Metro Pacific Investments Corporation

METRO PACIFIC INVESTMENTS CORPORATION

14 November 2013

PHILIPPINE STOCK EXCHANGE Disclosure Department 3/F PSE Plaza Ayala Triangle, Ayala Avenue Makati City

Attention: MS. JANET A. ENCARNACION Head Disclosure Department

RE: SEC FORM 17-Q 9M Financial Report ended 30th September 2013

In compliance with the Revised Disclosure rules of the Exchange, Metro Pacific Investments Corporation submits through Odisy, SEC form 17-Q, to report the financial results of the Company for the third quarter of 2013.

Thank you.

Very truly yours,

MELODY M. DEL ROSARIO Corporate Information Officer PR & Corporate Communications SEC Number CS200604494 File Number______

Metro Pacific Investments Corporation (Company’s Full Name)

10/F MGO Bldg., Legaspi cor. Dela Rosa Sts. Legaspi Village, 0721 Makati City (Company’s Address)

(632) 888-0888 Telephone Number

______N/A______(Fiscal Year Ending) (month & day)

Form 17-Q Form Type

______N/A______Designation (If applicable)

30 September 2013 Period Date Ended

______N/A______(Secondary License Type and File Number)

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-Q

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

1. For the quarterly period ended September 30, 2013

2. SEC identification number CS200604494

3. BIR Tax Identification No. 244-520-457-000

4. Exact name of issuer as specified in its charter METRO PACIFIC INVESTMENTS CORPORATION

5. Province, country or other jurisdiction of incorporation or organization Makati City, Philippines

6. Industry Classification Code: (SEC Use Only)

7. Address of issuer's principal office Postal Code 10/F MGO Bldg., Legaspi cor. Dela Rosa Sts., Legazpi Village, 0721 Makati City

8. Issuer's telephone number, including area code (632) 8880888

9. Former name, former address and former fiscal year, if changed since last report N/A

10. Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the RSA

Title of each Class Number of shares of common stock outstanding

Common Shares 26,024,748,7521

1 Reported by the stock transfer agent as of September 30, 2013

11. Are any or all of the securities listed on a Stock Exchange?

Yes [ X ] No [ ]

If yes, state the name of such Stock Exchange and the class/es of securities listed therein: Philippines Stock Exchange

12. Indicate by check mark whether the registrant:

(a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of the Corporation Code of the Philippines, during the preceding twelve (12) months (or for such shorter period the registrant was required to file such reports)

Yes [ x ] No [ ]

(b) has been subject to such filing requirements for the past ninety (90) days.

Yes [ x ] No [ ]

TABLE OF CONTENTS

Exhibit I Unaudited Interim Consolidated Financial Statements 2 Exhibit II Notes to Unaudited Interim Consolidated Financial Statements 9 Exhibit III Management's Discussion and Analysis of Financial Condition and Results of Operations 51 Financial Highlights and Key Performance Indicators 52 Operational Review – 9M2013 vs 9M2012 MPIC Consolidated 56 Operating Segments of the Group 60 Discussion of Financial Position 67 Liquidity & Capital Resources 71 Financial Soundness Indicators 73 Risk Factors 74 Key Variable and Other Qualitative and Quantitative Factors 77

Item 1

FINANCIAL STATEMENTS

Exhibit I

METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Amounts in Millions except Per Share Amounts) Nine Months ended Three Months ended September 30 September 30 2013 2012* 2013 2012*

OPERATING REVENUES Water and sewerage services revenue P=12,598 P=11,649 P=4,106 P=3,965 Toll fees 6,038 4,997 1,934 1,576 Hospital revenue 4,151 3,818 1,514 1,348 School revenue 92 73 39 31 22,879 20,537 7,593 6,920 COST OF SALES AND SERVICES (Note 20) (8,715) (8,037) (3,085) (2,764) GROSS PROFIT 14,164 12,500 4,508 4,156 General and administrative expenses (Note 21) (4,463) (4,189) (1,443) (1,533) Interest expense (Note 22) (3,044) (2,783) (1,023) (924) Share in net earnings of associates and a joint venture - net (Note 9) 1,869 1,645 634 428 Interest income (Note 22) 370 518 109 135 Other income and expenses - net (Note 23) 32 328 (62) 192 INCOME BEFORE INCOME TAX 8,928 8,019 2,723 2,454 PROVISION FOR (BENEFIT FROM) INCOME TAX Current 789 880 271 262 Deferred (225) (362) (72) (186) 564 518 199 76 NET INCOME 8,364 7,501 2,524 2,378 OTHER COMPREHENSIVE INCOME (Note 19) Net OCI to be reclassified to profit or loss in subsequent periods (139) 14 (122) 10 Net OCI not being reclassified to profit or loss in subsequent periods (124) − − − TOTAL COMPREHENSIVE INCOME P=8,101 P=7,515 P=2,402 P=2,388

Net Income Attributable to: Owners of the Parent Company P=5,237 P=4,989 P=1,547 P=1,545 Non-controlling interest 3,127 2,512 977 833 P=8,364 P=7,501 P=2,524 P=2,378

Total Comprehensive Income Attributable to: Owners of the Parent Company P=4,971 P=4,999 P=1,426 P=1,552 Non-controlling interest 3,130 2,516 976 836 P=8,101 P=7,515 P=2,402 P=2,388

EARNINGS PER SHARE (Note 24) Basic Earnings Per Common Share, Attributable to Owners of the Parent Company (In Centavos) P=20.21 P=20.27 P=5.94 P=6.28 Diluted Earnings Per Common Share, Attributable to Owners of the Parent Company (In Centavos) P=20.16 P=20.23 P=5.93 P=6.27

*Restated for consistency in presentation and classification with 2013 balances See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis 2

METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Amounts in Millions)

Unaudited Restated** September 30, December 31, 2013 2012

ASSETS Current assets Cash and cash equivalents and short-term deposits (Note 5) P=12,855 P=9,119 Restricted cash (Note 5) 1,549 1,359 Receivables (Note 6) 3,570 3,608 Due from related parties (Note 16) 237 146 Other current assets (Note 7) 2,791 1,793 Total Current Assets 21,002 16,025

Noncurrent Assets Receivables (Note 6) 756 7,332 Due from related parties (Note 16) 73 65 Available-for-sale financial assets (Note 8) 1,972 1,403 Investments and advances (Note 9) 46,591 45,083 Goodwill (Note 4) 18,307 13,155 Service concession assets (Note 10) 94,886 81,870 Property use rights 659 690 Property and equipment 6,563 6,049 Other noncurrent assets (Note 11) 2,841 1,805 Total Noncurrent Assets 172,648 157,452 P=193,650 P=173,477

** Restated for effects of adoption of the revised Philippine Accounting Standard 19 “Employee Benefits” See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis

(Forward)

METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Amounts in Millions)

Unaudited Restated** September 30, December 31, 2013 2012 LIABILITIES AND EQUITY

Current Liabilities Note payable (Note 14) P=− P=4,700 Accounts payable and other current liabilities (Note 12) 14,423 13,712 Income tax payable 248 183 Due to related parties (Note 16) 99 97 Current portion of: Provisions (Note 13) 4,392 3,670 Service concession fees payable 1,523 688 Long-term debt (Note 14) 3,754 1,847 Total Current Liabilities 24,439 24,897 Noncurrent Liabilities Noncurrent portion of: Provisions (Note 13) 404 252 Service concession fees payable 6,978 8,026 Long-term debt (Note 14) 42,754 37,068 Deferred credits and other long-term liabilities (Note 15) 5,205 5,398 Deferred tax liabilities 3,664 3,448 Total Noncurrent Liabilities 59,005 54,192 Total Liabilities 83,444 79,089

Equity Owners of the Parent Company: Capital stock (Note 17) 26,075 24,664 Additional paid-in capital 42,930 38,097 Equity reserves (Note 18) 2,630 707 Retained earnings 19,924 15,701 Other comprehensive income reserve (Note 18) 306 473 Total equity attributable to owners of the Parent Company 91,865 79,642 Non-controlling interest 18,341 14,746 Total Equity 110,206 94,388 P=193,650 =P173,477

METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in Millions) Nine Months Ended September 30 2013 2012

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=8,928 P=8,019 Adjustments for: Interest expense (Note 22) 3,044 2,783 Amortization of service concession assets (Note 10) 2,074 2,295 Equity in net earnings of associates and a joint venture – net (Note 9) (1,869) (1,645) Refinancing cost (Note 23) 814 − Recovery from accounts written-off, provisions and other liabilities (Note 23) (734) (2) Depreciation and amortization (Notes 20 and 21) 680 579 Dividend income on preferred shares (Note 23) (405) (561) Interest income (Note 22) (370) (518) Unrealized foreign exchange loss (gain) – net 284 (591) Provision for Long-term Incentive Plan 271 177 Deferred toll and tuition fees realized (31) (34) Provision for Executive Stock Option Plan (Note 25) 4 10 Mark-to-market gain (loss) on derivatives–net (Note 23) − (11) Operating income before working capital changes 12,690 10,501 Decrease (increase) in: Short-term deposits (188) 23 Restricted cash (189) 670 Receivables 205 (370) Due from related parties (99) 39 Other current assets (172) (60) Increase (decrease) in: Accounts payable and other current liabilities (271) 77 Accrued retirement cost 121 226 Provisions 640 612 Net cash generated from operations 12,737 11,718 Unearned toll revenue, tuition and other school fees 22 11 Income tax paid (723) (744) Interest received 205 393 Net cash provided by operating activities 12,241 11,378

CASH FLOWS FROM INVESTING ACTIVITIES Dividend received from an associate (Note 9) 287 262 Dividend received from investment in preference shares 405 561 Interest received 73 69 Increase (decrease) in other noncurrent assets (70) 5 Proceeds from/cash received from: Sale of Available-for-sale 11 − Investment in subsidiaries 777 − Sale of Property and equipment − 7 Notes receivable 3,186 884 Balance 4,669 1,788 (Forward)

METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in Millions) Nine Months Ended September 30 2013) 2012)

Balance brought forward P=4,669 P=1,788 Additions to: Service concession assets (Note 10) (5,379) (4,898) Loans and receivables (3,186) (600) Available-for-sale financial assets (Note 8) (1,581) − Property and equipment (1,031) (650) Investments in associates and joint venture (Note 9) (134) (6,263) Software cost (20) (4) Investments in subsidiaries, net of cash acquired − (207) Net cash provided by (used in) investing activities (6,662) (10,834)

CASH FLOWS FROM FINANCING ACTIVITIES Payments of: Long-term debt (Note 14) (29,646) (1,380) Short-term notes (Note 14) (4,700) − Dividends to non-controlling stockholders (1,225) (1,164) Refinancing and transaction costs on long-term debt (1,146) − Service concession fees payable (1,140) (890) Dividends paid to owners of the Parent Company (915) (668) Transaction cost (182) − Swap termination cost (175) − Due to related parties − (5) Payment to non-controlling interest − (139) Proceeds from: Long-term debt (Note 14) 30,192 300 Issuance of shares of stock 6,339 18 Sale to Non-controlling interest 3,533 − Reissuance of Treasury stock 6 − Due to related parties 9 2 5 Deposit from future stock subscription − − Interest paid (2,974) (2,533) Net cash used in financing activities (2,031) (6,456)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,548 (5,912)

CASH AND CASH EQUIVALENTS AT JANUARY 1 9,119 15,102

CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 (Note 5) P=12,667 P=9,190

See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis

METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012 (Amounts in Millions)

Nine Months Ended September 30, 2013 Attributable to Owners of the Parent Company Other Capital Additional Equity Comprehensive Stock Paid-in Reserves Retained Income Reserve Non-controlling (Note 17) Capital (Note 18) Earnings (Note 18) Total Interest (NCI) Total Equity At January 1, 2013, as previously reported P=24,664 P=38,097 P=707 P=16,181) (P=21) P=79,628 P=14,732 P=94,360 Adoption of revised PAS 19 (Note 2) − − − (480) 494 14 14 28 At January 1, 2013, as restated 24,664 38,097 707 15,701) 473 79,642 14,746 94,388 Total comprehensive income for the period Net income − − − 5,237 − 5,237 3,127 8,364 Other comprehensive income − − − − (266) (266) 3 (263) Total comprehensive income for the period − − − 5,237 (266) 4,971 3,130 8,101 Equity raising (net of transaction cost) 1,330 4,648 − − − 5,978 − 5,978 Executive Stock Option Plan 81 185 (40) − − 226 − 226 Cash dividends declared − − − (915) − (915) − (915) Dividends paid to non-controlling interest − − − − − − (1,225) (1,225) Gain on equity transfer and other changes in NCI − − 1,963 (99) 99 1,963 1,690 3,653 At September 30, 2013 P=26,075 P=42,930 P=2,630 P=19,924) P=306 P=91,865 P=18,341 P=110,206

Nine Months Ended September 30, 2012 Attributable to Owners of the Parent Company Other Capital Additional Equity Comprehensive Stock Paid-in Reserves Retained Income Reserve Non-controlling (Note 17) Capital (Note 18) Earnings (Note 18) Total Interest (NCI) Total Equity At January 1, 2012, as previously reported P=24,643 P=38,056 P=706 P=10,460 (P=102) P=73,763 P=12,667 P=86,430 Adoption of revised PAS 19 (Note 2) − − − 1 (1) − − − At January 1, 2012, as restated 24,643 38,056 706 10,461 (103) 73,763 12,667 86,430 Total comprehensive income for the period Net income − − − 4,989 − 4,989 2,512 7,501 Other comprehensive income − − − − 10 10 4 14 Total comprehensive income for the period − − − 4,989 10 4,999 2,516 7,515 Executive Stock Option Plan 7 15 7 − − 29 − 29 Cash dividends declared − − − (669) − (669) − (669) Dividends paid to non-controlling interest − − − − − − (1,164) (1,164) Completion of AHI's Right of First Refusal and Tender Offer − − − − − − 345 345 Maynilad’s acquisition of treasury shares − − − − − − (2) (2) At September 30, 2012 P=24,650 P=38,071 P=713 P=14,781 (P=93) P=78,122 P=14,362 P=92,484

See accompanying notes to the Unaudited Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis 7

Metro Pacific Investments Corporation Aging of Receivables (Amounts in Millions)

September 30, 2013 (Unaudited) 0 - 30 31 - 60 61 - 90 Over 90 Type Current days days days days Balance Trade Receivable P=866 P=1,090 P=276 P=149 P=619 P=3,000 Notes Receivable 1,033 − − − − 1,033 Other receivables 372 35 6 17 792 1,222 Due from related parties 341 − − − − 341

TOTAL 2,612 1,125 282 166 1,411 5,596 Allowance for impairment/loss Trade Receivables (733) Notes Receivable (180) Other Receivables (16) Due from related parties (31) TOTAL (960)

NET RECEIVABLES P=4,636

December 31, 2012 (Audited) 0 - 30 31 - 60 61 - 90 Over 90 Type of Accounts Receivable Current days days days days Balance Trade Receivable P=2,116 P=667 P=55 P=28 P=64 P=2,930 Notes Receivable 7,328 − − − 180 7,508 Other receivables 1,092 37 2 1 116 1,248 Due from related parties 362 − − − − 362 TOTAL 10,898 704 57 29 360 12,048 Allowance for impairment/loss Trade Receivables (550) Notes Receivable (180) Other Receivables (16) Due from related parties (151)

TOTAL (897)

NET RECEIVABLES P=11,151

Exhibit II

METRO PACIFIC INVESTMENTS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

Metro Pacific Investments Corporation (the Parent Company or MPIC) was incorporated in the Philippines and registered with the Philippine Securities and Exchange Commission (SEC) on March 20, 2006 as an investment holding company. MPIC’s common shares of stock are listed in and traded through the Philippine Stock Exchange (PSE). On August 6, 2012, MPIC launched Sponsored Level 1 American Depositary Receipt (ADR) Program with Deutsche Bank as the appointed depositary bank in line with the Parent Company’s thrust to widen the availability of its shares to investors in the United States.

The principal activities of the Parent Company’s subsidiaries and significant associates and joint venture are disclosed in Notes 2 and 9, respectively.

MPIC is 55.8% owned by Metro Pacific Holdings, Inc. (MPHI). MPHI is a Philippine corporation whose stockholders are Enterprise Investment Holdings, Inc. (EIH) (60.0%), Intalink B.V. (26.7%) and First Pacific International Limited (13.3%). First Pacific Company Limited (FPC), a company incorporated in Bermuda and listed in Hong Kong, through its subsidiaries, holds 40.0% equity interest in EIH and an investment financing which under Hong Kong Generally Accepted Accounting Principles require FPC to account for the results and assets and liabilities of EIH and its subsidiaries as part of FPC group of companies in Hong Kong.

The registered office address of the Parent Company is 10th Floor, MGO Building, Legaspi corner Dela Rosa Streets, Legaspi Village, Makati City.

The accompanying unaudited interim consolidated financial statements as at September 30, 2013 and for the nine months ended September 30, 2013 and 2012 were approved and authorized for issuance by the Board of Directors (BOD) on November 6, 2013.

2. Summary of Significant Accounting Policies

Basis of Preparation The interim condensed consolidated financial statements are prepared on a historical cost basis, except for derivative financial instruments and certain available-for-sale (AFS) financial assets that are measured at fair value, and are prepared in accordance with Philippine Accounting Standard (PAS) 34, “Interim Financial Reporting”. The interim condensed consolidated financial statements are presented in Philippine Peso, which is MPIC and its subsidiaries’ (henceforth together referred to as the Company) functional and presentation currency, and all values are rounded to the nearest millions (000,000), except when otherwise indicated.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company’s annual consolidated financial statements as at and for the year ended December 31, 2012.

Changes in Accounting Policies and Disclosures Our accounting policies are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended December 31, 2012, except for the following voluntary changes in accounting policies and adoption of new Philippine Financial Reporting Standards (PFRS) and Philippine interpretation effective January 1, 2013.

Voluntary changes in accounting policies

. Change in amortization method of Maynilad’s service concession asset — At the end of the year 2012, Maynilad determined that it is more appropriate to use the unit of production basis for amortizing the service concession asset as the economic benefit of this asset is more closely aligned with the billed volume. Beginning January 1, 2013, the service concession asset is amortized on a unit of production basis. The change in method of amortization resulted in a decrease in amortization expense by P=495.9 million of the service concession asset for the nine- month period ended September 30, 2013.

