as to whether
there is any indication that previously recognized provisions for impairment may no longer exist or
may have decreased. If such indication exists, the recoverable amount is estimated. A previously
recognized impairment loss is reversed only if there has been a change in the estimates used to
determine the asset’s recoverable amount since the last provision for impairment was recognized. If
that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of depreciation and
amortization (in the case of property and equipment, investment properties and intangible assets), had
no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or
loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation
increase. After such a reversal, the depreciation and amortization expense is adjusted in future years to
allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its
remaining life.
Goodwill
Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired. Impairment is determined by assessing the
recoverable amount of the CGUs to which the goodwill relates. Where the recoverable amount of the
CGU (or group of CGUs) is less than the carrying amount of the CGU (or group of CGUs) to which
the goodwill has been allocated, an impairment loss is recognized in the consolidated statement of
comprehensive income. Impairment losses relating to goodwill cannot be reversed for subsequent
increases in its recoverable amount in future periods. The Group performs its annual impairment test
of goodwill as at March 31 of each year.
Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the
*SGVFSM004069*
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Group expects a provision to be reimbursed, such as under an insurance contract, the reimbursement is
recognized as a separate asset but only when the reimbursement is virtually certain. The expense
relating to any provision is presented in the consolidated statement of comprehensive income, net of
any reimbursement. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flow at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the liability. When discounting is
used, the increase in the provision due to the passage of time is recognized as “Interest expense” in the
consolidated statement of comprehensive income.
Treasury Stocks
Own equity instruments which are reacquired (treasury stocks) are recognized at cost and deducted
from equity. No gain or loss is recognized in the consolidated statement of comprehensive income on
the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between
the carrying amount and the consideration, if reissued, is recognized as additional paid-in capital.
Earnings per Share (EPS) Attributable to the Equity Holders of the Parent Company
EPS is computed by dividing net income attributed to equity holders of the Parent Company for the
year by the weighted average number of shares issued and outstanding after giving retroactive effect to
any stock split and stock dividend declaration, if any.
Diluted EPS is calculated by dividing the net income attributable to equity holders of the Parent
Company by the weighted average number of common shares outstanding during the year adjusted for
the effects of any dilutive convertible common shares.
Revenue Recognition
Revenue is recognized when control of the goods or services are transferred to the customer at an
amount that reflects the consideration to which the Group expects to be entitled in exchange for those
goods or services. The Group assesses whether it is acting as a principal or an agent in every revenue
arrangement. It is acting as a principal when it has the primary responsibility for providing the goods
or services. The Group also acts as a principal when it has the discretion in establishing the prices and
bears inventory and credit risk. Revenue is measured at the fair value of the consideration received,
excluding discounts, rebates and value-added tax (VAT).
*SGVFSM004069*
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The following are contract balances relative to the adoption of PFRS 15:
Trade Receivables. Receivables represent the Group’s right to an amount of consideration that is
unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Contract liabilities. A contract liability is the obligation to transfer goods or services to a customer for
which the Group has received consideration (or an amount of consideration is due) from the customer.
If a customer pays consideration before the Group transfers goods or services to the customer, a contract
liability is recognized. Contract liabilities are recognized as revenue when the Group performs under
the contract. The Group’s Unearned tuition and other school fees account represents contract liabilities
which will be recognized as revenue when the related educational services are rendered.
The Group 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
Group’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 Group bases its estimates on
historical results, taking into consideration the type of customer, the type of transaction and the specifics
of each arrangement.
There were no changes in the recognition of the Group’s revenue upon adoption of PFRS 15.
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 satisfied over time using
the output method and is recognized as income over the corresponding school term to which they
pertain on the basis of the time lapsed over the service period. Fees received pertaining to the school
year commencing after the financial reporting date are recorded under the “Unearned tuition and other
school fees” account in the consolidated statement of financial position. Unearned tuition and other
school fees are amortized over the related school term.
Educational Services and Royalty Fees. Revenue from educational services and royalty fees is satisfied
over time based on a percentage of monthly franchise receipts and is recognized in accordance with the
terms of the licensing agreements.
Sale of Educational Materials and Supplies. Revenue is satisfied at a point in time and is recognized at
the time of sale when control of the goods or services are transferred to the customer.
Following are the revenue streams outside the scope of PFRS 15:
Rental Income. Rental income is recognized on a straight-line basis over the term of the lease
agreement.
Dividend Income. Revenue is recognized when the Group’s right to receive the payment is established.
Interest Income. Interest income is recognized as the interest accrues considering the effective yield on
the asset.
Other Revenues. Other revenues mainly pertain to the revenue related to the use of software licenses
by franchised schools. These are recognized over the related school year based on the number of
ongoing students of the schools and a fixed rate per student.
*SGVFSM004069*
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Pension Cost
The Group has the following pension plans (Plan) covering substantially all of its regular and permanent
employees:
Defined Benefit Plans. The net defined benefit liability or asset is the aggregate of the present value of
the defined benefit obligation at the end of the reporting period reduced by the fair value of plan assets
(if any), adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset
ceiling is the present value of any economic benefits available in the form of refunds from the plan or
reductions in future contributions to the plan.
The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method.
§ Service cost
§ Net interest on the net defined benefit liability or asset
§ Remeasurements of net defined benefit liability or asset
Service costs which include current service costs, past service costs and gains or losses on non-routine
settlements are recognized as an expense in the consolidated statement of comprehensive income. Past
service costs are recognized when plan amendment or curtailment occurs. These amounts are calculated
periodically by independent qualified actuary.
Net interest on the net defined benefit liability or asset is the change during the period in the net defined
benefit liability or asset that arises from the passage of time which is determined by applying the
discount rate based on government bonds to the net defined benefit liability or asset. Net interest on the
net defined benefit liability or asset is recognized as expense or income in the consolidated statement
of comprehensive income.
Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the
effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized immediately
in OCI in the period in which they arise. Remeasurements are not reclassified to profit or loss in
subsequent periods.
Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance
policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to the
Group. The fair value of plan assets is based on market price information. When no market price is
available, the fair value of plan assets is estimated by discounting expected future cash flows using a
discount rate that reflects both the risk associated with the plan assets and the maturity or expected
*SGVFSM004069*
- 31 -
disposal date of those assets (or, if they have no maturity, the expected period until the settlement of
the related obligations).
The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined benefit
obligation is recognized as a separate asset at fair value when and only when reimbursement is virtually
certain.
Defined Contribution Plan. De Los Santos-STI College and STI QA are members of the Catholic
Educational Association of the Philippines Retirement Plan (CEAP). CEAP is a funded,
noncontributory, defined contribution plan covering De Los Santos-STI College’s and STI QA’s
qualified employees under which De Los Santos-STI College and STI QA pay fixed contributions based
on the employees’ monthly salaries. De Los Santos-STI College and STI QA, however, are covered
under RA No. 7641, the Philippine Retirement Law, which provides for its qualified employees a
defined benefit (DB) minimum guarantee. The DB minimum guarantee is equivalent to a certain
percentage of the monthly salary payable to an employee at normal retirement age with the required
credited years of service based on the provisions of RA No. 7641.
Accordingly, De Los Santos-STI College and STI QA account for their retirement obligations under
the higher of the DB obligation relating to the minimum guarantee and the obligation arising from the
defined contribution (DC) plan. For the DB minimum guarantee plan, the liability is determined based
on the present value of the excess of the projected DB obligation over the projected DC obligation at
the end of the reporting period. The DB obligation is calculated annually by a qualified independent
actuary using the projected unit credit method. De Los Santos-STI College and STI QA determine the
net interest expense (income) on the net DB liability (asset) for the period by applying the discount rate
used to measure the DB obligation at the beginning of the annual period to the then net DB liability
(asset), taking into account any changes in the net DB liability (asset) during the period as a result of
contributions and benefit payments. Net interest expense and other expenses related to the DB plan are
recognized in profit or loss.
The DC liability, on the other hand, is measured at the fair value of the DC assets upon which the DC
benefits depend, with an adjustment for margin on asset returns, if any, where this is reflected in the
DC benefits. Remeasurements of the net DB liability, which comprise actuarial gains and losses, the
return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest),
are recognized immediately in OCI.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in the benefit
that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss.
De Los Santos-STI College and STI QA recognize gains or losses on the settlement of a DB plan when
the settlement occurs.
Leases
The determination whether an arrangement is, or contains, a lease is based on the substance of the
arrangement at the inception date of whether the fulfillment of the arrangement is dependent on the use
of a specific asset or the arrangement conveys a right to use the asset, even if that right is not explicitly
specified in the 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.
*SGVFSM004069*
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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).
Right-of-use assets
The Group recognizes ROU assets under “Property and equipment” account at the commencement date
of the lease (i.e., the date the underlying asset is available for use). ROU assets are measured at cost,
less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease
liabilities. The initial cost of ROU assets includes the amount of lease liabilities recognized, initial
direct costs incurred, lease payments made at or before the commencement date less any lease
incentives received and estimate of costs to be incurred by the lessee in dismantling or removing the
underlying asset.
Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease
term, the recognized ROU assets are depreciated on a straight-line basis over the shorter of its estimated
useful life and the lease term, as follows:
Land 25 years
Building 2 to 5 years
Transportation equipment 4 years
ROU assets are subject to impairment. Refer to the accounting policies in section impairment of
nonfinancial assets.
Lease liabilities
At the commencement date of the lease, the Group recognizes lease liabilities measured at the present
value of lease payments to be made over the remaining lease term. The lease payments include fixed
payments (including in-substance fixed payments, as applicable) less any lease incentives receivable
and amounts expected to be paid under residual value guarantees. The lease payments also include the
exercise price of a purchase option reasonably certain to be exercised by the Group and payments of
penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate.
In calculating the present value of lease payments, the Group uses the IBR at the lease commencement
date if the interest rate implicit in the lease is not readily determinable. After the commencement date,
the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made.
In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in
the lease term, a change in the in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased
property or, if lower, at the present value of the minimum lease payments. Lease payments are
apportioned between the finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are charged directly against
profit or loss.
*SGVFSM004069*
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Capitalized leased assets are depreciated over the useful life of the asset. However, if there is no
reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the asset and the lease term.
Leases, where the lessor retains substantially all the risks and benefits of ownership of the asset, are
classified as operating leases. Operating lease payments are recognized as expense in profit or loss on
a straight-line basis over the lease term.
Group as a Lessor. Leases, where the Group retains substantially all the risks and benefits of ownership
of the asset, are classified as operating leases. Initial direct costs incurred in negotiating an operating
lease are added to the carrying amount of the leased asset and recognized over the lease term on the
same basis as rental income.
Taxes
Current Tax. Current tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authority. The tax rates and tax laws used
to compute the amount are those that are enacted or substantially enacted at the financial reporting date.
Deferred Tax. Deferred tax is provided using the liability method on temporary differences at the
financial reporting date between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary
differences, except:
§ when the deferred tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither the accounting income nor taxable income or loss;
§ in respect of taxable temporary differences associated with investments in subsidiaries and
associates and interests in joint ventures, when the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse in
the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences and carryforward benefit of
net operating loss carryover (NOLCO), and to the extent that it is probable that taxable income will be
available against which the deductible temporary differences and carryforward benefits of NOLCO can
be utilized, except:
§ when the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting income nor taxable income or loss;
§ in respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred tax assets are recognized only to the extent that
it is probable that the temporary differences will reverse in the foreseeable future and taxable
income will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each financial reporting date and reduced to
the extent that it is no longer probable that sufficient future taxable profit will be available to allow all
or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each
financial reporting date and are recognized to the extent that it has become probable that future taxable
income will allow the deferred tax assets to be recovered.
*SGVFSM004069*
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Deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply
in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have
been enacted or substantially enacted at the financial reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.
Deferred tax items are recognized in correlation to the underlying transactions either in OCI or directly
in equity. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists
to offset current tax assets against current tax liabilities and the deferred taxes relate to the same taxable
entity and the same taxation authority.
VAT. Revenue, expenses and assets are recognized net of the amount of VAT, except:
§ when the VAT incurred on a purchase of assets or services is not recoverable from the taxation
authority, in which case the VAT is recognized as part of the cost of acquisition of the asset or as
part of the expense item as applicable; or
§ receivables and payables that are stated with the amount of VAT included.
The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of
the “Prepaid expenses and other current assets” or “Accounts payable and other current liabilities”
accounts in the consolidated statement of financial position.
Operating Segment
For management purposes, the Group is organized into business units based on the geographical
location of the students and assets. Financial information about operating segments is presented in
Note 3 to the consolidated financial statements.
Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. These are disclosed
in the notes to the consolidated financial statements unless the possibility of an outflow of resources
embodying economic benefits is remote. A contingent asset is not recognized in the consolidated
financial statements but disclosed in the notes to the consolidated financial statements when an inflow
of economic benefits is probable.
3. Segment Information
For management purposes, the Group is organized into business units based on the geographical
location of the students and assets, and has five reportable segments as follows:
a. Metro Manila
b. Northern Luzon
c. Southern Luzon
d. Visayas
e. Mindanao
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Management monitors operating results of its business segments separately for the purpose of making
decisions about resource allocation and performance assessment. Segment performance is evaluated
based on operating profit or loss and is measured consistently with profit and loss in the consolidated
financial statements.
On a consolidated basis, the Group’s performance is evaluated based on net income (loss) for the year
and EBITDA, defined as earnings (loss) before interest expense, interest income, provision for income
tax, depreciation and amortization, equity in net losses (earnings) of associates and joint ventures,
provision for impairment of noncurrent asset held for sale and nonrecurring gains (losses) such as gain
on disposal of net assets. Depreciation and interest expenses for purposes of this computation exclude
those related to ROU assets and lease liabilities, respectively.
The following table shows the reconciliation of the consolidated net income (loss) to consolidated
EBITDA:
Inter-Segment Transactions
Segment revenue, segment expenses and operating results include transfers among geographical
segments. The transfers are accounted for at market prices charged to unrelated customers for similar
services. Such transfers are eliminated upon consolidation.
*SGVFSM004069*
36
2020
Metro Manila Northern Luzon Southern Luzon Visayas Mindanao Consolidated
Revenues
External revenue = 1,188,867,653
P = 151,701,650
P = 638,446,135
P = 35,210,208
P = 52,799,970
P = 2,067,025,616
P
Results
Income (loss) before other income (expenses) and income tax 52,135,410 (18,570,719) 210,486,682 (2,817,125) (22,474,519) 218,759,729
Equity in net earnings of associates and joint ventures 5,307,508 – – – – 5,307,508
Interest expense (254,778,535) (5,866,114) (7,671,854) (1,650,711) (3,626,073) (273,593,287)
Interest income 3,683,040 52,763 642,305 16,776 11,848 4,406,732
Other income (expenses) (a) (174,186,545) 467,589 1,551,032 (913,959) 112,973 (172,968,910)
Provision for income tax (13,327,985) – – – – (13,327,985)
Net Income (Loss) (P
= 381,167,107) (P
= 23,916,481) = 205,008,165
P (P
= 5,365,019) (P
= 25,975,771) (P
= 231,416,213))
EBITDA = 748,788,166
P
*SGVFSM004069*
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2019
Metro Manila Northern Luzon Southern Luzon Visayas Mindanao Consolidated
Revenues
External revenue =1,333,203,275
P =114,476,219
P =629,889,898
P =39,566,194
P =74,108,083
P =2,191,243,669
P
Results
Income (loss) before other income (expenses) and income tax 149,390,959 (2,696,212) 211,826,170 183,215 (14,013,932) 344,690,200
Equity in net earnings of associates and joint ventures 4,716,716 – – – – 4,716,716
Interest expense (189,520,280) – (121) – – (189,520,401)
Interest income 15,518,125 51,912 539,087 15,024 23,492 16,147,640
Other income (expenses) (a) 114,488,957 128,000 1,192,602 369,548 (192,824) 115,986,283
Provision for income tax (37,426,647) – – – – (37,426,647)
Net Income (Loss) =57,167,830
P (P
=2,516,300) =213,557,738
P =567,787
P (P
=14,183,264) =254,593,791
P
EBITDA =806,111,804
P
*SGVFSM004069*
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2018
Metro Manila Northern Luzon Southern Luzon Visayas Mindanao Consolidated
Revenues
External revenue =1,644,220,234
P =137,130,546
P =682,081,346
P =44,627,481
P =87,958,673
P =2,596,018,280
P
Results
Income (loss) before other income (expenses) and income tax 526,114,822 17,897,080 257,182,223 2,990,272 (4,910,736) 799,273,661
Equity in net loss of associates and joint ventures (218,245,327) – – – – (218,245,327)
Interest expense (210,496,885) – (9,164) – – (210,506,049)
Interest income 26,906,076 71,317 167,874 28,518 27,349 27,201,134
Other income 101,534,100 60,000 1,243,528 61,060 122,504 103,021,192
Provision for income tax (67,676,384) – – – – (67,676,384)
Net Income (Loss) =158,136,402
P =18,028,397
P =258,584,461
P =3,079,850
P (P
=4,760,883) =433,068,227
P
EBITDA =1,219,382,693
P
*SGVFSM004069*
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The preparation of the consolidated financial statements in conformity with PFRS requires management
to make judgments, estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. The estimates used are based upon management’s
evaluation of relevant facts and circumstances as at the date of the consolidated financial statements,
giving due consideration to materiality. Actual results could differ from such estimates.
The Group believes the following represents a summary of these significant judgments, estimates and
assumptions and related impact and associated risks in its consolidated financial statements.
Judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on the
amounts recognized in the Group’s consolidated financial statements.
In response to the novel Coronavirus Disease 2019 (COVID-19), which has caused global economic
disruption, STI ESG has implemented programs to minimize the risks related to COVID-19 and
continue its operations.
Management has considered the potential impact of COVID-19 pandemic on the Group’s significant
accounting judgements and estimates and there are no changes to the significant judgements and
estimates in the March 31, 2020 consolidated financial statements from those applied in previous
financial year, other than for those disclosed under this section.
Determination of Control Arising from a Management Contract. The Parent Company has
management contract with STI Caloocan. Management has concluded that the Parent Company, in
substance, has the power to direct its relevant activities and has the means to obtain the majority of the
benefits of STI Caloocan, a non-stock corporation, through the management contract. Management
has assessed that it has control of STI Caloocan and accordingly, classifies the entity as subsidiary
effective from the date control was obtained.
Contractual cash flows assessment. For each financial asset, the Group assesses the contractual terms
to identify whether the instrument is consistent with SPPI.
“Principal” for the purpose of this test is defined as the fair value of the financial asset at initial
recognition and may change over the life of the financial asset if there are payments of principal or
amortization of the premium/discount. “Interest” is defined as the compensation for the time value of
money and credit risk although it can also include compensation for other lending risks such as liquidity,
administrative costs and profit margin.
The most significant elements of interest within a lending arrangement are typically the consideration
for the time value of money and credit risk. To make the SPPI assessment, the Group applies judgment
and considers relevant factors such as the currency in which the financial asset is denominated and the
period for which the interest rate is set.
In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility in
the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to
contractual cash flows that are SPPI on the amount outstanding. In such cases, the financial asset is
required to be measured at FVTPL.
*SGVFSM004069*
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Evaluation of business model in managing financial instruments. The Group determines its business
model at the level that best reflects how it manages financial assets to achieve its business objective.
The Group’s business model is not assessed on an instrument-by-instrument basis but at a higher level
of aggregated portfolios.
In determining the classification of a financial instrument under PFRS 9, the Group evaluates in which
business model a financial instrument or a portfolio of financial instruments belong to taking into
consideration the objectives of each business model established by the Group, various risks and the
expected frequency, value, timing, as well as the manner of compensation for them.
The business model assessment is based on reasonably expected scenarios without taking “worst case”
or “stress case” scenarios into account. If cash flows after initial recognition are realized in a way that
is different from the Group's original expectations, the Group does not change the classification of the
remaining financial assets held in that business model but incorporates such information when assessing
newly originated or newly purchased financial assets going forward.
Recognition of revenue from tuition and other school fees, educational services and royalty fees over
time. The Group concluded that tuition and other school fees, educational services, and royalty fees
are to be recognized over time using the output method on the basis of time lapsed over the service
period as it provides a representation of the Group’s performance in transferring control of the services
to the students and franchisees, respectively. The fact that another entity would not need to re-perform
the service that the Group has provided to date demonstrates that the students and franchisees
simultaneously receive and consume the benefits of the Group’s performance as it performs.
Recognition of revenue from the sale of educational materials and supplies at the point in time.
Revenue from the sale of educational materials and supplies is recognized at the point in time when the
control of the asset is transferred to the customer, generally upon receipt of the goods by franchisees
and students. It is also the point in which the customer has a present right to payment for the asset and
the Group has transferred physical possession of the asset.
Significant Influence on an Associate. The Parent Company has an equity interest of 5.05% in STI
Holdings (see Note 12). Management has assessed that it has significant influence by virtue of its
pooling agreement with other stockholders of STI Holdings owning 31.12% of the voting stock of STI
Holdings resulting in a total voting power of 36.19%. Under this agreement, the Parent Company and
the stockholder will pool their shares in STI Holdings and vote as a block in all matters that would
require a vote of the shareholders and the BOD. Accordingly, the Parent Company has the power to
participate in the financial and operating policy decisions of STI Holdings and accounts for the said
investment as an associate.
Investments in Joint Ventures. The Group has interests in PHEI and STI-PHNS, both joint ventures.
The Parent Company owns 40% and 50% of PHEI and STI-PHNS, respectively. The considerations
made in determining significant influence or joint control are similar to those necessary to determine
control over subsidiaries.
Noncurrent Asset Held for Sale. On June 27, 2017, STI ESG’s BOD approved the disposition of STI
ESG’s shares in Maestro Holdings to enable STI ESG to focus on its core business of offering
educational services. Management considered the investment in the shares of Maestro Holdings to meet
the criteria to be classified as held for sale for the following reasons:
§ The BOD approved the disposition of the shares in Maestro Holdings
§ The investment in the shares of Maestro Holdings is available for immediate sale in its present
condition
*SGVFSM004069*
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§ The shares will be sold at a price approximating its current fair value
§ Actions to locate a buyer and complete the sale have been initiated
§ Management expects to complete the sale within one year from the date of classification
As a result of the classification as noncurrent asset held for sale, STI ESG ceased the use of the equity
method of accounting for the investment in Maestro Holdings. The carrying value as at June 30, 2017,
which is the date of reclassification of the noncurrent asset held for sale, amounted P =716.6 million
(see Notes 9 and 12).
Events or circumstances may extend the period to complete the sale beyond one year. An extension of
the period required to complete a sale does not preclude an asset from being classified as held for sale
if there is sufficient evidence that the Group remains committed to its plan to sell the asset.
On September 24, 2020, STI ESG’s BOD approved the sale of its 20% stake in Maestro Holdings to a
third-party investor for a consideration higher than its present carrying value, subject to completion of
certain closing conditions.
Contingencies. The Group is currently a party in a number of cases involving claims and disputes
related to the collection of receivables and labor cases. The Group’s estimate of the probable costs for
the resolution of these claims has been developed in consultation with outside legal counsels handling
defense in these matters and is based upon an analysis of potential results. Management and its legal
counsels believe that the Group has substantial legal and factual bases for its position and are of the
opinion that losses arising from these legal actions, if any, will not have a material adverse impact on
the consolidated financial statements. It is possible, however, that future results of operations could be
materially affected by changes in the estimates or in the effectiveness of strategies relating to these
proceedings (see Note 33).
