PART III CONTROL AND COMPENSATION Item 9. Trustees and Executive Officers
Item 12. Related Party Transactions
The Group’s related parties include related parties under common management, key management personnel and others as described in Note 2.20 of the consolidated financial statements. The following are the Group’s transactions with such related parties:
May 31, 2017 May 31, 2016 March 31, 2016
Amount of
Amount of Outstanding Transaction Outstanding Amount of Outstanding
Transaction Receivable (Two Receivable Transaction Receivable
(One Year) (Payable) Months) (Payable) (One Year) (Payable) Terms Conditions
Related Parties Under Common Management:
Subscription of preferred stocks P 416,500,000 P - P - P - P - P - nonredeemable; not applicable
non-controlling
Advances to related parties 31,031,358 37,650,669 ( 3,012,589 ) 32,375,310 ( 38,800,433 ) 35,387,899 due and demandable; unsecured; not impaired noninterest-bearing
Advances from related party 1,480,974 ( 4,324,760) ( 43,633 ) ( 2,843,786) ( 24,047,509 ) ( 2,887,419) due and demandable; unsecured; not impaired noninterest-bearing
Management fees - - - 7,996,500 20,449,880 8,558,763 payable within 30 days; unsecured; not impaired
noninterest-bearing
Rental income 21,817,203 10,302,738 6,668,707 21,117,891 96,713,538 31,553,719 payable within 30 days; unsecured; not impaired
noninterest-bearing
Rental deposits - - 3,783,819 ( 4,008,683) 73,872 ( 7,792,502) not applicable not applicable
Others 10,000 ( 1,457,250) - ( 1,467,250) 133,750 ( 1,467,250) due and demandable; unsecured; impaired
noninterest-bearing Retirement Funds
Retirement plan assets - 632,111,250 - 698,534,855 - P 617,372,417 not applicable not applicable
Reimbursement of fund - 995,779 - 29,425,493 - - due and demandable; unsecured; not-impaired
noninterest-bearing Others
Key management
personnel compensation 341,021,838 - 25,239,938 - 167,011,088 - not applicable not applicable
Advances from
previous BOT of RCI ( 16,403,529) ( 105,264 ) - ( 19,023,017 ) - - due and demandable; unsecured; not impaired
interest-bearing
Subscription of Preferred Shares of Stock
In 2015, EAEF, a related party under common management, entered into a subscription agreement for the purchase of 240,000 preferred shares of EACCI (see Note 25.4 of the consolidated financial statements). The total consideration paid by EAEF amounted to P240.0 million. There was no outstanding receivable arising from the transaction as the amount is fully paid by EAEF in the year of subscription.
During the year ended May 31, 2017, EAEF also entered into a subscription agreement for the purchase of 416,500 preferred shares of FEUAI (see Note 25.4 of the consolidated financial statements). The total consideration paid by EAEF amounted to P416.5 million.
There was no outstanding receivable arising from the transaction as the amount is fully paid by EAEF in the year of subscription. No similar transaction occurred during the periods ended May 31, 2016 and March 31, 2016.
Noninterest-bearing Advances
(a) Advances of the University to Related Parties
The University grants unsecured and noninterest-bearing advances, which are due and demandable, to related parties under common management of the Group for working capital purposes.
Summarized below are the outstanding receivables from these advances as of May 31, 2017 and 2016 and March 31, 2016 recorded under Non-trade advances from related parties, which is shown as part of the Trade and Other Receivables account in the consolidated statements of financial position (see Note 9 of the consolidated financial statements):
Beginning Additional Ending
Balance Advances Repayments Balance
May 31, 2017
EAEF P 7,894,114 P 3,361,965 (P 2,061,074 ) P 9,195,005
FEU Public Policy
Foundation, Inc. 1,199,289 437,440 - 1,636,729
P 9,093,403 P 3,799,405 (P 2,061,074 ) P 10,831,734 May 31, 2016
EAEF P 6,941,664 P 2,073,341 (P 1,120,891 ) P 7,894,114
FEU Public Policy
Foundation, Inc. 1,199,289 - - 1,199,289
P 8,140,953 P 2,073,341 (P 1,120,891 ) P 9,093,403 March 31, 2016
EAEF P 7,174,074 P 24,029,802 (P 24,262,212 ) P 6,941,664
FEU Public Policy
Foundation, Inc. 1,180,568 18,721 - 1,199,289
P 8,354,642 P 24,048,523 (P 24,262,212 ) P 8,140,953
As of May 31, 2017 and 2016 and March 31, 2016, management believes that these outstanding balances are collectible in full in all the years presented; thus, no allowance for impairment on these receivables are recognized.