. Presentation of items of income and expense — Prior to 2013, the Company presented items of income and expense in two separate statements: (1) an income statement; and (2) a statement of comprehensive income beginning with net income and followed by components of other comprehensive income (OCI). Beginning 2013, the Company changed its presentation of items of income and expenses to a single statement of profit or loss and OCI referred to as the statement of comprehensive income. Such simplified format aims to assist users in an enhanced understanding of the financial performance achieved by the Company.

Adoption of new and amended standards and interpretations

. PAS 1, Presentation of Items of Other Comprehensive Income – Amendments to PAS 1 — The amendments to PAS 1 introduce a grouping of items presented in OCI. Items that could be reclassified (or recycled) to profit or loss at a future point in time (e.g., net gain on hedge of net investment, exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on available-for-sale financial assets) now have to be presented separately from items that will never be reclassified (e.g., actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The amendment affected presentation only and had no impact on the Company’s financial position or performance.

. PAS 1, Clarification of the requirement for comparative information (Amendment) — The amendment to PAS 1 clarifies the difference between voluntary additional comparative information and the minimum required comparative information. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The additional voluntary comparative information does not need to be presented in a complete set of financial statements.

An opening statement of financial position (known as the ‘third balance sheet’) must be presented when an entity applies an accounting policy retrospectively, makes retrospective restatements, or reclassifies items in its financial statements, provided any of those changes has a material effect on the statement of financial position at the beginning of the preceding period. The amendment clarifies that a third balance sheet does not have to be accompanied by comparative information in the related notes. Under PAS 34, the minimum items required for interim condensed financial statements do not include a third balance sheet. Thus, no third balance sheet has been presented in these interim financial statements. However, a third balance sheet would be presented in the Company’s annual consolidated financial statements.

. PAS 19, Employee Benefits (Revised) (PAS 19R) — PAS 19R includes a number of amendments to the accounting for defined benefit plans, including actuarial gains and losses that are now recognized in OCI and permanently excluded from profit or loss; expected returns on plan assets that are no longer recognized in profit or loss, instead, there is a requirement to recognize interest on the net defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit obligation, and; unvested past service costs are now recognized in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination costs are recognized. Other amendments include new disclosures, such as, quantitative sensitivity disclosures.

In the case of the Company, the transition to PAS 19R had no material impact on the net defined benefit plan obligations or on total equity as the Company’s previous accounting policy is to recognize actuarial gains and losses as income or expense immediately in the year when these are incurred. However, there is impact as to recognition of actuarial gains and losses from profit or loss to OCI. Impact on interim consolidated financial statements:

December 31, January 1, 2012 2012 (Unaudited) (In Millions) Consolidated statements of financial position: Increase (decrease) in: Pension asset (P=27) P=− Accrued retirement cost (66) − Deferred tax liability 11 − Equity – Owners of the Parent Company: Retained earnings (480) 1 Other comprehensive income (loss) reserve 494 (1) Non-controlling interest 14 −

Nine Months Ended September 30 2013 2012 (Unaudited) (In Millions) Consolidated statements of comprehensive income: Increase (decrease) in: Net income (P=58) P=− Other comprehensive income (loss) reserve 58 −

. PAS 27, Separate Financial Statements — As a consequence of the new PFRS 10, Consolidated Financial Statements, and PFRS 12, Disclosure of Interests in Other Entities, what remains of PAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. This amendment has no impact on the Company’s financial position or performance.

. PAS 28, Investments in Associates and Joint Ventures — As a consequence of the new PFRS 11, Joint Arrangements, and PFRS 12, Disclosure of Interest in Other Entities, PAS 28 has been renamed PAS 28, Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. This amendment has no impact on the Company’s financial position or performance as it currently accounts for its investments in associates and joint ventures using the equity accounting method.

. PFRS 7, Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendments) — These amendments require an entity to disclose information about rights of set-off and related arrangements (such as collateral agreements). The new disclosures are required for all recognized financial instruments that are set-off in accordance with PAS 32. These disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or “similar agreement”, irrespective of whether they are set-off in accordance with PAS 32. The amendments require entities to disclose, in a tabular format unless another format is more appropriate, certain minimum quantitative information. This is presented separately for financial assets and financial liabilities recognized at the end of the reporting period. As the Company is not setting off financial instruments in accordance with PAS 32 and does not have relevant offsetting arrangements, the amendment does not have an impact on the Company.

. PFRS 10, Consolidated Financial Statements — PFRS 10 replaces the portion of PAS 27 that addresses the accounting for consolidated financial statements. It also includes the issues raised in Standards Interpretation Committee (SIC)-12, Consolidation – Special Purpose Entities. PFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by PFRS 10 will require management to exercise significant judgment to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in PAS 27. The Company reassessed its portfolio of investments under PFRS 10 and concluded that it has properly identified those investees that it controls and has no control. Adoption of PFRS 10 also did not result in the creation of a new operating segment. This standard has no impact on both the Company’s parent and consolidated financial statements.

. PFRS 11, Joint Arrangements — PFRS 11 replaces PAS 31, Interests in Joint Ventures and SIC-13, Jointly-controlled Entities – Non-monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. The application of this new standard has no impact on the Company’s financial position as it currently accounts for its investment in a joint venture under the equity method of accounting.

. PFRS 12, Disclosure of Interest in Other Entities — PFRS 12 sets out the requirements for disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. None of these disclosure requirements are applicable for interim condensed consolidated financial statements, unless significant events and transactions in the interim period require that they are provided. Accordingly, the Company has not made such disclosures in these interim financial statements. However, required disclosures would be made in the Company’s annual consolidated financial statements.

. PFRS 13, Fair Value Measurement — PFRS 13 establishes a single source of guidance under PFRS for all fair value measurements. PFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under PFRS when fair value is required or permitted. The application of PFRS 13 has not materially impacted the fair value measurements carried out by the Company. PFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including PFRS 7, Financial Instruments: Disclosures. Some of these disclosures are specifically required for financial instruments by PAS 34.16A(j), thereby affecting the interim condensed consolidated financial statements period. The Company provided these disclosures in Note 27.

The following standards were also adopted but did not have any impact on the Company’s consolidated financial statements

. PFRS 1, First-time Adoption of International Financial Reporting Standards - Government Loans Amendments to PFRS 1

. Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine

. Improvements to PFRSs 2009-2011 Cycle: . Repeat application of PFRS 1 . PFRS 1 – Borrowing Costs . PAS 16 – Classification of servicing equipment . PAS 32 – Tax effects of distributions to holders of equity instruments . PAS 34 – Interim financial reporting and segment information for total assets and liabilities

The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. One of the standards that the Company did not early adopt is PFRS 9, Financial Instruments.

PFRS 9 is effective for annual periods beginning on or after January 1, 2015. PFRS 9, as issued, reflects the first phase on the replacement of PAS 39, Financial Instruments: Recognition and Measurement and applies to the classification and measurement of financial assets and liabilities as defined in PAS 39. Work on impairment of financial instruments and hedge accounting are still ongoing, with a view to replacing PAS 39 in its entirety. PFRS 9 requires all financial assets to be measured at fair value at initial recognition. A debt financial asset may, if the fair value option (FVO) is not invoked, be subsequently measured at amortized cost if it is held within a business model that has the objective to hold the assets to collect the contractual cash flows and its contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal outstanding. All other debt instruments are subsequently measured at fair value through profit or loss. All equity financial assets are measured at fair value either through OCI or profit or loss. Equity financial assets held for trading must be measured at fair value through profit or loss. For FVO liabilities, the amount of change in the fair value of a liability that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation of the fair value change in respect of the liability’s credit risk in OCI would create or enlarge an accounting mismatch in profit or loss. All other PAS 39 classification and measurement requirements for financial liabilities have been carried forward into PFRS 9, including the embedded derivative separation rules and the criteria for using the FVO. The Company will assess the impact of PFRS 9 on its financial statements once the other phases of the standards are finalized.

Basis of Consolidation The interim condensed consolidated financial statements include the accounts of the Parent Company and the following subsidiaries as at September 30, 2013:

September 30, 2013 December 31, 2012 MPIC Direct MPIC MPIC Direct MPIC Place of Direct Interest of Effective Direct Interest of Effective Name of Subsidiary Incorporation Principal Activity Interest Subsidiary Interest Interest Subsidiary Interest ( In %) ( In %) MPIC Subsidiaries Metro Pacific Tollways Corporation (MPTC) Philippines Investment holding 99.88 – 99.88 99.88 – 99.88 DMCI-MPIC Water Company, Inc. (DMWC) (a) Philippines Investment holding 51.27 – 51.27 55.41 – 55.41 Riverside Medical Center, Inc (RMCI) Philippines Hospital operation 51.00 – 51.00 51.00 – 51.00 East Manila Hospital Managers Corp. (EMHMC) Philippines Hospital operation 100.00 – 100.00 100.00 – 100.00 Asian Hospital Inc. (AHI) Philippines Hospital operation 5.66 79.90 85.56 5.66 79.90 85.56 Colinas Verdes Hospital Managers Corp. (CVHMC) Philippines Hospital operation 100.00 – 100.00 100.00 – 100.00 Metro Pacific Light Rail Corp. (MPLRC) Philippines Investment holding 100.00 – 100.00 100.00 – 100.00 Light Rail Manila Corporation Philippines Investment holding 50 50 100.00 – – – MetroPac Water Investments Corporation (MPWIC) Philippines Investment holding 100.00 – 100.00 100.00 – 100.00 Bumrungrad International Philippines Inc. (BIPI) Philippines Investment holding 100.00 – 100.00 100.00 – 100.00 Neptune Stroika Holdings, Inc. (NSHI) Philippines Investment holding 100.00 – 100.00 100.00 – 100.00 MPIC-JGS Airport Holdings, Inc. (MPIC-JGS) (b) Philippines Investment holding 58.75 – 58.75 – – – Fragrant Cedar Holdings, Inc. (FCHI) Philippines Real Estate 100.00 – 100.00 100.00 – 100.00 Neo Oracle Holdings, Inc Philippines Investment holding (NOHI) (c) and Real estate 96.60 – 96.60 96.60 – 96.60

MPTC Subsidiaries Operating Subsidiaries Metro Pacific Tollways Development Corporation (MPTDC) Philippines Investment holding – 100.00 99.88 – 100.00 99.88 Manila North Tollways Corporation (MNTC) Philippines Tollway operations – 67.10 67.00 – 67.10 67.00 Cavitex Infrastructure Corporation (CIC) and subsidiaries (d) Philippines Tollway operations – 100.00 100.00 – – –

MPTDC Subsidiaries Collared Wren Holdings, Inc. (CWHI) (e) Philippines Investment holding – 99.99 99.97 – – – Larkwing Holdings, Inc. (LHI) (e) Philippines Investment holding – 99.99 99.97 – – – MPCALA Holdings, Inc. (MHI) (e) Philippines Investment holding – 51.00 99.97 – – –

DMWC Subsidiary (a) Maynilad Water Services, Inc. (Maynilad) Philippines Water and sewerage services 5.19 92.85 52.80 5.88 91.91 56.81

Maynilad Subsidiaries Amayi Water Solutions, Inc. (AWSI) Philippines Water and sewerage services – 100.00 52.80 – 100.00 56.81 Philippine Hydro, Inc. (PHI) Philippines Water and sewerage services – 100.00 52.80 – 100.00 56.81

RMCI Subsidiary Riverside College, Inc. (RCI) Philippines School operations – 100.00 51.00 – 100.00 51.00

CVHMC Subsidiary Colinas Healthcare, Inc. Philippines Clinic Management – 100.00 100.00 – 100.00 100.00

NSHI Subsidiary De Los Santos Medical Center Inc. (DLSMC) Philippines Hospital operation – 51.00 51.00 – – – DLS-STI Megaclinic, Inc. (Megaclinic) Philippines Clinic Management – 51.00 51.00 – – –

NOHI Subsidiaries Operating Subsidiaries First Pacific Bancshares Philippines, Inc. Philippines Investment holding – 100.00 96.60 – 100.00 96.60 Metro Pacific Management Services, Inc. Philippines Management services – 100.00 96.60 – 100.00 96.60 First Pacific Realty Partners Corporation (FPRPC) Philippines Investment holding – 50.00 48.30 – 50.00 48.30 Preoperating Subsidiaries Metro Tagaytay Land Co., Inc. Philippines Real estate – 66.00 63.76 – 66.00 63.76 Lucena Commercial Land Corporation Philippines Real estate – 65.00 62.79 – 65.00 62.79

Dormant Subsidiaries Pacific Plaza Towers Management Services, Inc. Philippines Management services – 100.00 96.60 – 100.00 96.60 Philippine International Paper Corporation Philippines Investment holding – 100.00 96.60 – 100.00 96.60 Pollux Realty Development Corporation Philippines Investment holding – 100.00 96.60 – 100.00 96.60 Metro Asia Link Holdings, Inc. (MALHI) Philippines Investment holding – 60.00 57.96 – 60.00 57.96 Metro Capital Corporation (f) Cayman Islands Investment holding – – – – 100.00 96.60 Metro Pacific Capital Ltd. (f) Cayman Islands Investment holding – – – – 100.00 96.60 Uptime Limited (f) Cayman Islands Investment holding – – – – 100.00 96.60

(a) On February 13, 2013, MCNK JV Corporation acquired 20% effective ownership in Maynilad through Subscription Agreement between MCNK and DMWC (see Note 18) (b) On March 11, 2013, the Company and JG Summit Holdings, Inc. (JG Summit) formed MPIC-JGS to bid for the =P17.5 billion Mactan Cebu International Airport Passenger Terminal Project. MPIC-JGS may also be exploring other airport projects that may be rolled out by the government in the future. As at September 30, 2013, the Company has invested =P5.9 million in MPIC-JGS. (c) Formerly Metro Pacific Corporation (MPC) (d) By virtue of the Management Letter-Agreement, MPTC acquired control over CIC effective January 2, 2013 (see Note 4) (e) These companies were incorporated in September 2013 to facilitate the bidding of the P35.4 billion Cavite-Laguna Expressway. MHI is owned by MPTDC at 51% and the remaining 49% owned equally by CWHI and LHI. (f) These dormant companies were stricken off from their respective foreign government registers and are therefore, considered dissolved

3. Operating Segment Information

The Company is organized into five major business segments based on services and products namely: water utilities, toll operations, power distribution, healthcare, and others. The Company’s chief operating decision maker continues to be comprised of the BOD.

Seasonality. The Company’s toll road operations are a seasonal business, with comparatively higher revenues during the period from December to April and comparatively lower revenues during the period from June to September. The Company’s water utilities business is also seasonal, with comparatively lower revenues during the rainy season in the Philippines. For the power distribution segment, electricity sales exhibit a degree of quarterly seasonality with the first quarter having lower than the average electricity sales as this period is characterized by cooler temperature and softer consumer demand following heightened consumer spending in the last quarter of the year. The second quarter is marked by higher than average electricity sales. The fourth quarter performance is about the average of the year.

Customer Tariffs. The Company’s results of operations are highly dependent on ability to set and collect adequate tariffs under its concession agreements with the Philippine Government for both its Water Utilities and Toll Operations segments:

Maynilad Under the Water Utilities Concession Agreement, Maynilad may request tariff rate adjustments based on movements in the Philippine consumer price index, foreign exchange currency differentials, a rate rebasing process scheduled to be conducted every five years (‘‘Rate Rebasing’’) and certain extraordinary events. Any rate adjustment requires approval by MWSS and the Regulatory Office. Any tariff adjustments that are not granted, in a timely manner, in full or at all, could have a material adverse effect on the Company’s results of operations and financial condition.

For the Fourth Rate Rebasing Period, Maynilad submitted the business plan for the determination of the Rates Adjustment Limit to be applied to the standard rates for the period 2013 to 2017. In its September 12, 2013 resolution, MWSS denied Maynilad’s petition for an upward adjustment of 28.35% of its average basic water charge (or P=8.58 per cubic meter), and instead proposed a negative adjustment of 4.82% of Maynilad’s 2012 average basic water charge (or P=1.46 per cubic meter) to be implemented in five equal tranches of negative 0.964% (or P=0.29 per cubic meter) per charging year. Under the Concession Agreement, any disagreement, dispute, controversy or claim arising out of, or relating to, the Agreement, which cannot be resolved through consultation or negotiation between the parties must be resolved through an arbitration process. Accordingly, on October 4, 2013, Maynilad filed a Dispute Notice with the Secretariat of the International Chamber of Commerce (ICC) International Court of Arbitration to resolve its rebasing dispute with MWSS. As of November 6, 2013, this is pending the ICC Chairman’s appointment of a presiding arbitrator to the Appeals Panel.

MNTC and CIC MNTC and CIC derive substantially all of their revenues from toll collections from the users of the toll roads. The concession agreements establish a toll rate formula and adjustment procedure for setting the appropriate toll rate. Final approval for Toll rate adjustments for North Luzon Expressway and Manila-Cavite Toll Expressway (“CAVITEX”) remains pending with the Philippine Government.

Segment Performance. Segment performance continues to be evaluated based on: consolidated net income for the year; earnings before interest, taxes and depreciation and amortization, or Core EBITDA; Core EBITDA margin; and core income. Net income for the period is measured consistent with consolidated net income in the interim consolidated financial statements.

There are no revenue transactions with a single customer that accounted for 10% or more of the Company’s consolidated revenues and no material inter-segment revenue transactions for the nine- month period ended September 30, 2013.

The following table shows the reconciliations of the Company’s consolidated Core EBITDA to consolidated net income for the nine-month periods ended September 30, 2013 and 2012.