Classification of Leases - the Group as Lessee (Prior to adoption of PFRS 16). The Group acquired
various transportation equipment under various lease arrangements. The Group has evaluated the
arrangements and the terms and determined that the agreements qualify as finance lease since all the
significant risks and rewards of ownership of the leased assets are transferred to the Group.
The Group has entered into several lease agreements for land and building spaces, where the corporate
office and schools are located, where it has determined that the risks and rewards related to the
properties are retained with the lessor (e.g., no bargain purchase option and transfer of ownership at the
end of the lease term). The lease is, therefore, accounted for as an operating lease (see Note 28).
Measurement of expected credit losses. ECLs are derived from unbiased and probability-weighted
estimates of expected loss, and are measured as follows:
§ Financial assets that are not credit-impaired at the reporting date: as the present value of all cash
shortfalls over the expected life of the financial asset discounted by the effective interest rate. The
cash shortfall is the difference between the cash flows due to the Group in accordance with the
contract and the cash flows that the Group expects to receive.
*SGVFSM004069*
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§ Financial assets that are credit-impaired at the reporting date: as the difference between the gross
carrying amount and the present value of estimated future cash flows discounted by the credit-
adjusted effective interest rate.
The ECL is measured on either a 12-month or lifetime basis depending on whether a significant increase
in credit risk has occurred since initial recognition or whether an asset is considered to be credit-
impaired. ECLs are the discounted product of the Probability of Default (PD), Loss Given Default
(LGD), and Exposure at Default (EAD), defined as follows:
§ Probability of default
The PD represents the likelihood of a borrower defaulting on its financial obligation, either over
the next 12 months, or over the remaining life of the obligation. PD estimates are estimates at a
certain date, which are calculated based on statistical rating models based on internally compiled
data comprising both quantitative and qualitative factors. Where it is available, market data may
also be used to derive the PD.
§ Exposure at default
EAD is based on the amounts the Group expects to be owed at the time of default, over the next
12 months or over the remaining lifetime.
Simplified approach for receivables from students. The Group applies the simplified approach in
calculating ECLs of receivables from students. The Group develops loss rates based on days past due
for each grouping of receivables per school term. The methodology is initially based on the Group’s
historically observed default rates. The Group will then adjust the historical credit loss experience using
forward-looking information. At every reporting date, the historical default rates are updated and
changes in the forward-looking estimates are analyzed.
The assessment of the correlation between historical default rates, forecast economic conditions and
ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of
forecast economic conditions. The Group’s historical credit loss experience and forecast of economic
conditions may also not be representative of the customer’s actual default in the future.
The Group’s impairment calculations are outputs of statistical models with a number of underlying
assumptions regarding the choice of variable inputs and their interdependencies. Elements of the
impairment models that are considered accounting judgments and estimates include:
§ The Group’s criteria for defining default and for assessing if there has been a significant increase
in credit risk;
§ The segmentation of financial assets when impairment is assessed on a collective basis;
§ The choice of inputs and the various formulas used in the impairment calculation
§ Determination of relationships between macroeconomic scenarios and, economic inputs, such as
unemployment levels and collateral values, and the effect on PDs, EADs and LGDs; and
§ Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive
the economic inputs into the impairment models.
It is the Group’s policy to regularly review its models in the context of actual loss experience and adjust
when necessary. The Group has considered the impact of COVID-19 pandemic on the ECLs of its
financial instruments, mainly receivables from students. The amount and timing of the ECLs, as well
*SGVFSM004069*
- 43 -
as the probability assigned thereto, have been based on the available information at the end of the first
three months subsequent to report date. As a result of this review, the probability of default of
receivables from students that are due subsequent to report date was adjusted accordingly. Additional
scenario analysis was incorporated which considered differing severity and duration assumptions
relating to the global pandemic. This included probability-weighted shocks to annual gross domestic
product (GDP) and consequential impacts on unemployment and other economic variables.
This adjustment has no significant impact on the ECL computation. As uncertainties in market trend
and economic conditions may remain persistent amidst the continuous spread of COVID-19, actual
results in the future periods may differ from the estimates.
The Group has identified and documented key drivers of credit risk and credit losses of each portfolio
of financial instruments and, using an analysis of historical data, has estimated relationships between
macro-economic variables and credit risk and credit losses.
The macro-economic variables include the following key indicators for the Philippines: unemployment
rates, inflation rates and GDP growth rate. The inputs and models used for calculating ECL may not
always capture all characteristics of the market at the date of the consolidated financial statements. To
reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments when
such differences are significantly material.
The Group has not identified any uncertain event that it has assessed to be relevant to the risk of a
default occurring but where it is not able to estimate the impact on ECL due to lack of reasonable and
supportable information.
The Group reviews its receivables and advances to associates and joint ventures and other related parties
at each reporting date to assess whether an allowance for impairment loss should be recorded in the
consolidated statement of financial position. In particular, judgment by management is required in the
estimation of the amount and timing of future cash flows when determining the level of allowance
required. Such estimates are based on assumptions about a number of factors and actual results may
differ, resulting in future changes to the allowance.
In addition to specific allowance against individually significant receivables and advances, the Group
also makes a collective impairment allowance against exposures which, although not specifically
identified as requiring a specific allowance, have a greater risk of default than when originally granted.
This collective allowance is based on any deterioration in the internal rating of the receivables and
advances since it was granted or acquired.
The Group recognized provision for ECL/doubtful accounts amounting to P=52.1 million, P
=61.6 million
and P
=76.9 million in 2020, 2019 and 2018, respectively. Allowance for ECL on receivables amounted
to =
P143.1 million and =P163.2 million as at March 31, 2020 and 2019, respectively. The carrying
amounts of receivables as at March 31, 2020 and 2019 are disclosed in Note 6 to the consolidated
financial statements.
*SGVFSM004069*
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Valuation of Noncurrent Assets Held for Sale. PFRS 5 requires noncurrent assets held for sale to be
carried at the lower of fair value less costs to sell and its carrying amount. Management uses the adjusted
consolidated net assets value of PhilPlans and discounted cash flows from the financial budget covering
five years approved by the management of Philippine Life Financial Assurance Corporation (PhilLife)
and PhilhealthCare, Inc. (PhilCare) in estimating the fair value of Maestro Holdings. Philplans consists
primarily of investments in listed equity instruments, government bonds, other fixed-income securities
(accounts valued at Level 1 and Level 2) and pre-need reserves. Management used a discount rate for
the discounted cash flows of PhilLife and PhilCare equal to the prevailing rates of return for a group
having substantially the same risks and characteristics. Key assumptions used by management are
growth rates, long-term growth rate, discount rates, discount on lack of control (DLOC), discount on
lack of marketability (DLOM) and estimated costs to sell (under Level 3).
The Group recognized a provision for impairment of the noncurrent asset held for sale amounting to
=297.5 million for the year ended March 31, 2020. No impairment was recognized in 2019 and 2018.
P
As at March 31, 2020 and 2019, the carrying value of the noncurrent asset held for sale amounted to
=419.1 million and =
P P716.6 million, respectively (see Note 9).
Estimating Useful Lives of Nonfinancial Assets. Management determines the estimated useful lives and
the related depreciation and amortization charges for its property and equipment, investment properties,
excluding land, and intangible assets based on the period over which the property and equipment,
investment properties and intangible assets are expected to provide economic benefits. Management’s
estimation of the useful lives of property and equipment, investment properties and intangible assets is
based on a collective assessment of industry practice, internal technical evaluation and experience with
similar assets while for intangible assets with a finite life, estimated useful life is based on the economic
useful benefit of the intangible assets. These estimations are reviewed periodically and could change
significantly due to physical wear and tear, technical or commercial obsolescence and legal or other
limits on the use of the assets. A reduction in the estimated useful lives of property and equipment,
investment properties and intangible assets would increase recorded expenses and decrease noncurrent
assets.
There was no change in the estimated useful lives of the Group’s property and equipment, investment
properties and intangible assets in 2020 and 2019. The carrying values of nonfinancial assets subject to
depreciation and amortization are as follows:
2020 2019
Property and equipment (see Note 10) P
=5,528,952,723 =4,849,841,742
P
Investment properties (see Note 11) 469,233,652 497,710,588
Intangible assets (see Note 15) 31,774,511 3,332,089
Impairment of Nonfinancial Assets. PFRS requires nonfinancial assets to be tested for impairment
when certain impairment indicators are present, irrespective of whether there are any indications of
impairment. Nonfinancial assets include property and equipment, investment properties, investment in
and advances to associates and joint ventures and intangible assets and other noncurrent assets.
Management is required to make estimates and assumptions to determine the future cash flows to be
generated from the continued use and ultimate disposition of these assets in order to determine the value
of these assets. While STI ESG believes that the assumptions used are reasonable and appropriate,
these estimates and assumptions can materially affect the consolidated financial statements. Future
adverse events may cause management to conclude that the affected assets are impaired and may have
a material impact on the financial condition and results of operations of the Group.
*SGVFSM004069*
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The carrying value of property and equipment, investment properties, investment in and advances to
subsidiaries, associates and joint ventures and intangible assets and other noncurrent assets are
disclosed in Notes 10, 11, 12 and 15, respectively. No provision for impairment on nonfinancial assets
was recognized in the Group’s consolidated financial statements in 2020, 2019 and 2018.
Goodwill. Acquisition method requires extensive use of accounting estimates and judgments to allocate
the purchase price to the fair market values of the acquiree’s identifiable assets, liabilities and
contingent liabilities at the acquisition date. It also requires the acquirer to recognize any goodwill as
the excess of the acquisition cost over the fair value of the acquiree’s identifiable assets, liabilities and
contingent liabilities. The Group’s business acquisitions have resulted in goodwill which is subject to
an annual impairment testing. This requires an estimation of the value in use of the CGUs to which the
goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the
expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate
the present value of those cash flows.
The Group also reviewed its business and operations to take into consideration the estimated impacts
and effects of the COVID-19 pandemic on its operations. Using the updated information and various
scenarios of future financial performance and cash flows, an assessment of the recoverability of certain
assets as at March 31, 2020 was conducted.
The recoverable amounts of CGUs have been determined based on the value in use calculations using
cash flow projections covering a five-year period based on long-range plans approved by management.
The significant assumptions used in the value in use calculations are forecasted revenue growth,
EBITDA margins, long-term growth rate and discount rate.
Management used an appropriate discount rate for cash flows equal to the prevailing rates of return for
a group having substantially the same risks and characteristics. Management used the weighted average
cost of capital wherein the source of the costs of equity and debt financing are weighted. The weighted
average cost of capital is the overall required return on the CGUs. A pre-tax discount rate of 10.44% to
11.06% was used as at March 31, 2020. The growth rate used in extrapolating the cash flows beyond
the period covered by the CGU’s recent budgets was 5.00%.
Impairment testing as at March 31, 2020 and 2019 showed that the CGUs recoverable amounts were
greater than their carrying amounts except for the Goodwill related to STI Tuguegarao and STI
Pagadian as at March 31, 2019. The Group recognized provision for impairment of Goodwill amounting
to nil and P
=17.0 million for the years ended March 31, 2020 and 2019, respectively, related to these
schools since their recoverable amounts were lower compared to their carrying amounts. Goodwill
amounted to = P229.8 million and = P208.5 million as at March 31, 2020 and 2019, respectively
(see Note 15).
Realizability of Deferred Tax Assets. Deferred tax assets are recognized for unused tax losses to the
extent that it is probable that taxable profit will be available against which the losses can be utilized.
Significant management judgment is required to determine the amount of deferred tax assets that can
be recognized, based upon the likely timing and the level of future taxable profits together with future
tax planning strategies.
Deferred tax assets recognized as at March 31, 2020 and 2019 are disclosed in Note 29 of the
consolidated financial statements.
Measurement of Lease Liability. The Group’s lease liabilities are measured based on the present value
of lease payments over the lease term using the Group’s IBR.
*SGVFSM004069*
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The Group determined that renewal periods of leases with longer periods are not included as part
of the lease term as these are not reasonably certain to be exercised.
The Group’s lease liabilities as at March 31, 2020 are disclosed in Note 28 of the consolidated financial
statements.
Pension Cost. The determination of the obligation and cost for pension benefits is dependent on the
selection of certain assumptions provided by the Group to its actuaries in calculating such amounts.
Those assumptions were described in Note 27 and included among others, discount rate and future
salary increases. In accordance with Revised PAS 19, Employee Benefits, actual results that differ from
the Group’s assumptions are included in OCI and are not reclassified to profit or loss in subsequent
periods. While it is believed that the assumptions are reasonable and appropriate, significant
differences in actual experience or significant changes in assumptions may materially affect the
Group’s pension and other pension obligations.
The carrying values of pension assets and pension liabilities as at March 31, 2020 and 2019 are
disclosed in Note 27 of the consolidated financial statements.
2020 2019
Cash on hand and in banks P
=539,757,896 =321,478,088
P
Cash equivalents 77,924,142 79,759,973
P
=617,682,038 =401,238,061
P
Cash in banks earn interest at their respective deposit rates. Cash equivalents are short-term investments
which are made for varying periods of up to three months, depending on the immediate cash
requirements of the Group, and earn interest at their respective short-term investment rates.
*SGVFSM004069*
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6. Receivables
2020 2019
Tuition and other school fees P
=538,989,342 =460,896,259
P
Educational services 89,252,317 54,755,086
Rent, utilities and other related receivables 33,592,947 31,226,307
Advances to officers and employees (see Note 30) 24,131,003 17,540,523
Dividend receivable – 804,637
Others 93,815,294 18,822,102
779,780,903 584,044,914
Less allowance for expected credit losses 143,124,759 163,201,256
P
=636,656,144 =420,843,658
P
a. Tuition and other school fees include receivables from students and DepEd and CHED. These
receivables are noninterest-bearing and are normally collected on or before the date of major
examinations while receivables from DepEd and CHED are expected to be collected within the
next fiscal year.
b. Educational services receivables pertain to receivables from franchisees arising from
educational services, royalty fees and other charges. These receivables are generally
noninterest-bearing and are normally collected within 30 days. Interest is charged on past due
accounts.
c. Rent, utilities and other related receivables are normally collected within the next financial
year.
d. Advances to officers and employees are normally liquidated within one month.
e. Other receivables account includes P75.5 million receivable from STI College Tanay, Inc.
(STI Tanay). On November 4, 2019, STI ESG and the Development Bank of the Philippines
(DBP) entered into a Deed of Assignment wherein DBP assigned, transferred and conveyed,
without recourse, all its collectibles from STI Tanay to STI ESG for a consideration of
=75.5 million. DBP likewise granted to STI ESG all the rights, title and interest in and to the
P
loan, the Promissory Notes and the underlying collaterals and security covering the loan and
Promissory Notes, as well as full power and authority to demand, collect and receive payment
on the said loan and Promissory Notes.
This account also includes receivables from a former franchisee, vendors and SSS amounting
to =
P1.6 million, =
P6.1 million and = P5.0 million, respectively, as at March 31, 2020 and
amounting to =
P1.6 million, P
=5.4 million and =
P3.0 million, respectively, as at March 31, 2019.
These receivables are expected to be collected within the next reporting period.
*SGVFSM004069*
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The movements in the allowance for expected credit losses are as follows:
2020
Tuition and
Other School
Fees Others Total
Balance at beginning of year P
=160,325,293 P
=2,875,963 P
=163,201,256
Provisions (see Note 25) 51,840,526 282,509 52,123,035
Disposal of net assets
(see Note 9) (487,033) – (487,033)
Write-offs (71,429,990) (282,509) (71,712,499)
Balance at end of year P
=140,248,796 P
=2,875,963 P
=143,124,759
2019
Tuition and
Other School
Fees Others Total
Balance at beginning of year =180,254,832
P =2,760,450
P =183,015,282
P
Provisions (see Note 25) 61,448,754 115,513 61,564,267
Write-offs (81,378,293) − (81,378,293)
Balance at end of year =160,325,293
P =2,875,963
P =163,201,256
P
7. Inventories
2020 2019
At net realizable value:
Uniforms P
=106,167,639 =124,414,895
P
Textbooks and other education-related materials 10,437,489 11,171,578
Educational materials 116,605,128 135,586,473
Proware materials 10,197,432 8,817,729
Marketing materials 2,934,500 5,712,848
Promotional materials 13,131,932 14,530,577
School materials and supplies 2,659,742 1,641,734
P
=132,396,802 =151,758,784
P
Inventories charged to cost of educational materials and supplies sold amounted to P=105.0 million,
=113.9 million and =
P P119.3 million in 2020, 2019 and 2018, respectively (see Note 24).
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2020 2019
Input VAT - net P
=22,930,169 =43,646,166
P
Prepaid taxes 20,841,589 15,127,665
Excess contributions to CEAP 3,069,046 3,102,625
Prepaid subscriptions and licenses 2,932,644 1,549,762
Software maintenance cost 2,182,105 2,273,472
Prepaid rent 1,296,212 5,782,887
Prepaid insurance 299,777 462,781
Others 1,633,198 1,967,740
P
=55,184,740 =73,913,098
P
Input VAT represents the remaining balance after application against any output VAT and is
recoverable in future periods. Input VAT are primarily from the purchase of goods and services.
Prepaid taxes are substantially attributed to creditable taxes withheld by lessees and represent excess
creditable withholding taxes over tax due which will be applied against income tax due of the following
period.
Excess contributions to CEAP pertain to contributions made by De Los Santos-STI College and STI
QA to CEAP which are already considered forfeited pension benefits of those employees who can no
longer avail their pension benefits either because they did not meet the required tenure of ten years or
they did not reach the retirement age of sixty when they left the service or when De Los Santos-STI
College or STI QA has already advanced the benefits of qualified employees. The excess contributions
will be offset against De Los Santos-STI College’s and STI QA’s future required contributions to
CEAP.
Software maintenance cost includes annual support and maintenance charges for the use of accounting
and enrollment systems which are amortized in accordance with the terms of the agreements.
Prepaid rent substantially represents advance rent paid for the lease of land and building spaces which
are applied to the monthly rental in accordance with the terms of the lease agreements.
Prepaid insurance substantially represents fire insurance coverage. Fire insurance covers insurance on
building, including equipment and furniture. Fire insurance coverages were paid in advance and will
be recognized as expense over the period of the coverage, which is normally within the next reporting
period.
Maestro Holdings
Noncurrent asset held for sale amounting to =
P419.1 million and =
P716.6 million as at March 31, 2020
and 2019, respectively, represents the carrying value of STI ESG’s 20% ownership in Maestro
Holdings. Maestro Holdings owns 100% of PhilPlans, 99.89% of PhilCare, 90.77% of PhilLife and
100% of Banclife Insurance Co. Inc. (Banclife).
*SGVFSM004069*
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On June 27, 2017, STI ESG’s BOD approved the disposal of this 20% stake in Maestro Holdings to
enable the Group to focus on its core business of offering educational services. Since then, management
had discussions with potential buyers but no final agreements were reached. On September 24, 2020,
STI ESG’s BOD has approved the sale to a third-party investor for a consideration higher than its
present carrying value, subject to completion of certain closing conditions.
With the classification as noncurrent asset held for sale, STI ESG ceased the use of the equity method
of accounting for its investment in Maestro Holdings on June 30, 2017 and was carried at the lower of
its carrying amount and fair value less cost to sell.
For the year ended March 31, 2020, STI ESG recognized a provision for impairment of P =297.5 million
as a result of the decline in the fair value of Maestro Holdings. The decline in fair value as at
March 31, 2020 is an impact of the COVID-19 pandemic and the ensuing economic and market
disruptions across markets and industries. The fair value was estimated using adjusted consolidated net
assets value which consists significantly of investments in listed equity instruments, government bonds,
other fixed income securities (accounts valued at Level 1 and Level 2) and pre-need reserves for
PhilPlans and discounted cash flows from the financial budget covering five years approved by the
management of PhilLife and PhilCare.
Key assumptions used for the discounted cash flows of PhilLife and PhilCare (under Level 3) are
growth rates for: net premiums (7.00% y-o-y growth), claims (30.00% of net premiums), enrollees’ fee
(9.31% to 9.66%) and enrollees’ claims (70.00% of enrollees’ fees); long-term growth rate (5.70%);
and discount rates (13.80% to 15.10%). Other key assumptions used in determining the fair value less
costs to sell include DLOC and DLOM (15.00% to 20.00%) and estimated costs to sell (5.00%)
(see Note 4).
Management believes that a reasonably possible change in the assumptions used in the estimation
would not materially affect the fair value of noncurrent asset held for sale.
No provision for impairment was recognized for the years ended March 31, 2019 and 2018.
*SGVFSM004069*
51
There were no idle property and equipment as at March 31, 2020 and 2019.
*SGVFSM004069*
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Additions
Property and Equipment under Construction. As at March 31, 2020, the construction-in-progress
account pertains substantially to the construction of STI Academic Center Legazpi. The related contract
costs amounted to =P379.1 million, inclusive of materials, cost of labor and overhead and all other costs
necessary for the completion of the projects. Located at Rizal St., Cabangon East in Legazpi City, the
four-storey school building was built on a 4,149-square-meter property with an estimated capacity of
2,500 senior high school and college students. The new STI Academic Center Legazpi was completed
in September 2020, in time for the start of classes for SY 2020-2021.
As at March 31, 2019, the construction-in-progress account includes costs related to the construction
of school buildings which will be the new sites of STI Sta. Mesa, STI Pasay-EDSA and STI San Jose
del Monte. The related contract costs amounted to =
P2,128.6 million, inclusive of materials, cost of labor
and overhead and all other costs necessary for the completion of the projects. The construction works
for STI San Jose del Monte was completed in March 2019. Similarly, the construction works for STI
Sta. Mesa and STI Pasay-EDSA were completed in September 2019. For SY 2019-2020, these schools
held classes beginning June 2019 and July 2019 for SHS and tertiary students, respectively.
Capitalized Borrowing Costs. Total borrowing costs capitalized as part of property and equipment
amounted to = P5.4 million and =P35.5 million in 2020 and 2019, respectively. The average interest
capitalization rate was 5.97% and 5.96% in 2020 and 2019, respectively, which was the effective rate
of the borrowings.
2020
Condominium
Units and
Land Buildings Total
Cost:
Balance at beginning and end of year P
=23,986,424 P
=636,233,550 P
=660,219,974
Accumulated depreciation:
Balance at beginning of year – 138,522,962 138,522,962
Depreciation (see Notes 23 and 25) – 28,476,936 28,476,936
Balance at end of year – 166,999,898 166,999,898
Net book value P
=23,986,424 P
=469,233,652 P
=493,220,076
2019
Condominium
Units and
Land Buildings Total
Cost:
Balance at beginning and end of year =23,986,424
P =636,233,550
P =660,219,974
P
Accumulated depreciation:
Balance at beginning of year – 109,994,962 109,994,962
Depreciation (see Notes 23 and 25) – 28,528,000 28,528,000
Balance at end of year – 138,522,962 138,522,962
Net book value =23,986,424
P =497,710,588
P =521,697,012
P
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Description of valuation techniques used and key inputs to valuation of investment properties
The fair values of investment properties were determined by an independent professionally qualified
appraiser accredited by the SEC. 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 land was derived using the market approach. The market approach is a comparative
approach to value which considers the sales of similar or substitute properties and related market data
and establishes a value estimate by process involving comparison. Listings and offerings may also be
considered. Sales prices of comparable land in close proximity (external factor) are adjusted for
differences in key attributes (internal factors) such as location and size.
