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FAR EASTERN UNIVERSITY

P.O. BOX 609 MANILA, PHILIPPINES

October 03, 2012

Disclosure Department,

The Philippine Stock Exchange, Inc.

Tower One and Exchange Plaza Ayala Triangle, Ayala Avenue Makati City

Attention: Ms. Janet A. Encarnacion

Head

Madam:

Attached is FEU’s amended First Quarter Report for the period ended June 30, 2012 ( SEC Form 17-Q), in response to the letter of the Securities and Exchange Commission dated September 10, 2012, receipt of which was only made on October 1, 2012.

Please note the highlighted portions in compliance with SEC’s checklist of requirements.

Thank you.

Very truly yours,

FAR EASTERN UNIVERSITY

ANGELINA P. JOSE

Corporate Secretary

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FAR EASTERN UNIVERSITY

P.O. BOX 609 MANILA, PHILIPPINES

SECURITIES AND EXCHANGE COMMISSION AMENDED SEC FORM 17-Q

AMENDED QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES REGULATION CODE AND SEC RULE 17 (2) (b) THEREUNDER

1. For the Quarter period ended June 30, 2012

2. SEC Identification Number 538

3. PSE Code

4. BIR Tax Identification No. 000-225-442

5. Exact Name of Registrant as specified Far Eastern University, Inc.

in its charter

6. Province, Country or other jurisdiction of Philippines Incorporation or organization

7. __________________

/ / (SEC use only)

/ /

8. Address of Principal Office Nicanor Reyes Street, Sampaloc, Manila

Postal Code 1008

9. Registrant’s Telephone Number (632) 735-5621

including Area Code 10. NOT APPLICABLE

Former name, former address, and former fiscal year, if changed since last report.

11. Securities registered pursuant to Sections 8 and 12 of the SRC or Sections 4 and 8 of the RSA

Number of Shares of Common Stock Outstanding and

Title of Each Class Amount of Debt Outstanding

Common Stock, P100.00 par value 13,731,303 Bond with Non-Detachable Warrant, Not Applicable P1.00 per unit

(3)

- 2 -

12. All of these common securities are listed with the Philippine Stock Exchange, Inc.

13. Has filed all reports required during the preceding 12 months (or for such shorter period required to file such reports):

a) Sections 17 of the Code and SRC Rule 17

Yes [ x ] No [ ]

b) Sections 26 and 141 of the Corporation Code of the Philippines Yes [ x ] No [ ]

Financial Information

Item 1. Quarterly Financial Statements attached.

FAR EASTERN UNIVERSITY

ANGELINA P. JOSE GLENN Z. NAGAL

Corporate Secretary Comptroller

JUAN MIGUEL R. MONTINOLA ARNUALDO B. MACAPAGAL

Chief Finance Officer Chief Accountant

Manila

October 3, 2012

(4)

Management’s Discussion and Analysis or Plan of Operation

Financial Position:

Total assets as of June 30, 2012 amounting to P5,411.4 million increased by P880.8 million over this year’s beginning balance of P4,530.6 million. Current assets went up by P797.2 million and non-current assets by P83.6 million thus the increase in total assets by P880.8 million.

Total liabilities as of June 30, 2012 amounting to P1,467.1 million increased by P978.8 million over this year’s beginning balance of P488.3 million. The increase is mainly due to unearned tuition fees for the first semester.

Stockholder’s equity as of June 30, 2012 amounting to P3,944.3 million decreased by P98.0 million compared to this year’s beginning balance of P4,042.3 million due to the 12% cash dividend declared in June.

Results of Operation

Net income after tax for the first quarter is P85.31 million reflecting an increase of P36.31 million compared to last year's P49.00 million. Net operating (educational) income increased by P11.29 million and other income went up by P29.32 million. After an income tax of P10.61 million which increased by P4.29 million, net income after tax for the first quarter of this year is P36.31 million more than the same period last year.

A Look of What Lies Ahead

For the school year 2012-2013, the first semester enrollment increased by 10.11%

compared to the previous year’s 27,001. The increase in enrollment is attributed to our improved facilities and new course offerings. Our newly-opened branch in Makati brought in 1,771 students compared to last year’s 931 and we expect our branch enrollment to be substantial in the succeeding years.

The 4.8% tuition fee increase for 2012-2013 is a little higher than the previous year’s 4.5%. With the proper management of resources, we expect that operating profit will again improve this year.

With the company’s current assets amounting to P3,620.6 million and non-current assets amounting to P1,790.8 million as of June 30, 2012 and with the expected net income, the company does not foresee any cash flow or liquidity problem in the next 12 months. The company can easily meet all its commitments including those for improvements in instructional and other facilities from its present reserves and from expected future earnings.