Nine Months Ended September 30 2013 2012 (Unaudited) (In Millions) Consolidated Core EBITDA P=12,888 P=11,640 Depreciation and amortization (2,754) (2,874) Consolidated EBIT 10,134 8,766 Adjustments to reconcile with consolidated net income: Interest income 370 516 Equity in net earnings of associates and a joint venture 1,901 1,607 Interest expense (3,036) (2,783) Non-recurring expenses – net (452) (67) Benefit from income tax (553) (538) Consolidated net income P=8,364 P=7,501

The following table presents revenue and profit information regarding the Company’s operating segments for the nine months ended September 30, 2013 and 2012:

September 30, 2013 (Unaudited) Water Toll Power Utilities Operations Healthcare Distribution Others Consolidated (in Millions) Total revenue from external sales P=12,598 P=6,038 P=4,243 P=− P=− P=22,879 Core EBITDA 8,377 3,714 1,180 405 (788) 12,888 Core EBITDA Margin 66% 62% 28% 56% Core income (loss) 2,943 1,362 436 2,026 (1,153) 5,614 Non-recurring income (expense) (74) (54) 5 (33) (221) (377) Segment income (loss) P=2,869 P=1,308 P=441 P=1,993 (P=1,374) P=5,237

September 30, 2012 (Unaudited) Water Toll Power Utilities Operations Healthcare Distribution Others Consolidated (in Millions) Total revenue from external sales P=11,649 P=4,997 P=3,891 P=− P=− P=20,537 Core EBITDA 7,765 3,030 983 561 (699) 11,640 Core EBITDA Margin 67% 61% 25% 57% Core income (loss) 2,651 1,078 346 1,937 (987) 5,025 Non-recurring income (expense) (9) (45) (1) 34 (15) (36) Segment income (loss) P=2,642 P=1,033 P=345 P=1,971 (P=1,002) P=4,989

The following table presents segment assets and segment liabilities of the Company’s operating segments:

Water Toll Power Other Utilities Operations Healthcare Distribution Businesses Eliminations Consolidated (in Millions) Segment assets As at September 30, 2013 (Unaudited) P=78,806 P=32,188 P=10,774 P=43,355 P=58,401 (P=49,056) P=174,468 As at December 31, 2012 (Audited) 74,288 29,572 10,274 41,973 78,457 (74,970) 159,594 Segment liabilities As at September 30, 2013 (Unaudited) P=47,547 P=19,848 P=4,835 P=− P=8,070 (P=517) P=79,783 As at December 31, 2012 (Audited) 44,865 10,978 4,348 − 9,112 140 69,443 18

4. Business Combination

As of September 30, 2013 and December 31, 2012, goodwill from business combinations comprised of:

September 30, December 31, 2013 2012 (Unaudited) (Audited) (In Millions) DMWC/Maynilad P=6,803 P=6,803 MPTC 5,749 5,749 CIC 4,965 − PHI 288 108 AHI 234 234 CVHMC 192 192 RMCI 69 69 DLSMC 7 − P=18,307 P=13,155

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired. During the interim period, no indicators of impairment were noted that would trigger an impairment review.

Acquisitions in 2013

Acquisition of CIC

In relation to the Convertible Note Agreement executed by and between MPTC and Cavitex Holdings Inc.(CHI) as discussed in Note 6, MPTC, CHI with the conformity of its subsidiary CIC, executed a Management Letter-Agreement dated December 27, 2012, for the management of CIC by MPTC. Under the Management Letter-Agreement, management of CIC by MPTC commenced on January 2, 2013 and will continue until the issuance of the New CIC Shares in favor of MPTC as a result of the conversion into or exchange of the CHI Preferred Shares for the said New CIC Shares (“Management Period”). Also under the Management-Letter Agreement, MPTC shall receive all the financial benefits from CIC’s operations and all losses incurred by CIC shall be borne by MPTC. Thus, by virtue of the Management Letter-Agreement, MPTC acquired control over CIC effective January 2, 2013.

CIC holds the concession for the operation and maintenance of the Manila-Cavite Toll Expressway (“CAVITEX”). The CAVITEX is a 14-km long toll road built in two segments running from Parañaque to Cavite. The concession period extends to 2033 for the originally built road and to 2046 for a subsequent extension.

The allocation of the total cost of acquisition to identifiable assets, liabilities and contingent liabilities using provisional fair values as at January 2, 2013 is shown below:

Provisional Values Recognized on Acquisition (In Millions) Assets Cash and cash equivalents P=746 Receivables and other current assets 25 Concession asset 9,616 Advances to contractors 73 Property and equipment 25 Other noncurrent assets 697 11,182 Liabilities Accrued expenses and other current liabilities 406 Due to a related party 420 Long-term debt 7,005 Provision for heavy maintenance 228 Contingent liability 1,100 Deferred tax liability and other noncurrent liabilities 186 9,345 Total identifiable net assets at fair value 1,837 Provisional goodwill arising on acquisition 4,965 Consideration transferred P=6,802

Total consideration transferred consists of the fair value of the Convertible Note including the fair value of the derivative asset arising from the conversion feature (as discussed in Note 6). No transaction costs were incurred for the business combination.

The purchase price consideration was initially allocated to the identifiable assets and liabilities of CIC on the basis of provisional values. As permitted by PFRS 3, Business Combinations, the Company will recognize any adjustment to the provisional values as an adjustment to goodwill upon determining the final fair values of identifiable assets and liabilities within twelve (12) months from the acquisition date.

The fair value and gross amount of the receivables amounted to P=25.2 million. None of the receivables have been impaired and it is expected that the full contractual amounts will be collected.

A contingent liability at a fair value of P=1,100.1 million was recognized at the acquisition date arising from probable claim from a third party. As at September 30, 2013, the contingent liability amounted to P=1,131.6 million with the increase arising from the passage of time. An indemnification asset amounting to P=513.4 million as of acquisition date, was recognized in relation to such probable claim.

As at September 30, 2013, the indemnification asset increased to P=528.1 million with the increase arising from passage of time. No further disclosures regarding the contingent liability arising from the probable claim are being made by MPTC at this time as MPTC believes that such disclosures might be expected to be seriously prejudicial to its position.

The goodwill of P=4,965 million that arose on the acquisition can be attributed to the synergies expected to be derived from the business combination. None of the goodwill is expected to be deductible for tax purposes.

Net cash outflow on acquisition is as follows:

Amount (In Millions) Total cash paid on acquisition(a) P=6,772) Cash acquired with the subsidiary(b) (746) Net cash outflow P=6,026 (a)Cash paid on acquisition represents the cash consideration for the Convertible Notes Receivable (see Note 6). (b)Cash acquired with the subsidiary is included in cash flows from investing activities. From January 2, 2013 (the date of acquisition) to September 30, 2013, CIC contributed P=779.2 million and P=75.8 million to the Company’s consolidated revenue and consolidated net income, respectively.

Acquisition of DLSMC

On June 3, 2013, the Company, through NSHI, acquired 51% of the voting equity interest in DLSMC, a tertiary teaching and training hospital, by subscribing to 401,942 common shares. Total cash paid as consideration for the acquisition amounted to P=132.9 million. The Company acquired DLSMC as part of its strategy to grow its portfolio and increase the Company’s total bed capacity and be the largest private hospital group in the Philippines. Megaclinic, an ambulatory care center in SM Megamall, is a subsidiary of DLSMC as at acquisition date, and the Company’s first investment in a non-hospital-based diagnostic center. The acquisition has been accounted for using the acquisition method.

The provisional fair values of the identifiable assets and liabilities of DLSMC as at the date of acquisition:

Provisional Values Recognized on Acquisition (In Millions) Assets Cash and cash equivalents P=164 Receivables 95 Other current assets 43 Property and equipment 178 Deferred tax asset - net 10 Other noncurrent assets 16 P=506

(Forward)

Provisional Values Recognized on Acquisition (In Millions) Liabilities Accounts payable and accrued expenses P=160 Other current liabilities 11 Long term debt 64 Other noncurrent liabilities 23 258 Total identifiable net assets at fair value 248 Non-controlling interest (122) Provisional goodwill arising on acquisition 7 Consideration transferred P=133

Net cash inflow on acquisition is as follows:

Amount (In Millions) Cash acquired with the subsidiary(a) P=164 Total cash paid on acquisition (133) Net cash inflow P=31 (a)Cash acquired with the subsidiary is included in cash flows from investing activities.

The fair value of the property and equipment is provisional pending receipt of the final valuations for those assets. The fair value and gross amount of the trade receivables amounted to P=95.0 million and P=154.0 million, respectively. The difference between the fair value and the gross amount of the receivables represents the portion expected to be uncollectible.

The goodwill recognized is primarily attributed to the expected synergies and other benefits from combining the assets and activities of DLSMC with those of the hospitals of the Company. The goodwill is not deductible for income tax purposes.

The non-controlling interest has been recognized as a proportion of net assets acquired.

From the date of acquisition, DLSMC has contributed P=177.4 million to the consolidated revenue and P=17.0 million to the consolidated net income of the Company. If the combination had taken place at the beginning of the year, its contributions to the consolidated revenue and consolidated net income would have been P=348.1 million and P=20.0 million, respectively, for the nine-month period ended September 30, 2013.

Total transaction costs of P=3.0 million have been expensed. Of the total transaction costs, P=0.6 million was included in “General and administrative expenses” in the consolidated statement of comprehensive income and are part of operating cash flows for the nine-month period ended September 30, 2013. The remaining P=2.4 million portion of the transaction costs were recognized in the latter part of 2012.

Acquisition of Non-Controlling Interest in Megaclinic As at June 3, 2013, DLSMC had a 77.24% direct ownership interest in Megaclinic. On August 16, 2013, DLSMC sold its entire ownership in Megaclinic to its shareholders, resulting in the sale of 51% of its direct ownership interest in Megaclinic to NSHI for a cash consideration of P=17.3 million. The 11.61% increase in effective ownership in Megaclinic is accounted for as an acquisition of non-controlling interest. Although the purchase price allocation for the acquisition of DLSMC is still provisional, it is expected that the carrying value of the additional interest in Megaclinic approximates the consideration paid given the timing of both acquisitions.

Acquisition in 2012

Acquisition of PHI

On August 3, 2012, Maynilad acquired 100% of the voting shares of PHI, a company engaged in waterworks construction, engineering and consulting services and holds Bulk Water Supply Agreements in Central Luzon. Maynilad acquired PHI to expand its water business outside its existing concession area, as well as gain a foothold in the underserved growth area of the Province of Bulacan. Total consideration amounted to P=526.9 million (net of the negotiated discount of P=68.0 million), payable in tranches and upon fulfillment and completion of certain conditions precedent (mostly consisting of certain documentary requirements). The negotiated discount resulted from PHI’s failure to deliver certain documents and fulfill certain conditions precedent.

Unpaid portion of the acquisition cost as at December 31, 2012 was recognized as contingent consideration liability. As at September 30, 2013, P=284.0 million remains unsettled pending satisfaction of all the conditions precedent. All the conditions precedent are expected to be fulfilled within the year and thus, Maynilad expects to fully settle the contingent consideration liability in 2013.

Amount (In Millions) Cash paid in 2012 P=213 Cash paid during the nine-month period ended September 30, 2013 30 Contingent consideration liability as at September 30, 2013 284 Consideration transferred P=527

The fair values of the identifiable assets and liabilities of PHI as at the date of acquisition:

Fair Values Recognized on Acquisition (In Millions) Assets Cash and cash equivalents P=2 Receivables 20 Prepayments and other current assets 21 Service concession assets 394 Other noncurrent assets 3 P=440

Fair Values Recognized on Acquisition (In Millions) Liabilities Accounts payable and other current liabilities P=13 Notes payable 66 Deferred tax liabilities 30 Other noncurrent liabilities 92 201 Total net identifiable assets 239 Goodwill arising on acquisition 288 Consideration transferred P=527

Net cash outflow on acquisition is as follows:

September 30, December 31, 2013 2012 (In Millions)

Total cash paid P=30 P=213 Transaction costs(a) − (1) Cash acquired with the subsidiary(b) − (2) Net cash outflow P=30 P=210 (a)Transaction costs included in the “General and administrative expenses” in the consolidated statement of comprehensive income and included in the operating cash flow. (b)Cash acquired with the subsidiary is included in cash flows from investing activities.

None of the goodwill is expected to be deductible for tax purposes. The goodwill recognized is primarily attributed to the expected synergies and other benefits from combining the assets and activities of PHI with those of Maynilad. The fair value and gross amount of the receivables amounted to P=19.6 million. None of the receivables have been impaired and it is expected that the full contractual amounts can be collected.

The net assets recognized in the December 31, 2012 financial statements were based on a provisional assessment of fair value while Maynilad sought an independent valuation for the intangible assets owned by PHI. The valuation had not been completed by the date the 2012 consolidated financial statements were approved for issue by the BOD.

In August 2013, the valuation was completed and the acquisition date fair values of the service concession assets and other noncurrent assets were P=394.1 million (an increase of P=101.5 million over the provisional value) and P=2.9 million (a decrease of P=359.2 million over the provisional value), respectively. Goodwill and deferred tax liability have been adjusted accordingly. However, since the effect of the adjustments is not material to the 2012 comparative information, the previous year financial statements were no longer restated and the adjustments were made in 2013.

From the date of acquisition to December 31, 2012, PHI contributed P=7.4 million to the consolidated net income of the Company. If the combination had taken place as at January 1, 2012, PHI’s contribution to the Company’s consolidated net income for the year ended December 31, 2012 would have been P=10.7 million and its contribution to the Company’s consolidated revenues would have been P=48.5 million.

5. Cash and Cash Equivalents, Short-term Deposits and Restricted Cash

Cash and Cash Equivalents and Short- term Deposits

These accounts consist of: September 30, December 31, 2013 2012 (Unaudited) (Audited) (In Millions) Cash and cash equivalents P=12,667 P=9,105 Short-term deposits 188 14 P=12,855 P=9,119

For the purpose of the interim consolidated statement of cash flows for the nine months ended September 30, 2013 and 2012, details of cash and cash equivalents:

September 30, September 30, 2013 2012 (Unaudited) (In Millions) Cash on hand and in banks P=2,298 P=9,189 Short-term deposits that qualify as cash equivalents 10,369 1 P=12,667 P=9,190

Restricted Cash. Sinking fund or debt service account (DSA) represents amounts set aside for semi- annual principal and interest payments of certain long-term debt. This DSA is maintained and replenished in accordance with the provision of the loan agreements. Interest income from this DSA is for the account of the Company.

6. Receivables

This account consists of:

September, December 31, 2013 2012 (Unaudited) (Audited) (In Millions) Notes receivable P=1,033 P=7,508) Trade receivables 3,000 2,930) Advances to customers 454 500) Accrued interest receivables 250 179) Advances to affiliates 182 104) Advances to officers and employees 76 74) Dividends receivable − 25) Others 260 366) P=5,255 P=11,686)

Allowance for doubtful accounts (P=929) (P=746) 4,326 P=10,940) Current portion (3,570) (3,608) Noncurrent portion P=756 P= 7,332)

Notes Receivable. Notes receivable as at September 30, 2013 and December 31, 2012 consist of the following: Carrying Values September 30, December 31, Description Terms Maturity 2013 2012 (in Millions) P=6,771.6 million Note issued by Cavitex Convertible to CHI June 27, 2013 P=− P=6,578 Holdings Inc. (CHI) preferred shares

P=164.1 million loan to AB Holding 12% interest rate per December 31, 2014 164 164 Corporation (ABHC) annum

P=133.4 million loan to ABHC 10% interest rate per August 30, 2015 133 133 annum

P=100.0 million loan to Landco Pacific 10% interest per March 15, 2017 100 100 Corporation (Landco) annum

Preferred Shares issued by Landco With mandatory August 2020 354 353 redemption feature

P=102.0 million loan by MetroPac Water 7% interest per December 31, 2013 102 − Investments Corp (MPWIC) to Manila annum and May 2014 Water Consortium, Inc. (MWCI)

Others Various Various 180 180

Total notes receivable P=1,033 P=7,508

Additional information on the notes receivable as follows:

. On December 26, 2012, CHI and MPTC entered into a Convertible Note Agreement for the issuance of a Convertible Note (“Note”) to MPTC with a principal amount or face value of P=6,771.6 million consisting of 67,716,000 units valued at P=100 per unit. The Note is convertible into CHI Preferred Shares by maturity date. Upon conversion to CHI Preferred Shares, CHI shall also cause CIC to grant MPTC the option to exchange the CHI Preferred Shares to new common shares of CIC, subject to CIC securing certain regulatory approvals. The Convertible Note was converted into CHI Preferred Shares on June 25, 2013. But with MPTC acquiring control of CIC on January 2, 2013, the investment in CHI Preferred Shares is eliminated upon consolidation of CIC.

. In view of the mandatory redemption feature of the preferred shares of Landco, the Company recognized an assigned value of P=31.7 million for the conversion option feature presented as “Derivative asset” under “Other noncurrent assets” in the consolidated statements of financial position as at September 30, 2013 and December 31, 2012.

. The loans to ABHC and Landco are secured by a pledge of Landco shares owned by ABHC.

. In May 2013, MPWIC and MWCI entered into a loan agreement in relation to Cebu Manila Water Development, Inc. project amounting to P=70 million payable within one year from issuance. An additional loan of P=32 million was made in September 2013 payable by December 2013.

. Other notes receivable aggregating P=180.0 million comprising of defaulted loans are fully provided with allowance as at September 30, 2013 and December 31, 2012.

7. Other Current Assets

Other current assets consist of: September 30, December 31, 2013 2012 (Unaudited) (Audited) (In Millions) Available-for-sale financial (AFS) assets (Note 8) P=1,116 P=109) Creditable withholding taxes 490 442) Advances to contractors and consultants 446 236) Inventories-at cost 352 336) Prepaid expenses 254 186) Input VAT 189 96) Real estate for sale-at cost 152 152) Deposits 139 224) Derivative asset − 225) Miscellaneous deposits and others 9 143) 3,147 2,149) Allowance for decline in value (356) (356) P=2,791 P=1,793)

The “allowance for decline in value” substantially represents provision for impairment of portions of creditable withholding taxes expected not to be utilized.

8. AFS Financial Assets

This account consists of:

September 30, December 31, 2013 2012 (Unaudited) (Audited)

(In Millions) Shares of stock: Listed P=17 P=24 Unlisted 1,059 848 Unit Investment Trust Fund 1,069 − Investment in bonds (ROP fixed rate retail treasury bonds) 943 640 3,088 1,512 Less current portion 1,116 109 Noncurrent portion P=1,972 P=1,403

The movements in the AFS financial assets are as follows:

September 30, December 31, 2013 2012 (Unaudited) (Audited) (In Millions) Balance at beginning of year P=1,512 P=1,433 Additions 1,581 59 Reclassification − 3 Disposal (10) − Change in fair value 5 17 Balance at end of the period P=3,088 P=1,512

Addition to unlisted shares of stock pertains to investment in Subic Water Sewerage Co., Inc. (“Subic Water”). On January 18, 2013, Maynilad was declared as the winning bidder for the sale of Olongapo City’s 915,580 common “A” shares, representing 10% of the outstanding capital stock of Subic Water for a bid price of P=230 per share, or a total purchase price of P=210.6 million. The award and sale of Olongapo City’s shares in Subic Water to Maynilad is subject to the right of first refusal of the existing shareholders of Subic Water. On March 15, 2013, Maynilad entered into a Deed of Sale with Olongapo City for the purchase of the latter’s shares of stock in Subic Water after the lapse of the period for the exercise by the existing shareholders of their right of first refusal.

