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Quarterly Report ending November 30, 2018

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Any questions about the information contained herein should be directed directly to the Corporate Information Officer of the disclosing party. The increase in total liabilities is primarily the result of deferred tuition fees related to enrollment in the first semester. The consolidated total assets of the group increased by P1,186.49 million due to the following significant movements in the accounts:.

Cash and cash equivalents

Trade and other receivables

Financial assets at FVOCI

Investments at amortized cost

Property and equipment

Other current assets

Trade and other payables

Interest-bearing loans

Deferred revenue

Revaluation reserves

Retained Earnings

Non-controlling Interest (NCI)

Educational revenues-net

Finance income

Rental income

Other income – net

Security services expenses increased by P1.59 million, mainly due to increase in contracted services resulting from more students served during the period. Advertising and promotional expenses were higher by P4.45 million mainly due to the increased advertising expenses incurred by FEU, EACCI and RCI. The amount increased by P6.0 million, primarily due to interest rate changes on short-term loans in FEU.

Test of Liquidity

Test of Solvency

Test of Profitability

Product/Service Standard

PACUCOA awarded Level I status to its Bachelor of Science in Architecture program from February 2017 to February 2022. Bachelor of Science in Business Administration was awarded Center of Development by the Commission on Higher Education (CHED) from April 1, 2016 to December 31, 2018. Although established in 1992, EACCI began doing business under the name and style FEU Institute of Technology ( or "FIT" or "FEU Tech") in 2014 only.

Market Acceptability

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The items included in the consolidated financial statements of the Group are measured in its functional currency (see note 2.15). All subsequent changes in the share in the capital of the associated company are recognized in the book value of the University's investment. Financial assets are recognized when the Group becomes a party to the contractual terms of the financial instrument.

The amount of the reversal is recognized in the group's result. ii) Carried at fair value – AFS financial assets. Any gain or loss arising from derecognition of the asset (calculated as the difference between the net sales proceeds and the accounting value of the item) is included in the group's result in the period in which the item ceases. Financial liabilities, which include trade payables and other liabilities [excluding tax-related liabilities, deposits due and the National Service Training Program (NSTP) trust fund], interest-bearing loans, derivatives and refundable deposits (presented under Other non-current liabilities) are recognized when the Group becomes a party to the instrument contractual terms.

The difference between the accounting value of the terminated financial obligation and the consideration paid or owed is recognized in the result. Prepaid rent is recognized for the first time as part of the deferred revenue account in the consolidated balance sheet. This is presented as other operating income in the consolidated income statement. recognized when the risks and rewards of ownership of the goods have passed to the buyer.

The Group determines whether an agreement is or contains a lease based on the content of the agreement. Other reserves relate to the amount attributable to the parent as a result of the change in ownership of the NCI in the Group. Any post-year-end event that provides additional information about the consolidated financial position of the Group at the end of the reporting period (adjustment event) is reflected in the consolidated financial statements.

USE OF ACCOUNTING JUDGMENTS AND ESTIMATES

The BOT has overall responsibility for establishing and overseeing the Group's risk management framework. The Group's exposure to price risk arises from its investments in equity securities, which are classified as part of the AFS financial asset account in the consolidated statements of financial position. None of the Group's financial assets are also secured by collateral or other credit enhancements; except for cash and cash equivalents as described above.

None of the Group's financial assets are secured by collateral or other credit enhancements, except for cash and cash equivalents as follows. A description of the group's risk management objectives and policies for financial instruments is given in note 4. Below is the information on how the fair values ​​of the group's classes of financial assets and financial liabilities are calculated. a) Shares.

The fair value of the Group's debt securities, which consist of government and corporate bonds, is estimated based on the quoted offer price on the active market at the end of the reporting period and is classified in Level 1. c) Derivative financial instruments. Accordingly, the Group no longer presented a comparison of their fair values ​​with their book values ​​and, accordingly, their level in the fair value hierarchy. Based on management's assessment, the best use of the above-mentioned non-financial assets of the Group is their current use.

The valuation techniques used by the Group during the year for its non-financial assets were not changed.

PROPERTY AND EQUIPMENT

As of November 30 and May 31, 2018, certain fully depreciated assets with acquisition cost of P628.4 million are still used in the Group's operations. In 2018, the Group recognized impairment on certain buildings and improvements of RCI due to the closure of its Cubao and San Mateo campuses of P2.8 million. and presented as part of the costs and operating expenses in the consolidated statement of profit or loss.

