Management’s Discussion and Analysis or Plan of Operation

Item 5: Interest of Certain Persons in Matters to be Acted Upon

4. Management’s Discussion and Analysis or Plan of Operation

Financial Position :

On March 31, 2010, the company had a total resources of P3,741.2 million, a total liability of P518.9 million and a net worth of P3,222.3 million. Company resources consisted of P2,484.6 million current assets and P1,256.6 million non-current assets. Most of the company’s current assets were quick assets amounting to P2,393.7 million, an amount more than sufficient to cover the company’s total liability of P518.9 million as they fall due. The company’s net worth consisted of a paid-up capital, net of treasury stocks, amounting to P980.84 million; an accumulated fair value loss of P7.85 million; and a retained earnings of P2,233.54 million. The company’s retained earnings consisted of a P1,675.1 million restricted/appropriated retained earnings and a P558.4 million free/unappropriated retained earnings.

As of March 31, 2011, total assets amounted to P4,046.7 million which was 8.16% higher than the previous year’s P3,741.2 million. Total liabilities amounted to P468.3 million which was 9.75% lower than the previous year’s P518.9 million. Equity amounted to P3,578.4 million which was 11.05% higher than the previous year’s P3,222.3 million. Current ratio was 4.68:1 and debt was 13% of equity.

As of March 31, 2012 total assets amounted to P4,530.6 million. Total liabilities amounted to P488.3 million while total stockholders’ equity reached P4,042.3 million.

Compared to the previous year,assets and stockholders’ equity increased by 11.95% and 12.96 % respectively. Liabilities also went up by 4.27%. Current ratio was 5.78:1 and debt was 12% of equity.

As of March 31, 2013, total assets amounted to P5,828.9 million which was 28.66%

higher than the previous year’s P4,530.6 million. Total liabilities amounted to P1,234.2 million which was 152.7% higher than the previous year’s P488.3 million. Equity amounted to P4,594.7 million which was 13.66% higher than the previous year’s P4,042.3 million. Current ratio was 5.88:1 and debt was 27% of equity.

For the past four (4) years, total assets increased at an average annual rate of 14.18% or P590.7 million a year. On the average, liabilities increased at around P164.3 million or 34.3% a year. The increase in asset and liability in 2013 is mainly due to newly acquired loan of P800 million.

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

Total Increase (Decrease) Total Increase (Decrease) Year Assets Amount % Liabilities Amount %

March 31, 2009 3,466.1 576.9

March 31, 2010 3,741.2 275.1 7.94% 518.9 (58.0) (10.05%) March 31, 2011 4,046.7 305.5 8.16% 468.3 (50.6) ( 9.75%) March 31, 2012 4,530.6 483.9 11.96% 488.3 20.0 4.27%

March 31, 2013 5,828.9 1,298.3 28.66% 1,234.2 745.9 152.75%

2,362.8 56.72% 657.3 137.22%

Four year average 590.7 14.18% 164.3 34.3%

During the past four years, the company’s solvency has always been favorable as shown by the following figures in million Pesos:

Excess of Assets

Year Total Assets Total Liabilities over Liabilities March 31, 2010 P 3,741.2 P 518.9 3,222.3 March 31, 2011 4,046.7 468.3 3,578.4 March 31, 2012 4,530.6 488.3 4,042.3 March 31, 2013 5,828.9 1,234.2 4,594.7

As of March 31, 2013, the company has P4.72 worth of assets to pay for every P1.00 worth of liability.

During the same period of time, the company remained liquid as shown by the following statistics in million Pesos:

Excess of Current Assets

Year Current Assets Current Liabilities over Current Liabilities

March 31, 2010 P2,484.6 P518.9 P1,965.7 March 31, 2011 2,192.1 468.3 1,723.8 March 31, 2012 2,823.4 488.3 2,335.1 March 31, 2013 2,552.0 434.2 2,117.8

As of March 31, 2013, the company has P5.88 worth of current assets to pay for every P1.00 worth of current liability.

The stability in the company’s financial condition both in solvency and liquidity is largely attributed to the company’s net income each year over the past four years, which were all more than enough to pay for the usual yearly cash dividends during the same period of time.