9. Investments and Advances

The associates and joint ventures of the Company are as follows:

Ownership Interest Place of September 30, December 31, Incorporation Principal Activities 2013 2012 Associates: Costa De Madera Corporation (a) Philippines Real estate 62.00 62.00 Prime Media Holdings, Inc. Philippines Media holding company 44.61 49.00 Metro Pacific Land Holdings, Inc. Philippines Real estate 49.00 49.00 Tollways Management Corporation (TMC) Philippines Tollways 46.00 46.00 Davao Doctors Hospital, Inc. (DDH) Philippines Hospital 34.85 34.85 Medical Doctors Inc. (MDI) Philippines Hospital 33.38 33.72 First Gen Northern Energy Corp. (FGNEC) Philippines Power generation 33.33 33.33 Landco NE Resources Ventures, Inc. Philippines Real estate 24.95 24.95 (LNERVI) Manila Water Consortium Inc. (MWCI) Philippines Investment holding 39.00 -

Joint Venture: Beacon Electric Asset Holdings, Inc. (Beacon Electric) (b) Philippines Investment holding 50.00 50.00 (a) Not consolidated as control rests with the other shareholders (b) Beacon Electric’s ownership interest in Meralco is at 49.96% as of September 30, 2013.

The account “Investments and advances” consist of the following components:

September 30, December 31, 2013 2012 (Unaudited) (Audited) (In Millions) Carrying values of investments accounted for under the equity method: Associates: MDI P=1,636 P=1,595 DDH 688 664 TMC 596 668 MWCI 134 − Others 183 183 3,237 3,110 Joint Venture: Beacon Electric 31,025 29,644 Total 34,262 32,754 Investment in Beacon Electric preferred shares 11,573 11,573 Advances for conversion to equity 756 756 P=46,591 P=45,083

Movements in the “Carrying values of investments accounted for under the equity method”:

September 30, December 31, 2013 2012 (Unaudited) (Restated*) (In Millions) Acquisition costs: Balance at beginning of period P=31,196 P=28,496) Additions during the period 134 2,700) Balance at end of the period 31,330 31,196) Accumulated equity in net earnings: Balance at beginning of the period 2,319 935) Adoption of PAS19R − (80) Share in net earnings: Beacon Electric 1,589 1,425) Others 280 340) Dividends (287) (301) Balance at end of the period 3,901 2,319) Accumulated share in the investees’ other comprehensive income: Balance at beginning of the period 549 −) Adoption of PAS19R −) 80) Share in other comprehensive income (208) 469) Balance at end of the period 341 549) Total 35,572 34,064) Less allowance for impairment loss: Balance at beginning of period P=1,310 P=1,460)

September 30, December 31, 2013 2012 (Unaudited) (Restated*) (In Millions) Reversal P=− (P=150) 1,310 1,310) P=34,262 P=32,754) *Restated for effects of adoption of the revised Philippine Accounting Standard 19 “Employee Benefits” (see Note 2).

Addition in 2013

On January 7, 2013, MPWIC subscribed for 39% of the shares in MWCI for a total subscription price of P=133.8 million subject to the terms and conditions of the subscription agreement. MPWIC has transactions, contracts, and material documents that it entered with the Provincial Government of Cebu in relation to the development, operation, and maintenance of a bulk water supply system that will deliver treated bulk water supply covering a specified area in Cebu province and tapping the surface water source in Luyang River in the Municipality of Carmen, Cebu. MWCI is accounted for as an associate by the Company.

Beacon Electric

Additional investment in Meralco. On July 19, 2013, Beacon Electric acquired 10 million (0.89%) Meralco shares for P=2.7 billion. On July 30, 2013, Beacon Electric purchased an additional 8.3 million (or 0.74%) Meralco shares for P=2.4 billion. These additional purchases of Meralco shares increased Beacon Electric’s interest in Meralco to 49.96%.

Notes payable. On August 13, 2013, Beacon Electric availed of two short-term notes from local banks, each with a principal sum of P=200.0 million. Both notes are payable in full not later than November 13, 2013 (the maturity date) and bear interest at a fixed rate equivalent to the higher of 4.5% per annum and the Bangko Sentral ng Pilipinas Overnight Reverse Repurchase Agreement Rate prevailing on the interest setting date plus 1%. The notes are secured by a pledge on 3,000,000 shares of stock of Meralco owned by Beacon Electric.

Long-term Debt. The following facilities entered into by Beacon Electric are secured by a pledge over Meralco shares held by it and are not guaranteed by the Company. As Beacon Electric is accounted for at equity method, these facilities are not included in Company’s consolidated debt.

Carrying Values September 30, December 31, Description Interest Rate Terms 2013 2012 (In Millions) =P17,000.0 Million Corporate Notes: 10 years with semi-annual  P=2,285.0 million (Tranche A) 10-yr PDST-F + 2% interest and principal P=2,285 P=− or 6% floor payments starting May 27,  P=14,715.0 million (Tranche B) 5-yr PDST-F + 2% 2013 with final repayment on 14,715 − or 5.75% floor ; 5yrs March 27, 2023 onwards

=P11,000.0 Million Fixed Corporate 10-year PDST-F 10 years payable in semi- 11,000 11,000 Notes rate + 1.5% annual fixed interest payments and principal payments starting May 26, 2011 with final repayment on May 26, 2021

Carrying Values September 30, December 31, Description Interest Rate Terms 2013 2012 (In Millions)

=P9,000.0 Million Corporate Notes: 10 years with semi-annual  P=2,950.0 million (Tranche A) 10-yr PDST-F + interest and principal 2,950 − 1.5% or 6% floor payments starting July 31,  P=6,050.0 million (Tranche B) 5-yr PDST-F + 2013 with final repayment 6,050 − 1.25% or 5.5% floor July 31, 2023

=P18,000.0 Million Corporate Notes: 10 years payable with semi-  P=11,800.0 million Fixed Rate 10-year PDST-F annual interest payments and Tranche rate + 2.5% principal repayments with − 11,446 final repayment on  P=6,200.0 million Floating Rate 6-month PDST-F March 30, 2020 − 6,014 Tranche rate + 2.75%

=P5,000.0 Million Corporate Notes 10 years payable in semi-  P=550 million (Tranche A) 10-year PDST-F annual fixed interest − 550 rate + 1.5% payments and principal  P=3,450.0 million (Tranche B) 5-year PDST-F rate repayments starting − 3,450 + 1.5% February 1, 2012 with final  P=1,000.0 million 6-month PDST-F repayment on February 1, − 1,000 rate + 2.25% 2022

Total 37,000 33,460 Less: Debt issue cost 468 190

Total Debt, net of debt issue cost 36,532 33,270 Less: Current Portion 787 17,474

Total: Noncurrent Portion P=35,745 P=15,796

On February 6, 2013, Beacon Electric entered into a P=17,000 million, ten-year Corporate Notes Facility with FMIC and PNB Capital as joint lead arrangers and various local financial institutions as Noteholders. The proceeds were used to partially finance the prepayment of the P=18,000 million ten- year Corporate Notes Facility under a Facility Agreement dated March 22, 2010.

On May 27, 2013, Beacon Electric entered into a Forward Starting Interest Rate Swap (Forward Starting IRS) to hedge the interest repricing risk on the outstanding balance of the Tranche B (P=14,715 million) by the end of the fifth year. The Forward Starting IRS will have a receive leg based on a rate which will be determined on March 26, 2018 and pay leg of 6.98% fixed rate that virtually matches the debt’s critical terms (i.e, benchmark rate and fixing date). The hedge is expected to be highly effective and as such Beacon designates the Forward Starting IRS as a cash flow hedge. The changes in fair value of the Forward Starting IRS will be deferred in equity under Beacon’s Other Comprehensive Income (Loss) Reserve account. As at September 30, 2013, the Company’s share in Beacon Electric’s other comprehensive loss from the Forward Starting IRS is at P=148.9 million recognized as “share in the fair value changes in cash flow hedges of a joint venture” in the Company’s consolidated statement of comprehensive income.

On July 29, 2013, Beacon Electric entered into a P=9,000.0 million, ten-year Corporate Notes Facility with FMIC and PNB Capital as joint lead arrangers and various local financial institutions as noteholders. This facility was fully drawn as at August 1, 2013.

10. Service Concession Assets

The movements in the service concession assets follow:

As at September 30, 2013 (Unaudited) MPTC DMWC Total (In Millions) Cost: Balances at January 1, 2013 P=19,046 P=75,243 P=94,289 From business combinations (see Note 4) 9,616 102 9,718 Additions 101 5,278 5,379 Balances at September 30, 2013 28,763 80,623 109,386 Accumulated amortization: Balances at January 1, 2013 2,560 9,859 12,419 Amortization for the period 608 1,466 2,074 Reclassification − 7 7 Balances at September 30, 2013 3,168 11,332 14,500 P=25,595 P=69,291 P=94,886

Additions to service concession assets from business combinations relates to the acquisition of CIC and the finalization of the purchase price allocation of PHI (see Note 4).

11. Other Noncurrent Assets

This account consists of:

September 30, December 31, 2013 2012 (Unaudited) (Restated*) (In Millions) Deferred tax assets P=842 P=530 Deposits 584 462 Long-term cash and miscellaneous deposits 567 100 Indemnification asset (see Note 4) 528 − Software costs 79 86 Advances to contractors and consultant 65 − Pension asset 38 47 Derivative asset 32 32 Other intangible assets (see Note 4) − 352 Deferred charges and others 106 196 P=2,841 P=1,805 *Restated pension asset for effects of adoption of the revised Philippine Accounting Standard 19 “Employee Benefits” (see Note 2).

Deposits. Total deposits of P=462.5 million were made in connection with the Cooperation Agreement entered into with the Fil-Estate Companies for its rights and interests in the MRT 3 companies. Objective of the Cooperation Agreement include but is not limited to the acquisition of the interests of the Fil-Estate Companies in MRTH, MRTH-II, MRTC (MRT Companies) and MNRTC, subject to obtaining the necessary consents from the relevant parties. Should the planned acquisitions push through, these deposits will form part of the acquisition price. Otherwise, these will be forfeited and charged to expense.

Deferred Charges and Others. Deferred charges mainly include initial costs incurred in relation to a certain infrastructure project.

12. Accounts Payable and Other Current Liabilities

This account consists of:

September 30, December 31, 2013 2012 (Unaudited) (Audited) (In Millions) Trade and accounts payables P=3,089 P=3,474 Accrued construction and operation costs 6,554 5,114 Accrued expenses 2,666 2,595 Retention payable 628 67 Interest and other financing charge payable 322 737 Output taxes payable 266 112 Payable to CHI 163 575 Withholding taxes payable 81 124 Long-term Incentive Plan (LTIP) payable 75 407 Unearned revenue and other deposits 72 82 Dividends payable 2 303 Others 505 122 P=14,423 P=13,712

13. Provisions

Movements in this account follow:

September 30, 2013 (Unaudited) Warranties and Heavy Other Guarantees Maintenance Provisions Total (In Millions) Balance at the beginning of year P=489 P=337 P=3,096 P=3,922 From business combinations (Note 4) − 228 − 228 Additions − 185 775 960 Payments − (267) (47) (314) 489 483 3,824 4,796 Less current portion 489 154 3,749 4,392 P=− P=329 P=75 P=404

Warranties and Guarantees. This includes certain warranties and guarantees extended by NOHI in relation to debt for asset swap arrangements entered in prior years. Certain warranties and guarantees are secured by Pacific Plaza Tower condominium units and BLC shares with carrying values of P=18.9 million and P=46.5 million, respectively.

Heavy Maintenance. This pertains to the contractual obligations of MNTC and CIC to restore the service concession assets to a specified level of serviceability during the service concession term and to maintain the same assets in good condition prior to turnover of the assets to the Grantor.

Others. Other provisions consist of claims and potential claims against a subsidiary.

14. Note Payable and Long-term Debt

Note Payable. On December 27, 2012, the Company availed a short-term unsecured note in the amount of P=4.7 billion from a local bank, the proceeds of which were invested in MPTC. The note bears fixed interest of 4.5% per annum, payable in 90 days or on March 27, 2013. On the date of scheduled payment, the Company fully settled the outstanding balance of the short-term payable including the related interest.

Long-term Debt. As of September 30, 2013, this account consists of:

December 31, September 30, 2013 2012 (Unaudited) (Audited)

Convertible Preferred Long-term Loans Shares Bonds Total Total

DMWC and subsidiaries P=22,838 P=− P=− P=22,838 P=21,670 MPTC and subsidiaries, MNTC and CIC 15,726 − − 15,726 9,038 MPIC 6,448 − − 6,448 6,514 AHI 1,213 − − 1,213 1,397 CVHMC 100 − − 100 150 RMCI and a subsidiary, RCI 165 − − 165 137 EMHMC 90 − − 90 90 NOHI − 57 13 70 70 DLSMC 14 − − 14 − 46,594 57 13 46,664 39,066 Less unamortized debt issue cost 156 − − 156 151 46,438 57 13 46,508 38,915 Less current portion of long-term debt - net of unamortized debt issue cost 3,684 57 13 3,754 1,847 P=42,754 P=− P=− P=42,754 P=37,068

Updates for the nine-months ended September 30, 2013

MPTC and DLSMC. Additions to debts of MPTC and DLSMC are attributable to business combinations (see Note 4).

Maynilad. On March 22, 2013, Maynilad entered into a Concessionaire Lenders’ Agreement for a Term Loan Facility aggregating P=21.2 billion which will be used to refinance Maynilad’s outstanding loans. Under the new Loan Facility, interest rates change from a mix of fixed and floating rate to higher between PDST-F rate, plus 0.75% spread and 5.75% per annum to be repriced after 5 years, change in currency of all US dollar-denominated loans to peso, extension of 10-year maturity (all to March 2023) and negative pledge collateral.

On April 30, 2013, Maynilad availed of a new loan facility in the amount of P=5.0 billion from BDO. Initial drawdown of P=2.5 billion was made on April 30, 2013. The full drawdown was made on October 29, 2013. This loan has no pledge collateral.

Maynilad’s loan with the Land Bank of the Philippines dated October 25, 2012 in the amount of US$ 137.50 million to finance the Metro Manila Wastewater Management Project (MWMP) was amended on June 3, 2013. The amendments include, among others: (a) the deletion of the requirement for the loan to be secured by a mortgage over properties of the borrower and an assignment by the borrower of certain properties, rights and interests in favor of the lender; and (b) the amendment of the Debt to Equity Ratio. The first drawdown of US$2.0 million was made on October 1, 2013.

MPIC. On June 19, 2013, MPIC and BDO finalized the terms of the Notes Facility Agreement relating to the issuance of up to P=6,480 million Fixed Rate Notes due 2023. Proceeds from this loan was used to redeem the outstanding balance of the P=6,800 million loan entered into in November 4, 2008 which was used to partially finance the Company’s acquisition of MPTC common shares. The Notes bear interest at 7.50% per annum, fixed for the first five (5) years but subject to repricing on the fifth year. On the fifth year, the outstanding Notes shall be repriced to the higher of: 7.50% per annum; or the sum of the prevailing 5-year PDST-F Rate and a credit margin of 1.75% per annum; or the floor rate, if any, applicable on 5-year fixed rate corporate loans of BDO prevailing as of the repricing date. The Notes contain a negative pledge on all existing and future assets of the Parent Company and have a term of ten years payable with semi-annual interest payments and principal repayments with final repayment on February 13, 2023.

In accordance with the Company’s accounting policies, all loans and borrowings are initially recognized at fair value of the consideration received less directly attributable transaction costs (referred to as “debt issue costs”). Debt issue costs are amortized over the life of the debt instrument using the effective interest method.

15. Deferred Credits and Other Long-term Liabilities

September 30, December 31, 2013 2012 (Unaudited) (Restated*) (In Millions) Contingent liability (Note 4) P=1,132 P=− Lease payable 1,056 1,060 Customers’ guaranty deposits 780 711 Accrued interest payable to MWSS 607 607 Deferred credits 504 2,529 Accrued retirement cost 450 329 Payable to CHI 257 − LTIP payable 294 39 Financial guarantee obligation 73 65 Others 52 58 P=5,205 P=5,398 *Restated accrued retirement cost for effects of adoption of the revised Philippine Accounting Standard 19 “Employee Benefits” (see Note 2).

Deferred Credits As at September 30, 2013 and December 31, 2012, deferred credits representing the net effect of unrealized foreign exchange gain or loss on service concession payable to MWSS, and restatement of foreign currency-denominated interest bearing loans and related interest amounted to P=504 million and P=2,529 million, respectively. Deferred credits are calculated as the difference between the drawdown or rebased rate versus the closing rate.

LTIP On February 28, 2013, the Company’s Board of Directors approved the new LTIP cycle covering the years 2013 to 2015. The liability of the 2013 to 2015 LTIP comprises the present value of the defined benefit obligation and was determined using the projected unit credit method. The payment under the 2013 to 2015 LTIP is intended to be made at the end of the 2013 to 2015 LTIP Performance Cycle (without interim payments) and contingent upon the achievement of an approved target core income of the Company by the end of the said Performance Cycle.

16. Due to and from Related Parties

The Company, in the normal course of business, has transactions with related parties which consist mainly of availment of noninterest-bearing cash advances which are due and demandable anytime.

