You must read the following befo - Singapore Exchange

IMPORTANT NOTICE

NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES.

Important: You must read the following before continuing. The following applies to the offering circularfollowing this page (“offering circular”), and you are therefore advised to read this carefully before reading,accessing or making any other use of this offering circular. In accessing the offering circular, you agree tobe bound by the following terms and conditions, including any modifications to them any time you receiveany information from us as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FORSALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO.THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S.SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWSOF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAYNOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANT TO ANEXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIESLAWS.

THIS OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHERPERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR,MAY NOT BE FORWARDED TO ANY U.S. ADDRESS. ANY FORWARDING, DISTRIBUTION ORREPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TOCOMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THEAPPLICABLE LAWS OF OTHER JURISDICTIONS. ANY INVESTMENT DECISION SHOULD BE MADEON THE BASIS OF THE FINAL TERMS AND CONDITIONS OF THE SECURITIES AND THEINFORMATION CONTAINED IN AN OFFERING CIRCULAR THAT WILL BE DISTRIBUTED TO YOUON OR PRIOR TO THE CLOSING DATE AND NOT ON THE BASIS OF THE ATTACHED DOCUMENTS.IF YOU HAVE GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOINGRESTRICTIONS, YOU ARE NOT AUTHORISED AND WILL NOT BE ABLE TO PURCHASE ANY OFTHE SECURITIES DESCRIBED THEREIN.

Confirmation of the Representation: In order to be eligible to view this offering circular or make aninvestment decision with respect to the securities, investors must not be located in the United States. Thisoffering circular is being sent at your request and by accepting the electronic mail and accessing this offeringcircular, you shall be deemed to have represented to us that the electronic mail address that you gave us andto which this electronic mail has been delivered is not located in the United States and that you consent todelivery of such offering circular by electronic transmission.

You are reminded that this offering circular has been delivered to you on the basis that you are a person intowhose possession this offering circular may be lawfully delivered in accordance with the laws of jurisdictionin which you are located and you may not, nor are you authorised to, deliver this offering circular to anyother person.

The materials relating to any offering of securities to which this offering circular relates do not constitute,and may not be used in connection with, an offer or solicitation in any place where offers or solicitationsare not permitted by law. If a jurisdiction requires that such offering be made by a licensed broker or dealerand the underwriters or any affiliate of the underwriters is a licensed broker or dealer in that jurisdiction,such offering shall be deemed to be made by the underwriters or such affiliate on behalf of the Issuer (asdefined in the offering circular) in such jurisdiction.

This offering circular has been sent to you in an electronic form. You are reminded that documentstransmitted via this medium may be altered or changed during the process of electronic transmission andconsequently none of the Joint Lead Managers, the Trustee and the Agents (each as defined in the offeringcircular) or any person who controls such person or any director, officer, employee or agent of such personor affiliate of any such person accepts any liability or responsibility whatsoever in respect of any differencebetween this offering circular distributed to you in electronic format and the hard copy version available toyou on request from any of the Joint Lead Managers.

You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is atyour own risk and it is your responsibility to take precautions to ensure that it is free from viruses and otheritems of a destructive nature.

Royal Capital B.V.(incorporated with limited liability in the Netherlands)

U.S.$350,000,000

Senior Guaranteed Perpetual Capital Securitiesunconditionally and irrevocably guaranteed by

International Container Terminal Services, Inc.(incorporated with limited liability in the Republic of the Philippines)

Issue price: 100%

U.S.$350,000,000 senior guaranteed perpetual capital securities (the “Securities”) will be issued by Royal Capital B.V. (the “Issuer”) andthe due and punctual payment of all sums payable by the Issuer in respect of the Securities will be unconditionally and irrevocablyguaranteed (the “Securities Guarantee”) by International Container Terminal Services, Inc. (the “Company” or the “Guarantor”). TheIssuer is a special purpose company which is an indirect subsidiary of the Company.

The Securities confer a right to receive distributions (each a “Distribution”) at the applicable rate described below. Subject to Condition4.5 (Optional Deferral of Distributions) of the Terms and Conditions of the Securities, Distributions are payable semi-annually in arrearon the Distribution Payment Dates of each year. “Distribution Payment Date” shall mean on 5 May and 5 November of each yearcommencing 5 May 2018. Unless previously redeemed in accordance with the terms of the Securities and subject to Condition 4.1 (Rateof Distribution) and Condition 4.4 (Increase in Rate of Distribution) of the Terms and Conditions of the Securities, Distributions fromand including 18 January 2018 shall accrue on the outstanding principal amount of the Securities at 5.875 per cent. per annum (the “Rateof Distribution”).

The Issuer or the Guarantor may, on any day which is not less than five Business Days (as defined below) prior to any DistributionPayment Date, resolve to defer payment of all or some of the Distribution which would otherwise be payable on that Distribution PaymentDate unless, during the six months ending on the day before that scheduled Distribution Payment Date, (i) a discretionary dividend,distribution, interest or other payment has been paid or declared on or in respect of any Junior Securities or (except on a pro-rata basis)Parity Securities (each, as defined below), other than a dividend, distribution or other payment in respect of an employee benefit planor similar arrangement with or for the benefit of employees, officers, directors and consultants of the Issuer and/or the Guarantor; or (ii)at the discretion of the Issuer or the Guarantor, any Junior Securities or Parity Securities have been redeemed, repurchased or otherwiseacquired by the Issuer or the Company. Any such deferred Distribution will constitute “Arrears of Distribution” and will not be due andpayable until the relevant Payment Reference Date. Distributions will accrue on each Arrears of Distribution for so long as such Arrearsof Distribution remains outstanding at the same Rate of Distribution (as defined below) as the principal amount of the Securities bearsat such time and will be added to such Arrears of Distribution (and thereafter bear Distributions accordingly) on each Distribution PaymentDate.

The Securities are perpetual securities in respect of which there is no fixed redemption date. Subject to applicable law, the Issuer mayredeem the Securities (in whole but not in part) on 5 May 2022 (the “First Call Date”) or on any subsequent Distribution Payment Dateat the Redemption Price (as defined below), on the giving of not less than 30 and not more than 60 calendar days’ irrevocable notice ofredemption to the Securityholders (as defined under “Terms and Conditions of the Securities”) in accordance with Condition 12.1 (Noticesto Securityholders) of the Terms and Conditions of the Securities and to the Trustee and the Principal Paying Agent in writing. TheSecurities may also be redeemed (in whole but not in part) at the option of the Issuer at the Redemption Price upon the occurrence ofcertain changes in the Dutch or Philippine tax law requiring the payment of Additional Amounts (as defined under “Terms and Conditionsof the Securities”). In addition, the Securities may be redeemed (in whole but not in part) at the option of the Issuer (A) upon theoccurrence of Change of Control Event (as defined under “Terms and Conditions of the Securities”) (i) at any time prior to (but excluding)the First Call Date at the Special Redemption Price (as defined under “Terms and Conditions of the Securities”) or (ii) on or at any timeafter the First Call Date at the Redemption Price, (B) upon the occurrence of a Reference Security Default Event (as defined under “Termsand Conditions of the Securities”) at any time at the Redemption Price, (C) upon the occurrence of an Accounting Event (as defined under“Terms and Conditions of the Securities”) (i) at any time prior to (but excluding) the First Call Date at the Premium Redemption Price(as defined under “Terms and Conditions of the Securities”) or (ii) on or at any time after the First Call Date at the Redemption Price,(D) upon the occurrence of a Tax Event (as defined under “Terms and Conditions of the Securities”) (i) at any time prior to (but excluding)the First Call Date at the Special Redemption Price or (ii) on or at any time after the First Call Date at the Redemption Price or (E) inthe event less than 25 per cent. of the aggregate principal amount of the Securities originally issued remain outstanding (i) at any timeprior to (but excluding) the First Call Date at the Premium Redemption Price (as defined under “Terms and Conditions of the Securities”)or (ii) on or at any time after the First Call Date at the Redemption Price, in each case on the giving of not less than 30 and not morethan 60 calendar days’ irrevocable notice of redemption to the Securityholders in accordance with Condition 12.1 (Notices toSecurityholders) of the Terms and Conditions of the Securities and to the Trustee and the Principal Paying Agent in writing.

Approval-in-principle has been received from the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing andquotation of the Securities on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any statements made, opinionsexpressed or reports contained herein. Admission of the Securities to the Official List of the SGX-ST is not to be taken as an indicationof the merits of the Issuer, the Company or the Securities. The Securities will be traded on the SGX-ST in a minimum board lot size ofU.S.$200,000 for as long as the Securities are listed on the SGX-ST and the rules of the SGX-ST so require.

The Securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”).The Securities are being offered in offshore transactions outside the United States in reliance on Regulation S under the Securities Actand, subject to certain exceptions, may not be offered or sold within the United States.

The Securities will be evidenced by a global certificate (the “Global Certificate”) in registered form which will be registered in the nameof a nominee of, and deposited with, a common depositary for Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking S.A.(“Clearstream, Luxembourg”).

The appointment of the Trustee and the Agents is subject to internal approvals by the entities named as such in this Offering Circular.

Investing in the Securities involves certain risks. See “Risk Factors” beginning on page 27.

Joint Lead Managers

Citigroup Credit Suisse Standard Chartered Bank

Offering Circular dated 10 January 2018.

In this Offering Circular, references to the “Company” are references to International ContainerTerminal Services, Inc. and its consolidated subsidiaries, as the context requires. References to the“Issuer” are references to Royal Capital B.V.

Each of the Issuer and the Company, having made all reasonable enquiries, confirm that: (i) thisOffering Circular contains all information with respect to the Issuer, the Company, the Securities andthe Securities Guarantee, which is material in the context of the issue and offering of the Securities;(ii) the statements contained in it relating to the Issuer and the Company are in every material respecttrue and accurate and not misleading; (iii) the opinions and intentions expressed in this OfferingCircular with regard to the Issuer and the Company are honestly held, have been reached afterconsidering all relevant circumstances and are based on reasonable assumptions; (iv) there are noother facts in relation to the Issuer, the Company, the Securities or the Securities Guarantee, theomission of which would, in the context of the issue and offering of the Securities, make any statementin this Offering Circular misleading in any material respect; and (v) all reasonable enquiries have beenmade by the Issuer and the Company to ascertain such facts and to verify the accuracy of all suchinformation and statements. In addition, each of the Issuer and the Company accepts full responsibilityfor the accuracy of the information contained in this Offering Circular.

No person has been or is authorised to give any information or to make any representation concerningthe Issuer, the Company, the Securities or the Securities Guarantee other than as contained herein and,if given or made, any such other information or representation should not be relied upon as havingbeen authorised by the Issuer, the Company, Citigroup Global Markets Limited, Credit Suisse (HongKong) Limited and Standard Chartered Bank (the “Joint Lead Managers”), Citicorp InternationalLimited as Trustee (the “Trustee”) or the Agents (as defined in the Terms and Conditions of theSecurities). Neither the delivery of this Offering Circular nor any offering, sale or delivery made inconnection with the issue of the Securities shall, under any circumstances, constitute a representationthat there has been no change or development reasonably likely to involve a change in the affairs ofthe Issuer or the Company or any of them since the date hereof or create any implication that theinformation contained herein is correct as of any date subsequent to the date hereof. This OfferingCircular does not constitute an offer of, or an invitation by or on behalf of, the Issuer, the Company,the Joint Lead Managers, the Trustee or the Agents or their respective affiliates, employees, directors,agents or advisers to subscribe for or purchase any of the Securities and may not be used for thepurpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in whichsuch offer or solicitation is not authorised or is unlawful.

In this Offering Circular, the Joint Lead Managers, the Trustee and the Agents have not separatelyverified all the information contained herein. Accordingly, no representation or warranty, express orimplied, is made or given by the Joint Lead Managers, the Trustee or the Agents or their respectiveaffiliates, employees, directors, agents or advisers as to the accuracy, completeness or sufficiency ofthe information contained in this Offering Circular, and nothing contained in this Offering Circular is,or shall be relied upon as, a promise, representation or warranty by the Joint Lead Managers, theTrustee or the Agents or their respective affiliates, employees, directors, agents or advisers, and noresponsibility or liability is accepted by the Joint Lead Managers, the Trustee or the Agents or theirrespective affiliates, employees, directors, agents or advisers as to the accuracy or completeness of theinformation contained in this Offering Circular of any other information in connection with theSecurities, their distribution or the offering of the Securities. This Offering Circular is not intendedto provide the basis of any credit or other evaluation nor should it be considered as a recommendationby any of the Issuer, the Company, the Joint Lead Managers, the Trustee, the Agents or their respectiveaffiliates, employees, directors, agents or advisers that any recipient of this Offering Circular shouldpurchase the Securities. Each potential purchaser of the Securities should determine for itself therelevance of the information contained in this Offering Circular and its purchase of the Securitiesshould be based upon such investigations with its own tax, legal and business advisers as it deemsnecessary. Investors may not reproduce or distribute this Offering Circular in whole or in part, andinvestors may not disclose any of the contents of this Offering Circular or use any information hereinfor any purpose other than considering an investment in the Securities. Investors agree to theforegoing by accepting delivery of this Offering Circular.

— 3 —

This Offering Circular has been prepared by the Issuer and the Company solely for use in connectionwith the proposed offering of the Securities described in this Offering Circular. The distribution of thisOffering Circular and the offering of the Securities in certain jurisdictions may be restricted by law.Persons into whose possession this Offering Circular comes are required by the Issuer, the Companyand the Joint Lead Managers to inform themselves about and to observe any such restrictions. TheSecurities have not been and will not be registered under the Securities Act or with any securitiesregulatory authority of any state or other jurisdiction of the United States. Subject to certainexceptions, the Securities may not be offered or sold within the United States. No action is being takento permit a public offering of the Securities or the distribution of this Offering Circular in anyjurisdiction where action would be required for such purposes. There are restrictions on the offer andsale of the Securities, and the circulation of documents relating thereto, in certain jurisdictionsincluding the United States, the United Kingdom, Japan, Singapore, the Philippines and Hong Kong,and to persons connected therewith. For a description of certain further restrictions on offers, sales andresales of the Securities and distribution of this Offering Circular, see “Subscription and Sale”.

MiFID II product governance / Professional investors and ECPs only target market — Solely forthe purposes of a manufacturer’s product approval process, the target market assessment in respect ofthe Securities has led to the conclusion that: (i) the target market for the Securities is eligiblecounterparties and professional clients only, each as defined in Directive 2014/65/EU (as amended,“MiFID II”); and (ii) all channels for distribution of the Securities to eligible counterparties andprofessional clients are appropriate. Any person subsequently offering, selling or recommending theSecurities (a “distributor”) should take into consideration the manufacturer’s target marketassessment; however, a distributor subject to MiFID II is responsible for undertaking its own targetmarket assessment in respect of the Securities (by either adopting or refining the manufacturer’s targetmarket assessment) and determining appropriate distribution channels.

PRIIPs REGULATION / PROHIBITION OF SALES TO EEA RETAIL INVESTORS — TheSecurities are not intended to be offered, sold or otherwise made available to and should not beoffered, sold or otherwise made available to any retail investor in the European Economic Area(“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retailclient as defined in point (11) of Article 4(1) of MiFID II; (ii) a customer within the meaning ofDirective 2002/92/EC, where that customer would not qualify as a professional client as defined inpoint (10) of Article 4(1) of MiFID II. Consequently no key information document required byRegulation (EU) No 1286/2014 (the “PRIIPs Regulation”) for offering or selling the Securities orotherwise making them available to retail investors in the EEA has been prepared and thereforeoffering or selling the Securities or otherwise making them available to any retail investor in the EEAmay be unlawful under the PRIIPS Regulation.

In making an investment decision, investors must rely on their own examination of the Issuer, theCompany and the terms of the offering, including the merits and risks involved. See “Risk Factors”for a discussion of certain factors to be considered in connection with an investment in the Securities.

Each person receiving this Offering Circular acknowledges that such person has not relied on the JointLead Managers, the Trustee, the Agents or any of their respective affiliates, employees, directors,agents or advisers in connection with its investigation of the accuracy of such information or itsinvestment decision.

Forward-Looking Statements

This Offering Circular contains forward-looking statements and other information that involves risks,uncertainties and assumptions. Forward-looking statements are statements that concern plans,objectives, goals, strategies, future events or performance and underlying assumptions and otherstatements that are other than statements of historical fact, including, but not limited to, those that areidentified by the use of words such as “anticipates”, “believes”, “estimates”, “expects”, “intends”,“plans”, “predicts”, “projects” and similar expressions. Such forward-looking statements include,without limitation, statements relating to expansion plans, changes in tariffs, capacity levels, the

— 4 —

competitive environment in which the Company operates, general economic and business conditions,political, economic and social developments in the jurisdictions in which the Company operates,changes in fuel prices, changes in governmental regulations relating to the container terminal sectoror other port-related industries, liability for remedial action under environmental regulations, the costand availability of adequate insurance coverage and financing, changes in interest rates and otherfactors beyond the Company’s control. Risks and uncertainties that could affect the Company include,without limitation:

• changes in global or regional economic conditions that could affect the demand for the productsthat are shipped through the terminals the Company operates;

• instability in the social, political and economic conditions in the countries in which the Companyoperates, particularly in the Philippines;

• fluctuations in throughput volume, utilisation rates or tariffs, resulting from fluctuations inglobal shipping capacity and shipping demand, and changing economic conditions in the regionsin which the Company operates;

• the risk of accidents, natural disasters or other adverse incidents in the operation of the terminalsthe Company operates;

• the time or cost that it may take to develop or acquire new terminals and commence fulloperations thereat;

• changes in the volume of containers the Company’s terminals handle;

• increases in fuel prices;

• the need for unexpected capital expenditures;

• changes in government regulations and increases in regulatory burdens in the jurisdictions inwhich the Company operates, including those pertaining to operational, health, safety andenvironmental standards;

• risks associated with the strategic expansion into new geographic markets;

• uncertainties relating to ongoing and future bids to operate additional terminals;

• difficulties in raising additional financing to fund future capital expenditures, acquisitions andother general corporate activities;

• changes in import or export controls, duties, levies or taxes, either in international markets orin the Philippines;

• threats to the Company’s concession contracts, whether as a result of litigation, changingregulations, breaches of contract provisions, public policy concerns or any other factors;

• increased competition by other port operators;

• the emergence of alternative means of cargo transportation; and

• other risks related to the business, the industry or the regions in which the Company operates.

Should one or more of such risks and uncertainties materialise, or should any underlying assumptionsprove incorrect, actual outcomes may vary materially from those indicated in the applicableforward-looking statements. Any forward-looking statement or information contained in this OfferingCircular speaks only as of the date the statement was made.

— 5 —

All of the Company’s forward-looking statements made herein and elsewhere are qualified in theirentirety by the risk factors discussed in “Risk Factors” and “Industry Overview”. These risk factorsand statements describe circumstances that could cause actual results to differ materially from thosecontained in any forward-looking statement in this Offering Circular.

The Issuer, the Company, the Joint Lead Managers, the Trustee and the Agents and their respectiveaffiliates, employees, directors, agents and advisers assume no obligation to update any of theforward-looking statements after the date of this Offering Circular to conform those statements toactual results, subject to compliance with all applicable laws. The Issuer, the Company, the Joint LeadManagers, the Trustee and the Agents and their respective affiliates, employees, directors, agents andadvisers assume no obligation to update any information contained in this Offering Circular or topublicly release any revisions to any forward-looking statements to reflect events or circumstances,or to reflect that the Company became aware of any such events or circumstances, that occur after thedate of this Offering Circular.

Industry and Market Data

The information contained in the section “Industry Overview”, including market and industrystatistical data, was provided by Drewry Shipping Consultants Limited (“Drewry”), a consultant firmspecialising in the shipping industry. In compiling the data for this section, Drewry relied on industrysources, published materials, its own private databanks and direct contacts with the industry. All ofthese sources were used to calculate the data and market information shown in this Offering Circular.

This data is subject to change and cannot be verified with complete certainty due to limits on theavailability and reliability of data and other uncertainties inherent in any statistical survey. Drewry hasconsented to the inclusion of data produced by it in this Offering Circular but did not prepare any dataspecifically for this Offering Circular.

In addition, other market data and certain industry forecasts used throughout this Offering Circularwere obtained from internal surveys, market research, publicly available information and industrypublications. Industry publications generally state that the information they contain has been obtainedfrom sources believed to be reliable but that the accuracy and completeness of that information arenot guaranteed. Similarly, internal surveys, industry forecasts and market research, while believed tobe reliable, have not been independently verified, and none of the Issuer, the Company, the Joint LeadManagers, the Trustee, the Agents or any of their respective affiliates, employees, directors, agents oradvisers make any representation as to the accuracy or completeness of that information.

Certain Defined Terms and Conventions

In this Offering Circular, references to “U.S.$” and “U.S. dollars” are to the lawful currency of theUnited States of America; references to “Philippine pesos” or “ P=” are to the lawful currency of theRepublic of the Philippines; references to “euros” or “EUR” are to the lawful currency of theEuropean Union; references to “Brazilian real” or “R$” are to the lawful currency of Brazil;references to “Polish Zloty” are to the lawful currency of Poland; references to “Japanese yen” or“¥” are to the lawful currency of Japan; references to the “Malagasy ariary” or “MGA” are to thelawful currency of Madagascar; references to “Mexican pesos” are to the lawful currency of Mexico;references to “kuna” are to the lawful currency of Croatia; and references to “Renminbi” or “RMB”are to the lawful currency of the People’s Republic of China.

All references to dates and times are to Manila dates and times, unless otherwise specified.

The Company’s audited consolidated financial statements as of 31 December 2014, 2015 and 2016 andfor each of the three years in the period ended 31 December 2016 and the unaudited, interimcondensed consolidated financial statements as of 30 September 2017 and for each of the nine monthsin the periods ended 30 September 2016 and 2017 included in this Offering Circular have beenprepared in accordance with the Philippine Financial Reporting Standards (“PFRS”). The Company

— 6 —

maintains its books and prepares and reports its consolidated financial statements using the U.S. dollarin accordance with the provisions of Philippine Accounting Standard 21, “The Effects of Changes inForeign Exchange Rates”, an accounting standard that became effective for annual periods beginningon or after 1 January 2005.

All references in this Offering Circular to the “Government” are to the government of the Republicof the Philippines and all references to the “Philippines” are to the Republic of the Philippines.References to “management”, “Directors” and “executive officers” refer to the management,Directors and executive officers of the Company. References to the “Articles of Incorporation” referto the Articles of Incorporation of the Company, as amended.

References to “financial year” in this Offering Circular are to the Company’s financial year ended orending 31 December.

References to the “United States” or “U.S.” in this Offering Circular shall be to the United States ofAmerica, its territories and possessions, any State of the United States and the District of Columbia.

In this Offering Circular, where information has been presented in percentages, thousands or millionsof units, amounts may have been rounded up or down. Accordingly, totals of columns or rows ofnumbers in tables may not be equal to the apparent total of the individual items and actual numbersmay differ from those contained herein due to rounding. References to information in billions of unitsare to the equivalent of thousand million units.

Presentation of Capacity Information

Information included in this Offering Circular regarding the throughput capacity of the terminals theCompany operates is based upon estimates the Company has made based upon, among other things:

• market conditions, such as the types of ships that utilise the terminal, call schedules andcontainer box exchange rates;

• the layout and availability of the physical infrastructure of the terminal, including the quaylength, the continuity of the berths, yard area and the time that containers remain on the yardafter being removed from the vessel; and

• equipment installed and available at the terminal.

Such estimates require significant subjective assessments and have not been audited or confirmed byany third party. The Company also produces estimates on a per year basis. The Company must alsomake similar subjective assessments in determining the capacity of terminals the Company bids forand acquires. While the Company believes that its methods for determination are consistent withindustry standards, there are no prescribed guidelines for estimating capacity levels and othercompanies in the container terminal industry may calculate and present capacity data in a differentmanner. Caution should be used in comparing its data with data presented by other companies or inmaking comparisons across the different terminals that it operates, as the data may not be directlycomparable.

Non-PFRS Financial Measures

The term “EBITDA” refers to earnings before interest expenses, taxes, depreciation and amortisation.EBITDA is a supplemental measure of the Company’s performance and liquidity that is not requiredby, or presented in accordance with, PFRS. Further, EBITDA is not a measurement of the Company’sfinancial performance or liquidity under PFRS and should not be considered as an alternative to netincome, gross revenues or any other performance measure derived in accordance with PFRS or as analternative to cash flow from operations or as a measure of the Company’s liquidity.

— 7 —

The Company believes that EBITDA facilitates operating performance comparisons from period to

period and from company to company by eliminating potential differences caused by variations in

capital structures (affecting interest expense), tax positions (such as the impact on periods or

companies of changes in effective tax rates or net operating losses) and the age and book depreciation

of tangible assets (affecting relative depreciation expense). In particular, EBITDA eliminates non-cash

depreciation expenses that arise from the capital-intensive nature of the Company’s business. The

Company also believes that EBITDA is a supplemental measure of its ability to meet debt service

requirements. Finally, the Company presents EBITDA because it believes it is frequently used by

securities analysts and investors in the evaluation of companies in its industry.

— 8 —

TABLE OF CONTENTS

Page

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Summary Financial Information and Throughput Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Summary of Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Terms and Conditions of the Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

The Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Selected Financial Information and Throughput Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Management’s Discussion and Analysis of Financial Condition and Results of Operations . . 74

Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Description of Concession Agreements and Certain Indebtedness . . . . . . . . . . . . . . . . . . . . . 153

Certain Relationships and Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

Substantial Shareholders’ and Directors’ Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

Foreign Exchange and Foreign Investment Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167

Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

Clearance and Settlement of the Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

Subscription and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

— 9 —

SUMMARY

The following summary is qualified in its entirety, and is subject to, the more detailed information andthe financial information contained or referred to elsewhere in this Offering Circular. The meaningsof terms not defined in this summary can be found elsewhere in this Offering Circular.

Overview

The Company is an international operator of common user container terminals serving the globalcontainer shipping industry. Its business is the operational management, development and acquisitionof container terminals with a focus on origin and destination and gateway ports in emerging andfrontier markets. It also provides a number of ancillary services such as storage, container packing andunpacking, inspection, weighing and services for refrigerated containers, or reefers. The Companyholds rights to operate these terminals under long-term concession agreements with local portauthorities and governments. As of the date of this Offering Circular, the Company owned or operateda total of 27 terminal facilities, with nine key ports and an inland container terminal in the Philippines,two in Indonesia and one each in China, Ecuador, Brazil, Poland, Georgia, Madagascar, Croatia,Pakistan, Mexico, Honduras, Iraq, Argentina, Colombia, DR Congo and Australia; an acquisition ofan existing concession to construct and operate a port in Tuxpan, Mexico; and, recently, a project toconstruct a barge terminal in Cavite, Philippines and agreements to operate two international ports inPNG. For the year ended 31 December 2016 and the nine months ended 30 September 2017, theCompany handled an estimated 8,689,363 TEUs and 6,836,611 TEUs, respectively.

The Company was established by the Razon family, who remains the controlling shareholder, in 1987in connection with the privatisation of the MICT in the Port of Manila. The Company has built uponthe experience gained in rehabilitating, developing and operating MICT to establish an extensiveinternational network concentrated in emerging market economies.

For the year ended 31 December 2016, the Company reported consolidated gross revenues from portoperations and EBITDA of U.S.$1,128.4 million and U.S.$525.1 million, respectively. For the ninemonths ended 30 September 2017, the Company reported consolidated gross revenues from portoperations and EBITDA of U.S.$918.3 million and U.S.$434.9 million, respectively. The Companyorganises its business across three geographic regions: (i) Asia, (ii) the Americas and (iii) EMEA. In2016, Asia accounted for 52.4% of throughput and 51.5% of consolidated gross revenues from portoperations, the Americas accounted for 34.6% of throughput and 34.3% of consolidated gross revenuesfrom port operations, and EMEA accounted for 13.0% of throughput and 14.1% of consolidated grossrevenues from port operations. For the nine months ended 30 September 2017, Asia accounted for52.3% of throughput and 47.4% of consolidated gross revenues from port operations, the Americasaccounted for 31.9% of throughput and 33.1% of consolidated gross revenues from port operations,and EMEA accounted for 15.7% of throughput and 19.5% of consolidated gross revenues from portoperations.

The Company’s common stock was first listed on the PSE in March 1992. The Company’s marketcapitalisation as of 30 September 2017 was P=211.55 billion.

Key Competitive Strengths

The Company believes that its key competitive strengths include the following:

Business model focused on origin and destination terminals in emerging and frontier markets

Over the past decade, the Company believes that it has built a portfolio of terminals mainly in originand destination or “gateway” terminals, which are terminals where goods originate or are delivered asend destinations, as opposed to “transshipment” terminals, where goods may be offloaded at suchterminal and again loaded onto different vessels bound for different destinations. The Companybelieves that its focus on these gateway terminals, such as Manila, Honduras, Ecuador and Iraq, result

— 10 —

in its operations and business being less susceptible to market fluctuations, as volumes at thesegateway locations are supported by growing economies. Moreover, by virtue of their size and scale,these terminals are supported by steady consumption patterns, and are less susceptible to volatilefluctuations in the amount of cargo that passes through its terminals. In addition, the Companybelieves that its focus on building and operating terminals in emerging or “frontier” markets such asAsia, Latin America and Africa, which are areas where containerisation of cargo is still relatively low,present opportunities for high and steady levels of trade and consumption growth, as well assignificant profit potential for the Company.

Globally diversified revenue base

As of the date of this Offering Circular, the Company owned or operated ports in 18 countries andorganises its operations across three geographic regions: Asia, the Americas and EMEA. The Companybelieves that the geographical scope of its terminals reduces the concentration of its business in anyparticular country, region or industry. In 2016, Asia accounted for 52.4% of throughput and 51.5% ofconsolidated gross revenues from port operations, the Americas accounted for 34.6% of throughputand 34.3% of consolidated gross revenues from port operations, and EMEA accounted for 13.0% ofthroughput and 14.1% of consolidated gross revenues from port operations. For the nine months ended30 September 2017, Asia accounted for 52.3% of throughput and 47.4% of consolidated gross revenuesfrom port operations, the Americas accounted for 31.9% of throughput and 33.1% of consolidatedgross revenues from port operations, and EMEA accounted for 15.7% of throughput and 19.5% ofconsolidated gross revenues from port operations. In addition, each of the Company’s port facilitiesserves a number of different shipping lines, which reduces its reliance on any one particular customer.In 2016 and the nine months ended 30 September 2017, revenue from the Company’s largest customerrepresented only 9.5% and 10.0% of its consolidated gross revenues from port operations for eachperiod, respectively. The Company believes that its diversified operations spanning the major regionsof the world, as well as its presence in areas where consumption and merchandise inventory aregrowing, mitigates the effect of regional or area-specific economic downturns on its business andresults of operations.

Leading market positions in key targeted markets

The Company’s major terminals enjoy leading positions in their respective geographic markets. TheCompany believes that its strong market position in the regions where it operates allows it to enhanceoperating efficiencies and maximise throughput, which increases profitability. The Company owns oroperates the largest container terminals in terms of volume throughput and capacity in the Philippines,Ecuador, the Brazilian state of Pernambuco, Madagascar, Yantai in China, Honduras, and morerecently Iraq and DR Congo. At these terminals, there are limited opportunities for competition fromother port operators, other ports or other terminals within the same ports due to high barriers to entry.Some of these barriers include the limited number of port sites, government controls and high terminalconstruction costs. This means that there are few substitutes for the Company’s services, which allowsit to maintain significant pricing power and thus helps to ensure robust margins. Many of these portsare in emerging markets, which generally exhibit stronger growth than developed markets; thus theCompany believes that its leading position in these markets will allow it to directly capture organicgrowth in line with the economies of these markets. Furthermore, all of the Company’s concessionagreements are long-term agreements that ensure continued benefits from long-term GDP growthtrends.

Market Experience and Scale of Operations

The Company believes that its considerable expansion over the past decade has allowed it to gainsignificant experience in the regional markets in which it operates. This has resulted in the Companybeing more nimble to take advantage of acquisition, expansion and other business opportunities whicharise in those regions. For example, its experience operating in Latin America since 2007 and thepresence of a Latin America-based international team and operating unit helped it to identify andcapitalise opportunities to secure concessions in Argentina, Colombia and Mexico. The Company also

— 11 —

believes that its experience and relationships in the region with respect to operational aspects suchregulatory and labour allowed it to navigate necessary approvals and permits, as well as source themanpower and other requirements for its new terminals in a very efficient manner, often affordingsignificant savings, lower cost of capital and improved margins. In addition, the Company’s targetedand steady expansion has resulted in its operations achieving significant scale, which has translatedinto global relationships at the public and private sector levels which have allowed the Company toexert pricing influence over customers. The Company’s scale has also afforded it greater negotiatingpower with suppliers and other key third parties.

Dynamic and empowered management team

The Company’s management team has extensive experience in the acquisition, rehabilitation andoperation of container terminals. The Company has been able to deploy experienced management teammembers across its geographic operations to implement the start-up and takeover of new facilities. TheCompany’s management team is highly incentivised, as directors, company officers and related partieshave an approximate 62.0% equity interest in the Company as of the date of this Offering Circular.Its management structure is intentionally decentralised with broad authority delegated to individualoperating units, where management teams are closest to their customers and have the mostcomprehensive knowledge of the regulatory, labour and other key operating conditions prevailing intheir respective jurisdictions. The decentralised structure also allows for a lean and flat managementstructure organisation-wide, which reduces administrative costs. The Company’s senior managementat the corporate level focuses on providing overall strategy and direction as well as managing keyCompany-wide functions such as information technology, engineering and finance. The Companymaintains strong financial controls over each operating entity through standardised monthly reporting,its annual budget process, regular financial and operating audits, control over the external raising ofcapital and risk management.

Established track record of improving efficiency and performance

The Company has a strong track record of significantly improving the operating efficiency andfinancial performance of the terminals it acquires. The Company has developed robust financial andbusiness metrics to assess operational performance, search out inefficiencies and target areas forimprovement. The Company has made substantial investments in its terminals such as acquiring newhandling equipment to enhance handling capacity and efficiency, modernising information technologysystems and expanding and rehabilitating civil works. The Company also provides its know-howthrough enhanced training and the introduction of new work processes to streamline labour practices,and rational commercial strategies to achieve improvements in yield per TEU. The Company has beenable to improve efficiency measures that it believes shipping lines take into consideration whenchoosing a terminal, such as crane moves per hour and ship turnaround time. For example, at the portof Toamasina in Madagascar, prior to MICTSL’s takeover of operations, the average number ofcontainer moves per hour per vessel was 13 moves. After MICTSL assumed control, it implementedthe use of two mobile harbour cranes and increased the average number of moves to 36 per hour withina few months. This significantly decreased ship turnaround time. Similarly, at the Umm Qasr port,ICTSI Iraq improved quay crane productivity from 15 moves per hour to 53 moves per hour throughimproved maintenance, proper training and new/refurbished equipment. Likewise, lorry turn-aroundtime, in general, improved from approximately 24 hours to approximately two hours in the monthsafter MICTSL assumed control, and further decreased to under an hour in the following two years. TheCompany has received commendations and recognitions for its success in improving cargo handlingand assisting in the development of the private sector. For example, the Company has been cited bythe World Bank for its success in public-private partnerships in South America, Africa and Europe.The Company also believes that its recent improvements with respect to Enterprise Resource Planninginitiatives will also result in efficiencies and sustainable savings. Primarily as a result of these factorsthe Company has been able to maintain stable EBITDA margins (EBITDA as a percentage of grossrevenues from port operations) of 41.7%, 42.8%, 46.5%, 46.7% and 47.4% in the year ended 31December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, respectively.

— 12 —

Strong capital structure and stable cash flows

The Company’s finances are supported by a strong capital structure and stable cash flows. As of 30September 2017, the Company’s total indebtedness was U.S.$1,468.8 million and its totalindebtedness to total equity ratio (interest-bearing debt over total equity, as shown in the consolidatedbalance sheet) was 0.79 times, providing head room for future financial leverage. The Companybelieves that its cash flows and debt structure will provide it with a solid platform to pursueinvestment opportunities, supported by its active balance sheet management strategies and liabilitymanagement initiatives which have helped streamline its debt maturity profile and interest paymentschedules significantly. Moreover, the Company believes that its major terminals provide stable cashflows because of its globally diversified operations focusing primarily on gateway locations andcharacterised by long-term concession agreements, which have an average remaining term ofapproximately 18 years weighted by capacity. In addition, the Company’s terminals generally focuson end destination cargo (which accounts for substantially all of the Company’s consolidatedthroughput volume) limiting concentration risk to individual container shipping lines in that if ashipping line that calls at one of its terminals ceases to operate, the cargo intended for that particulardestination will simply be transferred to another shipping line that is still calling at that terminal. TheCompany believes that focusing on this type of cargo results in a higher yield per TEU, as comparedto other operators. Primarily as a result of these factors, the Company’s operating cash flow hasincreased from U.S.$387.8 million in 2014 and U.S.$407.7 million in 2015 to U.S.$466.9 million in2016. The Company’s operating cash flow was U.S.$390.1 million in the nine months ended 30September 2017.

Strategies

The Company’s key strategies are set out below.

Continue prudent growth through targeted acquisitions, organic growth and select privatisation

The Company plans to continue its focus on terminals in origin and destination gateway ports,particularly in emerging and “frontier” markets. Gateway ports are the principal points of entry for acountry or a community and serve as the origin and destination points for cargo, and have higher profitmargins per unit moved than transshipment points for cargo. The Company also plans to continue tosearch for opportunities globally in emerging markets that will typically offer greater scope forimprovements to operational and financial performance, higher levels of volume growth due toincreases in containerisation rates, and favourable demographics which would support higher levelsof merchandise trade and consumption growth. The Company believes that the global containerterminal industry remains fragmented. The Company’s acquisition strategy is to consider opportunitieswith favourable valuations and scopes for operational improvements. Container terminals in lessdeveloped economies often experience higher rates of volume growth, and typically have lower coststructures due to more flexible labour practices. The Company has developed robust financial andbusiness criteria to assess potential acquisitions and have been able to procure financing on terms ithas found acceptable to fund acquisitions. In addition, the Company plans to continue to pursueopportunities for organic growth in its present locations, whether by expansion of facilities or additionof other services. Finally, the Company will look to continue to scout for privatisation opportunitiesto further bolster its operations portfolio.

Maintain a leadership position in the markets in which it operates

The Company expects to continue to improve its position as a leading terminal operator in origin anddestination user container terminals particularly in emerging and “frontier” markets with stronggrowth and profit potential. The Company believes it has the largest market share in the major marketsin which it currently operates terminals. The Company intends to maintain a leadership position inthese markets through improving its handling capacity, maintaining and improving operatingefficiencies, focusing on providing high levels of customer service and leveraging the knowledge andexperience gained from operations across multiple terminals.