(5)

For the year’s ahead, management is committed to the continuous improvement of academic standards. This will be done by continuously improving curricula, strengthening faculty, improving services to students and providing the best educational facilities. The University is confident of being a university of choice for its target market.

Changes in Real Accounts as of June 30, 2012 compared to March 31, 2012

Increase

June 30, 2012 March 31, 2012 (Decrease) %

1 Cash & Cash Equivalents 557,685,855.18 421,846,870.61 135,838,984.57 32%

2 Receivables - net 1,358,240,419.60 758,811,846.89 599,428,572.71 79%

3 Available for sale Investments - net

2,017,458,964.45 1,948,189,802.51 69,269,161.94 4%

4 Other Current Assets 22,562,155.64 29,853,986.64 (7,291,831.00) -24%

5 Due from a related party 104,496,555.75 114,610,613.02

(10,114,057.27) -9%

6 Investment Property 161,337,315.21 163,711,489.55 (2,374,174.34) -1%

7 Property and Equipment, net

1,028,967,421.79 932,925,048.04 96,042,373.75 10%

8 Accounts payable &

other current liabilities

501,963,874.92 414,402,473.04 87,561,401.88 21%

9 Trust Funds 13,162,607.35 0.00 13,162,607.35 -

10 Unearned Tuition Fees 906,252,128.80 31,922,492.74 874,329,636.06 2739%

11 Income Tax Payable 45,697,078.60 41,982,048.73 3,715,029.87 9%

12 Accumulated fair value gains (losses)

65,048,520.18 83,549,498.44 (18,500,978.26) -22%

13 Unappropriated Retained Earnings

787,658,748.05 867,127,414.59 (79,468,666.54) -9%

(6)

Changes in Income and Expense Items during the same period (first quarter) this year and last year

INCOME June 30, 2012 June 30, 2011

Increase

(Decrease) %

1 Tuition Fees, net 291,971,608.05 285,184,000.00 6,787,608.05 2%

2 Other School Fees 11,484,750.28 8,851,704.80 2,633,045.48 30%

3 Other Income 77,430,505.10 48,111,465.73 29,319,039.37 61%

Increase

EXPENSES June 30, 2012 June 30, 2011 (Decrease) %

1 Salaries 162,911,394.63 163,608,630.70 (697,236.07) 0%

2 Employee Benefits 33,389,522.88 14,272,634.25 19,116,888.63 134%

3 RLE 0.00 1,095,500.00 (1,095,500.00) -100%

4 Affiliation 861,042.50 3,463,978.00 (2,602,935.50) -75%

5 Other Instructional &

Academic Expenses

15,342,450.41 26,740,342.74 (11,397,892.33) -43%

6 Rentals 17,815,100.82 16,910,468.50 904,632.32 5%

7 Other Administrative Expenses 2,706,142.90 1,574,163.62 1,131,979.28 72%

8 Utilities 17,149,176.13 17,933,590.01 (784,413.88) -4%

9 Janitorial Services 3,066,284.31 4,231,144.92 (1,164,860.61) -28%

10 Property Insurance 227,968.47 648,645.67 (420,677.20) -65%

11 Repairs & Maintenance, Buildings & Equipment

2,468,339.54 4,367,662.32 (1,899,322.78) -43%

12 Security Services 2,132,461.12 4,426,551.44 (2,294,090.32) -52%

13 Depreciation 18,877,913.13 16,793,684.12 2,084,229.01 12%

14 Publicity and Promotions 2,037,225.92 2,450,824.75 (413,598.83) -17%

15 Other General Expenses 1,283,419.05 3,127,664.01 (1,844,244.96) -59%

16 Professional Fee 4,568,961.06 4,626,105.19 (57,144.13) -1%

17 Taxes & Licenses 130,069.00 240,961.18 (110,892.18) -46%

18 Charitable Contribution 0.00 321,895.36 (321,895.36) -100%

(7)

Cause of Material Changes in Real Accounts as of June 30, 2012 compared to March 31, 2012

1. Cash and cash equivalent increased by P135.8 million due to fresh collections from students enrolled in the first semester.

2. Receivables increased by P599.4 million due to new receivables from students enrolled in the first semester.

3. Available for sale investments increased by P69.3 million due to additional placements.

4. Other current assets decreased by P7.3 million due to adjustment in prepaid rent.

5. Due from related party decreased by P10.1 million due to collection.

6. Investment Property decreased by P2.4 million due to depreciation.

7. Property and Equipment increased by P96.0 million due to major repairs/renovations and acquisitions of new equipment.

8. Accounts payable and other current liabilities increased by P87.6 million mainly due to dividends payable (declared in June and payable in July).

9. Trust funds increased by P13.2 million due to allocations made during the summer and the first semester of this school year.

10. Unearned tuition fee increased by P874.3 million due to tuition fee not yet earned for the rest of the first semester (4 months).

