MINUTES OF THE ANNUAL STOCKHOLDERS` MEETING OF STI

MINUTES OF THE
ANNUAL STOCKHOLDERS’ MEETING
OF
STI EDUCATION SYSTEMS HOLDINGS, INC.
25 September 2015, 3:00 P.M.
th
7 Floor, STI Holdings Center, 6764 Ayala Avenue, Makati City
PRESENT:
NO. OF SHARES
Total Number of Shares Represented
In Person and By Proxy
7,327,556,259
Total Outstanding Shares:
9,904,806,924
Attendance Percentage to Total Outstanding
Shares
73.98%
===========================================================
I.
CALL TO ORDER
The Chairman, Mr. Eusebio H. Tanco, called the meeting to order
and presided over the same. The Corporate Secretary, Atty. Arsenio C.
Cabrera, Jr., recorded the minutes of the meeting.
II.
CERTIFICATION OF NOTICE AND QUORUM
Based on the certification provided by Mr. Joel S. Cruz and Mr.
Antonio B. Madrid, Jr. of RCBC Stock and Transfer Agency, the stock and
transfer agent of the Corporation, the Corporate Secretary certified that
notices for the meeting were duly sent to all stockholders of record as of
25 August 2015 and that a quorum consisting of 73.98% of the
Corporation’s issued and outstanding capital stock existed for the valid
transaction of business.
The certification of Mr. Cruz and Mr. Madrid regarding the due
sending of notices to stockholders of record as of 25 August 2015 is
attached hereto as Annex “A”. The attendance tabulation reflecting the
abovementioned quorum is attached hereto as Annex “B”.
III.
APPROVAL OF PREVIOUS MINUTES
Upon motion made and duly seconded, the stockholders approved
the Minutes of the Annual Stockholders’ Meeting held on 26 September
2014.
IV.
PRESENTATION OF MANAGEMENT REPORT
The President, Mr. Monico V. Jacob, rendered the Management
Report for fiscal year 2014-2015. A copy of the Management Report is
attached hereto as Annex “C”.
The Chairman announced the declaration of cash dividends in the
amount of Two Centavos (Php 0.02) per share or an aggregate amount of
One Hundred Ninety Eight Million Ninety Six Thousand One Hundred
Thirty Eight Pesos and 42/100 (Php 198,096,138.42). He stated that the
cash dividends would be payable to stockholders of record as of 12
October 2015 and that the dividends would be payable on 5 November
2015.
Upon motion made and duly seconded, the stockholders noted and
approved the Management Report rendered by Mr. Monico V. Jacob.
V.
APPROVAL OF AUDITED FINANCIAL STATEMENTS
AS OF 31 MARCH 2015
Upon motion made and duly seconded, the Corporation’s Audited
Financial Statements for the period ending 31 March 2015 were noted and
approved.
VI.
RATIFICATION OF LEGAL ACTS, PROCEEDINGS
AND RESOLUTIONS OF THE BOARD OF DIRECTORS
AND OF MANAGEMENT
Upon motion made and duly seconded, all acts, proceedings and
resolutions of the Board of Directors and of Management since the 26
September 2014 Annual Stockholders’ Meeting up to 25 September 2015
were approved, confirmed and ratified.
VII.
RATIFICATION OF THE COMPREHENSIVE SURETY AGREEMENT
AND AMENDMENT AND SUPPLEMENTAL AGREEMENT TO THE
P3 BILLION CORPORATE NOTES FACILITY AGREEMENT
Upon motion made and duly seconded, stockholders representing
at least two-thirds (2/3) of the outstanding capital stock of the
Corporation approved the following resolutions in connection with the
ratification of: (a) the Comprehensive Surety Agreement with China
Banking Corporation as security for certain obligations of STI West
Negros University Corporation; and (b) the Amendment and
Supplemental Agreement to the P3 Billion Corporate Notes Facility
Agreement by and among STI Education Services Group, Inc., STI West
Negros University Corporation and China Banking Corporation:
“RESOLVED, That stockholders representing at least twothirds (2/3) of the outstanding capital stock of the Corporation
have ratified: (a) the execution, delivery and performance of the
Comprehensive Surety Agreement with China Banking
Corporation (the “Bank”) as security for the obligations of STI
West Negros University Corporation, namely: (1) a credit line of
P5 million; (2) a long-term loan of P300 million and (3) bridge
financing of P20 million; (b) the execution, delivery and
performance, as a conforming party of the Amendment and
Supplemental Agreement to the P3 Billion Corporate Notes
Facility Agreement (the “Agreement”) by and among STI
Education Services Group, Inc., STI West Negros University
Corporation and China Banking Corporation; and (c) the authority
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of Mr. Monico V. Jacob, the President and CEO of the
Corporation, to execute and deliver the Comprehensive Surety
Agreement and the Agreement on behalf of the Corporation;
“RESOLVED FINALLY, That all of the foregoing
resolutions remain in full force and effect, and that the Bank is
hereby authorized to rely upon these resolutions until written
notice of its revocation or amendment is delivered thereto.”