Composition of amounts due to/from related parties follows:

September 30, December 31, 2013 2012 (Unaudited) (Audited) (In Millions) Due from related parties: TMC P=198 P=177 Prime Media Holdings, Inc. − 120 FPC 85 7 Landco 44 44 Others 14 14 341 362 Less allowance for impairment 31 151 310 211 Less current portion 237 146 P=73 P=65

Due to related parties: Smart P=72 P=72 Landco 15 15 Ideaspace 6 3 LNERVI 2 2 Others 4 5 P=99 P=97

17. Equity

Details of authorized and issued capital stock follow: September 30, 2013 December 31, 2012 (Unaudited) (Audited) No. of Shares Amount No. of Shares Amount (In Millions) (In Millions) Authorized common shares - P=1.0 par value 28,500,000,000 P=28,500 28,500,000,000 P=28,500 Authorized preferred shares: Class A - P=0.01 par value 5,000,000,000 50 5,000,000,000 50 Class B - =P1.0 par value 1,500,000,000 1,500 1,500,000,000 1,500 35,000,000,000 P=30,050 35,000,000,000 P=30,050

September 30, 2013 December 31, 2012 (Unaudited) (Audited) No. of Shares Amount No. of Shares Amount (In Millions) (In Millions)

Issued - common shares: Balance at beginning of year 24,613,823,752 P=24,614 24,593,293,752 P=24,593 Equity raising exercise 1,330,000,000 1,330 - - Exercise of stock option plan 80,925,000 81 20,530,000 21 Balance at end of year 26,024,748,752 (a) P=26,025 24,613,823,752 P=24,614

Issued - preferred shares - Class A: 5,000,000,000 50 5,000,000,000 P=50

Total number of stockholders 1,359 - 1,357 -

Placing and Subscription Agreement between MPHI and MPIC During the special meeting of the stockholders of MPIC held on March 8, 2013, the stockholders passed and approved resolutions relating to the listing on the Philippine Stock Exchange of 1,330,000,000 common shares of MPIC in relation to the placing and subscription transaction, and the ratification of the implementation by MPIC of the overnight and accelerated placing and subscription transaction, in relation to the implementation of the equity and fund raising exercise approved by the Board of Directors of MPIC on January 22, 2013 and implemented by MPIC, including the basis for setting the number of the offer shares and subscription shares in said transaction and the determination of the offer price and the subscription price. The shares were issued at P=4.60 per share.

As a result of these transactions MPHI’s ownership of MPIC was reduced from 59.0% as of December 31, 2012 to 55.9% after this transaction.

Cash Dividends

Nine Months Ended September 30 2013 2012 (Unaudited) (In Millions) Interim dividend declared and paid during the interim period Common shareholder (P=0.015 per share in 2013; P=0.012 pare share in 2012) P=390.3 P=295.8 Class A preferred shareholders* 2.5 2.5 Dividends in respect of the previous financial year, approved and paid during the following interim period Common shareholder (P=0.02 per share in 2013; P=0.015 pare share in 2012) 519.9 368.9 Class A preferred shareholders* 2.5 1.8 *MPHI is the sole holder of Class A preferred shares

Reverse Stock Split At a meeting of the BOD on February 28, 2013, a committee of the BOD was appointed to consider whether a reverse stock split at a ratio of up to 50:1 would be in the best interest of the Company’s shareholders. On May 25, 2013, the BOD decided to defer the planned reverse stock split.

18. Equity Reserves and Other Comprehensive Income Reserve

Equity reserves consist of the following, net of applicable income taxes:

September 30, December 31, 2013 2012 (Unaudited) (Audited) (In Millions) Effect of MPIC acquisition of NOHI shares P=690) P=690) Acquisition of non-controlling interest 31 31) Gain on equity transfer 1,963 −) Loss on sale of non-controlling interest (122) (122) Other reserve from ESOP (see Note 25) 68 108) Total P=2,630 P=707)

Other comprehensive income consists of the following, net of applicable income taxes:

September 30, December 31, 2013 2012 (Unaudited) (Restated*) (In Millions) Share in the OCI of associates and joint venture (see Note 19)* P=341 P=548 Actuarial losses* (55) (55) Fair value changes on AFS financial assets, net of tax 27 24) Fair value changes on cash flow hedges net of tax (7) (11) Revaluation reserve and others, net of tax − (33) Total P=306 P=473 *Restated for effects of adoption of the revised Philippine Accounting Standard 19 “Employee Benefits” (see Note 2).

On January 29, 2013, MCNK JV Corporation (MCNK) completed and fully paid its total subscription of 678,470,727 common shares of stock of DMWC at a total subscription price of P=10,400 million giving it 21.54% equity interest in DMWC. With the change in the shareholding structure, the carrying amount of the controlling and the non-controlling interests were adjusted to reflect the changes in relative interests in DMWC and such change was charged accordingly to gain in equity transfer.

19. Other Comprehensive Income

Other comprehensive income recognized in the statement of comprehensive income for the nine months and three months ended September 30, 2013 and 2012 consists of the following:

Nine Months ended Three Months ended September 30 September 30 2013 2012 2013 2012 (Unaudited) (In Millions) Other comprehensive income to be reclassified to profit or loss in subsequent periods: Share in the fair value changes in cash flow hedges of joint venture (P=149) P=− (P=117) P=− Fair value changes of cash flow hedges 8 8 3 3 Change in fair value of AFS financial assets 5 12 (10) 12 Income tax (3) (6) 2 (5) Net other comprehensive income to be reclassified to profit or loss in subsequent periods (139) 14 (122) 10

Items not to be reclassified to profit or loss in subsequent periods: Share in the actuarial gains/(losses) on defined benefit plans of a joint venture (see Note 2) (58) − − − Revaluation increment (94) − − − Income tax 28 − − − Net other comprehensive income not being reclassified to profit or loss in subsequent periods (P=124) P=− P=− P=−

20. Costs of Sales and Services

The costs of sales and services consist of:

Nine Months Ended September 30 2013 2012* (Unaudited) (In Millions) Amortization of service concession assets (see Note 10) P=2,074 P=2,295 Salaries, wages and benefits 1,513 1,167 Operator’s fee 1,289 1,119 Cost of medical services and supplies 1,341 1,267 Utilities 727 654 Repairs and maintenance 396 340 PNCC fees P=310 P=295

Nine Months Ended September 30 2013 2012* (Unaudited) (In Millions) Contracted services P=359 P=236 Depreciation and amortization 182 175 Provision for heavy maintenance 159 80 Others 365 409 P=8,715 P=8,037 *Restated for consistency in presentation and classification with 2013 balances

Cost of sales and services relates to MNTC, CIC, Maynilad, RMCI, EMHMC, CVHMC and AHI operations. “Others” consists of rental, materials and supplies, insurance, toll collection and medical services.

21. General and Administrative Expenses

General and administrative expenses consist of:

Nine Months Ended September 30 2013 2012* (Unaudited) (In Millions) Personnel costs P=1,778 P=1,669 Depreciation and amortization 498 404 Outside services 408 441 Professional fees 264 144 Taxes and licenses 220 196 Transportation and travel 155 136 Provisions 115 132 Entertainment, amusement and representation 101 84 Utilities 114 184 Repairs and maintenance 110 82 Public relation 78 55 Collection charges 74 75 Advertising and promotion 72 85 Administrative supplies 69 86 Insurance 56 44 Rentals 43 45 Commissions 10 10 Miscellaneous 298 317 P=4,463 P=4,189 * Restated for consistency in presentation and classification with 2013 balances

22. Interest Income and Expenses

The following are the sources of the Company’s interest income:

Nine Months Ended September 30 2013 2012 (Unaudited) (In Millions) Cash and cash equivalents P=254 P=411 Notes receivable 73 77 Investment in bonds 28 25 Others 15 5 P=370 P=518

The following are the sources of the Company’s interest expense:

Nine Months Ended September 30 2013 2012 (Unaudited) (In Millions) Long -term debts P=2,380 P=2,121 Accretion of concession fees payable 487 499 Amortization of debt issue costs and discounts 47 65 Accretion on noncurrent financial liabilities 11 57 Others 119 41 P=3,044 P=2,783

23. Other Income and Other Expenses

Other income consists of:

Nine Months Ended September 30 2013 2012 (Unaudited) (In Millions) Other income: Construction revenue P=5,253 P=4,928 Recovery from accounts written-off, provisions and other liabilities 734 2 Dividend income 405 561 Management fees 90 42 Foreign exchange gains – net 61 830 Mark-to-market gain on derivatives(a) − 11 Others 253 301 6,796 6,675 Other expenses: Construction costs 5,185 4,851 Refinancing costs 814 − Foreign Currency Differential Adjustment (FCDA) 158 821 Other provisions(b) 596 641 Others 11 34 6,764 6,347 P=32 P=328 (a) Represents changes in the fair value of MNTC’s non-hedge Interest rate swap. (b) Represents provision for estimated claims and tax liabilities.

24. Earnings per Share

The calculation of earnings per share follows: Nine Months Ended September 30 2013 2012 (Unaudited) (In Millions, except for Per Share amounts) Net income attributable to equity holders of the Parent Company P=5,237 P=4,989 Dividends on preference equity holders of the Parent Company (4) (4) Net income attributable to ordinary equity holders of the Parent Company (a) 5,233 4,985 Outstanding common shares at 1 January 24,614 24,593

Nine Months Ended September 30 2013 2012 (Unaudited) (In Millions, except for Per Share amounts) Effect of issuance of common shares during the year 1,280 3 Weighted average number of common shares for basic earnings per share (b) 25,894 24,596 ESOP 63 51 Weighted average number of common shares adjusted for the effects of potential dilution (c) 25,957 24,647

Basic earnings per share (in centavos) (a/b) P=20.21 P=20.27

Diluted earnings per share (in centavos) (a/c) P=20.16 P=20.23

25. Share-based Payments

The following tables illustrate the number of, exercise prices of, and movements in share options during the period for each grant:

First Grant Tranche A Tranche B Number Number of shares Exercise price of shares Exercise price Outstanding at December 31, 2012 15,000,000 P=2.12 25,050,000 P=2.73 Exercised during the year (10,000,000) 2.12 (22,550,000) 2.73 Forfeited during the year (5,000,000) 2.12 (2,500,000) 2.73 Outstanding at September 30, 2013 − P=2.12 − P=2.73

Exercisable at December 31, 2012 15,000,000 P=2.12 25,050,000 P=2.73

Exercisable at September 30, 2013 − P=2.12 − P=2.73

Second Grant Tranche A Tranche B Number Number of shares Exercise price of shares Exercise price Outstanding at December 31, 2012 59,380,000 P=2.73 28,105,000 P=2.73 Exercised during the year (31,280,000) 2.73 (8,900,000) 2.73 Outstanding at September 30, 2013 28,100,000 P=2.73 19,205,000 P=2.73

Exercisable at December 31, 2012 59,380,000 P=2.73 16,975,000 P=2.73

Exercisable at September 30, 2013 28,100,000 P=2.73 19,205,000 P=2.73

Third Grant Tranche A Tranche B Tranche C Number Exercise Number Exercise Number Exercise of shares price of shares price of shares price Outstanding at December 31, 2012 10,000,000 P=3.50 1,000,000 P=3.53 2,750,000) P=3.66 Exercised during the year (6,500,000) 3.50 (650,000) 3.53 (1,045,000) 3.66 Outstanding at September 30, 2013 3,500,000 P=3.50 350,000 P=3.53 1,705,000 P=3.66

Exercisable at December 31, 2012 6,500,000 P=3.50 300,000 P=3.53 1,250,000) P=3.66

Exercisable at September 30, 2013 3,500,000 P=3.50 350,000 P=3.53 1,705,0000 P=3.66

Carrying value of the ESOP recognized under “Other reserves” in the equity section of the consolidated statement of financial position amounted to P=68 million and P=108 million as at September 30, 2013 and December 31, 2012, respectively (see Note 18).

Total ESOP expense for September 30, 2013 and 2012 amounted to P=4 million and P=10 million, respectively, included in “Personnel costs” under “General and administrative expenses” account in the consolidated statements of comprehensive income.

26. Contracts, Commitments and Contingencies

The information provided in this report must be read in conjunction with the 2012 audited consolidated financial statements of MPIC and its subsidiaries and significant associates and joint ventures.

Maynilad

There are no significant updates to the contingencies with respect to Maynilad, as disclosed in the annual consolidated financial statements as at December 31, 2012 except for items noted below. The ultimate outcome of these matters still cannot be presently determined.

Real Property Taxes Assessment. Maynilad’s evidence has been formally filed with the Central Board of Assessment Appeals (CBAA) level MWSS did not present its evidence, maintaining its position that it is a tax exempt entity. Norzagaray is scheduled to present its evidence.

DENR Charges. On August 24, 2012, Maynilad filed a Petition for Review on Certiorari before the Supreme Court, which remains pending as of November 6, 2013.

Cost of Living Allowance (COLA). On January 8, 2013, Maynilad received a copy of the Supreme Court Notice on the Resolution dated November 12, 2012 requiring MWSA to file a Consolidated Reply to the Comment. Maynilad filed its Rejoinder to MWSA’s reply on April 26, 2013.

MPTC/MPTDC/MNTC

Business Taxes. On July 7, 2011, the Regional Trial Court of Bulacan ruled that MNTC is liable for P=67.4 million in back local business taxes and permits and regulatory fees, citing that the North Luzon Expressway (NLEX) toll plazas located in Guiguinto, Bulacan are considered branches or sales outlets and that the STOA does not expressly provide for MNTC’s exemption on local business taxes. However, the decision adopted the amount assessed by the Municipality of Guiguinto, Bulacan, which is not based on the gross sales of the NLEX toll plazas. A proffer of excluded evidence and a petition for review with the RTC of Malolos, Bulacan and Court of Tax Appeals (CTA), respectively, were filed on November 9, 2011 by MNTC. The CTA, in a decision dated December 3, 2012, partially granted the Company’s petition for review. The CTA modified the RTC of Malolos, Bulacan’s decision dated July 7, 2011. The CTA cancelled and set aside for lack of basis the notice of assessment dated 2008 issued against MNTC for P=67.4 million LBT for the years 2005 to 2007. However, the CTA ordered the Company to pay the municipality of Guiguinto the P=2.3 million mayors’ permit and other regulatory fees assessment for the years 2004 to 2008, inclusive of surcharges and penalties. The municipality of Guiguinto subsequently filed with the CTA a motion for reconsideration. The CTA has not yet acted on the motion as at November 6, 2013.

MNTC’s Segment 9. Construction of MNTC’s Segment 9 (part of Phase II) commenced in May 2013. Total project cost is estimated to be at P=1.9 billion and expected for completion until July 2014.

Toll Collection System. On June 14, 2013, MNTC entered into an agreement with Egis Projects, Phils. and Indra Philippines, Inc. for the front end and design works for the Toll Collection System migration. Total project cost is €6.2 million (P=359.1 million).

Meralco

Meralco and its subsidiaries are subject to various pending or threatened legal actions in the ordinary course of business which, if found against Meralco and subsidiaries, may result in the payout of substantial claims and or the adjustment of electricity distribution rates. These contingencies mainly relate to tax assessments (real property tax, franchise, local business tax and income tax), the ongoing mediation with National Power Corporation and the unbundling of rates for which Meralco is awaiting the action of the ERC on the COA Audit Report.

Other disclosures required by PAS 37 were not provided as it may prejudice the Company’s position in on-going claims, litigations and assessments.

NOHI

Donors Tax. In a Resolution dated November 13, 2012, the Court admitted in evidence all of the NOHI’s exhibits, and NOHI presented evidence on January 16, 2013.

During the hearing on January 16, 2013, respondent’s counsel requested for a resetting, which was granted and the hearing was reset to February 21, 2013. On February 6, 2013, respondent’s counsel filed a motion to cancel the February 21, 2013 hearing, which was likewise granted and the hearing was reset to March 18, 2013. On March 18, 2013, respondent’s counsel presented as her first witness, Mr. Albert C. Eya, a BIR Revenue Officer. The hearing scheduled on April 22, 2013 for continuation of presentations of respondent's witnesses and pieces of evidence was postponed due to the re- organization of the Court of Tax Appeals after the appointment of a new presiding justice. After the

respondent filed her Formal Offer of Evidence, and the exhibits offered by her were admitted in evidence, the parties were granted time within which to submit their respective memoranda. Both parties submitted their respective memoranda and the matter has been submitted for resolution of the Court of Tax Appeals.

NOHI firmly believes that it is not liable for the deficiency donor’s taxes and that it has strong legal and factual basis to question the FDDA in its appeal with the CTA. Accordingly, NOHI believes that no provision for the assessment is necessary as at September 30, 2013.

27. Financial Instruments

Categories of Financial Instruments There are no changes in the classification of financial assets resulting from changes in the use and purpose of these assets. The categories of the Company’s financial assets and financial liabilities as at September 30, 2013 are: September 30, 2013 Financial Assets Financial Liabilities AFS Other Loans and Financial Financial FVPL Receivables HTM Assets FVPL Liabilities Total (In Millions) ASSETS Cash and cash equivalents P=– P=12,855 P=– P=– P=– P=– P=12,855 Restricted cash – 1,549 – – – – 1,549 Receivables - net – 4,326 – – – – 4,326 Due from related parties – 310 – – – – 310 AFS financial assets – – – 3,088 – – 3,088 Other current assets – 139 – – – – 139 Investments in associates and interest in joint ventures (a) – 756 – 11,573 – – 12,329 Other noncurrent assets – 1,150 – – – – 1,150 P=– P=21,085 P=– P=14,661 P=– P=– P=35,746 LIABILITIES Accounts payable and other current liabilities (b) P=– P=– P=– P=– P=– P=13,924 P=13,924 Due to related parties – – – – – 99 99 Service concession fees payable – – – – – 8,501 8,501 Long-term debt – – – – – 46,508 46,508 Payable to CHI – – – – – 163 163 Deferred credits and other long-term liabilities – – – – – 853 853 P=– P=– P=– P=– P=– P=70,048 P=70,048

Fair Values The following table shows a comparison, by classes, between the carrying values and fair values of certain of the Company’s financial instruments as at September 30, 2013. Financial instruments with carrying amounts reasonably approximating their fair values are no longer included in the comparison.

September 30, 2013 Carrying Fair Value Value Financial Assets Loans and Receivables: Notes receivable P=853 P=1,145 Due from related parties 310 402 P=1,163 P=1,547

September 30, 2013 Carrying Fair Value Value Financial Liabilities Other Financial Liabilities: Service concession fees payable (current and noncurrent) P=8,501 P=10,566 Long-term debts (current and noncurrent) 46,508 50,951 Customer guaranty deposits 780 1,148 Financial guarantee obligation(a) 73 165 P=55,862 P=62,830 (a)Included in “Deferred credits and other long-term liabilities” account in the consolidated statement of financial position.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value:

Cash and Cash Equivalents. Due to the short-term nature of transactions, the fair value of cash and cash equivalents approximate the carrying amounts at the end of the reporting period.

Restricted Cash, Cash Deposits, Due from Related Parties and Accounts Payable and Other Current Liabilities. Carrying values approximate the fair values at the reporting date due to the short-term nature of the transactions.

Service Concession Fees Payable and Customers’ Guaranty Deposits. Estimated fair value is based on the discounted value of future cash flows using the applicable rates for similar types of financial instruments.