11. Income tax payable increased by P3.7 million due to provision for income tax expense for the first quarter of this year. Income tax payable for the previous year was paid in July, 2012.

12. Accumulated fair value gain decreased by P18.5 million due to decrease in market value of available for sale investments.

13. Unappropriated retained earnings decreased by P79.5 million due to cash dividends declared in June which is more than the net income for the first quarter.

(8)

Cause of Material Changes in Income and Expense Items during the same period (First Quarter) this year and last year.

INCOME

1. Tuition fee income went up by P6.79 million due to the increase in first semester enrollment and in tuition fee rates.

2. Other School Fees increased by P2.63 million due to the increase in first semester enrollment and in rates.

3. Other income increased by P29.32 million due to higher interest/investment income and rental income.

EXPENSES

1. Salaries and allowances decreased by P.7 million due to lower rates for new hires.

2. Employee and faculty benefits increased by P19.1 million due to last year’s application of retirement forfeitures to retirement contribution.

3. RLE decreased by P1.09 million due to decrease in Nursing enrollment.

4. Affiliation fee decreased by P2.60 million due to timing difference.

5. Other Instructional and academic expenses decreased by P11.40 million due to:

(in million)

Conference and Seminar P (2.791)

Supplies and Materials 2.277

Printing and Binding (0.001)

Student Services (0.674)

Other Academic Expenses (10.207)

P (11.396) 4. Rental expense increased by P.90 million mainly due to increase in rate.

7. Other administrative expenses increased by P1.13 million due to:

(in million)

Conference and Seminar P 0.079

Supplies and Materials (0.170)

Other Administrative Expenses 1.222

Total P 1.131

(9)

8. Utilities expense decreased by P.784 million due to:

(in million)

Light and Power P 0.121

Water (0.774)

Telephone 0.445

Gasoline and Oil (0.152)

Others (0.424)

P (0.784)

9. Janitorial Services decreased by P1.16 million due to efficient assignment of janitors.

10. Property Insurance decreased by P.42 million due to timing differences.

11. Repairs and Maintenance decreased by P1.9 million due to less projects.

12. Security Services decreased by P2.29 million due to timing difference.

13. Depreciation increased by P2.08 million due to additional depreciable assets.

14. Publicity and Promotions decreased by P.4 million due to less advertisements.

15. Other General expenses decreased by P1.84 million due to:

(in million)

Interest and Bank Charges P (0.190)

Other General Expenses (1.654)

Total P (1.844)

16. Professional Fees decreased by P.05 million due to timing difference.

17. Taxes and Licenses decreased by P.11 million. Last year’s figure includes one time zoning fee.

18. Charitable Contribution decreased by P.321 million due to less donations.

(10)

Top Five (5) Key Performance Indicators / Financial Soundness Indicators

I. Test of Liquidity

Liquidity refers to the company’s ability to pay its short-term current liabilities as they fall due. This is measured by any of the following:

1. Current ratio measures the number of times that the current liabilities could be paid with the available current assets (Adequate: at least 1.5:1)

June 30, 2011 2.19:1 March 31, 2012 5.78:1 June 30, 2012 2.47:1

2. Quick ratio measures the number of times that the current liabilities could be paid with the available quick assets (Adequate: at least 1:1)

June 30, 2011 2.18:1 March 31, 2012 5.72:1 June 30, 2012 2.45:1

II. Test of Solvency

Solvency refers to the company’s ability to pay all its debts whether such liabilities are current or non-current. It is somewhat similar to liquidity, except that solvency involves a longer time horizon. This is measured by any of the following:

1. Debt to equity ratio measures the amount of assets provided by the creditors relative to that provided by the owner (Adequate : 100% or less)

June 30, 2011 39%

March 31, 2012 12%

June 30, 2012 37%

2. Debt to asset ratio measures the amount of assets provided by the creditors relative to the total amount of assets of the company. (Adequate: 50% or less)

June 30, 2011 28%

March 31, 2012 11%

June 30, 2012 27%

3. Equity to asset ratio measures the amount of assets provided by the owner relative to the total assets of the company (Adequate: 50% or more)

June 30, 2011 72%

March 31, 2012 89%

June 30, 2012 73%

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III. Test of Profitability

Profitability refers to the company’s earning capacity. It also refers to the company’s ability to earn a reasonable amount of income in relation to its total investment. It is measured by any of the following:

1. Return on total assets measures how well management has used its assets under its control to generate income (Adequate: at least equal to the prevailing industry rate).

June 30, 2011 1% (first quarter) March 31, 2012 16% ( one year ) June 30, 2012 2% (first quarter) 2. Return on owner’s equity measures how much was earned on the owners’

or stockholders’ investment. (Adequate: at least equal to the prevailing industry rate).

June 30, 2011 1% (first quarter) March 31, 2012 18% ( one year ) June 30, 2012 2% (first quarter) 3. Earnings per share measures the net income per share.