— 13 —

Continue to optimise the benefits of existing ports

The Company will continue to look for opportunities to grow its revenues and profit margins, expand

and enhance efficiency at its existing port terminals, and will continue to focus on end-destination

cargo. The Company plans to optimise its operations to harness market trends, such as the increasing

containerisation of goods and the growth of emerging market economies. The Company also plans to

proactively manage its facilities to expand when maintaining and growing its margins. These

programmes may include cost reductions, equipment upgrades, and projects to improve labour

efficiencies and processes. As an example, the Company recently implemented its Terminal

Appointment Booking System (“TABS”), which helps to improve capacity and operational efficiency

in its terminals. Improvements to the labour pool also come from knowledge and experience sharing

across ports. The Company also plans to expand the handling capacity of its ports as needed, such as

the construction of new yard facilities at the MICT.

Continue to actively manage its balance sheet to optimise its yield curve and capital requirements

The Company plans to continue to actively and dynamically manage the principal redemption profile

of its liabilities to more closely align with its fluid cashflow requirements. As part of its balance sheet

management initiatives, the Company also plans to continue proactive management of its debt and

other financing covenants through periodic reviews, liability management exercises and other

measures, to ensure that such restrictions, covenants and the Company’s interest rate profile for its

liabilities more closely align with the Company’s rapid growth and improving profile with investors

and the financing markets. The Company experiences significant cashflow needs from time to time —

whether it be for greenfield port developments, targeted acquisitions or to ramp up volume and expand

operations at existing ports. The Company’s overall intention with its capital management initiatives

is to achieve a value accretive capital structure, wherein the deployment of capital for its various new

and existing projects does not impair its capacity to quickly secure financing for opportunistic

expansion or continuing improvements at existing ports.

Continue developing investor management initiatives and policies

The Company has developed fulsome and proactive investor management initiatives in recent years.

These initiatives are anchored on the core Company philosophy of transparency with its investors, the

number of which has steadily expanded over the years as the Company has accessed a wider market

base. The Company intends to continue periodic open dialogues and active engagement with its

investor base, with the aim of ensuring awareness of significant company developments and soliciting

regular feedback from stakeholders in the Company. The Company firmly believes that this policy of

active and regular engagement has allowed it to efficiently access its existing investor base from time

to time in relation to its financing and balance sheet management initiatives. The Company also

believes that these policies keep it informed of developments in the markets, as well as on issues and

concerns of investors with respect to similar companies and businesses.

Corporate Information

The Company is incorporated under the laws of the Philippines. The Issuer is incorporated under the

Laws of the Netherlands. They maintain their principal executive offices at ICTSI Administration

Building, Manila International Container Terminal, MICT South Access Road, Manila 1012,

Philippines. The telephone number at that address is +63-2-245-4101. The Company’s website is at

www.ictsi.com. Information on its website or websites is not incorporated by reference into this

Offering Circular and should not be relied on for the purposes of the Offering.

— 14 —

SUMMARY FINANCIAL INFORMATION AND THROUGHPUT DATA

The summary historical consolidated balance sheet data as of 31 December 2014, 2015 and 2016 andsummary historical consolidated statement of income and cash flow data for the years ended 31December 2014, 2015 and 2016 set forth below have been derived from, and should be read inconjunction with, the audited consolidated financial statements and, including the notes thereto,included elsewhere in this Offering Circular. SyCip Gorres Velayo & Co., a member firm of Ernst &Young Global Limited, has audited the consolidated financial statements in accordance withPhilippine Standards on Auditing. The summary historical consolidated balance sheet data as of 30September 2017 and summary historical consolidated statement of income and cashflow data for thenine months ended 30 September 2016 and 2017 have been derived from, and should be read inconjunction with, the unaudited interim condensed consolidated financial statements, which SyCipGorres Velayo & Co. has reviewed in accordance with Philippine Standard on Review Engagements2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”.

Potential investors should read the following data together with the more detailed informationcontained in “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and the financial statements and related notes included elsewhere in this OfferingCircular. The following data is qualified in its entirety by reference to all of that information.

Consolidated Statement of Income Data

Year ended 31 DecemberNine months ended

30 September

2014 2015 2016 2016 2017

(in millions of U.S.$)

(Audited) (Unaudited)IncomeGross revenues from port operations ...... 1,061.2 1,051.3 1,128.4 835.0 918.3Other income(1) ...................................... 71.2 23.9 35.7 24.4 42.4Total income ......................................... 1,132.4 1,075.2 1,164.1 859.4 960.7ExpensesPort Authorities’ share in gross

revenues ............................................. 163.6 169.0 183.7 134.6 140.0Manpower costs ..................................... 205.4 193.2 192.5 144.0 152.5Equipment and facilities-related

expenses ............................................. 135.5 124.8 119.9 87.5 112.7Administrative and other operating

expenses ............................................. 113.6 114.4 107.2 78.6 78.3Depreciation and amortisation ................ 121.7 126.5 147.8 109.8 129.3Impairment losses .................................. 38.1 114.6 — — —Interest expense and financing charges

on borrowings..................................... 58.9 61.2 75.1 56.6 74.9Interest expense on concession rights

payable ............................................... 38.1 37.3 34.0 27.5 24.8Other expenses(2) ................................... 12.1 14.7 46.8 20.4 40.2Total expenses....................................... 887.0 955.6 907.1 659.1 752.7Construction Revenue (Expense)Construction revenue ............................. 106.2 116.1 55.9 41.7 59.6Construction expense ............................. (106.2) (116.1) (55.9) (41.7) (59.6)Income before income tax .................... 245.4 119.6 257.0 200.4 208.0Provision for income tax ........................ 53.9 50.6 63.6 49.5 39.9Net income ............................................ 191.5 69.0 193.5 150.8 168.1

Notes:

(1) Other income includes gain on sale of subsidiaries, foreign exchange gain, interest income and other income.

(2) Other expenses include foreign exchange loss, equity in net loss of a joint venture and other expenses.

— 15 —

Consolidated Balance Sheet Data

As of 31 DecemberAs of 30

September

2014 2015 2016 2017


(Audited) (Unaudited)AssetsNoncurrent AssetsIntangibles ....................................................... 1,770.5 1,715.6 1,720.2 1,711.7Property and equipment ................................... 934.4 1,148.9 1,381.5 1,454.1Other noncurrent assets(1)................................. 336.2 452.6 555.4 565.5Total Noncurrent Assets ................................. 3,041.1 3,317.1 3,657.1 3,731.3Current AssetsCash and cash equivalents................................ 194.3 354.5 325.1 319.8Other current assets(2) ...................................... 165.3 159.2 200.0 230.5Total Current Assets....................................... 359.6 513.7 525.0 550.3Total Assets..................................................... 3,400.8 3,830.8 4,182.1 4,281.7LiabilitiesNoncurrent LiabilitiesLong-term debt — net of current portion ........ 998.2 1,026.6 1,326.3 1,386.1Concession rights payable - net of current

portion.......................................................... 518.7 503.2 481.7 472.7Deferred tax liabilities ..................................... 68.1 66.9 71.4 68.6Other noncurrent liabilities .............................. 58.7 119.4 90.8 111.4Total Noncurrent Liabilities ........................... 1,643.7 1,716.0 1,970.2 2,038.7Current LiabilitiesLoans payable .................................................. 24.5 2.0 36.6 60.3Accounts payable and other current

liabilities(3) ................................................... 203.8 223.4 382.0 292.4Current portion of long-term debt .................... 47.8 54.5 18.5 22.4Current portion of concession rights payable.... 7.5 8.8 8.8 10.0Total Current Liabilities ................................ 283.5 288.8 445.8 385.2Total Liabilities .............................................. 1,927.2 2,004.8 2,416.0 2,423.9EquityCapital stock .................................................... 67.6 67.6 67.6 67.6Additional paid-in capital................................. 530.7 534.8 536.2 547.4Cost of shares held by a subsidiary .................. (72.5) (74.3) (74.3) (74.3)Retained earnings............................................. 763.3 723.2 779.4 807.6Perpetual capital securities ............................... 337.0 831.9 761.3 761.3Others(4) .......................................................... (310.1) (408.7) (445.9) (410.7)Total equity attributable to equity holders

of the parent ............................................... 1,316.0 1,674.4 1,624.4 1,698.9Equity attributable to non-controlling interests . 157.5 151.6 141.7 158.8Total Equity .................................................... 1,473.6 1,826.0 1,766.1 1,857.7Total Liabilities and Equity ........................... 3,400.8 3,830.8 4,182.1 4,281.7

Notes:

(1) Other noncurrent assets include investment properties, investments in and advances to a joint venture and an associate,deferred tax assets and other noncurrent assets.

(2) Other current assets include receivables, spare parts and supplies, prepaid expenses and other current assets and derivativeassets.

(3) Accounts payable and other current liabilities also include income tax payable and derivative liabilities.

(4) Others include treasury shares, excess of acquisition cost over the carrying value of non-controlling interests and othercomprehensive loss.

— 16 —

Consolidated Cash Flow Data


30 September

2014 2015 2016 2016 2017


(Audited) (Unaudited)

Net cash provided by operatingactivities................................... 387.8 407.7 466.9 323.4 390.1

Net cash used in investingactivities................................... (340.8) (547.6) (468.5) (336.2) (255.2)

Net cash provided by/(used in)financing activities ................... (94.1) 297.1 (21.7) (109.9) (148.7)

Effect of exchange rate changeson cash and cashequivalents.... ........................... (0.8) 3.0 (6.2) (5.0) 8.6

Net increase (decrease) in cashand cash equivalents ................. (47.9) 160.2 (29.4) (127.8) (5.2)

Cash and cash equivalents atbeginning of year/period ........... 242.2 194.3 354.5 354.5 325.1

Cash and cash equivalents at endof year/period ........................... 194.3 354.5 325.1 226.7 319.8

Other Financial Data

The following table shows EBITDA as derived from the Company’s net income for the period:


30 September

2014 2015 2016 2016 2017



Net income .................................. 191.5 69.0 193.5 150.8 168.1

Provision for income tax .............. 53.9 50.6 63.6 49.5 39.9

Income before income tax .......... 245.4 119.6 257.0 200.4 208.0

Add (Deduct):

Depreciation and amortisation ...... 121.7 126.5 147.8 109.8 129.3

Interest and other expenses(1) ....... 147.2 227.8 155.9 104.5 140.0

Interest and other income(2) ......... (71.2) (23.9) (35.7) (24.4) (42.4)

EBITDA (3) .................................. 443.0 450.0 525.1 390.3 434.9

Notes:

(1) Interest and other expenses include foreign exchange loss, interest expense on concession rights payable, impairment

losses, interest expense and financing charges on borrowings, equity in net loss of a joint venture and other expenses.

(2) Interest and other income include gain on sale of subsidiaries, foreign exchange gain, interest income and other income.

(3) EBITDA is not a uniformly or legally defined financial measure. It generally represents earnings before interest, taxes,

depreciation and amortisation. The Company presents EBITDA because it believes it to be an important supplemental

measure of its performance and liquidity and believes it is frequently used by securities analysts, investors and other

interested parties in the evaluation of companies in its industry.

— 17 —

The EBITDA figures are not, however, readily comparable to other companies’ EBITDA figures, as they are calculated

differently and must be read in conjunction with the related additional explanations. EBITDA has limitations as an

analytical tool and potential investors should not consider it in isolation or as a substitute for analysis of its results as

reported under PFRS. Some of the limitations concerning EBITDA are:

• EBITDA does not reflect the Company’s cash expenditures or future requirements for capital expenditures or

contractual commitments;

• EBITDA does not reflect changes in, or cash requirements for, the Company’s working capital needs;

• EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal

payments, on the Company’s debt;

• Although depreciation and amortisation are non-cash charges, the assets being depreciated or amortised will often

have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and

• Other companies in the industry may calculate EBITDA differently than the Company does, limiting its usefulness

as a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to the

Company to invest in the growth of its business. The Company compensates for these limitations by relying primarily on

its PFRS results and using EBITDA only supplementally.

Throughput Data

The following sets out the throughput data for the Company’s principal segments and terminals for the

periods indicated.

Year ended 31 December Nine months ended 30 September

2014 2015 2016 2016 2017

TEUs% oftotal TEUs

% oftotal TEUs

% oftotal TEUs

% oftotal TEUs

% oftotal

Asia(1) ................... 3,820,572 51.4% 4,094,580 52.7% 4,552,881 52.4% 3,364,342 52.3% 3,577,607 52.3%

Americas(2) ............ 2,687,447 36.1% 2,738,079 35.2% 3,004,690 34.6% 2,247,847 34.9% 2,183,308 31.9%

EMEA(3) ................ 930,616 12.5% 943,334 12.1% 1,131,792 13.0% 823,003 12.8% 1,075,696 15.7%

Total ..................... 7,438,635 100.0% 7,775,993 100.0% 8,689,363 100.0% 6,435,192 100.0% 6,836,611 100.0%

Notes:

(1) Asia includes: MICT (Manila), YRDICTL/YICT (China, YRDICTL through June 2014 and YICT from July 2014), PICT

(Pakistan), PTMTS (Indonesia), SBITC (Subic), ICTSI Subic, Inc. (Subic), DIPSSCOR (Davao), MICTSI (Mindanao),

SCIPSI (Gen.Santos City), OJA (Indonesia) and VICT (Australia, from April 2017).

(2) Americas includes: CGSA (Ecuador), TSSA (Brazil), OPC (Honduras), IOI (Portland, through December 2016) and CMSA

(Mexico).

(3) EMEA includes: MICTSL (Madagascar), BCT (Poland), BICTL (Georgia), AGCT (Croatia), ICTSI Iraq (Iraq, from

September 2014) and IDRC (DR Congo, from July 2016).

— 18 —

SUMMARY OF OFFER

This is a summary of the Terms and Conditions of the Securities. Please refer to “Terms andConditions of the Securities” for a detailed description of the terms and conditions. Phrases used inthis summary and not otherwise defined shall have the meanings given to them in “Terms andConditions of the Securities”.

Issuer Royal Capital B.V., a company incorporated with limitedliability under the laws of the Netherlands.

Guarantor International Container Terminal Services, Inc., a companyincorporated with limited liability under the laws of theRepublic of the Philippines.

Securities Offered U.S.$350,000,000 senior guaranteed perpetual capitalsecurities.

Securities Guarantee The Guarantor will unconditionally and irrevocably guaranteeon an unsubordinated basis the due payment of the principalof and Distributions on the Securities and all other moneysexpressed to be payable by the Issuer under the Securities andthe Trust Deed. The obligations of the Guarantor in thatrespect are contained in the Trust Deed.

Status of the Securities The Securities will constitute direct, unconditional, unsecuredand unsubordinated obligations of the Issuer and will at alltimes rank pari passu without any preference amongthemselves and with all other outstanding unsecured andunsubordinated obligations of the Issuer, past and future, but,in the event of insolvency, only to the extent permitted byapplicable laws relating to creditors’ rights.

The claims of the Securityholders in respect of the Securities,including in respect of any claim to Arrears of Distribution,will, in the event of the Winding-Up of the Issuer (subject toand to the extent permitted by applicable law), rank paripassu with each other and with all unsubordinated obligationsof the Issuer.

Status of the Securities Guarantee The claims of the Securityholders in respect of the SecuritiesGuarantee, including in respect of any claim to Arrears ofDistribution, will, in the event of the Winding-Up of theGuarantor (subject to and to the extent permitted byapplicable law), rank pari passu with each other and with allunsubordinated obligations of the Guarantor.

No set-off To the extent and in the manner permitted by applicable law,no Securityholder may exercise, claim or plead any right ofset-off, counterclaim, compensation or retention in respect ofany amount owed to it by the Issuer or the Guarantor inrespect of, or arising from, the Securities or the SecuritiesGuarantee, as the case may be, and each Securityholder will,by virtue of his holding of any Security, be deemed to havewaived all such rights of set-off, counterclaim, compensationor retention.

Rate of Distribution 5.875 per cent. per annum.

— 19 —

Issue Price 100 per cent.

Form and Denomination The Securities will be issued in registered form in thespecified denomination of U.S.$200,000 and integralmultiples of U.S.$1,000 in excess thereof.

Distributions Subject to Condition 4.4 and Condition 4.5 of the Terms andConditions of the Securities, the Securities will confer a rightto receive distributions (“Distributions”) from the periodcommencing on (and including) the Issue Date, at the Rate ofDistribution, semi-annually in arrear on 5 May and 5November of each year (each a “Distribution PaymentDate”) commencing on 5 May 2018.

Increase in Rate of Distribution Following the earlier to occur of:

(a) the date which is the 61st day, or if such day is not aBusiness Day the first Business Day thereafter,following a Change of Control Event; and

(b) the date on which a Reference Security Default Eventoccurs,

the Rate of Distribution will increase by 2.5 per cent. perannum with effect from the next Distribution Payment Date(or, if the relevant event occurs two Business Days prior tothe next Distribution Payment Date, the next followingDistribution Payment Date).

A “Change of Control Event” means the Permitted Holdersceasing to beneficially own at least 35 per cent. of theoutstanding voting capital stock of the Guarantor plus oneshare.

The “Permitted Holders” means (i) Mr. Enrique K. RazonJr., (ii) any Affiliate of Mr. Enrique K. Razon Jr., or (iii) anyPerson who is a Related Person with respect to thosementioned in (i) or (ii) above.

“Reference Security Default Event” means an event ofdefault which occurs pursuant to condition 10.1(b) of ICTSITreasury B.V.’s outstanding approximately U.S.$400 million5.875 per cent. Senior Notes due 2025, guaranteed by theGuarantor (the “Senior Notes”) (ISIN: XS0972298300), orsimilar condition of any U.S. dollar-denominated debtsecurity issued for, or the net proceeds of which are used torefinance or refund, replace, exchange, renew, repay, defeaseor discharge the Senior Notes prior to their maturity (the“Refinancing Securities”), as a result of the default in,non-compliance with or non-performance of condition 4 ofthe Senior Notes or similar condition of the RefinancingSecurities, as the case may be, by either of ICTSI TreasuryB.V. or the Guarantor, as such Senior Notes are amended fromtime to time in accordance with condition 15 of the SeniorNotes and the trust deed dated 9 January 2013 (as amendedand supplemented from time to time) constituting the SeniorNotes or similar condition of the Refinancing Securities, asthe case may be.

— 20 —

Optional Distribution Deferral The Issuer or the Guarantor may, at its sole and absolutediscretion, on any day which is not less than five BusinessDays prior to any Distribution Payment Date, resolve to deferpayment of any or all of the Distribution which wouldotherwise be payable on that Distribution Payment Dateunless, during the six months ending on that scheduledDistribution Payment Date a Compulsory DistributionPayment Event has occurred (the “Deferral ElectionEvent”). Any such deferred Distribution will constitute“Arrears of Distribution” and will not be due and payableuntil the relevant Payment Reference Date. Distributions willaccrue on each Arrears of Distribution for so long as suchArrears of Distribution remains outstanding at the same Rateof Distribution as the Principal Amount of the Securities bearsat such time and will be added to such Arrears of Distribution(and thereafter bear Distributions accordingly) on eachDistribution Payment Date.

Neither the Issuer nor the Guarantor is subject to any limit asto the number of times Distributions and Arrears ofDistributions may be deferred pursuant to the provisions ofCondition 4.5(a) of the Terms and Conditions of theSecurities.

“Compulsory Distribution Payment Event” means (i) adiscretionary dividend, distribution, interest or other paymenthas been paid or declared on or in respect of any JuniorSecurities or (except on a pro-rata basis) Parity Securities ofthe Issuer and/or the Guarantor, other than a dividend,distribution or other payment in respect of an employeebenefit plan or similar arrangement with or for the benefit ofemployees, officers, directors and consultants of the Issuerand/or the Guarantor; or (ii) at the discretion of the Issuer orthe Guarantor, any Junior Securities or Parity Securities havebeen redeemed, repurchased or otherwise acquired by theIssuer or the Guarantor.

Payment of Arrears ofDistribution

The Issuer may elect to pay Arrears of Distribution (in wholeor in part) at any time on the giving of at least five BusinessDays’ prior notice to Securityholders (in accordance withCondition 12.1 of the Terms and Conditions of the Securities)and to the Trustee and the Principal Paying Agent in writing.If not paid earlier, Arrears of Distribution will become dueand payable, and the Issuer must pay such Arrears ofDistribution (including any amount of distribution accruedthereon in accordance with Condition 4.5(a) of the Terms andConditions of the Securities), on the relevant PaymentReference Date (in accordance with Condition 6 of the Termsand Conditions of the Securities). Any partial payment ofoutstanding Arrears of Distribution by the Issuer shall bemade on a pro-rata basis between the Securityholders.

“Payment Reference Date” means the date which is theearliest of:

(i) the date on which the Securities are redeemed;

— 21 —

(ii) the date on which an order is made for the Winding-Upof the Guarantor;

(iii) the date on which the Issuer or the Guarantor is inviolation of Condition 4.6 of the Terms and Conditionsof the Securities or the date on which there is theoccurrence of a Compulsory Distribution PaymentEvent; and

(iv) the date of any substitution or modification pursuant toCondition 13 of the Terms and Conditions of theSecurities.

Expected Closing Date 18 January 2018.

Maturity Date There is no maturity date.

Redemption at the option of theIssuer

Subject to applicable law, the Issuer may redeem theSecurities (in whole but not in part) on:

(a) the First Call Date; or

(b) any Distribution Payment Date falling after the FirstCall Date,

in each case, at the Redemption Price, on the giving of notless than 30 and not more than 60 calendar days’ irrevocablenotice of redemption to the Securityholders in accordancewith Condition 12.1 of the Terms and Conditions of theSecurities and to the Trustee and the Principal Paying Agentin writing.

Early Redemption due to aGross-up Event

If the Issuer or the Guarantor satisfies the Trustee that aGross-up Event has occurred, the Issuer may redeem theSecurities (in whole but not in part) at the Redemption Price,on the giving of not less than 30 and not more than 60calendar days’ irrevocable notice of redemption to theSecurityholders in accordance with Condition 12.1 of theTerms and Conditions of the Securities and to the Trustee andthe Principal Paying Agent in writing.

No such notice of redemption may be given earlier than 45calendar days prior to the earliest calendar day on which theIssuer or, as the case may be, the Guarantor would be for thefirst time obliged to pay the Additional Amounts in questionon payments due in respect of the Securities.

Prior to the giving of any such notice of redemption, theIssuer will deliver or procure that there is delivered to theTrustee:

(i) a certificate signed by any two Authorised Signatories ofthe Issuer stating that the Issuer is entitled to effect suchredemption and setting out a statement of facts showingthat the conditions to the exercise of the right of theIssuer to redeem have been satisfied and that theobligation to pay Additional Amounts cannot be avoidedby the Issuer or, as the case may be, the Guarantor takingreasonable measures available to it; and

— 22 —

(ii) an opinion of an independent legal or tax adviser ofrecognised standing to the effect that the Issuer or, as thecase may be, the Guarantor has or will become obligedto pay the Additional Amounts in question as a result ofa Gross-up Event,

and the Trustee shall be entitled to accept the abovecertificate and opinion as sufficient evidence of thesatisfaction of the conditions precedent set out above, inwhich event the same shall be conclusive and binding on theSecurityholders.

Early redemption due to aChange of Control Event

If a Change of Control Event occurs, the Issuer may redeemthe Securities (in whole but not in part) (i) at any time priorto but excluding the First Call Date at the Special RedemptionPrice or (ii) on or at any time after the First Call Date at theRedemption Price, in each case on the giving of not less than30 and not more than 60 calendar days’ irrevocable notice ofredemption to the Securityholders in accordance withCondition 12.1 of the Terms and Conditions of the Securitiesand to the Trustee and the Principal Paying Agent in writing.

Early redemption due to aReference Security DefaultEvent

If a Reference Security Default Event occurs, the Issuer mayredeem the Securities (in whole but not in part) at any time atthe Redemption Price, on the giving of not less than 30 andnot more than 60 calendar days’ irrevocable notice ofredemption to the Securityholders in accordance withCondition 12.1 of the Terms and Conditions of the Securitiesand to the Trustee and the Principal Paying Agent in writing.

Early redemption due to anAccounting Event

If an Accounting Event occurs, the Issuer may redeem theSecurities (in whole but not in part) (i) at any time prior to butexcluding the First Call Date at the Premium RedemptionPrice or (ii) on or at any time after the First Call Date at theRedemption Price, in each case on the giving of not less than30 and not more than 60 calendar days’ irrevocable notice ofredemption to the Securityholders in accordance withCondition 12.1 of the Terms and Conditions of the Securitiesand to the Trustee and the Principal Paying Agent in writing.

Early redemption due to a TaxEvent

If a Tax Event occurs, the Issuer may redeem the Securities(in whole but not in part) (i) at any time prior to but excludingthe First Call Date at the Special Redemption Price or (ii) onor at any time after the First Call Date at the RedemptionPrice, in each case on the giving of not less than 30 and notmore than 60 calendar days’ irrevocable notice of redemptionto the Securityholders in accordance with Condition 12.1 ofthe Terms and Conditions of the Securities and to the Trusteeand the Principal Paying Agent in writing.

— 23 —

Taxation and Additional Amounts All payments in respect of the Securities by or on behalf ofthe Issuer or the Guarantor will be made without withholdingor deduction for, or on account of, any present or future taxes,duties, assessments or governmental charges of whatevernature (“Taxes”) imposed or levied by or on behalf of theRelevant Jurisdiction, unless the withholding or deduction ofthe Taxes is required by law. In the event where suchwithholding or deduction is made by the Guarantor at the rateof up to and including 20 per cent., the Guarantor will paysuch additional amounts as will result in the receipt by theSecurityholders of such amounts as would have been receivedby them had no such withholding or deduction been required.In the event that the Issuer or, as the case may be, theGuarantor makes a deduction or withholding required by law(and, in the case of the Guarantor, in excess of 20 per cent.),the Issuer or, as the case may be, the Guarantor, shall pay suchadditional amount (“Additional Amounts”) as will result inreceipt by the Securityholders of such amounts as would havebeen received by them had no such withholding or deductionbeen required, except in certain circumstances. See Condition7 (Taxation and Gross-up) of the Terms and Conditions of theSecurities.

Proceedings for Winding-Up Securityholders are not entitled to proceed directly against theIssuer or the Guarantor or to institute proceedings for theWinding-Up or claim in the liquidation of the Issuer or theGuarantor (as the case may be) or to prove in suchWinding-Up unless the Trustee, having become so bound toproceed or being able to prove in such Winding-Up or claimin such liquidation, fails to do so within a reasonable periodand such failure shall be continuing, in which case theSecurityholders shall have only such rights against the Issueras those which the Trustee is entitled to exercise as set out inCondition 10 of the Terms and Conditions of the Securities.

Substitution or Modification The Trustee may (but shall not be obliged to), without theconsent of the Securityholders, agree with the Issuer and theGuarantor to:

(a) the substitution in place of the Issuer (or of any previoussubstitute under Condition 13 of the Terms andConditions of the Securities) as the principal debtorunder the Securities and the Trust Deed of the Guarantoror any of its Subsidiaries; or

(b) the modification of these Conditions to the extentreasonably necessary,

— 24 —

in order to remedy a pending or existing Gross-Up Event,Accounting Event or Tax Event provided that:

(i) in the case of a substitution of an entity other than theGuarantor, the Securities remaining unconditionally andirrevocably guaranteed by the Guarantor in a mannerwhich would give the Securityholders a status in aWinding-Up of the Guarantor which is akin to the statusSecurityholders would have at that time in respect of aWinding-Up of the relevant issuer;

(ii) the Trustee being satisfied that the interests of theSecurityholders will not be materially prejudiced by thesubstitution or modification; and

(iii) compliance with certain other conditions set out in theTrust Deed.

The Trustee may (but shall not be obliged to), without theconsent of the Securityholders, agree to any modification(except as mentioned in the Trust Deed) of the Terms andConditions of the Securities or the Trust Deed if, in theopinion of the Trustee, such modification will not bematerially prejudicial to the interests of Securityholders andto any modification of the Securities or the Trust Deed whichis in the opinion of the Trustee of a formal, minor or technicalnature or is to correct a manifest error or is made to complywith mandatory provisions of law. In addition, the Trusteemay (but shall not be obliged to), without the consent of theSecurityholders, authorise or waive any proposed breach orbreach of the Securities or the Trust Deed if, in the opinion ofthe Trustee, the interests of the Securityholders will not bematerially prejudiced thereby.

Trust Deed The Securities will be constituted by a Trust Deed to be datedon or about 18 January 2018 made between the Issuer andCiticorp International Limited (the “Trustee”).

Further Issues The Issuer may from time to time create and issue furtherSecurities without the consent of the Securityholders. SeeCondition 9 of the Terms and Conditions of the Securities.

Listing and Trading Approval-in-principle has been received from the SGX-ST forthe listing and quotation of the Securities on the SGX-ST. TheSGX-ST assumes no responsibility for the correctness of anystatements made, opinions expressed or reports containedherein. Admission of the Securities to the Official List of theSGX-ST is not to be taken as an indication of the merits of theIssuer, the Company or the Securities.

The Securities will be traded on the SGX-ST in a minimumboard lot size of U.S.$200,000 for as long as the Securitiesare listed on the SGX-ST and the rules of the SGX-ST sorequire.

— 25 —

Use of Proceeds The net proceeds from the issue of the Securities, which areapproximately U.S.$348 million (after the deduction ofcommissions), will be used for the financing of acquisitionsand capital expenditures and for general corporate purposes.See “Use of Proceeds”.

Selling Restrictions The Securities have not been and will not be registered underthe Securities Act and, subject to certain exceptions, may notbe offered or sold within the United States. The Securitiesmay be sold in other jurisdictions (including United Kingdom,Hong Kong, Singapore and the Philippines) only incompliance with applicable laws and regulations. See“Subscription and Sale”.

ISIN XS1740005811

Common Code 174000581

— 26 —

RISK FACTORS

The Company believes that the following factors may affect its ability to fulfil its obligations underthe Securities. Most of these factors are contingencies which may or may not occur and the Companyis not in a position to express a view on the likelihood of any such contingency occurring.

In addition, factors which are material for the purpose of assessing the market risks associated withthe Securities are described below.

The Company believes that the factors described below represent the principal risks inherent ininvesting in the Securities, but the inability of the Company to pay distributions, principal or otheramounts on or in connection with the Securities may occur for other reasons which may not beconsidered significant risks by the Company based on information currently available to it or whichit may not currently be able to anticipate. Prospective investors should also read the detailedinformation set out elsewhere in this Offering Circular and reach their own views prior to making anyinvestment decision.

Risks Relating to the Company’s Business

The Company’s business is highly dependent on regional and global economic trends.

The volume of containers the Company handles and the usage of other port-related services areinfluenced by the performance and growth of regional and international trading economies. TheCompany has a substantial port operations business within the Philippines as well as an internationalportfolio of terminals. Its core business consists of the management, operation and development ofcontainer terminals and the provision of cargo handling and other port-related services. Such servicesare required by the Company’s shipping line customers for the transportation of containerised goodsby sea within the global and regional marketplace. As a result, there is a correlation between thecondition of global and regional economies and the volume of container throughput the Companyhandles. Because the Company tends to operate small- to medium-sized end-destination terminals, theCompany’s results of operations are highly influenced by specific conditions in the local marketswhere it operates.

In addition, the global markets have experienced, and may continue to experience, significantdislocation and turbulence due to economic and political instability in several areas of the world,including North Africa and the Middle East, Europe and Japan. Trade may be affected throughout theMediterranean, the Middle East, and particularly around Iraq and Congo as a result of ongoingpolitical instability and potentially escalating conflicts. Furthermore, instability in the region mayresult in increased fuel prices that could negatively affect the cost of shipping and the volume of trade.

The Company’s business is also influenced by other factors that impact regional and internationaltrading economies, including economic and political conditions, trade restrictions, sanctions,embargoes, boycotts and other trade measures, exchange controls, currency fluctuations, unexpectedchanges in laws relating to tariffs or taxation policies, trade disputes, labour strikes and other workstoppages, acts of war, hostilities, epidemics, terrorism, changes in seaborne and other transportationpatterns, weather patterns and crop yields, and the occurrence of natural disasters, such as the TohokuEarthquake and subsequent tsunami. Interruptions of the continuity of operations, decreases in importsand exports or reduced trading patterns caused by these or other causes may reduce the frequency ofvessels calling at the ports at which the Company operates and may adversely affect its business andresults of operations. The Company has little or no control over any of these risks and it may be unableto anticipate changes in economic and political conditions or anticipate extended disruptions oftransport activity due to other factors. As a result, the Company may be unable to alter its businesspractice in time to avoid the adverse effects of any of these changes. Any further downturn in regionaland international trading economies could impact the volume of containerised cargo trade due to theseor any other extraneous factors and adversely affect its business, results of operations and financialcondition.

— 27 —

The Company operates in a number of emerging markets that have experienced economic andpolitical instability in the past and whose institutions may not be as developed as more maturemarkets.

The Company operates mainly in emerging markets, many of which have experienced political andeconomic instability in the past. Many of these countries were formerly socialist or quasi-socialist andare still undergoing developments into market economies. The size of the Company’s operationsmakes it more vulnerable to economic fluctuations than larger, more established companies. Many ofthe countries in which the Company operates or may operate in the future continue to face significantbudget deficits, limited foreign currency reserves, volatile exchange rates and highly regulated andless sophisticated banking sectors. In addition, the regulatory environments in these countries maychange frequently. There can be no assurance that these factors, among others, will not affect regionaleconomies in an adverse manner. Furthermore, many of the countries in which the Company operates,including the Philippines, have experienced frequent changes in governments, political scandals,terrorist attacks and civil strife. For example, in Madagascar, political tensions resulted in politicalturmoil and forced the resignation of the president in 2009. Likewise, Ecuador has a history ofremoving presidents from power through congressional action or through street protests. TheCompany previously operated a port in Syria until December 2012, and has operated ports in Iraq andDR Congo since September 2014 and July 2016, respectively, both of which remain in a region ofongoing political instability and potentially escalating conflicts. External forces may also be an issuein countries where the ports are located. In 2008, Georgia and Russia were briefly in military conflictover various political issues resulting in a decrease in Georgian foreign trade. No assurance can begiven that that the future political environment in these countries will be stable or that current orfuture governments will adopt economic policies conducive to sustaining economic growth.

The Company is dependent on concessions and other key contracts to conduct its business.

The Company relies on concessions and other key contracts to operate its business. The Company,generally, does not own terminals but rather obtains the right, subject to certain conditions, to manage,operate and develop terminals for a set period of time. These contracts contain provisions that allowthe relevant port authority to suspend, cancel or terminate the contract on specified grounds, includingthe Company’s non-compliance with the terms of the contract and, in certain instances, the occurrenceof a “change of control” of the Company without the consent of the relevant port authority or if therelevant port authority determines that the public interest may be better served by the cancellation ofthe contract in accordance with its regulations. See “Description of Concession Agreements andCertain Indebtedness”. Certain of the Company’s concession agreements also contain penaltyprovisions if they do not meet certain throughput levels or if they do not fulfil their investmentcommitments. The termination of, or implementation of penalties under, any of the Company’sconcessions or key contracts could have a material adverse effect on its business, results of operationsand financial condition. Furthermore, the cancellation of, or implementation of penalties under, anyof its concessions or key contracts could cause its reputation in the container terminal industry to beharmed, which could negatively affect the Company’s ability to acquire new concessions. In addition,if the Company is unable to renew or extend its concessions and key contracts at their expiration oncommercially reasonable terms or at all, its business, results of operations and financial conditionwould be adversely affected.

The Company acquired many of its concessions, including the concession to operate MICT, throughprivatisation processes. Privatisations are often opposed by local governments, labour unions or otherinterest groups. In the case of foreign privatisations, opposition may be raised due to security concernsregarding a foreign operator managing port operations. The Company has faced challenges to itsacquisition of concessions to operate ports that it obtained as part of a privatisation programme in boththe Philippines and Brazil. Many of the Company’s concessions are located in emerging markets wherethe political and economic environment is less predictable and more volatile than developed markets.There can be no assurances that further challenges to the Company’s operations will not be raised orthat its concessions will not be terminated for public policy reasons.

— 28 —

The Company faces competition at its domestic and international terminals.

The Company competes with both local and international port operators in the Philippine and overseasmarket places on factors such as location, facilities, supporting infrastructure, service and price. TheCompany’s competitors may offer lower tariffs than the Company; or have greater financial resourceswith which to develop the ports that they operate. One of the Company’s strategies is to acquireterminals in emerging markets, then improve operations and grow volume organically. If tradingvolumes increase, competitors may begin to target these same markets. Increased competition fromexisting and future competitors may result in a reduction in the Company’s market share, a decreasein the volume of containers it handles or increased price competition, in each case resulting in possibledeclines in its cash flows, operating margins and profitability. In addition, from time to time certainpoliticians and academics call for an increase of competition at the Port of Manila, including allowingprivate port operators to compete directly with MICT and the other existing operator. Additionalcompetition at the Port of Manila could reduce MICT’s volumes and force it to reduce its tariffs.Furthermore, if additional competitors are subject to less stringent regulations or are not required toshare their revenues with the Philippine Ports Authority (“PPA”), the Company’s competitivenesscould be adversely affected.

The Company’s inability to raise funds on favourable terms for capital expenditures, futureacquisitions and refinancing could adversely affect its business.

The Company’s operations and expansion plans are capital intensive. For example, the Company iscurrently undergoing or about to start major expansion projects in its terminals in Iraq, Honduras,Mexico and the Philippines. These activities require significant capital expenditures for theconstruction of port facilities, including ship berths, storage yards and administrative facilities, andfor the acquisition of cargo handling equipment. The Company also plans to continue to drive thegrowth of its business through the acquisition and improvement of other terminals. Moreover, someof the Company’s concession agreements require it to invest a certain amount of its resources todevelop and improve the terminal’s infrastructure and to purchase equipment. The Company may alsomake investments beyond the levels to which it has committed in such concession agreements. It mayalso need to refinance its existing debt from time to time. The Company’s ability to obtain externalfinancing and the cost of such financing are dependent on numerous factors, including generaleconomic and capital market conditions, interest rates and credit availability from banks or otherlenders. The Company’s sources of debt are finite and limited in availability, especially in theemerging markets. There can be no assurance that additional financing or refinancing, either on ashort-term or a long-term basis, will be made available or, if available, that such financing will beobtained on favourable terms.

The Company generates a large proportion of its revenues at MICT and its other Philippineterminals and is therefore heavily reliant on the performance of MICT and its other Philippineterminals.