INVESTMENT PROPERTIES

Total rental income earned by the Group from its investment properties amounted to P21.3 million and P19.0 million for the six months ended November 30, 2018 and 2017, respectively. The direct operating expenses, including depreciation and amortization, insurance and property taxes incurred by the Group made in respect of investment property are presented as part of Depreciation and amortization, Property insurance and Taxes and licenses, under Expenses and operating expenses in the consolidated income statement. Information on fair value measurement and disclosures related to investment property is presented in Note 6.4.

INTEREST-BEARING LOANS

The base interest rate is determined based on the quarterly bid yields of the Philippine Dealing System Treasury Reference for Philippine government securities. a) In May 2016, the University obtained an interest-bearing loan of P800.0 million from a local commercial bank which was used for the University's general capital expenditures, including corporate acquisitions and general corporate financing requirements. The university's initial loan drawdown was P680.0 million and is due within seven years, with the first principal payment being made in June 2017. The first interest payments were made in February and May 2017. e) In June 2017, the University obtained a P100 0.0 million interest-bearing loan from a local commercial bank for general capital expenditures, including financing a business acquisition and general corporate financing requirements.

The first interest payments were also made in the same month. f) In May 2017, the University secured an interest-bearing loan of P50.0 million from a local commercial bank for general capital expenditures, including financing a corporate acquisition and general corporate funding requirements. In August 2017, the university obtained an interest-bearing loan of P200.0 million from a local commercial bank to finance certain strategic investments of the university and for general corporate financing needs. In October 2017, the university obtained an interest-bearing loan of P175.0 million from a local commercial bank to finance certain investments and for general working capital requirements.

The current interest rate is 5.5%. i) In December 2017, the University received a P60.0 million interest loan from a local commercial bank for additional working capital. The local commercial bank and the University agreed to extend the term of the loan with a new maturity in December 2018. The loan has no significant or restrictive conditions. k) In April 2018, the University received a PEN 100.0 million interest loan from a local commercial bank for additional working capital.

From 30 November and 31 May 2018, there are listed shares, which include own shares and shares owned by the university's close associates.

EARNINGS PER SHARE

COMMITMENTS AND CONTINGENCIES

As of May 31, 2017, the university has a case pending against the local government of the City of Manila, where it contests the levying of local business tax on tuition fees collected. The university's protest is based on the following premises: (i) the lack of a specific provision in the Local Government Code and in the Local Tax Code of Manila authorizing the City of Manila to levy a 1% corporate tax on tuition fees to lift; (ii) prescription; and (iii) violation of due process. Also, as of the same date, the university is a defendant in certain civil cases pending before the National Labor Relations Commission, the Court of Appeals and the Supreme Court.

Per 30 November and 31 May 2018 no final decision has been made by the courts in the above-mentioned cases; therefore, no provisions are recognized for unforeseen expenses. The university's management and its legal advisors believe that any liabilities that may result from the outcome of these cases will not significantly affect the university's financial position and operating results. Provisions have been recognized in the consolidated statement of financial position which arise as part of the normal operations of certain subsidiaries.

There are also other unforeseen circumstances that arise in the normal course of business, which are not recognized in the group's consolidated accounts. Management is of the opinion that any losses resulting from these provisions, liabilities and contingencies will not materially affect its consolidated financial statements, but the Group has generally chosen to use a portion of the retained earnings to cover such contingencies.

CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES The Group aims to provide returns on equity to shareholders while managing operational

CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES The Group aims to provide shareholder return on equity while operationally managing. The Group's capital management objective is to maintain a lower liability compared to adjusted equity or a debt-to-equity structure ratio of no more than . This is consistent with the university's bank covenants regarding its borrowings, which require the university to maintain a debt-to-equity structure ratio of no more than and a debt service coverage ratio of at least 1.2x.

The university has complied with its covenant obligations, including maintaining the required debt ratio in all the years presented. There have been no significant changes in the group's approach to capital management during the year.

SEASONAL FLUCTUATIONS

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NAUUGNAY NA DOKUMENTO

Far Eastern University, Incorporated FEU PSE Disclosure Form 4-3 - Amendments to Articles of Incorporation References: SRC Rule 17 SEC Form 17-C and Section 4.4 of the Revised