June 30, 2011 P 5.00 (first quarter) March 31, 2012 51.93 ( one year ) June 30, 2012 6.21 (first quarter)

IV. Product Standard

1. Teaching performance in the University is constantly being monitored to maintain a satisfactory level of excellence. Various incentives are given to our faculty for teaching excellence.

2. a). The Philippine Association of Colleges and Universities Commission on Accreditation (PACUCOA) has granted Certificates of Level III Re- accredited Status from April 2011 to April 2016 to:

Bachelor of Arts in Mass Communications

Bachelor of Science in Business Administration major in:

Business Economics Financial Management Marketing Management

Human Resource Development Management Operations Management

Business Management Internal Auditing Legal Management

(12)

Similarly, effective April 2011, PACUCOA granted a Level III Reaccredited Status to:

Bachelor of Science in Accountancy Bachelor of Science in Biology

Bachelor of Science in Applied Mathematics with Information Technology Bachelor of Science in Psychology

Bachelor of Science in Secondary Education Bachelor of Science in Elementary Education

b). The Philippine Accrediting Association of Schools, Colleges and

Universities (PAASCU) granted a level II Reaccredited Status to its Nursing program for another 5 years up to 2015.

c). The Commission on Higher Education (CHED) granted Far Eastern University an Autonomous status effective July 25, 2012 to May 31, 2014.

3. Performance of FEU graduates in their respective Board Exams is generally better than the national passing rate with the following board placers:

CPA, October 2011 10th Place

CPA, May 2011 10th Place

BAR, 2011 9th Place

Nursing, 2011 3rd, 6th, 7th, 9th and 10th Places Teacher Licensure Exam., 2011 8th and 9th Places

V. Market Acceptability

The growth in enrollment despite difficult times and the increase in the number of valedictorians, salutatorians and entrance merit scholars are indications that FEU is one of the better choices among the various colleges and universities in the metropolis.

First Semester Increase (Decrease) SY Enrollment No. of Students %

2009-2010 22,890

2010-2011 24,671 1,781 7.78

2011-2012 27,001 2,330 9.44

2012-2013 29,731 2,730 10.11

(13)

Formula

1 Liquidity

1 Current ratio = Current assets

Current Liabilities

2 Acid test ratio = Quick assets

Current Liabilities

2 Solvency

1 Debt to Equity ratio = Total liabilities

Total Stockholder's Equity

2 Debt to Asset ratio = Total liabilities

Total assets

3 Equity to Asset ratio = Total Stockholder's Equity Total assets

3 Profitability

1 Return on Assets = Net Profit

Total assets

2 Return on Owner's Equity = Net Profit

Total Stockholder's Equity

3 Earning per share = Net Profit

Total Outstanding shares

(14)

Facts

( I n M i l l i o n P e s o s )

1st Quarter 1st Quarter

June 30, 2011 March 31, 2012 June 30, 2012

Quick Assets 2,932.0 2,793.5 3,598.1

Current Assets 2,952.6 2,823.4 3,620.6

Non-Current Asset 1,895.3 1,707.2 1,790.8

Total Assets 4,847.9 4,530.6 5,411.4

Current Liabilities 1,347.8 488.3 1,467.1

Total Liabilities 1,347.8 488.3 1,467.1

Stockholder's Equity 3,500.1 4,042.3 3,944.3

Operating Profit 7.20 539.8 18.49

Other Income 48.11 270.3 77.43

Net Profit before Tax 55.31 810.1 95.92

Net Profit or Profit after Tax 49.00 713.0 85.31

Other Comprehensive Income 19.90 62.9 (18.50)

Total Comprehensive Income 68.90 775.9 66.81

Total Outstanding shares 9,808,448 13,731,303 13,731,303

(15)

Other Items

1. The current economic condition may still affect the sales/revenues/income from operations.

2. There are no known events that would result in any default or acceleration of an obligation.

3. There are no known events that will trigger direct or contingent financial obligation that may be material to the company

4. There are no material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the company with unconsolidated entities or other persons created during the reporting period.

5. There are no sales of Unregistered or Exempt Securities including Recent Issuance of Securities Constituting an Exempt Transaction.

6. There are no significant elements of income or loss from continuing operations.

7. Seasonal aspects that has material effect on financial statements:

There are three school terms within a fiscal year: the summer (April-May), the first semester (June to October) and the second semester (November to March). The first semester has the highest enrollment at an average of 26,000 students. The second semester is usually at 90% of the first semester’s enrollment while summer is the lowest at around 33%. The full load of a student during the summer is 9 units compared to 21 to 24 during the first and second semesters. The tuition fee increase, if any, usually takes effect during the first semester of the current school year. Thus, old rates are followed during the summer term while new rates are used during the first and second semesters. Since the first quarter is from April to June, the resulting income for the first quarter is expected to be lowest among the four quarters of the fiscal year.