The Company has operated MICT since 1988 and its operations at MICT and its other Philippineterminals have historically provided the majority of its gross revenues from port operations. Althoughthe Company has expanded globally over the past few years, it remains heavily reliant on itsperformance at its Philippine terminals and expects to remain so in the near future. If there aresignificant decreases in container traffic or tariff rates at its Philippine terminals, the Company’sbusiness and results of operations would be adversely affected. Furthermore, increased capacity at theCompany’s Philippine terminals will ensure that the Philippine terminals’ share of total throughputand gross revenues remain high relative to the other terminals. If the Company is unable to continueits expansion of its international operations or if it chooses to or is forced to abandon its expansionstrategy, its ability to diversify its operations to reduce the relative importance of its Philippineterminals may be limited. Any sustained deterioration in global or regional economic conditions,particularly in the Philippines, could adversely affect the Company’s business, results of operationsand financial condition.

— 29 —

The Company’s failure to manage its existing container terminal operations and growth effectivelymay adversely impact the Company’s business.

The Company has rapidly expanded its container terminal operations, in particular those located

overseas. This rapid expansion into new markets has presented, and will continue to present,

significant challenges for the Company’s management, operational and administrative systems and its

ability to maintain effective systems of internal controls. There can be no assurance that it will not

experience difficulties in managing its existing terminal operations and growth effectively because of

issues such as capacity and capital constraints, and construction delays or operational difficulties at

new facilities. The Company may also face difficulties in upgrading or expanding existing facilities,

including upgrading of its current operating and information technology systems, locating and

providing suitable local senior management and training an increasing number of personnel to manage

and operate those facilities and upgraded systems. Further, the Company must manage relationships

with a large and growing number of customers, suppliers, contractors, service providers, lenders and

other third parties. The Company may not successfully integrate new acquisitions to meet its

efficiency and performance standards, nor keep existing facilities up to those same standards. In

addition, the key personnel, either from existing and newly acquired terminals, may not continue to

work for the Company. The Company may also be required to keep employees whom it otherwise

deems to be redundant. The Company also needs to constantly develop and adjust management and

administrative responsibilities to match market conditions and its growth and expansion. The

Company’s continued development into a global terminal operator requires it to identify new qualified

personnel with widespread knowledge of the industry and the countries in which it operates. The

Company’s failure to identify suitable personnel for these management and administrative positions

may adversely affect the Company’s ability to manage its growth and continue to pursue its growth

strategy. All of these difficulties could disrupt the Company’s ongoing business, distract its

management and employees and increase its expenses. All of these issues could have an adverse

impact on the Company’s business, results of operations and financial condition.

The Company’s business and operations depend significantly upon key personnel.

The Company’s operations depend to a significant extent upon, among other factors, the continued

service of senior executives, including the Company’s Chairman, Enrique K. Razon Jr., and other

management professionals. The Company has a relatively small management team which makes it

more dependent on its senior personnel than some of its larger competitors. With the rapid growth of

the container terminal industry, competition for skilled senior employees is intense and there are a

limited number of qualified candidates. If any of the Company’s existing key personnel leaves their

position and the Company fails to appoint a replacement promptly, or if it fails to maintain a sufficient

level of professional staff in line with the Company’s growth, the Company’s business and results of

operations may be adversely affected.

The Company manages its business on a decentralised basis, which may restrict implementation ofadequate business controls and may limit its ability to manage its business effectively.

The Company owns or operates container terminals in the Philippines and in 17 other countries around

the world. It generally manages its business on a decentralised basis, allowing local management to

retain significant responsibility for day-to-day operations, profitability and growth. As the Company’s

portfolio of container terminals has grown in recent years, especially internationally, these facilities

may operate with insufficient management and support personnel and may require significant central

oversight and coordination. If proper business controls have not been and are not implemented, a

decentralised operating strategy could result in inconsistent operating and financial practices, which

could materially and adversely affect the Company’s business and results of operations.

— 30 —

The Company’s results of operations and financial condition may be adversely affected by exchangerate fluctuations.

Because of the geographic diversity of the Company’s business, it receives revenue and incursexpenses in a variety of currencies. Its revenues are primarily in U.S. dollars, Philippine pesos,Mexican pesos, Brazilian reals and euros, while its expenses are generally in U.S. dollars and localcurrencies. The Company attempts to match its revenues and expenses whenever possible and, fromto time, engages in hedging activities. Changes in exchange rates affect the U.S. dollar value of itsrevenues and costs that are denominated in foreign currencies.

The Company is also subject to translation risks whereby changes in exchange rates impact itsreported revenues in U.S. dollar terms. Because the Company’s reports its financial statements in U.S.dollars, increases in the value of the U.S. dollar against the currencies in which it receives revenuesin its international operations, such as Philippine pesos, Mexican pesos, Brazilian reals and euros,could restrict its revenue growth in U.S. dollar terms and vice versa. Continued fluctuations in thevalue of the U.S. dollar against the Company’s subsidiaries’ functional currencies could cause theCompany’s revenues to decrease in U.S. dollar terms and distort comparisons of its results ofoperations and financial condition across periods.

The Company has a unionised work force and may experience work stoppages.

As at 30 September 2017, approximately 58.6% of the Company’s employees are members of a labourunion. The Company has experienced minor labour disturbances at the Port of Suape in Brazil and theBaltic Container Terminal in Poland in the past. In June to August 2012 and in 2015, the Companyexperienced a work slowdown in the Port of Portland, resulting in discontinued vessel calls of twomajor shipping lines at ICTSI Oregon, and the Company subsequently terminated its lease with thePort of Portland on 31 March 2017. ICTSI Oregon was granted a favourable decision from the U.S.Court of Appeals in Washington D.C. against the International Longshore and Warehouse Union(“ILWU”). The U.S. Court of Appeals found ILWU guilty of violating federal labour laws and upheldtwo National Labour Relations Board (“NLRB”) decisions declaring that ILWU engaged in deliberatework stoppages and slowdowns, made false safety claims, and engaged in other coercive conductagainst ICTSI Oregon and its customers.

The Company can make no assurances that major disruptions or work stoppages will not occur in thefuture at any of the terminals that it operates. Any such disruptions or stoppages could have a materialadverse effect on its business, results of operations and financial condition. The Company has enteredinto collective bargaining agreements (“CBAs”) with its employees in the Philippines, China,Pakistan, Ecuador, Brazil, Poland, Mexico and Madagascar that govern, among other things, periodicwage increases. If the Company is unable to renew these agreements at commercially reasonable termsor at all or in a timely manner, its labour costs may increase significantly, which could negativelyaffect its business, results of operations and financial condition.

The Company is limited in its ability to raise the tariffs that it charges its customers.

The MICT Contract and certain of the Company’s other concession agreements and key contractsprescribe the maximum tariffs that it may charge to customers and either prohibit any changes in thosetariffs without the approval of the relevant port authority or subject the tariffs to an automaticadjustment mechanism. See “Business —Revenue Streams”. At MICT, tariff increases have beenimplemented in phases and thus there may be time lags between the events that caused the Companyto petition for an increase and the actual increase in the tariff, which could negatively affect its resultsof operations. In the countries in which tariffs are not prescribed, such as Poland, Brazil and Mexico,the Company is still limited in its ability to raise tariffs by market norms, competition and localdemand. Moreover, rates may decline as a result of downward market pressures. If the Company isunable to raise tariffs to cover increased expenses or to respond to changes in market conditions, itsbusiness, results of operations and financial condition would be adversely affected.

— 31 —

A few major customers contribute a significant portion of the Company’s operating revenue.

Consistent with other major port operators, major shipping lines contribute significantly to theCompany’s business and revenue. In 2016, Maersk and Mediterranean Shipping Company (“MSC”)accounted for 9.5% and 6.3%, respectively, of the Company’s consolidated gross revenues from portoperations. In the nine months ended 30 September 2017, Maersk and MSC accounted for 10.0% and7.0%, respectively, of the Company’s gross revenues from port operations. Individual terminals maybe even more dependent on a small group of customers. For example, at TSSA, Hamburg Sud and MSCaccounted for 28.9% and 14.4%, respectively, of TSSA’s gross revenues from port operations for theyear ended 31 December 2016. Maersk accounted for 40.3% of CMSA’s gross revenue during the sameperiod. Additionally, Hamburg Sud and MSC accounted for 33.6% and 14.2%, respectively, of TSSA’sgross revenues from port operations for the nine months ended 30 September 2017 and MSC accountedfor 21.7% of CMSA’s gross revenue during the same period. The loss of business from these customerscould have a significant effect on the Company’s growth rates and results of operations. The Companyanticipates that for the foreseeable future, a limited number of the Company’s largest shipping linecustomers will continue to account for a significant portion of the Company’s container throughputand revenue globally. If the Company’s business with any major customer significantly decreases, theCompany’s business and results of operations could be adversely affected. Moreover, the shippingindustry has recently seen increased consolidation, which has allowed shipping lines enhanced abilityto negotiate prices and bulk discounts with terminal operators. The Company generally does not offerany bulk discounts to shipping lines but can make no assurances that it will not do so in the future.If it were required to offer bulk discounts to more and more customers, the Company’s revenues maydecrease which could negatively affect its prospects.

The Company is subject to the risk of system failures.

The Company’s business and operations are reliant on sophisticated information technology andautomated systems to handle its terminal operations for high productivity and efficient handling ofcontainers. Should any of the Company’s key systems fail or not perform as anticipated, whether asa result of an interruption in power supplies, technical or mechanical complications, or any otherreason, terminal operations may be delayed or hindered. Although the Company maintains back-upsystems, and it attempts to appropriately protect, develop and service its information technology, noassurance can be given that there will not be a failure of computer systems or software or a breachof security. There can be no assurance that any such failure for a prolonged period will not adverselyaffect the Company’s existing operations and thereby have a material adverse effect on its business,results of operation or financial condition.

The Company depends on key pieces of plant, equipment and machinery to conduct its containerhandling operations.

The Company’s container handling operations depend on key pieces of plant, equipment andmachinery, including cranes, rubber-tyred gantries, reach stackers and general infrastructure andequipment. Any significant damage to, failure of, or operational difficulties with, the key componentsof the Company’s container handling operations could have a material adverse effect on its business,results of operations and financial condition.

The Company’s facilities could be exposed to unforeseen catastrophic events over which it has littleor no control.

The Company’s facilities may be exposed to the effects of natural disasters and other potentiallycatastrophic events, such as major accidents, acts of God, terrorist attacks, armed conflicts andhostilities. For example, the Philippines is vulnerable to typhoons, earthquakes and other majornatural disasters, which could suspend the Company’s operations temporarily or damage or destroykey equipment. The Company shuts down its operations at MICT and its other terminals from time to

— 32 —

time due to adverse weather conditions. While the Company assesses risk and implements mitigation

programs on a per terminal basis to minimise loss and/or business interruption, there is no assurance

that such programs would be effective. The occurrence of a catastrophic event could have a material

adverse effect on the Company’s business, results of operations and financial condition.

The Company’s insurance policies may not be adequate to cover all losses incurred.

The Company maintains insurance policies covering both its assets and employees on terms which it

believes are common and at times superior to the container terminal industry and in line with what it

believes are general business practices in the countries in which it operates. Risks insured against

include, but are not limited to, fire, earthquakes, lightning, flooding, theft and vandalism liability.

There are, however, certain types of losses such as those arising from business interruptions, other

natural disasters or property damage that are generally not economically feasible to insure and for

which the Company’s operations at the majority of its ports is not insured. The Company may also be

unable to maintain insurance of the types or at levels which it deems necessary or adequate or at rates

which it considers reasonable.

The Company is subject to regulations that govern operational, environmental and safety standards.

The Company’s terminal services are conducted under licences, concessions, permits or certificatesgranted by the applicable regulatory body in the countries in which it operates. Failure to comply withrelevant laws and regulations may result in financial penalties or administrative or legal proceedingsagainst the Company, including the revocation or suspension of the Company’s concessions orlicences. If any of the Company’s concessions, licences, permits or certificates is revoked, suspendedor amended, the Company’s business, results of operations and financial condition may be adverselyaffected.

The Company must also comply with various environmental and safety standards applicable under therespective relevant laws and regulations in each jurisdiction in which it operates. In addition,organisations and governmental entities such as the International Maritime Organisation or the U.S.Department of Homeland Security may enact certain rules (for example, rules relating to the types ofships allowed to carry certain products). These standards may become increasingly more burdensomeand may require the Company to incur significant capital expenditure or other obligations. If theCompany fails to comply with any such standards, it may be subject to penalties and its operations inthe relevant jurisdiction or jurisdictions may be adversely affected.

Some of the goods the Company handles are hazardous and could result in spills and/orenvironmental damage.

Certain of the Company’s customers are involved in the transportation of hazardous materials. Thetransportation of certain types of materials that the Company handles, such as petroleum or chemicals,is subject to the risk of leaks and spills, causing environmental damage. Furthermore, because theCompany charges higher rates for hazardous cargo, customers may ship undeclared hazardous cargoto avoid the additional surcharge. Regulations also generally limits the handling or storage of certainquantities of specified hazardous chemicals, many of which the Company handles and stores. Althoughthe Company believes that it does not handle or store these hazardous chemicals in quantities abovethe specified limits, there can be no assurance that it has not in the past or will not in the future violateapplicable environmental regulations. Violations of environmental regulations may subject theCompany to fines and penalties or result in the closure or temporary suspension of its operations. Ifthe Company is found to have violated environmental regulations because of the cargo it handles andstores or are required to discontinue handling such cargo, that could have a material adverse effect onthe Company’s business and results of operations.

— 33 —

The Company is subject to political, economic, regulatory and other risks due to the internationalnature of its operations.

The Company maintains operations and provide services in 18 countries in East Asia, Europe, Northand South America, Australia, the Middle East and Africa. The Company may be subject to greaterrisks than other companies as a result of the international nature of its business operations. TheCompany’s activities are subject to the uncertainties associated with international business operations,including foreign governmental regulations, trade barriers, economic sanctions, tax regulations,import and export regulations, duties and tariffs, anti-corruption laws and changes in trade policies,any of which could have a material adverse effect on its business, financial condition and/or operatingresults. If the Company needs to pursue legal remedies against customers or business partners locatedin certain countries, it may be difficult for the Company to enforce its rights depending on the relevantjurisdiction.

The Company has conducted port operations in a country that is presently the target of economicsanctions administered by the Office of Foreign Assets Control of the U.S. Department of theTreasury. Future changes in the U.S. economic sanctions landscape may result in jurisdictions inwhich the Company operates becoming sanctions targets.

The United States has imposed economic sanctions against Syria, affecting the ability of certainshipping companies and exporters to conduct business in Syria. The Company possessed a concessionto operate a port in Syria but terminated such concession on 27 December 2012. The Company’soperations in Syria accounted for 0.6% of its total consolidated volume and 0.3% of its consolidatedgross revenue from port operations in 2012.

The United States, the European Union and the UN Security Council have imposed targeted sanctionsagainst certain individuals and armed groups in DR Congo. Expansion of the economic sanctions mayaffect the conduct of business in the country. The Company possesses a concession to operate a portin DR Congo. The Company’s operations in DR Congo accounted for 0.8% of its total consolidatedvolume and 3.9% of its consolidated gross revenue from port operations in the first nine months of2017.

Future changes in the U.S. economic sanctions landscape may result in other jurisdictions in whichthe Company presently operates or may operate in the future becoming targets of U.S. economicsanctions. In the future, the Company may acquire ports in other jurisdictions or from governmentsthat are the target of U.S. economic sanctions. Furthermore, the Company’s ability to operate in theUnited States may be limited by concerns related to its operations involving jurisdictions or partiesthat are targets of U.S. economic sanctions.

The Company is subject to joint venture risks.

The Company may enter into joint ventures or alliances with respect to certain terminal operations andbids, including bids in jurisdictions that require part ownership by local concerns. Some of itscontainer terminal and other operations, including its operations in China, Pakistan, Indonesia and thePhilippines (aside from MICT), are, or will be, conducted through jointly controlled entities andassociated companies. Joint ventures may involve special risks associated with the possibility that thejoint venture partner may (i) have economic or business interests or goals that are inconsistent withthat of the Company; (ii) take actions contrary to the Company’s interests; (iii) be unable or unwillingto fulfil its obligations under the joint venture agreement; or (iv) experience financial difficulties.There can be no assurance that the Company’s best commercial interests and business philosophy willbe consistent with its major joint venture partners. There is also a possibility that such joint venturepartners may enter into the same or similar businesses that the Company currently operates. As aresult, the Company may face increasing competition which may adversely affect its business andresults of operations.

— 34 —

The Company is controlled by the Razon Family, whose interests may not be the same as those ofother shareholders.

The Razon Family currently, directly or indirectly, controls 61.4% of the outstanding share capital of

the Company as of 30 September 2017. Accordingly, the Razon Family is able to elect members of theBoard and pass shareholder resolutions, both of which under the By-laws generally require a majorityvote by its shareholders. In addition, a member of the Razon Family, Mr. Enrique K. Razon Jr., is theChairman of the Board of Directors. Accordingly, the Razon Family exercises control over or hassignificant ability to influence major policy decisions of the Company, including its overall strategicand investment decisions, dividend plans, issuances of securities, adjustments to its capital structure,mergers, liquidation or other reorganisation and amendments to its Articles of Incorporation andBy-laws. If the interests of the Razon family conflict with the interests of other shareholders of theCompany, there can be no assurance that the Razon Family would not cause the Company to takeaction in a matter which might differ from the interests of the other shareholders.

The Company’s results of operations may fluctuate significantly as a result of seasonality.

The container terminal industry has historically experienced seasonal variations. This seasonality mayresult in quarter-to-quarter volatility in the Company’s operating results. Trade volumes in thejurisdictions in which the Company operates tend to be stronger in the third and fourth quarters andweaker in the first quarter. As a result, the Company’s results of operations may fluctuate significantlyand comparisons of operating results between different periods within a single financial year, orbetween different periods in different financial years, may not necessarily be meaningful and may notbe relied upon as indications of the Company’s overall performance.

Future port congestion in Manila could adversely affect the Company’s business.

In February 2014, the City of Manila imposed additional time restrictions on the number of hours thattrucks in Manila could use the roads in the city. Among other factors, this truck ban contributed tosignificant congestion in the Port of Manila with respect to containers that could not be transportedout of the port area as easily. The Port of Manila’s congestion issues resulted in a significant backlogof cargo accumulating at the port, as well as a substantial amount of new incoming cargo divertingto other Philippine and international ports to unload their cargo. As volume from MICT comprise asignificant portion of the Company’s overall operations, any future congestion or related issues couldhave a material adverse effect on the Company’s consolidated throughput as well as the Company’sbusiness, results of operations and general business reputation.

Risks Relating to the Philippines

A significant portion of the Company’s business activities are conducted in the Philippines and asignificant portion of its infrastructure assets are located in the Philippines, which exposes theCompany to risks associated with the Philippines, including the performance of the Philippineeconomy.

Historically, the Company has derived most of its revenues and operating profits from the Philippinesand its business is dependent on the state of the Philippine economy. Demand for goods importedthrough the Company’s port facilities are directly related to the strength of the Philippine economy(including overall growth and income levels) and the overall levels of business activity in thePhilippines.

In the past, the Philippines has experienced periods of slow or negative growth, high inflation,significant devaluation of its currency and the imposition of exchange controls.

— 35 —

Other factors that may adversely affect the Philippine economy include:

• reduced business, industrial, manufacturing or financial activity in the Philippines or elsewherein Southeast Asia;

• scarcity of credit or other financing available to the Government, corporations or individuals inthe Philippines;

• fluctuations in currency exchange rates and interest rates or prolonged periods of inflation ordeflation;

• significant changes to the Government’s economic, social or tax policies; natural disasters,including tsunamis, typhoons, earthquakes, fires, floods and similar events;

• political instability, terrorism or military conflict in the Philippines, other countries in the regionor globally;

• a downgrade in the long-term foreign and local currency sovereign credit ratings of thePhilippines or the related outlook for such ratings; and

• other regulatory, political or economic developments in or affecting the Philippines.

Any deterioration in economic conditions in the Philippines as a result of these or other factors couldmaterially and adversely affect the Company or its consumers, customers and contractualcounterparties. This, in turn, could materially and adversely affect the Company’s business, financialcondition and results of operations and its ability to implement its business strategy.

Political instability in the Philippines could destabilise the country and may have a negative effecton the Company.

The Philippines has from time to time experienced severe political and social instability. ThePhilippine Constitution provides that, in times of national emergency, when the public interest sorequires, the Government may take over and direct the operation of any privately owned public utilityor business. In the last few years, there were instances of political instability, including public andmilitary protests arising from alleged misconduct by the previous administration.

On 27 March 2014, the Government and the Moro Islamic Liberation Front (“MILF”) signed a peaceagreement, the Comprehensive Agreement on Bangsamoro. On 10 September 2014, the draft of theBangsomoro Basic Law (“BBL”) was submitted by former President Aquino to Congress. The BBL isa draft law intended to establish the Bangsamoro political entity in the Philippines and provide for itsbasic structure of government, which will replace the existing Autonomous Region in MuslimMindanao. Following the Mamasapano incident where high-profile terrorists clashed with armedmembers of the Bangsamoro Islamic Freedom Fighters and MILF leading to the deaths of members ofthe Special Action Force (“SAF”) of the Philippine National Police, MILF, the Bangsamoro IslamicFreedom Fighters, and several civilians, the Congress stalled deliberations on the BBL. The Board ofInquiry on the Mamasapano incident and the Senate released their reports on the Mamasapanoincident. On 27 March 2015, former President Aquino named a Peace Council consisting of fiveoriginal members to study the draft BBL. 17 co-convenors were later named as part of the PeaceCouncil. The Council examined the draft law and its constitutionality and social impact. The CouncilMembers testified before the House of Representatives and the Senate, and submitted their report,which endorses the draft BBL but with some proposed amendments. On 13 and 14 May 2015, theSenate conducted public hearings on the BBL in Zamboanga and Jolo, Sulu, with the Zamboanga Citygovernment and sultanate of Sulu opposing their inclusion in the proposed Bangsamoro entity.

— 36 —

The Philippine Presidential elections were held on 9 May 2016, and on 30 June 2016 PresidentRodrigo Duterte assumed the presidency with a mandate to advance his “Ten-Point Socio-EconomicAgenda” focusing on policy continuity, tax reform, infrastructure spending and countrysidedevelopment, among others. The Duterte government has initiated efforts to build peace withcommunist rebels and other separatists through continuing talks with these groups. The shift to thefederal-parliamentary form of government is likewise targeted to be achieved in two years.

There can be no assurance that the current administration will continue to implement social andeconomic policies favored by the previous administration. Major deviation from the policies of theprevious administration or fundamental change of direction may lead to an increase in political orsocial uncertainty and instability. The President’s unconventional methods may also raise risks ofsocial and political unrest. Any potential instability could have an adverse effect on the Philippineeconomy, which may impact the Company’s business, prospects, financial condition and results ofoperations.

Acts of terrorism could destabilise the country and could have a material adverse effect on theCompany’s assets and financial condition.

The Philippines has been subject to a number of terrorist attacks since 2000. In recent years, thePhilippine army has also been in conflict with the Abu Sayyaf organisation, which has ties to theal-Qaeda terrorist network, and has been identified as being responsible for certain kidnappingincidents and other terrorist activities particularly in the southern part of the Philippines. Moreover,there were isolated bombings in the Philippines in recent years, mainly in regions in the southern partof the Philippines, such as the province of Maguindanao. Although no one has claimed responsibilityfor these attacks, it is believed that the attacks are the work of various separatist groups, possiblyincluding the Abu Sayyaf organisation. An increase in the frequency, severity or geographic reach ofthese terrorist acts could destabilise the Philippines and adversely affect the country’s economy.

The Government of the Philippines and the Armed Forces of the Philippines (“AFP”) have clashedwith members of several separatist groups seeking greater autonomy, including the MILF, the MoroNational Liberation Front (“MNLF”) and the New People’s Army.

In January 2015, a clash took place in Mamasapano in Maguindanao province between the SAF of thePhilippine National Police and the Bangsamoro Islamic Freedom Fighters (“BIFF”) and the MILF,which led to the deaths of 44 members of SAF, 18 from the MILF, five from the BIFF, and severalcivilians, including Zulkifli Abdhir, a Malaysian national included in the US Federal Bureau ofInvestigation’s most wanted terrorists.

On 2 September 2016, a bombing that killed 15 and injured 71 took place in Davao City, Mindanao.It is believed that the Abu Sayyaf organisation and/or their allies are responsible for the bombing.

On 23 May 2017, a deadly firefight in Marawi, Lanao del Sur, erupted between government securityforces and the ISIS affiliated-Maute group, following the government’s offensive to capture allegedISIS leader in Southeast Asia, Isnilon Hapilon, who was believed to be in the city. President Duterteimmediately declared martial law in Mindanao amid protests from the opposition and sectors of civilsociety. In a special joint session convened on 22 July 2017, both Houses of Congress voted to extendmartial law until the end of 2017. President Duterte asked for the extension as the rebellion could notbe completely quashed over the initial 60-day period of martial law. On 17 October 2017, PresidentDuterte declared the liberation of Marawi City from terrorists and the beginning of the rehabilitationof Marawi City. Although top leaders of the Abu Sayyaf organization and the Maute group have beeneliminated since 16 October 2017, martial law has not been lifted as the military still needs to expelremaining terrorist groups. These clashes have resulted in the loss of lives of civilians, soldiers andISIS-inspired extremists, as well as damage to property and livelihood of Marawi residents. Currently,several fund raising activities are being held by local government units to help rebuild Marawi Cityas well as aid families of the soldiers and policemen who were killed in the campaign to retake MarawiCity from the terrorists.

— 37 —

Similar attacks or conflicts between the Government and armed or terrorist groups could lead to

further injuries or deaths of civilians and police or military personnel, which could destabilise parts

of the country and adversely affect the country’s economy. Any such destabilisation could cause

interruption to parts of the Company’s business and materially and adversely affect its financial

conditions, results of operations and prospects.

Territorial disputes with China and a number of Southeast Asian countries may disrupt thePhilippine economy and business environment.

The Philippines, China and several Southeast Asian nations have been engaged in a series of long

standing territorial disputes over certain islands in the West Philippine Sea, also known as the South

China Sea. The Philippines maintains that its claim over the disputed territories is supported by

recognised principles of international law consistent with the United Nations Convention on the Law

of the Sea (“UNCLOS”). Despite efforts to reach a compromise, a dispute arose between the

Philippines and China over a group of small islands and reefs known as the Scarborough Shoal.

Actions taken by both sides have threatened to disrupt trade and other ties between the two countries,including a temporary ban by China on Philippine banana imports, a temporary suspension of tours tothe Philippines by Chinese travel agencies and the rejection by China of the Philippines’ request forarbitral proceedings administered in accordance with the UNCLOS to resolve the disputes.

On 12 July 2016, the Permanent Court of Arbitration ruled in favor of the Philippines against Chinaover territorial disputes in the West Philippine Sea. The arbitral tribunal unanimously ruled, amongothers, that (a) China has “no historical rights” to the resources within the sea areas falling within the“nine-dash line;” (b) Chinese reclamation activity in the West Philippine Sea has caused irreparabledamage to the environment, obligating the Chinese government to stop further activities in the WestPhilippine Sea; and (c) China had violated the Philippines’ sovereign rights in its exclusive economiczone by interfering with Philippine fishing and petroleum exploration, constructing artificial islands,and failing to prevent Chinese fishermen from fishing in the zone. However, China has said it will notrecognise the ruling. With no formal enforcement mechanism in place, the territorial dispute in theWest Philippine Sea remains contentious and unresolved.

There had been other occurrences of territorial disputes with Malaysia and Taiwan. In March 2013,several hundred armed Filipino-Muslims illegally entered Malaysia in a bid to enforce an allegedhistorical claim on the territory. Clashes between the Filipino-Muslim individuals and the Malaysianarmed forces resulted in casualties on both sides. Taiwan imposed economic sanctions on thePhilippines as a result of an incident in May 2013, whereby a Taiwanese fisherman was unintentionallykilled by a Philippine Coast Guard ship that opened fire on his vessel in a disputed exclusive economiczone between Taiwan and the Philippines. The sanctions were eventually lifted after a formal apologywas issued by the Government.

Should territorial disputes between the Philippines and other countries in the region continue orescalate further, the Philippines and its economy may be disrupted and the Company’s operationscould be adversely affected as a result.

Investors may face difficulties enforcing judgments against the Company.

It may be difficult for investors to enforce judgments against the Company obtained outside of thePhilippines. In addition, substantially all of the directors and officers of the Company are residentsof the Philippines, and all or a substantial portion of the assets of such persons are located in thePhilippines. As a result, it may be difficult for investors to effect service of process upon such persons,or to enforce against them judgments obtained in courts or arbitral tribunals outside the Philippinespredicated upon the laws of jurisdictions other than the Philippines.

— 38 —

The Philippines is party to the United Nations Convention on the Enforcement and Recognition of

Arbitral Awards, though it is not party to any international treaty relating to the recognition or

enforcement of foreign judgments. Nevertheless, the Philippine Rules of Civil Procedure provide that

a judgment or final order of a foreign court is, through the institution of an independent action,

enforceable in the Philippines as a general matter, unless there is evidence that: (i) the foreign court

rendering judgment did not have jurisdiction; (ii) the judgment is contrary to the laws, public policy,

customs or public order of the Philippines; (iii) the party against whom enforcement is sought did not

receive notice; or (iv) the rendering of the judgment entailed collusion, fraud, or a clear mistake of

law or fact.

Risks Relating to the Securities

The Securities may not be a suitable investment for all investors.

Each potential investor in the Securities must determine the suitability of that investment in light of

its own circumstances. In particular, each potential investor should:

(i) have sufficient knowledge and experience to make a meaningful evaluation of the Securities, the

merits and risks of investing in the Securities and the information contained or incorporated by

reference in this Offering Circular;

(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its

particular financial situation, an investment in the Securities and the impact the Securities will

have on its overall investment portfolio;

(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the

Securities, including where the currency for principal or Distribution payments is different from

the potential investor’s currency;

(iv) understand thoroughly the terms of the Securities and be familiar with the behaviour of any

relevant financial markets; and

(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for

economic, interest rate and other factors that may affect its investment and its ability to bear the

applicable risks.

The priority of debt evidenced by a public instrument.

Under Philippine law, in the event of liquidation of a company, unsecured debt of the company

(including guarantees of debt) which is evidenced by a public instrument as provided in Article

2244(14) of the Civil Code of the Philippines will rank ahead of unsecured debt of the company which

is not so evidenced. Under Philippine law, a debt becomes evidenced by a public instrument when it

has been acknowledged before a notary or any person authorised to administer oaths in the

Philippines. Although the position is not clear under Philippine law, it is possible that a jurat (which

is a statement of the circumstances in which an affidavit was made) may be sufficient to constitute a

debt evidenced by a public instrument. Some of the Company’s financial indebtedness are covered by

agreements which are embodied in public instruments. However, these agreements contain a waiver

by each of the respective lenders of the benefit of preference or priority accorded to public instruments

under Article 2244(14) of the Civil Code of the Philippines. The waivers are subject to the condition

that all present and future creditors of the Company are in pari passu and no creditor shall be

conferred a superior right on the basis that its credit appear in a public instrument.

— 39 —

The imposition of exchange controls could result in an investor not receiving payments on theSecurities.

The Government has, in the past, instituted restrictions on the conversion of Philippine pesos intoforeign currency and the use of foreign exchange received by Philippine residents to pay foreigncurrency denominated obligations. The Monetary Board of the BSP, with the approval of the Presidentof the Philippines, has statutory authority, during a foreign exchange crisis or in times of nationalemergency, to suspend temporarily or restrict sales of foreign exchange, require licensing of foreignexchange transactions or require delivery of foreign exchange to the BSP or its designee. TheCompany is not aware of any pending proposals by the Government regarding such restrictions.Although the Government has from time to time made public pronouncements of a policy not toimpose restrictions on foreign exchange, there can be no assurance that the Government will maintainsuch policy or will not impose economic or regulatory controls that may restrict free access to foreigncurrency. Any such restriction imposed in the future could adversely affect the ability of investors torepatriate foreign currency upon receipt of any payments from the Company.

The Securities may have limited liquidity.

The Securities constitute a new issue of securities for which there is no existing market. Approvalin-principle has been obtained from the SGX-ST for the listing and quotation of the Securities. Theoffer and sale of the Securities is not conditioned on obtaining a listing of the Securities on theSGX-ST or any other exchange. Although the Joint Lead Managers have advised the Company thatthey currently intend to make a market for the Securities, they are not obligated to do so, and anymarket-making activity with respect to the Securities, if commenced, may be discontinued at any timewithout notice in their sole discretion.

No assurance can be given as to the liquidity of, or the development and continuation of an activetrading market for, the Securities. If an active trading market for the Securities does not develop oris not maintained, the market price and liquidity of the Securities may be adversely affected. If sucha market were to develop, the Securities could trade at prices that may be higher or lower than theprice at which the Securities are issued depending on many factors, including:

• prevailing interest rates;

• the Company’s results of operations and financial condition;

• political and economic developments in and affecting the Philippines;

• the market conditions for similar securities; and

• the financial condition and stability of the Philippine financial sector.

The conditions of the Securities contain provisions which may permit their modification without theconsent of all investors and confer significant discretions on the Trustee which may be exercisedwithout the consent of the Securityholders and without regard to the individual interests ofparticular Securityholders.

The terms and conditions of the Securities contain provisions for calling meetings of Securityholdersto consider matters affecting their interests generally. These provisions permit defined majorities tobind all Securityholders including Securityholders who did not attend and vote at the relevant meetingand Securityholders who voted in a manner contrary to the majority.

The terms and conditions of the Securities also provide that the Trustee may, without the consent ofSecurityholders, agree to (i) any modification (except as mentioned in the Trust Deed) of, or to the

— 40 —

waiver or authorisation of any breach or proposed breach of, any of the provisions of Securities if, inthe opinion of the Trustee, the interests of the Securityholders will not be materially prejudicedthereby; or (ii) any modification which, in its opinion, is of a formal, minor or technical nature or tocorrect a manifest error or is made to comply with mandatory provisions of law.

The Securities may be subject to withholding taxes in circumstances where the Issuer is not obligedto make gross up payments and this would result in holders receiving less distributions thanexpected and could significantly adversely affect their return on the Securities.

The U.S. “Foreign Account Tax Compliance Act” (or “FATCA”) imposes a new reporting regime and,potentially, a 30% withholding tax with respect to (i) certain payments from sources within the UnitedStates, (ii) “foreign passthru payments” made to certain non-U.S. financial institutions that do notcomply with this new reporting regime, and (iii) payments to certain investors that do not provideidentification information with respect to interests issued by a participating non-U.S. financialinstitution. Whilst the Securities are in global form and held within the clearing systems, in all but themost remote circumstances, it is not expected that FATCA will affect the amount of any paymentreceived by the clearing systems. However, FATCA may affect payments made to custodians orintermediaries in the subsequent payment chain leading to the ultimate investor if any such custodianor intermediary generally is unable to receive payments free of FATCA withholding. It also may affectpayment to any ultimate investor that is a financial institution that is not entitled to receive paymentsfree of withholding under FATCA, or an ultimate investor that fails to provide its broker (or othercustodian or intermediary from which it receives payment) with any information, forms, otherdocumentation or consents that may be necessary for the payments to be made free of FATCAwithholding. Investors should choose the custodians or intermediaries with care (to ensure each iscompliant with FATCA or other laws or agreements related to FATCA) and provide each custodian orintermediary with any information, forms, other documentation or consents that may be necessary forsuch custodian or intermediary to make a payment free of FATCA withholding. The Issuer’sobligations under the Securities are discharged once it has paid the common depositary or commonsafekeeper for the clearing systems and the Issuer has therefore no responsibility for any amountthereafter transmitted through the clearing systems and custodians or intermediaries. Prospectiveinvestors should refer to the section “Taxation — U.S. Foreign Account Tax Compliance Act”.

The Company has not obtained BSP approval for the Securities Guarantee.

The Company has not obtained the approval of the Bangko Sentral ng Pilipinas (“BSP”) for theissuance of the Securities Guarantee and, accordingly, the Company will not be able to purchase U.S.dollars from the Philippine banking system for the purpose of funding payments under the SecuritiesGuarantee. The Company believes that it will be able to obtain sufficient U.S. dollars to meet itsobligations under the Securities Guarantee from sources outside the Philippine banking system.

The Issuer is a special purpose vehicle.

The Issuer is a special purpose finance company which is an indirect subsidiary of the Company. TheIssuer will on-lend the proceeds from the sale of the Securities to the Company or the subsidiaries ofthe Company (the “Intercompany Loans”). The Issuer will depend on payments on the IntercompanyLoans to provide it with funds to meet its obligations under the Securities, including payments ofdistributions and principal thereon.

The Issuer has limited assets, no subsidiaries, and a limited ability to generate revenues. See “TheIssuer”. Upon completion of the offering of the Securities, the only significant assets of the Issuer willbe the receivables under the Intercompany Loans. The Issuer’s material liabilities will be theSecurities. As such, the Issuer will be dependent upon payment under the Intercompany Loans to makeany payments due on the Securities. Should the Company or any of its subsidiaries be unable to fundthe Intercompany Loans in the future, the Issuer would be unable to meet its obligations under theSecurities.

— 41 —

The Securities are perpetual securities and investors have no right to require redemption.

The Securities are perpetual and have no fixed final maturity date. Holders have no right to requirethe Issuer to redeem the Securities at any time and they can only be disposed of by sale. Holders whowish to sell their Securities may be unable to do so at a price at or above the amount they have paidfor them, or at all, if insufficient liquidity exists in the market for the Securities. Therefore, holdersof Securities should be aware that they may be required to bear the financial risks of an investmentin the Securities for an indefinite period of time.

The Issuer and the Company may raise other capital which affects the price of the Securities.

The Issuer may from time to time and without prior consultation of the holders of the Securities createand issue further Securities (see “Terms and Conditions of the Securities —Further Issues”).Furthermore, the Issuer and/or the Company may raise additional capital through the issue of othersecurities or other means. Under the terms of the Securities, there is no restriction, contractual orotherwise, on the amount of Securities which the Issuer may further issue or securities or otherliabilities which the Issuer and the Company may issue or incur and which rank senior to, or pari passuwith, the Securities. The issue of any further Securities or such securities or the incurrence of any suchother liabilities may reduce the amount (if any) recoverable by holders of the Securities on aWinding-Up of the Issuer and/or the Company, and may also have an adverse impact on the tradingprice of the Securities and/or the ability of holders to sell them.

Holders may not receive Distribution payments if the Issuer elects to defer Distribution payments.