Financial Guarantee Obligation. Estimated fair value is based on the discounted value of future cash flows using the prevailing peso interest rates that are specific to the tenor of the instruments’ cash flows.

AFS Financial Assets. Unquoted shares classified as AFS financial assets are carried at cost as there are no other reasonable basis for fair value. Quoted shares and investments in bonds classified as AFS financial assets are carried at fair value based on their quoted market prices.

Notes Receivable, Miscellaneous Deposits and Other Financial Assets. Estimated fair value is based on the present value of future cash flows discounted using the prevailing PDST-F rates that are specific to the tenor of the instruments’ cash flows at the end of each reporting period.

Long-term Debt. For both fixed rate and floating rate (repriceable every six months) Philippine Peso- denominated fixed rate corporate notes, estimated fair value is based on the discounted present value of future cash flows using prevailing Philippine risk free rates.

Derivative Assets and Liabilities. The derivative asset from the conversion option bifurcated from the preferred shares of Landco are carried at cost since the underlying common shares are unquoted and there is no reliable basis for its fair value.

Fair Value Hierarchy The Company uses the following hierarchy for determining and disclosing the fair values of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

For financial instruments that are recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Below are the set of financial instruments carried at fair value and their classification in the fair value hierarchy as at September 30, 2013:

September 30, 2013 Total Level 1 Level 2 Level 3 (In Millions) Financial Assets AFS financial assets - Unit Investment Trust Fund P=1,069 P=1,069 P=– P=– Investment in bonds 943 943 – – P=2,012 P=2,012 P=– P=–

During the nine-month period ended September 30, 2013, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements.

As at December 31, 2012, the financial instrument classified under Level 3 amounting to P=225.0 million pertains to the derivative asset arising from the options embedded in the Note (host instrument) acquired by the MPTC from CHI (see Note 6). With MPTC acquiring control of CIC on January 2, 2013, the investment in CHI Preferred Shares and the derivative asset arising from the remaining embedded option (conversion of CHI Preferred Shares to Common Shares), are eliminated upon consolidation.

28. Events after the Reporting Period

MPIC

On October 24, 2013, the Company completed the acquisition of 51% equity ownership in Central Luzon Doctors’ Hospital, Tarlac’s largest private hospital, for a total consideration of ₱188.8 million. The funding will go towards the purchase of major medical equipment and the implementation of an infrastructure development plan highlighted by the construction of a new building to house new operating rooms, as well as additional patient beds and doctors’ clinics.

MNTC Business and Operating Agreement (BOA) with BCDA. On July 20, 2011, MNTC and BCDA signed a BOA covering the assignment by BCDA to MNTC of its rights, interest and obligations under the TOA relating to the management, operation and maintenance of the SCTEx (which shall include the exclusive right to possess and use the SCTEx toll road and facilities and the right to collect toll). On December 14, 2012, MNTC and BCDA agreed to extend the long-stop date for the effectivity of the BOA until March 31, 2013. The long-stop date for the effectivity of the BOA was further extended to December 31, 2013.

Connector Road Project. On June 5, 2010, the Department of Public Works and Highways (DPWH) accepted MPTDC’s unsolicited proposal for the NLEX to South Luzon Expressway Connector Road project (“the Connector Road Project”), a 13.5-km elevated toll road which will connect the north to south corridor. Following the submission of the required documents, MPTDC was granted the “original proponent” status for the Connector Road Project. MPTDC is currently in discussion with Government on how best to execute its proposal.

29. Supplemental Cash Flow Information

During the current period, the Company had a non-cash investing activity which was not reflected in the consolidated statement of cash flows. As discussed in Note 4, the Company acquired control over CIC by virtue of a Management Letter Agreement which gave MPTC control over CIC beginning January 2, 2013.

Item 2

Management's Discussion and Analysis of Financial Condition and Results of Operations

Exhibit III

Financial Highlights and Key Performance Indicators

The summary financial information presented below as at September 30, 2013 and December 31, 2012 was derived from the Company’s unaudited interim consolidated financial statements, prepared in accordance with Philippine Accounting Standard 34, Interim Financial Reporting. The information below is not necessarily indicative of the results of future operations.

In this Report, Core EBITDA, Core EBITDA Margin and Core Income are not measures of performance under Philippine Financial Reporting Standards (PFRS), and users of this Report should not consider Core EBITDA, Core EBITDA Margin and Core Income in isolation or as alternatives to net income as an indicator of the Company’s operating performance or to cash flow from operating, investing and financing activities as a measure of liquidity, or any other measures of performance under PFRS. Because there are various Core EBITDA, Core EBITDA Margin and Core income calculation methods, the Company’s presentation of these measures may not be comparable to similarly titled measures used by other companies.

The following discussion and analysis of the Group’s financial condition and results of operations should be read in conjunction with the accompanying unaudited interim condensed consolidated financial statements and the related notes as at September 30, 2013 and December 31, 2012 and for the periods ended September 30, 2013 and 2012 included in this Report.

Unaudited Increase (Decrease) in Php Millions 9M2013 9M2012 Amount % Operating Revenues 22,879 20,537 2,342 11 Cost of Sales and Services 8,715 8,037 678 8 General and administrative expenses 4,463 4,189 274 7 Interest expense 3,044 2,783 261 9 Share in net earnings of associates and a joint venture 1,869 1,645 224 14 Interest income 370 518 (148) (29) Other income (expense) - net 32 328 (296) (90) Income before income tax 8,928 8,019 909 11 Net income attributable to owners of the Parent Company 5,237 4,989 248 5 Core EBITDA 12,888 11,640 1,248 11 Core income 5,614 5,025 589 12 Nonrecurring income (expense) (377) (36) 341 100+ Core EBITDA margin 56% 57% -1% (2)

Overview

Highlights for the past nine months of the year which had significant impact on the financial results of the Group are as follows:

. Well-positioned to fund new opportunities. On January 22, 2013, the Company raised P=6.12 billion gross of additional equity via an overnight private placement. The placement was executed at P=4.60 per share representing a 2.86% discount to the 30-day Volume Weighted Average Price (VWAP). The primary purpose of this capital raising was to boost the Company’s future investment ability after a majority of the Company’s spare debt capacity was used in investing in CAVITEX and for the follow-on funding needed to expand this road.

. Tariff progression. Maynilad implemented a 3.2% basic tariff increase effective January 1, 2013. It includes changes in Consumer Price Index to be applied to the 2012 Basic Charge and Foreign Currency Differential (FCDA) adjustment as recommended by the MWSS Regulatory. For the Fourth Rate Rebasing Period, Maynilad submitted the business plan for the determination of the Rates Adjustment Limit to be applied to the standard rates for the period 2013 to 2017.

In its September 12, 2013 resolution, MWSS denied Maynilad’s petition for an upward adjustment of 28.35% of its average basic water charge (or P=8.58 per cubic meter), and instead proposed a negative adjustment of 4.82% of Maynilad’s 2012 average basic water charge (or P= 1.46 per cubic meter) to be implemented in five equal tranches of negative 0.964% (or P=0.29 per cubic meter) per charging year. Under the Concession Agreement, any disagreement, dispute, controversy or claim arising out of, or relating to, the Agreement, which cannot be resolved through consultation or negotiation between the parties must be resolved through an arbitration process. Accordingly, on October 4, 2013, Maynilad filed a Dispute Notice with the Secretariat of the International Chamber of Commerce (ICC) International Court of Arbitration to resolve its rebasing dispute with MWSS. As at November 6, 2013, this is pending the ICC Chairman’s appointment of a presiding arbitrator to the Appeals Panel.

. Maximizing Water investment through technical partnership. On February 13, 2013, Marubeni Corporation acquired a 20% effective ownership in Maynilad through DMWC. This reduced the Company’s economic interest in Maynilad from 56.8% to 52.8%. The entry of MCNK JV Corporation, a subsidiary of Marubeni Corporation, in Maynilad is expected to boost Maynilad’s technical proficiency in the water business, in addition to possibly providing Maynilad access to additional sources of funding.

. Expanding the Company’s reach to provide clean water. On January 7, 2013, the Company through MPWIC, acquired 39% ownership in Manila Water Consortium, Inc., which was awarded the Carmen Bulk Water Project by the Provincial Government of Cebu. The project is a partnership with Manila Water and Provincial Government of Cebu, for the supply of water to Metro Cebu’s Water District. In addition, on March 15, 2013, Maynilad acquired 10% stake in Subic Water amounting to P=211 million.

. Seamless network of toll roads. On January 2, 2013, MPTC acquired control over Cavitex Infrastructure Corp. (CIC) by virtue of the Management Letter Agreement. CIC holds the concession for the operation and maintenance of Manila-Cavite Toll Expressway (CAVITEX).

On June 5, 2010, the Department of Public Works and Highways (DPWH) accepted MPTDC’s unsolicited proposal for the NLEX to South Luzon Expressway Connector Road project (“the Connector Road Project”), a 13.5-km elevated toll road which will connect the north to south corridor. Following the submission of the required documents, MPTDC was granted the “original proponent” status for the Connector Road Project. MPTDC is currently in discussion with Government on how best to execute its proposal.

. Maximizing Power investment through technical partnership. In March 2013, MERALCO announced the acquisition of an effective 28% interest in GMR Energy (Singapore) Pte Ltd, a 2x400 MW Liquefied Natural Gas (LNG)-fired combined cycle facility in Singapore. The first 400 MW unit was synchronized to the local electricity grid on June 30, 2013 and the second on August 30, 2013. PacificLight Power is MERALCO’s first power generation project outside the Philippines at an investment cost of ₱9.0 billion.

. Continuous power supply. On August 29, 2013, MGen signed a Joint Development Agreement with a wholly-owned subsidiary of Electricity Generating Public Company Limited (“EGCO”) of Thailand for the development of a new 460 MW supercritical coal-fired power plant in Mauban, Quezon. MGen’s equity in the joint venture company will be 49% with a right to nominate a preferred investor for an additional 2%. Together with EGCO, MGen is selecting a financial advisor for project financing and tendering the Engineering, Procurement and Construction contract for the project.

On October 7, 2013, MGen executed a Share Sale and Purchase Agreement with First Metro Investment Corporation (“FMIC”) for the sale by FMIC of 20% equity interest in Global Business Power Corporation (“GBPC”) to MGen for a consideration of ₱7.15 billion. GBPC is one of the largest power producers in the Visayas with nine coal and diesel power plants amounting to a total installed capacity of 627 MW with two more projects on the way, an 82 MW plant in Toledo City and a 150 MW expansion in Panay.

. Continuous bid to improve services. On February 22, 2013, MPIC and JG Summit signed a memorandum of agreement to form an exclusive strategic partnership to jointly pursue and bid for the P=17.5 billion Mactan Cebu International Airport (MCIA) Passenger Terminal Project. On March 11, 2013, MPIC-JGS Airport Holdings, Inc. (MPIC-JGS) was formed in which the Company owns 58.75%, while JG Summit at 41.25%. The consortium will bid for the rehabilitation and expansion of the MCIA and will also be exploring other airport projects that may be rolled out by the government in the future.

The MPIC–Ayala Corporation Consortium in the Automated Fare Collection System (“AFCS”) has been declared qualified to bid for the AFCS project to provide a unified ticketing system for Manila’s Metro Rails. Bid submission is set for November 18, 2013.

. Building nationwide chain of premier hospitals. On June 3, 2013, the Company completed its investment in a 51% equity ownership of De Los Santos Medical Center (DLSMC), a 150-bed hospital in Quezon City, Metro Manila. Included in the transaction is Megaclinic, a mall-based ambulatory diagnostic and surgical center, marking MPIC’s first investment in a non-hospital- based health facility.

On October 24, 2013, the Company MPIC moved another step forward in building its nationwide chain of premier private hospitals with the completion of an investment in 51% of Tarlac's largest private hospital, the 200-bed Central Luzon Doctors’ Hospital (CLDH) for a total consideration of ₱188.8 million.

Description of Operational Segments of the Group

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The Group is organized into five major business segments based on services and products namely water utilities, toll operations, power distribution, healthcare and others as enumerated below:

 Water Utilities – Water utilities business segment primarily relates to the operations of MPWIC, DMCI-MPIC Water Company and Maynilad in relation to the provision of water and sewerage

services and bulk water supply.

 Toll Operations – Toll operations business segment primarily relates to the operations and maintenance of toll facilities by MPTC and its subsidiaries, Manila North Tollways Corporation and CIC and an associate, Tollways Management Corporation.

 Power Distribution – Power distribution business segment primarily relates to the operations of MERALCO in relation to the distribution and supply of electricity.

 Healthcare – Healthcare business segment primarily relates to the operations and management of hospitals, nursing and medical schools and such other enterprises that have similar undertakings provided for by MPIC’s associates’ Medical Doctors, Inc. and Davao Doctors Hospital and subsidiaries Riverside Medical Center Inc., East Manila Hospital Managers Corp, Colinas Verdes Hospital Managers Corp, Asian Hospital Inc and De Los Santos Medical Center.

 Others – This represents holding companies and operations of subsidiaries involved in real estate and provision of services. Real estate primarily relates to the operations of Neo Oracle Holdings, Inc.

Operational Review

I - MPIC CONSOLIDATED

Management monitors the operating results of each business unit separately for purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on consolidated net income for the year; earnings before interest, taxes and depreciation and amortization, or Core EBITDA; Core EBITDA margin; and Core income. Net income for the year is measured consistent with consolidated net income in the consolidated financial statements. Core EBITDA is measured as net income excluding depreciation and amortization of property and equipment and intangible assets, asset impairment on noncurrent assets, financing costs, interest income, equity in net earnings (losses) of associates and a joint venture, net foreign exchange gains (losses), net gains (losses) on derivative financial instruments, provision for (benefit from) income tax and other nonrecurring gains (losses). Core EBITDA margin pertains to Core EBITDA divided by service revenues. Management also assesses the performance of the operating segments based on a measure of recurring profit or core income. Core income is measured as net income attributable to owners of the Company excluding the effects of forex and derivative gains or losses and non-recurring items, net of tax effect of aforementioned. Non-recurring items represent income/gains or expenses/losses that, through occurrence or size, are not considered usual operating items.

The following section includes discussion of the Company’s results of its operations as presented in its consolidated financial statements as well as management’s assessments of the performance of the Group which is translated to core (or recurring) profit and non-core (or non-recurring) profit.

9M2013 versus 9M2012

MPIC CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited Increase (Decrease) in Php Millions 9M2013 9M2012 Amount % Operating Revenues 22,879 20,537 2,342 11 Cost of Sales and Services 8,715 8,037 678 8 General and administrative expenses 4,463 4,189 274 7 Interest expense 3,044 2,783 261 9 Share in net earnings of associates and a joint venture 1,869 1,645 224 14 Interest income 370 518 (148) (29) Other income (expense) - net 32 328 (296) (90) Provision for income tax 564 518 46 9 Net income attributable to owners of the Parent Company 5,237 4,989 248 5 Other comprehensive income (loss) (263) 14 (277) (100+) Total comprehensive income attributable to owners of the Parent Company 4,971 4,999 (28) (1) Core income 5,614 5,025 589 12 Nonrecurring income (expense) (377) (36) 341 100+

Revenues

The Company’s revenues increased by 11% to P=22,879 million for the first nine months of 2013, reflecting improved performance of the Company’s major operating subsidiaries, Maynilad and Metro Pacific Tollways Corporation (MPTC). Maynilad posted an 8% increase in revenues brought about by 3% billed volume growth coupled with 4% increase in average effective tariff. MPTC likewise posted 21% higher revenues mainly due to 6% higher average daily vehicle entries in North Luzon Expressway (NLEX) and consolidation of CIC which was acquired in January 2, 2013. Hospital revenues also increased by 10% mainly driven by increasing number of patients served at Makati Medical Center and Asian Hospital.

Cost of Sales and Services

Cost of sales and services increased by 8% to P=8,715 million for the first nine months of 2013. Salaries, wages and benefits increased by 30% due to increase in headcount and annual salary. In addition, operators fee and provision for heavy maintenance increased by 15% and 99%, respectively, due to consolidation of CIC. The increases in these items of cost of sales and services were offset by the lower amortization of service concession asset driven by the change in Maynilad’s amortization method from straight line to units-of-production (UOP).

General and administrative expenses

General and administrative expenses increased by 7% to P=4,463 million for the first nine months of 2013 due to increases in personnel costs, professional fees and depreciation & amortization across the group. Annual salary increases and expanded headcount caused the increase in personnel cost while the continuing capital expenditure program caused the increase in depreciation and amortization cost. Increase in professional fees is due to the Company’s project bidding expenses.

Interest expense

Interest expense increased by 9% to P=3,044 million for the first nine months of 2013 mainly due to consolidation of CIC’s own loan and interest from the P=4.7 billion loan to fund the acquisition of CAVITEX.

Share in net earnings of associates and a joint venture

Increase in MPIC’s share in the cumulative net earnings of associates and joint venture for the first nine months of 2013 is due to increases in operational performance at MERALCO, Tollways Management Corporation, Medical Doctors Inc. and Davao Doctors Hospital, Inc. plus increase in ownership in MERALCO which was partially pulled back MERALCO ’s recognition of gain from recovery of Local Franchise Tax in 2012.

Interest income

Interest income decreased by 29% to P=370 million for the first nine months of 2013 mainly due to lower level of placements in 9M2013 as compared to 9M2012. The proceeds from the equity placement in January 2013 were subsequently used to pay the P=4.7 billion loan due in March 2013.

Other income and expenses - net

“Other income and expenses-net” decreased by 90% to P=32 million mainly due to the increase in other expenses attributable to the refinancing cost of Maynilad and MPIC Parent amounting to P=814 million which was largely offset by the recovery of deferred credits amounting to P=734 million.

Provision for income tax

Provision for income tax increased by 9% to P=564 million due to Maynilad’s lower deferred tax benefit from IFIRC 12 and partly offset by lower current tax due to MNTC’s election of the Optional Standard Deduction (OSD) for taxable year 2013. MNTC’s effective income tax rate decreased from 30% to 23% of pre-tax income.

Consolidated net income attributable to equity holders of the Parent Company

The 5% increase from P=4,989 million to P=5,237 million for the period is attributable mainly to the strong growth in profit contribution of the major businesses. In summary: increase in Maynilad’s contribution due mainly to higher billed volume and tariff; increased traffic volume and additional contribution from acquisition of CIC; and increase in hospital revenue and effective cost management in Healthcare group.