Using the latest available valuation report as at March 31, 2020, the following shows the valuation
techniques used in measuring the fair value of the land, as well as the significant unobservable inputs
used:
Fair value P
=134,287,000
Valuation technique Market approach
Unobservable input Net price per square meter
Relationship of unobservable inputs The higher the price per square
to fair value meter, the higher the fair value
Fair value P
=1,462,838,000
Valuation technique Market approach
Unobservable input Net price per square meter
Relationship of unobservable inputs The higher the price per square meter,
to fair value the higher the fair value
The highest and best use of the condominium units and buildings is commercial utility.
Rental
Rental income earned from investment properties amounted to = P109.2 million, P
=101.5 million and
=93.2 million in 2020, 2019 and 2018, respectively (see Note 28). Direct operating expenses, including
P
real property taxes, insurance, janitorial, security services and repairs and maintenance, arising from
investment properties amounted to P =5.1 million, P =4.6 million and P=14.4 million in 2020, 2019 and
2018, respectively.
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There is no movement in the allowance for impairment of investments in and advances to associates
and joint ventures. The carrying values of the Group’s investments in and advances to associates and
joint ventures are as follows:
2020 2019
Associates:
STI Holdings P
=458,928,855 =464,431,383
P
STI Accent 37,868,986 37,868,986
STI Alabang 24,873,546 24,873,546
GROW 14,679,178 16,248,742
Joint venture - PHEI 5,145,208 3,056,104
541,495,773 546,478,761
Allowance for impairment loss 37,868,986 37,868,986
P
=503,626,787 =508,609,775
P
As at March 31, 2020 and 2019, the carrying amount of the investments in STI Marikina, Synergia,
STI Accent and PHNS amounted to nil. The Group received dividends from STI Marikina which was
recognized as income amounting to =
P1.0 million and =
P2.0 million in 2020 and 2019, respectively.
Information about associates and indirect associates and their major transactions are discussed below:
Maestro Holdings (an associate up to June 30, 2017 - see Note 9). Maestro Holdings is a holding
company that holds investments in PhilPlans, PhilCare, PhilLife and Banclife. PhilPlans is a leading
pre-need company, providing innovative pension, education and life plans. It owns 65% of Rosehills
Memorial Management, Inc. (RMMI), a company engaged in the operation and management of a
*SGVFSM004069*
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memorial park, memorial and interment services and sale of memorial products. PhilCare is a Health
Maintenance Organization (HMO) that provides effective and quality health services and operates
through its own clinics and through nationwide accredited clinics and hospitals. PhilLife provides
financial services, such as individual, family and group life insurance, investment plans and loan
privilege programs. Banclife is formerly engaged in the life insurance business in the Philippines. It
ceased operations in March 2013. The investment in Maestro Holdings is presented as Noncurrent asset
held for sale in the consolidated statements of financial position as at March 31, 2020 and 2019
(see Note 9).
STI Holdings. STI Holdings is a holding company whose primary purpose is to invest in, purchase or
otherwise acquire and own, hold, use, sell, assign, transfer, lease, mortgage, pledge, exchange, or
otherwise dispose of real properties as well as personal and movable property of any kind and
description, including shares of stock, bonds, debentures, notes, evidence of indebtedness and other
securities or obligations of any corporation or corporations, association or associations, domestic or
foreign and to possess and exercise in respect thereof all the rights, powers and privileges of ownership,
including all voting powers of any stock, so owned, but not to act as dealer in securities and to invest
in and manage any company or institution. STI Holdings aims to focus on education and education
related activities and investments.
*SGVFSM004069*
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In 2017, the Group disposed of a portion of its investment in STI Holdings, or 0.02% interest, resulting
in a gain of =
P0.2 million. Condensed financial information of STI Holdings is as follows:
March 31
2020 2019 2018
Current assets =2,177,644,765
P =2,258,792,211
P P3,378,708,853
=
Noncurrent assets 12,918,900,992 12,516,396,609 11,045,334,618
Current liabilities (1,496,288,740) (1,447,858,004) (1,190,253,558)
Noncurrent liabilities (5,347,584,743) (4,602,708,217) (4,422,644,311)
Total equity 8,252,672,274 8,724,622,599 8,811,145,602
Less:
Equity attributable to holders of noncontrolling
interests (81,683,099) (7,272,646) (100,648,270)
STI ESG's cumulative total comprehensive income
taken up by STI Holdings (3,625,976,543) (4,065,618,985) (3,888,525,411)
Total equity, net of cumulative total comprehensive
income taken up by STI Holdings 4,545,012,632 4,651,730,968 4,821,971,921
Proportion of the Group’s ownership 5.05% 5.05% 5.05%
Equity attributable to equity holders of the parent
company 229,523,138 235,025,666 243,626,978
Excess of acquisition cost over carrying value of net
assets 229,405,717 229,405,717 229,405,717
Carrying amount of the investment P458,928,855
= P464,431,383
= P473,032,695
=
Others. The carrying amount of the Group’s investments in STI Alabang, GROW and STI Marikina
represents the aggregate carrying values of individually immaterial associates.
*SGVFSM004069*
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March 31
2020 2019 2018
Current assets =177,665,351
P =168,750,426
P =151,461,875
P
Noncurrent assets 40,436,151 48,214,696 37,978,667
Current liabilities (106,685,234) (144,719,686) (132,038,222)
Noncurrent liabilities (15,340,787) (11,647,634) (10,022,871)
=96,075,481
P =60,597,802
P =47,379,449
P
STI Accent is engaged in providing medical and other related services. It ceased operations on
June 20, 2012 after the contract of usufruct between STI Accent and Dr. Fe Del Mundo Medical Center
Foundation Philippines, Inc. to operate the hospital and its related healthcare service businesses was
rescinded in May 2012. As at March 31, 2020 and 2019, allowance for impairment loss on the Parent
Company’s investment in STI Accent and related advances amounted to = P37.9 million.
Terms and conditions relating to advances to associates and joint ventures are disclosed in Note 30 to
the consolidated financial statements.
PHEI
On March 19, 2004, the Parent Company, together with the University of Makati (UMak) and another
shareholder, incorporated PHEI in the Philippines. The Parent Company and UMak each owns 40.00%
of the equity of PHEI with the balance owned by another shareholder. PHEI is envisioned as the College
of Nursing of UMak.
The following are certain key terms under the agreement signed in 2003 by the Parent Company and
UMak:
a. The Parent Company shall be primarily responsible for the design of the curriculum for the
Bachelor’s Degree in Nursing (BSN) and Master’s Degree in Nursing Informatics with such
curriculum duly approved by the University Council of UMak;
b. UMak will allow the use of its premises as a campus of BSN while the premises of Information
and Communications Technology Academy, Inc. (iACADEMY) will be the campus of the post
graduate degree.
c. Parent Company will recruit the nursing faculty while UMak will provide the faculty for basic
courses that are non-technical in nature.
STI-PHNS
On September 16, 2005, GROW and PHNS International Holdings, Inc., a company incorporated in
Dallas, Texas, USA, entered into a Joint Venture Agreement (JVA). Under the JVA, the parties have
agreed to incorporate a joint venture company in the Philippines and set certain terms with regard to
*SGVFSM004069*
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capitalization, organization, conduct of business and the extent of their participation in the management
of affairs of the joint venture company for the primary purpose of engaging, directly or indirectly, in
the business of medical transcription and other related business in the Philippines. As a result of the
JVA, the parties incorporated STI-PHNS where each has a 50.00% ownership of the outstanding capital
stock of STI-PHNS.
A Deed of Assignment between GROW and STI ESG was executed on May 5, 2006, to transfer all the
rights of GROW in the JVA to the latter.
STI-PHNS ceased operations in 2014. On April 7, 2016, the BOD of STI-PHNS ratified the resolution
approving the cessation of the business activities of STI-PHNS effective March 1, 2013 and approved
the resolution to shorten the corporate term of STI-PHNS until June 30, 2017. On the same date, the
BOD of Summit Technologies, Inc. (Summit) ratified the resolution approving the cessation of
operations and closure of the business of Summit effective February 28, 2013 and March 1, 2013,
respectively, and approved the resolution to shorten the corporate term of Summit until June 30, 2017.
Summit is an 89.51%- subsidiary of STI-PHNS. Summit is primarily engaged in encoding, transcribing,
translating or converting information, data, documents, files and records of whatever form into usable
electronic information or database for use with software programs or other information or database
application. The amendments to the STI-PHNS and Summit’s Articles of Incorporation for shortening
of the corporate term were approved by the SEC on July 12, 2016 and June 7, 2016, respectively.
The allowance for impairment loss on STI ESG’s investment in STI-PHNS amounted to P
=5.6 million
as at March 31, 2020 and 2019.
The Group’s share in the net earnings of its joint ventures amounted to =
P2.1 million for the year ended
March 31, 2020 and the share in net losses amounted to = P0.4 million and =
P2.2 million for the years
ended March 31, 2019 and 2018, respectively, which were are all individually immaterial.
14. Equity Instruments designated at Fair Value through Other Comprehensive Income (FVOCI)
2020 2019
Quoted equity shares P
=3,746,944 =3,975,280
P
Unquoted equity shares 63,852,363 45,802,363
P
=67,599,307 =49,777,643
P
STI ESG and De Los Santos-STI College, a subsidiary, own 57,971 shares and 115,073 shares of
De Los Santos Medical Center, Inc. (DLSMC), formerly De Los Santos General Hospital,
respectively.
*SGVFSM004069*
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On December 12, 2018, De Los Santos-STI College and Metro Pacific Hospital Holdings, Inc.
(MPHHI) entered into a deed of absolute sale wherein De Los Santos-STI College sold its
79,399 common shares of stock in DLSMC to MPHHI for a total consideration of P =39.7 million.
Similarly, on February 7, 2019, De Los Santos-STI College and MPHHI entered into another deed
of absolute sale wherein De Los Santos-STI College sold its remaining 35,674 common shares of
stock in DLSMC to MPHHI for a total consideration of P =17.8 million. At the date of sale, the fair
value of the shares is equal to the total consideration. These transactions resulted in realized fair
value gain on financial assets designated at FVOCI amounting to 37.1 million which was directly
recognized to retained earnings in 2019.
In January 2019, First Pacific Investment Ltd., PLDT, Inc., Benpro Inc., Pilipinas Global Network
Limited, Cignal TV, Inc., Suha-PH, Inc., Happyfeet Esports team and STI ESG entered into an
investment and shareholders agreement whereby the parties agreed to form Philippine Online
Sports League Inc., a stock association, which will establish, operate and maintain a national multi-
game Esports league in the Philippines with the aim to promote and develop Esports in the country.
Esports is a growing sport internationally and in the Philippines. With this, Philippine Online Sports
League Inc. was incorporated on September 30, 2019 with the SEC. It has an authorized capital
stock of P
=155.0 million divided into 1.25 million common shares and 200.0 thousand preferred
shares with a par value of =P100.0 per common share and = P150.0 per preferred share. The initial
subscribed and paid-up capital of Philippine Online Sports League Inc. is = P90.0 million of which
STI ESG subscribed to and paid P =10.0 million for 100.0 thousand shares at = P100.0 par value per
share.
Dividend income earned from DLSMC shares pertaining to the shares held by De Los Santos-STI
College classified as equity instruments designated at FVOCI amounted to P =3.1 million and
=2.9 million in 2019 and 2018, respectively, while STI ESG recognized dividend income earned
P
from DLSMC shares amounting to P =0.8 million, =
P2.4 million and P
=1.5 million in 2020, 2019 and
2018, respectively.
The rollforward analysis of the “Unrealized fair value adjustment on equity instruments designated
at FVOCI” account as shown in the equity section of the consolidated statements of financial
position follows:
2020 2019
Balance at beginning of year P
=3,185,170 =40,580,739
P
Unrealized fair value adjustment on equity
instruments designated at FVOCI 7,821,664 (261,920)
Realized fair value adjustment on disposal of equity
instruments designated at FVOCI – (37,133,649)
Balance at end of year P
=11,006,834 =3,185,170
P
c. Pledged Shares
On June 3, 2013, the Parent Company executed a Deed of Pledge on all of its DLSMC shares in
favor of Neptune Stroika Holdings, Inc., now known as MPHHI, a wholly-owned subsidiary of
Metro Pacific Investments Corporation (MPIC), to cover the indemnity obligations of the Parent
Company enumerated in its Investment Agreement entered into in 2013 with MPIC. On
January 3, 2020, STI ESG received the notice of termination of the Deed of Pledge and as such,
MPHHI released STI ESG from its liability. The pledged share certificates have likewise been
released to STI ESG. The carrying value of the investment in DLSMC amounted to = P29.0 million
as at March 31, 2020 and 2019.
*SGVFSM004069*
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2020 2019
Goodwill P
=229,750,336 =208,519,102
P
Deposits for asset acquisitions 185,951,923 231,735,901
Advances to suppliers 47,295,901 7,907,102
Rental and utility deposits 32,194,153 55,696,369
Intangible assets 31,774,511 3,332,089
Others 3,569,189 3,906,093
P
=530,536,013 =511,096,656
P
Goodwill
Goodwill acquired through business combinations have been allocated to select schools which are
considered separate cash-generating units (CGUs).
2020 2019
STI Caloocan P
=64,147,877 =64,147,877
P
STI Cubao 28,327,670 28,327,670
STI Pasay-EDSA (formerly STI Makati and STI
Taft) 22,292,630 22,292,630
STI Novaliches (see Note 19) 21,803,322 21,803,322
NAMEI (see Note 38) 21,231,234 –
STI Global City 11,360,085 11,360,085
STI Sta. Mesa (formerly STI Shaw) 11,213,342 11,213,342
STI Lipa 8,857,790 8,857,790
STI Ortigas-Cainta 7,476,448 7,476,448
STI Dagupan 6,835,818 6,835,818
STI Meycauayan 5,460,587 5,460,587
STI Tanauan 4,873,058 4,873,058
STI Iloilo 3,806,173 3,806,173
STI Las Piñas 2,922,530 2,922,530
STI Batangas 2,585,492 2,585,492
STI Kalibo 2,474,216 2,474,216
STI Naga 2,305,368 2,305,368
STI Sta. Maria 1,776,696 1,776,696
P
=229,750,336 =208,519,102
P
Management performs its impairment test every March 31 for each reporting period for all the CGUs.
The recoverable amounts are computed based on value-in-use calculations using cash flow projections.
Future cash flows are discounted using a pre-tax discount rate ranging from 10.44% to 11.06% and
from 11.55% to 12.29% in 2020 and 2019, respectively. The cash flow projections are based on a
five-year financial planning period as approved by senior management. The growth rate used to
extrapolate the cash flows of the unit beyond the five-year period is 5.00% in 2020 and 2019.
Considering the impact of COVID-19, the management used forecasted revenue decrease ranging from
10.19% to 46.93% on all CGUs for SY 2020-2021 and forecasted revenue increase on all CGUs ranging
from 2.16% to 54.07% in the next five years. In 2019, forecasted growth rates ranging from 3.00% to
49.00% were used on most CGUs while STI ESG used 4.00% to 125.00% on select CGUs with
expansion projects. Provision for impairment on goodwill amounted to nil in 2020, = P17.0 million in
2019 and nil in 2018 (see Note 25).
*SGVFSM004069*
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§ Forecasted revenue growth - Revenue forecasts are management’s best estimates considering
factors such as historical/industry trends, target market analysis, government regulations and other
economic factors.
§ EBITDA margin - It is a measure of a firm's profit that includes all expenses except interest and
income tax expenses. It is the difference between operating revenues and operating expenses.
Earnings before tax differ for each CGU and are based on historical data and future plans for each
CGU which may be affected by expected capital expenditures and number of projected students.
§ Discount rate - Discount rates represent the current market assessment of the risks specific to each
CGU, taking into consideration the time value of money and individual risks of the underlying
assets that have not been incorporated in the cash flow estimates. The discount rate calculation is
based on the specific circumstances of the Group and its operating segments and is derived from
its weighted average cost of capital (WACC). The Group used the WACC rate as affected by the
beta of companies with similar activities and capital structure with the CGUs. WACC is also
affected by costs of debt and capital based on average lending rates for a 10-year term due to the
assumption that the CGUs will exist beyond 10 years.
Advances to Suppliers
Advances to suppliers substantially pertain to advance payments made in relation to the acquisition of
property and equipment and construction of STI Academic Center Legazpi (see Note 10). These will
be reclassified to the “Property and equipment” account when the goods are received or the services
are rendered.
*SGVFSM004069*
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Intangible Assets
Intangible assets pertain to the cost of the Group’s accounting and school management software which
are being amortized over their estimated useful lives.
2020 2019
Cost, net of accumulated amortization:
Balance at beginning of year P
=3,332,089 =12,965,479
P
Additions 31,689,789 126,000
Amortization (see Notes 23 and 25) (3,247,367) (9,759,390)
Balance at end of year P
=31,774,511 =3,332,089
P
Cost P
=70,689,872 P39,000,083
=
Accumulated amortization (38,915,361) (35,667,994)
Net carrying amount P
=31,774,511 =3,332,089
P
The Group identified the license to operate a maritime school and related agreements as an intangible
asset, for purposes of estimating the fair value of the net assets acquired. Accordingly, intangible assets
with indefinite useful life amounting to P =27.6 million representing the fair value of the license and
agreements was recognized as at March 31, 2020 (see Note 38).
*SGVFSM004069*
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b. Accrued expenses, network events fund, student organization fund, and other payables are expected
to be settled within the year.
c. Statutory payables primarily include taxes and other payables to government agencies which are
normally settled within 30 days.
d. Advanced rent pertains to amount received by the Group which will be earned and applied within
the next financial year.
e. Dividends payable pertains to dividend declared which are unclaimed as at report date.
f. Refundable deposits pertain to security deposits received from existing lease agreements and are
expected to be settled within the next financial year.
g. Terms and conditions of payables to related parties are disclosed in Note 30 to the consolidated
financial statements.
2020 2019
Corporate Notes Facility:
Current portion P
=240,000,000 =240,000,000
P
Non-current portion 120,000,000 360,000,000
Term Loans:
Non-current portion* 794,262,208 −
P
=1,154,262,208 =600,000,000
P
Net of unamortized debt issuance costs of =
P5.7 million and nil as at March 31, 2020 and 2019, respectively.
On May 9, 2014, the first drawdown date, STI ESG elected to have a 7-year term loan with floating
interest based on the 1-year PDST-F plus a margin of two percent (2.00%) per annum, which interest
rate shall in no case be lower than the BSP overnight rate plus a margin of three-fourths percent (0.75%)
per annum, which is subject to repricing.
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An Accession Agreement to the Credit Facility Agreement was executed on December 16, 2014 among
STI ESG, STI West Negros University, Inc. (STI WNU), a company under common control of STI
Holdings, and China Bank whereby STI WNU acceded to the Credit Facility entered into by STI ESG
with China Bank in March 2014. In addition, an Amendment and Supplemental Agreement was also
executed by the parties on the same date. The Amendment and Supplemental Agreement allowed STI
WNU to draw up to = P300.0 million from the facility.
On December 19, 2014, STI ESG advised China Bank that it will not be availing of tranche 2 of the
Credit Facility Agreement thus limiting the facility available to STI ESG to =
P1,500.0 million.
The Credit Facility Agreement, together with the Accession Agreement, contains, among others,
covenants regarding incurring additional debt and declaration of dividends, to the extent that such will
result in a breach of the required debt-to-equity and debt service cover ratios (DSCR). The Parent
Company was required to maintain a debt-to-equity ratio of not more than 1.00:1.00 and debt service
cover ratio of not less than 1.10:1.00.
2020 2019
Balance at beginning of year P
=600,000,000 =600,000,000
P
Repayments 240,000,000 −
Balance at end of year 360,000,000 600,000,000
Less current portion 240,000,000 240,000,000
Noncurrent portion P
=120,000,000 =360,000,000
P
On January 19, 2017, STI ESG and China Bank executed a Second Amendment and Supplemental
Agreement to the Corporate Notes Facility Agreement. Significant amendments are as follows:
a) change in interest rate of either (1) the 1-year Benchmark Rate (PDST-R2) plus a margin of 1.5%
per annum which interest rate shall in no case be lower than 3.75% per annum or (2) the 3-month
Benchmark Rate plus a margin of 1.5% per annum which interest rate shall in no case be lower
than 3.5% per annum.
b) amendments on the required financial ratios, whereby STI ESG shall maintain the following ratios
which shall be computed based on the consolidated financial statements:
(1) Debt-to-equity ratio of not more than 1.5x, computed by dividing total debt by total equity.
For the purpose of this computation, total debt shall exclude unearned tuition and other
school fees;
As at March 31, 2020 and 2019, STI ESG complied with the above covenants (see Note 18).
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Related events after the reporting period are discussed in Note 39.
As stated in the Term Loan Agreement, STI ESG has elected to fix the interest on each drawdown on
a per annum basis based on the higher of 1-year PHP Bloomberg Valuation Services (BVAL) rate plus
an interest spread of 1.5% divided by the Applicable Interest Premium Factor, or the agreed Floor rate
divided by the Applicable Interest Premium Factor. On the Initial Interest Rate Resetting Date, the
applicable interest rate per annum for all drawdowns shall be collectively reset based on the higher of
1-year BVAL rate plus an interest spread of 1.5% divided by the Applicable Interest Premium Factor,
or the agreed Floor rate divided by the Applicable Interest Premium Factor.
STI ESG may, on any Interest Resetting Date and upon serving a written notice, elect to fix the interest
rate for the remaining period of the loan based on the higher of applicable BVAL rate plus an interest
spread of 1.5% divided by the Applicable Interest Premium Factor, or the agreed Floor rate divided by
the Applicable Interest Premium Factor.
The Agreement prescribes that the following financial covenants shall be observed and computed based
on STI ESG’s consolidated financial statements:
1. Debt-to-equity ratio of not more than 1.5x, computed by dividing Total Liabilities by Total Equity.
For purposes of this computation, Total Liabilities shall exclude Unearned Tuition and Other
School Fees, and
2. Debt Service Cover Ratio of a minimum of 1.05x, which is the ratio of EBITDA to Debt Service.
As at March 31, 2020, STI ESG is compliant with the required ratios.
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These loans are unsecured and are due based on the following schedule:
Related events after the reporting period are discussed in Note 39.
Short-term Loans
=468.0 million in 2020.
STI ESG availed of loans from Bank of the Philippine Islands aggregating to P
These loans are subject to interest rates ranging from 4.75% to 5.75%. The short-term loans were
unsecured and were fully settled as at March 31, 2020. The proceeds from these loans were used for
working capital requirements.
Interest Expense
Starting February 1, 2016, the one-year PDST-F on the Credit Facility Agreement was changed to
PDST-R2 as the basis for determining the interest rate.
On January 31, 2017, STI ESG elected to adopt the interest rate based on the 1-year Benchmark Rate
plus a margin of 1.5% per annum which interest rate shall in no case be lower than 3.75% payable every
January 31 and July 31 of each year.
On October 29, 2018, the Bankers Association of the Philippines launched the BVAL Reference Rates
replacing the set of PDST Reference Rates (PDST-R1 & PDST-R2). Hence, starting the interest period
January 31, 2019, the benchmark rate for the loans of STI ESG is the BVAL reference rate for
one-year tenor.
2020 2019
Principal:
Fixed-rate bonds due 2024 P
=2,180,000,000 =2,180,000,000
P
Fixed-rate bonds due 2027 820,000,000 820,000,000
3,000,000,000 3,000,000,000
Less unamortized debt issuance costs 35,581,838 42,045,746
P
=2,964,418,162 =2,957,954,254
P
On March 23, 2017, the Parent Company issued the first tranche of its =
P5,000.0 million fixed-rate bonds
program under its 3-year shelf registration with the SEC which ended on March 9, 2020. The bonds,
amounting to an aggregate of P=3,000.0 million were listed through the PDEx, with interest payable
quarterly and were issued with a fixed rate of 5.8085% for the 7-year series, due 2024, and 6.3756%
*SGVFSM004069*
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for the 10-year series, due 2027. The bonds were rated ‘PRS Aa’ by PhilRatings in 2017. Proceeds of
the issuance were used to finance the campus expansion projects, refinancing of the short-term loans
incurred for the acquisition of land, and for other general corporate requirements of the Group.