The Issuer or the Guarantor may, at its sole discretion and subject to certain conditions, elect to deferany scheduled Distributions on the Securities for any period of time. Neither the Issuer nor theGuarantor is subject to any limits as to the number of times Distributions and Arrears of Distributionscan be deferred. Although, following a deferral, Arrears of Distributions are cumulative subject to theConditions, the Issuer or the Guarantor may defer their payment for an indefinite period of time bydelivering the relevant deferral notices to the Securityholders. Any such deferral of Distribution shallnot constitute a default for any purpose unless, in the case of a deferral, such payment is required inaccordance with Condition 4.6 of the Terms and Conditions of the Securities.

Any deferral of Distributions will likely have an adverse effect on the market price of the Securities.In addition, as a result of the Distributions deferral provision of the Securities, the market price of theSecurities may be more volatile than the market prices of other debt securities on which original issuediscount or interest accrues that are not subject to such deferrals and may be more sensitive generallyto adverse changes in the Company’s financial condition.

The Securities may be redeemed at the Issuer’s option on the First Call Date or on any subsequentDistribution Payment Date or upon the occurrence of certain other events.

The Securities are redeemable at the option of the Issuer, in whole but not in part on the First CallDate or on any subsequent Distribution Payment Date at 100% of their principal amount together withall other outstanding amounts due under the Securities accrued to the date fixed for redemption.

The Issuer also has the right to redeem the Securities upon the occurrence of certain changes in theDutch or Philippine tax law requiring the payment of Additional Amounts (as defined under the Termsand Conditions of the Securities). In addition, the Securities may be redeemed (in whole but not inpart) at the option of the Issuer (A) upon the occurrence of a Change of Control Event (as definedunder the Terms and Conditions of the Securities) (i) at any time prior to (but excluding) the First CallDate at the Special Redemption Price (as defined under the Terms and Conditions of the Securities)or (ii) on or at any time after the First Call Date at the Redemption Price, (B) upon the occurrenceof a Reference Security Default Event at any time at the Redemption Price, (C) upon the occurrence

— 42 —

of an Accounting Event (i) at any time prior to (but excluding) the First Call Date at the PremiumRedemption Price (as defined under the Terms and Conditions of the Securities) or (ii) on or at anytime after the First Call Date at the Redemption Price, (D) upon the occurrence of a Tax Event (asdefined under the Terms and Conditions of the Securities) (i) at any time prior to (but excluding) theFirst Call Date at the Special Redemption Price or (ii) on or at any time after the First Call Date atthe Redemption Price, or (E) in the event less than 25 per cent. of the aggregate principal amount ofthe Securities originally issued remain outstanding (i) at any time prior to (but excluding) the FirstCall Date at the Premium Redemption Price (as defined under the Terms and Conditions of theSecurities) or (ii) on or at any time after the First Call Date at the Redemption Price, in each case onthe giving irrevocable notice of redemption to the Securityholders in accordance with Condition 12.1(Notices to Securityholders) of the Terms and Conditions of the Securities and to the Trustee and thePrincipal Paying Agent in writing.

The date on which the Issuer elects to redeem the Securities and the Final Maturity Date may notaccord with the preference of individual Securityholders. This may be disadvantageous to theSecurityholders in light of market conditions or the individual circumstances of the holder of theSecurities. In addition, an investor may not be able to reinvest the redemption proceeds in comparablesecurities at an effective distribution rate at the same level as that of the Securities.

There are limited remedies for default under the Securities and the Securities Guarantee.

There are limited remedies for default under the Securities and the Securities Guarantee. ScheduledDistribution will not be due if the Issuer or the Guarantor elects to defer that Distribution pursuantto the Conditions. Notwithstanding any of the provisions relating to non-payment defaults, the rightto institute Winding-Up proceedings is limited to circumstances where payment has become due andIssuer (failing whom, the Guarantor) fails to make the payment when due. The only remedy againstthe Issuer or the Guarantor available to the Trustee or (where the Trustee has failed to proceed againstthe Issuer or the Guarantor, as the case may be, as provided in the Conditions) any Securityholder forrecovery of amounts in respect of the Securities or the Securities Guarantee following the occurrenceof a payment default after any sum becomes due in respect of the Securities or the SecuritiesGuarantee will be instituting Winding-Up proceedings and/or proving and/or claiming in Winding-Upin respect of any of the Issuer’s or the Guarantor’s payment obligations arising from the Securities,the Securities Guarantee and the Trust Deed.

The Trustee may request the Securityholders to provide an indemnity and/or security and/orprefunding to its satisfaction.

In certain circumstances (including without limitation the institution of proceedings for theWinding-Up of the Issuer, the Guarantor or both of them (as applicable) and/or proving in theWinding-Up of the Issuer, the Guarantor or both of them (as applicable) and/or claiming in theliquidation of the Issuer, the Guarantor or both of them (as applicable) and/or the institution ofproceedings against the Issuer, the Guarantor or both of them (as applicable) to enforce any term orcondition binding on the Issuer and/or the Guarantor under the Trust Deed or the Securities (subjectto certain exceptions), all as contemplated in Condition 10 of the Terms and Conditions of theSecurities), the Trustee may (at its sole discretion) request Securityholders to provide an indemnityand/or security and/or prefunding to its satisfaction before it takes actions on behalf ofSecurityholders. The Trustee shall not be obliged to take any such actions if not first indemnifiedand/or prefunded and/or secured to its satisfaction. Negotiating and agreeing to an indemnity and/orsecurity and/or prefunding can be a lengthy process and may impact on when such actions can betaken. The Trustee may not be able to take actions, notwithstanding the provision of an indemnity orsecurity or prefunding to it, in breach of the terms of the Trust Deed constituting the Securities andin such circumstances, or where there is uncertainty or dispute as to the applicable laws or regulations,to the extent permitted by the agreements and the applicable laws and regulations, it will be for theSecurityholders to take such actions directly.

— 43 —

There is no prior market for the Securities.

The Securities are new issues of Securities for which there is currently no trading market. If the

Securities are traded after they are issued, they may trade at a discount from their initial offering price,

depending on many factors, including prevailing interest rates, the market for similar securities,

general economic conditions, and the Company’s financial condition, performance and prospects.

Although approval-in-principle has been received from the SGX-ST for permission to deal in and the

listing and quotation of the Securities, the Issuer and the Company cannot guarantee that such listing

will be maintained, or that, if listed, a liquid trading market will develop or continue. If an active

trading market for the Securities does not develop or continue, the market price and liquidity of the

Securities may be adversely affected. The Issuer may elect to apply for a de-listing of the Securities

from any stock exchange or markets of such stock exchange on which they are traded because the

maintenance of such listing is or would be unduly burdensome.

— 44 —

TERMS AND CONDITIONS OF THE SECURITIES

The following (other than sentences in italics and subject to completion and amendment) are the termsand conditions substantially in the form in which they will be endorsed on the Securities if issued indefinitive certificated form, and which will be incorporated by reference into the Global Certificaterepresenting the Securities, subject to the provisions of such Global Certificate.

The issue of the securities in registered form comprising the U.S.$350,000,000 5.875% seniorguaranteed perpetual securities (the “Securities,” which expression shall, in these Conditions, unlessthe context otherwise requires, include any further Securities issued pursuant to Condition 9 andforming a single series with the Securities) of Royal Capital B.V. (the “Issuer”), was authorised bya resolution of the Board of Directors of the Issuer passed on 10 January 2018 and the guarantee ofthe Securities were authorised by resolutions of the Board of Directors of International ContainerTerminal Services, Inc. (the “Guarantor”) on 5 January 2018. The Securities are constituted by a trustdeed (as amended and/or supplemented from time to time, the “Trust Deed”) dated 18 January 2018(the “Issue Date”) among the Issuer, the Guarantor and Citicorp International Limited as trustee (the“Trustee”, which term shall, where the context so permits, include all other persons or companies forthe time being acting as trustee or trustees under the Trust Deed) for the holders of the Securities. TheIssuer and the Guarantor have entered into an agency agreement (as amended and/or supplementedfrom time to time, the “Agency Agreement”) dated 18 January 2018 with the Trustee, Citibank, N.A.,London Branch as principal paying agent (the “Principal Paying Agent”) and as transfer agent (the“Transfer Agent”), Citibank, N.A., London Branch as registrar (the “Registrar”) and the other agentsappointed under it, relating to the Securities. The expression “Paying Agents” includes the PrincipalPaying Agent. The Principal Paying Agent, the Registrar, the Transfer Agent and any other agentsappointed under the Agency Agreement are collectively referred to as the “Agents”, and suchexpression includes any successor or additional agent appointed pursuant to the Agency Agreementwith respect to the Securities. References to the “Principal Paying Agent”, “Paying Agent”,“Registrar”, “Transfer Agent” and “Agents” below are references to the principal paying agent,paying agent, registrar, transfer agent and agents for the time being. The statements in these terms andconditions (these “Conditions”) include summaries of, and are subject to, the detailed provisions ofthe Trust Deed and the Agency Agreement. Copies of the Trust Deed and of the Agency Agreementare available for inspection upon prior written request and satisfactory proof of holding at allreasonable times during normal business hours on any weekday (except public holidays) bySecurityholders at the principal place of business in Hong Kong of the Trustee, being at 39/F,Champion Tower, Three Garden Road, Central, Hong Kong at the Issue Date. The Securityholders areentitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the TrustDeed and those provisions of the Agency Agreement applicable to them. Capitalised terms nototherwise defined herein or in Condition 18 shall have the meaning given to them in the Trust Deedunless the context otherwise requires.

1. STATUS OF THE SECURITIES AND THE SECURITIES GUARANTEE

1.1 Status of the Securities

The Securities constitute direct, unconditional, unsecured and unsubordinated obligations of theIssuer and will at all times rank pari passu without any preference among themselves and withall other outstanding unsecured and unsubordinated obligations of the Issuer, past and future,but, in the event of insolvency, only to the extent permitted by applicable laws relating tocreditors’ rights.

The claims of the Securityholders in respect of the Securities, including in respect of any claimto Arrears of Distribution, will, in the event of the Winding-Up of the Issuer (subject to and tothe extent permitted by applicable law), rank pari passu with each other and with all otherunsubordinated obligations of the Issuer.

— 45 —

1.2 No set-off

To the extent and in the manner permitted by applicable law, no Securityholder may exercise,claim or plead any right of set-off, counterclaim, compensation or retention in respect of anyamount owed to it by the Issuer in respect of, or arising from, the Securities and eachSecurityholder will, by virtue of his holding of any Security, be deemed to have waived all suchrights of set-off, counterclaim, compensation or retention.

1.3 No Voting Rights

The Securities do not confer any voting rights to Securityholders with respect to the ordinaryshares or any other class of share capital of the Issuer.

2. SECURITIES GUARANTEE

2.1 Status of the Securities Guarantee

The payment of principal of and Distributions on the Securities and all other moneys payable bythe Issuer under or pursuant to the Trust Deed has been unconditionally and irrevocablyguaranteed on an unsubordinated basis by the Guarantor (the “Securities Guarantee”) in theTrust Deed.

The claims of the Securityholders in respect of the Securities Guarantee, including in respect ofany claim to Arrears of Distribution, will, in the event of the Winding-Up of the Guarantor(subject to and to the extent permitted by applicable law), rank pari passu with each other andwith all unsubordinated obligations of the Guarantor.

2.2 No set-off

To the extent and in the manner permitted by applicable law, no Securityholder may exercise,claim or plead any right of set-off, counterclaim, compensation or retention in respect of anyamount owed to it by the Guarantor in respect of, or arising from, the Securities Guarantee andeach Securityholder will, by virtue of his holding of any Security, be deemed to have waived allsuch rights of set-off, counterclaim, compensation or retention.

3. FORM, DENOMINATION AND TITLE

3.1 Form and Denomination

The Securities are issued in registered form in the specified denomination of U.S.$200,000 andintegral multiples of U.S.$1,000 in excess thereof (referred to as the “principal amount” of aNote). An individual certificate (a “Certificate”) will be issued to each Securityholder in respectof its registered holding or holdings of Securities.

Each Certificate will be serially numbered with an identifying number which will be recorded inthe register of Securityholders (the “Register”).

The Securities are not issuable in bearer form.

3.2 Title and Transfer

(a) Title to the Securities passes upon registration of transfers in the Register which the Issuerwill procure to be kept by the Registrar in accordance with the provisions of the AgencyAgreement. The registered Holder of any Security will (except as ordered by a court ofcompetent jurisdiction or as otherwise required by law) be treated as its absolute owner forall purposes (whether or not any payment in respect of it is overdue and regardless of anynotice of ownership, trust or any interest in it, any writing on it (other than a duly

— 46 —

completed and endorsed form of transfer in respect of such Security) or its theft or loss) andno person will be liable for so treating such Holder. In these Conditions, “Securityholder”and (in relation to a Security) “Holder” mean the person in whose name a Security isregistered in the Register.

For a description of the procedures for transferring title to book-entry interests in theSecurities, see “Clearing and Settlement of the Securities”.

(b) Subject to Condition 3.2(e), one or more Securities may be transferred in whole or in partin their principal amount(s). Any Security or Securities represented by one or moreCertificates may be transferred only upon the surrender, at the specified office of theRegistrar or any Transfer Agent, of the Certificate(s) representing such Security(s) to betransferred, with the form of transfer endorsed on such Certificate duly completed andexecuted and together with such other evidence as the Registrar or the relevant TransferAgent may require. In the case of a transfer of part only of a holding of Securitiesrepresented by one Certificate, a new Certificate will be issued to the transferee in respectof the part transferred and a further new Certificate in respect of the balance of the holdingnot transferred will be issued to the transferor.

For a description of certain restrictions on transfers of interests in the Securities, see“Subscription and Sale”.

(c) Each new Certificate to be issued pursuant to Condition 3.2(b) will be available for deliveryand the Registrar shall register the transfer in question within five business days of receiptof such form of transfer. Delivery of new Certificate(s) shall be made at the specified officeof the Transfer Agent or the Registrar, as the case may be, to whom delivery shall have beenmade or, at the option of the Holder making such delivery as aforesaid and as specified inthe form of transfer or otherwise in writing, shall be mailed by pre-paid first class post atthe risk of the Holder entitled to the new Certificate to such address as may be so specified,unless such Holder requests otherwise and pays in advance to the relevant Transfer Agentor the Registrar (as the case may be) the costs of such other method of delivery and/or suchinsurance as it may specify. For the purposes only of this Condition 3.2(c), “business day”means a day, other than a Saturday or Sunday, on which banks are open for business in theplace of the specified office of the Transfer Agent and the Registrar.

Except in the limited circumstances described herein (see “The Global Certificate”),owners of interests in the Securities will not be entitled to receive physical delivery ofCertificates. Issues of Certificates upon transfer of Securities are subject to compliance bythe transferor and transferee with the certification procedures described above and in theAgency Agreement.

(d) Transfers of Securities and Certificates representing such Securities in accordance withthese Conditions on registration or transfer will be effected without charge by or on behalfof the Issuer, the Registrar or the Transfer Agent, but upon payment (or the giving of suchindemnity and/or security and/or pre-funding as the Registrar or the relevant Transfer Agentmay require in respect thereof) of any tax, duty or other governmental charges which maybe imposed in relation to it.

(e) No Securityholder may require the transfer of a Security to be registered during the periodof 15 calendar days ending on the due date for any payment of principal, premium (if any)or distributions of that Security.

(f) All transfers of Securities and entries on the Register will be made subject to the detailedregulations concerning the transfer of Securities scheduled to the Agency Agreement. Theregulations may be changed by the Issuer in any manner which is reasonably required bythe Issuer with the prior written approval of the Trustee and the Registrar, and by the

— 47 —

Registrar with the prior written approval of the Trustee. A copy of the current regulationswill be sent by the Registrar to any Securityholder (free of charge to the Holder and at theIssuer’s (failing which, the Guarantor’s) expense) upon written request and satisfactoryproof of holding.

4. DISTRIBUTIONS

4.1 Rate of Distribution

Subject to Condition 4.4 and Condition 4.5, the Securities will confer a right to receivedistributions (“Distributions”) at the rate of 5.875 per cent. per annum (the “Rate ofDistribution”), payable semi-annually in arrear on 5 November and 5 May of each year (eacha “Distribution Payment Date”) commencing on 5 May 2018.

4.2 Distribution Accrual

Each Security will cease to accrue Distributions from and including its due date for redemptionunless, upon due presentation, payment of the principal in respect of the Security is improperlywithheld or refused or unless default is otherwise made in respect of payment, in which eventDistributions shall continue to accrue as provided in the Trust Deed.

4.3 Broken Amounts

When any Distribution is required to be calculated in respect of a period of less than a full sixmonths, it shall be calculated on the basis of a 360-day year consisting of 12 months of 30 dayseach and, in the case of an incomplete month, the number of days elapsed on the basis of a monthof 30 days.

4.4 Increase in Rate of Distribution

Following the earlier to occur of:

(a) the date which is the 61st day, or if such day is not a Business Day the first Business Daythereafter, following a Change of Control Event; and

(b) the date on which a Reference Security Default Event occurs,

the Rate of Distribution will increase by 2.5 per cent. per annum with effect from the nextDistribution Payment Date (or, if the relevant event occurs two Business Days prior to the nextDistribution Payment Date, the next following Distribution Payment Date).

A “Change of Control Event” means the Permitted Holders ceasing to beneficially own at least35 per cent. of the outstanding voting capital stock of the Guarantor plus one share.

The “Permitted Holders” means (i) Mr. Enrique K. Razon Jr., (ii) any Affiliate of Mr. EnriqueK. Razon Jr., or (iii) any Person who is a Related Person with respect to those mentioned in (i)or (ii) above.

“Reference Security Default Event” means an event of default which occurs pursuant tocondition 10.1(b) of ICTSI Treasury B.V.’s outstanding approximately U.S.$400 million 5.875per cent. Senior Notes due 2025, guaranteed by the Guarantor (the “Senior Notes”) (ISIN:XS0972298300), or similar condition of any U.S. dollar denominated debt security issued for, orthe net proceeds of which are used to refinance or refund, replace, exchange, renew, repay,defease or discharge the Senior Notes prior to their maturity (the “Refinancing Securities”), asa result of the default in, non-compliance with or non-performance of condition 4 of the SeniorNotes or similar condition of the Refinancing Securities, as the case may be, by either of ICTSI

— 48 —

Treasury B.V. or the Guarantor, as such Senior Notes or Refinancing Securities are amended fromtime to time in accordance with condition 15 of the Senior Notes and the trust deed dated 9January 2013 (as amended and supplemented from time to time) constituting the Senior Notes,or similar condition of the Refinancing Securities, as the case may be.

4.5 Optional Deferral of Distributions

(a) The Issuer or the Guarantor may, in its sole and absolute discretion, on any day which isnot less than five Business Days prior to any Distribution Payment Date, resolve to deferpayment of any or all of the Distribution which would otherwise be payable on thatDistribution Payment Date unless, during the six months ending on that scheduledDistribution Payment Date a Compulsory Distribution Payment Event has occurred (the“Deferral Election Event”). Any such deferred Distribution will constitute “Arrears ofDistribution” and will not be due and payable until the relevant Payment Reference Date.Distributions will accrue on each Arrears of Distribution for so long as such Arrears ofDistribution remains outstanding at the same Rate of Distribution as the Principal Amountof the Securities bears at such time and will be added to such Arrears of Distribution (andthereafter bear Distributions accordingly) on each Distribution Payment Date.

(b) The Issuer or, as the case may be, the Guarantor will notify the Securityholders (inaccordance with Condition 12.1) and the Trustee and the Principal Paying Agent in writingof any deferral of Distribution not less than five Business Days prior to the relevantDistribution Payment Date (the “Deferral Election Notice”). Deferral of a Distributionpursuant to Condition 4.5(a) will not constitute a default by the Issuer or the Guarantor orany other breach of their respective obligations under the Securities or the Trust Deed orfor any other purpose.

(c) Each Deferral Election Notice shall be accompanied, in the case of the notice to the Trusteeand the Principal Paying Agent, by a certificate in the form scheduled to the Trust Deedsigned by two Authorised Signatories of the Guarantor confirming that no CompulsoryDistribution Payment Event has occurred.

The Trustee shall accept such certificate as sufficient evidence of the occurrence of aDeferral Election Event and it shall be conclusive and binding on the Securityholders.

(d) Neither the Issuer nor the Guarantor is subject to any limit as to the number of timesDistributions and Arrears of Distributions may be deferred pursuant to the provisions ofCondition 4.5(a).

“Compulsory Distribution Payment Event” means (i) a discretionary dividend, distribution,interest or other payment has been paid or declared on or in respect of any Junior Securities or(except on a pro-rata basis) Parity Securities of the Issuer and/or the Guarantor, other than adividend, distribution or other payment in respect of an employee benefit plan or similararrangement with or for the benefit of employees, officers, directors and consultants of the Issuerand/or the Guarantor; or (ii) at the discretion of the Issuer or the Guarantor, any Junior Securitiesor Parity Securities have been redeemed, repurchased or otherwise acquired by the Issuer or theGuarantor.

4.6 Restrictions in the case of Deferral

If on any Distribution Payment Date, payment of all Distributions scheduled to be made on suchdate is not made in full by reason of the Issuer deferring such Distributions in accordance withthe terms of the Securities, neither the Issuer nor the Guarantor shall:

(a) declare or pay any discretionary dividends, distributions or make any other payment on, andwill procure that no discretionary dividend, distribution or other payment is made on its

— 49 —

Junior Securities or (except on a pro-rata basis) its Parity Securities other than a dividend,distribution or other payment in respect of an employee benefit plan or similar arrangementwith or for the benefit of employees, officers, directors and consultants of the Issuer and/orthe Guarantor; or

(b) at its discretion, redeem, reduce, cancel, buy-back or acquire for any consideration itsJunior Securities or its Parity Securities,

unless and until (i) the Issuer or the Guarantor has satisfied in full all outstanding Arrears ofDistribution; or (ii) the Issuer or the Guarantor is permitted to do so with the consent of theSecurityholders holding more than 50 per cent. in aggregate principal amount of the Securitiesthen outstanding.

4.7 Payment of Arrears of Distribution

(a) The Issuer may elect to pay Arrears of Distribution (in whole or in part) at any time on thegiving of at least five Business Days’ prior notice to Securityholders (in accordance withCondition 12.1) and to the Trustee and the Principal Paying Agent in writing. If not paidearlier, Arrears of Distribution will become due and payable, and the Issuer must pay suchArrears of Distribution (including any amount of Distribution accrued thereon inaccordance with Condition 4.5(a)), on the relevant Payment Reference Date (in accordancewith Condition 6). Any partial payment of outstanding Arrears of Distribution by the Issuershall be made on a pro-rata basis between the Securityholders.

(b) “Payment Reference Date” means the date which is the earliest of:

(i) the date on which the Securities are redeemed;

(ii) the date on which an order is made for the Winding-Up of the Guarantor;

(iii) the date on which the Issuer or the Guarantor is in violation of Condition 4.6 or thedate on which a Compulsory Distribution Payment Event has occurred; and

(iv) the date of any substitution or modification pursuant to Condition 13.

5. REDEMPTION AND PURCHASE

5.1 Redemption

The Securities are perpetual securities in respect of which there is no fixed redemption date.

5.2 Redemption at the option of the Issuer

Subject to applicable law, the Issuer may redeem the Securities (in whole but not in part) on:

(a) 5 May 2022 (the “First Call Date”); or

(b) any Distribution Payment Date falling after the First Call Date.

in each case, at the Redemption Price, on the giving of not less than 30 and not more than 60calendar days’ irrevocable notice of redemption to the Securityholders in accordance withCondition 12.1.

— 50 —

5.3 Early redemption due to a Gross-up Event

(a) If the Issuer or the Guarantor satisfies the Trustee that a Gross-up Event has occurred, theIssuer may redeem the Securities (in whole but not in part) at the Redemption Price, on thegiving of not less than 30 and not more than 60 calendar days’ irrevocable notice ofredemption to the Securityholders in accordance with Condition 12.1 and to the Trustee andthe Principal Paying Agent in writing.

(b) No such notice of redemption may be given earlier than 45 calendar days prior to theearliest calendar day on which the Issuer or, as the case may be, the Guarantor would befor the first time obliged to pay the Additional Amounts in question on payments due inrespect of the Securities.

(c) Prior to the giving of any such notice of redemption, the Issuer will deliver or procure thatthere is delivered to the Trustee:

(i) a certificate signed by any two Authorised Signatories of the Issuer stating that theIssuer is entitled to effect such redemption and setting out a statement of factsshowing that the conditions to the exercise of the right of the Issuer to redeem havebeen satisfied and that the obligation to pay Additional Amounts cannot be avoided bythe Issuer or, as the case may be, the Guarantor taking reasonable measures availableto it; and

(ii) an opinion of an independent legal or tax adviser of recognised standing to the effectthat the Issuer or, as the case may be, the Guarantor has or will become obliged to paythe Additional Amounts in question as a result of a Gross-up Event,

and the Trustee shall be entitled to accept the above certificate and opinion as sufficient evidenceof the satisfaction of the conditions precedent set out above, in which event the same shall beconclusive and binding on the Securityholders.

(d) “Gross-up Event” means that as a result of any change in, or amendment to, the laws ortreaties (or any rules or regulations thereunder) of any Relevant Jurisdiction, or any changein or amendment to any official interpretation or application of those laws, treaties or rulesor regulations, which change or amendment becomes effective on or after the Issue Date (i)the Issuer has or will become obliged to pay Additional Amounts; or (ii) the Guarantor hasor will become obliged to pay Additional Amounts; provided that (in either case) thepayment obligation cannot be avoided by the Issuer or, as the case may be, the Guarantortaking reasonable measures available to it; provided further that where any AdditionalAmounts due in accordance with Condition 7 are in consequence of any change in the lawsor treaties of the Republic of the Philippines after the Issue Date, a Gross-Up Event shallhave occurred only in the event that the rate of withholding or deduction required by suchlaw or treaty is in excess of 20 per cent.

5.4 Early redemption due to a Change of Control Event, Reference Security Default Event,Accounting Event or Tax Event

(a) If a Change of Control Event occurs, the Issuer may redeem the Securities (in whole butnot in part) (i) at any time prior to but excluding the First Call Date at the SpecialRedemption Price or (ii) on or at any time after the First Call Date at the Redemption Price,in each case on the giving of not less than 30 and not more than 60 calendar days’irrevocable notice of redemption to the Securityholders in accordance with Condition 12.1and to the Trustee and the Principal Paying Agent in writing.

— 51 —

(b) If a Reference Security Default Event occurs, the Issuer may redeem the Securities (in

whole but not in part) at any time at the Redemption Price, on the giving of not less than

30 and not more than 60 calendar days’ irrevocable notice of redemption to the

Securityholders in accordance with Condition 12.1 and to the Trustee and the Principal

Paying Agent in writing.

(c) If an Accounting Event occurs, the Issuer may redeem the Securities (in whole but not in

part) (i) at any time prior to but excluding the First Call Date at the Premium Redemption

Price or (ii) on or at any time after the First Call Date at the Redemption Price, in each case

on the giving of not less than 30 and not more than 60 calendar days’ irrevocable notice of

redemption to the Securityholders in accordance with Condition 12.1 and to the Trustee and

the Principal Paying Agent in writing.

(d) If a Tax Event occurs, the Issuer may redeem the Securities (in whole but not in part) (i)

at any time prior to but excluding the First Call Date at the Special Redemption Price or

(ii) on or at any time after the First Call Date at the Redemption Price, in each case on the

giving of not less than 30 and not more than 60 calendar days’ irrevocable notice of

redemption to the Securityholders in accordance with Condition 12.1 and to the Trustee and

the Principal Paying Agent in writing.

(e) Such notice of redemption as provided in Conditions 5.4(a), 5.4(b), 5.4(c) and 5.4(d) may

only be given simultaneously with or after a notification by the Issuer to the

Securityholders in accordance with Condition 12.1 and notice in writing to the Trustee and

the Principal Paying Agent that a Change of Control Event, a Reference Security Default

Event, an Accounting Event or a Tax Event (as the case may be) has occurred.

An “Accounting Event” means that an opinion of a recognised accountancy firm of international

standing has been delivered to (i) the Issuer or the Guarantor and (ii) the Trustee, stating the

Securities may no longer be recorded as “equity” in the audited consolidated financial statements

of the Guarantor prepared in accordance with PFRS or other recognised accounting standards

that the Guarantor has adopted from time to time for the preparation of its audited consolidated

financial statements and such event cannot be avoided by the Issuer or the Guarantor taking

reasonable measures available to it.

A “Tax Event” means that the Issuer and/or the Guarantor receives an opinion from an

internationally recognised law firm, accounting firm, or practitioner experienced in taxation that,

due to a change in law, rule, regulation or official interpretation, there is more than an

insubstantial risk that the Issuer will no longer be able to obtain a deduction for the purposes of

corporations tax of the Kingdom of the Netherlands for any payment of interest in respect of any

distribution under the Securities.

5.5 Purchase of Securities

The Issuer, the Guarantor or any of their respective Subsidiaries may, in compliance with

applicable laws, purchase Securities in any manner and at any price. Such acquired Securities

may be surrendered for cancellation or held or resold. The Securities so purchased, while held

by or on behalf of the Issuer, the Guarantor or any such Subsidiary, shall not entitle the holder

to vote at any meetings of the Securityholders and shall not be deemed to be outstanding for

certain purposes, including without limitation for the purposes of calculating quorums at

meetings of the Securityholders or for the purposes of Conditions 10 or 14.1.

— 52 —

5.6 Redemption of Securities in the case of minimal outstanding amounts

In the event that the Issuer, the Guarantor and/or any Subsidiary of the Guarantor has,individually or in aggregate, purchased (and not resold) or redeemed Securities equal to or inexcess of 75 per cent. of the aggregate Principal Amount of the Securities issued on the IssueDate, the Issuer may redeem the remaining Securities (in whole but not in part):

(a) at any time prior to the First Call Date, at the Premium Redemption Price; or

(b) on or at any time after the First Call Date, at their Redemption Price,

on the giving of not less than 30 and not more than 60 calendar days’ irrevocable notice ofredemption to the Securityholders in accordance with Condition 12.1 and to the Trustee and thePrincipal Paying Agent in writing.

The Trustee and the Agents shall not be required to take any steps to ascertain whether aGross-Up Event, Change of Control Event, Reference Security Default Event, Accounting Eventor Tax Event has occurred and shall not be responsible or liable to the Securityholders, the Issuer,the Guarantor or any other person for any loss arising from any failure to do so.

6. PAYMENTS

6.1 Principal and Distributions

Payments of principal, premium (if any), and Distributions (including any Arrears ofDistribution) will be made by transfer to the registered account of the Securityholder or by U.S.dollar cheque drawn on a bank that processes payments in U.S. dollars mailed to the registeredaddress of the Securityholder if it does not have a registered account. Payments of principal,premium (if any) and payments of distributions due otherwise than on a Distribution PaymentDate will only be made against surrender of the relevant Certificate at the specified office of anyPaying Agent. Distributions (including any Arrears of Distribution) on Securities due on aDistribution Payment Date will be paid to the Holder shown on the Register at the close ofbusiness on the date (the “record date”) being the fifteenth day before the relevant DistributionPayment Date.

For the purposes of this Condition 6.1, a Securityholder’s registered account means the U.S.dollar account maintained by or on behalf of it with a bank that processes payments in U.S.dollars, details of which appear on the Register at the close of business, in the case of principal,premium (if any) and distributions due otherwise than on a Distribution Payment Date, on thesecond Business Day (as defined below) before the due date for payment and, in the case ofdistributions due on a Distribution Payment Date, on the relevant record date, and aSecurityholder’s registered address means its address appearing on the Register at that time.

So long as the Global Certificate is held on behalf of Euroclear, Clearstream, Luxembourg or anyother clearing system, each payment in respect of the Global Certificate will be made to theperson shown as the Securityholder in the register at the close of business of the relevantclearing system on the Clearing System Business Day before the due date for such payments,where “Clearing System Business Day” means a weekday (Monday to Friday, inclusive) except25 December and 1 January.

6.2 Payments subject to Applicable Laws

Payments in respect of principal, premium (if any) and distributions on Securities are subject inall cases to any fiscal or other laws and regulations applicable in the place of payment, butwithout prejudice to the provisions of Condition 8.

— 53 —

6.3 No Commissions

No commissions or expenses shall be charged to the Securityholders in respect of any paymentsmade in accordance with this Condition 6.

6.4 Payment on Business Days

Where payment is to be made by transfer to a registered account, payment instructions (for valuethe due date or, if that is not a Business Day (as defined below), for value the first following daywhich is a Business Day (as defined below) will be initiated and, where payment is to be madeby cheque, the cheque will be mailed, on the Business Day (as defined below) preceding the duedate for payment or, in the case of a payment of principal and premium (if any), or a paymentof distributions due otherwise than on a Distribution Payment Date, if later, on the Business Day(as defined below) on which the relevant Certificate is surrendered at the specified office of anAgent.

Securityholders will not be entitled to any Distributions or other payment for any delay after thedue date in receiving the amount due if the due date is not a Business Day (as defined below),if the Securityholder is late in surrendering its Certificate (if required to do so) or if a chequemailed in accordance with this Condition 6.4 arrives after the due date for payment.

In these Conditions, “Business Day” means a day (other than a Saturday or Sunday) on whichcommercial banks are open for business in New York City, Hong Kong, London, Amsterdam andManila, and, in the case of presentation of a Certificate, in the place in which the Certificate ispresented.

6.5 Partial Payments

If the amount of principal, premium (if any) or distributions which is due on the Securities is notpaid in full, the Registrar will annotate the Register with a record of the amount of principal,premium (if any) or distributions in fact paid.

6.6 Agents

The names of the initial Agents and their initial specified offices are set out below and in theAgency Agreement. The Issuer and the Guarantor reserve the right, subject to the prior writtenapproval of the Trustee, at any time to vary or terminate the appointment of any Agent and toappoint additional or other Agents provided that:

(a) there will at all times be a Principal Paying Agent;

(b) so long as the Securities are listed on the Singapore Exchange Securities Trading Limited(the “SGX-ST”) and the rules of the SGX-ST so require, if the Securities are issued indefinitive form, there will be at all times be a Paying Agent in Singapore unless the Issuerobtains an exemption from the SGX-ST. In addition, an announcement of such exchangeshall be made by or on behalf of the Issuer through the SGX-ST and such announcementwill include all material information with respect to the delivery of the Certificates,including details of the Paying Agent in Singapore; and

(c) there will at all times be a Registrar.

Notice of any termination or appointment and of any changes in specified offices shall be givento the Securityholders promptly by the Issuer in accordance with Condition 12.1.

— 54 —

7. TAXATION AND GROSS-UP

7.1 Payment without withholding

All payments in respect of the Securities by or on behalf of the Issuer or the Guarantor will bemade without withholding or deduction for, or on account of, any present or future taxes, duties,assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by or onbehalf of the Relevant Jurisdiction, unless the withholding or deduction of the Taxes is requiredby law. In the event where such withholding or deduction is made by the Guarantor at the rateof up to and including 20 per cent., the Guarantor will pay such additional amounts as will resultin the receipt by the Securityholders of such amounts as would have been received by them hadno such withholding or deduction been required. In the event that the Issuer or, as the case maybe, the Guarantor makes a deduction or withholding required by law (and, in the case of theGuarantor, in excess of 20 per cent.), the Issuer or, as the case may be, the Guarantor, shall paysuch additional amount (“Additional Amounts”) as will result in receipt by the Securityholdersof such amounts as would have been received by them had no such withholding or deduction beenrequired; except that no Additional Amounts will be payable in relation to any payment in respectof any Security:

(a) presented for payment (if applicable) by or on behalf of a Securityholder who is liable tothe Taxes in respect of such Security by reason of their having some connection with anyRelevant Jurisdiction other than the mere holding of the Security; or

(b) presented for payment (if applicable) more than 30 days after the Relevant Date (as definedin Condition 7.2) except to the extent that a Holder of such Security would have beenentitled to such Additional Amounts on presenting the same for payment on the last day ofthe period of 30 days assuming, whether or not such is in fact the case, that day to have beena Business Day (as defined in Condition 6.4).

7.2 Interpretation

In these Conditions:

(a) The “Relevant Date” means the date on which the payment first becomes due but, if thefull amount of the moneys payable has not been received by the Principal Paying Agent, theTrustee or the Registrar, as the case may be, on or before such due date, it means the dateon which, the full amount of such moneys having been so received, notice to that effect hasbeen duly given to the Securityholders by the Issuer in accordance with Condition 12.1.

(b) The “Relevant Jurisdiction” means, in respect of the Issuer, the Kingdom of theNetherlands or any political subdivision or any authority thereof or therein having powerto tax and, in respect of the Guarantor, the Republic of the Philippines or any politicalsubdivision or any authority thereof or therein having power to tax, and in the event of anysubstitution or other corporate action resulting in either the Issuer or the Guarantor (as thecase may be) being incorporated in any other jurisdiction, that other jurisdiction or anypolitical subdivision or any authority thereof or therein having power to tax.

7.3 Additional Amounts, principal and distributions

Any reference in these Conditions to any amounts in respect of the Securities will be deemed alsoto refer to any Additional Amounts which may be payable under this Condition 7 or under anyundertakings given in addition to, or in substitution for, this Condition pursuant to the TrustDeed. Unless the context otherwise requires, any reference in these Conditions to “principal”includes any instalment amount or redemption amount and any other amounts in the nature ofprincipal payable pursuant to these Conditions and “distributions” includes all amounts payablepursuant to Condition 3 and any other amounts in the nature of distributions payable pursuant tothese Conditions.

— 55 —

Neither the Trustee nor any Agent shall be responsible for paying any tax, duty, charges,

withholding or other payment referred to in this Condition 7 or for determining whether such

amounts are payable or the amount thereof, and none of them shall be responsible or liable for

any failure by the Issuer, the Guarantor, any Securityholder or any third party to pay such tax,duty, charges, withholding or other payment in any jurisdiction or to provide any notice orinformation to the Trustee or any Agent that would permit, enable or facilitate the payment ofany principal, premium (if any), Distributions or other amount under or in respect of theSecurities without deduction or withholding for or on account of any tax, duty, charge,withholding or other payment imposed by or in any jurisdiction.

8. PRESCRIPTION

Securities will become void unless presented for payment within periods of 10 years (in the caseof principal or premium) and five years (in the case of Distributions) from the Relevant Date inrespect of the Securities subject to the provisions of Condition 6.

9. FURTHER ISSUES

The Issuer is at liberty from time to time without the consent of the Securityholders to create andissue further Securities or bonds either (a) ranking pari passu in all respects (or in all respectssave for the issue date and the first payment of Distributions thereon) and so that the same willbe consolidated and form a single series with the Securities or (b) upon such terms as to ranking,distributions, conversion, redemption and otherwise as the Issuer may determine at the time ofthe issue. Any further Securities which are to form a single series with the Securities will beconstituted by a deed supplemental to the Trust Deed.