Other comprehensive income

Other comprehensive loss of P=263 million is substantially attributable to the Company’s share in the other comprehensive income (loss) of Beacon. The share in the other comprehensive income (loss) of Beacon represents the Company’s share in the investee’s fair value changes in cash flow hedges and share in the actuarial loss on defined benefit plan.

Core Income attributable to equity holders of the Parent Company

MPIC’s share in the consolidated core income increased by 12% from P=5,025 million for the first nine months of 2012 to P=5,614 million in 2013 mainly reflecting the following:

 11% increase in contribution from Maynilad from P=2,651 million in 2012 to P=2,943 million in 2013 due to all-in effective tariff increase of 4%, lower amortization of concession asset and 3% increase in billed volume.

 26% increase in contribution from MPTC from P=1,078 million in 2012 to P=1,362 million in 2013 mainly due to contribution from CIC, strong volume growth and benefit from lower tax rate due to election of OSD by MNTC.

 5% increase in contribution from Beacon/MERALCO from P=1,937 million in 2012 to P=2,026 million in 2013 which is slightly above 2012 despite the higher energy sold and increased average tariff as 2012 benefitted from MERALCO’S recovery of Local Franchise Tax (P=1.6 billion net of tax).

 26% increase in contribution from Healthcare group from P=347 million in 2012 to P=436 million in 2013 mainly due to hospital revenue growth, lower operating expenses and consolidation of De Los Santos Medical Center

These represent MPIC’s share in the stand-alone core income of the operating companies, net of consolidation adjustments.

Maynilad, MPTC, MERALCO and Healthcare accounted for 43%, 20%, 30% and 7%, respectively of MPIC’s share of operating income.

Non-recurring epenses

Non-recurring expenses amounted to P=377 million for the first nine months in 2013 from the P=36 million nonrecurring expense last year. Significant increase in the non-recurring expenses is attributable to the refinancing costs of Maynilad, MPIC Parent and Beacon.

II - OPERATING SEGMENTS OF THE GROUP

Water utilities Unaudited Increase (Decrease) Maynilad Water Services, Inc. 9M2013 9M2012 Amount % (in Php Millions, unless otherwise stated) Consolidated Statements of Income Revenues 12,598 11,649 949 8 Cost of Services 3,553 3,468 86 2 Operating expenses 1,453 1,392 61 4 Interest income (expense) - net (1,513) (1,524) (11) (1) Other income (expense) - net (489) (484) 5 1 Benefit from income tax 233 313 (79) (25) Core Income 5,824 5,095 729 14 Non-recurring income (expense) (802) (1) 801 100+ Reported Net Income 5,022 5,094 (72) (1) Core EBITDA 8,382 7,772 610 8 Core EBITDA margin 67% 67% 0% 0 Capital Expenditure 5,420 5,097 323 6

Key Performance Indicators Volume of water supplied (MCM) 546.3 573.0 (26.7) (5) Volume of water billed (MCM) 330.9 320.1 10.8 3 Non revenue water % (average) 39.4% 44.1% -4.7% (11) Non revenue water % (period end) 38.3% 42.4% -4.1% (10) Billed customers (period end) 1,116,109 1,056,538 59,571 6 Customer mix (% based on billed volume) Domestic (residential and semi-business) 79.8% 79.1% 0.7% 1 Non-domestic (commercial and industrial) 20.2% 20.9% -0.7% (3)

Operational highlights

Maynilad, the biggest water utility in the Philippines, saw a 3% increase in the volume of water sold in its concession area in the first nine months of this year, a rate of growth held back by project delays in Cavite. The increase in water sold was achieved even as Maynilad managed to draw 5% less water from the Angat Dam.

Selling more water while drawing less, as well as lower leakage and theft, resulted in a decline in non- revenue water (“NRW”) to 38.3% by the end of September 2013 from 42.4% a year earlier. The improvement was achieved through Maynilad’s continuing leak repair program, which saw 32,136 leaks repaired in the first nine months of 2013. The program, coupled with pipe rehabilitation and more efficient management of water pressure and supply, has resulted in the recovery of over 143 million liters of water per day. Maynilad continues to push forward with its ambitious NRW reduction program by allocating ₱1.7 billion in 2013 for NRW diagnostics, leak repairs and the establishment and maintenance of District Metered Areas.

Maynilad now delivers 24-hour water supply to 97.5% of its customers, while 99.8% of customers also receive water pressure of at least seven pounds per square inch, the minimum pressure necessary to provide water to the second floor. The year-earlier percentages were 95% and 99.8%, respectively. The

number of billed customers rose by 6% to 1,116,109 by the end of September 2013 from 1,056,538 a year earlier.

Revenues

Unaudited Increase (Decrease) 9M2013 9M2012 Amount % Water Services 10,159 9,298 861 9 Sewer Services 2,137 2,035 102 5 Other Contract & Services 302 316 (14) (4) Total Revenues 12,598 11,649 949 8

Revenues for the period grew 8% to P=12,598 million from P=11,649 million last year due to the combined effect of a 3% increase in billed volume coupled with the basic tariff increase of 3.2% in January 2013. Percentage increases in the components of Maynilad’s revenues are set out above.

Cost of Services

Slight increase in Cost of Services by 2% from P=3,468 million to P=3,553 million is attributable to increase in personnel cost, utilities and outside services due to increased network pumping activities in order to deliver water to new customers in the south and operation of new sewage treatment plants (STPs) built to meet the sewerage coverage targets in the San Juan river system in Quezon City. The increase was pulled back by the lower amortization expense driven by the change in the amortization method of the service concession asset from straight line to units of production.

Operating expenses

Operating expenses increased due to (a) higher personnel cost due to average salary increase and earlier accrual of year-end incentives compared to last year; (b) outside services increased in line with the growth of the company's facilities, particularly the new sewage treatment plants; and (c) higher depreciation expense.

Core income

Maynilad’s core income increased by 14% to P=5,824 million for the first nine months of 2013 from P=5,094 million last year due to increased billed volume and higher average tariff as discussed above plus impact of lower amortization of concession assets due to change in amortization method to units-of- production.

Non-recurring income (expense)

Non-recurring items include foreign exchange loss from US dollar transactions and refinancing of fixed rate loans.

Reported Net Income

Reported Net Income profit decreased by 1% for the first nine months of 2013 due to the cost of refinancing fixed rate loans.

Toll Roads

Unaudited Increase (Decrease) Metro Pacific Tollways Corporation 9M2013 9M2012 Amount % (in Php Millions, unless otherwise stated) Consolidated Statements of Income Net toll revenues 6,038 4,997 1,041 21 Cost of Services 2,456 2,053 403 20 Operating expenses 573 487 86 18 Interest income (expense) - net (725) (415) 310 (75) Non-controlling interest (573) (496) 77 (16) Share in earnings of an associate 185 152 33 22 Other income (expense) - net 136 91 44 49 Provision for income tax 594 678 (84) (12) Core Income 1,437 1,112 326 29 Non-recurring income (expense) (54) (45) 9 (20) Reported net income attributable to equity holders of MPTC 1,383 1,067 317 30 Core EBITDA 4,099 3,255 844 26 Core EBITDA margin 68% 65% 3% 5 Capital Expenditure 367 203 164 81

Key Performance Indicators Average Daily Vehicle Entries - NLEX 170,584 160,707 9,877 6 Average Daily Vehicle Entries - CAVITEX 100,947 92,424 8,523 9 Average Kilometers Travelled - NLEX 3,231,046 3,068,187 162,859 5

Operational highlights

MPTC’s Core Income of ₱1,437 million for the first nine months of 2013 was 29% higher than a year earlier as a result of strong traffic growth and lower interest, a lower effective tax rate and operating costs on the NLEX together with a contribution from CAVITEX beginning on 2nd January 2013. Average daily entries rose 6% on the NLEX and 9% on the CAVITEX in the first nine months from a year earlier.

Work has begun in earnest on construction of the first stage of the NLEX Harbour Link extension following a ground-breaking ceremony earlier this year. The 8-kilometer road to link NLEX to the North Manila Port will see its first stage open in the second quarter of next year. Work is proceeding with the Government to begin the resettlement needed to begin construction on the NLEX Citilink project to extend the NLEX by 8km and connect Mindanao Avenue to Katipunan Avenue and to C5.

Metro Pacific Tollways Development Corporation (MPTDC) is in talks with the Government on how best to execute its proposal to build an elevated expressway that will connect the Northern and Southern toll road systems. The “Connector Road” Project is a planned four-lane elevated expressway to connect the Harbour Link to Southern Luzon. MPTC expects the Connector Road to increase traffic on existing Northern and Southern toll road systems by enabling commercial vehicles to traverse Metro Manila without violating a daytime truck ban and by slashing travel time between the two road systems to no more than 20 minutes from over an hour today.

CAVITEX is a 14-km toll road built in two segments running from Parañaque to Cavite with an average traffic of 100,000 vehicle entries a day. The business offers significant expansion prospects as a result of the NAIA 2 and CALA expressway projects which aim to connect to CAVITEX, as well as from the

recently opened Ternate-Nasugbu tunnel which will substantially reduce the travel time between Batangas and Manila.

The NLEX Harbour Link, Citilink and Connector Road projects together with the CAVITEX expansion will see MPTC invest approximately ₱41 billion over the next few years to complete construction of these vital road infrastructure. MPTC and MPIC intend to fund this sum using internal resources and external debt.

MNTC continues to await approval of its proposal with the Bases Conversion and Development Authority and the Government, in a series of negotiations since 2010, on turning over management of the Subic Clark Tarlac Expressway (SCTEX). MNTC plans to invest ₱400 million to integrate SCTEX with NLEX to facilitate seamless travel between the two expressways.

Net Toll Revenues

Net toll revenues amounted to P=6,038 million, 21% higher year-on-year, mainly due to contribution from CIC and traffic volume growth for the first nine months of 2013. Average daily traffic along NLEX reached 170,584 vehicle entries for the first nine months of 2013, 6% higher than in the same period in 2012.

Operating and Maintenance Costs and Operating expenses

Total cost and expenses increased primarily on account of consolidation of CIC starting January 2, 2013 which contributed P=305 million of the total expenses. Excluding the effect of CIC, total cost and expenses increased by 3% largely due to NLEX’s operators fee.

Interest expense - net

Financing cost increased by 75% or P=310 million mainly due to consolidation of CIC with interest expense on its long term debt amounting to P=334 million. This was partly offset by lower interest expense from MNTC due to pre-termination of PNB interest rate swap agreement which also decreased the interest rate from 6.01% to 1.44%.

Core income

Core net income increased by 29% to P=1,437 million mainly due to contribution from CIC plus higher traffic volume, lower operating cost and interest expense in NLEX.

Non-recurring expense

Non-recurring items include forex and business development expenses.

Reported Net income attributable to equity holders of MPTC

Reported Net income increased by 30% for the first nine months of 2013 mainly due to contribution from CIC and higher toll revenues.

Power

Unaudited Increase (Decrease) Manila Electric Company 9M2013 9M2012 Amount % (in Php Millions, unless otherwise stated) Distribution & Other Revenues 45,084 39,161 5,923 15 Total Revenues 208,097 214,749 (6,652) (3) Core EBITDA 24,566 21,740 2,826 13 Core EBITDA margin 12% 10% 2% 20 Core Income 13,558 12,892 666 5 Non-recurring income (expense) 86 754 (668) (89) Reported net income attributable to equity holders of MERALCO 13,644 13,646 (2) (0) Capital Expenditure 6,126 5,967 159 3

Key Performance Indicators Volume Sold (in mln kwh) 25,616 24,448 1,168 5 System Loss (12-month moving average) 6.71% 7.19% -0.48% (7) Average Distribution Revenue per kWh YTD 1.65 1.53 0.12 8 Distribution Revenues 42,285 37,467 4,818 13 Distribution EBITDA 24,182 25,045 (863) (3) Distribution EBITDA Margin 57% 67% -10% (15)

Operational highlights

Core Income for the first nine months of the year rose 5% to ₱13.6 billion compared with the same period last year on the strength of a higher average distribution tariff and a 5% increase in energy sales to 25,616 gigawatt hours. The volume growth was buoyed by sustained healthy demand from the commercial and residential segments, which grew by 5.5% and 5.6%, respectively, followed by 3.1% growth in industrial electricity consumption.

The average distribution charge for the first nine months stood at ₱1.65 per kWh, up from ₱1.53 per kWh in the first nine months of 2012.

Growth in Core Income was held back by ₱1.6 billion (net of tax) of Local Franchise Tax recoveries MERALCO recorded in the second quarter of 2012.

Capital expenditure for the first nine months of 2013 rose to ₱6.1 billion from ₱6.0 billion a year earlier and was invested mainly in new substations designed to decongest critical loads, provide additional capacity for load growth and improve network reliability.

MERALCO's capex commitment is delivering strong returns. The 12-month moving average system loss fell to just 6.71% as at the end of September 2013. This level is 1.79 percentage points lower than the regulatory cap of 8.5%, and marks the best performance yet achieved in MERALCO's 110-year history.

MERALCO continues to build out businesses crucial to growth going forward. The wholly-owned MERALCO PowerGen Corporation ("MGen") continues to develop Redondo Peninsula Energy, Inc., a project to build a 2x300 MW coal-fired power plant in Subic Bay. The plant will employ circulating fluidized bed coal technology, the cleanest of all coal-fired generation technologies. The next step towards this goal is to confirm the validity of the Environmental Compliance Certificate and the Lease Development Agreement.

On June 26, 2013, Retail Competition and Open Access commenced on a voluntary basis, allowing major electricity consumers to shop for the lowest electricity prices. Out of approximately 700 qualified customers in the MERALCO franchise area, over 230 customers opted for immediate contestability and of those 151 customers representing 60 percent by volume of electricity consumed signed up with MERALCO’s Retail Electricity Supply unit MPower.

In Singapore, PacificLight Power, a 2x400 MW liquefied natural gas plant on Jurong Island, is on track for full commercial operations by early 2014. The first 400 MW unit was synchronized to the local electricity grid on June 30, 2013 and the second on 30th August, 2013. PacificLight Power is MERALCO's first power generation project outside the Philippines with an effective economic interest of 28% at an investment cost of ₱9.0 billion.

On August 29, 2013, MGen signed a Joint Development Agreement with a wholly-owned subsidiary of Electricity Generating Public Company Limited ("EGCO") of Thailand for the development of a new 460 MW supercritical coal-fired power plant in Mauban, Quezon. MGen's equity in the joint venture company will be 49% with a right to nominate a preferred investor for an additional 2%. Together with EGCO, MGen is selecting a financial advisor for project financing and tendering the Engineering, Procurement and Construction contract for the project.

On October 7, 2013, MGen executed a Share Sale and Purchase Agreement with First Metro Investment Corporation ("FMIC") for the sale by FMIC of 20% equity interest in Global Business Power Corporation ("GBPC") to MGen for a consideration of ₱7.15 billion. GBPC is one of the largest power producers in the Visayas with nine coal and diesel power plants amounting to a total installed capacity of 627 MW with two more projects on the way, an 82 MW plant in Toledo City and a 150 MW expansion in Panay.

Core income

MERALCO's core income for the first nine months of 2013 was P=13.56 billion in 2013 compared with P=12.89 billion in 2012. The slight increase was mainly due to the increase in distribution tariff due to changes in customer mix and an increase in MAP for Regulatory Year 2013 starting July 2012 offset by the P=1.6 billion Local Franchise Tax recoveries recorded in the second quarter of 2012.

Non-recurring income

Non-recurring income for the first nine months 2013 pertains to foreign exchange gain substantially attributable to MGen's advances to FPM Power.

Healthcare

Unaudited Increase (Decrease) Healthcare Group 9M2013 9M2012 Amount % (in Php Millions, unless otherwise stated) Net Revenues 9,220 8,363 857 10 Hospital Revenue 9,037 8,191 846 10 School Revenue 183 172 11 6 Core EBITDA 2,026 1,704 322 19 Core Income 670 542 128 24 Reported Net Income 673 558 115 21 Core Income - Hospitals 692 573 119 21 Core Income - Schools (22) (31) 9 (29)

Key Performance Indicators Occupancy rate (%) - Standard Beds 79% 84% -5% Total beds available (including Nursery beds) 1,958 1,695 263 16 No. of Accredited Doctors 5,244 4,470 774 17 No. of Enrollees (schools) - average YTD 3,781 3,305 476 14

Aggregate Core Income for the Hospital Group rose by 24% to P=670 million in the first nine months of 2013 compared with a year earlier as a result of higher patient revenues, lower losses at our nursing schools, and tighter expense controls.

The Hospital Group comprises seven full-service hospitals with 1,958 beds in total: Makati Medical Center, Cardinal Santos Medical Center, Our Lady of Lourdes Hospital, Asian Hospital and DLSMC in Metro Manila; Riverside Medical Center in the Visayas; and Davao Doctors Hospital in Mindanao. MPIC operates the largest private hospital group in the country with hospitals in all three major island groupings of the Philippines.

Discussion on Financial Position from December 31, 2012 to September 30, 2013 balances

Assets

The following table summarizes the individual increase (decrease) of consolidated asset accounts.

Unaudited Restated Increase (Decrease) 9M2013 % 2012 % Amount % (in Php Millions) ASSETS Current assets Cash and cash equivalents and short-term deposits 12,855 61 9,119 57 3,736 41 Restricted cash 1,549 7 1,359 8 190 14 Receivables 3,570 17 3,608 23 (38) (1) Due from related parties 237 1 146 1 91 62 Other current assets 2,791 14 1,793 11 998 56 21,002 100 16,025 100 4,977 31

Noncurrent Assets Receivables 756 - 7,332 5 (6,576) (90) Due from related parties 73 - 65 - 8 12 Available for sale financial assets 1,972 1 1,403 1 569 41 Investments and advances 46,591 27 45,083 30 1,508 3 Goodwill 18,307 11 13,155 7 5,152 39 Service concession assets 94,886 55 81,870 52 13,016 16 Property use rights 659 - 690 - (31) (4) Property and equipment 6,563 4 6,049 4 514 8 Other noncurrent assets 2,841 2 1,805 1 1,036 57 172,648 100 157,452 100 15,196 10

 Cash and cash equivalents and short-term deposits – (Increase) Mainly due to the result of MPIC’s equity raising through an overnight private placement of 1.33 billion shares at P=4.6 per share, proceeds from sale of 4% ownership in Maynilad to MCNK partially offset by the settlement of the P=4.7 billion short-term loan used to fund CAVITEX investment.