(b) Advances between EACCI and EAEF
During the periods ended May 31, 2017 and 2016 (nil for the year ended March 31, 2016), EACCI granted to and obtained from EAEF cash advances for working capital requirements and other purposes. These advances are non-interest bearing, unsecured and payable in cash upon demand. As of May 31, 2017 and 2016, outstanding advances to EAEF amounting to P26.6 million and P20.7 million, respectively, are presented as part of Non-trade advances to related parties under the Trade and Other Receivables account, while the outstanding advances from EAEF amounting to P4.3 million and P2.8 million, respectively, are presented as Advances from related party under the Trade and Other Payables account in the consolidated statements of financial position (see Notes 9 and 17 of the consolidated financial statements). No impairment loss is recognized by the Group on these advances during the periods ended May 31, 2017 and 2016.
(c) Advances of RCI to its Related Party
RCI grants noninterest-bearing and unsecured advances to Roosevelt College Center for Teacher Education, a related party under common management, for working capital purposes. These advances are generally collectible in cash and are due upon demand or through offsetting arrangement. The outstanding balance from these transactions which amounted to P3.0 million and P2.7 million as of May 31, 2017 and 2016, respectively, are presented as part of Non-trade advances to related parties under the Trade and Other Receivables account in the consolidated statements of financial position (see Note 9 of the consolidated financial statements).
Management Services
The University provided management services to EAEF and FERN College, which agreed to pay management fee computed at a certain percentage of the latter’s gross revenue subject to certain conditions. Management fees earned amounted to P20.4 million for the year ended March 31, 2016 and is presented as Management Fees under Revenues in the consolidated statements of profit or loss. No similar income was earned for the periods ended May 31, 2017 and 2016 as EACCI already took over the operations of EAEF during the said periods.
Outstanding receivables arising from this transaction amounted to P8.0 million and P8.6 million as of May 31, 2016 and March 31, 2016, respectively, (nil as of May 31, 2017) and are presented as part of Management fee under the Trade and Other Receivables account in the consolidated statements of financial position (see Note 9 of the consolidated financial statements). No impairment loss is recognized by the University on these receivables.
Leases
(a) Lease of Buildings to EAEF
The University leases out certain buildings to EAEF for a period of one to five years until May 31, 2015. However, upon expiration of the term of the contract, the University and EAEF had mutually agreed not to renew such lease agreement. Instead, as of May 31, 2017 and 2016 and March 31, 2016, only certain floors of the buildings were leased out to EAEF. Starting July 2016, upon take-over of EACCI of the EAEF’s operations, the lease of the buildings was transferred to the custody of EACCI.
Meanwhile, since the construction of the school building of EACCI was fully completed as of March 31, 2015, EAEF and EACCI entered into a contract to lease certain floors of EACCI’s newly constructed school building (see Note 15 of the consolidated financial statements). The lease commenced on July 1, 2014 for a period of five years with 5%
annual escalation. However, in May 2016, the lease agreement was pre-terminated.
Accordingly, EACCI reversed the related accrued rent receivable arising from straight line recognition of lease amounting to P7.0 million and is recorded as part of General Expenses under Operating Expenses in the consolidated statement of profit or loss (see Note 20 of the consolidated financial statements).
Total rental income earned by the University and EACCI from EAEF, presented as part of Rental under Revenues in the consolidated statements of profit or loss, amounted to P2.8 million, P6.7 million and P79.8 million for the periods ended May 31, 2017 and 2016 and March 31, 2016, respectively. Outstanding receivable arising from the transaction amounts to P23.4 million, P17.0 million and P27.5 million as of May 31, 2017 and 2016 and March 31, 2016, respectively, and is presented as part of the Trade and Other Receivables account in the consolidated statement of financial position.
(b) Lease of Buildings to FERN College
FRC leases out certain buildings to FERN College effective from June 1, 2007 to
May 31, 2017 for an annual rental of P14.0 million or 10% of gross annual revenue, whichever is higher. In January 2013, an amended lease agreement was executed by both parties which stated that the lease term shall now be from January 31, 2013 to December 31, 2023 for an annual rental fee of P12.0 million or 10% of FERN College’s annual gross income, whichever is higher.
Total rental income of FRC from FERN College amounted to P18.0 million and P16.1 million for the years ended May 31, 2017 and March 31, 2016, which is recorded as part of Rental under Revenues in the consolidated statements of profit or loss. No similar income was earned during the two months ended May 31, 2016. Outstanding receivables from this transaction amount to P7.0 million as of May 31, 2017 and P4.1 million as of May 31, 2016 and March 31, 2016, are presented as part of Rental receivable under the Trade and Other Receivables account in the consolidated statements of financial position (see Note 9 of the consolidated financial statements). No impairment loss is recognized by the Group on this receivable from FERN College.