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

Excess of Net Cash Income over Cash Year Net Income Dividends Paid % Dividends Paid %

2009 – 2010 594.4 294.2 49.5% 300.2 50.5%

2010 – 2011 637.6 294.2 46.1% 343.4 53.9%

2011 – 2012 713.0 311.9 43.7% 401.1 56.3%

2012 – 2013 785.9 329.6 41.9% 456.3 58.1%

218.8%

Four year average 54.7%

Based on the above figures, around 54.7% of each year’s net income had been retained by the company. As a result, owner’s equity steadily improved as follows:

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

Increase

Year Owner’s Equity (Decrease) %

March 31, 2009 2,889.2

March 31, 2010 3,222.3 333.1 11.52%

March 31, 2011 3,578.4 356.1 11.05%

March 31, 2012 4,042.3 463.9 12.96%

March 31, 2013 4,594.7 552.4 13.66%

As of March 31, 2013, owner’s equity accounts for 78.83% of total assets. Since 43.78%

of the company’s total assets is current, the company can pay all its liabilities and still have 22.61% current assets and 56.22% non-current assets. In pesos, this would mean P1,317.8 million current assets and P3,276.9 million non-current assets after paying all liabilities amounting to P1,234.2 million as of March 31, 2013.

In Million %

Owners’ Equity P4,594.7 78.83%

Total Assets 5,828.9 100.00%

Non-Current Assets 3,276.9 56.22%

Current Assets 2,552.0 43.78%

Total Liabilities 1,234.2 21.17%

Current Assets after Total Liabilities 1,317.8 22.61%

Results of Operations

Net income after tax in 2009-2010 amounted to P594.4 million. Operating income contributed 77.74% while the 22.26% came from other income. Operating income, reached P521.7 million as a result of a total educational revenue of P1,844.5 million and a total operating expense of P1,322.8 million. Other income amounted to P149.4 million and came mainly from investment income (P87.9 million) and rental income (P39.2 million).

For the year 2010-2011, net income for the period was P637.6 million which was 7.27%

higher than the previous year’s P594.4 million. This year’s figure consisted of 72.22%

operating profit and 27.78% other income. Operating profit increased by P1.3 million and other

income by P51.8 million. As a result, net income after tax for the year increased by P43.2

million.

For the year 2011-2012, net income for the period amounted to P713.0 million which was 11.83% higher than the previous year’s P637.6 million. This year’s figure consisted of 66.63%

operating profit and 33.37% other income. Operating profit increased by P16.8 million while other income increased by P69.1 million. The combined effect resulted in an increase in net income after tax by P75.4 million.

For the year 2012-2013, net income for the period amounted to P785.9 million and was 10.22% higher than the previous year’s P713.0 million. This year’s figure consisted of 70.76%

operating profit and 29.24% other income. Operating profit increased by P98.95 million while other income slightly decreased by P6.2 million. As a result, net income after tax increased by P72.9 million.

The company’s operating profit which is largely dependent on enrollment, was up in 2006-2007 when enrollment was still at the 26,000 level but went down in 2007-2008, 2008- 2009 and 2009-2010 when enrollment dropped to 23,000. In 2010-2011, the first semester enrollment increased to 24,600 but the first year operating cost of the newly opened Makati Campus offset the increase in educational income thus, the minimal increase in operating profit.

In 2011-2012, the first semester enrollment further increased to 26,848, thus further improving the company’s operating profit. For 2012-2013, the first semester enrollment reached a record high of 29,580 and increased the company’s operating income by as much as P99 million.

Other income consists largely of investment income. During the past four years, investment income accounted for 52.91% of the total other income. Rental income accounted for 24.59%, management fees accounted for 15.32% with the remaining 7.18% from other miscellaneous income.

A Look of What Lies Ahead

For school year 2013-2014, the first semester enrollment is at 28,814 which is 766 students (2.59%) less that last year’s 29,580. The slight decrease in enrollment is due to this year’s re- configuration of facilities resulting in a slightly lower maximum capacity and the intended improvement in faculty-student ratio.

The 2013-2014 tuition fee increase of 3.5% of basic is likewise lower than last year’s 4.8%.

Since only 10% of tuition fee increase goes to return on investment, the positive effect of this year’s tuition fee increase to income is only .35% (3.5% x 10%).

The slight decrease in enrollment and the lower tuition fee increase will certainly have an adverse effect on income but with proper and better management of resources, we expect that this year’s operating income would still be more than satisfactory.

With the company’s current assets amounting to P2,552.0 million and non-current assets

amounting to P3,276.9 million as of March 31, 2013 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.

For the year’s ahead, management is committed to continue to uplift academic standards even more. This will be done through continuously updating curricula, strengthening faculty, improving services to students and providing the best educational facilities. With an additional campus and with sustained improvement in all fronts, plus a reasonable tuition fee hike, the University is confident that it will maintain its market share in the industry.

Top Five (5) Key Performance Indicators