The bonds include an embedded derivative in the form of an early redemption option that gives the
Parent Company the option, but not the obligation, to redeem in whole (and not in part), the outstanding
bonds before the relevant maturity date, based on a certain price depending on the fixed early
redemption option dates. Management has assessed that the early redemption option is closely related
to the bonds and would not require to be separated from the value of the bonds and accounted for as a
derivative under PAS 39, Financial Instruments: Recognition and Measurement. Under PFRS 9,
Financial Instruments, subsequent reassessment is required when there has been a change in the terms
of the contract that significantly modifies the cash flows.
Covenants
The bonds provide certain restrictions and requirements with respect to, among others, change in
majority ownership and management, merger or consolidation with other corporation resulting in loss
of control over the overall resulting entity and sale, lease, transfer or otherwise disposal of all or
substantially all of its assets. The Credit Facility Agreement also contains, among others, covenants
regarding incurring additional debt and declaration of dividends. The Parent Company is required to
maintain a debt-to-equity ratio of not more than 1.50:1.00 and debt service cover ratio of not less than
1.05:1.00 computed based on the consolidated financial statements.
As at March 31, 2020 and 2019, STI ESG is in compliance with the debt covenants.
The Group’s debt-to-equity and debt service cover ratios as at March 31, 2020 and 2019 are as follows:
2020 2019
Total liabilities(a) P
=5,184,846,516 =4,407,031,500
P
Total equity 6,112,499,312 6,569,707,487
Debt-to-equity 0.85:1.00 0.67:1.00
(a) Excluding unearned tuition and other school fees
2020 2019
EBITDA (Note 3) (b) P
=748,788,166 =806,111,804
P
Total interest-bearing liabilities(c) 491,929,714 462,616,744
Debt service cover 1.52:1.00 1.74:1.00
(b) EBITDA for the last twelve months
(c) Total principal and interests due in the next twelve months
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Related events after the reporting period are discussed in Note 39.
Interest Expense
Interest expense (including amortization of bond issuance costs), net of amount capitalized as property
and equipment, associated with the bonds payable recognized in the consolidated statements of
comprehensive income amounted to P =183.7 million, =P150.7 million and P =162.0 million in 2020, 2019
and 2018, respectively.
2020 2019
Advance rent - net of current portion (see Note 16) P
=30,866,051 =45,053,509
P
Payable to STI Diamond - net of current portion
(see Note 16) 22,421,181 38,336,143
Refundable deposit - net of current portion
(see Note 16) 15,382,548 16,075,752
Deferred lease liability 2,869,794 2,438,532
P
=71,539,574 =101,903,936
P
Advance rent pertains to amount received by the Group which will be earned and applied to future
rentals for periods more than one year after the reporting date.
On August 16, 2016, STI Diamond entered into a Deed of Assignment with STI Novaliches where STI
Diamond assigned, transferred and conveyed in a manner absolute and irrevocable, and free and clear
of all liens and encumbrances, to STI Novaliches all its rights, title and interest in its assets and
liabilities for a price of =
P75.7 million, payable quarterly over five years. Consequently, the management
contract between the Parent Company and STI Diamond was terminated. In addition, any rights to the
residual interest in STI Diamond was transferred to an entity outside of the Group. As a result, STI
Diamond was derecognized as a subsidiary of the Parent Company. The total carrying value of the
unpaid purchase price amounted to P =38.3 million and P =50.0 million as at March 31, 2020 and 2019,
respectively. The current portion of the payable amounted to = P15.9 million and =P11.7 million is
recorded under the “Accounts payable and other current liabilities” account as at March 31, 2020 and
2019, respectively (see Note 16).
Refundable deposits are held by the Group throughout the term of the lease and are refunded in full to
the lessee at the end of the lease term if the lessee has performed fully and observed all of the conditions
and provisions in the lease. Refundable deposits are presented in the consolidated statements of
financial position at amortized cost. The difference between the fair value at initial recognition and the
notional amount of the refundable deposit is charged to “Deferred lease liability” and amortized on a
straight-line basis over the respective lease term.
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20. Equity
Capital Stock
The details of the issued and outstanding number of common shares and amount in 2020 and 2019 are
as follows:
March 31
No. of Shares Amount (at par)
Authorized - =
P1 par value 5,000,000,000 P =5,000,000,000
Issued and outstanding:
Balance at beginning and end of year 3,087,829,443 3,087,829,443
Less: Treasury stocks (5,952,273) (5,952,273)
Issued and outstanding at end of year 3,081,877,170 =P3,081,877,170
Treasury stock
Treasury stocks acquired as at March 31, 2020 and 2019 amounted to =
P10.8 million.
Other Comprehensive Income and Other Equity Reserves associated with Noncurrent Asset Held for
Sale (Note 9)
As at March 31, 2020 and 2019, the cumulative balance of other comprehensive income and other
equity reserves associated with noncurrent asset held for sale consists of:
Share in associates’:
Unrealized fair value adjustment on equity instruments designated
at FVOCI =108,558,621
P
Remeasurement loss on life insurance reserves (18,096,674)
Cumulative actuarial gain 685,850
Other equity reserve 728,649
=91,876,446
P
Retained Earnings
a. On September 20, 2019, the Parent Company’s BOD approved the cash dividends declaration of
=0.06 per share for a total amount of P
P =184.9 million, in favor of the stockholders of record as at
September 30, 2019. Such dividends were paid on November 5, 2019.
b. On September 27, 2018, the Parent Company’s BOD approved the cash dividends declaration of
=0.06 per share for a total amount of P
P =184.9 million, in favor of the stockholders of record as at
September 30, 2018. Such dividends were paid on October 10, 2018.
c. On September 19, 2017, the Parent Company’s BOD approved the cash dividends declaration of
=0.08 per share for a total amount of P
P =246.5 million, in favor of the stockholders of record as at
September 30, 2017. Such dividends were paid on October 19, 2017.
d. STI ESG’s retained earnings available for dividend declaration computed on the guidelines
provided in the SEC Memorandum Circular No. 11, amounted to = P1,967.3 million and
=2,123.7 million as at March 31, 2020 and 2019, respectively.
P
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The BOD approved a dividend declaration policy equivalent to 25% to 40% of the core income of the
Group from the previous fiscal year, subject to compliance with the requirements of applicable laws
and regulations, statutory limitations and/or restrictions, terms and conditions which may be imposed
on the Group by lenders or other financial institutions, and the Group’s investment plans and financial
condition.
Core income is defined as consolidated net income after tax derived from the Group’s main business-
which is education and other recurring income.
The amount of dividends will be reviewed periodically by the BOD in light of the earnings, financial
conditions, cash flows, capital requirements and other considerations, while maintaining a level of
capitalization that is commercially sound and sufficient to ensure that the Group can operate on a
standalone basis.
Dividends shall be declared and paid out of the Group’s unrestricted retained earnings which shall be
payable in cash, property or stock to all shareholders on the basis of outstanding stock held by them.
Unless otherwise required by law, the BOD, at its sole discretion, shall determine the amount, type and
date of payment of the dividends to the shareholders, taking into account various factors, including:
§ the level of the Group’s earnings, cash flow, return on equity and retained earnings;
§ its results for and its financial condition at the end of the year in respect of which the dividend is
to be paid and its expected financial performance;
§ the projected levels of capital expenditures and other investment programs;
§ restrictions on payments of dividends that may be imposed on it by any of its financing
arrangements and current or prospective debt service requirements; and such other factors
as the BOD deems appropriate.
21. Revenues
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Contract Balances
The Group’s receivables are disclosed in Note 6 while the contract liabilities are presented as Unearned
tuition and other school fees in the consolidated statements of financial position. Significant changes
in the contract liability include the implementation of the second batch of tertiary students in
SY2018-2019 and the shift in the classes of tertiary students from June to July in SY2019-2020 that
extended collection of tuition and other school fees after March 31, 2019 and 2020, respectively.
2020 2019
Amounts included in contract liabilities at the
beginning of the year P
=59,890,787 =39,370,772
P
There is no revenue recognized from performance obligations satisfied in previous years in 2020 and
2019.
Performance Obligations
The performance obligation related to revenue from tuition and other school fees, educational services,
and royalty fees are satisfied over time since the student and the franchisees receive and consume the
benefit provided by the Group’s performance. The payment for these services is normally due within
the related school term.
On the other hand, the performance obligations related to the sale of educational materials and supplies
and other revenues are satisfied upon receipt by the customers since the control of the goods and
products is transferred at this point. The payment for the sale of educational materials and supplies is
generally due within 30 days from delivery.
As at March 31, 2020 and 2019, the transaction price allocated to the remaining performance
obligations (unsatisfied or partially satisfied) are as follows:
2020 2019
Within one year P
=195,013,267 =81,379,657
P
More than one year − −
The remaining performance obligations which are expected to be satisfied within one year pertains to
the advance payment for tuition and other school fees for the school year commencing after the financial
reporting date and will be recognized as tuition and other school fees within the school year. On the
other hand, STI ESG does not have any performance obligation that is expected to be satisfied in more
than one year.
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*SGVFSM004069*
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*SGVFSM004069*
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Under the existing regulatory framework, RA No. 7641 (Retirement Pay Law) requires a provision for
retirement pay to qualified private sector employees in the absence of any retirement plan in the entity,
provided however that the employee’s retirement benefits under any collective bargaining and other
agreements shall not be less than those provided under the law. The law does not require minimum
funding of the plan.
Retirement benefits are payable in the event of termination of employment due to: (i) early, normal, or
late retirement; (ii) physical disability; (iii) voluntary resignation; or (iv) involuntary separation from
service. For plan members retiring under normal, early or late terms, the retirement benefit is equal to
a percentage of final monthly salary for every year of credited service.
In case of involuntary separation from service, the benefit is determined in accordance with the
Termination Pay provision under the Philippine Labor Code or similar legislation on involuntary
termination.
The funds are administered by a trustee bank under the supervision of the Board of Trustees of the plan.
The Board of Trustees is responsible for the investment of the assets. It defines the investment strategy
as often as necessary, at least annually, especially in the case of significant market developments or
changes to the structure of the plan participants. When defining the investment strategy, it takes account
of the plans’ objectives, benefit obligations and risk capacity. The investment strategy is defined in the
form of a long-term target structure (Investment policy). The Board of Trustees implements the
Investment policy in accordance with the investment strategy, as well as various principles and
objectives.
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The following tables summarize the components of the Group’s net pension expense recognized in the
consolidated statements of comprehensive income and the pension asset/liability recognized in the
consolidated statements of financial position as at March 31:
The Group offsets its pension assets and liabilities on a per company basis for presentation in the
consolidated statements of financial position since pension assets are restricted for the settlement of
pension liabilities only.
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The principal assumptions used in determining pension liabilities are shown below:
The maximum economic benefit available is a combination of expected refunds from the plan and
reductions in future contributions.
The major categories of the Group’s total plan assets as a percentage of the fair value of the total plan
assets are as follows:
2020 2019
Short-term fixed income 67% 55%
Investments in:
Equity securities 33% 42%
Debt securities –% 3%
100% 100%
The plan assets of the Group are maintained by Union Bank of the Philippines and United Coconut
Planters Bank.
Details of the Group’s net assets available for plan benefits and their related market values are as
follows:
2020 2019
Cash and cash equivalents P
=180,656 =2,141
P
Short-term fixed income 65,272,765 63,727,326
Investments in:
Equity securities 31,739,002 49,676,952
Debt securities – 3,476,675
P
=97,192,423 =116,883,094
P
Short-term Fixed Income. Short-term fixed income investment includes time deposits and special
savings deposits.
Investments in Equity Securities. Investments in equity securities pertain to investment in shares of STI
Holdings, the ultimate parent company, which has a fair value of = P0.40 and = P0.71 per share as at
March 31, 2020 and 2019, respectively.
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Total unrealized loss from investments in equity securities of related parties amounted to P
=7.0 million
as at March 31, 2020 and =P14.7 million unrealized gain as at March 31, 2019.
The plan may expose the Group to a concentration of equity market risk since the STI ESG’s plan assets
are primarily composed of investments in listed equity securities.
Investments in Government Securities. Investments in government securities include treasury bills and
fixed-term treasury notes with maturities ranging from one to thirteen years and bear interest rates
ranging from 3.25% to 6.25%. These securities are fully guaranteed by the Government of the Republic
of the Philippines.
Management performs an Asset-Liability Matching Study annually. The overall investment policy and
strategy of the Group’s defined benefit plans are guided by the objective of achieving an investment
return which, together with contributions, ensures that there will be sufficient assets to pay pension
benefits as they fall due while also mitigating the various risk of the plans. The Group’s current strategic
investment consists of 67% of short-term fixed income, 33% of equity instruments and minimal cash
and cash equivalents.
The average duration of the defined benefit obligation as at March 31, 2020 is 13 years.
Shown below is the maturity analysis of the undiscounted benefit payments as at March 31:
2020 2019
Less than one year P
=40,595,143 =30,483,598
P
More than one year to five years 56,991,519 23,736,779
More than five years to 10 years 58,351,014 82,265,004
More than 10 years to 15 years 99,644,518 142,779,528
More than 15 years to 20 years 78,359,622 102,365,640
More than 20 years 108,441,132 391,996,893
The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the defined benefit obligation as at the end of the reporting period, assuming
all other assumptions are held constant:
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De Los Santos-STI College and STI QA’s contributions consist of future service cost and past service
cost. The future service cost is equal to 4.00% of employee’s monthly salary from the date an employee
becomes a member of CEAP. Past service cost is equal to 5.00% of the employees’ average monthly
salary for a 12-month period, immediately preceding the date of De Los Santos-STI College and STI
QA’s participation in CEAP, multiplied by the number of years of past service amortized over 10 years.
Future service refers to the periods of covered employment on or after the date of De Los Santos-STI
College and STI QA’s participation in CEAP. Past service refers to the continuous service of an
employee from the date the employee met the requirements for membership in the retirement plan to
the date of acceptance of De Los Santos-STI College and STI QA as a Participating Employer in CEAP
Retirement Plan. In addition, De Los Santos-STI College and STI QA give the employee an option to
make a personal contribution to the fund at an amount not to exceed 4.00% of his monthly salary. De
Los Santos-STI College and STI QA then provide an additional contribution of 1.00% of the
employee’s contribution based on the latter’s years of tenure. Although the De Los Santos Plan has a
defined contribution format, the Group regularly monitors compliance with RA No. 7641. As at
March 31, 2020, 2019 and 2018, the Group is in compliance with the requirements of RA No. 7641.
As at March 31, 2020 and 2019, De Los Santos-STI College and STI QA have excess contributions to
CEAP amounting to = P3.1 million. These excess contributions are classified as a prepaid expense and
will be offset against De Los Santos-STI College and STI QA’s future required contributions to CEAP
(see Note 8).
Philippine Interpretations Committee Q&A No. 2013-03 requires De Los Santos-STI College’s defined
contribution plan to be accounted for as a defined benefit plan due to the minimum retirement benefits
mandated under RA No. 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 RA No. 7641 exceeded the accumulated contribution and earnings under the Plan,
however, the amount is not significant.
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28. Leases
The Group acquired various transportation equipment under various finance lease arrangements. These
are included as part of transportation equipment under the “Property and equipment” account in the
consolidated statements of financial position.
Future minimum lease payments under the lease agreements, together with the present value of the
minimum lease payments follow:
2019
Within one year P7,451,034
=
After one year but not more than five years 12,845,387
Total minimum lease payments 20,296,421
Less amount representing interest 2,444,375
Present value of lease payments 17,852,046
Less current portion of obligations under finance lease 6,208,432
Noncurrent portion of obligations under finance lease =11,643,614
P
Interest expense incurred from obligations under finance lease amounted to nil, P
=1.1 million and
=0.8 million in 2020, 2019 and 2018, respectively (see Note 22).
P
As Lessor
The Group entered into several lease agreements, as lessors, on their buildings and condominium units
under operating lease agreements with varying terms and periods. All leases are subject to annual
repricing based on a pre-agreed rate.
The Group also earns rental income from concessionaires and for the occasional use of some of the
Group’s properties primarily used for school operations such as gymnasiums.
Future minimum rental receivable for the remaining lease terms as at March 31 are as follow:
2020 2019
Within one year P
=108,450,346 P83,949,795
=
After one year but not more than five years 154,009,364 103,392,016
P
=262,459,710 =187,341,811
P
As Lessee
The Group leases land and building spaces where the corporate office and schools are located, under
operating lease agreements with varying terms and periods ranging from 1 to 25 years. The lease rates
are subject to annual repricing based on a pre-agreed rate.
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Certain subsidiaries also paid their lessors rental deposits equivalent to several months of rental
payments as security for its observance and faithful compliance with the terms and conditions of the
agreement (see Note 15).
The following are the amounts recognized in consolidated statement of comprehensive income:
2020
Depreciation expense of ROU assets included in property and
equipment (see Note 10) =65,272,026
P
Interest expense on lease liabilities (see Note 22) 28,633,210
Expenses relating to short-term leases (see Notes 23 and 25) 43,761,281
Variable lease payments (see Notes 23 and 25) 861,921
Total amount recognized in the consolidated statement of
comprehensive income =138,528,438
P
2020
As at April 1, 2019, as previously stated =−
P
Effect of adoption of PFRS 16 (see Note 2) 391,816,395
At April 1, 2019, as restated 391,816,395
Additions 58,461,692
Interest expense 28,633,210
Payments (83,002,811)
As at March 31, 2020 395,908,486
Less current portion 66,111,807
Noncurrent portion =329,796,679
P
March 31
2020 2019
Within one year P
=80,507,482 =102,110,073
P
After one year but not more than five years 208,726,972 244,092,438
More than five years 276,381,169 283,992,880
P
=565,615,623 =630,195,391
P
All domestic subsidiaries qualifying as private educational institutions are subject to tax under
RA No. 8424, “An Act Amending the National Internal Revenue Code, as amended, and For Other
Purposes” which was passed into law effective January 1, 1998. Title II Chapter IV - Tax on
Corporation - Sec 27(B) of the said Act defines and provides that: a “Proprietary Educational
Institution” is any private school maintained and administered by private individuals or groups with an
issued permit to operate from DepEd, CHED, or TESDA, as the case may be, in accordance with the
existing laws and regulations and shall pay a tax of ten percent (10.00%) on its taxable income.
In 2020, 2019 and 2018, the current income tax pertains to regular corporate income tax.
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The components of recognized net deferred tax assets and deferred tax liabilities are as follows:
2020 2019
Deferred tax assets:
Lease liabilities P
=38,060,131 P–
=
Allowance for ECL (see Note 6) 14,312,476 16,234,248
Unearned tuition and other school fees 6,672,419 7,473,621
Pension liabilities (see Note 27) 5,595,173 3,309,855
Advance rent 4,707,643 4,505,351
Excess of cost over net realizable value of
inventories 1,646,017 1,093,436
70,993,859 32,616,511
Deferred tax liabilities:
Right-of-use assets (32,117,533) –
Intangible assets (2,762,187) –
Unamortized debt issue costs (1,554,555) (1,164,068)
Excess of rental under operating lease computed
on a straight-line basis (1,178,603) 874,634
Excess of fair values of net assets acquired over
acquisition cost from a business
combination – (209,144)
(37,612,878) (498,578)
Net deferred tax assets P
=33,380,981 =32,117,933
P
Certain deferred tax assets of the Group were not recognized as at March 31, 2020 and 2019 as it is not
probable that future taxable profits will be sufficient against which these can be utilized.
The following are the deductible temporary differences and unused NOLCO for which no deferred tax
assets were recognized:
2020 2019
NOLCO P
=78,467,814 =55,728,103
P
Allowance for:
Advances to associate (see Note 12) 37,868,986 37,868,986
ECL (see Note 6) – 858,771
Pension liability (see Note 27) 192,506 242,908
Net deferred tax assets P
=116,529,306 =94,698,768
P
As at March 31, 2020 and 2019, the Group also did not recognize any deferred tax assets on the
provision for impairment losses on investment in associate because management does not expect to
generate enough capital gains against which these capital losses can be offset.
*SGVFSM004069*
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The reconciliation of the provision for income tax on income before income tax computed at the effect
of the applicable statutory income tax rate to the provision for income tax as shown in the consolidated
statements of comprehensive income is summarized as follows:
Others pertain to the income tax effects of change in unrecognized deferred tax assets and other items.
Parties are considered to be related if one party has the ability to control the other party or exercise
significant influence over the other party in making financial and operating decisions. This includes:
(a) enterprises or individuals owning, directly or indirectly through one or more intermediaries, control
or are controlled by, or under common control with the Parent Company; (b) associates; and
(c) enterprises or individuals owning, directly or indirectly, an interest in the voting power of the
company that gives them significant influence over the Parent Company, key management personnel,
including directors and officers of the Group and close members of the family of any such enterprise
or individual.