(c) Lease of Transportation Vehicle to FERN College
In 2012, FRC entered into a contract with FERN College for the lease of a bus to the latter for a fixed monthly rental of P0.1 million covering a term of five years, from June 2012 to May 31, 2017.
The rental income earned from this transaction amounted to P1.5 million for the years ended May 31, 2017 and March 31, 2016 and is presented as part of Rental under Revenues in the consolidated statements of profit or loss. No similar income was earned during the two months ended May 31, 2016. The Group recognized unearned rental income in accordance with PAS 17 from FERN College amounting to P0.1 million as of May 31, 2017 and P0.9 million as of May 31, 2016 and March 31, 2016, and are presented as part of the Deferred Revenues account in the consolidated statements of financial position.
(d) Rental Deposits
Outstanding rental deposits arose from the lease of building by EACCI to EAEF, which amounted to P4.0 million and P7.8 million as of May 31, 2016 and March 31, 2016, respectively (nil as of May 31, 2017). These deposits are presented as part of Other Non-current Liabilities account in the consolidated statements of financial position.
Retirement Funds
The University’s, FECSI’s and EACCI’s retirement funds are in the form of trustee-banks managed accounts. The fair value of the University’s retirement plan assets amounted to P630.9 million, P697.7 million and P616.5 million as of May 31, 2017 and 2016 and March 31, 2016, respectively. The details of the retirement plans are presented in Note 22(d)(iii) of the consolidated financial statements. The University, FECSI and EACCI have no transactions with the retirement plans other than contributions and benefit payments in all periods presented.
During the periods ended May 31, 2017 and 2016, the University funded the retirement pay of certain employees who availed of the ERGP [see Note 22(a)(i) of the consolidated financial statements], which will be reimbursed by the Fund. The outstanding receivable from this transaction amounted to P1.0 million and P29.4 million as of May 31, 2017 and 2016, respectively and is recorded as part of Receivables from related parties under Receivables in the statement of financial position (see Note 9 of the consolidated financial statements). No similar transaction occurred for the year ended March 31, 2016.
None of the retirement plan assets are invested in or provided to the University or FECSI, their related parties, and to their officers in the form of advances or loans.
The retirement funds neither provide any guarantee nor surety for any obligation of the University and FECSI.
Key Management Personnel Compensation
Total remunerations of the Group’s key management personnel for the periods ended May 31, 2017 and 2016 and March 31, 2016, which are presented as part of Salaries and allowances and Employees benefits under Instructional and academic and Administrative expenses (see Note 20 of the consolidated financial statements), are as follows:
May 31, May 31, March 31,
2017 2016 2016
(One Year) (Two Months) (One Year) Short-term benefits P 150,018,280 P 21,511,998 P 147,028,692
Post-employment benefits 21,581,308 3,727,940 19,982,396
P 171,599,588 P 25,239,938 P 156,331,506
Advances from RCI’s BOT
RCI obtains unsecured, interest-bearing cash advances from the current members of its BOT, with an interest rate ranging from 8% to 12% per annum, for working capital purposes.
These advances are generally collectible in cash and are due upon demand. The outstanding balance from these transactions is presented as part of the Trade and Other Payables account in the consolidated statements of financial position as of May 31, 2017 and 2016 (see Note 17 of the consolidated financial statements).
Others
Others include amounts due to non-controlling interest that pertain to the unclaimed payments arising from fractional shares that were treated as treasury stocks in 2007 and 2015 by FRC. Total amount of payable to non-controlling interest amounts to P1.2 million as of May 31, 2017 and P1.5 million as of May 31, 2016 and March 31, 2016 and is presented as part of Others under the Trade and Other Payables account in the consolidated statements of financial position (see Note 17 of the consolidated financial statements).
Financial Guaranty for Subsidiaries’ Loans
In March 2017, the BOT approved that for and in consideration of the loan or credit facilities obtained by any subsidiary of the University, in which the University owns at least 75% of the outstanding voting capital stock of such subsidiary, from a local commercial bank, the University gives its full consent and authority to act as surety for the subsidiary’s obligations arising from any loan or availments from any credit facilities granted by the said local bank in favor of the subsidiary, as well as any renewals, increases, extensions of existing obligations obtained by or which may hereafter be obtained by the subsidiary from the local bank, whether direct or indirect, principal or secondary. As of the report date, no subsidiary has availed of any loan drawdown from the University’s credit facility with the local bank.
PART V – EXHIBITS AND SCHEDULES