10. NON-PAYMENT

10.1 Non-payment when due

Notwithstanding any of the provisions below in this Condition 10, the right to instituteWinding-Up proceedings is limited to circumstances where payment has become due. In the caseof any Distributions, such Distributions will not be due if the Issuer has elected to deferDistributions in accordance with Condition 4.5. In addition, nothing in this Condition 10,including any restriction on commencing proceedings, shall in any way restrict or limit anyrights of the Trustee or any of its directors, officers, employees or agents to claim from or tootherwise take any action against the Issuer and/or the Guarantor, as the case may be, in respectof any costs, charges, fees, expenses or liabilities incurred by such party pursuant to or inconnection with the Trust Deed or the Securities.

10.2 Proceedings for Winding-Up

If (i) an order is made or an effective resolution is passed for the Winding-Up of the Issuer orthe Guarantor or (ii) the Issuer or the Guarantor fails to make payment in respect of the Securitiesor the Securities Guarantee, as the case may be, for a period of 10 days or more after the dateon which such payment is due, the Issuer and the Guarantor shall be deemed to be in defaultunder the Trust Deed and the Securities (in the case of the Issuer) and the Trustee may, subjectto the provisions of Condition 10.4 and subject to and to the extent permitted by applicable law,institute proceedings for the Winding-Up of the Issuer, the Guarantor or both of them (asapplicable) and/or prove in the Winding-Up of the Issuer, the Guarantor or both of them (asapplicable) and/or claim in the liquidation of the Issuer, the Guarantor or both of them (asapplicable) for such payment.

— 56 —

10.3 Enforcement

Without prejudice to Condition 10.2 but subject to the provisions of Condition 10.4, the Trusteemay without further notice to the Issuer and/or the Guarantor institute such proceedings againstthe Issuer, the Guarantor or both of them (as applicable) as it may think fit to enforce any termor condition binding on the Issuer and/or the Guarantor under the Trust Deed or the Securities(other than any payment obligation of the Issuer or the Guarantor under or arising from theSecurities or the Trust Deed, including, without limitation, payment of any principal or premiumor satisfaction of any Distributions (including any Arrears of Distribution) in respect of theSecurities or the Securities Guarantee, including any damages awarded for breach of anyobligations) and in no event shall the Issuer or the Guarantor, by virtue of the institution of anysuch proceedings, be obliged to pay any sum or sums, in cash or otherwise, sooner than the samewould otherwise have been payable by it.

10.4 Entitlement of Trustee

The Trustee shall not and shall not be obliged to take any of the actions referred to in Condition10.2 or 10.3 above against the Issuer, the Guarantor or both of them (as applicable) to enforcethe terms of the Trust Deed or the Securities unless (i) it shall have been so requested by anExtraordinary Resolution of the Securityholders or in writing by the Securityholders holding atleast twenty five per cent. in principal amount of the Securities then outstanding and (ii) it shallhave been indemnified and/or secured and/or pre-funded to its satisfaction. The Trustee shallhave no obligation to monitor whether (i) an order has been made or an effective resolutionpassed for the Winding-Up of the Issuer or the Guarantor or (ii) the Issuer or the Guarantor hasfailed to make any payment due in respect of the Securities or the Securities Guarantee, and shallnot be liable to the Securityholders or any other person for not doing so.

10.5 Right of Securityholders

Securityholders are not entitled to proceed directly against the Issuer or the Guarantor or toinstitute proceedings for the Winding-Up or claim in the liquidation of the Issuer or theGuarantor (as the case may be) or to prove in such Winding-Up unless the Trustee, havingbecome so bound to proceed or being able to prove in such Winding-Up or claim in suchliquidation, fails to do so within a reasonable period and such failure shall be continuing, inwhich case the Securityholders shall have only such rights against the Issuer as those which theTrustee is entitled to exercise as set out in this Condition 10.

10.6 Extent of Securityholders’ remedy

No remedy against the Issuer or the Guarantor, other than as referred to in this Condition 10,shall be available to the Trustee or the Securityholders, whether for the recovery of amountsowing in respect of the Securities or under the Trust Deed or in respect of any breach by theIssuer or the Guarantor of any of its other obligations under or in respect of the Securities orunder the Trust Deed.

11. REPLACEMENT OF CERTIFICATES

Should any Certificate be lost, stolen, mutilated, defaced or destroyed it may be replaced at thespecified office of the Registrar or any Transfer Agent upon payment by the claimant of theexpenses incurred in connection with the replacement and on such terms as to evidence andindemnity as the Issuer may reasonably require or, as the case may be, upon payment by theclaimant of the expenses incurred in connection with such replacement and on such terms as toevidence and indemnity and/or security as the Registrar or such Transfer Agent may require.Mutilated or defaced Certificates must be surrendered before replacements will be issued.

— 57 —

12. NOTICES

12.1 Notices to Securityholders

All notices to the Securityholders will be valid if mailed to them at their respective addresses in

the register of Securityholders maintained by the Registrar and, so long as the Securities are

listed on a stock exchange and the rules of that Exchange so require, published in a daily

newspaper of general circulation in the place or places required by the rules of that stock

exchange. Any notice shall be deemed to have been given on the seventh day after being so

mailed or on the date of publication or, if so published more than once or on different dates, on

the date of the first publication.

So long as the Securities are represented by the Global Certificate and the Global Certificate is

held on behalf of Euroclear or Clearstream, Luxembourg or the Alternative Clearing System (as

defined in the form of the Global Certificate), notices to Securityholders shall be given by

delivery of the relevant notice to Euroclear or Clearstream or the Alternative Clearing System,

for communication by it to entitled accountholders in substitution for notification as required by

the Conditions.

12.2 Notices from Securityholders

Notices to be given by any Securityholder must be in writing and given by lodging the same,

together with any Certificate in respect of such Security or Securities, with the Registrar or, if

the Securities are held in a clearing system, may be given through the clearing system in

accordance with its standard rules and procedures.

13. SUBSTITUTION OR MODIFICATION TO REMEDY GROSS-UP EVENT, ACCOUNTINGEVENT OR TAX EVENT

The Trustee may (but shall not be obliged to), without the consent of the Securityholders, agree

with the Issuer and the Guarantor to:

(a) the substitution in place of the Issuer (or of any previous substitute under this Condition

13) as the principal debtor under the Securities and the Trust Deed of the Guarantor or any

of its Subsidiaries; or

(b) the modification of these Conditions to the extent reasonably necessary,

in order to remedy a pending or existing Gross-Up Event, Accounting Event or Tax Event

provided that:

(i) in the case of a substitution of an entity other than the Guarantor, the Securities remaining

unconditionally and irrevocably guaranteed by the Guarantor in a manner which would give

the Securityholders a status in a Winding-Up of the Guarantor which is akin to the status

Securityholders would have at that time in respect of a Winding-Up of the relevant issuer;

(ii) the Trustee being satisfied that the interests of the Securityholders will not be materially

prejudiced by the substitution or modification; and

(iii) compliance with certain other conditions set out in the Trust Deed.

— 58 —

14. MEETINGS OF SECURITYHOLDERS, MODIFICATION, WAIVER, AUTHORISATIONAND DETERMINATION

14.1 Meetings of Securityholders

The Trust Deed contains provisions for convening meetings of the Securityholders to considerany matter affecting their interests, including the modification or abrogation by ExtraordinaryResolution of any of these Conditions or any of the provisions of the Trust Deed. Such a meetingmay be convened by the Issuer, the Guarantor or the Trustee and shall be convened by the Trusteeif it receives a written request from Securityholders holding not less than 10 per cent. in principalamount of the Securities for the time being outstanding and subject to it being indemnified and/orsecured and/or pre-funded to its satisfaction against all costs and expenses. The quorum at anymeeting for passing an Extraordinary Resolution will be one or more persons present holding orrepresenting more than 50 per cent. in principal amount of the Securities for the time beingoutstanding, or at any adjourned such meeting one or more persons present whatever theprincipal amount of the Securities held or represented by him or them, except that, at any meetingthe business of which includes any of the following matters:

(a) reduction or cancellation of the amount payable or, where applicable, modification, exceptwhere such modification is in the opinion of the Trustee bound to result in an increase, ofthe method of calculating the amount payable or modification of the date of payment or,where applicable, of the method of calculating the date of payment in respect of anyprincipal, premium (if any) or Distribution in respect of the Securities;

(b) alteration of the currency in which payments under the Securities are to be made;

(c) alteration of the majority required to pass an Extraordinary Resolution;

(d) (i) sanctioning of any scheme or proposal for the exchange or sale of the Securities for orthe conversion of the Securities into or the cancellation of the Securities in considerationof securities, shares, stock, notes, bonds, debentures, debenture stock and/or otherobligations and/or securities of the Issuer or any other company formed or to be formed,or for or into or in consideration of cash, or partly for or into or in consideration of suchshares, stock, notes, bonds, debentures, debenture stock and/or other obligations and/orsecurities as aforesaid and partly for or into or in consideration of cash and for theappointment of some person with power on behalf of the Holders to execute an instrumentof transfer of the Securities held by them in favour of the persons with or to whom theSecurities are to be exchanged or sold respectively or (ii) substitution of any entity for theIssuer and/or the Guarantor (or any previous substitute) as principal debtor and/or asguarantor; or

(e) alteration of the quorum required to pass an Extraordinary Resolution,

the necessary quorum for passing an Extraordinary Resolution will be one or more personspresent holding or representing not less than 66 2/3 per cent., or at any adjourned such meetingnot less than 33 1/3 per cent., of the aggregate principal amount of the Securities for the timebeing outstanding. An Extraordinary Resolution passed at any meeting of the Securityholderswill be binding on all Securityholders, whether or not they are present at the meeting.

The Trust Deed provides that a written resolution signed by or on behalf of the Securityholdersof not less than 75 per cent. of the aggregate principal amount of the Securities for the time beingoutstanding shall be as valid and effective as a duly passed Extraordinary Resolution. Such aresolution in writing may be contained in one document or several documents in the same form,each signed by or on behalf of one or more Securityholders.

— 59 —

14.2 Modification, Waiver, Authorisation and Determination

The Trustee may (but shall not be obliged to), without the consent of the Securityholders, agreeto any modification of these Conditions or the Trust Deed if, in the opinion of the Trustee, suchmodification will not be materially prejudicial to the interests of Securityholders and to anymodification of the Securities or the Trust Deed which is in the opinion of the Trustee of aformal, minor or technical nature or is to correct a manifest error or is made to comply withmandatory provisions of law. In addition, the Trustee may (but shall not be obliged to), withoutthe consent of the Securityholders, authorise or waive any proposed breach or breach of theSecurities or the Trust Deed if, in the opinion of the Trustee, the interests of the Securityholderswill not be materially prejudiced thereby.

14.3 Trustee to have Regard to Interests of Securityholders as a Class

In connection with the exercise by it of any of its trusts, powers, authorities and discretions(including, without limitation, any modification, waiver, authorisation, determination orsubstitution), the Trustee shall have regard to the general interests of the Securityholders as aclass and shall not have regard to any interests arising from circumstances particular toindividual Securityholders (whatever their number) and, in particular but without limitation,shall not have regard to the consequences of any such exercise for individual Securityholders(whatever their number) resulting from their being for any purpose domiciled or resident in, orotherwise connected with, or subject to the jurisdiction of, any particular territory or anypolitical sub-division thereof and the Trustee will not be entitled to require, nor will anySecurityholder be entitled to claim, from the Issuer, the Guarantor, the Trustee or any otherperson any indemnification or payment in respect of any tax consequence of any such exerciseupon individual Securityholders except to the extent already provided for in Condition 7 and/orany undertaking given in addition to, or in substitution for, Condition 7 pursuant to the TrustDeed.

14.4 Notification to Securityholders

Any modification, waiver, authorisation, determination or substitution agreed to by the Trusteewill be binding on the Securityholders and, unless the Trustee agrees otherwise, anymodification, waiver, authorisation, determination or substitution will be notified by the Issuerto the Securityholders as soon as practicable thereafter in accordance with Condition 12.1.

15. INDEMNIFICATION OF THE TRUSTEE, ITS CONTRACTING WITH THE ISSUER ANDTHE GUARANTOR AND OTHER MATTERS

15.1 Indemnification of the Trustee

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief fromresponsibility, including provisions relieving it from taking proceedings to enforce repaymentunless indemnified and/or pre-funded and/or secured to its satisfaction.

15.2 Right to obtain instructions from Securityholders

Whenever the Trustee is required or entitled by the terms of the Trust Deed, the AgencyAgreement or these Conditions to exercise any discretion or power, take any action, make anydecision or give any direction, the Trustee is entitled, prior to exercising any such discretion orpower, taking any such action, making any such decision or giving any such direction, to seekdirections from the Securityholders by way of Extraordinary Resolution, and the Trustee shallnot be responsible for any loss or liability incurred by the Issuer, the Guarantor, theSecurityholders or any other person as a result of any delay in it exercising such discretion orpower, taking such action, making such decision or giving such direction as a result of seekingsuch direction from the Securityholders or in the event that no direction is given to the Trustee

— 60 —

by the Securityholders. None of the Trustee or any Agent shall be liable to any Securityholder,the Issuer, the Guarantor or any other person for any action taken by the Trustee or such Agentin accordance with the instructions of the Securityholders. The Trustee shall be entitled to relyon any direction, request or resolution of Securityholders given by Securityholders holding therequisite principal amount of Securities outstanding or passed at a meeting of Securityholdersconvened and held in accordance with the Trust Deed.

15.3 Trustee Contracting with the Issuer and the Guarantor

The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (a)to enter into business transactions with the Issuer and/or the Guarantor and/or any of theGuarantor’s Subsidiaries and/or any entity related directly or indirectly to the Issuer or theGuarantor and to act as trustee, agent or depositary for the holders of any other securities issuedor guaranteed by, or relating to, the Issuer and/or the Guarantor and/or any of the Guarantor’sSubsidiaries and/or any entity related directly or indirectly to the Issuer or the Guarantor, (b) toexercise and enforce its rights, comply with its obligations and perform its duties under or inrelation to any such transactions or, as the case may be, any such trusteeship without regard tothe interests of, or consequences for, the Securityholders, and (c) to retain and not be liable toaccount for any profit made or any other amount or benefit received thereby or in connectiontherewith.

16. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No person shall have any right to enforce any term or condition of the Securities under theContracts (Rights of Third Parties) Act 1999, but this does not affect any right or remedy of anyperson which exists or is available apart from that Act.

17. GOVERNING LAW AND SUBMISSION TO JURISDICTION

17.1 Governing Law

The Trust Deed, the Agency Agreement and the Securities, and any non-contractual obligationsarising out of or in connection with these documents are governed by and shall be construed inaccordance with English law.

17.2 Jurisdiction of English courts

(a) Each of the Issuer and the Guarantor has, in the Trust Deed, irrevocably agreed for thebenefit of the Trustee and the Securityholders that the courts of England are to haveexclusive jurisdiction to settle any disputes which may arise out of or in connection withthe Trust Deed or the Securities (including any dispute relating to any non-contractualobligations arising out of or in connection with the Trust Deed or the Securities) and hasaccordingly submitted to the exclusive jurisdiction of the English courts.

(b) Each of the Issuer and the Guarantor has, in the Trust Deed, waived any objection to thecourts of England on the grounds that they are an inconvenient or inappropriate forum. TheTrustee or the Securityholders may take any suit, action or proceeding (referred to as“Proceedings”) arising out of, or in connection with the Trust Deed or the Securitiesrespectively (including any Proceedings relating to any non-contractual obligations arisingout of or in connection with the Trust Deed or the Securities respectively) against the Issueror the Guarantor in any other court of competent jurisdiction and concurrent Proceedingsin any number of jurisdictions.

— 61 —

17.3 Appointment of process agent

Each of the Issuer and the Guarantor has, in the Trust Deed, irrevocably and unconditionallyappointed Law Debenture Corporate Services Limited at the latter’s registered office for the timebeing as its agent for service of process in England in respect of any Proceedings and hasundertaken that in the event of such agent ceasing so to act it will promptly appoint anotherperson as its agent for that purpose and shall deliver to the Trustee a copy of that new agent’sacceptance of appointment within 30 days of such cessation.

18. DEFINITIONS

Unless the context otherwise requires, the following terms will have the following meanings inthese Conditions:

“Accounting Event” has the meaning specified in Condition 5.4.

“Additional Amounts” has the meaning specified in Condition 7.1.

“Affiliate” means, with respect to any Person, any other Person (a) directly or indirectlycontrolling, controlled by, or under direct or indirect common control with, such Person, or (b)who is a director or officer of such Person or any subsidiary of such Person or of any Personreferred to in clause (a) of this definition. For purposes of this definition, “control” (including,with correlative meanings, the terms “controlling,” “controlled by” and “under common controlwith”), as applied to any Person, means the possession, directly or indirectly, of the power todirect or cause the direction of the management and policies of such Person, whether through theownership of voting securities, by contract or otherwise.

“Agency Agreement” has the meaning specified in the preamble to these Conditions.

“Agent” and “Agents” have the meaning specified in the preamble to these Conditions.

“Arrears of Distribution” has the meaning specified in Condition 4.5(a).

“Authorised Signatory” has the meaning given to it in the Trust Deed.

“Business Day” has the meaning specified in Condition 6.4.

“Capital Stock” means, with respect to any Person, any and all shares, interests, rights topurchase, warrants, options, participations or other equivalents (however designated, whethervoting or non-voting) in equity of such Person, whether outstanding on the Issue Date or issuedthereafter, including, without limitation, all Common Stock and Preferred Stock.

“Certificate” has the meaning specified in Condition 3.1.

“Change of Control Event” has the meaning given to it in Condition 4.4.

“Common Stock” means, with respect to any Person, any and all shares, interests, rights topurchase, warrants, options or other participations in, and other equivalents (however designatedand whether voting or non-voting) of such Person’s common stock or ordinary shares, whetheror not outstanding at the Issue Date, and include, without limitation, all series and classes of suchcommon stock or ordinary shares.

“Compulsory Distribution Payment Event” has the meaning specified in Condition 4.5.

“Conditions” means these terms and conditions of the Securities.

“Deferral Election Event” has the meaning specified in Condition 4.5(a).

— 62 —

“Deferral Election Notice” has the meaning specified in Condition 4.5(b).

“Distribution Payment Date” has the meaning specified in Condition 4.1(a).

“Distributions” has the meaning specified in Condition 4.1(a).

“Extraordinary Resolution” has the meaning given to it in the Trust Deed.

“Gross-up Event” has the meaning specified in Condition 5.3(d).

“Guarantor” means International Container Terminal Services, Inc.

“Holder” has the meaning specified in Condition 3.2.

“Issue Date” means 18 January 2018.

“Issuer” means Royal Capital B.V.

“Junior Securities” means any class of share capital (including preference shares) of the Issueror the Guarantor (as the case may be) and (i) any security issued by the Issuer or the Guarantor(as the case may be) which ranks, or is expressed to rank, junior to the Securities; and (ii) anysecurity guaranteed by, or subject to the benefit of an indemnity entered into by, the Issuer orthe Guarantor (as the case may be) where the Issuer’s or the Guarantor’s (as the case may be)obligations under the relevant guarantee or indemnity rank, or is expressed to rank, junior to theIssuer’s or the Guarantor’s (as the case may be) obligations under the Securities.

“Parity Securities” means: (i) any security issued by the Issuer or the Guarantor (as the casemay be) which ranks, or is expressed to rank, pari passu with the Securities; and (ii) any securityguaranteed by, or subject to the benefit of an indemnity entered into by, the Issuer or theGuarantor (as the case may be) where the Issuer’s or the Guarantor’s (as the case may be)obligations under the relevant guarantee or indemnity rank, or is expressed to rank, pari passuwith the Issuer’s or the Guarantor’s (as the case may be) obligations under the Securities.

“Paying Agent” has the meaning specified in the preamble to these Conditions.

“Payment Reference Date” has the meaning specified in Condition 4.7(b).

“PFRS” means Philippine Financial Reporting Standards and includes statements named PFRSand Philippine Accounting Standards (PAS) and Philippine Interpretations of InternationalFinancial Reporting Interpretation Committee (IFRIC) issued by the Financial ReportingStandards Council (FRSC) as in effect from time to time.

“Permitted Holders” has the meaning given to it in Condition 4.4.

“Person” means any individual, corporation, partnership, limited liability company, jointventure, trust, unincorporated organisation or government or any agency or political subdivisionthereof.

“Preferred Stock” as applied to the Capital Stock of any Person means Capital Stock of anyclass or classes that by its term is preferred as to the payment of dividends, or as to thedistribution of assets upon any voluntary or involuntary liquidation or dissolution of suchPerson, over any other class of Capital Stock of such Person.

“Premium Redemption Price” means 110 per cent. of the Principal Amount of the Securitiesplus any accrued but unpaid Distributions and any Arrears of Distribution (including any amountof Distributions accrued thereon in accordance with Condition 4.5(a)).

— 63 —

“Principal Amount” has the meaning specified in Condition 3.1.

“Principal Paying Agent” has the meaning specified in the preamble to these Conditions.

“Proceedings” has the meaning specified in Condition 17.2(b).

“Rate of Distribution” has the meaning specified in Condition 4.1.

“Record Date” has the meaning specified in Condition 6.1.

“Redemption Price” means the Principal Amount of the Securities plus any accrued but unpaidDistributions and any Arrears of Distribution (including any amount of Distributions accruedthereon in accordance with Condition 4.5(a)), as applicable.

“Reference Security Default Event” has the meaning given to it in Condition 4.4.

“Refinancing Securities” has the meaning given to it in Condition 4.4.

“Registrar” has the meaning specified in the preamble to these Conditions.

“Related Person” with respect to any Person means:

(i) any controlling stockholder or a majority (or more) owned Subsidiary of such Person, or,in the case of an individual, any spouse or immediate family member of such Person, anytrust created for the benefit of such individual or such individual’s estate, executor,administrator, committee or beneficiaries; or

(ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners,owners or Persons beneficially holding a majority (or more) controlling interest of whichconsist of such Person and/or such other Persons referred to in the immediately precedingparagraph of this definition.

“Relevant Date” has the meaning specified in Condition 7.2.

“Relevant Jurisdiction” has the meaning specified in Condition 7.2.

“Securities” has the meaning specified in the preamble to these Conditions.

“Securities Guarantee” has the meaning specified in Condition 2.1.

“Securityholders” has the meaning specified in Condition 3.2.

“Senior Notes” means ICTSI Treasury B.V.’s outstanding approximately U.S.$400,000,0005.875 per cent. Senior Notes due 2025, guaranteed by the Guarantor (ISIN: XS0972298300).

“SGX-ST” has the meaning specified in Condition 6.6.

“Special Redemption Price” means 101 per cent. of the Principal Amount of the Securities plusany accrued but unpaid Distributions and any Arrears of Distribution (including any amount ofdistributions accrued thereon in accordance with Condition 4.5(a)).

“Subsidiary” means, with respect to any Person, any corporation, association or other businessentity, more than 50.0 per cent. of the voting power of the outstanding Voting Stock of which isowned or controlled, directly or indirectly, by such Person and one or more other Subsidiariesof such Person. To be “controlled” by another means that the other (whether, directly orindirectly, and whether by the ownership of share capital, the possession of voting power, by

— 64 —

contract or otherwise) has the power to appoint and/or remove all or the majority of the members

of the board of directors or other governing body of that company or otherwise controls or has

a power to control the affairs and policies of that company and “control” shall be construed

accordingly.

“Taxes” has the meaning specified in Condition 7.1.

“Tax Event” has the meaning specified in Condition 5.4.

“Trust Deed” has the meaning specified in the preamble to these Conditions.

“Trustee” has the meaning specified in the preamble to these Conditions.

“Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily

having the power to vote for the election of directors, managers or other voting members of the

governing body of such Person.

“Winding-Up” means, with respect to the Issuer or the Guarantor, a final and effective order or

resolution for the bankruptcy, winding up, liquidation, receivership, insolvency or similar

proceedings in respect of the Issuer or the Guarantor, as the case may be.

— 65 —

USE OF PROCEEDS

The net proceeds from the issue of the Securities, which are approximately U.S.$348 million (after the

deduction of commissions), will be used for the financing of acquisitions and capital expenditures and

for general corporate purposes.

— 66 —

EXCHANGE RATES

The Philippine Dealing System, a computer network supervised by the BSP, through which the

members of the Bankers Association of the Philippines effect spot and forward currency exchange

transactions, was introduced in 1992. The Philippine Dealing System was adopted by the BSP as a

means to monitor foreign exchange rates. The BSP Rate is the weighted average rate for the purchase

of U.S. dollars with Philippine pesos under the Philippine Dealing System and published in the BSP’s

Reference Exchange Rate Bulletin. On 30 September 2017, the BSP Rate was P=51.073 = U.S.$1.00.

The following table sets forth certain information concerning the BSP Rate between the Philippine

peso and the U.S. dollar for the periods and dates indicated, expressed in Philippine pesos per

U.S.$1.00.

Year ended 31 December Low1 Average2 High3 Period End

(in Philippine pesos per U.S.$)

2013 ........................................................ 40.569 42.416 44.660 44.414

2014 ........................................................ 43.280 44.393 45.406 44.617

2015 ........................................................ 44.053 45.488 47.435 47.166

2016 ........................................................ 45.917 47.493 49.984 49.813

2017

January ................................................. 49.466 49.736 49.953 49.814

February ............................................... 49.671 49.961 50.305 50.267

March ................................................... 50.145 50.275 50.379 50.194

April .................................................... 49.530 49.863 50.219 49.699

May...................................................... 49.651 49.860 50.054 49.867

June...................................................... 49.404 49.850 50.466 50.466

July ...................................................... 50.449 50.638 50.883 50.582

August .................................................. 50.185 50.875 51.494 51.166

September............................................. 50.629 51.009 51.242 51.073

October ................................................ 50.830 51.343 51.799 51.799

November ............................................ 50,365 51,038 51,686 50,365

Source: Reference Exchange Rate Bulletin, Treasury Department of the BSP.

1 Lowest daily closing exchange rate for the period.2 Weighted average rate under the PDS.3 Highest daily exchange rate for the period.

— 67 —

CAPITALISATION

The following table sets forth the indebtedness and capitalisation of the Company as at 30 September

2017. This table should be read in conjunction with the Company’s unaudited interim condensed

consolidated financial statements as at 30 September 2017 and the notes presented elsewhere herein.

As at 30 September 2017

Actual As Adjusted

(in U.S.$ millions)(1)

Cash and cash equivalents ......................................................... 319.8 668.2

Indebtedness

Current

Loans payable........................................................................... 60.3 60.3

Current portion of long-term debt ............................................. 22.4 22.4

Non-current

Long-term debt — net of current portion .................................. 1,386.1 1,386.1

Total indebtedness ...................................................................... 1,468.8 1,468.8

Equity

Capital stock ................................................................................ 67.6 67.6

Additional paid-in capital............................................................. 547.4 547.4

Cost of shares held by subsidiaries .............................................. (74.3) (74.3)

Retained earnings......................................................................... 807.6 807.6

Perpetual capital securities ........................................................... 761.3 1,109.7

Others(1) ...................................................................................... (410.7) (410.7)

Total equity attributable to equity holders of the parent ......... 1,698.9 2,047.3

Equity attributable to non-controlling interests ............................. 158.8 158.8

Total Equity ................................................................................ 1,857.7 2,206.1

Total Indebtedness and Equity................................................... 3,326.5 3,674.9

Notes:

(1) Others includes treasury shares, excess of acquisition cost over the carrying value of non-controlling interests and other

comprehensive loss.

Except as otherwise disclosed in this Offering Circular, there has been no material adverse change in

the Company’s capitalisation or indebtedness since 30 September 2017.

— 68 —

THE ISSUER

Royal Capital B.V., a majority owned indirect subsidiary of the Company, was incorporated as an

exempted company with limited liability under the laws of the Netherlands on 19 April 2011. Its

registered office is located at Hofplein 20, 5th Floor, Office 5.27, 3032AC Rotterdam, the

Netherlands.

The Issuer, whose primary purpose is to act as a financing subsidiary of the Company, will remain a

majority owned indirect subsidiary of the Company as long as the Securities are outstanding. The

Issuer has no material assets.

The directors of the Issuer are as follows:

Name Position

Jose Joel Maghinang Sebastian ...................................................................... Director

Rafael De la Cruz Consing Jr ........................................................................ Director

Lyanne Mayo Riva Guillermo ........................................................................ Director

Florisa Cang Almodiel-Luteijn ....................................................................... Director

The business address of the abovementioned directors for the purposes of their directorships of the

Issuer is Hofplein 20, 5th Floor, Office 5.27, 3032AC Rotterdam, the Netherlands (telephone number

+31-10-310-0833) or alternatively ICTSI Administration Building, Manila International Container

Terminal, MICT South Access Road, Manila 1012, Philippines (telephone number +63-2-245-4101).

The objects for which the Issuer are established are set forth in Article 3 of the Issuer’s articles of

association (copies of which are available as described under “General Information”). The Issuer has

full power and authority to carry out any object not prohibited by the laws of the Netherlands.

The issued share capital of the Issuer is EUR18,000.

No part of the equity securities of the Issuer is listed or dealt on any stock exchange and no listing

or permission to deal in such securities is being or is proposed to be sought. The Issuer has no

subsidiaries. The Issuer is required to publish its accounts under the laws of the Netherlands and is

required to keep such accounts and records as are necessary to give a true and fair view of the Issuer’s

affairs and to explain its transactions.

— 69 —

SELECTED FINANCIAL INFORMATION AND THROUGHPUT DATA

The selected historical consolidated balance sheet data as of 31 December 2014, 2015 and 2016 andselected historical consolidated statement of income and cash flow data for the years ended 31December 2014, 2015 and 2016 set forth below have been derived from, and should be read inconjunction with, the audited consolidated financial statements and, including the notes thereto,included elsewhere in this Offering Circular. SyCip Gorres Velayo & Co., a member firm of Ernst &Young Global Limited, has audited the consolidated financial statements in accordance withPhilippine Standards on Auditing. The selected historical consolidated balance sheet data as of 30September 2017 and selected historical consolidated statement of income and cashflow data for thenine months ended 30 September 2016 and 2017 have been derived from, and should be read inconjunction with, the unaudited interim condensed consolidated financial statements, which SyCipGorres Velayo & Co. has reviewed in accordance with Philippine Standard on Review Engagements2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”.

Potential investors should read the following data together with the more detailed informationcontained in “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and the financial statements and related notes included elsewhere in this OfferingCircular. The following data is qualified in its entirety by reference to all of that information.

Consolidated Statement of Income Data


30 September

2014 2015 2016 2016 2017


(Audited) (Unaudited)IncomeGross revenues from port operations ...... 1,061.2 1,051.3 1,128.4 835.0 918.3Other income(1) ...................................... 71.2 23.9 35.7 24.4 42.4Total income ......................................... 1,132.4 1,075.2 1,164.1 859.4 960.7ExpensesPort Authorities’ share in gross

revenues ............................................. 163.6 169.0 183.7 134.6 140.0Manpower costs ..................................... 205.4 193.2 192.5 144.0 152.5Equipment and facilities-related

expenses ............................................. 135.5 124.8 119.9 87.5 112.7Administrative and other operating

expenses ............................................. 113.6 114.4 107.2 78.6 78.3Depreciation and amortisation ................ 121.7 126.5 147.8 109.8 129.3Impairment losses .................................. 38.1 114.6 — — —Interest expense and financing charges

on borrowings..................................... 58.9 61.2 75.1 56.6 74.9Interest expense on concession rights

payable ............................................... 38.1 37.3 34.0 27.5 24.8Other expenses(2) ................................... 12.1 14.7 46.8 20.4 40.2Total expenses....................................... 887.0 955.6 907.1 659.1 752.7Construction Revenue (Expense)Construction revenue ............................. 106.2 116.1 55.9 41.7 59.6Construction expense ............................. (106.2) (116.1) (55.9) (41.7) (59.6)Income before income tax .................... 245.4 119.6 257.0 200.4 208.0Provision for income tax ........................ 53.9 50.6 63.6 49.5 39.9Net income ............................................ 191.5 69.0 193.5 150.8 168.1

Notes:

(1) Other income includes gain on sale of subsidiaries, foreign exchange gain, interest income and other income.

(2) Other expenses include foreign exchange loss, equity in net loss of a joint venture and other expenses.

— 70 —

Consolidated Balance Sheet Data


September

2014 2015 2016 2017


(Audited) (Unaudited)AssetsNoncurrent AssetsIntangibles ....................................................... 1,770.5 1,715.6 1,720.2 1,711.7Property and equipment ................................... 934.4 1,148.9 1,381.5 1,454.1Other noncurrent assets(1)................................. 336.2 452.6 555.4 565.5Total Noncurrent Assets ................................. 3,041.1 3,317.1 3,657.1 3,731.3Current AssetsCash and cash equivalents................................ 194.3 354.5 325.1 319.8Other current assets(2) ...................................... 165.3 159.2 200.0 230.5Total Current Assets....................................... 359.6 513.7 525.0 550.3Total Assets..................................................... 3,400.8 3,830.8 4,182.1 4,281.7LiabilitiesNoncurrent LiabilitiesLong-term debt — net of current portion ........ 998.2 1,026.6 1,326.3 1,386.1Concession rights payable - net of current

portion.......................................................... 518.7 503.2 481.7 472.7Deferred tax liabilities ..................................... 68.1 66.9 71.4 68.6Other noncurrent liabilities .............................. 58.7 119.4 90.8 111.4Total Noncurrent Liabilities ........................... 1,643.7 1,716.0 1,970.2 2,038.7Current LiabilitiesLoans payable .................................................. 24.5 2.0 36.6 60.3Accounts payable and other current

liabilities(3) ................................................... 203.8 223.4 382.0 292.4Current portion of long-term debt .................... 47.8 54.5 18.5 22.4Current portion of concession rights payable.... 7.5 8.8 8.8 10.0Total Current Liabilities ................................ 283.5 288.8 445.8 385.2Total Liabilities .............................................. 1,927.2 2,004.8 2,416.0 2,423.9EquityCapital stock .................................................... 67.6 67.6 67.6 67.6Additional paid-in capital................................. 530.7 534.8 536.2 547.4Cost of shares held by a subsidiary .................. (72.5) (74.3) (74.3) (74.3)Retained earnings............................................. 763.3 723.2 779.4 807.6Perpetual capital securities ............................... 337.0 831.9 761.3 761.3Others(4) .......................................................... (310.1) (408.7) (445.9) (410.7)Total equity attributable to equity holders

of the parent ............................................... 1,316.0 1,674.4 1,624.4 1,698.9Equity attributable to non-controlling interests . 157.5 151.6 141.7 158.8Total Equity .................................................... 1,473.6 1,826.0 1,766.1 1,857.7Total Liabilities and Equity ........................... 3,400.8 3,830.8 4,182.1 4,281.7

Notes:

(1) Other noncurrent assets include investment properties, investments in and advances to a joint venture and an associate,deferred tax assets and other noncurrent assets.

(2) Other current assets include receivables, spare parts and supplies, prepaid expenses and other current assets and derivativeassets.

(3) Accounts payable and other current liabilities also include income tax payable and derivative liabilities.

(4) Others include treasury shares, excess of acquisition cost over the carrying value of non-controlling interests and othercomprehensive loss.

— 71 —

Consolidated Cash Flow Data


30 September

2014 2015 2016 2016 2017










Other Financial Data

The following table shows EBITDA as derived from the Company’s net income for the period:


30 September

2014 2015 2016 2016 2017



Net income .................................. 191.5 69.0 193.5 150.8 168.1

Provision for income tax .............. 53.9 50.6 63.6 49.5 39.9

Income before income tax .......... 245.4 119.6 257.0 200.4 208.0

Add (Deduct):

Depreciation and amortisation ...... 121.7 126.5 147.8 109.8 129.3

Interest and other expenses(1) ....... 147.2 227.8 155.9 104.5 140.0

Interest and other income(2) ......... (71.2) (23.9) (35.7) (24.4) (42.4)

EBITDA (3) .................................. 443.0 450.0 525.1 390.3 434.9

Notes:

(1) Interest and other expenses include foreign exchange loss, interest expense on concession rights payable, impairment

losses, interest expense and financing charges on borrowings, equity in net loss of a joint venture and other expenses.

(2) Interest and other income include gain on sale of subsidiaries, foreign exchange gain, interest income and other income.

(3) EBITDA is not a uniformly or legally defined financial measure. It generally represents earnings before interest, taxes,

depreciation and amortisation. The Company presents EBITDA because it believes it to be an important supplemental

measure of its performance and liquidity and believes it is frequently used by securities analysts, investors and other

interested parties in the evaluation of companies in its industry.

— 72 —

The EBITDA figures are not, however, readily comparable to other companies’ EBITDA figures, as they are calculated

differently and must be read in conjunction with the related additional explanations. EBITDA has limitations as an

analytical tool and potential investors should not consider it in isolation or as a substitute for analysis of its results as

reported under PFRS. Some of the limitations concerning EBITDA are:

• EBITDA does not reflect the Company’s cash expenditures or future requirements for capital expenditures or

contractual commitments;

• EBITDA does not reflect changes in, or cash requirements for, the Company’s working capital needs;

• EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal

payments, on the Company’s debt;

• Although depreciation and amortisation are non-cash charges, the assets being depreciated or amortised will often

have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and

• Other companies in the industry may calculate EBITDA differently than the Company does, limiting its usefulness

as a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to the

Company to invest in the growth of its business. The Company compensates for these limitations by relying primarily on

its PFRS results and using EBITDA only supplementally.

Throughput Data

The following sets out the throughput data for the Company’s principal segments and terminals for the

periods indicated.

Year ended 31 December Nine months ended 30 September

2014 2015 2016 2016 2017

TEUs% oftotal TEUs

% oftotal TEUs

% oftotal TEUs

% oftotal TEUs

% oftotal

Asia(1) ................... 3,820,572 51.4% 4,094,580 52.7% 4,552,881 52.4% 3,364,342 52.3% 3,577,607 52.3%

Americas(2) ............ 2,687,447 36.1% 2,738,079 35.2% 3,004,690 34.6% 2,247,847 34.9% 2,183,308 31.9%

EMEA(3) ................ 930,616 12.5% 943,334 12.1% 1,131,792 13.0% 823,003 12.8% 1,075,696 15.7%

Total ..................... 7,438,635 100.0% 7,775,993 100.0% 8,689,363 100.0% 6,435,192 100.0% 6,836,611 100.0%

Notes:





(Mexico).