The following are the Group’s transactions with its related parties:
Amount of Transactions Outstanding Receivable
During the period (Payable)
Related Party 2020 2019 2018 2020 2019 2018 Terms Conditions
Associates
STI Accent
Reimbursement for various P
=– =–
P =591,839
P P
=37,868,986 =37,868,986
P =37,868,986
P 30 days upon Unsecured; with
expenses and other charges receipt provision for
of billings; impairment
noninterest-
bearing
GROW
Rental income and other charges 585,110 232,379 29,025 7,600,032 7,033,994 6,931,016 30 days upon Unsecured;
receipt no impairment
of billings
Reimbursement for various – – – – – 143,571 30 days upon
expenses receipt of
billings;
(Forward)
*SGVFSM004069*
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*SGVFSM004069*
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Outstanding receivables, before any allowance for impairment, and payables arising from these
transactions are summarized below:
*SGVFSM004069*
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Outstanding balances of the Parent Company’s transactions with subsidiaries which were eliminated
during consolidation are as follows:
Amount of Transactions Outstanding Receivable
During the period (Payable)
Related Party 2020 2019 2018 2020 2019 2018 Terms Conditions
Subsidiaries
STI Caloocan
Educational services, sale of P
=86,307,679 P
=101,007,832 =77,903,673
P P
=– =–
P =– 30 days from billing Unsecured;
P
educational materials and or cut-off date; no impairment
supplies, management fees, and noninterest-
other charges bearing
Reimbursement for various expenses 3,423,929 42,207,135 41,184,083 (244,470,858) (233,089,773) (236,271,389) 30 days from billing Unsecured
or cut-off date;
noninterest-
bearing
Rental income and other related 50,289,600 50,289,600 50,289,600 – – – 30 days from billing Unsecured;
charges or cut-off date; no impairment
noninterest-
bearing
STI Novaliches
Educational services, sale of 28,807,978 56,302,202 54,620,643 – – 5,398,721 30 days from billing Unsecured;
educational materials and or cut-off date; no impairment
supplies, management fees, and noninterest-
other charges bearing
Reimbursement for various expenses 6,614,932 8,340,336 6,622,888 (151,067,438) (163,986,690) (160,495,253) 30 days from billing Unsecured
or cut-off date;
noninterest-
bearing
Rental income and other related 30,720,000 30,720,000 30,720,000 – – – 30 days from billing Unsecured;
charges or cut-off date; no impairment
noninterest-
bearing
STI Tuguegarao
Educational services, sale of 917,580 950,348 1,259,791 12,997,611 12,195,755 12,556,544 30 days from billing Unsecured; with
educational materials and or cut-off date; provision for
supplies, management fees, and noninterest- impairment
other charges bearing
Reimbursement for various expenses 1,953,440 887,867 668,043 2,578,637 1,580,004 1,328,925 30 days from billing Unsecured; with
or cut-off date; provision for
noninterest- impairment
bearing
STI QA
Educational services, sale of 7,023,318 9,620,184 10,500,868 209,186 205,365 1,651,658 30 days from billing Unsecured; with
educational materials and or cut-off date; provision for
supplies, management fees, and noninterest- impairment
other charges bearing
Reimbursement for various expenses – 70 – 14,251,618 14,251,618 14,251,548 30 days from billing Unsecured; with
or cut-off date; provision for
noninterest- impairment
bearing
STI Batangas
Educational services, sale of 23,004,071 36,859,134 23,827,583 1,010,749 61,417 9,259,570 30 days from billing Unsecured;
educational materials and or cut-off date; no impairment
supplies, management fees and noninterest-
other charges bearing
Reimbursement for various expenses 10,874,621 10,774,059 11,006,688 13,813,003 10,118,298 11,006,688 30 days from billing Unsecured;
or cut-off date; no impairment
noninterest-
bearing
Rental income and other related 14,968,800 14,968,800 14,968,800 33,530,112 33,530,112 23,613,620 30 days from billing Unsecured;
charges or cut-off date; no impairment
noninterest-
bearing
STI Iloilo
Educational services, sale of 2,147,587 3,054,565 4,069,589 7,566,256 6,166,856 4,013,036 30 days from billing Unsecured; with
educational materials and or cut-off date; provision for
supplies, noninterest- impairment
bearing
Reimbursement for various expenses 2,930,171 114,561 635,073 9,523,888 6,693,717 7,079,156 30 days from billing Unsecured; with
or cut-off date; provision for
noninterest- impairment
bearing
STI Pagadian
Educational services, sale of 2,218,247 1,527,787 909,367 5,326,164 3,468,764 2,451,353 30 days from billing Unsecured; with
educational materials and or cut-off date; provision for
supplies, noninterest- impairment
bearing
Reimbursement for various expenses 3,446,117 2,260,105 2,811,758 9,244,550 7,238,674 5,922,799 30 days from billing Unsecured; with
or cut-off date; provision for
noninterest- impairment
bearing
(Forward)
*SGVFSM004069*
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Related Party 2020 2019 2018 2020 2019 2018 Terms Conditions
Subscription of common stock P
=– =–
P =– (P
P =15,000,000) (P
=15,000,000) (P
=15,000,000) Due and Unsecured
demandable,
noninterest-
bearing
STI Tanauan
Educational services, sale of 7,492,746 8,758,427 8,946,759 – – – 30 days from billing Unsecured;
educational materials and or cut-off date; no impairment
supplies, noninterest-
bearing
Reimbursement for various expenses 522,423 8,112,311 4,320,101 (15,012,877) (10,517,394) (15,573,659) 30 days from billing Unsecured
or cut-off date;
noninterest-
bearing
STI Lipa
Educational services, sale of 22,495,896 10,817,829 9,684,534 – – – 30 days from billing Unsecured;
educational materials and or cut-off date; no impairment
supplies, noninterest-
bearing
Reimbursement for various expenses 919,217 13,905,677 686,247 4,821,605 3,056,709 711,192 30 days from billing Unsecured;
or cut-off date; no impairment
noninterest-
bearing
Rental income and other related 44,067,600 – – 38,567,232 – – 30 days from billing Unsecured;
charges or cut-off date; no impairment
noninterest-
bearing
STI Sta. Maria
Educational services, sale of 13,323,856 17,728,653 – – – – 30 days from billing Unsecured;
educational materials and or cut-off date; no impairment
supplies, noninterest-
bearing
Reimbursement for various expenses 10,380,338 10,059,610 145,868,951 60,722,408 55,622,603 58,252,912 30 days upon Unsecured;
receipt of no impairment
billings;
noninterest-
bearing
STI Training Academy
Reimbursement for various expenses 8,363,843 – – 8,363,843 – – 30 days upon Unsecured; no
receipt of impairment
billings;
noninterest-
bearing
NAMEI Polytechnic Institute of
Mandaluyong Inc.
Reimbursement for various expenses 3,633,188 – – 198,484 – – 30 days upon Unsecured;
receipt of no impairment
billings;
noninterest-
bearing
Rental income and other related 5,148,260 – – 5,148,260 – – 30 days upon Unsecured;
charges receipt of no impairment
billings;
noninterest-
bearing
NAMEI Polytechnic Institute, Inc.
Reimbursement for various expenses 55,999,726 – – 49,022,388 – – 30 days upon Unsecured;
receipt of no impairment
billings;
noninterest-
bearing
Rental income and other related 7,061,069 – – 7,061,069 – – 30 days upon Unsecured;
charges receipt of no impairment
billings;
noninterest-
bearing
*SGVFSM004069*
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31. Basic and Diluted EPS on Net Income (Loss) Attributable to Equity Holders of the Parent
Company
The table below shows the summary of net income (loss) and weighted average number of common
shares outstanding used in the calculation of EPS for the years ended March 31:
2020 2019 2018
Net income (loss) attributable to
equity holders of the Parent
Company (P
=226,277,507) =254,872,593
P =432,057,214
P
Weighted average number of
common shares outstanding 3,087,829,443 3,087,829,443 3,087,829,443
Basic and diluted earnings (loss)
per share on net income (loss)
attributable to equity holders
of the Parent Company (P
=0.07) =0.08
P =0.14
P
The basic and diluted EPS are the same for the years ended March 31, 2020, 2019 and 2018 as there
are no dilutive potential common shares.
On December 9, 2002, the BOD of the Parent Company approved the offer for sale and issue of up to
=2.0 billion worth of GOKs.
P
The STI GOKs are noninterest-bearing certificates that entitle the holders or any designated scholars
to redeem academic units in any member of the STI Group or equivalent academic units in any STI
school on certain designated redemption dates or, to require STI Group to pay in cash the par value of
the outstanding STI GOKs on designated graduation dates. The redemption dates range from the
SY 2004-2005 to six years from date of issue of the STI GOKs. The graduation dates range from four
to ten years from issue date. A total offer size of 2,409,600 academic units for the entire STI Group or
its equivalent units in any STI school will be offered 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 for the
said STI GOKs.
The Parent Company is planning to amend the terms of the GOKs to conform with future business
strategies. As at September 24, 2020, there has been no sale nor issuance of GOKs. Hence, pursuant to
Section 17.2 (a) of the Securities Regulation Code (SRC), STI ESG is not required to file the reports
required under Section 17 of the SRC.
*SGVFSM004069*
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Contingencies
a. Tax Assessment Case. The Parent Company filed a petition for review with the Court of Tax
Appeals (CTA) on October 12, 2009. This is to contest the Final Decision on Disputed Assessment
issued by the BIR assessing the Parent Company for deficiencies on income tax and expanded
withholding tax for the year ended March 31, 2003 amounting to P =124.3 million. On
April 17, 2013, the CTA issued a Decision which granted the Parent Company’s petition for review
and ordered the cancellation of the BIR’s assessment since its right to issue an assessment for the
alleged deficiency taxes had already prescribed. The Commissioner of Internal Revenue’s (“CIR”)
filed a Motion for Reconsideration which was later denied by the CTA. On August 22, 2013, the
CIR filed its Petition for Review with the CTA En Banc. On March 24, 2015, the CTA En Banc
affirmed the decision dated April 17, 2013 and ordered the cancellation of the BIR assessment for
the fiscal year ended March 31, 2003. On April 21, 2015, the CIR filed a Motion for
Reconsideration with the CTA En Banc, which was denied by the CTA En Banc on
September 2, 2015. On October 30, 2015, the CIR filed a Petition for Review with the Supreme
Court. STI ESG filed its Comment on the Petition and, subsequently, the CIR filed its reply to STI
ESG’s Comment.
On October 4, 2017, STI ESG received the decision from the Supreme Court dated July 26, 2017.
In its decision, the Supreme Court denied the petition for review filed by the CIR and affirmed the
Decision dated March 24, 2015 and Resolution dated September 2, 2015 of the Court of Tax
Appeals En Banc in CTA EB No. 1050. On October 25, 2017, the CIR has filed a Motion for
Reconsideration of the Supreme Court’s decision dated July 26, 2017.
On December 14, 2017 the Supreme Court denied with finality the Motion for Reconsideration
filed by the CIR and affirmed the Decision dated July 26, 2017.
The Supreme Court also ordered the immediate issuance of the Entry of Judgment.
On July 2, 2018, STI ESG received the Entry of Judgment issued by the Supreme Court dated
May 7, 2018 which certified that its decision dated December 14, 2017 became final and executory
and was recorded in the Book of Entries of Judgments on the said date.
b. Labor Cases.
i. A former employee filed a Petition with the Supreme Court after the Court of Appeals denied
the former employee’s claims and rendered prior decisions in favor of the Parent Company. On
August 13, 2014, the Parent Company received the Supreme Court’s decision dated
July 9, 2014 annulling the decision of the Court of Appeals and ordered that the Parent
Company reinstate the former employee to her former position and pay the exact salary,
benefits, privileges and emoluments which the current holder of the position is receiving and
should be paid backwages from the date of the former employee’s dismissal until fully paid,
with legal interest.
On November 17, 2014, the Supreme Court issued a resolution which denied with finality the
Parent Company’s Motion for Reconsideration. As a result of the decision, the Parent Company
recognized a provision amounting to P
=3.0 million representing the estimated compensation to
be made to the former employee.
*SGVFSM004069*
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On October 20, 2015, a Bank Order to release was issued to one of Parent Company’s
depository banks for the release of the garnished amount of P
=2.2 million. The bank released
the garnished amount to the National Labor Relations Commission (NLRC).
The garnished amount was put on hold for fifteen (15) days because of the filing of the Parent
Company’s Petition questioning, among others, the Writ of Execution issued by the labor
arbiter, which was docketed as LER-CN-10291-15.
While the Petition was pending for resolution by the NLRC and without any injunction order
being issued by the said Commission, the garnished amount of P
=2.2 million was released to the
former employee.
In addition, the former employee waived the reinstatement aspect of the March 31, 2016
decision of labor arbiter, and sought the payment of separation pay.
On October 28, 2015, the Parent Company filed another Petition with the NLRC, which sought
to inhibit the labor arbiter from continuing the execution proceedings for the former employee’s
judgment award. In the said Petition, the Parent Company alleged that the actions of the labor
arbiter showed partiality and bias in favor of the former employee.
On October 29, 2015, the Parent Company filed a Motion to Consolidate with the NLRC. In
the said Motion, the Parent Company moved that the aforesaid Petitions would be consolidated
and resolved by the same Division of the NLRC.
The former employee, thru her new counsel, filed two (2) Entry of Appearance with Motion
for Leave (To Admit Attached Answer with Comment/Opposition) for the two (2) Petitions of
the Parent Company. In the said Comment/Opposition, the former employee averred that
(a) the Writ of Execution was issued pursuant to the Supreme Court’s Decision dated
July 9, 2014 and (b) the acts of labor arbiter were above-board.
Before the NLRC resolved the pending Petitions filed by the Parent Company, the garnished
amount was released to the former employee as partial payment for the judgment award. Based
on the record of the NLRC, the amount of P
=2.2 million was released for the partial execution
of the judgment award of the former employee.
On February 29, 2016, the Sixth Division of the NLRC issued a Decision wherein it, among
others, nullified the Writ of Execution, and ordered the inhibition of labor arbiter. In the same
Decision, the Sixth Division of the NLRC also set a guide for the enforcement of the judgment
award in favor of the former employee, which provides, among others, that the computation of
the backwages of the former employee shall be from May 18, 2004 until October 30, 2006.
After the denial of the former employee’s Motion for Reconsideration on the aforesaid
Decision, STI ESG received on September 6, 2016 the former employee’s Petition for
Certiorari filed with the Court of Appeals. Said Petition questioned the aforesaid decision of
the NLRC.
*SGVFSM004069*
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After the filing of their respective pleadings in relation to the former employee’s Petition for
Certiorari, STI ESG received on June 6, 2017 the Court of Appeals’ Decision wherein it
determined that there is no need to resolve the issue on the nullification of the Partial Writ of
Execution because both parties agreed that the funds garnished by virtue of said Writ to the
former employee shall be considered as partial satisfaction of her judgment award.
The Court of Appeals likewise clarified that the issue on the former employee’s waiver of
reinstatement pending appeal should have been resolved by the new labor arbiter, and not the
NLRC. Contrary to the former employee’s assertion that the former labor arbiter resolved the
said issue, the Court of Appeals took into consideration that the NLRC validly ordered the re-
raffle of the case to a new labor arbiter who should resolve all pending incidents and issues.
Without making any findings and/or rulings contrary to STI ESG’s claim that the former
employee waived her reinstatement pending appeal in October 2006 and consequently
invalidated her assertion that her backwages should be computed from May 2004 until present
day, the Court of Appeals affirmed the re-raffle of the execution proceedings of the former
employee’s judgment award to a new labor arbiter to make an independent determination of all
pending incidents and issues.
Considering the aforesaid Decision did not prejudice STI ESG’s position, STI ESG decided to
refer all pending issues on the execution of the judgment award of the former employee,
including the waiver of backwages pending appeal, to the new labor arbiter.
On September 19, 2017, STI ESG received the former employee’s Manifestation with Omnibus
Motion filed with the new labor arbiter. In the said Manifestation with Omnibus Motion, the
former employee sought for (a) computation of the updated judgment award,
(b) resolution of the issue on waiver of reinstatement by the former employee raised by STI
ESG and (c) issuance of Writ of Execution based on the updated judgment award.
The new labor arbiter set the pre-execution hearing on January 31, 2018. During the said
hearing, STI ESG filed its Comment with Manifestation. In the Comment with Manifestation,
STI ESG asserted that the only issues to be resolved are the computations of the (a) backwages,
(b) legal interest and (c) separation pay. STI ESG further reiterated that the former employee
is entitled to receive backwages from May 2004 until October 2006 and separation pay from
November 1999 until February 2016. Based on said premises, STI ESG paid the former
employee P =2.0 million in January 2018.
Based on the record, STI ESG has paid the total amount of = P4.2 million, exclusive of
withholding taxes, to the former employee. STI ESG then moved for the new labor arbiter to
issue a resolution that STI ESG has fully paid the judgment award of the former employee.
While the former employee accepted the aforesaid amount, she manifested that the same is
only partial payment of the judgment award, and moved that she would be given ten (10) days
to file her reply to the Comment with Manifestation.
In the hearing on February 13, 2018, the former employee filed her Reply dated
February 12, 2018. In the Reply, it was argued that the alleged waiver of reinstatement pending
appeal in October 2006 did not interrupt the running of backwages until present day. She
insisted that the return to work order of Corporation was (a) vague, (b) served only through her
former counsel and (c) belatedly served or after four (4) months from the Corporation’s receipt
of the former labor arbiter’s order to reinstate her. Based on the foregoing the former employee
presented her computation of her judgment award to date, which amounted to
=11.0 million, less payments already made by STI ESG.
P
*SGVFSM004069*
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On February 28, 2018, STI ESG filed and served the Rejoinder. In the Rejoinder, STI ESG
reiterated that the notice to return to work was (a) clear and (b) duly received by her through
her former counsel. It was asserted that the former employee was fully aware of said return to
work order because she refused the same by filing a counter-manifestation with the former
labor arbiter. Moreover, the belated service of said return to work order does not prevent STI
ESG to choose actual reinstatement pending appeal as provided in the Labor Code.
After the parties filed their respective Rejoinder and Sur-Rejoinder, the new labor arbiter
granted STI ESG’s motion to submit the pending issues on the computation of the former
employee’s judgment award for resolution.
As at September 24, 2020, the new labor arbiter has not issued any resolution on the aforesaid
computation of the former employee’s judgment award.
ii. A former IT Instructor who eventually became the IT Program Head of STI College Cagayan
de Oro, a school owned by STI ESG, filed an illegal dismissal case against STI College
Cagayan de Oro on the ground that she was constructively dismissed when upon returning from
preventive suspension, she allegedly no longer had any work to go back to because the STI
ESG-owned company purportedly removed her workplace from the school premises. For its
part, STI ESG countered the complainant's claim that she was dismissed by presenting the
complainant's one-liner resignation letter.
The Labor Arbiter decided that there was neither an illegal dismissal nor resignation to speak
of in this case, hence, the parties were ordered to return to status quo, which meant
reinstatement of complainant to her former position but without backwages, separation pay, or
similar benefits. Nevertheless, STI was ordered to pay complainant the amount of
=7.4 thousand representing her unpaid salary for the period March 10-30, 2014. However, the
P
NLRC overturned the Labor Arbiter’s decision upon a dubious motion for partial
reconsideration declaring complainant to have been illegally dismissed and ordering STI ESG
not only to reinstate her but also to pay her full backwages computed from the time
compensation was withheld up to the date of actual reinstatement. STI ESG moved to
reconsider the NLRC's decision but to no avail. A Petition for Certiorari questioning the
decision of the NLRC was filed before the Court of Appeals.
On May 12, 2017, STI ESG received a copy of a Motion for Execution with Prayer for Payment
of Separation Pay in Lieu of Reinstatement filed by Complainant-Appellant seeking the
issuance of a writ of execution for the implementation of the Resolution dated June 30, 2016
issued by the Honorable Eight Division, National Labor Relations Commission, Cagayan de
Oro City. On May 22, 2017, STI ESG filed its Opposition to the Motion for Execution with
Prayer for Payment of Separation Pay in Lieu of Reinstatement.
Subsequently, a hearing on the motion for execution was set on June 5, 2017. In the said
hearing, STI ESG reiterated that it is amenable to reinstating complainant but as a Part-time
Full Load faculty member. Complainant countered that she is not interested in reinstatement
but would rather be paid her backwages and separation pay. When we asked for how much is
she willing to settle the matter amicably, she insisted that she be paid the total amount of her
backwages and separation pay. When asked if STI ESG has any counter-offer on the payment
of backwages and separation pay, STI ESG manifested that it already filed its opposition
thereto and that there is still a need for the official computation of the same. At that point, the
hearing officer showed STI ESG a computation of the backwages which amounted to
=0.5 million. STI ESG then manifested that it will bring the matter to management. On the part
P
of complainant, she manifested that she will file her reply to our opposition. The hearing officer
*SGVFSM004069*
- 92 -
then said that upon submission of said reply, the motion for execution is deemed submitted for
resolution.
Also, in the motion for execution, it was also alleged that the Court of Appeals already denied
the Petition for Certiorari of STI ESG. However, STI ESG did not receive any copy of said
resolution by the Court of Appeals. Upon inquiry with the Court of Appeals, it appeared that
the copy of the resolution dismissing the petition for certiorari was returned to sender due to
“RTS-UNKNOWN ADDRESS”. Apparently, the indicated address of counsel of record
simply states Ortigas Ave., Extension, Cainta, Rizal. STI ESG then filed a manifestation with
the Court of Appeals manifesting that it has yet to receive a copy of their minute resolution and
clarifying that the complete address where a copy of the said resolution may be sent is
“3rd Flr. STI Academic Center, Ortigas Avenue Extension, Cainta, Rizal 1900”.
On June 2, 2017, STI ESG received a copy of the Minute Resolution dated January 12, 2017
dismissing its Petition for Certiorari based on the following grounds: a) failure to attach a copy
of the Resolution dated June 30, 2017 of the NLRC; b) failure to attach the Secretary Certificate
authorizing Mario Malferrari, Jr. as representative for STI ESG to file the petition for certiorari;
c) failure to verify the petition; and d) failure to attach affidavit of service.
On June 21, 2017, STI ESG filed its Motion for Reconsideration.
Meanwhile, on July 12, 2017, STI ESG received an Order from the Office of the Labor Arbiter
granting the Motion for Execution filed by Complainant. On July 21, 2017, STI ESG received
a copy of the Writ of Execution issued by Office of the Labor Arbiter directing the payment of
=0.5 million to Complainant and her immediate reinstatement. In compliance with the Writ of
P
Execution, Complainant was paid the amount of = P0.5 million and was reinstated to her former
position.
On November 7, 2017, STI ESG received a copy of the Resolution of the Court of Appeals
dated September 25, 2017 on its motion for reconsideration. The Court of Appeals resolved to
grant the motion for reconsideration and reinstated STI ESG’s petition for certiorari.
Complainant was then directed to file her comment to the petition within ten (10) days from
receipt of the said resolution and STI ESG was given five (5) days to file its reply to
Complainant’s comment.
On January 31, 2018, STI ESG received a copy of a Minute Resolution dated January 15, 2018
issued by the Court of Appeals which resolved that Complainant is deemed to have waived her
filing of a comment to the petition for certiorari and directed the parties to file their respective
memorandum within fifteen (15) days from receipt of said minute resolution. Thereafter, the
petition for certiorari is deemed submitted for decision.
On February 15, 2018, STI ESG filed through registered mail its Memorandum with the
22nd Division, Court of Appeals, CDO. On April 25, 2018, STI ESG received a copy of
Complainant’s Memorandum. In a resolution of the Court of Appeals dated April 19, 2018,
with the filing of the parties’ respective memorandum, the Court declared the petition
submitted for decision.
On July 11, 2018, STI ESG received a copy of the Decision of the 21st Division, Court of
Appeals, CDO, setting aside the resolution of the NLRC declaring complainant to have been
illegally dismissed and awarding the payment of backwages. In the same decision, the Court
of Appeals dismissed the charge of illegal dismissal for lack of merit. However, STI College
CDO was directed to pay complainant the sum of P =7.4 thousand representing her unpaid salary
for the period March 10-30, 2014.
*SGVFSM004069*
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On September 5, 2018, STI ESG received a copy of the Motion for Reconsideration filed the
complainant with the Court of Appeals (Special Former Twenty-First [21st] Division). On
October 31, 2018, STI ESG received the resolution of the said court directing STI ESG to file
its Comment to the Motion for Reconsideration filed by complainant within ten (10) days from
notice. On November 12, 2018, STI ESG filed its Comment to the Motion for Reconsideration
of complainant. With the filing of the Comment, the Motion for Reconsideration is deemed
submitted for resolution.
On January 24, 2019, STI ESG received a copy of the Resolution of the Court of Appeals
(Special Former Twenty-First [21st] Division) denying the Motion for Reconsideration filed by
the complainant. On April 22, 2019, STI ESG received a copy of the Entry of Judgment of the
Decision dated June 29, 2018. With this development, STI ESG will now initiate proceedings
to recover the amount of P =0.5 million, more or less given to the complainant based on the
overturned decision of the NLRC.
As at September 24, 2020, STI ESG is preparing the necessary motion for the recovery of the
=0.5 million.
P
iii. Former part-time faculty members of STI College Legazpi who were erroneously issued
employment contracts for regular employees filed an illegal dismissal case against STI College
Legazpi, a school owned by STI ESG, following their stubborn refusal to sign their respective
job offers as required by CHED. The labor arbiter rendered a Decision finding the complainants
as regular employees of STI ESG; declaring the Parent Company as guilty of illegal dismissal;
and ordering the Parent Company to pay them separation pay of P =0.22 million, P=0.18 million,
=0.15 million, respectively, plus backwages, moral and exemplary damages of =
P P0.2 million
each, plus 10% attorney's fees.