VIII. ELECTION OF DIRECTORS
The Chairman stated that under the Articles of Incorporation, the
Company provides for eleven (11) directors, two (2) of whom must be
independent directors.
The Corporate Secretary also stated that under the Corporation’s
By-Laws and Manual on Corporate Governance, the nomination of the
Corporation’s directors shall be conducted by the Nomination Committee
prior to the annual stockholders’ meeting. All recommendations shall be
signed by the nominating stockholders together with the acceptance and
conformity of the would-be nominees and shall be submitted to the
Nomination Committee and the Corporate Secretary at least forty-five (45)
days before the date of the actual meeting.
The Nomination 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.
Upon motion duly made and seconded, the following individuals
were elected as Directors to serve as such for the ensuing year and until
the election and qualification of their successors:
1.
2.
3.
4.
5.
6.
7.
8.
Eusebio H. Tanco
Monico V. Jacob
Martin K. Tanco
Joseph Augustin L. Tanco
Maria Vanessa Rose L. Tanco
Rainerio M. Borja
Paolo Martin O. Bautista
Teodoro L. Locsin, Jr.
Independent Directors:
1.
2.
3.
IX.
Jesli A. Lapus
Ernest Lawrence L. Cu
Johnip G. Cua
APPOINTMENT OF EXTERNAL AUDITOR
Upon motion made and duly seconded, the stockholders approved
the appointment of SyCip Gorres Velayo and Co. as the external auditor of
the Corporation.
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Annex "B"
STOCKHOLDER'S MEETING
Print Date: September 25, 2015
Print Time: 3:12:45 PM
_______________________________________________________________________________________
Quorum: 73.98%
Total no of Present: 7,327,556,259
Total no of Shares: 9,904,806,924
_______________________________________________________________________________________
We embarked on the construction of the new headquarters and
new campus of the STI Education Services Group in Ortigas
Avenue Extension in Cainta, Rizal.
Built on almost five hectares of land, it houses the three-storey
administration building and the eight-storey college building. The
first of STI’s academic centers, it opened its doors in time for the
first semester of school year 2013-2014.
Ortigas-Cainta’s student capacity is currently at 7,000 from its
previous capacity of 1,500.
2
Added in SY 2014-15 in quick succession were academic centers
in Caloocan, Cubao, Calamba and Batangas. All four finished
construction during the first half of the year. Cubao, Calamba and
Batangas opened in time for the first semester of school year
2014-2015 while Caloocan was inaugurated in February 2014.
STI Caloocan has a gross floor area of 10,689 square meters.
STI Cubao is an eight-storey building with Mezzanine having a
Gross Floor Area of 9,600sqm. Construction was completed in
October 2014 and the building was inaugurated in January 2015.
STI Calamba was inaugurated on January 20, 2015. The building
stands on a 5,220.75 sq.m. property.
It is a four-storey building with Mezzanine and Deck having a
Gross Floor Area of 5,176sqm. Construction was completed in
November 2014.
STI Batangas is a three-storey building with a Gross Floor Area of
5,672sqm. Construction was completed in August 2014 and the
building was inaugurated in January 2015.
3
The student capacities for the four academic centers are 8
thousand for Caloocan, 6 thousand for Cubao, four thousand for
Calamba and three thousand for Batangas.
Batangas had no reference point in 2013 because it was
previously a franchised school before it was acquired by STI ESG
in June 2013.
4
Meanwhile, STI Academic Center Lucena is the latest campus and
was inaugurated in January 2015.
The school with a floor area of 6,870 square meters can
accommodate up to 4,000 students at full occupancy from its old
capacity of 700.
5
This year, gymnasiums in two academic centers have been
completed providing students and the community ample space
for different campus activities. The construction of a third
gymnasium, that is located in STI Lucena, is underway.
The Eusebio H. Tanco Gymnasium in STI Ortigas Cainta was
inaugurated on August 12, 2015.
The STI Calamba Gymnasium was completed on September 11,
2015.
The construction of the STI Lucena Gymnasium is ongoing.
6
We have also started to move forward on the construction of the
new STI Academic Center in Las Pinas City. This project is
expected to be finished by the 1st semester of School Year 20162017.
7
The STI WNU campus now boasts of a façade that reflects the
new University Signage — “STI West Negros University,” and
showcases the gleaming new offices and renovated buildings
which were completed in February 2015.
8
The campus now showcases the new admission office and the
refurbished Kitchen & Dining Laboratory that can be seen along
Burgos Street.
9
iACADEMY, our premier school for multimedia technology and
design, occupies 8 of 11 floors of its new home in Makati City.