(16)

June 2012 March 2012

A S S E T S Current Assets

Cash and cash equivalents P 557,685,855.18 P 421,846,870.61

Receivables - net 1,358,240,419.60 758,811,846.89

Available-for-sale investments - net 1,682,158,100.81 1,612,888,938.87

Other current assets 22,562,155.64 29,853,986.64

Total Current Assets 3,620,646,531.23 2,823,401,643.01 Noncurrent Assets

Due from a related party 104,496,555.75 114,610,613.02

Available-for-sale investments 335,300,863.64 335,300,863.64

Investments in subsidiaries and an associate 147,313,488.94 147,313,488.94

Investment property , net 161,337,315.21 163,711,489.55

Property and equipment, net 1,028,967,421.79 932,925,048.04

Deferred tax assets - net 9,424,385.00 9,424,385.00

Other non-current assets 3,929,796.34 3,929,796.34

Total Noncurrent Assets 1,790,769,826.67 1,707,215,684.53

TOTAL ASSETS P 5,411,416,357.90 P 4,530,617,327.54

LIABILITIES & EQUITY Current Liabilities

Accounts payable & other current liabilities P 501,963,874.92 P 414,402,473.04

Trust funds 13,162,607.35 0.00

Unearned tuition fees 906,252,128.80 31,922,492.74

Income tax payable 45,697,078.60 41,982,048.73

Total Current Liabilities 1,467,075,689.67 488,307,014.51 Equity

Capital Stock 1,376,863,400.00 1,376,863,400.00

Treasury stock (3,733,100.00) (3,733,100.00)

Accumulated fair value gains (losses) 65,048,520.18 83,549,498.44 Retained Earnings

Appropriated retained earnings 1,718,503,100.00 1,718,503,100.00 Unappropriated retained earnings 787,658,748.05 867,127,414.59

Total Equity 3,944,340,668.23 4,042,310,313.03

TOTAL LIABILITIES AND EQUITY P 5,411,416,357.90 P 4,530,617,327.54 THE FAR EASTERN UNIVERSITY, INCORPORATED

STATEMENTS OF FINANCIAL POSITION June 30, 2012

(With comparative figures for March 31, 2012)

(17)

April to

June 2012 June 2011

EDUCATIONAL REVENUES

Tuition Fees - net P 291,971,608.05 P 285,184,000.00

Other school fees 11,484,750.28 8,851,704.80

303,456,358.33 294,035,704.80 OPERATING EXPENSES ( Schedule 1 ) 284,967,471.87 286,834,446.78

OPERATING INCOME 18,488,886.46 7,201,258.02

OTHER INCOME

Finance Income 58,769,092.83 32,114,384.45

Rental 15,834,142.11 14,893,659.21

Finance Costs 0.00 (412,758.54)

Others 2,827,270.16 1,516,180.61

77,430,505.10 48,111,465.73

INCOME BEFORE TAX 95,919,391.56 55,312,723.75

TAX EXPENSE

Provision for Income Tax 3,715,029.87 996,756.01

Tax Expense - Final Tax 6,897,392.23 5,320,017.07

10,612,422.10 6,316,773.08

NET INCOME 85,306,969.46 48,995,950.67

OTHER COMPREHENSIVE INCOME

Fair value gains (losses) (18,500,978.26) 19,889,668.81

Reclassification to profit or loss 0.00 0.00

(18,500,978.26) 19,889,668.81 TOTAL COMPREHENSIVE INCOME P 66,805,991.20 P 68,885,619.48

EARNINGS PER SHARE

Basic and Diluted P 6.21 3.57

THE FAR EASTERN UNIVERSITY, INCORPORATED

STATEMENTS OF COMPREHENSIVE INCOME For the three month period ended June 30, 2012 & 2011

(18)

June 2012 June 2011

CAPITAL STOCK - P100 par value P 1,376,863,400.00 P 984,577,900.00 TREASURY STOCK - at cost ( 37,331 shares ) (3,733,100.00) (3,733,100.00) ACCUMULATED FAIR VALUE GAINS (LOSSES)

Balance at beginning of year 83,549,498.44 20,650,844.92 Fair Value gains (losses) for the year (18,500,978.26) 19,889,668.81 65,048,520.18 40,540,513.73 RETAINED EARNINGS

APPROPRIATED

Balance at beginning of year 1,718,503,100.00 1,853,733,100.00

Appropriations 0.00 0.00

Reversal for Appropriations 0.00 0.00

Balance at end of period 1,718,503,100.00 1,853,733,100.00

UNAPPROPRIATED Balance at beginning of year

As previously reported 867,127,414.59 703,282,400.89

Prior period adjustment 0.00 19,843,900.56

As restated 867,127,414.59 723,126,301.45

Net Income 85,306,969.46 48,995,950.67

Cash dividends (164,775,636.00) (147,126,720.00)