Upon appeal to the NLRC, the case filed by one of the faculty members was dropped, while
the rest of the Decision was affirmed. Accordingly, a Motion for Reconsideration of the NLRC
Decision was filed wherein it prayed for the dismissal of the complaints of Brazil and Garcera
as well, invoking well-settled cases as jurisprudential authorities to persuade the NLRC to
dismiss the cases against the Parent Company.
As it developed, STI ESG prevailed at the NLRC, and the complaint was dismissed. The former
faculty members assailed said Decision of the NLRC at the Court of Appeals which denied the
Petition.
Both parties here may have been mistaken in believing that the former faculty members have
become regular faculty members by their length of service and seemingly satisfactory
performance. Because of such incorrect grant of regular employment status, STI ESG, for
years, have paid to complainants the salaries and benefits ought to be received by regular
faculty members, which they did not deserve considering their failure to meet the qualifications
set out in the Manual of Regulations for Private Schools (MORPS) and Manual of Regulations
for Private Higher Education (MORPHE). To punish STI ESG for such act of giving Petitioners
more than what they deserve would run contrary to the basic tenets of equity and justice. In
fact, STI sought to remedy its mistake by formulating its two-year compliance consideration
program, wherein affected teachers such as complainants shall continue to receive the same
benefits they are currently enjoying, subject to the completion of their master's degree within
a period of two (2) years. Even complainants admitted that their job offers stipulated a higher
monthly salary. In spite of all these, complainants chose not to sign the said job offers.
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The former faculty members filed a motion for reconsideration of the said decision of the Court
of Appeals. STI ESG filed its Comment on the motion for reconsideration emphasizing the
following points: (1) that the instant motion for reconsideration is pro-forma and should be
denied outright; and (2) that the petitioners failed to raise any substantial argument to warrant
a modification of the Court’s decision considering that (a) the Court of Appeals did not err in
finding that the NLRC did not commit grave abuse of discretion in dismissing petitioner’s
complaint for illegal constructive dismissal; and (b) the Court of Appeals did not err in
upholding the NLRC’s finding that petitioners were mere part-time teaching personnel of STI.
In a Resolution dated June 30, 2017, the Court of Appeals denied the Motion for
Reconsideration filed by the former faculty members.
On September 6, 2017, STI ESG received a copy of the Petition for Review on Certiorari of
the Decision of the Court of Appeals dismissing the complaint for illegal dismissal of the
former faculty members with the Supreme Court. STI ESG filed its Comment to the petition
on November 10, 2017.
In a decision dated November 21, 2018, the First Division of the Supreme Court denied the
petition filed by petitioners and affirmed the November 9, 2016 Decision as well as the
June 30, 2017 Resolution of the Court of Appeals.
As at September 24, 2020, STI ESG has yet to receive a motion for reconsideration by the
petitioners of the decision dated November 21, 2018.
iv. The case stemmed from a Complaint for illegal dismissal filed by former employees of STI
Davao. They were formerly the Chief Executive Officer (CEO) and Chief Operating Officer
(COO), respectively, of STI Davao, until they were separated from service effective
June 23, 2009.
On September 03, 2009, STI Davao filed a Motion to Dismiss before the Labor Arbiter and
prayed for the dismissal of the Complaint for illegal dismissal on the ground that the Labor
Arbiter and the NLRC have no jurisdiction over the case. STI Davao argued that Complainants
are not mere employees, but are rather corporate officers, of STI Davao. As such, the
controversy involving their removal involves an intra-corporate dispute which falls within the
jurisdiction of the regular courts.
On December 16, 2009, the Labor Arbiter issued an Order which granted the Motion to Dismiss
filed by STI Davao. The Labor Arbiter ruled that Complainants are corporate officers, and are
not mere employees, of STI Davao.
Not satisfied with the ruling of the Labor Arbiter, Complainants filed an appeal before the
NLRC. On September 30, 2010, the NLRC issued a Resolution affirming the Labor Arbiter’s
Order dated December 16, 2009 finding that Complainants are corporate officers whose
removal from office is not within the ambit of the jurisdiction of the NLRC. While they
subsequently filed a Motion for Reconsideration, such motion was denied by the NLRC.
Complainants then elevated the case to the Court of Appeals via a Petition for Certiorari. On
February 14, 2014, the Court of Appeals rendered a Decision annulling the assailed Resolutions
of the NLRC and found that Complainants are not corporate officers, but are rather mere
employees, of STI Davao. The case was thus ordered to be remanded to the Labor Arbiter for
reception of evidence. While STI Davao filed a Motion for Reconsideration, such motion was
denied by the Court of Appeals.
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STI Davao eventually elevated the case to the Supreme Court via a Petition for Review on
Certiorari. Unfortunately, through a Resolution dated August 19, 2015, the Supreme Court
denied the Petition. STI Davao’s Motion for Reconsideration was likewise denied by the
Supreme Court.
On August 23, 2017, STI Davao received a Notice of Hearing from the Office of Labor Arbiter
for a preliminary conference set on September 18, 2017. STI Davao attended the said hearing.
During the hearing, Complainants proposed for the amicable settlement of their claims the
payment of their separation pay, backwages, monetary benefits, as well as damages with
attorney’s fees. STI Davao requested that Complainants provide the exact amount of what they
are asking for the amicable settlement of their claims. Another hearing was made on
October 26, 2017 for the continuation of the preliminary conference.
In the October 26, 2017 hearing, Complainants provided STI Davao with a computation of
what they are willing to accept for the amicable settlement of the case with total amount of
=33.2 million.
P
In the December 5, 2017 hearing, considering the substantial amount being demanded by
Complainants for the amicable settlement of their claims, no amicable settlement was reached
by the parties, hence, they were directed to file their respective position papers within ten days
from the receipt of the order from the Office of the Labor Arbiter. The last day of the ten-day
period to file STI Davao’s position paper was on February 5, 2018. However, a Motion for
Extension of Time to File Position Paper was filed by STI Davao on February 5, 2018.
On February 19, 2018, STI ESG filed its position paper by registered mail. In the Position
Paper, the following important points were raised: (1) the complainants’ termination from
employment is clearly legal having been grounded on just and valid causes since (a) the
adoption of the Parent Company’s Basic Operations Manual and Code of Conduct providing,
among others, disciplinary rules and regulations on willful disobedience of the lawful orders,
instructions, policies and procedure of the Parent Company, is well within the ambit of
management prerogative, (b) complainants’ willful disregard and violation of the Parent
Company’s Basic Operations Manual and Code of Conduct providing guidelines and standards
for employees to effectively go about their roles and prohibiting willful disobedience as well
as failure to perform assigned tasks, constitute sufficient bases for termination of employment,
(c) complainants’ acts or omissions in willful disregard of the Parent Company’s general work
policies and procedures, amounted to gross and habitual neglect of duties, (d) complainants’
willful disregard of the Parent Company’s operating procedures and systems amounted to
serious misconduct, and (e) the Parent Company’s evidence sufficiently established facts and
incidents upon which the loss of confidence in the complainants may fairly be made to rest
considering that (i) complainants held a position of trust and confidence, and (ii) complainants’
termination was based on willful breach of trust and founded on clearly established facts;
(2) the School observed the requirements of due process before effecting complainants’
dismissal from employment; (3) complainants are not entitled to their claims for reinstatement
and the payment of monetary benefits, such as allowance, as well as damages and attorney’s
fees; and (4) complainants have no cause of action for illegal suspension and against individual
respondent of STI ESG.
On March 14, 2018, STI ESG received a copy of the Position Paper of complainants. On
April 5, 2018, STI ESG filed its Reply to the Position Paper of complainants. In said reply, STI
ESG emphasized the following important points: (1) the Parent Company’s prerogative to
terminate the complainants’ employment on just and valid causes does not run afoul with the
enshrined right to security of tenure; (2) complainants’ termination from employment was
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warranted by just and valid grounds as (a) the just and valid causes were proven with substantial
evidence, and (b) the penalty of dismissal is warranted under the circumstances;
(3) there is no necessity to dwell on the issue of whether the respondents observed and complied
with the requirements of due process before effecting complainants’ dismissal from
employment; and (4) complainants are not entitled to their claim for reinstatement with
payment of full backwages, and other monetary claims such as damages and attorney’s fees.
In a decision dated June 28, 2018, the labor arbiter dismissed the complaint for lack of merit.
On August 2, 2018, STI ESG received a copy of the Memorandum of Appeal filed by
complainants with the NLRC. On August 28, 2018, STI ESG filed its Answer to Appeal with
the Eighth Division of the NLRC in Cagayan De Oro City where it was emphasized that the
complainants had failed to show that the Arbiter a quo committed grave abuse of discretion
and/or serious errors in rendering the assailed Decision, particularly in declaring that the
complainants were lawfully terminated on the ground of loss of trust and confidence. In support
of STI ESG’s counter-arguments to the complainants’ arguments, STI ESG stressed on the
following important points: (a) the Appeal is just a 90% verbatim reproduction of the facts,
arguments and discussion in their Position Paper; and (b) there was no such grave error shown
in the case at bar considering that there is more than sufficient basis for the School to lose the
trust and confidence it bestowed upon the complainants (i) as one of the complainants
demonstrated, through repeated infractions, that complainant is not fit to continue undertaking
the serious task and heavy responsibility of a CEO, and this holds true for the other
complainant, being the COO of STI Davao, (ii) the willful act of disregarding the Operating
Procedures and Systems equates to abuse of authority and, therefore, is sufficient basis for STI
to lose its trust and confidence on the complainants, and (iii) the task of ensuring the integrity
of the RFA by warranting the completeness and accuracy of the information and required
supporting documents thereto, definitely falls within the complainants’ scope of
responsibilities.
In a Decision dated February 13, 2019, the Eighth Division of the NLRC in Cagayan De Oro
City dismissed the Appeal filed by the complainants and hereby affirmed the earlier Decision
of Labor Arbiter dated June 28, 2018. A motion for reconsideration dated March 4, 2019 was
filed by the complainants. On March 25, 2019, STI ESG filed its Opposition to the Motion for
Reconsideration filed by the complainants. In a Resolution dated March 26, 2019, the Eighth
Division of the NLRC in Cagayan De Oro City denied the Motion for Reconsideration filed by
the complainants.
On June 10, 2019, STI ESG received a copy of the Petition for Certiorari filed by complainants
with the Court of Appeals in Cagayan De Oro City. On July 4, 2019, STI ESG received a copy
of the Resolution dated June 25, 2019 of the Court of Appeals in Cagayan De Oro City
dismissing the Petition for Certiorari filed by complainants for failure to comply with the
requirements for filing said petition.
A motion for reconsideration dated July 18, 2019 on the said resolution of the Court of Appeals
in Cagayan De Oro City dismissing the Petition for Certiorari was filed by complainants. As at
September 24, 2020, STI ESG filed its Comment to the motion for reconsideration of the
complainants.
Without having received the resolution of the Court of Appeals on the motion for
reconsideration filed by complainant, as at August 03, 2020, STI ESG received a copy of
Complainant’s Petition for Review on Certiorari filed before the Supreme Court. As at
September 24, 2020, STI ESG has yet to receive any action by the Court of Appeals on the
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motion for reconsideration filed by complainants. The Supreme Court likewise has yet to
render its initial action on the Petition.
c. Specific Performance Case. STI College Cebu, Inc. (STI Cebu) and STI ESG’s Finance Officer
were named defendants in a case filed by certain individuals for specific performance and damages.
In their Complaint, the Plaintiffs sought the execution of Deed of Absolute Sale over a parcel of
land situated in Cebu City on the bases of an alleged perfected contract to sell.
On March 15, 2016, STI ESG, as the surviving corporation in the merger between STI ESG and
STI Cebu, filed a Motion to Dismiss.
After the filing of their respective pleadings to the said Motion(s) to Dismiss, the Defendants
received on February 28, 2017 the Resolution of the Trial Court wherein it denied the Defendants’
Motion(s) to Dismiss.
On March 6, 2017, the Defendants filed their Joint Motion for Reconsideration Ad Cautelam in
relation to the Resolution.
On March 14, 2017, the Defendants received the Plaintiffs’ Comment/Opposition to Joint Motion
Reconsideration Ad Cautelam and/or Motion to Declare Defendants in Default dated
March 11, 2017 (Comment with Motion). In the Comment with Motion, Plaintiffs alleged that the
Defendants should have filed their Answer instead of the Joint Motion for Reconsideration Ad
Cautelam after the denial of their Motions to Dismiss. Considering that the Defendants did not file
their Answer, Plaintiffs moved to declare the Defendants in default.
After due proceedings and filing of their respective responsive pleadings to the aforesaid (a) Joint
Motion and (b) Motion to Declare in Default, the Trial Court issued the Resolution dated
August 16, 2017, which denied the said Motions.
After seeking an extension to file the Answer to the Plaintiffs’ Amended Complaint, the Defendants
filed the Consolidated Answer to the Amended Complaint on August 30, 2017. In the Consolidated
Answer, Defendants asserted that there is no perfected contract to sell or of sale between STI ESG
and the Plaintiffs considering that (a) there is no Board approval on the sale of the Subject Property;
(b) lack of definite terms and conditions thereof; and (c) the Finance Officer of STI ESG has no
authority to bind STI ESG on the alleged contract to sell or sale of the Subject Property.
While Plaintiffs opposed the (a) motion for extension and (b) subsequent filing of the Consolidated
Answer, the Trial Court affirmed the admission of the Consolidated Answer and set the case for
pre-trial.
While both parties were referred to court-annexed mediation and judicial dispute resolution as
required under the relevant rules, the parties failed to reach an amicable settlement of the case.
As required by the rules, the case was re-raffled to a new presiding judge who will handle the trial
and disposition of the case.
On August 3, 2018, STI ESG received a Notice from the new Presiding Judge setting the case for
pre-trial on August 14, 2018.
After the unsuccessful judicial dispute resolution, the case was re-raffled from Branch 6 to
Branch 42 of the Regional Trial Court of Manila
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On August 14, 2018, Plaintiffs filed a Motion for Leave to Admit Second Amended Complaint,
whereby they sought the substitution of STI ESG as one of the Defendants.
After the filing of opposition thereto, STI ESG received the Summons dated September 26, 2018,
directing it to file its Answer to the Plaintiff’s Second Amended Complaint.
On October 17, 2018, the Defendants filed their Amended Consolidated Answer with Compulsory
Counterclaims.
On November 8, 2018, the Defendants received the Order dated October 26, 2018 of the Trial
Court. In the Order, the Trial Court set the pre-trial conference on November 14, 2018 and required
the parties to file not later than five (5) days before pre-trial their respective Judicial Affidavit(s)
of their witnesses.
On November 9, 2018, the Defendants filed their Amended Pre-Trial Brief and Judicial Affidavit(s)
of their witnesses.
On November 14, 2018, the parties attended and participated in the scheduled pre-trial conference
Based on the plaintiffs’ pre-trial brief and manifestation during said hearing, the Plaintiffs intended
to include in their list of witnesses two senior officers of STI ESG. While there were no
interrogatories sent to said adverse witnesses as required by the Rules of Court, the Defendants
reserve their right to file the appropriate pleading on said matter.
The Trial Court then gave the Plaintiffs six (6) hearing dates to present their witnesses. Within the
said period, the Plaintiffs presented four (4) witnesses. Based on their respective testimonies, the
said witnesses testified the discussions and/or communications between the Plaintiffs and STI
ESG’s Finance Officer regarding the sale of the subject property.
During their respective cross-examination, the said witnesses failed to provide any document
and/or evidence showing (a) the authority of the Finance Officer to bind STI ESG on said
negotiations and (b) approval of the BOD of STI ESG on the terms and conditions discussed during
said negotiations.
After the Plaintiffs presented their fourth (4th) witness, the Plaintiffs orally moved for the issuance
of Subpoena to two Senior Officers of STI ESG.
In relation to said subpoena and to comply with the relevant provisions of the Rules of Court, the
Plaintiffs served written interrogatories to the said Senior Officers.
After STI ESG objected on the same, the Trial Court ordered the Senior Officers to file their
respective Answer(s) to the written interrogatories.
After the filing and admission of their Answer(s) to the written interrogatories of the Plaintiffs, the
case was set for continuation of the Plaintiffs’ presentation of evidence June 19, 2019.
Despite being allowed by the Trial Court to propound additional oral interrogatories to the Senior
Officers, the Plaintiffs waived the same before the scheduled hearing.
Consequently, the Trial Court required the Plaintiffs to file their Formal Offer of Evidence in order
to terminate the presentation of their evidence.
On August 6, 2019, the Defendants received the Formal Offer of Evidence of the Plaintiffs.
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After the Defendants filed its Objections to the Formal Offer of Evidence, the Trial Court issued
its Order dated September 27, 2019. In the Order, the Trial Court denied the admission of, among
others, the SMS messages relating to the communications between certain officers of STI ESG and
Plaintiffs, and a certification issued by the Finance Officer on the receipt of an earnest money from
the Plaintiffs marked as Exhibit “G-2”.
On October 21, 2019, the parties appeared before the Trial Court to set the schedule for the
presentation of the testimonies of the witnesses of STI ESG. Upon agreement of the parties, the
same is set for hearing on November 12, 19, 29 and December 3, 2019.
On October 23, 2019, STI ESG received the Plaintiffs’ Motion for Partial Reconsideration of the
Order dated September 27, 2019. In the said Motion, the Plaintiffs sought for the admission of the
evidence excluded by the Trial Court except Exhibit “G-2”.
After filing the Comment to the Plaintiffs’ Motion for Partial Reconsideration on
November 8, 2019, the Trial Court issued its Omnibus Order dated November 11, 2019. In the
Omnibus Order, the Trial Court admitted the exhibits enumerated in the Motion for Partial
Reconsideration except the SMS messages. However, the Trial Court also admitted Exhibit “G-2”
despite (a) the Defendant’s valid objections and (b) the same was not included in the exhibits sought
to be admitted in the Motion for Partial Reconsideration.
On November 12, 2019, the Defendants presented their first witness, Defendant Finance Officer,
to testify, among others, that (a) he acted as liaison of the STI Cebu and STI ESG on the
negotiations for the sale of the subject property and (b) the Boards of Directors of STI Cebu and
STI ESG did not approve the proposal/offer to purchase of the Plaintiffs.
After cross-examination, the Defendants terminated the presentation of said witness’ testimony.
On November 29, 2019, the Defendants presented their external counsel’s accountant who testified
on their counterclaim against the Plaintiffs for legal cost/fees incurred for the case.
On January 17, 2020, the Defendants terminated the presentation of their evidence.
After due proceedings on the Defendants’ Formal Offer of Evidence, the Trial Court issued the
Order dated February 13, 2020, which admitted all the documentary evidence of the Defendants.
After both parties completed the presentation of evidence and filed their respective Memoranda,
the Defendants received the Decision of the Trial Court on June 22, 2020.
In the Decision dated June 18, 2020, the Trial Court determined that there was no perfected contract
to sell over the Property. The Trial Court affirmed that the Plaintiffs failed to obtain the consent of
STI ESG. There was no evidence showing that STI ESG, through its BOD, (a) gave its consent to
the sale or (b) authorized its Finance Officer to sell the Property in favor of the Plaintiffs.
However, the Trial Court determined that STI ESG’s Finance Officer is liable to pay the Plaintiffs
the total amount of Two Hundred Thousand Pesos (₱0.2 million) representing temperate and
exemplary damages (“Damages”). The Trial Court determined that the actions of STI ESG’s
Finance Officer insofar as (a) receipt of the earnest money, (b) lack of written authority from STI
ESG during the negotiation and (c) continued assurances to the Plaintiffs in relation to the BIR
ruling on the tax-free exchange and then sudden withdrawal from the transaction constitute bad
faith.
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Lastly, the Trial Court ordered STI ESG to return the amount of Three Hundred Thousand Pesos
(₱0.3 million) it received from the Plaintiffs as “earnest money” with interest rate of six percent
(6%) per annum from receipt thereof on March 30, 2011 until latter’s tender of the same to the
Plaintiffs on July 2, 2015.
Both parties filed their respective Partial Motion for Reconsideration insofar as the (a) dismissal of
the Complaint and (b) award of Damages.
On August 25, 2020, the Trial Court issued its Order, which modified the Decision only insofar as
requiring STI ESG’s Finance Officer to pay an additional ₱50.0 thousand as attorney’s fees in favor
of the Plaintiffs. The rest of the findings in the Decision is affirmed.
Consequently, the parties will comply with the appeal procedures required under the Rules of
Court.
d. Complaint for Damages filed by GATE (formerly STI-College Santiago, Inc.). Global Academy of
Technology and Entrepreneurship, Inc. (GATE) filed a complaint for Damages against STI ESG
for its non-renewal of the Licensing Agreement despite the former’s alleged compliance of the
latter’s audit recommendations. On the basis of such alleged invalid non-renewal of the Licensing
Agreement, GATE seeks for (a) moral damages in the amount of = P0.5 million, (b) exemplary
damages in the amount of P =0.5 million and (c) attorney’s fees in the amount of 15% of the amount
to be awarded and = P3.0 thousand per court appearance.
On January 23, 2017, STI ESG filed its Motion to Dismiss Ad Cautelam. In the said Motion, STI
ESG asserted that the dismissal of the case was warranted on the following grounds; (a) lack of
jurisdiction over STI ESG due to improper service of Summons to a Human Relations Officer (HR
Officer), and (b) failure to state a cause of action because GATE has no right for the renewal of the
Licensing Agreement when (i) the same already expired and (ii) it clearly provides that it may be
renewed by mutual agreement of the parties. The Motion to Dismiss Ad Cautelam was set for
hearing on February 3, 2017.
On February 3, 2017, STI ESG received GATE’s Comment /Opposition. In the said
Comment/Opposition, GATE alleged that (a) the HR Officer was allegedly authorized by its
in-house counsel to receive the Summons, and (b) the decision of STI ESG not to renew the
Licensing Agreement was not based on its mutual agreement provision but the violations of GATE.
Consequently, such decision of STI ESG to cancel the Licensing Agreement was allegedly in bad
faith.
Upon the filing of all the pleadings in relation to the Motion to Dismiss Ad Cautelam of STI ESG,
the Trial Court issued its Resolution dated May 16, 2017, which denied the said Motion. The Trial
Court also required STI ESG to file its Answer to the Complaint within the non-extendible fifteen
(15) days from receipt of said Resolution on May 25, 2017 or until June 9, 2017.
On June 9, 2017, STI ESG filed its Answer to the Complaint. In the Answer, STI ESG reiterated
its position that GATE has no cause of action against it because its decision not to renew the
Licensing Agreement is in accordance with contractual stipulations therein that its renewal is upon
mutual agreement of both parties. Considering the effectivity period of the Licensing Agreement
expired on March 31, 2016 without being renewed by both parties, GATE cannot claim any
damages for STI ESG’s lawful exercise of its rights under the Licensing Agreement.
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Both parties have been required to attend and participate in the court-annexed mediation, and
subsequently, the judicial dispute resolution with the Trial Court. After the aforesaid proceedings,
the parties failed to reach an amicable settlement and terminated the judicial dispute resolution on
October 27, 2017. As mandated by the relevant rules, the case was raffled to a new presiding judge.
The new presiding judge issued an Order setting the case for pre-trial hearing on May 11, 2018.
The pre-trial proper was re-scheduled by the Trial Court in order for the parties to pre-mark their
documentary evidence before the branch clerk of court on May 23, 2018.
On May 23, 2018, both parties attended and caused the pre-marking of their respective
documentary exhibits.
Meanwhile, the pre-trial was set by the Trial Court and upon agreement of the parties on
August 31, 2018.
On August 31, 2018, the pre-trial conference commenced and terminated on the same day. The
Trial Court then scheduled the presentation of the testimony of the Plaintiffs’ witnesses on
October 9 and 30, 2018.