— 73 —

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company’s audited consolidated

financial statements and unaudited interim condensed consolidated financial statements, together

with the related notes thereto, which are included elsewhere in this Offering Circular. This discussion

contains forward-looking statements that involve risks and uncertainties. The Company’s actual

results may differ significantly from those projected in the forward-looking statements. Factors that

might cause future results to differ significantly from those projected in the forward-looking

statements include, but are not limited to, those discussed below and elsewhere in this Offering

Circular, particularly in “Risk Factors” and “Notice to Investors —Forward-Looking Statements”.

Overview

The Company is an international operator of common user container terminals serving the global

container shipping industry. Its business is the operational management, development and acquisition

of container terminals with a focus on origin and destination and gateway ports in emerging and

frontier markets. It also provides a number of ancillary services such as storage, container packing and

unpacking, inspection, weighing and services for refrigerated containers, or reefers. The Company

holds rights to operate these terminals under long-term concession agreements with local port

authorities and governments. As of the date of this Offering Circular, the Company owned or operated

a total of 27 terminal facilities, with nine key ports and an inland container terminal in the Philippines,

two in Indonesia and one each in China, Ecuador, Brazil, Poland, Georgia, Madagascar, Croatia,

Pakistan, Mexico, Honduras, Iraq, Argentina, Colombia, DR Congo and Australia; an acquisition of

an existing concession to construct and operate a port in Tuxpan, Mexico; and, recently, a project to

construct a barge terminal in Cavite, Philippines and agreements to operate two international ports in

PNG. For the year ended 31 December 2016 and the nine months ended 30 September 2017, the

Company handled an estimated 8,689,363 TEUs and 6,836,611 TEUs, respectively.

The Company was established by the Razon family, who remains the controlling shareholder, in 1987

in connection with the privatisation of the MICT in the Port of Manila. The Company has built upon

the experience gained in rehabilitating, developing and operating MICT to establish an extensive

international network concentrated in emerging market economies.

For the year ended 31 December 2016, the Company reported consolidated gross revenues from port

operations and EBITDA of U.S.$1,128.4 million and U.S.$525.1 million, respectively. For the nine

months ended 30 September 2017, the Company reported consolidated gross revenues from port

operations and EBITDA of U.S.$918.3 million and U.S.$434.9 million, respectively. The Company

organises its business across three geographic regions: (i) Asia, (ii) the Americas and (iii) EMEA. In

2016, Asia accounted for 52.4% of throughput and 51.5% of consolidated gross revenues from port

operations, the Americas accounted for 34.6% of throughput and 34.3% of consolidated gross revenues

from port operations, and EMEA accounted for 13.0% of throughput and 14.1% of consolidated gross

revenues from port operations. For the nine months ended 30 September 2017, Asia accounted for

52.3% of throughput and 47.4% of consolidated gross revenues from port operations, the Americas

accounted for 31.9% of throughput and 33.1% of consolidated gross revenues from port operations,

and EMEA accounted for 15.7% of throughput and 19.5% of consolidated gross revenues from port

operations.

The Company’s common stock was first listed on the PSE in March 1992. The Company’s market

capitalisation as of 30 September 2017 was P=211.55 billion.

— 74 —

Factors affecting the results of operations

The Company’s financial condition and results of operations are affected by numerous factors. These

factors include those that impact and determine the container volumes handled at the terminals, tariff

levels and the development of existing and new terminals. The Company believes that the followingare of particular importance:

Local and worldwide economic and political conditions

The Company’s major customers are international shipping companies and cargo owners involved inthe import and export of goods to and from the jurisdictions in which it operates. The Company’s grossrevenues are primarily determined by the number of containers that it handles at its terminals, whichis highly dependent on local and worldwide market conditions. Fluctuations in worldwide economicor industry conditions affecting consumer demand, production and distribution could affect itsbusiness, results of operations and financial condition on a global basis. Similarly, politicaldevelopments that impact worldwide economic and trading patterns could impact the overall volumeof containers that it handles.

The Company is also highly dependent on regional economic and political developments in each ofthe jurisdictions in which it operates and their primary import and export markets. These regionaleffects can vary widely from terminal to terminal due to, among other things, the maturity of thepolitical and economic systems in place, tax and trade policies and regional strife. See “Risk Factor—Risks Relating to the Company’s Business—The Company’s business is highly dependent on regionaland global economic trends”.

The following describes some of the major economic and political considerations at its primary marketsegments and terminals.

Asia

• MICT: In recent years, the Philippines has shown steady GDP growth. Despite the political noiseand events in Marawi from “terrorist events”, growth has stayed strong. The Philippine economyposted a remarkable growth of 6.9% in the third quarter of 2017, which is higher than the 6.7%revised growth in the second quarter of the year. Average year-to-date economic growth for 2017is at 6.7% and the country is on track to meet the official target of 6.5%-7.5% growth in 2017on the back of worker remittances growth, as well as higher spending on public infrastructureprojects and business climate reforms such as the pending tax reform package. MICT is expectedto benefit from the continued improvement in the economy.

• YRDICT/YICT: The consolidation in July 2014 enabled YICT to optimise the overall portoperations and become the only foreign container terminal within the Zhifu Bay Port Area. Sincethen, it has continued to show improvement in throughput volume.

• PICT: The Port of Karachi is one of the South Asia’s largest and busiest deep-water seaports,handling approximately 65% of Pakistan’s container traffic. The port currently has threeterminals: ICTSI’s PICT, Karachi International Container Terminal (“KICT”) and South AsiaPakistan Terminals (“SAPT”), of which both KICT and SAPT are operated by Hutchison PortHoldings. Also on the other side of the city of Karachi is Qasim International Container Terminal(“QICT”), operated by Dubai Ports World at Port Qasim, which handles approximately 34% ofthe country’s containers traffic. The Company believes that PICT captured approximately 24.0%of the market as of 30 September 2017, with QICT, KICT and SAPT handling 34.0%, 26.0% and16%, respectively.

— 75 —

Americas

• CGSA: The Port of Guayaquil is the principal port and main industrial centre of Ecuador. In

addition, Ecuador is a major exporter of bananas to the world. In the past few years, Ecuador’s

economy suffered a setback mainly due to the effect of falling oil prices but recent performance

of Ecuador’s economy indicates increasing stability. Ecuador’s economy expanded 3.3% in the

second quarter of 2017, accelerating from a downwardly revised 2.2% growth in the previous

quarter. This expansion was the strongest since the first quarter of 2015. Rapid credit growth

boosted private consumption, which shored up economic growth despite a steep drop in

investment. In addition, a surge in oil production at the end of the quarter—shortly before the

country formally abandoned the OPEC production deal—supported growth.

• TSSA: The Port of Suape serves as an end-destination cargo port for the city of Recife and the

northeastern region of Brazil. This area of Brazil is undergoing rapid industrialisation and there

are approximately 100 industrial sites being developed nearby. The slowdown in Brazil’s

economy during the past three years, compounded by the significant depreciation of the Brazilian

real amid domestic political issues and strengthening of the U.S. dollar, has resulted in a decrease

in volume at TSSA, and in Brazilian foreign trade in general. However, signs of commencement

of recovery of the economy are reflected in terms of higher throughput volume in 2017.

• OPC: Puerto Cortes is located along the Atlantic coast in the northern part of Honduras. The port

is the country’s centre of transportation and commerce and is considered to be one of Central

America’s most important ports. Approximately 92% of all shipment at Puerto Cortes is to

Honduras, while approximately 6% is to Nicaragua and 2% is to El Salvador. OPC took over

operations at the port in December 2013 and has since installed a new management team and a

fleet of new port equipment, significantly improving operational efficiency at the port.

• CMSA: CMSA is located in the Port of Manzanillo on the Pacific coast of Mexico. The Port of

Manzanillo is the largest port complex in Mexico and is located approximately 800 km from

Mexico City and 300 km from Guadalajara. Throughput volume for CMSA has steadily increased

since operations commenced in 2014 and ramp up of volume has been faster than expected.

EMEA

• MICTSL: From 2009 to 2013, Madagascar has been hit by bouts of political turmoil.

Madagascar’s investment climate shifted significantly in the first half of 2014, and further

improvements appear likely if favourable political changes continue. With increasing stability in

government, the Malagasy private sector and potential foreign investors expect the investment

climate to improve.

Competition

The Company faces competition to a varying degree at its existing terminals. Its strategy is to operate

in select markets that support a minimal number of container terminals, which in turn limits the

number of port operators in that region. However, there can be no assurances that larger or other

terminal operators will not enter the markets in which the Company operates or that additional

competitors will not develop. Some of the Company’s competitors may have stronger financial

resources than it does and may be able to fund expansion or withstand poor economic conditions more

easily than it can. The Company also faces competition from rail and truck operators, particularly in

largely land-locked countries such as Poland.

— 76 —

Available capacity and capacity utilisation

The utilisation rate at the Company’s terminals is the ratio of the throughput volume divided by thetotal capacity of the terminal. The table below describes the current capacities at the Company’s majorterminals and the utilisation rates for the periods shown.

Year ended 31 December

2014 2015 2016

Capacity(1) Throughput Utilisation(2) Capacity(1) Throughput Utilisation(2) Capacity(2) Throughput Utilisation(2)

TEUs (% Total) TEUs (% Total) TEUs (% Total)

Asia(3).............................. 6,800,000 3,820,572 56.2% 7,050,000 4,094,580 58.1% 7,050,000 4,552,881 64.6%

Americas(4) ...................... 3,900,000 2,687,447 68.9% 4,130,000 2,738,079 66.3% 4,680,000 3,004,690 64.2%

EMEA(5) .......................... 2,000,000 930,616 46.5% 2,600,000 943,334 36.3% 3,125,000 1,131,792 36.2%

Total................................ 12,700,000 7,438,635 58.6% 13,780,000 7,775,993 56.4% 14,855,000 8,689,363 58.5%

Nine months ended 30 September

2016 2017

Capacity(1)(6) Throughput Utilisation(2)(6) Capacity(1)(6) Throughput Utilisation(2)(6)

TEUs (% Total) TEU (% Total)

Asia(3).............................. 7,050,000 3,364,342 47.7% 7,700,000 3,577,607 46.5%

Americas(4) ...................... 4,680,000 2,247,847 48.0% 4,850,000 2,183,308 50.8%(7)

EMEA(5) .......................... 3,125,000 823,003 26.3% 3,125,000 1,075,696 34.4%

Total................................ 14,855,000 6,435,192 43.3% 15,675,000 6,836,611 43.6%

Notes:

(1) Information regarding throughput capacity for each individual terminal is based upon estimates the Company has made

based upon, among other things, market conditions and available infrastructure and equipment. Such estimates require

significant subjective assessments. Other companies in the Company’s industry may calculate and present capacity data

in a different manner. Caution should be used in comparing its data with data presented by other companies or in making

comparisons across the different ports that the Company owns or operates, as the data may not be directly comparable.

(2) Throughput as a percentage of annual capacity.





(Mexico).



(6) The utilisation rate for the nine months ended 30 September 2016 and 2017 was calculated by comparing the throughput

of each terminal as of the end of the nine-month period with the annual capacity of such terminal for the year.

(7) The utilisation rate for the nine months ended 30 September 2017 of Americas excludes the 550,000 TEUs capacity of

SPIA (Colombia), an unconsolidated entity.

Tariffs

The Company’s revenues are dependent on the volumes achieved as well as the tariffs received fromthe Company’s customers for its services.

The tariffs on the services of MICT, CGSA, PICT, MICTSL and OPC are regulated. The tariffs atMICT and the Philippine subsidiaries are regulated by the PPA. At CGSA, the tariffs are regulated andset by the local port authority. Maximum tariff rates at MICTSL were set in the concession agreementand are subject to adjustment for European and Malagasy transport inflation escalators.

— 77 —

The tariffs in China, Poland, Brazil and Mexico are not regulated by the relevant port authorities.

However, the Company may not always be able to pass along increased labour, fuel or other costs to

its customers on a timely basis, or at all. In addition, its operations in Poland have recently seen

increased competition which limits its ability to increase tariffs.

To the extent the Company is not able to affect increases in tariffs in line with increases in costs, its

results of operations may be adversely affected.

Ability to manage variable costs

The majority of the Company’s expenses are fees paid to port authorities under concessions or similar

arrangements. These agreements usually call for a fixed lease payment and a variable payment, which

in general represents the majority of such fees to the port authorities. The variable payment is

generally in the form of a revenue sharing arrangement whereby the Company provides the port

authority with either a fixed percentage of its gross revenues or an agreed amount per TEU handled

by the port facility. The Company may also commit to a fixed investment schedule under which it

commits to invest a fixed amount in the terminal over the course of the concession. After the Company

enters into the concession agreement it is limited in its ability to reduce the fixed lease payments. In

addition, it is restricted contractually and by market conditions in the ability to swiftly and frequently

adjust its tariff rates. Therefore, the Company’s ability to maintain and reduce its variable costs is a

major factor in reducing expenses to increase margins.

The Company’s principal variable costs include fuel, power and labour costs. Manpower costs are its

largest cash operating expense (comprised of manpower costs, equipment and facilities-related

expenses and administrative and other operating expenses). The Company believes that it is able to

manage manpower costs by reducing the number of overtime hours worked by its employees or by

implementing workforce restructuring programmes. Fuel and power costs typically account for a large

percentage of equipment and facilities-related expenses, which vary depending on the volume of

throughput. Any significant increase in variable costs will have a direct negative effect on the margins

and any prolonged disruption in operations caused by work stoppages, mechanical failures or any

other reason could have a direct adverse effect on the Company’s business. Approximately half of the

employees at the terminals that the Company owns or operates are unionised. The Company has

entered into various CBAs with its unionised staff, which fix salaries at certain rates or introduce

gradual salary increases. If the Company is unable to maintain or renew these CBAs at commercially

acceptable terms, or at all, its results of operations may decrease.

Significant Accounting Policies

Significant accounting policies are those that are both (i) relevant to the presentation of the

Company’s financial condition and results of operations and (ii) require management’s most difficult,

subjective or complex judgments, often as a result of the need to make estimates about the effect of

matters that are inherently uncertain. For a discussion of the Company’s significant accounting

policies, see Note 3 to the audited consolidated financial statements as of and for the years ended 31

December 2014, 2015 and 2016 included in this Offering Circular and Note 3 to the unaudited interim

condensed consolidated financial statements as of 30 September 2017 and for the nine months ended

30 September 2016 and 2017 included in this Offering Circular.

— 78 —

Segment Data

As the Company’s business is principally concentrated in one industry segment, it has not divided itsbusiness into multiple operating segments for accounting purposes. However, it has organised itsbusiness into three geographical segments: Asia, Americas and EMEA. The Company’s Asian segmentcomprises the operations at MICT in the Philippines, YRDICT/YICT in China, PICT in Pakistan andall of its Asia based subsidiaries. The Americas segment comprises the operations at CGSA in Ecuador,TSSA in Brazil, and its subsidiaries based in Colombia, Argentina, Honduras and Mexico. EMEAcomprises the operations at BCT in Poland, MICTSL in Madagascar and its subsidiaries in Georgia,Croatia, DR Congo and Iraq.

The following describes certain financial data by geographic segment.

Year ended 31 December(1)

As of and for the nine months ended30 September(1)

2014 2015 2016(2) 2016 2017

Total% ofTotal Total

% ofTotal Total

% ofTotal Total

% ofTotal Total

% ofTotal

(U.S.$ in millions, except percentages and TEUs)

Asia

TEUs ................................ 3,820,572 51.4% 4,094,580 52.7% 4,552,881 52.4% 3,364,342 52.3% 3,577,607 52.3%

Gross revenues from port

operations .................... 531.5 50.1% 564.6 53.7% 581.4 51.5% 435.1 52.1% 435.1 47.4%

Capital expenditures(3) ...... 84.4 30.2% 210.1 53.1% 226.9 57.9% 177.9 59.7% 156.6 73.1%

Other information:

Segment assets(4).......... 1,670.6 50.0% 2,029.2 54.0% 2,319.0 56.7% 2,191.4 55.7% 2,407.9 57.4%

Segment liabilities(5) .... 1,541.0 83.7% 1,549.6 80.9% 1,815.5 78.5% 1,744.8 81.5% 1,836.4 78.8%

Americas

TEUs ................................ 2,687,447 36.1% 2,738,079 35.2% 3,004,690 34.6% 2,247,847 34.9% 2,183,308 31.9%


operations .................... 424.6 40.0% 377.6 35.9% 387.4 34.3% 288.0 34.5% 304.3 33.1%


Other information:

Segment assets(4).......... 1,408.0 42.1% 1,392.4 37.1% 1,344.5 32.9% 1,330.3 33.8% 1,355.3 32.3%

Segment liabilities(5) .... 199.0 10.8% 290.2 15.1% 420.0 18.2% 314.9 14.7% 412.6 17.7%

EMEA

TEUs ................................ 930,616 12.5% 943,334 12.1% 1,131,792 13.0% 823,003 12.8% 1,075,696 15.7%


operations .................... 105.1 9.9% 109.1 10.4% 159.6 14.1% 112.0 13.4% 178.8 19.5%


Other information:

Segment assets(4).......... 264.3 7.9% 332.9 8.9% 428.1 10.5% 412.4 10.5% 431.6 10.3%

Segment liabilities(5) .... 101.8 5.5% 76.1 4.0% 76.8 3.3% 80.5 3.8% 81.3 3.5%

The Company

TEUs ................................ 7,438,635 7,775,993 8,689,363 6,435,192 6,836,611


operations .................... 1,061.2 1,051.3 1,128.4 835.0 918.3

Capital expenditures(3) ...... 279.0 396.0 391.9 297.9 214.1

Other information:

Segment assets(4).......... 3,342.9 3,754.4 4,091.6 3,934.1 4,194.8

Segment liabilities(5) .... 1,841.8 1,915.9 2,312.4 2,140.2 2,330.4

Notes:

(1) Figures for the years ended 31 December 2014, 2015 and 2016 are audited. All figures for the nine months ended 30

September 2016 and 2017 are unaudited.

— 79 —

(2) Segment assets and segment liabilities amounts as of 31 December 2016 are related on a consistent basis with the 30September 2017 accounts.

(3) Capital expenditures include amount spent for the acquisition of port facilities and equipment classified as intangiblesunder IFRIC 12 and property and equipment as shown in the statement of cash flows.

(4) Segment assets do not include deferred tax assets.(5) Segment liabilities do not include income tax payable and deferred tax liabilities.

Income

The Company’s income is primarily derived from port operations. These include providing shippinglines with on-vessel services, such as loading and unloading cargo, and providing cargo owners withservices to move containers from container yards to gates. The Company also receives revenues fromancillary services such as storage, container freight station and the use of reefer outlets as well asservices relating to non-containerised cargo such as bulk cargo for fruits and produce and projectcargo for heavy machinery. The fees the Company receives for container handling operations are oftensubject to government approved tariff rates, for example, in the Philippines tariffs are set by agovernment authority. The tariffs on the services of CGSA, PICT, MICTSL and OPC are alsoregulated. At CGSA, the tariffs are regulated and set by the local port authority. Maximum tariff ratesat MICTSL were set in the concession agreement and are subject to adjustment for European andMalagasy transport inflation escalators. At OPC, the tariffs are regulated and set by the local portauthority. The tariffs at CMSA and TSSA are not regulated.

Other components of total income include gains on foreign exchange, interest income and otherincome. Other income primarily includes rental income, gains on sale of property and equipment,dividend income and others.

Expenses

Port Authorities’ Share in Gross Revenues

The Company’s primary expenses are the fees that it is obligated to pay to the relevant port authorities.Under the relevant concession contracts, the Company is required to pay the relevant port authorityfixed fees and, in most terminals, variable fees that are related to revenues, which account for themajority of the port authorities’ share in gross revenues. Variable fees paid to the relevant portauthorities are recorded as part of “Port Authorities Share in Gross Revenues” in the Company’sfinancial statements. The fixed fees of the terminals within the scope of IFRIC 12 form part of thecapitalised concession rights and are amortised over the period of the concession. The fixed fees ofthe terminals within the scope of IFRIC 4 form part of the equipment and facilities-related expensesand are recorded as part of “Rental Others”. See “Description of Concession Agreements and CertainIndebtedness”.

Manpower Costs

Manpower costs include salaries, bonuses and costs related to retirement and other benefits for theCompany’s staff, including officers, executives and contracted labour.

Equipment and Facilities-Related Expenses

Equipment and facilities-related expenses primarily consist of equipment and facility maintenance andrepair expenses, power and fuel expenses and equipment rental fees.

Administrative and Other Operating Expenses

The Company’s administrative and other operating expenses consist primarily of costs incurred withrespect to general corporate overhead, business development and security. Business developmentexpenses include expenses related to identifying, investigating and bidding on new terminals, such asexpenses for the procurement of engineering and market studies, travel costs, and legal, advisory andtranslation fees.

— 80 —

Depreciation and Amortisation

Depreciation and amortisation expenses primarily relate to the depreciation and amortisation of

property and equipment, as well as the amortisation of the concession rights and computer software.

Depreciation and amortisation are computed using the straight-line method over the estimated useful

lives of the assets or the terms of the operating contracts with port authorities or concessions,

whichever is shorter.

Other Expenses

Other expenses include losses on foreign exchange interest expenses and financing charges, and

impairment losses on investments.

Taxation

The Company operates in multiple tax jurisdictions with different tax rates. Accordingly, it must

determine the appropriate allocation of income in accordance with local law for each of these

jurisdictions. The Company provides for both current taxes and deferred taxes. Deferred taxes arise

mainly from timing differences on unrealised foreign exchange gain/loss and depreciation rates

applicable to the books of account and depreciation under the relevant tax laws to which the Company

is subject.

The table below describes the statutory tax rate applicable to the Company and its material

subsidiaries.

Year Ended 31 DecemberYTD 30

September

2014 2015 2016 2017(1)

The Company........................................... 30.0% 30.0% 30.0% 30.0%

Asia

PICT (Pakistan) .................................... 33.0% 33.0% 33.0% 32.0%

YRDICT/YICT (China)(2)...................... 25.0% 25.0% 25.0% 25.0%

Americas

CGSA (Ecuador) ................................... 22.0% 22.0% 22.0% 22.0%

TSSA (Brazil)(3) ................................... 25.0% 25.0% 25.0% 25.0%

OPC (Honduras) ................................... 25.0% 25.0% 25.0% 25.0%

EMEA

BCT (Poland) ....................................... 19.0% 19.0% 19.0% 19.0%

MICTSL (Madagascar) .......................... 20.0% 20.0% 20.0% 20.0%

Notes:

(1) As per regulations in effect on 30 September 2017.

(2) Registered as a Sino-foreign joint venture in China, commencing in 2008 and 2006, respectively, Berths 61 and 56 of YICT

were entitled to a full tax holiday in the first five years and a 50.0% exemption in the subsequent five years. YICT’s tax

exemption was until December 2015 and commencing in 2016 YICT became subject to the 25.0% regular income tax rate.

Tax losses may be carried forward for five years. In January 2015, Berths 51 and 52 of YICT were granted a full tax holiday

in the first three years and a 50.0% exemption in the subsequent three years.

(3) TSSA was granted a tax incentive effectively reducing the nominal tax rate of 25% to 15.25%. The tax incentive is

applicable for the years 2005-2022 on profits from port operating services in Suape, Pernambuco.

— 81 —

Results of Operations

Nine Months Ended 30 September 2017 Compared with Nine Months Ended 30 September2016

All comparative analysis of the nine months ended 30 September 2017 versus the nine months ended30 September 2016 refer to the unaudited interim condensed consolidated financial statements.

Total Income

Total income for the nine months ended 30 September 2017 amounted to U.S.$960.7 million, anincrease of 11.8% from U.S.$859.4 million for the nine months ended 30 September 2016. Grossrevenues from port operations totalled U.S.$918.3 million or 95.6% of total income, with foreignexchange gain, interest and other income contributing the balance of U.S.$42.4 million or 4.4%.

Gross Revenues from Port Operations

Gross revenues from port operations increased by 10.0% to U.S.$918.3 million for the nine monthsended 30 September 2017 from U.S.$835.0 million for the nine months ended 30 September 2016mainly due to container volume growth, tariff rate adjustments at certain terminals, new contracts withshipping lines and services and contribution of new projects, including IDRC and VICT. The increasewas partially offset by the lower storage revenues at the Philippine terminals, lower vessels calls inCGSA and the unfavourable translation impact of the Mexican peso and the Philippine peso againstthe U.S. dollar. Excluding IDRC and VICT, consolidated gross revenues would have increased by5.5% for the nine months ended 30 September 2017.

Total throughput handled at the Company’s terminals increased by 6.2% to 6,836,611 TEUs for thenine months ended 30 September 2017 from 6,435,192 TEUs for the nine months ended 30 September2016 primarily due to continuous improvement in trade activities surrounding the Company’sterminals, continuous growth and ramp-up at certain terminals and contribution of new projects,including IDRC and VICT. Total throughput handled at the Company’s Asia operations increased by6.3% to 3,577,607 TEUs for the nine months ended 30 September 2017 from 3,364,342 TEUs for thenine months ended 30 September 2016. The largest gain by percentage in total throughput handledoccurred within the Company’s EMEA segment, which increased by 30.7% to 1,075,696 TEUs for thenine months ended 30 September 2017 from 823,003 TEUs for the nine months ended 30 September2016. In the Americas segment, throughput decreased by 2.9% to 2,183,308 TEUs for the nine monthsended 30 September 2017 from 2,247,847 TEUs for the nine months ended 30 September 2016.

Asia

Gross revenues from port operations in the Company’s Asia segment remained flat at U.S.$435.1million for both the nine months ended 30 September 2017 and the nine months ended 30 September2016, primarily due to lower storage revenues and unfavourable translation impact of the Philippinepeso against the U.S. dollar. The decrease was partially offset by container volume growth at YICTand certain Philippine terminals, new services at OJA and contribution of a new terminal, VICT.Excluding VICT and the translation impact of the Philippine peso, gross revenues from port operationsof the Company’s Asia segment would have increased by 1.7% for the nine months ended 30September 2017. Gross revenues from port operations in the Company’s Asia segment represented47.4% and 52.1% of the Company’s gross revenues from port operations for the nine months ended30 September 2017 and 2016, respectively.

Americas

Gross revenues from port operations in the Company’s Americas segment increased by 5.7% toU.S.$304.3 million for the nine months ended 30 September 2017 from U.S.$288.0 million for the ninemonths ended 30 September 2016, primarily due to container volume growth at CMSA, tariff rate

— 82 —

adjustments at CGSA, improvement in trade activities at TSSA and favourable translation impact ofthe Brazilian real against the U.S. dollar. The increase was partially offset by decreased vessel callsat CGSA. Gross revenues from port operations in the Company’s Americas segment represented 33.1%and 34.5% of the Company’s gross revenues from port operations for the nine months ended 30September 2017 and 2016, respectively.

EMEA

Gross revenues from port operations in the Company’s EMEA segment increased by 59.7% toU.S.$178.8 million for the nine months ended 30 September 2017 from U.S.$112.0 million for the ninemonths ended 30 September 2016, primarily due to continuous growth and ramp-up at ICTSI Iraq,continuous improvement in trade activities at MICTSL, BCT and AGCT and contribution of a newproject, IDRC. Excluding IDRC, gross revenues from EMEA operations would have increased by34.0% for the nine months ended 30 September 2017. Gross revenues from port operations in theCompany’s EMEA segment represented 19.5% and 13.4% of the Company’s gross revenues from portoperations for the nine months ended 30 September 2017 and 2016, respectively.

Gains on foreign exchange and interest income

Gains on foreign exchange increased to U.S.$5.2 million for the nine months ended 30 September2017 from U.S.$3.7 million for the nine months ended 30 September 2016, mainly due to thefavourable translation impact of certain currencies against the U.S. dollar.

Interest income increased by 27.2% to U.S.$16.5 million in the nine months ended 30 September 2017from U.S.$13.0 million for the nine months ended 30 September 2016, mainly due to higher interestincome earned from advances granted to Sociedad Puerto Industrial de Aguadulce S.A. (“SPIA”), ajoint venture associate.

Other income

Other income increased to U.S.$20.7 million for the nine months ended 30 September 2017 fromU.S.$7.7 million for the nine months ended 30 September 2016 mainly due to a one-time gain fromreimbursement of costs incurred related to the terminated sub-concession agreement at LekkiInternational Container Terminal Services LFTZ Enterprise (“LICTSLE”) and recognition of incometax credit at OPC.

Port authorities’ share in gross revenues

The amount of port authorities’ share in gross revenues increased by U.S.$5.4 million, or 4.0%, toU.S.$140.0 million in the nine months ended 30 September 2017 from U.S.$134.6 million in the ninemonths ended 30 September 2016. This increase was primarily due to container volume growth andhigher revenues from port operations at the relevant terminals during the period.

Other Expenses

Manpower costs. Manpower costs increased by 5.9% to U.S.$152.5 million for the nine months ended30 September 2017 from U.S.$144.0 million for the nine months ended 30 September 2016, primarilydue to government-mandated and contracted salary rate adjustments at certain terminals, theunfavourable translation impact of the Brazilian real against the U.S. dollar and cost contribution ofnew projects, including IDRC and VICT. The increase was partially offset by cost optimisationmeasures that were implemented and the favourable translation impact of the Mexican peso and thePhilippine peso. Excluding IDRC and VICT, consolidated manpower costs would have decreased by1.7% for the nine months ended 30 September 2017. Manpower costs accounted for 44.4% and 46.4%of cash operating expenses for the nine months ended 30 September 2017 and 2016, respectively.

— 83 —

Equipment and facilities-related expenses. Equipment and facilities-related expenses increased by28.7% to U.S.$112.7 million for the nine months ended 30 September 2017 from U.S.$87.5 millionfor the nine months ended 30 September 2016 due to the fixed port lease expense at VICT, increasesin fuel prices and power tariff rate adjustments at certain terminals, the unfavourable translationimpact of the Brazilian real against the U.S. dollar and cost contribution of new projects, includingIDRC and VICT. The increase was partially offset by the cancellation of the port lease at ICTSIOregon as a result of the pre-termination of the lease agreement and the favourable translation impactof the Mexican peso and the Philippine peso. Excluding IDRC and VICT, consolidated equipment andfacilities-related expenses would have marginally increased by 0.3% for the nine months ended 30September 2017. This expense account represented 32.8% and 28.2% of cash operating expenses forthe nine months ended 30 September 2017 and 2016, respectively.

Administrative and other operating expenses. Administrative and other operating expenses decreasedmarginally by 0.4% to U.S.$78.3 million for the nine months ended 30 September 2017 fromU.S.$78.6 million for the nine months ended 30 September 2016 due to decreases in insurance costs,travel, taxes and license fees and other office expenses as a result of cost optimisation measures thatwere implemented and the favourable foreign exchange translation impact of the Philippine peso andthe Mexican peso against the U.S. dollar. The decrease was partially offset by cost contribution of newterminals, increases in professional fees and the unfavourable foreign exchange translation impact ofthe Brazilian real against the U.S. dollar. Excluding new projects, consolidated administrative andother operating expenses would have decreased by 3.3% for the nine months ended 30 September2017. This expense account represented 22.8% and 25.3% of the total cash operating expenses for thenine months ended 30 September 2017 and 2016, respectively.

Depreciation and amortisation expenses. Depreciation and amortisation expenses increased by 17.7%to U.S.$129.3 million for the nine months ended 30 September 2017 from U.S.$109.8 million for thenine months ended 30 September 2016 due to depreciation of port facilities and equipment at IDRCand VICT and higher depreciation costs arising from expansion projects at ICTSI Iraq and CGSA.

Interest expense and financing charges on borrowings. Interest expense and financing charges onborrowings increased by 32.4% to U.S.$74.9 million for the nine months ended 30 September 2017from U.S.$56.6 million for the nine months ended 30 September 2016, primarily due to higher averageloan balance and lower capitalised borrowing costs on qualifying assets.

Interest expense on concession rights payable. Interest expense on concession rights payabledecreased by 9.9% to U.S.$24.8 million for the nine months ended 30 September 2017 from U.S.$27.5million for the nine months ended 30 September 2016, primarily due to the reduction of fixed port feesat OPC.

Foreign exchange loss and other expenses. Foreign exchange loss and other expenses increased by97.1% to U.S.$40.2 million for the nine months ended 30 September 2017 from U.S.$20.4 million forthe nine months ended 30 September 2016, mainly due to the favourable translation impact of certaincurrencies against the U.S. dollar and recognition of one-time solidarity contribution tax and provisionfor claims at CGSA in 2016, partially offset by write-off of costs incurred in connection with thecancellation and securitisation of ICTSI Global Finance B.V.’s U.S.$350.0 million syndicatedrevolving credit facility in June 2017 and employee termination costs.

Provision for Income Tax

Provision for current and deferred income taxes decreased by 19.5% to U.S.$39.9 million for the ninemonths ended 30 September 2017 from U.S.$49.5 million for the nine months ended 30 September2016 mainly due to the income tax exemption of OPC finalised in the first quarter of 2017, which waspartially offset by higher taxable income as a result of strong operating income. Effective income taxrates for the nine months ended 30 September 2017 and 2016 were 19.2% and 24.7%, respectively.

— 84 —

Net Income

For the reasons described above, the Company’s net income increased by 11.5% to U.S.$168.1 million

for the nine months ended 30 September 2017 from U.S.$150.8 million for the nine months ended 30

September 2016. Net income attributable to equity holders or net profits excluding share of

non-controlling interests increased by 5.2% to U.S.$149.3 million for the nine months ended 30

September 2017 from U.S.$141.9 million for the nine months ended 30 September 2016.

Year Ended 31 December 2016 Compared with Year Ended 31 December 2015

All comparative analysis of the year ended 31 December 2016 versus the year ended 31 December

2015 refer to the audited financial statements.

Total Income

Total income for the year ended 31 December 2016 amounted to U.S.$1,164.1 million, an increase of

8.3% from U.S.$1,075.2 million for the year ended 31 December 2015. In 2016, gross revenues from

port operations totalled U.S.$1,128.4 million or 96.9% of total income, with foreign exchange gain,

interest and other income contributing the balance of U.S.$35.7 million or 3.1%.


Gross revenues from port operations increased by 7.3% to U.S.$1,128.4 million for the year ended 31

December 2016 from U.S.$1,051.3 million for the year ended 31 December 2015 mainly due to

container volume growth, tariff rate adjustments at certain terminals, new contracts with shipping

lines and services and continuous growth and ramp-up at ICTSI Iraq. The increase in revenue was

tapered by lower storage and non-containerised revenues at TSSA, weaker short-sea trade and reduced

vessel calls at BCT, discontinued vessel calls at IOI and the unfavourable translation impact of the

Philippine peso and the Mexican peso against the U.S. dollar.

Total throughput handled at the Company’s terminals increased by 11.7% to 8,689,363 TEUs for the

year ended 31 December 2016 from 7,775,993 TEUs for the year ended 31 December 2015 primarily

due to new shipping lines and services, improvement in trade activities at certain terminals and

continuous growth and ramp-up at ICTSI Iraq. The largest gain in total throughput handled occurred

within the Company’s Asia segment, which increased by 11.2% to 4,552,881 TEUs for the year ended

31 December 2016 from 4,094,580 TEUs for the year ended 31 December 2015. Total throughput

handled at the Company’s Americas operations increased by 9.7% to 3,004,690 TEUs for the year

ended 31 December 2016 from 2,738,079 TEUs for the year ended 31 December 2015. In the EMEA

segment, throughput increased by 20.0% to 1,131,792 TEUs for the year ended 31 December 2016

from 943,334 TEUs for the year ended 31 December 2015.

Asia

Gross revenues from port operations in the Company’s Asia segment increased by 3.0% to U.S.$581.4

million for the year ended 31 December 2016 from U.S.$564.6 million for the year ended 31 December

2015, primarily due to improvement in trade activities at most of the Philippine terminals resulting in

container volume growth, new contracts with shipping lines and services at OJA and PICT and tariff

rate adjustments at certain terminals. The increase was partially offset by the depreciation of the

Philippine peso against the U.S. dollar. Gross revenues from port operations in the Company’s Asia

segment represented 51.5% and 53.7% of the Company’s gross revenues from port operations for the

years ended 31 December 2016 and 2015, respectively.

— 85 —

Americas

Gross revenues from port operations in the Company’s Americas segment increased by 2.6% toU.S.$387.4 million for the year ended 31 December 2016 from U.S.$377.6 million for the year ended31 December 2015, resulting primarily from new shipping lines and services at CGSA and CMSA andtariff rate adjustments and increased storage and special services at OPC. The increase was partiallyoffset by lower storage and non-containerised revenues at TSSA, unfavourable translation impact ofthe Mexican peso against the U.S. dollar and discontinued vessel calls of two major shipping lines atICTSI Oregon as a result of the continuous labour disputes. Gross revenues from port operations inthe Company’s Americas segment represented 34.3% and 35.9% of the Company’s gross revenuesfrom port operations for the years ended 31 December 2016 and 2015, respectively.

EMEA

Gross revenues from port operations in the Company’s EMEA segment increased by 46.2% toU.S.$159.6 million for the year ended 31 December 2016 from U.S.$109.1 million for the year ended31 December 2015, primarily due to continuous growth and ramp-up at ICTSI Iraq and favourablecontainer volume mix and tariff rate adjustments at MICTSL. The increase was partially offset byweaker short-sea trade and reduced vessel calls at BCT. Gross revenues from port operations in theCompany’s EMEA segment represented 14.2% and 10.4% of the Company’s gross revenues from portoperations for the years ended 31 December 2016 and 2015, respectively.


Gains on foreign exchange increased to U.S.$4.7 million for the year ended 31 December 2016 fromU.S.$3.7 million for the year ended 31 December 2015, mainly due to the favourable translationimpact of certain currencies against the U.S. dollar.

Interest income increased by 31.9% to U.S.$17.7 million in the year ended 31 December 2016 fromU.S.$13.4 million for the year ended 31 December 2015, mainly due to higher interest income earnedfrom advances granted to SPIA, a joint venture associate.

Other income

Other income was recorded at U.S.$13.4 million for the year ended 31 December 2016, compared toU.S.$6.8 million for the year ended 31 December 2015 mainly due to gain on disposal of certainproperty and equipment and recovery of claims from contractors and insurance, tax refunds andcredits.


The amount of port authorities’ share in gross revenues increased by U.S.$14.7 million, or 8.7%, toU.S.$183.7 million in the year ended 31 December 2016 from U.S.$169.0 million in the year ended31 December 2015. This increase was primarily due to higher gross revenues.

Other Expenses

Manpower costs. Manpower costs decreased marginally by 0.3% to U.S.$192.5 million for the yearended 31 December 2016 from U.S.$193.2 million for the year ended 31 December 2015, primarilydue to a decline in contracted services at ICTSI Oregon and the favourable translation impact of theMexican peso and the Philippine peso against the U.S. dollar. The decrease was partially offset byincreases in variable contracted services driven by container volume growth, government-mandatedand contracted salary rate adjustments at certain terminals and the contribution of new projects,including IDRC and VICT. Manpower costs accounted for 45.9% and 44.7% of cash operatingexpenses for the years ended 31 December 2016 and 2015, respectively.