Balance at end of period 787,658,748.05 624,995,532.12

Total Retained Earnings 2,506,161,848.05 2,478,728,632.12

TOTAL EQUITY P 3,944,340,668.23 P 3,500,113,945.85

THE FAR EASTERN UNIVERSITY, INCORPORATED STATEMENTS OF CHANGES IN EQUITY For the three month period ended June 30, 2012 & 2011

(19)

June 2012 June 2011 CASH FLOWS FROM OPERATING ACTIVITIES

Income before tax P 95,919,391.56 P 55,312,723.75

Adjustments for:

Interest Income (57,537,601.08) (32,114,384.45)

Depreciation and amortization 18,877,913.13 16,793,684.12

Unrealized foreign exchange losses (gains) 0.00 412,758.54

Operating income before working capital changes 57,259,703.61 40,404,781.96

Decrease (increase) in receivables (538,918,926.56) (534,996,258.02) Decrease (increase) in Other assets 7,291,831.00 8,227,583.55 Increase (decrease) in accounts payable & other current liabilitie 87,561,401.88 91,980,678.96 Increase (decrease) in unearned tuition fee 874,329,636.06 770,146,085.11

Increase (decrease) in trust funds 13,162,607.35 16,347,179.02

Cash generated from (used in) operations 500,686,253.34 392,110,050.58

Income taxes paid 0.00 0.00

Net cash from operating activities 500,686,253.34 392,110,050.58

CASH FLOWS FROM INVESTING ACTIVITIES

Decrease (Increase) in loans receivable (60,509,646.15) 45,442,566.56 Decrease (Increase) in available-for-sale investments (87,770,140.20) 6,528,426.67 Acquisitions of property and equipment and investment property (112,546,112.54) (72,442,006.46) Decrease (Increase) in due from related party 10,114,057.27 14,515,272.27

Interest Received 50,640,208.85 26,794,367.38

Net cash provided by (used in) investing activities (200,071,632.77) 20,838,626.42 CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid (164,775,636.00) (147,126,720.00)

Effect of exchange rate changes in cash

and cash equivalents 0.00 (412,758.54)

NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS 135,838,984.57 265,409,198.46

CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 421,846,870.61 342,506,590.00

CASH AND CASH EQUIVALENTS

AT END OF PERIOD P 557,685,855.18 P 607,915,788.46

THE FAR EASTERN UNIVERSITY, INCORPORATED STATEMENTS OF CASH FLOWS

For the three month period ended June 30, 2012

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June 2012 June 2011

Instructional and Academic

Salaries and allowances P 131,924,526.80 P 132,310,717.63

Employees benefits 24,436,823.53 11,644,151.90

RLE 0.00 1,095,500.00

Affiliation 861,042.50 3,463,978.00

O t h e r s 15,342,450.41 26,740,342.74

172,564,843.24 175,254,690.27 Administrative

Salaries and allowances 24,320,064.20 25,087,154.08

Employees benefits 5,953,754.89 1,998,116.60

Rentals 17,815,100.82 16,910,468.50

O t h e r s 2,706,142.90 1,574,163.62

50,795,062.81 45,569,902.80 Maintenance and Plant Operation

Utilities 17,149,176.13 17,933,590.01

Janitorial services 3,066,284.31 4,231,144.92

Salaries and allowances 6,666,803.63 6,210,758.99

Employees benefits 2,998,944.46 630,365.75

Property insurance 227,968.47 648,645.67

Repairs and maintenance

Buildings and equipments 2,468,339.54 4,367,662.32

32,577,516.54 34,022,167.66 General

Depreciation 18,877,913.13 16,793,684.12

Security services 2,132,461.12 4,426,551.44

Publicity and promotions 2,037,225.92 2,450,824.75

Professional Fee 4,568,961.06 4,626,105.19

Charitable contribution 0.00 321,895.36

Taxes and licenses 130,069.00 240,961.18

O t h e r s 1,283,419.05 3,127,664.01

29,030,049.28 31,987,686.05

TOTAL P 284,967,471.87 P 286,834,446.78

Schedule 1 THE FAR EASTERN UNIVERSITY, INCORPORATED

Schedule of Operating/Educational Expenses For the three month period ended June 30, 2012 & 2011

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THE FAR EASTERN UNIVERSITY, INCORPORATED Aging of Accounts Receivable

As of June 30, 2012

Past due accounts Total 1 to 6 months 7 mos. To 1 year One year or more & items in litigation Type of Accounts receivable

Non - Trade Receivables

1 . Official and Personal 11,719,379.83 11,719,379.83 Not Applicable

2 . SSS Sickness Benefit 316,038.55 316,038.55 "

3 . FERN College 12,238.66 12,238.66 - - "