On October 9 and 30, 2018, the Plaintiff presented its two witnesses.
Thereafter, the Plaintiff terminated their presentation of evidence and filed their Formal Offer of
Evidence.
On December 11, 2018, STI ESG filed the Comment and Objections to the said Formal Offer of
Evidence.
On February 6, 2019, the Trial Court issued the Order dated January 10, 2019. In the Order, the
Trial Court denied the admission of two (2) letters issued by both parties as part of the evidence of
the Plaintiff.
After the Plaintiffs filed the Motion for Reconsideration, the Trial Court admitted the aforesaid two
(2) letters, and set the presentation of evidence by STI ESG.
STI ESG presented three (3) witnesses in relation to its defense that the decision not to renew the
Licensing Agreement was (a) in accordance with the contractual stipulations therein, and
(b) devoid of any bad faith. Moreover, STI ESG presented evidence to show the attorney’s fees it
incurred in the instant case.
After the presentation of the last witness, STI ESG formally offered its evidence by filing its Formal
Offer of Evidence on May 22, 2019.
After the Plaintiffs filed their Comment/Objections to the Formal Offer of Evidence, the Trial Court
issued its Order dated July 18, 2019. In the Order, the Trial Court denied the admission of only one
(1) exhibit, which was the letter of Plaintiff’ counsel to STI ESG insisting that the cancellation of
the Licensing Agreement was erroneous and in bad faith.
In the same Order, the Trial Court required the parties to file their respective Memoranda. After
the filing of said Memoranda, the case was submitted for decision by the Trial Court.
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On February 4, 2020, STI ESG received the Decision dated January 16, 2020. In the Decision, the
Trial Court dismissed the instant case because the Plaintiffs failed to establish that STI ESG acted
in abuse of rights when it refused to renew the Licensing Agreement with the Plaintiffs. The Trial
Court confirmed that said Agreement clearly provided that the same can only be renewed by mutual
agreement of the parties.
The Trial Court also ordered the payment by the Plaintiffs of STI ESG’s counterclaim in the amount
of P
=0.3 million as attorney’s fees plus cost of suit. Despite filing a Motion for Reconsideration,
the Trial Court affirmed its dismissal of the Plaintiff’s claim and the award of litigation cost in
favor of STI ESG in an Order dated July 6, 2020.
On August 3, 2020, STI ESG received the Notice of Appeal filed by the Plaintiff.
e. Criminal Case. A complaint for qualified theft was filed by the Parent Company against its former
school accounting supervisor and acting school accountant (former supervisor/accountant). In the
complaint, the Parent Company alleged that said former supervisor/accountant manipulated the
payroll registers of STI College Global City by including the name of a former faculty member of
STI College Global City in the payroll registers and placing a corresponding salary and 13th month
pay beside said faculty member’s name. The salary of said former faculty member was deposited
in a bank account belonging to the former supervisor/accountant. The total amount deposited to the
bank account of the former supervisor/accountant through this scheme amounted to = P0.2 million.
The complaint for qualified theft was filed with Office of the City Prosecutor of Taguig City.
Summons to the former supervisor/accountant was returned undelivered despite the Parent
Company providing additional addresses of the former supervisor/accountant where the summons
could be served.
After the former supervisor/accountant failed to appear on two preliminary investigations, the
complaint was submitted for resolution.
On September 8, 2016, STI ESG filed an Ex-Parte Motion for Early Resolution to resolve the case
pointing out that more than sixteen (16) months have elapsed since the matter was submitted for
resolution.
As at September 24, 2020, the Office of the City Prosecutor of Taguig City has yet to issue a
resolution in the instant case.
f. Breach of contract. STI ESG engaged the services of Mobeelity Innovations, Inc. (MOBEELITY)
to deploy its digital classroom pilot, also known as e-Learning Management System (eLMS) and
MOBEELITY committed to provide the necessary applications suite of the intended learning
management system of STI ESG.
MOBEELITY undertook to provide STI ESG with access to the EDU 2.0 LMS (now known as
NEO) and iMEET virtual classroom. MOBEELITY committed to provide STI ESG with online
and on-site technical support for the implementation of the EDU 2.0 LMS and iMEET virtual
classroom. Furthermore, MOBEELITY committed to provide STI ESG with all updates and
modifications to EDU 2.0 LMS and iMEET virtual classroom free of charge. Out of these two
platforms, STI ESG was only able to avail of and utilize the EDU 2.0 LMS under the agreement.
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MOBEELITY provided STI ESG access to the EDU 2.0 LMS. EDU 2.0 LMS is a product of
Cypher Learning, and MOBEELITY was an authorized reseller of this product. In accordance with
the terms of the Agreement, STI ESG paid MOBEELITY the sum of = P3.3 million as downpayment
for services to be rendered by MOBEELITY for the First Semester of SY 2016-2017 or from June
to November 2016.
On June 12, 2016, it came to the attention of STI ESG that Cypher Learning had terminated its
relationship with MOBEELITY due to the fraudulent acts committed by MOBEELITY against
Cypher Learning.
Pursuant to the arbitration clause of the Memorandum dated September 8, 2014 (Memorandum)
executed by STI ESG and MOBEELITY, STI ESG initiated the instant ad hoc arbitration to settle
a dispute involving the reimbursement of = P3.3 million by MOBEELITY due to a breach of its
obligations under the Memorandum.
After due proceedings, the Arbitral Tribunal issued the arbitral award dated August 9, 2018 wherein
MOBEELITY is required to pay STI ESG the amount of = P3.3 million and arbitration cost of
=0.9 million.
P
STI ESG, through counsel, will be filing the appropriate petition before the Regional Trial Court
of Makati City for the execution of the aforesaid arbitral award as required by law.
g. Due to the nature of the Parent Company’s business, it is involved in various legal proceedings,
both as plaintiff and defendant, from time to time. The majority of outstanding litigation involves
illegal dismissal cases under which faculty members have brought claims against the Parent
Company by reason of their faculty and/or employment contracts. Management and its legal
counsels believe that the Parent Company has substantial legal and factual bases for its position
and is of the opinion that losses arising from these legal actions and proceedings, if any, will not
have a material adverse impact on the Parent Company’s consolidated financial position and results
of operations.
h. Other subsidiaries also stand as the defendant of various lawsuits and claims filed by their former
employees. The complainants are seeking payment of damages such as backwages and attorney’s
fees.
As at September 24, 2020, the cases are pending before the labor arbiter.
Management and their legal counsels believe that the outcome of these cases will not have a
significant impact on the consolidated financial statements.
Commitments
a. Financial Commitments
The Parent Company has domestic bills purchase lines from various local banks amounting to
=65.0 million as at March 31, 2020, specifically for the purchase of local and regional clearing
P
checks. Interest on drawdown from such facility is waived except when drawn against returned
checks to which the interest shall be the prevailing lending rate of such local bank. This facility is
on a clean basis.
*SGVFSM004069*
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b. Capital Commitments
As at March 31, 2020, STI ESG has contractual commitments and obligations for the construction
of STI Legazpi with an aggregate project cost of =
P251.8 million of which =
P135.2 million has been
paid as at March 31, 2020.
As at March 31, 2019, the STI ESG has contractual commitments and obligations for the
construction of school buildings for STI Lipa, STI Sta. Mesa, STI Pasay-EDSA and STI San Jose
del Monte with an aggregate amount of = P1,956.6 million of which = P1,850.6 million and
=1,682.4 million have been paid as at March 31, 2020 and 2019, respectively.
P
c. Others
(i) On April 21, 2017, STI ESG, Mr. Tony Tan Caktiong (TTC), STI Tanauan, and Injap
Investments, Inc. (Injap), referred collectively as the Joint Venture Parties, entered into an
agreement to transform STI Tanauan into a Joint Venture Company which shall operate a
farm-to-table school that offers courses ranging from farm production to food services.
The Joint Venture Parties also agreed to increase STI Tanauan’s authorized capital stock to
an amount that will be agreed by the Joint Venture Parties in a separate agreement. As agreed
by the Joint Venture Parties, the increase in the authorized capital stock will be funded through
STI Tanauan’s declaration of stock dividends to STI ESG based on STI Tanauan’s
unrestricted retained earnings as at March 31, 2017 and cash payments by the Joint Venture
Parties.
The equity sharing in the Joint Venture Company would be 60%, 25% and 15% for STI ESG,
TTC and Injap, respectively.
On June 21, 2017, in separate meetings, the stockholders and the BOD of STI Tanauan
approved the increase in the authorized capital stock of the corporation from = P1.0 million
divided into 10,000 shares with a par value of = P100 to = P75.0 million divided into
750,000 shares with a par value of =P100. The increase will be funded through the declaration
of stock dividends and cash subscriptions by the shareholders. In the same meeting, the
stockholders and the BOD approved the declaration of 150,000 shares as stock dividends with
an aggregate par value of = P15.0 million to be distributed to stockholders of record as at
March 31, 2017 based on the unrestricted retained earnings of STI Tanauan as shown in its
audited financial statements as at March 31, 2017.
On January 24, 2018, STI ESG subscribed to and fully paid for 35,000 shares at a subscription
price of =
P495 per share for a total of P
=17.3 million.
On February 26, 2018, STI Tanauan applied with the SEC to increase its authorized capital
stock from =
P1.0 million to =
P75.0 million.
On March 2, 2018, the SEC approved the increase and issued the Certificate of Approval on
Increase of Capital Stock.
On March 3, 2018, STI Tanauan issued to STI ESG stock dividends of 150,000 shares and
35,000 shares as subscribed by the latter.
*SGVFSM004069*
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(ii) On December 17, 2018, the CHED, Unified Student Financial Assistance System for Tertiary
Education Board (UniFAST) and STI ESG signed a memorandum of agreement to avail of
the Tertiary Education Subsidy (TES) and Student Loan Program (SLP) for its students under
the “Universal Access to Quality Tertiary Education Act (UAQTEA)” and its Implementing
Rules and Regulations (IRR). Republic Act No. 10931 or the UAQTEA and its IRR provide
among others, that to support the cost of tertiary education or any part or portion thereof, TES
and SLP are established for all Filipino students who shall enroll in undergraduate and post-
secondary programs of private HEIs. Accordingly, the TES and the SLP shall be administered
by the UniFAST Board. The annual TES for students, subject to guidelines and implementing
rules and regulations on the release of TES, enrolled in SUCs or CHED recognized LUCs is
=40.0 thousand. Students enrolled in select private HEIs who are qualified to receive the TES,
P
are entitled to =
P60.0 thousand. The TES sharing agreement states that P =40.0 thousand shall
go to the TES student grantee and = P20.0 thousand to the private HEI. The subsidy is for
Tuition and other related school fees and should cover the living allowance, books, supplies,
transportation and miscellaneous expense. Additional benefits are likewise given to Persons
with Disabilities (PWDs) and graduates of programs with licensure exams amounting to
=30.0 thousand per annum and =
P P10.0 thousand, respectively. Under the TES program, CHED
pays directly the schools where these students enrolled.
(iii) On October 21, 2019, STI ESG, acting on its own and in behalf of NAMEI Polytechnic
Institute Inc. (collectively referred to as “STI”) and Raft Shore People, Inc. (RAFT), entered
into a Cooperation Agreement (the “Agreement”) to work together to ensure that the seafarers
of the Philippines continue to be the preferred employees of international shipping companies.
In summary, the parties agree as follows:
a. Establish a culinary school offering modular culinary courses which shall prepare the
students to work on board cruise vessels and to jointly oversee the preparation and
implementation of modular culinary and catering courses.
b. To jointly oversee the preparation and implementation of the curriculum for courses such
as Bachelor of Science in Marine Transportation, Bachelor of Science in Marine
Engineering, Senior High School Maritime track and Maritime Information Technology
Programs. The parties likewise endeavor to enhance the curriculum with electives or
additional modular courses in keeping with the requirements of the international shipping
industry and the International Convention on Standards of Training, Certification and
Watchkeeping for Seafarers (STCW).
c. To engage the Dean and other administrators as well as the members of the faculty who
are professionals and are highly qualified to provide the students with the requisite
education and training which will prepare them for work on board vessels.
The parties recognize that RAFT has already incurred expenses, including faculty costs in
preparation for this cooperation agreement. As such, STI will reimburse RAFT US$150,000,
with 50% payable upon signing of the agreement while the remaining 50% will be payable
within calendar year 2020. Additionally, and as compensation for jointly overseeing and
providing academic governance, selection and management of faculty, as well as curriculum
and courseware preparation and implementation for the courses agreed upon, STI shall pay
RAFT the sum of US$10,000 per month beginning January 2020. The parties also agreed that
a variable compensation of 5% of the tuition fee shall be paid to RAFT when the student
population reaches 2,000 plus an additional 1% variable compensation for every
1,000 enrollees while RAFT shall receive 5% of tuition fee for the culinary/hospitality
programs upon reaching a student population of 2,000 plus 1% variable compensation for every
*SGVFSM004069*
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1,000 enrollees. Said variable compensation may be increased from year to year at the
discretion of the governing board.
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 working
capital and major capital investment financing for the Group’s school operations. The Group has
various other financial assets and liabilities such as receivables, accounts payable and other current
liabilities which arise directly from its operations.
The main risks arising from the Group’s financial instruments are liquidity risk, credit risk and interest
rate risk. The Parent Company’s BOD and management reviews and agrees on the policies for
managing each of these risks as summarized as follows.
Liquidity Risk
Liquidity risk arises from the possibility that the Group may encounter difficulties in raising funds to
meet its currently maturing commitments. The Group’s liquidity profile is managed to be able to
finance its operations and capital expenditures and other financial obligations. To cover its financing
requirements, the Group uses internally-generated funds and interest-bearing loans and borrowings. As
part of its liquidity risk management program, the Group regularly evaluates the projected and actual
cash flow information and continuously assesses conditions in the financial markets for opportunities
to pursue fund-raising initiatives
Any excess funds are primarily invested in short-dated and principal-protected bank products that
provide the flexibility of withdrawing the funds anytime. The Group regularly evaluates available
financial products and monitors market conditions for opportunities to enhance yields at acceptable
risk levels.
The Group’s current liabilities are mostly made up of trade liabilities with a 30 to 60-day payment
terms, current portion of interest-bearing loans and borrowings that are expected to mature within one
year after reporting date. On the other hand, the biggest components of the Group’s current assets are
cash and cash equivalents, receivables from students and franchisees and advances to subsidiaries,
associates and joint ventures with credit terms of 30 days.
As at March 31, 2020 and 2019, the Group’s current assets amounted to P=1,861.0 million and
=1,764.3 million respectively, while current liabilities amounted to P
P =1,043.7 million and
=1,023.6 million, respectively.
P
As part of the Group’s liquidity risk management program, management regularly evaluates the
projected and actual cash flow information.
In relation to the Group’s interest-bearing loans and borrowings, the debt service coverage ratio, based
on the consolidated financial statements of STI ESG and its subsidiaries, is also monitored on a regular
basis. The debt service coverage ratio is equivalent to the EBITDA divided by total principal and
interests due for the next twelve months. The Group monitors its debt service coverage ratio to keep it
at a level acceptable to the Group, the lender bank and the STI ESG bondholders. The Group’s policy
is to keep the debt service coverage ratio not lower than 1.05:1.00. Related developments due to the
outbreak and the economic effects of COVID-19 are discussed in Note 39.
*SGVFSM004069*
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The tables below summarize the maturity profile of the Group’s financial assets held for liquidity
purposes and other financial liabilities based on undiscounted contractual payments.
2020
Less than 3 to 12 More than
On demand 3 Months Months 1 Year Total
Financial Assets
Loans and receivables at amortized cost:
Cash and cash equivalents = 617,682,038
P =–
P =–
P =–
P = 617,682,038
P
Receivables* 170,078,732 181,103,982 117,673,877 143,668,550 612,525,141
Rental and utility deposits (included as part of the
“Goodwill, intangible and other noncurrent
assets” account) – – – 32,194,153 32,194,153
Equity investments designated at FVOCI – – – 67,599,307 67,599,307
= 787,760,770
P = 72,807,969
P = 181,103,982
P = 243,462,010
P = 1,330,000,639
P
Financial Liabilities
Other financial liabilities:
Bonds payable
Principal P–
= =–
P =–
P = 3,000,000,000
P = 3,000,000,000
P
Interest – – 178,905,220 693,555,420 872,460,640
Interest-bearing loans and borrowings
Principal – – 240,000,000 920,000,000 1,160,000,000
Interest – – 81,704,050 235,849,160 317,553,210
Accounts payable and other current liabilities** 468,555,889 6,716,532 43,363,248 – 518,635,669
Lease liabilities – 17,877,211 62,630,271 485,108,141 565,615,623
Other noncurrent liabilities*** – – – 37,803,729 37,803,729
= 468,555,889
P = 24,593,743
P = 606,602,789
P = 5,372,316,450
P = 6,472,068,871
P
2019
Less than 3 to 12 More than
On demand 3 Months Months 1 Year Total
Financial Assets
Loans and receivables at amortized cost:
Cash and cash equivalents P401,238,061
= =–
P P–
= P–
= P401,238,061
=
Receivables* 378,667,040 24,636,095 – – 403,303,135
Rental and utility deposits (included as part of the
“Goodwill, intangible and other noncurrent
assets” account) – – – 55,696,369 55,696,369
Equity investments designated at FVOCI – – – 49,777,643 49,777,643
=779,905,101
P =24,636,095
P =–
P =105,474,012
P =910,015,208
P
Financial Liabilities
Other financial liabilities:
Bonds payable
Principal P–
= P–
= =–
P =3,000,000,000
P P3,000,000,000
=
Interest – – 178,905,220 872,460,640 1,051,365,860
Interest-bearing loans and borrowings
Principal – – 240,000,000 360,000,000 600,000,000
Interest – – 36,260,490 27,364,050 63,624,540
Accounts payable and other current liabilities** 264,916,411 112,840,892 284,771,857 – 662,529,160
Obligations under finance lease
Principal – 1,565,143 4,643,289 11,643,614 17,852,046
Interest – 357,703 884,899 1,201,773 2,444,375
Other noncurrent liabilities*** – – – 54,411,895 54,411,895
=264,916,411
P =114,763,738
P =745,465,755
P =4,327,081,972
P =5,452,227,876
P
*Excluding advances to officers and employees amounting to =P24,1 million and =P17.5 million as at March 31, 2020 and 2019, respectively.
**Excluding government and other statutory liabilities amounting to =
P21.1 million and =
P21.4 million as at March 31, 2020 and 2019, respectively.
***Excluding advance rent and deferred lease liability amounting to =
P33.7 million and =
P47.5 million as at March 31, 2020 and 2019, respectively.
2020 2019
Current assets P
=1,861,035,618 =1,764,340,159
P
Current liabilities 1,043,698,926 1,023,567,896
Current ratios 1.78:1.00 1.72:1.00
*SGVFSM004069*
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Credit Risk
Credit risk is the risk that the Group will incur a loss arising from students, franchisees or other
counterparties that fail to discharge their contractual obligations. The Group manages and controls credit
risk by setting limits on the amount of risk that the Group is willing to accept for individual
counterparties and by monitoring expenses in relation to such limits.
It is the Group’s policy to require the students to pay all their tuition and other school fees before they
can get their report cards and other credentials. In addition, receivable balances are monitored on an
ongoing basis with the result that the Group’s exposure to bad debts is not significant.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and
cash equivalents and equity investments designated at FVOCI, the Group’s exposure to credit risk arises
from the default of the counterparty, with a maximum exposure equal to the carrying amount of these
instruments. As at March 31, 2020 and 2019, there is no significant concentration of credit risk.
Credit Risk Exposures. The table below shows the maximum exposure to credit risk for the components
of the consolidated statements of financial position:
2020 2019
Gross Net Gross Net
Maximum Maximum Maximum Maximum
Exposure(1) Exposure(2) Exposure(1) Exposure(2)
Financial Assets
Loans and receivables:
Cash and cash equivalents (excluding
cash on hand) =
P420,680,596 =
P399,680,596 P400,436,569
= P379,436,569
=
Receivables* 612,525,141 612,525,141 403,303,135 403,303,135
Rental deposits** 32,194,153 32,194,153 55,696,369 55,696,369
Equity investment designated at FVOCI 67,599,307 67,599,307 49,777,643 49,777,643
= 1,132,999,197
P P
=1,111,999,197 =909,213,716
P =888,213,716
P
*Excluding advances to officers and employees amounting to = P 24.1 million and =
P17,5 million as at March 31, 2020 and 2019, respectively.
**Included as part of “Goodwill, intangible and other noncurrent assets” account.
(1)
Gross financial assets before taking into account any collateral held or other credit enhancements or offsetting arrangements.
(2)
Gross financial assets after taking into account any collateral held or other credit enhancements or offsetting arrangements or insurance in case of bank
deposits.
Credit Quality per Class of Financial Asset. The tables below show the credit quality by class of
financial assets based on STI ESG’s credit rating system as at March 31, 2020 and 2019:
2020
Stage 1 Stage 2 Stage 3
12-month Lifetime Credit
ECL ECL Impaired Total
Class A P
=827,659,992 P
=324,019,393 P
=– P
=1,151,679,385
Class B – 260,006,501 – 260,006,501
Class C – 58,563,550 2,875,962 61,439,512
Gross carrying amount 827,659,992 642,589,444 2,875,962 1,473,125,398
ECL – 140,248,797 2,875,962 143,124,759
Carrying amount P
=827,659,992 P
=502,340,647 P
=– P
=1,330,000,639
*SGVFSM004069*
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2019
Stage 1 Stage 2 Stage 3
12-month Lifetime Credit
ECL ECL Impaired Total
Class A =586,823,216
P =200,689,985
P =–
P P787,513,201
=
Class B – 203,167,029 – 203,167,029
Class C – 79,660,271 2,875,963 82,536,234
Gross carrying amount 586,823,216 483,517,285 2,875,963 1,073,216,464
ECL – 160,325,293 2,875,963 163,201,256
Carrying amount =586,823,216
P =323,191,992
P =–
P =910,015,208
P
The following credit quality categories of financial assets are managed by the Group as internal credit
ratings. The credit quality of the financial assets was determined as follows:
§ Class A - Cash and cash equivalent and Rental and utility deposits are classified as “Class A”
based on the good credit standing or rating of the counterparty. Receivables classified as
“Class A” are those with a high probability of collection and/or customer or counterparties who
possess strong to very strong capacity to meet its obligations.
§ Class B - these are Receivables from customers who settle their obligations within tolerable
delays.
§ Class C - these pertain to Receivables from customers with payment behavior normally
extending beyond the credit terms and have a high probability of becoming impaired.
The table below shows the aging analysis of receivables from students on which the amount of
allowance was based on lifetime expected credit loss:
After the
Semester but
Within the within the After the School
Current Semester School Year Year ECL Total
March 2020 = 234,767,076
P = 34,448,801
P = 1,231,961
P = 58,563,550
P (P
= 140,248,795) P
= 188,762,593
March 2019 145,934,900 49,715,933 1,057,885 78,602,387 (160,325,293) 114,985,812
Interest Rate Risk. Interest rate risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. Fixed-rate financial instruments
are subject to fair value interest rate risk while floating rate financial instruments are subject to cash
flow interest rate risk. The Group’s interest rate risk management policy centers on reducing the overall
interest expense and exposure to changes in interest rates. Changes in market interest rates relate
primarily to the Group’s interest-bearing loans and bonds. While the Group’s long-term debt has a
floating interest rate, the Group elected to have the interest rate repriced every year, thus minimizing
the exposure to market changes in interest rates. The interest rates for the STI ESG bonds are, however,
fixed for the 7-year bonds and the 10-year bonds.