— 86 —

Equipment and facilities-related expenses. Equipment and facilities-related expenses decreased by

3.9% to U.S.$119.9 million for the year ended 31 December 2016 from U.S.$124.8 million for the year

ended 31 December 2015 due to lower fuel cost as a result of a decrease in global fuel prices, lower

repairs and maintenance as a result of improved operational efficiencies, a decline in variable costs,

such as fuel and power, at ICTSI Oregon and the favourable translation impact of the Mexican peso

and the Philippine peso against the U.S. dollar. The decrease was slightly offset by higher fuel

consumption driven by a growth in volume and higher fuel and power tariffs at CGSA. This expense

account represented 28.6% and 28.9% of cash operating expenses for the years ended 31 December

2016 and 2015, respectively.

Administrative and other operating expenses. Administrative and other operating expenses decreased

by 6.3% to U.S.$107.2 million for the year ended 31 December 2016 from U.S.$114.4 million for the

year ended 31 December 2015 due to the reduction in travel, insurance costs and professional fees as

a result of cost optimisation measures that were implemented, the foreign exchange translation impact

of the Mexican peso and the Philippine peso against the U.S. dollar and decreases in taxes and license

fees. The decrease was partially offset by higher IT costs and the contribution of new projects,

including Tecplata, IDRC and VICT. This expense account represented 25.5% and 26.5% of the total

cash operating expenses for the years ended 31 December 2016 and 2015, respectively.

Depreciation and amortisation expenses. Depreciation and amortisation expenses increased by 16.9%

to U.S.$147.8 million for the year ended 31 December 2016 from U.S.$126.5 million for the year

ended 31 December 2015 due to the commencement of depreciation of Tecplata’s port facilities on 1

January 2016 and acquisition of port equipment and improvement of port facilities at MICT, YICT and

OPC.

Interest expense and financing charges on borrowings. Interest expense and financing charges on

borrowings increased by 22.6% to U.S.$75.1 million for the year ended 31 December 2016 from

U.S.$61.2 million for the year ended 31 December 2015, primarily due to higher average loan balance

and lower capitalised borrowing costs on qualifying assets. Capitalised borrowing costs on qualifying

assets amounted to U.S.$24.3 million for 2016 and U.S.$27.5 million for 2015, with the decrease

resulting from the cessation of Tecplata’s borrowing cost.

Interest expense on concession rights payable. Interest expense on concession rights payable

decreased by 8.7% to U.S.$34.1 million for the year ended 31 December 2016 from U.S.$37.3 million

for the year ended 31 December 2015, primarily due to the declining principal balances of the

Company’s concession rights payable as of 31 December 2016.

Impairment losses. Impairment losses was nil for the year ended 31 December 2016 compared with

U.S.$114.6 million for the year ended 31 December 2015, primarily due to the absence of the

nonrecurring impairment charge on the concession rights assets of Tecplata amounting to U.S.$88.0

million in 2015 as a result of lower projected cash flows caused by the prevailing and challenging

economic conditions in Argentina and impairment charges on the goodwill of PT ICTSI Jasa Prima

Tbk and OJA as a result of lower projected cash flows.

Foreign exchange loss and other expenses. Foreign exchange loss and other expenses increased by


ended 31 December 2015. The 2016 amount included recognition of a non-recurring charge on the

pre-termination of the lease agreement at ICTSI Oregon amounting to U.S.$23.4 million, the probable

loss on non-trade advances and solidarity contribution on equity at CGSA in 2016 and the foreign

exchange translation impact of certain currencies against the U.S. dollar.

— 87 —


Provision for current and deferred income taxes increased by 25.7% to U.S.$63.6 million for the year

ended 31 December 2016 from U.S.$50.6 million for the year ended 31 December 2015 mainly due

to higher taxable income as a result of strong operating income, which was partially offset by higher

deferred income tax benefit on unrealised foreign exchange loss in 2016. Effective income tax rates

for the years ended 31 December 2016 and 2015 were 24.7% and 42.3%, respectively.

Net Income

For the reasons described above, the Company’s net income increased by 180.4% to U.S.$193.5


2015. Net income attributable to equity holders or net profits excluding share of non-controlling

interests increased by 207.5% to U.S.$180.0 million for the year ended 31 December 2016 from

U.S.$58.5 million for the year ended 31 December 2015.

Year Ended 31 December 2015 Compared with Year Ended 31 December 2014

All comparative analysis of the year ended 31 December 2015 versus the year ended 31 December

2014 refer to the audited financial statements.

Total Income

Total income for the year ended 31 December 2015 amounted to U.S.$1,075.2 million, a decrease of

5.1% from U.S.$1,132.4 million for the year ended 31 December 2014. In 2015, gross revenues from

port operations totalled U.S.$1,051.3 million or 97.8% of total income, with foreign exchange gain,

interest and other income contributing the balance of U.S.$23.9 million or 2.2%.


Gross revenues from port operations decreased marginally by 0.9% to U.S.$1,051.3 million for the

year ended 31 December 2015 from U.S.$1,061.2 million for the year ended 31 December 2014 mainly

due to unfavourable container volume mix, lower storage revenues and ancillary services and the

unfavourable translation impact of the Brazilian real, the euro, the Mexican peso and the Philippine

peso against the U.S. dollar. The decrease was partially offset by tariff rate adjustments at certain

terminals, new contracts with shipping lines and services at PICT and CGSA, continuous growth and

ramp up at CMSA and OPC, favourable impact of consolidation of terminal operations at YICT and

the first full year contribution of ICTSI Iraq. Excluding ICTSI Iraq and the translation impact of

currency depreciation, consolidated gross revenues would have increased by 2.0% in 2015.

Total throughput handled at the Company’s terminals increased by 4.5% to 7,775,993 TEUs for the

year ended 31 December 2015 from 7,438,635 TEUs for the year ended 31 December 2014 primarily

due to new shipping lines and services, continuous growth and ramp-up at CMSA and OPC, increased

demand for services at SBITC and the first full year contribution of ICTSI Iraq. Excluding ICTSI Iraq,

consolidated container volume would have increased by 2.6% in 2015. The largest gain in total

throughput handled occurred within the Company’s Asia segment, which increased by 7.2% to

4,094,580 TEUs for the year ended 31 December 2015 from 3,820,572 TEUs for the year ended 31

December 2014. Total throughput handled at the Company’s Americas operations increased by 1.9%

to 2,738,079 TEUs for the year ended 31 December 2015 from 2,687,447 TEUs for the year ended 31

December 2014. In the EMEA segment, throughput increased by 1.4% to 943,334 TEUs for the year

ended 31 December 2015 from 930,616 TEUs for the year ended 31 December 2014.

— 88 —

Asia

Gross revenues from port operations in the Company’s Asia segment increased by 6.2% to U.S.$564.6


2014, primarily due to the favourable impact of consolidation of terminal operations at YICT,

favourable container volume mix and higher ancillary services at SBITC and new contracts with

shipping lines and services at PICT. The increase was partially offset by the depreciation of the

Philippine peso against the U.S. dollar. Excluding the translation impact of the Philippine peso, gross

revenues of the Asia segment would have increased by 8.0% in 2015. Gross revenues from port

operations in the Company’s Asia segment represented 53.7% and 50.1% of the Company’s gross

revenues from port operations for the years ended 31 December 2015 and 2014, respectively.

Americas

Gross revenues from port operations in the Company’s Americas segment decreased by 11.1% to

U.S.$377.6 million for the year ended 31 December 2015 from U.S.$424.6 million for the year ended

31 December 2014, resulting primarily from unfavourable container volume mix, lower storage and

non-containerised revenues at TSSA, lower imports at CGSA due to higher trade tariffs imposed by

the Ecuadorian government, unfavourable translation impact of the Brazilian real and the Mexican

peso against the U.S. dollar and discontinued vessel calls of two major shipping lines at ICTSI Oregon

as a result of the continuous labour disputes. The decrease was partially offset by tariff rate

adjustments at certain terminals, new shipping lines and services at CGSA and container volume

growth and stronger ancillary revenues due to continuous growth and ramp-up at CMSA and OPC.

Excluding the translation impact of the Brazilian real and the Mexican peso, gross revenues of the

Americas segment would have decreased by 3.1% in 2015. Gross revenues from port operations in the

Company’s Americas segment represented 35.9% and 40.0% of the Company’s gross revenues from

port operations for the years ended 31 December 2015 and 2014, respectively.

EMEA

Gross revenues from port operations in the Company’s EMEA segment increased by 3.8% to

U.S.$109.1 million for the year ended 31 December 2015 from U.S.$105.1 million for the year ended

31 December 2014, primarily due to the first full year revenue contribution of ICTSI Iraq, and tariff

rate adjustments at certain terminals. The increase was partially offset by weaker short-sea trade and

reduced vessel calls at BCT and the depreciation of the Euro against the U.S. dollar. Excluding ICTSI

Iraq and the translation impact of the Euro, gross revenues from the EMEA segment would have

decreased by 7.5% in 2015. Gross revenues from port operations in the Company’s EMEA segment

represented 10.4% and 9.9% of the Company’s gross revenues from port operations for the years ended

31 December 2015 and 2014, respectively.


Gains on foreign exchange increased to U.S.$3.7 million for the year ended 31 December 2015 from

U.S.$1.2 million for the year ended 31 December 2014, mainly due to the favourable translation

impact of a weaker Mexican peso against the U.S. dollar.

Interest income increased by 22.6% to U.S.$13.4 million in the year ended 31 December 2015 from

U.S.$10.9 million for the year ended 31 December 2014, mainly due to higher interest income earned

from advances granted to SPIA, a joint venture associate.

— 89 —

Other income

Other income was recorded at U.S.$6.8 million for the year ended 31 December 2015, compared toU.S.$59.2 million for the year ended 31 December 2014. In 2014, the Company sold its 60.0% equityinterest in Yantai Rising Dragon International Container Terminals Ltd. (“YRDICTL”) to Yantai PortHoldings (“YPH”) for a total cash consideration of U.S.$94.8 million, which was recognised duringthe same year.


The amount of port authorities’ share in gross revenues increased by U.S.$5.4 million, or 3.3%, toU.S.$169.0 million in the year ended 31 December 2015 from U.S.$163.6 million in the year ended31 December 2014. This increase was primarily due to the first full year revenue contribution of ICTSIIraq. Excluding ICTSI Iraq, port authorities’ share in gross revenues would have decreased by 0.4%in 2015.

Other Expenses

Manpower costs. Manpower costs decreased by 6.0% to U.S.$193.2 million for the year ended 31December 2015 from U.S.$205.4 million for the year ended 31 December 2014, primarily due to adecline in contracted services at ICTSI Oregon and the favourable translation impact of the Brazilianreal, the euro, the Mexican peso and the Philippine peso against the U.S. dollar. The decrease waspartially offset by increased headcount as a result of the consolidation at YICT, government-mandatedand contracted salary rate adjustments at certain terminals, the first full year contribution of ICTSIIraq and the contribution of new projects, including VICT, IDRC and LGICT. Excluding ICTSI Iraq,new projects and the translation impact of currency depreciation, consolidated manpower costs wouldhave decreased marginally by 0.5% in 2015. Manpower costs accounted for 44.7% and 45.2% of cashoperating expenses for the years ended 31 December 2015 and 2014, respectively.

Equipment and facilities-related expenses. Equipment and facilities-related expenses decreased by7.9% to U.S.$124.8 million for the year ended 31 December 2015 from U.S.$135.5 million for the yearended 31 December 2014 due to lower fuel cost as a result of a decrease in global fuel prices, lowerequipment rentals and repairs and maintenance as a result of equipment acquisition and upgrades atcertain terminals, a decline in variable costs, such as fuel and power, at ICTSI Oregon and thefavourable translation impact of the Brazilian real, the euro, the Mexican peso and the Philippine pesoagainst the U.S. dollar. The decrease was slightly offset by higher power costs driven by power tariffadjustments at certain terminals, the first full year contribution of ICTSI Iraq and the contribution ofnew projects, including IDRC and LGICT. Excluding ICTSI Iraq, new projects and translation impactof currency depreciation, consolidated equipment and facilities-related expenses would havedecreased by 2.0% in 2015. This expense account represented 28.9% and 29.8% of cash operatingexpenses for the years ended 31 December 2015 and 2014, respectively.

Administrative and other operating expenses. Administrative and other operating expenses increasedmarginally by 0.7% to U.S.$114.4 million for the year ended 31 December 2015 from U.S.$113.6million for the year ended 31 December 2014 due to the first full year contribution and start-up costsof ICTSI Iraq, the contribution and start-up costs of new projects, including VICT, IDRC, LICTSLE,TMT and LGICT, and higher insurance costs arising from increased risk coverage of the Company’sassets. The increase was partially offset by the foreign exchange translation impact of the Brazilianreal, the euro, the Mexican peso and the Philippine peso against the U.S. dollar. Excluding ICTSI Iraq,new projects and translation impact of currency depreciation, consolidated administrative expensesand other operating expenses would have increased by 2.2%. This expense account represented 26.5%and 25.0% of the total cash operating expenses for the years ended 31 December 2015 and 2014,respectively.

— 90 —

Depreciation and amortisation expenses. Depreciation and amortisation expenses increased by 3.9%

to U.S.$126.5 million for the year ended 31 December 2015 from U.S.$121.7 million for the year

ended 31 December 2014 due to the acquisition of port facilities and equipment upon consolidation

of YICT, acquisition of port equipment and improvement of yard facilities at MICT and OPC and the

first full year contribution of ICTSI Iraq. Excluding ICTSI Iraq, depreciation and amortisation

expense would have increased by 3.5% in 2015.

Interest expense and financing charges on borrowings. Interest expense and financing charges on

borrowings increased by 4.0% to U.S.$61.2 million for the year ended 31 December 2015 from

U.S.$58.9 million for the year ended 31 December 2014, primarily due to the increased level of

outstanding debt and credit lines, which was partially offset by the lower financing cost as a result of

the exchange of senior notes for lower cost notes under the MTN Programme in January 2015 as part

of the Company’s liability management strategies. Capitalised borrowing costs on qualifying assets

amounted to U.S.$27.5 million for 2015 and U.S.$25.0 million for 2014, with the increase resulting

from the construction activities at Tecplata during the year and the ongoing construction activities at

VICT, IDRC and ICTSI Iraq.

Interest expense on concession rights payable. Interest expense on concession rights payable

decreased by 2.0% to U.S.$37.3 million for the year ended 31 December 2015 from U.S.$38.1 million

for the year ended 31 December 2014, primarily due to the declining principal balances of the

Company’s concession rights payable as of 31 December 2015.

Impairment losses. Impairment losses increased to U.S.$114.6 million for the year ended 31 December

2015 from U.S.$38.1 million for the year ended 31 December 2014, primarily due to the nonrecurring

impairment charge on the concession rights assets of Tecplata amounting to U.S.$88.0 million in 2015

as a result of lower projected cash flows caused by the prevailing and challenging economic conditions

in Argentina and impairment charges on the goodwill of PT ICTSI Jasa Prima Tbk and OJA as a result

of lower projected cash flows.

Foreign exchange loss and other expenses. Foreign exchange loss and other expenses increased by


ended 31 December 2014. The 2015 amount included recognition of a one-time wealth tax imposed

on the Company for its equity holdings in SPIA amounting to U.S.$1.1 million pursuant to a new tax

reform in Colombia in 2015.


Provision for current and deferred income taxes decreased by 6.0% to U.S.$50.6 million for the year

ended 31 December 2015 from U.S.$53.9 million for the year ended 31 December 2014 mainly due

to higher deferred income tax benefit on unrealised foreign exchange loss in 2015, which was partially

offset by recognition of a super tax at PICT amounting to U.S.$1.0 million pursuant to the Finance

Act 2015 of Pakistan. Effective income tax rates for the years ended 31 December 2015 and 2014 were

42.3% and 22.0%, respectively.

Net Income

For the reasons described above, the Company’s net income decreased by 64.0% to U.S.$69.0 million

for the year ended 31 December 2015 from U.S.$191.5 million for the year ended 31 December 2014.

Net income attributable to equity holders or net profits excluding share of non-controlling interests

decreased by 67.8% to U.S.$58.5 million for the year ended 31 December 2015 from U.S.$182.0

million for the year ended 31 December 2014.

— 91 —

Liquidity And Capital Resources

As of 30 September 2017, the Company had total current assets of U.S.$550.3 million and total current

liabilities of U.S.$385.2 million. As of such date, the Company’s current assets primarily comprised

cash and cash equivalents of U.S.$319.8 million and its current liabilities primarily comprised of

accounts payable and other current liabilities, which amounted to U.S.$262.5 million. Accounts

payable generally represent accrued operating expenses, including those payable to port authorities

other than concession rights payable.

Cash Flows

The Company’s principal sources of funds have historically been free cash flow from operating

activities and debt financing. Its principal use of funds have historically been to pay for its working

capital requirements, to pay for capital expenditures related to the development of the container

terminals that it operates, as well as acquisition and other business development related activities. It

believes that it has sufficient working capital available for its present requirements as at the date of

this Offering Circular. The following table sets forth its cash flow positions for the periods indicated.


30 September

2014 2015 2016 2016 2017










Nine months ended 30 September 2017

Operating activities. The Company realised a net cash inflow from operating activities of U.S.$390.1

million in the nine months ended 30 September 2017. The main component of this inflow was stronger

operating income.

Investing activities. Net cash used in investing activities in the nine months ended 30 September 2017

totalled U.S.$255.2 million. The largest component of the Company’s cash outflow for investing

activities was U.S.$155.7 million for acquisitions of property and equipment.

— 92 —

Financing activities. Net cash used in financing activities in the nine months ended 30 September2017 totalled U.S.$148.7 million. During the period, the Company made long-term borrowings ofU.S.$81.7 million and short-term borrowings of U.S.$65.3 million while it paid long-term borrowingsof U.S.$40.7 million and short-term borrowings of U.S.$42.0 million. The Company also madedividend payments of U.S.$108.0 million.

Year ended 31 December 2016

Operating activities. The Company realised a net cash inflow from operating activities of U.S.$466.9million in the year ended 31 December 2016. The main component of this inflow was strongeroperating income.

Investing activities. Net cash used in investing activities in the year ended 31 December 2016 totalledU.S.$468.5 million. The largest components of the Company’s cash outflow for investing activitieswere U.S.$275.2 million for the acquisition of property and equipment and U.S.$105.8 million for theacquisition of intangible assets.

Financing activities. Net cash used in financing activities in the year ended 31 December 2016 totalledU.S.$21.7 million. The Company made long-term borrowings of U.S.$473.1 million while it paidlong-term borrowings of U.S.$207.1 million. The Company also used U.S.$122.1 million in itsacquisition of perpetual capital securities. The Company also made dividend payments of U.S.$53.7million.



Investing activities. Net cash used in investing activities in the year ended 31 December 2015 totalledU.S.$547.6 million. The largest components of the Company’s cash outflow for investing activitieswere U.S.$252.6 million for the acquisition of property and equipment and U.S.$143.4 million for theacquisition of intangible assets.

Financing activities. Net cash provided by financing activities in the year ended 31 December 2015totalled U.S.$297.1 million. The Company generated U.S.$483.0 million through its issuance ofperpetual capital securities. The Company also made long-term borrowings of U.S.$212.2 millionwhile it paid long-term borrowings of U.S.$178.0 million. The Company also made dividend paymentsof U.S.$52.3 million.



Investing activities. Net cash used in investing activities in the year ended 31 December 2014 totalledU.S.$340.8 million. The largest components of the Company’s cash outflow for investing activitieswere U.S.$146.0 million for the acquisition of property and equipment and U.S.$135.4 million for theacquisition of YICT.

Financing activities. Net cash used in financing activities in the year ended 31 December 2014 totalledU.S.$94.1 million. The largest payment during the period was U.S.$92.4 million for interest onborrowings and concession rights payable. During the period, the Company made long-termborrowings of U.S.$112.9 million while it paid long-term borrowings of U.S.$46.8 million. TheCompany also made dividend payments of U.S.$49.6 million.

— 93 —

Debt Obligations and Facilities

The Company relies on long-term borrowings, bank financing and internally generated cash to fundits operations or make capital investments. The Company attempts to match the currency of the loanwith the expenditures to which the proceeds are applied. For a description of the Company’s currentdebt obligations and facilities see “Description of Concession Agreements and CertainIndebtedness—Description of Financing Agreements”. Long-term debt is recorded as the combinationof “long-term debt — net of current portion”, “current portion of long-term debt” and “loans payable”in the Company’s consolidated financial statements. The following table describes the Company’sprincipal repayment obligations, net of unamortised debt issuance costs, with respect to long-termdebt (including current maturities of long term debt) as of 30 September 2017.

Amount % of total


(Unaudited)

2017 (October onwards) ............................................................... 4.1 0.3%

2018 ............................................................................................ 21.1 1.5%

2019 ............................................................................................ 36.7 2.6%

2020 ............................................................................................ 237.6 16.9%

2021 onwards............................................................................... 1,109.1 78.7%

Total............................................................................................ 1,408.5 100.0%

Capital Expenditures

The Company operates in a very capital intensive industry. Its capital expenditure expenses relate tothe development of the container terminals that it operates, such as procuring and improvingequipment, constructing and upgrading facilities and civil works, and upgrading securityinfrastructure. All capital expenditures are made at its expense without financial support from therelevant port authorities or local governments. Capital expenditures relate to port infrastructure andequipment and are presented as a combination of two accounts under “cash flows used in investingactivities” in the Company’s consolidated financial statements, namely “acquisitions of intangibleassets” and “acquisitions of property and equipment”. The following table describes its capitalexpenditures for the periods indicated.


Ninemonths

ended 30September

2014 2015 2016 2017


Total capital expenditures ........................ 279.0 396.0 391.9 214.1

Capital expenditures for the first nine months, excluding capitalised borrowing costs and expenses,amounted to U.S.$113.5 million, which accounts for 47.3% of the U.S.$240.0 million capitalexpenditure budget for the full year. The established budget has been primarily allocated for thecompletion of the initial stage development of the Company’s greenfield projects in DR Congo andIraq; the second stage development of the Company’s project in Australia; continuing development ofthe Company’s container terminals in Mexico and Honduras; and capacity expansion in its terminaloperations in Manila. In addition, the Company invested U.S.$25.2 million in SPIA in Buenaventura,Colombia to fund the completion of the initial phase and to finance the start-up operations of its jointventure container terminal project with PSA International.

— 94 —

Contractual Obligations and Contingent Liabilities

Under the Company’s concession agreements and other agreements with port authorities, it isgenerally obliged to invest certain pre-determined amounts in the terminals over the course of theconcession. Certain of the contracts specifically set forth equipment to be procured or improvementsto be made over the course of the concession, while others only provide amounts or general guidance.

The Company’s material capital commitments under its concession or other agreements for itscontainer terminal operations are described below:

Asia

• MICT: Under the existing MICT Contract, which expires in 2038, the Company is required to,among other things, implement and execute a container terminal equipment acquisitionprogramme and deployment schedule as well as expand and develop the landside and maintainthe basin of MICT.

• YICT: Under the joint-venture agreement, YICT is obliged to make certain capital structureimprovements, including four (4) quay cranes.

• PICT: Under its concession agreement with the port authority, PICT is in charge of the exclusiveconstruction, development, operations and management of a common user container terminal atBerths 6 to 9, East Wharf, Karachi port.

• VICT: Under the concession agreement, the Company is required to implement and manage agreenfield development project for the construction of a terminal that meets certain definedspecifications. Phase 1 of the project has already been completed while Phase 2 is expected tobe completed by 31 December 2017.

Americas

• CGSA: Under the concession agreement, the Company is required to, among other things,implement and execute a capital improvement project and container terminal equipmentacquisition programme and expand and develop the terminal facilities in accordance with theagreed development plan.

• TSSA: Under its concession agreement with the port authority, TSSA must make all investmentsin works, equipment and systems necessary for achieving the object of the agreement, includingspecifically to acquire and install one mobile crane and two gantry cranes. As of the date of thisOffering Circular, TSSA has made all investments which are mandatory pursuant to itsconcession agreement with the port authority.

• Tecplata: Under the concession agreement, the Company is required to implement and managea greenfield development project for the construction of a terminal that meets certain definedspecifications. The first phase of Tecplata’s construction obligation was completed in 2015.While Tecplata has been authorised since April 2015 to commence its operations, it has yet tocommerce operations due to unfavourable market conditions.

• SPIA: Under the concession agreement, the Company is required to implement and manage agreenfield development project for the construction of a terminal that meets certain definedspecifications.

• CMSA: Under the concession agreement, the Company is required to implement and manage agreenfield development project for the construction of a terminal that meets certain definedspecifications.

— 95 —

• OPC: Under its concession agreement, which was won through a public hearing, OPC is incharge of the rehabilitation and expansion of existing facilities in the main seaport of Honduras.

• TMT: Under the concession agreement, the Company is required to construct and operate amaritime container terminal in the Port of Tuxpan, Mexico and is the owner of the real estatewhere the maritime container terminal will be constructed.

EMEA

• BCT: Under its agreements with the port authority, BCT was required to invest euro 20.0 millionin equipment by 2011. BCT completed compliance with this investment requirement in 2006.

• MICTSL: Under its concession agreement with the port authority, MICTSL was required toacquire and install the necessary equipment to achieve pre-set productivity rates. It also had torehabilitate the quay and the yards. MICTSL has complied with these investment requirements.

• AGCT: Under its concession agreement with the port authority, AGCT was required to integrateinto its facilities a berth and yard extension project being conducted at the terminal by the portauthority in 2013 as well as acquire and commission port equipment to modernise the terminaloperation. As concessionaire, AGCT is required to comply with additional investmentcommitments in port equipment and the concession area, which are to be fulfilled during theremaining concession period without specific deadlines.

• ICTSI Iraq/BGT: Under the concession agreement, BGT was required to rehabilitate three oldberths and operate them for 21 years to handle containers, general cargo and “roll-on, roll-off”businesses. Furthermore, BGT was obliged to construct three new berths, acquire the terminalhandling equipment for them and operate them for 26 years, out of which one berth is alreadyoperational and two additional berths remain work in progress. BGT is planning for investmentsof more than U.S.$100 million over the course of the next two years.

• IDRC: Under the agreement, IDRC is required to implement and manage a greenfielddevelopment project for the construction of a terminal that meets certain defined specifications.IDRC has met all requirements from the authority to operate the terminal.

See “Description of Concession Agreements and Certain Indebtedness”. The Company has met orexceeded its tangible capital commitments under concession agreements at all of its major terminals.

Other than its obligations under its concession agreements, the Company’s other long-term contractualobligations are in the form of performance bonds and customs guarantees. Performance bonds arebonds issued by financial institutions to guarantee the timely payment of port authority fees and thecapital commitments under the concession agreements and other agreements with port authorities. Thecustoms guarantee is a guarantee made for the benefit of the Ecuadoran customs authorities to provideassurances that certain equipment, which have received exemptions from import duties, are nottransferred outside the designated CGSA port terminal area.

Off Balance Sheet Obligations

As of the date of this Offering Circular, the Company is not a financial guarantor of obligations of anyunconsolidated entity and is not a party to any off-balance sheet obligations or arrangements, otherthan the contingent liabilities mentioned above.

Quantitative and Qualitative Disclosures about Market Risk

The Company’s geographically diverse operation exposes it to various market risks, particularlyforeign exchange risk, liquidity risk, credit risk and interest rate risk, which movements may

— 96 —

materially impact the financial results of the Company. The importance of managing these risks hassignificantly increased in light of the heightened volatility in both the Philippine and internationalfinancial markets. With a view to managing these risks, the Company has incorporated a financial riskmanagement function within its treasury operations.

Foreign Exchange Risk

Fluctuations in the exchange rates between the Philippine peso and the U.S. dollar and other foreigncurrencies will affect the U.S. dollar value of the Company’s assets and liabilities that aredenominated in currencies other than U.S. dollars.

The Company receives a substantial portion of its gross revenues from port operations in currenciesother than U.S. dollars. Other than certain revenue streams at MICT, CGSA, BCT, PICT, BICTL, BGTand IDRC, the Company’s revenues are denominated in non-U.S. dollars. The Company incursexpenses in foreign currency for all the operating and start up requirements of its internationalsubsidiaries. In certain countries the concession fees payable to the port authorities are eitherdenominated in or linked to the U.S. dollar.

The following table represents the exchange rates of relevant currencies against the U.S. dollar as atthe dates indicated.


September

2015 2016 2017

Philippine peso .................................................. 47.06 49.72 50.82

Mexican Peso..................................................... 17.21 20.73 18.25

Brazilian real ..................................................... 3.96 3.26 3.16

Euro................................................................... 0.92 0.95 0.85

RMB .................................................................. 6.49 6.95 6.65

Source: Bloomberg.

The Company hedges its foreign exchange exposure by minimising any mismatch between asubsidiary’s monetary assets and liabilities when determining such subsidiary’s functional currency.If mismatches cannot be eliminated, the Company applies translation hedge accounting wheneverappropriate. The Company also hedges operationally by negotiating contracts with customers in sucha way that a substantial portion of its revenues and EBITDA are in U.S. dollar terms or are in termslinked to the U.S. dollar. For any residual foreign exchange exposure, the Company uses financialderivatives and ensures that any medium- to long-term hedges are eligible for hedge accountingtreatment.

Translation Hedging. Foreign currency translation gains or losses on Philippine peso-denominatedshort-term investments that qualify as highly effective cash flow hedges are deferred in equity. Anyineffective portion is recognised directly in earnings. Foreign currency translation gains or lossesdeferred in equity would form part of variable fees, presented as “Port Authorities’ Share in GrossRevenues” in the consolidated statement of income, when the hedged variable PPA fee is recognised.Foreign currency losses amounting to U.S.$3.1 million for the year ended 31 December 2014 waspresented as part of “Port Authorities’ Share in Gross Revenues” account in the consolidatedstatements of income.

Tecplata designated an aggregate of U.S.$173.0 million (AR$927.9 million) in 2013 and U.S.$40.3million (AR$308.5 million) in 2014 of its Argentine peso-denominated cash and cash equivalents ascash flow hedges of the currency risk on Argentine peso-denominated payables that would arise fromforecasted Argentine peso-denominated capital expenditures. The hedging in 2013 and 2014 covered

— 97 —

forecasted Argentine peso-denominated expenditures from April 2013 until June 2014 and from March

2014 until December 2014, respectively. Foreign currency translation gains or losses deferred in

equity would form part of the cost of the port infrastructure (including port fees during the

construction period) and would be recycled to profit and loss through depreciation.

Foreign currency translation loss on Argentine peso-denominated cash and cash equivalents

designated as cash flow hedges aggregating to U.S.$6.2 million have been recognised under equity in

2014 and U.S.$6.2 million, U.S.$1.9 million and nil have been transferred from equity to construction

in-progress under “Intangible Assets” account in the consolidated balance sheets as at 31 December

2014, 2015 and 2016, respectively. No hedging ineffectiveness was recognised in the consolidated

statements of income for the years ended 31 December 2014, 2015 and 2016, respectively.

As at 31 December 2016, Tecplata does not have any outstanding Argentine peso-denominated

amounts designated as cash flow hedge.

Net Investment Hedging. In March 2017, the Company entered into a cross currency swap that converts

its U.S. dollar bond with a coupon of 7.375% maturing on 17 March 2020 to a euro liability that has

a coupon of 5.05% with the same maturity. The EUR15.0 million cross currency swap was designated

as a net investment hedge to offset the movement of the Company’s euro net investment in its

subsidiary in Madagascar, MICTSL. As of 30 September 2017, the market valuation loss on the

outstanding cross currency swap amounted to EUR2.2 million (U.S.$1.9 million).

Interest Rate Risk

The Company’s liabilities have combined fixed and floating interest rates. A rise in short-term interest

rates in U.S. dollars will result in a corresponding increase in the interest rates due on the Company’s

floating rate U.S. dollar denominated liabilities. The Company enters into interest rate swap

agreements, on a limited basis, to manage its exposure to interest rate fluctuations.

Interest Rate Swap. In 2014, AGCT entered into an interest rate swap transaction to hedge the interest

rate exposure on its floating rate Euro-denominated loan maturing in 2023. A notional amount of

EUR5.1 million (U.S.$6.2 million) in 2013 and EUR3.8 million (U.S.$4.6 million) in 2014 out of the

total EUR10.6 million (U.S.$12.8 million) floating rate loan was swapped to fixed rate. Under the

interest rate swap, AGCT pays fixed interest of 6.19% for EUR5.1 million and 5.55% for EUR3.8

million and receives floating rate of one-month EURIBOR plus 4.20 bps on the notional amount. As

of 30 September 2017, the market valuation loss on the outstanding interest rate swap amounted to

EUR0.5 million (U.S.$0.4 million).

In January 2016, CMSA entered into interest rate swap transactions to hedge the interest rate exposure

on its floating rate U.S.$-denominated loan maturing in 2027. A total notional amount of U.S.$181.0

million floating rate loan was swapped to fixed rate. Under the interest rate swap arrangements, CMSA

pays annual fixed interest of 2.44% and receives floating rate of six-month LIBOR on the notional

amount. As of 30 September 2017, the market valuation loss on the outstanding interest rate swaps

amounted to U.S.$2.6 million.

In August 2016, VICT entered into interest rate swap transactions to hedge the interest rate exposures

on its floating rate AUD-denominated loans maturing in 2023, 2026 and 2031. A total notional amount

of U.S.$320.4 million floating rate loan was swapped to fixed rate. Under the interest rate swap

arrangements, VICT pays annual fixed interest of a range of 2.10% to 2.5875% and receives floating

rate of six-month BBSY basis points on the notional amount. As at 30 September 2017, the market

valuation gain on the outstanding interest rate swaps amounted to AUD7.7 million (U.S.$6.0 million).

— 98 —

In November 2016, the Company entered into an interest rate swap transaction to hedge the interestrate exposures of CGSA’s U.S.$-denominated floating rate loan maturing in 2021. A total nominalamount of U.S.$32.5 million of such floating rate loan was swapped to fixed rate. Under the interestrate swap arrangements, the Company pays annual fixed interest of 3.045% and receives floating rateof six-month LIBOR plus 160 basis points on the nominal amount. As of 30 September 2017, themarket valuation gain on the outstanding interest rate swaps amounted to U.S.$144.8 thousand. Theeffective portion of the fair value of the interest rate swap amounting to U.S.$101.4 thousand, net ofU.S.$43.4 thousand in deferred taxes, for the nine months period ended 30 September 2017, wasaccounted for as equity under other comprehensive loss.

As of 30 September 2017, the Company’s interest bearing liabilities were as follows:

Borrower Type of Facility Amount InterestMaturityDate

Guarantor ................. Unsecured U.S. DollarTerm Loan

U.S.$55.0 million Floating 2017

CGSA ...................... Unsecured U.S. DollarTerm Loan

U.S.$4.3 million Fixed 2018

BCT......................... Unsecured U.S. DollarTerm Loan


ITBV ....................... Unsecured U.S. DollarBond

U.S.$752.5 million Fixed 2023-2025

VICT ....................... Secured AUD Term Loan U.S.$240.9 million Fixed* 2023-2031

Guarantor ................. Unsecured U.S. DollarBond**

U.S.$179.2 million Fixed 2020

CMSA...................... Secured U.S. Dollar TermLoan

U.S.$169.1 million Fixed* 2027

CGSA ...................... Unsecured U.S. DollarTerm Loan

U.S.$28.2 million Fixed 2017-2021

OPC......................... Unsecured U.S. DollarTerm Loan


YICT ....................... Secured RMB Term Loan U.S.$15.0 million Floating 2023

AGCT ...................... Secured Euro Term Loan U.S.$7.0 million Fixed* 2023-2024

* Under interest rate swap agreement

** U.S.$16.1 million under euro-U.S. dollar cross currency swap agreement

The Company’s exposure to market risk for changes in interest rates relates primarily to theCompany’s bank loans and is addressed by a periodic review of the Company’s debt mix with theobjective of reducing interest cost and maximising available loan terms. As of 30 September 2017,96% of the Company’s total indebtedness was fixed interest rate, compared to 98%, 95% and 88% asof 31 December 2016, 2015 and 2014, respectively.

Liquidity Risk

The Company manages its liquidity profile to be able to finance its working capital and capitalexpenditure requirements through internally generated cash and proceeds from debt. As part of theCompany’s liquidity risk management, the Company maintains strict control of its cash and ensuresthat excess cash held by subsidiaries is timely transmitted to the Company. The Company alsomonitors receivables and payables to ensure that these are at optimal levels. In addition, it regularlyevaluates its projected and actual cash flow information and continually assesses the conditions in thefinancial market to pursue fund raising initiatives. These initiatives may include accessing bank loans,project finance facilities and the debt capital markets.

— 99 —

The Company monitors and maintains a level of cash and cash equivalents and bank credit facilities

deemed adequate by management to finance the Company’s operations, ensure continuity of funding

and to mitigate the effects of fluctuations in cash flows.

There are no other known trends, demands, commitments, events or uncertainties that will materially

affect the Company’s liquidity.

Credit Risk

The Company trades only with recognised, creditworthy third parties and the exposure to credit risk

is monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not

significant. Since the Company trades only with recognised third parties, collateral is not required in

respect of financial assets. Moreover, counterparty credit limits are reviewed by management on an

annual basis. The limits are set to minimise the concentration risks and mitigate financial loss through

potential counterparty failure.

With respect to credit risk arising from the other financial assets of the Company, which comprise cash

and cash equivalents, and available-for-sale financial assets, the Company’s exposure to credit risk

arises from default of the counterparty, with a maximum exposure equal to the carrying amount of

these instruments.

Inflation

The Company operates in a number of countries that, from time to time, experience high levels of

inflation. High rates of inflation can impact variable costs including costs for fuel, power and labour.

In inflationary environments, the Company may not be able to raise tariffs to adjust for these increases

in costs on a timely basis or at all, which in turn may adversely affect its results of operations.

Seasonality

The container terminal industry has historically experienced seasonal variations. This seasonality may

result in quarter-to-quarter volatility in operating results. Trade volumes in the jurisdictions in which

the Company operates tend to be stronger in the third and fourth quarters and weaker in the first

quarter. The Company does not believe that such seasonal variations over the last three years have had

a material effect on the results of operations.

— 100 —

INDUSTRY OVERVIEW

The information and data in this section has been provided by Drewry and has been taken fromDrewry’s database and from other sources in the public domain. Drewry has advised the Company thatsuch information and data accurately describes the industry described herein, subject to theavailability and reliability of the data supporting the statistical and graphical information presented.Drewry’s methodologies for collecting information and data, and therefore the information discussedin this section, may differ from those of other sources, and does not reflect all or even necessarily acomprehensive set of the actual transactions occurring in the industry. The source of all tables andcharts is Drewry unless otherwise indicated.