4 . NRMF 570,452.54 570,452.54 "

5 . Engineering / East Asia 7,500,000.00 7,500,000.00 "

6 FEU Silang 2,965.65 2,965.65 - - "

7 FERN Realty 350,680,283.15 171,833,338.74 108,710,887.78 70,136,056.63 "

8 ICF-CCE, Inc. 23,750,000.00 23,750,000.00 "

9 Alphaland, Corp. 370,000.00 181,300.00 114,700.00 74,000.00 "

10 Moldex 4,021,862.50 4,021,862.50 "

Total 398,943,220.88 212,407,576.47 116,325,587.78 70,210,056.63

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FAR EASTERN UNIVERSITY Notes to Financial Statements

June 30, 2012

1.

The interim Financial Statements of the University have been prepared in accordance with Philippine Financial Reporting Standards (PFRS). PFRS are adopted by the Financial Reporting Standards Council (FRSC) from the pronouncements issued by the International Accounting Standards Board.

2. The same accounting policies and methods of computation are followed in the interim financial statements as compared with the most recent annual financial statements.

3. There are no items affecting assets, liabilities, equity, net income, or cash flows that are unusual because of their nature, size or incidents.

4. No significant changes in estimates of amounts reported in prior interim periods or in prior financial years that have a material effect in the current interim period have been noted.

5. There are no issuances, repurchases, and repayments of debt and equity securities.

6. On June 19, 2012, a cash dividend of P12.00 per share has been declared to all stockholders on record as of July 04, 2012. There were 13,731,303 outstanding shares and a total of P164,775,636.00 was paid on July 18, 2012.

7. A new school site (FEU Makati Campus) was constructed and opened in June 2010 at the Makati area to offer business courses. Its educational income for the first quarter ended June 30, 2012 is P16.44 million while its operating expense for the same period amounted to P5.60 million.

The Board of Trustees in its meeting held on March 16, 2010, also authorized the Corporation to join and participate as a party/co-venturer with PHI Culinary Arts and Food Services Institute, Inc. to set up a Joint Venture Company (JVC) named ICF-CCE, Inc. for the purpose of owning and operating a culinary arts school to be named

“ICF@FEU”. The registration of the JVC was approved by SEC on May 7, 2010.

8. There are no material events subsequent to the end of the interim period that have not been reflected in the financial statements for the interim period.

9. There are no changes in composition of the issuer during the interim period, including business combinations, acquisitions or disposal of subsidiaries and long-term investments, restructurings, and discontinuing operations.

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10. There are no changes in contingent liabilities or contingent assets since the last annual balance sheet date.

11. PFRS 9, Financial Interests: Classification and Measurement( Effective from January 1, 2015)

The University does not expect to implement and adopt PFRS 9 until its effective date or until all chapters of this new standard have been published. In addition, management is currently assessing the impact of PFRS 9 on the financial statements of the University and is committed to conduct a comprehensive study of the potential impact of this standard to assess the impact of all changes in view of its adoption in 2015.

12. Currently, the University’s financial instruments are categorized as follows:

a) Financial Assets at FVTPL

This category includes financial assets that are either classified as held for trading or that meet certain conditions and are designated by the entity to be carried at FVTPL upon initial recognition. All derivatives fall into this category, except for those designated and effective as hedging instruments. Assets in this category are classified as current if they are either held for trading or are expected to be realized within 12 months from the end of the reporting period.

Financial assets at FVTPL are measured at fair value, and changes therein are recognized in profit or loss. Financial assets (except derivatives and financial instruments originally designated as financial assets at FVTPL) may be reclassified out of FVTPL category if they are no longer held for the purpose of being sold or repurchased in the near term.

The University has derivative assets (including embedded derivatives), included under this category, that are presented as Financial Assets at Fair Value through Profit or Loss account in 2012 statement of financial position.

The University uses derivative financial instruments to manage its risks associated with fluctuations in foreign currency. Such derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

The University’s derivative instruments provide economic hedges under the University’s policies but are not designated as accounting hedges. Consequently, any gains or losses arising from changes in fair value are taken directly to profit or loss for the period.

The University’s embedded derivative instruments consist of cross currency swaps embedded in its AFS investments.

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b) Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the University provides money, goods or services directly to a debtor with no intention of trading the receivables. They are included in current assets when their maturity is within 12 months after the reporting period.

Loans and receivables are subsequently measured at amortized cost using the effective interest method, less any impairment loss. Any change in their value is recognized in profit or loss. Impairment loss is provided when there is objective evidence that the University will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the impairment loss is determined as the difference between the assets carrying amount and the present value of estimated cash flows.

The University’s financial assets categorized as loans and receivables are presented as Cash and Cash Equivalents, Receivables, Due from a Related Party and Other Current Assets to the extent of the restricted cash and cash equivalents included therein, in the statement of financial positions.