Renovation has been completed and the building features a
design that mirrors its cutting edge academic programs.
The iACADEMY Plaza has an auditorium which could house at
least 450 people. The Multimedia Arts laboratories and Computer
laboratories have been improved for the better use of the
students. All the other laboratories, such as Cintiq and the iMAC
were also developed to satisfy all the needs of the students. All
laboratories are equipped with high speed internet and latest
software.
10
The welcome addition of STI West Negros University to the roster
of STI Education Systems Holdings brings total student capacity to
41,000 – exactly what was committed during our follow on
offering.
We add to this capacity the current capacities of Cagayan de Oro,
Cebu, Davao and Las Pinas which brings total student capacity to
almost 46,000.
11
We present to you the utilization for the six academic centers.
The chart represents old student capacity in blue, while the
orange chart shows current student capacity after expansion.
[SY 2013-14]: This line represents the ongoing students for the
school year 2013-14.
[SY 2014-15]: The yellow line is for total ongoing students for the
school year 2014-15.
[SY 2015-16]: And the last line represents total ongoing students
for 2015-16.
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This table shows the number of ongoing students for each of the
six academic centers from 2013 to 2015.
The matrix shows a marked increase in the total number of
students from the school year 2014-15 to 2015-16, primarily due
to the rise of the academic centers.
13
14
With campus expansion and the acquisition of a university, total
cost has reached over 3 billion pesos for land and construction
expenses since 2013. The proceeds from the follow on offering
helped greatly in funding these costs, along with internally
generated cash and proceeds of loans from banks.
15
As with the previous year, our efforts have been rewarded with an
increase in consolidated student enrollment of 4,005 students
from last year’s 76,195 to 80,200. This represents an increase of
5.3 percent for the year under review.
16
The increase in student enrollment corollarily meant an increase
in the combined revenues for the company, growing year on year.
Broken down, tuition and other school fees make up 87% of STI
Holdings’ core revenues. The remainder is generated from
educational services, royalty fees, educational materials and
other services.
17
As in previous years, STI ESG’s enrollment mix continues to lean
more towards the four-year programs than the two-year
programs. Ratio for SY 2014-15 was 82% four-year programs and
18% two-year programs.
STI ESG contributed greatly to the continuing increase in
combined revenue. Moreover, trends for the past four years have
shown a marked preference for the four year baccalaureate
programs over the two-year associate programs with the longer
period of study translating to higher tuition fees.
18
STI Holdings’ EBITDA has been steadily growing since SY 2010-11.
Core EBITDA has grown from PHP 432 Million in SY 2010-11 to
PHP 846 Million in SY 2014-15 or a CAGR of 18.3%.
19
STI has increased its gross profit from PHP 945 Million in SY 201011 to PHP 1,509 Million in SY 2014-15 or a CAGR of 12.4%.
Operating profit has increased from PHP 281 Million in SY 201011 to PHP 517 Million in SY 2014-15 or a CAGR of 16.5%.
The increases in gross profit, operating profit and EBITDA margins
are primarily attributable to the economies of scale that STI
enjoys as revenues increase.
20
STI Holdings achieved a total of PHP 731 million in net income in
2015, representing a 12 percent increase or PHP 76 million higher
compared to PHP 655 million it posted in 2014.
The graph also shows that STI Holdings’ EBITDA has been steadily
growing since 2011. EBITDA ranges from PHP 432 million in 2011
to PHP 846 million in SY 2014-15 with a CAGR of 18.3%.
EBITDA margins range from a low of 29% in SY 2010-11 to a high
of 38% in SY 2014-15
This strong financial performance is attributable to the increase in
the number of students of STI Education Services Group (ESG) and
its subsidiaries.
21
22
Total enrollment at the STI Holdings network of schools for the
first quarter of 2015 was at 84,764, a combined growth rate of
5.7% year-on-year.
Enrollees at STI ESG’s owned schools increased by 9 percent yearon-year from 38,715 students in the first quarter of 2014 to
42,047 in the first quarter of 2015 driven by the opening of STI’s
new academic centers.
23
Combined revenues grew by 10 percent year-on-year for the first
quarter of 2015, driven primarily by the growth in Tuition & Other
School Fees which grew by 7 percent.
24
Gross profit also grew by 4% year-on-year from PHP 251.2 Million
in the first quarter of 2014 to PHP 262.3 Million in the first
quarter of 2015.’
EBITDA grew even faster at a 30% year-on-year growth rate, from
PHP 103.6 Million in the first quarter of 2014 to PHP 134.2 Million
in the first quarter of 2015.
25
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While most tertiary education institutions are bracing for massive
decline in enrollments due to the implementation of the K to 12
program, STI schools have managed to tum this potential problem
into an opportunity for growth.