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 magnitude of the deposits,
a significant change in interest rate may also affect the consolidated statements of comprehensive
income.
*SGVFSM004069*
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The following table demonstrates the sensitivity, to a reasonably possible change in interest rates, with
all other variables held constant, of the consolidated statement of comprehensive income and
consolidated statement of changes in equity for the years ended March 31:
The Group manages its capital structure and makes adjustments to it in light of changes in economic
conditions. The Group is not subject to externally imposed capital requirements.
The Group monitors capital using the debt-to-equity ratio which is computed as the total of current and
noncurrent liabilities, net of unearned tuition and other school fees, divided by total equity. The Group
monitors its debt-to-equity ratio to keep it at a level acceptable to the Group, the lender bank and STI
ESG bondholders. The Group’s policy is to keep the debt-to-equity ratio at a level not exceeding
1.50:1.00.
March 31
2020 2019
Capital stock P
=3,087,829,443 P=3,087,829,443
Additional paid-in capital 386,916,479 386,916,479
Retained earnings (see Note 20) 2,572,194,979 3,023,825,683
P
=6,046,940,901 P=6,498,571,605
March 31
2020 2019
Total liabilities* P
=5,184,846,516 P=4,407,031,500
Total equity 6,112,499,312 6,569,707,487
Debt-to-equity ratio 0.85:1.00 0.67:1.00
*Excluding unearned tuition and other school fees
March 31
2020 2019
Total assets P
=11,492,359,095 P
=11,058,118,644
Total equity 6,112,499,312 6,569,707,487
Asset-to-equity ratio 1.88:1.00 1.68:1.00
No changes were made in the objectives, policies or processes during the years ended
March 31, 2020 and 2019.
*SGVFSM004069*
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The following tables set forth the carrying amounts and estimated fair values of financial assets and
liabilities recognized as at March 31, 2020 and 2019. There are no material unrecognized financial
assets and liabilities as at March 31, 2020 and 2019.
2020
Carrying
Amount Fair Value Level 1 Level 2 Level 3
Financial Assets
At amortized cost:
Rental and utility deposits P32,194,153
= P31,550,028
= =–
P =–
P = 31,550,028
P
Equity instruments designated at FVOCI 67,599,307 67,599,307 3,746,944 63,852,363 –
= 99,793,460
P = 99,149,335
P = 3,746,944
P = 63,852,363
P = 31,550,028
P
Financial Liabilities
Other financial liabilities at amortized cost:
Lease liabilities = 395,908,486
P = 395,908,486
P P–
= P–
= = 395,908,486
P
Refundable deposits 22,400,940 22,479,301 – – 22,479,301
= 418,309,426
P = 418,387,787
P =–
P =–
P = 418,387,787
P
2019
Carrying
Amount Fair Value Level 1 Level 2 Level 3
Financial Assets
At amortized cost:
Rental and utility deposits P55,696,369
= P54,989,443
= =–
P =–
P =54,989,443
P
Equity instruments designated at FVOCI 49,777,643 49,777,643 3,975,280 45,085,500 –
=105,474,012
P =104,767,086
P =3,975,280
P =45,085,500
P =54,989,443
P
Financial Liabilities
Other financial liabilities at amortized cost:
Obligations under finance lease =17,852,046
P = 16,194,197
P =–
P =–
P =16,194,197
P
Refundable deposits 21,778,168 21,120,069 – – 21,120,068
=39,630,214
P =37,314,266
P =–
P =–
P =37,314,265
P
Cash and Cash Equivalents, Receivables and Accounts Payable and Other Current Liabilities. Due to
the short-term nature of transactions, the fair values of these instruments approximate the carrying
amounts as at financial reporting date.
Rental and Utility Deposits. The fair values of these instruments are computed based on the present
value of future cash flows discounted using the prevailing BVAL reference rates that are specific to the
tenor of the instruments’ cash flows at the end of the reporting period.
Equity instruments designated at FVOCI. The fair values of publicly-traded Equity instruments
designated at FVOCI, classified under Level 1, are determined by reference to market bid quotes as at
financial reporting date. The fair values of unquoted shares are determined using valuation techniques
with inputs and assumptions that are based on market observable data and conditions. Such techniques
include using recent arm’s-length market transactions; reference to the current market value of another
instrument which is substantially the same.
Interest-bearing Loans and Borrowings. The carrying value approximates its fair value because of
recent and regular repricing based on market conditions.
*SGVFSM004069*
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Lease Liabilities. Estimated fair value is based on the present value of future cash flows discounted
using the prevailing BVAL reference rates that are specific to the tenor of the instruments’ cash flows
at the end of the reporting period.
Obligation under Finance Lease. The fair values of obligations under finance lease are computed based
on the discounted present value of lease payments with discount rate ranging from 5.59% to 6.18% as
at March 31, 2019.
Refundable Deposits. The fair values of the refundable deposits are computed based on the present value
of future cash flows discounted using the prevailing BVAL reference rates that are specific to the tenor
of the instruments’ cash flows at the end of the reporting period.
In 2020 and 2019, there were no transfers between Level 1 and 2 fair value measurements, and no
transfers into and out of Level 3 fair value measurements.
*SGVFSM004069*
113
Noncash Movements
Effect of Adoption Interest Capitalized Dividends
of PFRS 16 Expense borrowing costs Declared Reclassified New Leases
March 31, 2019 Cash flows (see Note 2) (see Note 22) (see Note 10) (see Note 20) as Current (see Note 28) March 31, 2020
Current interest-bearing loans
and borrowings = 240,000,000
P (P
= 240,000,000) =–
P =–
P =–
P =–
P = 240,000,000
P =–
P = 240,000,000
P
Current obligations under
finance leases 6,208,432 – (6,208,432) – – – – – –
Bonds payable 2,957,954,254 – – 6,463,908 – – – – 2,964,418,162
Noncurrent interest-bearing
loans and borrowings 360,000,000 794,000,000 – (1,866,285) 2,128,493 – (240,000,000) – 914,262,208
Noncurrent obligations under
finance leases 11,643,614 – (11,643,614) – – – – – –
Lease liabilities – (83,002,811) 391,816,395 28,633,210 – – – 58,461,692 395,908,486
Dividends payable 12,431,266 (183,585,711) – – – 184,912,630 – – 13,758,185
Interest payable 11,435,922 (247,308,163) 1,180,635 240,362,454 3,286,900 – – – 8,957,748
Total liabilities from financing
activities = 3,599,673,488
P = 40,103,315
P = 375,144,984
P = 273,593,287
P = 5,415,393
P = 184,912,630
P =–
P = 58,461,692
P = 4,537,304,789
P
Noncash Movements
Effect of Adoption Interest Capitalized Dividends
of PFRS 16 Expense borrowing costs Declared Reclassified
March 31, 2018 Cash flows (see Note 2 (see Note 22) (see Note 10) (see Note 20) as Current New Leases March 31, 2019
Current interest-bearing loans
and borrowings =134,400,000
P (P
=134,400,000) =–
P =–
P =–
P =–
P =240,000,000
P =–
P =240,000,000
P
Current obligations under
finance leases 6,360,503 (6,607,474) – – – – 6,455,403 – 6,208,432
Bonds payable 2,951,879,134 – – 6,075,120 – – – – 2,957,954,254
Noncurrent interest-bearing
loans and borrowings 600,000,000 – – – – – (240,000,000) – 360,000,000
Noncurrent obligations under
finance leases 14,079,817 – – – – – (6,455,403) 4,019,200 11,643,614
Dividends payable 13,813,740 (186,295,104) – – – 184,912,630 – – 12,431,266
Interest payable 9,283,548 (216,761,784) – 183,445,281 35,468,877 – – – 11,435,922
Total liabilities from financing
activities =3,729,816,742
P (P
=544,064,362) =–
P =189,520,401
P =35,468,877
P =184,912,630
P =–
P =4,019,200
P =3,599,673,488
P
*SGVFSM004069*
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The Group’s material noncash investing and financing activities pertain to the following:
a. Noncash additions to ROU assets presented under “Property and equipment” aggregating to
=59.7 million as at March 31, 2020.
P
c. Acquisitions of property and equipment under finance lease presented as part of “Property and
equipment” account in the consolidated statements of financial position amounting to nil,
=3.1 million and =
P P15.5 million as at March 31, 2020, 2019 and 2018, respectively.
d. Uncollected dividends from De Los Santos Medical Center amounting to nil as at March 31, 2020
and 2018 and =
P0.8 million as at March 31, 2019 (see Note 2).
Sta. Maria. On May 23, 2017, STI Sta. Maria entered into a Deed of Assignment with Halili Reyes
Educational Institution, Inc. (HREI) where HREI assigned, transferred and conveyed in a manner
absolute and irrevocable, and free and clear of all liens and encumbrances, to STI Sta. Maria all its
rights, title and interest in the acquired school’s assets and liabilities for a price of P
=20.0 million. The
assignment of the net assets shall retroact to April 1, 2017. Consequently, the P =18.0 million initial
deposit made was applied to the purchase price and the Parent Company paid the remaining balance of
=2.0 million in 2018.
P
The purchase price consideration has been allocated to the assets and liabilities based on the fair values
at the date of acquisition resulting in goodwill amounting to P =1.8 million. The carrying values of the
financial assets and liabilities and other assets recognized at the date of acquisition approximate their
fair values due to the short-term nature of the transactions.
The following are the identifiable assets and liabilities as at the date of acquisition:
Assets
Cash and cash equivalents =7,828,110
P
Receivables 8,483,088
Inventories 674,354
Prepaid expenses 2,356,576
Property and equipment-net 1,529,891
20,872,019
Liabilities
Accounts payable and other current liabilities 2,648,715
Total identifiable net assets at fair value 18,223,304
Purchase consideration transferred 20,000,000
Goodwill =1,776,696
P
*SGVFSM004069*
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NAMEI. On February 15, 2019, STI ESG and the shareholders of NAMEI entered into a share purchase
agreement for the sale of approximately 92% of the 50,000 outstanding shares of NAMEI Polytechnic
Institute, Inc. and 99% of the 10,000 outstanding shares of NAMEI Polytechnic Institute of
Mandaluyong, Inc. Both shares are with par value of = P10.0 each. In January 2019, STI ESG made a
deposit of =
P14.0 million which was held in escrow with a law firm. This amount was treated as part of
the purchase price at closing date. Another =
P36.0 million was paid on February 15, 2019. On the same
date, STI ESG paid P =10.0 million to NAMEI as deposit for future subscription in shares of NAMEI
and another P=10.0 million representing STI ESG’s share in the transaction costs and all other fees and
expenses incurred under the agreement. On April 1, 2019, Deeds of Assignment were executed by the
shareholders of NAMEI transferring and conveying ownership of 94% of NAMEI Polytechnic Institute,
Inc. and 100% ownership of NAMEI Polytechnic Institute of Mandaluyong, Inc. to STI ESG. NAMEI
is a subsidiary of STI ESG effective April 1, 2019.
The identifiable assets and liabilities recognized in the consolidated financial statements as at
March 31, 2020 were based on the purchase price allocation report of the fair value of these assets and
liabilities at the time of acquisition resulting in goodwill amounting to = P21.2 million. STI ESG
identified the license to operate a maritime school and related agreements as an intangible asset, for
purposes of estimating the fair value of the net assets acquired. Intangible assets amounting to
=27.6 million represents the fair value of the license and agreements. Deferred tax liability amounting
P
to =
P2.8 million is calculated based on the estimated fair value of the license to operate a maritime
school, its related agreements and a 10.0% income tax rate for educational institutions. The carrying
values of other accounts such as cash, receivables, and property and equipment, among others,
approximate their fair values.
The following are the identifiable assets and liabilities as at the date of acquisition:
Assets
Cash and cash equivalents =52,938
P
Receivables 8,173,081
Inventories 158,769
Prepaid expenses 51,000
Intangible assets 27,621,874
Property and equipment-net 12,630,327
48,687,989
Liabilities
Accounts payable and other current liabilities 9,330,730
Deferred tax liabilities 2,762,187
Non-controlling interest 1,090,678
Total identifiable net assets at fair value 35,504,394
Purchase consideration transferred 56,735,628
Goodwill =21,231,234
P
*SGVFSM004069*
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*SGVFSM004069*
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b. For SY 2019-2020, the school calendar for tertiary students is from July 2019 to April 2020.
Classes of tertiary students were suspended since the implementation of the ECQ in March 2020.
Online classes of those who opted online and offline studies resumed beginning the 3rd week of
May 2020 and were completed as at July 30, 2020. For SY 2020-2021, STI ESG is introducing the
ONline and ONsite Education (ONE) STI Learning Model. The ONE STI Learning Model is an
innovative approach to student development that uses digital tools and online technology combined
with invaluable hands-on practice and onsite engagements to achieve the students’ academic
objectives through a responsive learning experience. Onsite refers to school activities to be
conducted on-campus. Onsite activities follow the latest regulations issued by the IATF, DepEd for
Senior High School, and CHED for College. In the event that onsite activities are prohibited by a
government agency, activities or modules are to be delivered 100% online until onsite sessions are
allowed.
Management continues to monitor the COVID-19 situation and will take further actions as
necessary and appropriate in response to the economic disruptions, government regulations and
other COVID-19 consequences.
c. On June 23, 2020, STI ESG requested China Bank for waivers on certain covenants in connection
with STI ESG’s availment of the Land Bank of the Philippines (LandBank) ACcess to Academic
Development to Empower the Masses towards Endless Opportunities (ACADEME) Program. On
July 23, 2020, China Bank approved the waiver of the following covenants:
Further, China Bank approved the temporary waiver of the DSCR requirement covering period
ending September 30, 2020 and March 31, 2021.
d. On July 3, 2020, STI ESG and China Bank executed the amendment to the Term Loan Agreement
dated May 7, 2019 to amend the availability period of the Term Loan Facility. The Term Loan
Facility shall be available to the Borrower on any Business day for the period beginning on the date
of this Agreement and ending on the earliest of: (a) July 31, 2020; (b) the date the Term Loan
Facility is fully drawn; or (c) the date the Lender’s commitment to extend the Term Loan Facility
to the Borrower is canceled or terminated in accordance with this Agreement. Any amount undrawn
at the end of the Availability Period shall be automatically cancelled and may not be reinstated. On
July 3, 2020 and July 30, 2020, STI ESG made drawdowns aggregating to = P400.0 million from this
Term Loan Facility. As of July 31, 2020, the Term Loan Facility is fully drawn at P=1,200.0 million.
*SGVFSM004069*
- 118 -
e. On July 20, 2020, STI ESG delivered to China Banking Corporation – Trust and Asset
Management Group, in its capacity as trustee (the “Trustee”) for the Series 7Y Bonds due 2024 and
the Series 10Y Bonds due 2027 (collectively, the “Bonds”) a Consent Solicitation Statement (the
“Consent Solicitation Statement”) and the annexed Consent Form (the “Consent Form”) in
connection with the proposed amendments to the Trust Agreement dated March 10, 2017 (the
“Trust Agreement”) governing the Bonds issued by STI ESG. Pursuant to the Consent Solicitation
Statement, STI ESG sought the consent of the holders of the Bonds (the “Record Bondholders”) to
certain proposed amendments to the Trust Agreement. The Proposed Amendments are (1) the
waiver of Section 7.02(a) of the Trust Agreement which prohibits the Issuer from incurring or
suffering to exist any Lien upon any assets or revenues, present and future, of the Issuer in relation
to the requirement of Land Bank to assign the sub-promissory notes to be executed by the parents
or benefactors of the Issuer’s students in favor of LandBank as security for the ACADEME Lending
Program (2) the waiver of Section 7.02(b) of the Trust Agreement which prohibits the Issuer from
incurring Indebtedness or entering into any loan facility agreement secured by or to be secured by
a lien upon any assets and revenues, present and future, whether registered or unregistered, of the
Issuer, unless the Issuer has made or will make effective provisions, satisfactory to the Bondholders
in the latter’s absolute discretion, whereby the Lien thereby created will secure, on an equal first
ranking and ratable basis, any and all obligations of the Issuer under the Trust Agreement and such
other Indebtedness which the Lien purports to secure; (3) the waiver of Section 7.02(f) of the Trust
Agreement which prohibits the Issuer from assigning, transferring or conveying its right to receive
income or revenues insofar as such assignment relates to the requirement of LandBank to assign
the sub-promissory notes to be executed by the parents or benefactors of STI ESG’s students in
favor of LandBank as security for the ACADEME Lending Program; and (4) the waiver of the
Debt Service Coverage Ratio up to June 30, 2023, as provided under Section 7.01(k) of the Trust
Agreement. The Proposed Amendments will not alter the interest rate or maturity date of the
Bonds, the Issuer’s obligation to make principal and interest payments on the Bonds, or the
substantive effect of any other covenant or provision of the Bonds. The Trustee certified as of
August 15, 2020, that it has obtained the required consent of the Record Bondholders holding or
representing at least fifty percent (50%) plus one peso (Php1.00) of the aggregate principal amount
of the Bonds to the Proposed Amendments to the Trust Agreement governing the Bonds. On
August 19, 2020, pursuant to the Consent Solicitation Statement, STI ESG and the Trustee executed
the Supplemental Trust Agreement incorporating the Proposed Amendments, as follows:
(b) Section 7.02(b) of the Trust Agreement is hereby amended to read as follows:
“incur Indebtedness or enter into, or permit any Subsidiary to enter into, any loan facility
agreement secured by or to be secured by a Lien upon any assets and revenues, present and
future, whether registered or unregistered, of the Issuer or any Subsidiary, as the case may
be, xxx except for the assignment by the Issuer to LandBank of sub-promissory notes to be
executed by the parents or benefactors of the Issuer’s students as security for the
ACADEME Lending Program of LandBank”;
*SGVFSM004069*
- 119 -
(c) Section 7.02(f) of the Trust Agreement is hereby amended to read as follows:
“assign, transfer or otherwise convey any right to receive any of its income or revenues
unless in the ordinary course of business, or unless otherwise required by applicable law,
except for the assignment by the Issuer to LandBank of sub-promissory notes to be
executed by the parents or benefactors of the Issuer’s students as security for the
ACADEME Lending Program of LandBank”;
Effective as of the date stated in the Majority Bondholders’ Consent, the following
amendment shall be deemed to have been made to Section 7.01(k) of the Trust Agreement:
This =
P250.0 million Term Loan/Rediscounting Line Facility approved for STI ESG is secured by
a Comprehensive Surety issued by STI Holdings.
On September 16, 2020, the Rediscounting Agreement with LandBank was executed by STI ESG
in relation to this loan arrangement. Further, on the same date, the Comprehensive Surety
Agreement was executed by STI Holdings in favor of LandBank.
g. In various dates in September 2020, STI ESG wrote CHED, TESDA and DepEd of its decision to
suspend the operations of some of its owned schools namely: STI Cebu, STI Iloilo, STI Quezon
Avenue and STI Tuguegarao for SY 2020-2021 and to cease the operations of STI Pagadian
effective SY 2020-2021. Similarly, the respective franchisees also informed CHED, TESDA and
DepEd of the cessation of operations of some of STI ESG’s franchised schools namely: STI College
Bohol, Inc. (STI Bohol), STI College Recto, Inc. (STI Recto), Sungold Technologies, Inc. (STI
Zamboanga), STI College Pasay, Inc. (STI Pasay), STI College Dipolog, Inc. (STI Dipolog), STI
College San Francisco, Inc. (STI San Francisco) and suspension of operations of STI College
Parañaque, Inc. (STI Parañaque) effective SY 2020-2021.
h. On September 24, 2020, STI ESG’s BOD approved the sale of its 20% stake in Maestro Holdings
to a third-party investor for a consideration higher than its present carrying value, subject to
completion of certain closing conditions.
*SGVFSM004069*
SyCip Gorres Velayo & Co. Tel: (632) 8891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 8819 0872 October 4, 2018, valid until August 24, 2021
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-5 (Group A),
Philippines November 6, 2018, valid until November 5, 2021
We have audited the accompanying consolidated financial statements of STI Education Services Group,
Inc. and its subsidiaries (the Group) as at March 31, 2020 and for the year ended, on which we have
rendered the attached report dated September 24, 2020.
In compliance with the Revised Securities Regulation Code Rule 68, we are stating that the above Group
has 48 stockholders owning 100 or more shares each.
Benjamin N. Villacorte
Partner
CPA Certificate No. 111562
SEC Accreditation No. 1539-AR-1 (Group A),
March 26, 2019, valid until March 25, 2022
Tax Identification No. 242-917-987
BIR Accreditation No. 08-001998-120-2019,
January 28, 2019, valid until January 27, 2022
PTR No. 8125320, January 7, 2020, Makati City
*SGVFSM004069*
A member firm of Ernst & Young Global Limited
SyCip Gorres Velayo & Co. Tel: (632) 8891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 8819 0872 October 4, 2018, valid until August 24, 2021
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-5 (Group A),
Philippines November 6, 2018, valid until November 5, 2021
We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of STI Education Services Group, Inc. and its subsidiaries (the Group) as at March 31, 2020
and 2019 and for each of the three years in the period ended March 31, 2020, included in this Form 17-A,
and have issued our report thereon dated September 24, 2020. Our audits were made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The schedules listed in the Index
to Consolidated Financial Statements and Supplementary Schedules are the responsibility of the Group’s
management. These schedules are presented for purposes of complying with Revised Securities
Regulation Code Rule 68, and are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state, in all material respects, the information required to be set forth therein in relation to
the basic financial statements taken as a whole.
Benjamin N. Villacorte
Partner
CPA Certificate No. 111562
SEC Accreditation No. 1539-AR-1 (Group A),
March 26, 2019, valid until March 25, 2022
Tax Identification No. 242-917-987
BIR Accreditation No. 08-001998-120-2019,
January 28, 2019, valid until January 27, 2022
PTR No. 8125320, January 7, 2020, Makati City
*SGVFSM004069*
A member firm of Ernst & Young Global Limited
SyCip Gorres Velayo & Co. Tel: (632) 8891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 8819 0872 October 4, 2018, valid until August 24, 2021
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-5 (Group A),
Philippines November 6, 2018, valid until November 5, 2021
We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of STI Education Services Group, Inc. and its subsidiaries as at March 31, 2020 and 2019 and
for each of the three years in the period ended March 31, 2020, included in this Form 17-A, and have
issued our report thereon dated September 24, 2020. Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The Supplementary Schedule on Financial
Soundness Indicators, including their definitions, formulas, calculation, and their appropriateness or
usefulness to the intended users, are the responsibility of the Company’s management. These financial
soundness indicators are not measures of operating performance defined by Philippine Financial
Reporting Standards (PFRSs) and may not be comparable to similarly titled measures presented by other
companies. This schedule is presented for the purpose of complying with the Revised Securities
Regulation Code Rule 68 issued by the Securities and Exchange Commission, and is not a required part
of the basic financial statements prepared in accordance with PFRSs. The components of these financial
soundness indicators have been traced to the Company’s consolidated financial statements as at
March 31, 2020 and 2019 and for each of the three years in the period ended March 31, 2020 and no
material exceptions were noted.
Benjamin N. Villacorte
Partner
CPA Certificate No. 111562
SEC Accreditation No. 1539-AR-1 (Group A),
March 26, 2019, valid until March 25, 2022
Tax Identification No. 242-917-987
BIR Accreditation No. 08-001998-120-2019,
January 28, 2019, valid until January 27, 2022
PTR No. 8125320, January 7, 2020, Makati City
*SGVFSM004069*
A member firm of Ernst & Young Global Limited