 Restricted Cash – (Increase) Represents amount set aside to cover semi-annual principal and interest payments of certain long-term debt.

 Receivables – current portion and non-current portions – (Decrease) By virtue of the Management Letter Agreement executed among MPTC, Cavitex Holdings Inc. (CHI) and CIC, MPTC acquired control over CIC effective January 2, 2013 which resulted to the consolidation of CIC and thus, the elimination of the Convertible Note included in the Receivables as at December 31, 2012.

 Due from related parties – current portion and non-current portions – (Increase) Additional intercompany advances for the period. The non-current portions represents long-term receivable of MPTDC from a financial guarantee obligation of TMC. The receivable is equivalent to the financial guarantee obligation recorded as the present value of the guaranteed portion of the liability of TMC by MPTDC.

 Other current assets – (Increase) Additional advances to contractors and consultants from consolidation of CIC.

 Available-for-sale financial assets – (Increase) Mainly due to investment made by Maynilad in Subic Water and investment in Unit investment trust Fund.

 Investments and advances – (Increase) Increase substantially relates to the recognition of the Company’s share in the earnings of Beacon Electric and the other associates. Other increase relates to the acquisition of 39% effective ownership in MWCI by MPWIC.

 Goodwill – (Increase) Increase primarily relates to goodwill from business combination transaction in 2013 with the acquisition of CIC and DLSMC and the finalization of the purchase price allocation of PHI, which was provisional in 2012. See Note 4 in the accompanying Unaudited Interim Consolidated Financial Statements for further details.

 Service concession assets – (Increase) Mainly due to the additional concession assets from the acquisition of CIC and capital expenditures for the year, net of amortization.

 Property use rights – (Decrease) Represents the intangible asset of CVHMC and EMHMC acquired through business combinations where the legal forms of the arrangements are leases. Decrease pertains to amortization for the nine-month period ended September 30, 2013.

 Property and equipment, net – (Increase) Increase pertains to additional Property and equipment from DLSMC and capital expenditures for the year, net of depreciation.

 Other noncurrent assets – (Increase) Due to the increase in deferred tax asset arising from temporary differences on provisions and concession accounting and the recognition of the indemnification asset arising from the business combination of CIC.

Liabilities and Equity

The following table summarizes the individual increase (decrease) of consolidated liability and equity accounts.

Unaudited Restated Increase (Decrease) 9M2013 % 2012 % Amount % (in Php millions) Current Liabilities Note payable - - 4,700 19 (4,700) (100) Accounts payable and other current liabilities 14,423 59 13,712 55 711 5 Income tax payable 248 1 183 1 65 36 Due to related parties 99 - 97 - 2 2 Current portion of: Provisions 4,392 18 3,670 15 722 20 Service concession fees payable 1,523 6 688 3 835 121 Long-term debts 3,754 15 1,847 7 1,907 103 24,439 99 24,897 100 (458) (2)

Noncurrent Liabilities Noncurrent portion of: Provisions 404 1 252 - 152 60 Service concession fees payable 6,978 12 8,026 15 (1,048) (13) Long-term debts 42,754 72 37,068 69 5,686 15 Deferred credits and other long-term liabilities 5,205 9 5,398 10 (193) (4) Deferred tax liabilities 3,664 6 3,448 6 216 6 59,005 100 54,192 100 4,813 9

Equity Capital stock 26,075 28 24,664 31 1,411 6 Additional paid-in capital 42,930 47 38,097 47 4,833 13 Equity reserves 2,630 3 707 1 1,923 272 Retained earnings 19,924 22 15,701 20 4,223 27 Other comprehensive income reserve 306 - 473 1 (167) (35) Total equity attributable to owners of the Parent Company 91,865 100 79,642 100 12,223 15

Non-controlling interest 18,341 14,746 3,595 24

 Note Payable - (Decrease) Mainly due to the settlement of the P=4.7 billion short-term loan utilized to fund CAVITEX acquisition.

 Accounts payable and other current liabilities - (Increase) Mainly due to consolidation of CIC and DLSMC.

 Income tax payable – (Increase) Due to accrual of additional income taxes of the Group, net of payment for the period with majority of the increase coming from MPTC due to consolidation of CIC.

 Provisions – current and noncurrent portions – (Increase) Pertains to MPTC’s periodic provision for heavy maintenance related to construction costs and additional provision for heavy maintenance from business combination of CIC. Increase is partially offset by payments made during the period.

 Service concession fees payable – current and noncurrent portions – (Decrease) Represents actual payment of concession fees.

 Long-term debt – current and noncurrent portions – (Increase) Mainly due to acquired loans and notes payable from CIC partially offset by the payments made for the first nine months of 2013.

 Deferred credits and other long-term liabilities – (Decrease) Release of Maynilad's deferred credits as the result of refinancing of its USD loans partially offset by the increase in contingent liability arising from the business combination of CIC.

 Deferred tax liabilities – (Increase) Pertains to deferred tax liabilities arising from business combination and concession asset accounting.

 Capital stock – (Increase) Substantially due to MPIC’s equity raising through an overnight private placement of 1.33 billion shares.

 Additional paid-in capital – (Increase) Mainly due to the excess of par value from MPIC’s equity raising through an overnight private placement of 1.33 billion shares.

 Equity reserves – (Increase) Increase is attributable to the gain on equity transfer arising from the change in the shareholding structure in Maynilad (see Note 18 to the Unaudited Interim Consolidated Financial Statements).

 Retained earnings – (Increase) Attributable to the net income earned for the period, net of dividends declared in 2013.

 Other comprehensive income reserves – (Decrease) Decrease pertains to share in other comprehensive income of Beacon arising from the effective portion of the hedge which was offset by recognition of actuarial gains/losses from defined benefit plan arising from adoption of the revised Philippine Accounting Standards 19, "Employee Benefits".

 Non-controlling interest – (Increase) Increase significantly resulted from adjustment made in the non- controlling interest with the entry of MCNK JV Corporation as one of the investors in DMWC (see Note 18 to the Unaudited Interim Consolidated Financial Statements).

Liquidity and Capital Resources

For the first nine months, the Company raised additional equity of P=6.12 billion (gross of transaction costs) via an overnight private placement. In addition, the Company settled the P=4.7 billion short-term loan used to fund CAVITEX investment.

The following table shows a summary of the Group’s unaudited statements of cash flows for the first nine months of 2013 and 2012 as well as our consolidated capitalization as of September 30, 2013 and December 31, 2012:

Unaudited Increase (Decrease) 9M2013 9M2012 Amount % (in Php Millions) Cash Flows Net cash provided by operating activities 12,241 11,378 863 8 Net cash used in investing activities (6,662) (10,834) (4,172) (39) Net cash (used in) provided by financing activities (2,031) (6,456) (4,425) (69) Net increase (decrease) in cash and cash equivalents 3,548 (5,912) 9,460 160 Capital expenditures 6,430 5,552 878 16

Unaudited Restated Increase (Decrease) 9M2013 2012 Amount % (in Php Millions)

Capitalization Long-term debt net of current portion 42,754 37,068 5,686 15 Current portion of long-term debt 3,754 1,847 1,907 103 Total 46,508 38,915 7,593 20 Non-controlling interest 18,341 14,746 3,595 24 Total equity attributable to owners of the Parent Company 91,865 79,642 12,223 15

Cash and cash equivalents 12,667 9,105 3,562 39 Short-term deposits 188 14 174 1,243

As at September 30, 2013, MPIC’s consolidated cash and cash equivalents and short-term investments totaled P=12,667 million, an increase of P=3,562 million from P=9,105 million as at December 31, 2012.

Principal sources of the consolidated cash and cash equivalents in first nine months of 2013 were cash inflows from operating activities amounting to P=12,241 million driven by improved operational performance of subsidiaries.

Operating Activities

MPIC’s consolidated net operating cash flow in first nine months of 2013 posted a 8% increase from P=11,378 million to P=12,241 million, the increase is due to the increase in operational performance as compared to first nine months of 2012.

A large portion of the Group’s cash flow from operating activities is generated by the water utility which accounted for 55% and 57% of the Group’s total revenues in 9M2013 and 9M2012 respectively. Revenues from the toll roads business accounted for 26% and 24% in 9M2013 and 9M2012 respectively. Hospital business accounts for the remaining 19% in 9M2013 and 9M2012.

Investing activities

Net of dividends received, net cash used in investing activities amounted to P=6,662 million. Below are the cash outflows under investing activities made during the first nine months of 2013:

 De Los Santos Medical Center Inc. On June 3, 2013, On June 3, 2013, the Company, through NSHI acquired 51% of the voting equity interest in DLSMC, a tertiary teaching and training hospital, by subscribing to 401,942 common shares. Total cash paid as consideration for the acquisition amounted to P=132.9 million. Megaclinic, an ambulatory care center in SM Megamall, is one of its affiliates, and MPIC's first investment in a non-hospital-based diagnostic center.

 Subic Water and Sewerage Company, Inc. On March 15, 2013 Maynilad acquired 10% stake in Subic Water and Sewerage Company, Inc. from the local Government of Subic for a total purchase price of P=210.6 million.

 Subscription agreement of MPWIC and MWCI. On January 7, 2013, MPWIC agreed to subscribe for and MWCI agreed to issue an additional 128,700,000 shares (the "Subscription Shares"), as a subscription price of P=1.04 per share in MWCI for a total subscription price of P=133.8 million subject to the terms and agreements of the subscription agreement.

 Capital expenditures. The Group’s capital expenditures amounted to P=6,430 million in 9M2013, compared with P=5,552 million in 9M2012. This is mainly attributable to construction costs at Maynilad and continuous improvements for the Hospitals.

Financing Activities

The Company’s consolidated cash outflows from financing activities decreased from of P=6,456 million in 9M2012 to P=2,031 million in 9M2013. Despite payments of maturing obligations in 2013 such as the P=4,700 million short-term loan obtained to finance acquisition of CAVITEX, we see decrease in cash outflow from financing activities substantially due to the proceeds from the additional equity obtained via an overnight private placement of P=6.12 billion, gross of transaction costs.

FINANCIAL SOUNDNESS INDICATORS

Financial Ratios Formula September 30, 2013 December 31, 2012 a) Current Ratio Total Current Assets 0.86 0.64 Total Current Liabilities b) Solvency Ratio* NPAT + Depreciation and amortization 0.18 0.17 Total Liabilities c) Debt-to-Equity Ratio Total Debt 0.42 0.41 Total Stockholders' Equity d) Asset to Equity Ratio Total Assets 1.76 1.84 Total Stockholders' Equity *Annualized

Financial Ratios Formula September 30, 2013 September 30, 2012 e) Interest Rate Coverage Ratio EBIT 4.34 4.54 Net Interest Expense f) Net Profit margin Net Profit after tax 36.6% 36.5% Net Revenues g) Return on asset NPAT + Interest Expense (net of tax) 5.7% 6.2% Average Total Asset h) Return on Equity Net Profit after tax 8.2% 8.4% Average Total Stockholders' Equity

RISK FACTORS

As an investment and management company, Metro Pacific Investments Corporation (MPIC) undertakes risk management at a number of distinct levels:

1. on entering new investments; 2. ongoing management of the financial stability of the holding company itself; and 3. within the operating company investments.

1. On entering new investments

MPIC’s geographic focus is predominantly the Philippines within which its management team has extensive experience.

Prior to making a new investment, any business to be acquired is subject to an extensive due diligence including financial, operational, regulatory and risk management. Risks to investment returns are then calibrated and specific measures to manage these risks are determined.

MPIC’s investments involve - to varying degrees - a partnership approach with key operating partners providing operational and technological input and thereby mitigating risks associated with investing in new business areas. These partners are equity partners - and having co-invested with the Company in a particular opportunity, they will participate in the risks and rewards of the business alongside MPIC.

Financing of new investments is through a combination of debt and/or equity by reference to the underlying strength of the cashflow of the target business and the overall financing position of MPIC itself.

2. On ongoing Management of the Financial Stability of the Holding Company

MPIC does not guarantee the borrowings of its investee companies and there are no cross default provisions from one investee company to another. Financial stability of the holding company is managed by reference to the ability of the investee companies to remit dividends to MPIC to cover operating costs and service borrowings. We avoid currency and investment cycle mismatches by borrowing only in Pesos using primarily long term instruments with fixed rates.

There is also a risk that the holding company will be unable to remit dividends to its shareholders should there be impairment of its assets. Impairment review of assets, specifically goodwill and intangibles, is performed annually or more frequently if appropriate.

3. Risk Management within the Operating Companies

Operational risks Each of the operating companies has a full management team which is responsible for having their own plan to manage risk which is reviewed annually by the MPIC Audit and Risk Management Committee, together with MPIC’s designated Chief Risk Officer, and each of the respective operating companies’ board of directors.

Regulatory The majority of our invested capital is deployed into businesses which are directly regulated by arms of the state: electricity distribution; water supply and distribution along with sewage treatment; and tollroads. Each of these businesses has concession and / or franchise agreements which involve a degree of operating performance obligation in order to retain our rights and earn our expected returns. In some cases, these agreements provide for retrospective assessment of the extent of our overall operational and financial performance sometimes over a period of years.

Risks arising from these types of businesses include the potential for differences with regulators involving interpretation of the relevant concessions – either during the period in question or in retrospect. To manage these risks, the investee companies have established dedicated regulatory management groups with experienced personnel. Their duty is to manage the relationship with regulators, keep management up-to-date on the status of the relationship and ensure companies are well prepared for any forthcoming regulatory changes or challenges.

Competition and Market Competitive and market-driven demand risks are most pronounced in MERALCO, MPTC and the Healthcare group.

MERALCO carries a degree of market risk and its returns may be impacted by consumers who elect to self-generate and disconnect from the distribution grid. We are mitigating that risk by improving efficiencies to the point that makes it uneconomic to self-generate. With the move to Open Access from June 2013, MERALCO has taken on new risks associated with buying and selling power on its own account instead of on a pass through basis. MERALCO has long prepared for this and has an experienced management team already in place to lead this new business.

MERALCO has entered the power generation market in Singapore and the Philippines. As such it now takes competition risk in these open markets which it seeks to minimize by assessing supply and demand imbalances before investing.

At MPTC we set tariffs on new road projects based on traffic projections agreed with the regulator. Rising fuel prices, alternative means of transport and existing or prospective alternative routes are all factors that can affect the number of vehicles that use our roads.

We alleviate this risk by choosing our projects carefully. Existing high traffic density, difficulty in securing competing routes, a high potential for growth given demographic changes and conservative growth estimates, even with the prior factors included in the assessment, are the important variables we consider when committing to traffic projections with the regulator.

For the Hospitals group, investment is taking place to enable more qualified personnel to better serve patients more efficiently and effectively in upgraded facilities and with better equipment.

The primary risk is that investment runs ahead of demand and patient ability to pay. Additionally, there are other operators in the market that offer competitive and complementary services. We mitigate that risk by ensuring we know our target market very well and scale our improvements to their ability to pay. The pace of medical innovation is accelerating requiring increased management of the risk that expensive equipment may become out of date before its cost is fully recovered.

The water company has some supply side risk in that: (i) it secures most of its supply from a single source – the Angat dam; and (ii) this water source is shared by another water concessionaire, a hydroelectric plant, and the needs of farmers for irrigation. A water usage protocol is in place to

ensure all users receive water as expected within the constraints of available supply. Following significant water supply disruption in late 2009 arising indirectly from typhoons, the business entered 2010 with less water supply available than allowed for in its concession. We have worked to moderate our reliance on Angat by developing the Putatan Water Treatment Plant and are working on other alternative water sources in partnership with our regulator.

Financial MPIC’s investee companies’ financial risks are primarily: interest rate risk, foreign currency risk, liquidity risk, credit risk and equity price risk. The Board of Directors of each of the operating companies reviews and approves policies for managing each of these risks as follows:

Interest Rate Risk Interest rate exposure is managed by using a mix of fixed and variable rate debt.

Foreign Currency Risk In general the investee companies will place some degree of reliance on their regulated return mechanisms to pass through foreign currency risk. The current liquidity and depth of the Philippine credit market is such that there should be little need for raising new borrowings in foreign currency.

Maynilad has some foreign currency borrowing but there is a mechanism in place wherein it can recover currency fluctuations as approved by its regulator.

MPTC swapped all its foreign currency borrowings in to Pesos prior to 2010.

Asian Hospital Inc. has foreign currency risk arising from its cash and cash equivalents; receivables from international insurance companies; and dollar denominated loans.

Liquidity Risk Each business monitors its cash position using a cash forecasting system wherein all expected collections, check disbursements and other payments are determined to arrive at the projected cash position to cover its obligations.

Credit Risk Credit risk is managed by setting limits on the amount of risk a business is willing to accept for individual counterparties and by monitoring exposures in relation to such limits.

Equity Price Risk Our investee companies are generally not faced with equity price risk beyond that normal for any listed company, where relevant. MPIC’s investment in MERALCO, through Beacon Electric, is partly financed by borrowings which require a certain security cover based on the price of MERALCO’s shares on the PSE on a volume weighted 30 trading day average calculation. MERALCO’s share price would have to decline by 61.4% from its price as at September 30, 2013 before Beacon Electric would be required to top-up collateral with cash or pay-down debt.

Key Variable and Other Qualitative and Quantitative Factors

i. Events that will trigger direct or contingent financial obligation that is material to the company, including any default or acceleration of an obligation

Please refer to Note 26 – Commitments and Contingencies of the accompanying Unaudited Interim Consolidated Financial Statements for the updates on the Company’s financial obligations.

ii. All 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 periods

Please refer to Note 26 – Commitments and Contingencies of the accompanying Unaudited Interim Consolidated Financial Statements for the updates on the Company’s financial obligations.

iii. Description of any material commitments for capital expenditures, general purpose of such commitments, expected sources of funds for such expenditures

Please refer to Note 26 – Commitments and Contingencies and Note 28 – Events after the Reporting Period of the accompanying Unaudited Interim Consolidated Financial Statements for the updates on the Company’s commitments.

iv. Any known trends, events or uncertainties that have had or that are reasonably expected to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations

Please refer to Note 3 – Operating Segment Information of the accompanying Unaudited Interim Consolidated Financial Statements for the status of the rate rebasing exercise for the water utilities and toll operations segments.

v. Any seasonal aspects that had a material effect on the financial condition or results of operations

Please refer to Note 3 – Operating Segment Information of the accompanying Unaudited Interim Consolidated Financial Statements for information regarding seasonality of the Company’s operations.