The Department of Education has granted to 77 of the 78 STI
branded colleges and education centers, STI West Negros
University, and iACADEMY their respective permits to offer senior
high school under the K to 12 program.
In getting the DepEd permits to offer senior high school, STI
schools can now take in enrollees, especially those from public
high schools, if their schools are not yet deemed ready to
implement K to 12.
The lack of classrooms and facilities of public high schools and the
absence of freshmen students during the first year of
implementation of the Senior High School posed as the
opportunity that the STI group needed and at the same time,
enabled the network to provide the DepEd with the needed
assistance in housing the students who will be displaced.
We have newly constructed or renovated facilities in 13 STI ESG
campuses and 8 franchised schools. Our nationwide facilities can
accommodate 112,131 students
27
The Senior High School Programs of the STI Network are
extensive, following the tracks set by DepEd.
The Senior High School offering of STI ESG, STI WNU and
iACADEMY aims to minimize the impact of the expected
reduction in enrollment since there will be no incoming freshmen
during the transition period from Senior High School to College.
Likewise, there is an opportunity for the three institutions to
increase their student retention and migration when the students
graduate from Senior High School and decide to pursue a
Baccalaureate degree.
During the first quarter of 2014, 92 private schools nationwide
were granted permits by the DepEd to offer Senior High School.
During that time, 67 or about 73 percent of these 92 institutions
are STI schools.
As of today, of the 77 schools in the STI ESG network, 76 have
been granted the DepEd permit to offer Senior High School. Only
one is still waiting for the permit.
iACADEMY received DepEd’s approval of its application to offer
Senior High School on March 31, 2015.
STI WNU’s application to offer Senior High School was approved
on April 10, 2015.
28
In June 2014, 32 STI schools were able to pilot Senior High School
with a total of 1,482 students.
For SY 2015-16, 36 STI ESG schools offered Senior High School
with a total of 1,778 students.
To date, 676 students have registered for Senior High School for
School Year 2016-17.
29
The ISO 9001:2008 is an international certification that indicates
an institution’s effectiveness and consistency in managing and
carrying out its system regulation. It has strengthened the
institution’s standing in its performance to provide quality
education that the students need. With an international
accreditation, it has verified the institution’s world-class
performance in its education delivery.
In a course of one year, the STI community worked together in
achieving the ISO 9001:2008 certification and fulfilled the
requirements that included extensive researching on the criteria
of the ISO; training sessions on proper documentation and
internal quality audit provided by TUV Rheinland Philippines Inc.,
an ISO certifying body.
The ISO certification is a milestone for the institution’s thrust
towards academic excellence by reaching global standards in its
learning delivery system. This covers development of tertiary level
lesson plans, faculty training, and faculty certification.
30
STI ESG establishes, maintains, and promotes partnerships with
legitimate members of the industry to increase our students’ and
graduates’ employability under the STI Partnership Program.
Through the PP, opportunities such as on-the-job training,
employment, courseware enhancements, and faculty
development are made available to STI, its students, and
partners. In addition, activities such as mock recruitment,
employment preparation seminars, job fairs, scholarships,
postings of employment opportunities, and faculty trainings are
also made possible.
31
The Petition was filed by Dr. Helena Z. Benitez (“Dr. Benitez”), as
an alleged creditor of PWU, to seek the suspension of all actions
for the enforcement of claims against PWU, and rehabilitation of
PWU. The Commencement/Stay Order was used to suspend the
extra-judicial foreclosure proceedings initiated by the Company
against PWU and UNLAD to satisfy their outstanding obligations
in the amount of P926,146,885.86 as of 7 December 2014. The
Rehabilitation Court dismissed the Petition on the following
grounds:
1. The Petition, the Rehabilitation Plan and the attachments
thereto contain materially false and misleading statements. The
Rehabilitation Court materially considered the Rehabilitation
Receiver’s Report (“Report”), which provided, among others, that
PWU’s insolvency is due to debts not incurred in the ordinary
course of business. The Report further stated that PWU entered
into transactions outside the nature of PWU, as an educational
institution. Moreover, acquisition of properties and agreements
that appear for the school did not materialize and yet money was
already spent causing PWU to be in debt. Lastly, unauthorized
advances by its then President and unaccounted money for the
school formed part of liabilities NOT in the ordinary course of
business; and
2. The Petition is a sham filing intended to delay the enforcement
of the rights of creditors. The Rehabilitation Court questioned the
right of Dr. Benitez as an alleged creditor to file the Petition
considering that she (a) is the “brand name, epitome and
embodiment” of PWU, (b) has unsubstantiated claims and (c)
claims against PWU are for personal expenses . The Rehabilitation
32
Court was convinced that the Petition was executed for the primary purpose of delaying
the enforcement of the rights of the Company as creditor .
Under Section 4, Rule 1 of the Financial Rehabilitation Rules of Procedure, the Order of
Dismissal is immediately executory.
32
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