Cash and cash equivalents are defined as cash on hand, demand deposits and short- term, highly liquid investments readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

c) HTM Investments

The category includes non-derivative financial assets with fixed or determinable payments and a fixed date of maturity that the University has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. HTM investments are included in non-current assets in the statement of financial position, except those maturing within 12 months from the end of the reporting period, which are presented as part of current assets. Subsequent to initial recognition, the investments are measured at amortized cost using the effective interest method, less impairment losses, if any.

Impairment lost, which is the difference between the carrying value and the present value of estimated cash flows of the investment, is recognized when there is objective evidence that the investment has been impaired. Any changes to the carrying amount of the investment, including impairment loss, are recognized in profit or loss.

d) AFS Financial Assets

This category includes non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. They are included in non-current assets under the Available-for- sale Investments account in the statement of financial position unless management

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intends to dispose of the investment within 12 months from the end of the reporting period.

All AFS financial assets are measured in fair value, unless otherwise disclosed, with changes in value recognized in other comprehensive income, net of any effects arising from income taxes. When the asset is disposed of or is determined to be impaired the cumulative gain or loss recognized in other comprehensive income is reclassified from revaluation reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income.

Reversal of impairment loss is recognized in other comprehensive income, except for financial assets that are debt securities which are recognized in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognized.

11. The Company does not have any investment in foreign securities.

12. Risk Management Objectives and Policies

The University is exposed to certain financial risks in relation to financial instruments.

Its main purpose for its dealings in financial instruments is to fund operational and capital expenditures. The BOT has overall responsibility for the establishment and oversight of the University’s risk management framework. It has a risk management committee headed by an independent trustee that is responsible for developing and monitoring the University’s policies, which address risk management areas.

Management is responsible for monitoring compliance with the University’s risk management policies and procedures and for reviewing the adequacy of these policies in relation to the risks faced by the University.

The University does not engage in trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the University is exposed to are described below.

a) Interest Rate Sensitivity

The University’s exposure to interest rate risk arises from interest-bearing financial instruments which are subject to variable interest rates. All other financial assets and liabilities have fixed rates.

b) Credit Risk

Credit risk represents the loss the University would incur if the counterparty failed to perform under its contractual obligations. The University’s exposure to credit risk on its receivables related primarily to the inability of the debtors to pay and students to fully settle the unpaid balance of tuition fees and other charges which are owed to the University based on installment payment schemes. The University

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has established controls and procedures in its credit policy to determine and to monitor the credit worthiness of the students based on relevant factors.

The University neither has any significant exposure to any individual customer or counterparty nor does it have any other concentration of credit risk arising from counterparties in similar business activities, geographic region or economic parties.

It has, however, a significant amount of loans to FRC which are not considered high risk considering that FRC is a subsidiary of the University. With respect to credit risk arising from cash and cash equivalents, receivables, due from a related party, AFS investments and HTM investments, the University’s exposure to credit risk arises from default of the counterparty, with maximum exposure equal to the carrying amount of these instruments.

c) Liquidity Risk

The University manages liquidity risk by maintaining a balance between continuity of funding and flexibility. Treasury controls and procedures are in place to ensure that sufficient cash is maintained to cover daily operational and working capital requirements. Management closely monitors the University’s future and contingent obligations and ensures that future cash collections are sufficient to meet them in accordance with internal policies. The University invests in cash placements when excess cash is obtained from operations.

Financial liabilities of the University at the end of the reporting period comprise of Accounts Payable and Other Liabilities which are all short-term in nature and have contractual maturities of less than 12 months.

d) Other Price Risk Sensitivity

The University’s exposure to price risk arises from its investments in equity and debt securities, which are classified as AFS Investments in the statements of financial position.

Management monitors its equity and debt securities in its investments portfolio based on market indices. Material investments within the portfolio are managed on an individual basis.

AFS investments consist of publicly listed equity securities and government securities which are carried at fair value and non-listed equity securities for which no fair value information is available and that are therefore carried at cost.

13. Capital Management Objectives, Policies and Procedures

The University aims to provide returns on equity to shareholders while managing operational and strategic objectives. The University manages its capital structure and

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makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust capital structure, the University may adjust the dividend payment to shareholders, return to capital shareholders or issue new shares.

The University defines capital as paid-in capital stock and retained earnings, both appropriated and unappropriated. Other components of equity such as treasury stock and revaluation reserves are excluded from capital for purposes of capital management. The BOT has overall responsibility for monitoring of capital in proportion to risks. Profiles for capital ratios are set in the light of changes in the University’s external environment and the risks underlying the University’s business, operation and industry.

The University monitors capital on the basis of debt-to-equity ratio, which is calculated as total debt divided by total equity.

The University is not subject to any externally-imposed capital requirements.

There was no change in the University’s approach to capital management during the year.

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