Neither the Company, the Joint Lead Managers nor any of their respective affiliates or advisors hasindependently verified the information included in this section. This information is subject to revisionby Drewry at any time. Projections contained in this section are based on varying levels ofquantitative and qualitative analyses, including analyses of global and local economic development,container traffic, market penetration, terminal infrastructure and ongoing and projected terminaldevelopment projects and employ significant levels of judgment.

Containerised cargo first developed in the late 1950’s as an alternative means of transporting generalcargoes comprised principally of manufactured goods, consumer products and all other non-bulkcargo. Bulk cargo generally refers to commodities such as oil, grain, iron ore, which are typicallytransported in specialised vessels and the loading and unloading of which is normally done atspecialised, dedicated port facilities. The significant benefits of transporting general cargo incontainers, including the ability to create integrated intermodal transport chains linking sea transportwith road and rail networks to provide end-to-end transport services and the dramatic reductions inboth transport times and shipping costs, resulted in the rapid and widespread adoption of containerisedshipping as the predominant means of transporting non-bulk cargoes. The containerised percentage ofworld general cargo volume (computed as the estimated tonnage of world containerised traffic volumedivided by the world estimated tonnage of total general cargo volume) was just 21.9% in 1980, buthad reached an estimated 71.4% in 2016. Global container throughput volumes grew at a CAGR of8.2% from 1980 to 2016, compared to 3.3% for dry bulk cargos during the same period.

Source: Drewry

Cargo is categorized by either transhipment cargo which is transported to a feeder terminal to befurther transported to another regional terminal, or end-destination cargo. Terminal handling ratescharged for end-destination cargo tends to be higher than those for transhipment cargo. This is because

— 101 —

handling end-destination cargo includes more services than transhipment (e.g. loading containers toand from road trucks). In addition, transhipment traffic tends to be more mobile than end-destinationtraffic, which is usually more captive. Also, for full end-destination containers, shipping lines areusually able to pass on the terminal handling charges to cargo owners, whereas transhipment is a purecost which the shipping lines must bear, therefore making them more sensitive to transhipmentcharges.

The rapid acceptance and growth in containerised shipping necessitated charges in the worldwideports and cargo handling industries. Prior to the widespread adoption of containerised vessels,independent contractors known as stevedores handled the loading and unloading of general cargo. Inmany cases, the actual cargo handling facilities including vessel berths, quayside and storage areaswere owned by the local port authority and shared by multiple stevedoring companies, each of whomhad agreements to provide loading/unloading services to individual shipping lines.

The introduction of containerised vessels made the shared facility stevedoring system impractical.Ship loading and unloading times could be dramatically reduced through the introduction ofspecialised quay cranes and yard handling equipment. In many cases, the new equipment necessitatedreinforcing berths and altering and expanding cargo-handling areas. In addition, specialisedinformation technology systems were introduced to optimise ship loading and unloading and managecontainer transit times into and out of the terminal. As a result of these innovations, the traditionalstevedoring business was fundamentally transformed into a capital-intensive business with a highdegree of operating leverage where one operator controlled and provided a complete range ofship-to-gate services in an individual terminal. In addition, the substantial investment requirementsprompted many government port authorities to turn operation of cargo handling over to privateoperators pursuant to long-term concession contracts and similar arrangements. Through this process,a number of global/international common user terminal operators have emerged. A number of majorinternational container shipping lines have also developed international terminal networks, principallyas a means of facilitating and strengthening their own global transport networks. The following tabledescribes the major international operators ranked by throughput for the year ended 31 December2016:

Global/international terminal operators’ equity based throughput league table, 2016(Million teu / % share of world container port throughput)

Ranking2016 Operator 2016

Million Teu %Share

1 .............. PSA International 52.4 7.5%

2 .............. Hutchison Ports 45.6 6.5%

3 .............. DP World 40.0 5.7%

4 .............. APM Terminals 37.3 5.3%

5 .............. China Cosco Shipping * 29.1 4.2%

6 .............. China Merchants Port Holdings ** 27.9 4.0%

7 .............. Terminal Investment Limited (TIL) 19.3 2.8%

8 .............. ICTSI 7.9 1.1%

9 .............. Evergreen 7.6 1.1%

10 ............ Eurogate 7.4 1.1%

11 ............ SSA Marine / Carrix 6.5 0.9%

12 ............ Hanjin 5.7 0.8%

13 ............ Yildirim/Yilport *** 5.2 0.7%

14 ............ CMA CGM ** 5.1 0.7%

15 ............ NYK 3.4 0.5%

— 102 —

Ranking2016 Operator 2016

Million Teu %Share

16 ............ OOCL 3.2 0.5%

17 ............ MOL 2.8 0.4%

18 ............ Yang Ming 2.5 0.4%

19 ............ Bollore 2.5 0.4%

20 ............ China Shipping Terminal Development 2.4 0.3%

21 ............ K Line 2.3 0.3%

22 ............ Hyundai 2.2 0.3%

23 ............ APL/NOL ** 2.1 0.3%

Global/international operators total: 320.5 45.8%

Source: Drewry

Notes

1. Unless stated otherwise figures include total annual throughput for all terminals in which shareholdings held as at 31st Dec

2016, adjusted according to the extent of equity held in each terminal

2. Figures for each operator include equity volumes from other GTO/ITO and non-GTO/ITO operators in which stakes are

held. Figures do not include stevedoring operations at common user terminals and also exclude barge/river terminals

3. * For 2016, China COSCO Shipping includes Cosco Shipping Ports, China Shipping and Cosco Container Line for the

period Apr-Dec 2016 after the merger in Feb 2016. China Shipping Terminal Development figure for 2016 is Jan-Mar pro

rata estimate.

4. PSA and HPH figures have been adjusted to account for PSA’s 20% shareholding in HPH

5. ** CMA CGM and CMHI figures have been adjusted to account for CMHI’s 49% shareholding in Terminal Link. CMA

CGM figure also includes 6 months of APL volumes, for period after acquisition finalised. APL’s 2016 figure adjusted

downwards accordingly

6. APM Terminals figure has been adjusted to account for its stake in GPI

7. Hutchison figures include HPH Trust volumes

8. TIL figure does not include MSC/affiliated companies

9. *** Yildirim/Yilport and CMA CGM figures have been adjusted to account for Yildirim’s 20% stake in CMA CGM (and

hence indirect stakes in Terminal Link and CMA Terminals)

10. APMT’s acquisition of the majority of Grup TCB’s terminals was completed in early March 2016, and so Grup TCB is

no longer included as a separate operator in this table

11. Hanjin Shipping Co. filed for bankruptcy in September 2016 and declared bankrupt in Feb 2017

12. Some figures are estimated

Concurrent to the emergence of international terminal operators is the increasing importance placedby shipping lines on service levels at the ports and terminals, which they use. Ships are expensiveassets which generate income while at sea and thus rapid port handling is essential. Shipping linesvalue terminal operators that can provide efficient and swift cargo handling services, along withreliability, safety and low/zero damage levels and errors.

This aspect of the international terminal business has become increasingly important due to the rapidincrease in container ship sizes in recent years. In order to pursue economies of scale, shipping lineshave deployed ever larger ships in the main east-west trade lanes. This has led to larger ships not onlyin these trade lanes, but also in the secondary north-south trade lanes. The need to be able to physicallyaccommodate larger ships in container terminals around the world, as well as maintaining orimproving handling speeds and turnaround times has placed further emphasis on terminal operatorefficiency and expertise. The table below illustrates the increase in maximum container ship size since1992 to the date of this Offering Circular.

— 103 —

Largest container ship in world fleet

1992 ................................................................................................................ 4,469 TEUs

2002 ................................................................................................................ 7,500 TEUs

2006 ................................................................................................................ 15,550 TEUs

2012 ................................................................................................................ 16,020 TEUs

2013 ................................................................................................................ 18,270 TEUs

2014 ................................................................................................................ 19,000 TEUs

2015 ................................................................................................................ 19,200 TEUs

2016 ................................................................................................................ 19,200 TEUs

2017 ................................................................................................................ 21,413 TEUs

Source: Drewry

Container port throughput volumes are driven by growth in global container shipping traffic, which

is in turn driven by overall GDP growth, increases in merchandise trade and increases in the percent

of general cargo shipped in containers (commonly referred to as “containerisation”). Since 1945,

world trade growth has consistently grown faster than GDP due to, among other factors, a greater

degree of integration in the world economy, an increase in the number of countries following

market-oriented economic models and the emergence of integrated global supply chains as a business

strategy. These trends have resulted in strong growth in container port throughput volumes,

particularly in less-developed economic areas.

The table below displays global container port throughput for the regions and dates indicated:

Year ended December 31 CAGR

Region 1080 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20161980-2016

2013-14

growth

2014-15

growth

2016-17

growth

NORTH AMERICA ................................ 9,596 12,889 17,131 22,828 32,215 46,674 49,626 50,936 49,090 42,791 49,118 50,477 52,302 53,491 55,628 58,257 59,017 5.2% 4.0% 4.7% 1.3%

East Coast North America ....................... 4,857 6,236 7,111 9,249 12,468 17,129 17,837 18,433 18,133 15,698 17,752 18,415 18,873 19,294 20,602 22,299 22,414 4.3% 6.8% 8.2% 0.5%

Gulf Coast North America ....................... 743 1,042 1,282 1,706 2,519 3,332 3,289 3,699 3,732 3,623 3,996 4,198 4,397 4,553 4,564 4,904 5,100 5.5% 0.2% 7.5% 4.0%

West Coast North America....................... 3,997 5,612 8,738 11,873 17,227 26,212 28,500 28,805 27,226 23,470 27,370 27,863 29,033 29,644 30,462 31,053 31,503 5.9% 2.8% 1.9% 1.4%

EUROPE ................................................ 12,496 17,318 23,785 34,831 55,302 84,160 91,942 103,739 106,789 92,266 102,025 109,707 112,125 115,419 120,563 118,362 121,456 6.5% 4.5% -1.8% 2.6%

North West Europe .................................. 8,197 11,165 15,288 20,378 30,369 43,827 47,312 52,730 53,220 44,914 50,051 52,877 52,705 53,711 56,465 56,476 56,888 5.5% 5.1% 0.0% 0.7%

Scandinavia & Baltic ............................... 1,026 1,443 1,859 2,741 3,697 6,520 7,318 8,123 8,904 6,855 8,151 9,452 10,215 10,565 10,740 9,460 9,933 6.5% 1.7% -11.9% 5.0%

West Mediterranean ................................. 2,263 3,291 4,064 6,892 13,975 20,331 21,255 23,630 24,015 22,063 22,957 24,056 24,590 25,356 26,012 26,352 27,350 7.2% 2.6% 1.3% 3.8%

East Mediterranean & Black Sea ............. 1,010 1,419 2,574 4,821 7,261 13,482 16,058 19,256 20,650 18,435 20,866 23,322 24,616 25,788 27,346 26,073 27,286 9.6% 6.0% -4.7% 4.7%

ASIA....................................................... 9,387 16,379 32,515 61,941 103,163 190,456 214,493 246,627 263,212 244,234 284,074 312,052 329,673 343,758 362,748 367,913 377,861 10.8% 5.5% 1.4% 2.7%

North Asia ............................................... 5,973 10,032 16,320 23,018 32,466 45,780 47,673 50,969 50,895 44,650 51,776 56,554 58,065 59,593 62,192 61,334 62,591 6.7% 4.4% -1.4% 2.0%

Greater China .......................................... 1,544 2,873 6,515 17,926 36,152 90,025 107,562 127,401 140,459 131,537 155,651 172,450 184,727 195,176 206,309 211,980 217,787 14.7% 5.7% 2.7% 2.7%

South East Asia ....................................... 1,871 3,474 9,679 20,997 34,545 54,650 59,258 68,256 71,858 68,047 76,647 83,048 86,882 88,989 94,247 94,598 97,483 11.6% 5.9% 0.4% 3.0%

MIDDLE EAST INDIAN SUB CONTI .. 1,792 3,298 4,726 8,667 14,742 29,881 33,298 38,606 43,938 42,200 47,399 50,047 52,699 53,166 57,691 60,508 62,861 10.4% 8.5% 4.9% 3.9%

Middle East ............................................. 1,543 2,406 2,946 5,436 9,258 20,128 21,817 25,051 29,077 28,151 30,600 32,410 34,999 34,584 36,857 38,564 38,472 9.3% 6.6% 4.6% -0.2%

South Asia ............................................... 249 892 1,780 3,231 5,483 9,753 11,481 13,554 14,861 14,048 16,799 17,636 17,700 18,581 20,834 21,944 24,388 13.6% 12.1% 5.3% 11.1%

LATIN AMERICA ................................. 2,293 3,409 4,779 9,443 16,700 25,704 29,140 32,090 34,365 31,515 36,326 39,691 41,727 42,303 42,539 42,783 42,268 8.4% 0.6% 0.6% -1.2%

Central America/Caribbean ...................... 1,857 2,380 3,228 5,325 10,025 14,129 15,759 17,447 18,597 17,364 19,534 20,888 22,437 21,669 21,436 21,927 21,167 7.0% -1.1% 2.3% -3.5%

East Coast South America ....................... 322 775 1,128 2,647 4,297 7,717 8,507 9,107 9,609 8,324 10,036 11,173 11,324 12,316 12,087 11,911 11,564 10.5% -1.9% -1.5% -2.9%

West Coast South America....................... 114 255 423 1,470 2,378 3,859 4,875 5,536 6,159 5,827 6,756 7,631 7,965 8,318 9,015 8,945 9,537 13.1% 8.4% -0.8% 6.6%

AFRICA ................................................. 1,502 2,037 2,766 4,190 6,790 12,229 13,181 14,836 17,379 16,966 19,161 20,948 21,830 23,392 24,346 24,250 23,958 8.0% 4.1% -0.4% -1.2%

East Africa .............................................. 110 269 456 684 1,017 1,896 2,008 2,412 2,660 2,754 2,825 3,312 3,635 3,729 4,006 4,119 4,366 10.8% 7.4% 2.8% 6.0%

North Africa ............................................ 121 182 276 454 981 1,912 1,967 2,222 3,456 3,731 4,728 4,845 4,713 5,475 6,176 6,060 6,242 11.6% 12.8% -1.9% 3.0%

West Africa ............................................. 671 940 1,222 1,585 2,706 5,176 5,536 6,145 6,923 6,422 7,017 7,742 8,465 8,749 8,763 8,654 8,233 7.2% 0.2% -1.2% -4.9%

Southern Africa ....................................... 600 646 812 1,468 2,086 3,244 3,670 4,056 4,340 4,059 4,591 5,051 5,016 5,440 5,401 5,416 5,116 6.1% -0.7% 0.3% -5.5%

OCEANIA .............................................. 1,681 2,073 2,449 3,555 5,159 7,670 8,027 8,925 9,554 9,070 9,685 10,333 10,617 10,711 11,171 11,440 11,701 5.5% 4.3% 2.4% 2.3%

Oceania ................................................... 1,681 2,073 2,449 3,555 5,159 7,670 8,027 8,925 9,554 9,070 9,685 10,333 10,617 10,711 11,171 11,440 11,701 5.5% 4.3% 2.4% 2.3%

WORLD ................................................. 38,748 57,404 88,151 145,455 234,070 396,774 439,707 495,759 524,328 479,042 547,788 593,255 620,973 642,239 674,687 683,512 699,122 8.4% 5.1% 1.3% 2.3%

Source: Drewry

— 104 —

Despite prior consolidation in the terminal industry, the sector remains fragmented with respect to

terminals with throughputs of less than 500,000 TEUs, the operators of which are still significantly

public sector entities. The table below describes the number of terminals worldwide by size as well

as the percentages that were in the public ownership as of 31 December 2016

Terminal size(TEU)*

2016throughput

(millionTEU)**

% of globalthroughput

Totalnumber ofterminals

% of totalterminals

Average2016

throughputper terminal

(TEU)

No. ofterminalswhich arestate/portauthority

owned andoperated***

State/portauthority

owned/operated %

of totalterminals in

size class

1-99,999 ................... 18.8 2.7% 516 39.3% 36,343 281 54.5%

100,000-249,999 ....... 39.0 5.5% 239 18.2% 163,153 77 32.2%

250,000-499,999 ....... 67.5 9.6% 190 14.5% 355,174 47 24.7%

500,000-999,999 ....... 120.1 17.0% 174 13.3% 690,069 35 20.1%

1,000,000 and above. 460.8 65.3% 193 14.7% 2,387,815 40 20.7%

Grand Total............. 706.1 100.0% 1,312 100.0% 538,224 480 36.6%

Source: Drewry

Notes:

* Terminal size is based on 2016 throughput

** Global throughput figure is higher than standard Drewry global figure due to inclusion of non-specialised container

terminals (e.g. ro-ro terminals)

*** Excludes terminals owned/operated by global/international operators which are ultimately majority state owned (such as

PSA and DP World) but includes terminals where government/port authorities have control of ownership/operations

— 105 —

BUSINESS

Overview

The Company is an international operator of common user container terminals serving the globalcontainer shipping industry. Its business is the operational management, development and acquisitionof container terminals with a focus on origin and destination and gateway ports in emerging andfrontier markets. It also provides a number of ancillary services such as storage, container packing andunpacking, inspection, weighing and services for refrigerated containers, or reefers. The Companyholds rights to operate these terminals under long-term concession agreements with local portauthorities and governments. As of the date of this Offering Circular, the Company owned or operateda total of 27 terminal facilities, with nine key ports and an inland container terminal in the Philippines,two in Indonesia and one each in China, Ecuador, Brazil, Poland, Georgia, Madagascar, Croatia,Pakistan, Mexico, Honduras, Iraq, Argentina, Colombia, DR Congo and Australia; an acquisition ofan existing concession to construct and operate a port in Tuxpan, Mexico; and, recently, a project toconstruct a barge terminal in Cavite, Philippines and agreements to operate two international ports inPNG. For the year ended 31 December 2016 and the nine months ended 30 September 2017, theCompany handled an estimated 8,689,363 TEUs and 6,836,611 TEUs, respectively.

The Company was established by the Razon family, who remains the controlling shareholder, in 1987in connection with the privatisation of the MICT in the Port of Manila. The Company has built uponthe experience gained in rehabilitating, developing and operating MICT to establish an extensiveinternational network concentrated in emerging market economies.

For the year ended 31 December 2016, the Company reported consolidated gross revenues from portoperations and EBITDA of U.S.$1,128.4 million and U.S.$525.1 million, respectively. For the ninemonths ended 30 September 2017, the Company reported consolidated gross revenues from portoperations and EBITDA of U.S.$918.3 million and U.S.$434.9 million, respectively. The Companyorganises its business across three geographic regions: (i) Asia, (ii) the Americas and (iii) EMEA. In2016, Asia accounted for 52.4% of throughput and 51.5% of consolidated gross revenues from portoperations, the Americas accounted for 34.6% of throughput and 34.3% of consolidated gross revenuesfrom port operations, and EMEA accounted for 13.0% of throughput and 14.1% of consolidated grossrevenues from port operations. For the nine months ended 30 September 2017, Asia accounted for52.3% of throughput and 47.4% of consolidated gross revenues from port operations, the Americasaccounted for 31.9% of throughput and 33.1% of consolidated gross revenues from port operations,and EMEA accounted for 15.7% of throughput and 19.5% of consolidated gross revenues from portoperations.

The tables below describe the total throughput and gross revenues from port operation for theCompany’s domestic and international operations for the periods indicated.


30 September

2016 2017

GrossRevenues

% of TotalGross

RevenuesGross

Revenues

% of TotalGross

Revenues

(in U.S.$ Mn)(Audited)

(in U.S.$ Mn)(Unaudited)

Asia ......................................................... 581.4 51.5% 435.1 47.4%

Americas.................................................. 387.4 34.3% 304.3 33.1%

EMEA...................................................... 159.6 14.1% 178.8 19.5%

Total........................................................ 1,128.4 100.0% 918.3 100.0%

— 106 —


30 September

2016 2017

Throughput% of Total

Throughput Throughput% of Total

Throughput

(TEUs) (TEUs)

Asia(1)...................................................... 4,552,881 52.4% 3,577,607 52.3%

Americas(2) .............................................. 3,004,690 34.6% 2,183,308 31.9%

EMEA(3) .................................................. 1,131,792 13.0% 1,075,696 15.7%

Total........................................................ 8,689,363 100.0% 6,836,611 100.0%

Notes:

(1) Asia includes: MICT (Manila), YICT (China), PICT (Pakistan), PTMTS (Indonesia), SBITC (Subic), ICTSI Subic, Inc.(Subic), DIPSSCOR (Davao), MICTSI (Mindanao), SCIPSI (Gen.Santos City), OJA (Indonesia) and VICT (Australia).

(2) Americas includes: CGSA (Ecuador), TSSA (Brazil), OPC (Honduras) and CMSA (Mexico).

(3) EMEA includes: MICTSL (Madagascar), BCT (Poland), BICTL (Georgia), AGCT (Croatia), ICTSI Iraq (Iraq) and IDRC

(DR Congo).

The Company’s common stock was first listed on the PSE in March 1992. The Company’s marketcapitalisation as of 30 September 2017 was P=211.55 billion.

Key Competitive Strengths

The Company believes that its key competitive strengths include the following:

Business model focused on origin and destination terminals in emerging and frontier markets

Over the past decade, the Company believes that it has built a portfolio of terminals mainly in originand destination or “gateway” terminals, which are terminals where goods originate or are delivered asend destinations, as opposed to “transshipment” terminals, where goods may be offloaded at suchterminal and again loaded onto different vessels bound for different destinations. The Companybelieves that its focus on these gateway terminals, such as Manila, Honduras, Ecuador and Iraq, resultin its operations and business being less susceptible to market fluctuations, as volumes at thesegateway locations are supported by growing economies. Moreover, by virtue of their size and scale,these terminals are supported by steady consumption patterns, and are less susceptible to volatilefluctuations in the amount of cargo that passes through its terminals. In addition, the Companybelieves that its focus on building and operating terminals in emerging or “frontier” markets such asAsia, Latin America and Africa, which are areas where containerisation of cargo is still relatively low,present opportunities for high and steady levels of trade and consumption growth, as well assignificant profit potential for the Company.

Globally diversified revenue base

As of the date of this Offering Circular, the Company owned or operated ports in 18 countries andorganises its operations across three geographic regions: Asia, the Americas and EMEA. The Companybelieves that the geographical scope of its terminals reduces the concentration of its business in anyparticular country, region or industry. In 2016, Asia accounted for 52.4% of throughput and 51.5% ofconsolidated gross revenues from port operations, the Americas accounted for 34.6% of throughputand 34.3% of consolidated gross revenues from port operations, and EMEA accounted for 13.0% ofthroughput and 14.1% of consolidated gross revenues from port operations. For the nine months ended30 September 2017, Asia accounted for 52.3% of throughput and 47.4% of consolidated gross revenuesfrom port operations, the Americas accounted for 31.9% of throughput and 33.1% of consolidatedgross revenues from port operations, and EMEA accounted for 15.7% of throughput and 19.5% ofconsolidated gross revenues from port operations. In addition, each of the Company’s port facilities

— 107 —

serves a number of different shipping lines, which reduces its reliance on any one particular customer.In 2016 and the nine months ended 30 September 2017, revenue from the Company’s largest customerrepresented only 9.5% and 10.0% of its consolidated gross revenues from port operations for eachperiod, respectively. The Company believes that its diversified operations spanning the major regionsof the world, as well as its presence in areas where consumption and merchandise inventory aregrowing, mitigates the effect of regional or area-specific economic downturns on its business andresults of operations.

Leading market positions in key targeted markets

The Company’s major terminals enjoy leading positions in their respective geographic markets. TheCompany believes that its strong market position in the regions where it operates allows it to enhanceoperating efficiencies and maximise throughput, which increases profitability. The Company owns oroperates the largest container terminals in terms of volume throughput and capacity in the Philippines,Ecuador, the Brazilian state of Pernambuco, Madagascar, Yantai in China, Honduras, and morerecently Iraq and DR Congo. At these terminals, there are limited opportunities for competition fromother port operators, other ports or other terminals within the same ports due to high barriers to entry.Some of these barriers include the limited number of port sites, government controls and high terminalconstruction costs. This means that there are few substitutes for the Company’s services, which allowsit to maintain significant pricing power and thus helps to ensure robust margins. Many of these portsare in emerging markets, which generally exhibit stronger growth than developed markets; thus theCompany believes that its leading position in these markets will allow it to directly capture organicgrowth in line with the economies of these markets. Furthermore, all of the Company’s concessionagreements are long-term agreements that ensure continued benefits from long-term GDP growthtrends.

Market Experience and Scale of Operations

The Company believes that its considerable expansion over the past decade has allowed it to gainsignificant experience in the regional markets in which it operates. This has resulted in the Companybeing more nimble to take advantage of acquisition, expansion and other business opportunities whicharise in those regions. For example, its experience operating in Latin America since 2007 and thepresence of a Latin America-based international team and operating unit helped it to identify andcapitalise opportunities to secure concessions in Argentina, Colombia and Mexico. The Company alsobelieves that its experience and relationships in the region with respect to operational aspects suchregulatory and labour allowed it to navigate necessary approvals and permits, as well as source themanpower and other requirements for its new terminals in a very efficient manner, often affordingsignificant savings, lower cost of capital and improved margins. In addition, the Company’s targetedand steady expansion has resulted in its operations achieving significant scale, which has translatedinto global relationships at the public and private sector levels which have allowed the Company toexert pricing influence over customers. The Company’s scale has also afforded it greater negotiatingpower with suppliers and other key third parties.

Dynamic and empowered management team

The Company’s management team has extensive experience in the acquisition, rehabilitation andoperation of container terminals. The Company has been able to deploy experienced management teammembers across its geographic operations to implement the start-up and takeover of new facilities. TheCompany’s management team is highly incentivised, as directors, company officers and related partieshave an approximate 62.0% equity interest in the Company as of the date of this Offering Circular.Its management structure is intentionally decentralised with broad authority delegated to individualoperating units, where management teams are closest to their customers and have the mostcomprehensive knowledge of the regulatory, labour and other key operating conditions prevailing intheir respective jurisdictions. The decentralised structure also allows for a lean and flat managementstructure organisation-wide, which reduces administrative costs. The Company’s senior managementat the corporate level focuses on providing overall strategy and direction as well as managing key

— 108 —

Company-wide functions such as information technology, engineering and finance. The Companymaintains strong financial controls over each operating entity through standardised monthly reporting,its annual budget process, regular financial and operating audits, control over the external raising ofcapital and risk management.

Established track record of improving efficiency and performance

The Company has a strong track record of significantly improving the operating efficiency andfinancial performance of the terminals it acquires. The Company has developed robust financial andbusiness metrics to assess operational performance, search out inefficiencies and target areas forimprovement. The Company has made substantial investments in its terminals such as acquiring newhandling equipment to enhance handling capacity and efficiency, modernising information technologysystems and expanding and rehabilitating civil works. The Company also provides its know-howthrough enhanced training and the introduction of new work processes to streamline labour practices,and rational commercial strategies to achieve improvements in yield per TEU. The Company has beenable to improve efficiency measures that it believes shipping lines take into consideration whenchoosing a terminal, such as crane moves per hour and ship turnaround time. For example, at the portof Toamasina in Madagascar, prior to MICTSL’s takeover of operations, the average number ofcontainer moves per hour per vessel was 13 moves. After MICTSL assumed control, it implementedthe use of two mobile harbour cranes and increased the average number of moves to 36 per hour withina few months. This significantly decreased ship turnaround time. Similarly, at the Umm Qasr port,ICTSI Iraq improved quay crane productivity from 15 moves per hour to 53 moves per hour throughimproved maintenance, proper training and new/refurbished equipment. Likewise, lorry turn-aroundtime, in general, improved from approximately 24 hours to approximately two hours in the monthsafter MICTSL assumed control, and further decreased to under an hour in the following two years. TheCompany has received commendations and recognitions for its success in improving cargo handlingand assisting in the development of the private sector. For example, the Company has been cited bythe World Bank for its success in public-private partnerships in South America, Africa and Europe.The Company also believes that its recent improvements with respect to Enterprise Resource Planninginitiatives will also result in efficiencies and sustainable savings. Primarily as a result of these factorsthe Company has been able to maintain stable EBITDA margins (EBITDA as a percentage of grossrevenues from port operations) of 41.7%, 42.8%, 46.5%, 46.7% and 47.4% in the year ended 31December 2014, 2015 and 2016 and the nine months ended 30 September 2016 and 2017, respectively.

Strong capital structure and stable cash flows

The Company’s finances are supported by a strong capital structure and stable cash flows. As of 30September 2017, the Company’s total indebtedness was U.S.$1,468.8 million and its totalindebtedness to total equity ratio (interest-bearing debt over total equity, as shown in the consolidatedbalance sheet) was 0.79 times, providing head room for future financial leverage. The Companybelieves that its cash flows and debt structure will provide it with a solid platform to pursueinvestment opportunities, supported by its active balance sheet management strategies and liabilitymanagement initiatives which have helped streamline its debt maturity profile and interest paymentschedules significantly. Moreover, the Company believes that its major terminals provide stable cashflows because of its globally diversified operations focusing primarily on gateway locations andcharacterised by long-term concession agreements, which have an average remaining term ofapproximately 18 years weighted by capacity. In addition, the Company’s terminals generally focuson end destination cargo (which accounts for substantially all of the Company’s consolidatedthroughput volume) limiting concentration risk to individual container shipping lines in that if ashipping line that calls at one of its terminals ceases to operate, the cargo intended for that particulardestination will simply be transferred to another shipping line that is still calling at that terminal. TheCompany believes that focusing on this type of cargo results in a higher yield per TEU, as comparedto other operators. Primarily as a result of these factors, the Company’s operating cash flow hasincreased from U.S.$387.8 million in 2014 and U.S.$407.7 million in 2015 to U.S.$466.9 million in2016. The Company’s operating cash flow was U.S.$390.1 million in the nine months ended 30September 2017.

— 109 —

Strategies

The Company’s key strategies are set out below.

Continue prudent growth through targeted acquisitions, organic growth and select privatisation

The Company plans to continue its focus on terminals in origin and destination gateway ports,particularly in emerging and “frontier” markets. Gateway ports are the principal points of entry for acountry or a community and serve as the origin and destination points for cargo, and have higher profitmargins per unit moved than transshipment points for cargo. The Company also plans to continue tosearch for opportunities globally in emerging markets that will typically offer greater scope forimprovements to operational and financial performance, higher levels of volume growth due toincreases in containerisation rates, and favourable demographics which would support higher levelsof merchandise trade and consumption growth. The Company believes that the global containerterminal industry remains fragmented. The Company’s acquisition strategy is to consider opportunitieswith favourable valuations and scopes for operational improvements. Container terminals in lessdeveloped economies often experience higher rates of volume growth, and typically have lower coststructures due to more flexible labour practices. The Company has developed robust financial andbusiness criteria to assess potential acquisitions and have been able to procure financing on terms ithas found acceptable to fund acquisitions. In addition, the Company plans to continue to pursueopportunities for organic growth in its present locations, whether by expansion of facilities or additionof other services. Finally, the Company will look to continue to scout for privatisation opportunitiesto further bolster its operations portfolio.

Maintain a leadership position in the markets in which it operates

The Company expects to continue to improve its position as a leading terminal operator in origin anddestination user container terminals particularly in emerging and “frontier” markets with stronggrowth and profit potential. The Company believes it has the largest market share in the major marketsin which it currently operates terminals. The Company intends to maintain a leadership position inthese markets through improving its handling capacity, maintaining and improving operatingefficiencies, focusing on providing high levels of customer service and leveraging the knowledge andexperience gained from operations across multiple terminals.

Continue to optimise the benefits of existing ports

The Company will continue to look for opportunities to grow its revenues and profit margins, expandand enhance efficiency at its existing port terminals, and will continue to focus on end-destinationcargo. The Company plans to optimise its operations to harness market trends, such as the increasingcontainerisation of goods and the growth of emerging market economies. The Company also plans toproactively manage its facilities to expand when maintaining and growing its margins. Theseprogrammes may include cost reductions, equipment upgrades, and projects to improve labourefficiencies and processes. As an example, the Company recently implemented its TABS, which helpsto improve capacity and operational efficiency in its terminals. Improvements to the labour pool alsocome from knowledge and experience sharing across ports. The Company also plans to expand thehandling capacity of its ports as needed, such as the construction of new yard facilities at the MICT.

Continue to actively manage its balance sheet to optimise its yield curve and capital requirements

The Company plans to continue to actively and dynamically manage the principal redemption profileof its liabilities to more closely align with its fluid cashflow requirements. As part of its balance sheetmanagement initiatives, the Company also plans to continue proactive management of its debt andother financing covenants through periodic reviews, liability management exercises and othermeasures, to ensure that such restrictions, covenants and the Company’s interest rate profile for itsliabilities more closely align with the Company’s rapid growth and improving profile with investorsand the financing markets. The Company experiences significant cashflow needs from time to time —

— 110 —

whether it be for greenfield port developments, targeted acquisitions or to ramp up volume and expandoperations at existing ports. The Company’s overall intention with its capital management initiativesis to achieve a value accretive capital structure, wherein the deployment of capital for its various newand existing projects does not impair its capacity to quickly secure financing for opportunisticexpansion or continuing improvements at existing ports.

Continue developing investor management initiatives and policies

The Company has developed fulsome and proactive investor management initiatives in recent years.These initiatives are anchored on the core Company philosophy of transparency with its investors, thenumber of which has steadily expanded over the years as the Company has accessed a wider marketbase. The Company intends to continue periodic open dialogues and active engagement with itsinvestor base, with the aim of ensuring awareness of significant company developments and solicitingregular feedback from stakeholders in the Company. The Company firmly believes that this policy ofactive and regular engagement has allowed it to efficiently access its existing investor base from timeto time in relation to its financing and balance sheet management initiatives. The Company alsobelieves that these policies keep it informed of developments in the markets, as well as on issues andconcerns of investors with respect to similar companies and businesses.

History

The Company was established by the Razon family, who remains the controlling shareholder, in 1987in connection with the privatisation of the MICT in the Port of Manila. In May 1988, the PPA awardedthe Company a concession to be the exclusive operator of MICT for a period of 25 years. Under theconcession, the Company undertook the obligation to develop and expand the port’s land side andharbour basin, subject to the supervision of the PPA. It commenced the operation of MICT in June1988. In March 1992, the Company’s shares were listed on the PSE following an initial publicoffering.

In January 2007, the Company, through its wholly-owned holding company ICTSI (Hong Kong) Ltd.(“IHKL”), signed a joint venture contract with Yantai Port Group Company Limited and SDICCommunications Co. for the purchase of a 60.0% equity interest in the Chinese port operator, YantaiGangtong Container Terminal Co. Ltd., which manages the Yantai Gangtong Terminal in ShandongProvince. The company was then renamed YRDICTL. On 1 July 2014, the Company, through itssubsidiary IHKL, acquired 51.0% of the total equity interest of YICT for a total cash considerationof approximately U.S.$137.3 million (RMB854.2 million), which was paid in four installments. On thesame date, the Company sold its 60.0% ownership interest in YRDICTL to YPH for a total cashconsideration of approximately U.S.$94.8 million (RMB588.1 million), which was paid in twoinstallments in July 2014. All the proceeds from the sale of YRDICTL were used to partially fund theacquisition of YICT. The objective of these transactions was to consolidate and optimise the overallport operations within the Zhifu Bay Port Area in Yantai, China. YICT became the only foreigncontainer terminal within the Zhifu Bay Port Area. DP World China (Yantai) and YPH together holdownership interests of 12.5% and 36.5%, respectively, in YICT, with the Company as the majorityshareholder. YRDICTL became fully owned by YPH and is dedicated to handling local containercargo.

In May 2007, the Company’s local operating unit, CGSA (Ecuador), signed a contract with the portauthority of Guayaquil, Autoridad Portuario de Guayaquil, giving it a 20-year operating concession ofthe container and multipurpose terminals in Guayaquil.

In September 2007, the Company, through its subsidiary, BICTL (Georgia), acquired a concession tolease and develop a container terminal and a ferry and dry bulk handling facility in the Port of Batumiin Georgia. Additionally, the Company’s local operating unit gained an exclusive 48-year terminaloperating agreement.

— 111 —

In July 2007, the Company, through its wholly-owned subsidiary, ICTSI Ltd., concluded agreementsto start the construction and development of a new multi-user container terminal at the Port ofBuenaventura in Colombia. The Company also acquired stakes in two Panamanian companies to gaineffective control of SPIA (Colombia). SPIA was granted a 30-year concession by the ColombianNational Institute of Concessions to develop, construct and operate a container handling facility inAguadulce. On 18 September 2013, PSA and the Company, through ICTSI Ltd., entered into anagreement for the joint development, construction and operation of the container port terminal andancillary facilities, involving PSA’s purchase of an approximately 45.6% ownership stake in SPIA.After completion of the agreement on 31 October 2013, ICTSI and PSA, through their subsidiaries,controlled approximately 91.3% of SPIA. Following a series of further share purchases from minorityshareholders, the present combined ownership of ICTSI and PSA is 92.6%. Having been substantiallycompleted, SPIA commenced initial operations in the fourth quarter of 2016.

In April 2008, the Company, through its subsidiary, SBITC (Subic), took control of the New ContainerTerminal. Prior to this, SBITC (Subic) was already in possession of a 25-year concession to develop,manage, and operate the terminal that was part of the NSD Waterfront Area in the Subic Freeport Zonein Zambales, Philippines.

In April 2008, the Phividec Industrial Authority awarded the Company the concession to operate andmanage the Mindanao Container Terminal for a period of 25 years until 2033. Eventually, theconcession was assigned to the Company’s wholly-owned subsidiary, MICTSI.

In July 2008, the Company acquired additional shares of SCIPSI to increase its ownership to 50.1%from 35.7% and obtain control. SCIPSI had a ten-year contract with the PPA for the exclusivemanagement and operation of loading/unloading, stevedoring, bagging and crated cargo handlingservices at Makar Wharf, Port of General Santos in General Santos City in the Philippines that expiredon 19 February 2016. Since then, the local office of the PPA in General Santos City has grantedSCIPSI a series of hold-over authorities for periods of one year each. The latest hold-over authorityis set to expire on 24 February 2018.

In November 2008, the Company, through its subsidiary ICTSI Ltd., acquired the concession todevelop and manage the container terminal in the Port of La Plata, Argentina, through the acquisitionof Edanfer S.A. (later renamed as International Ports of South America and Logistics S.A.), which isa major stockholder of Tecplata, S.A. Tecplata was granted a 30-year concession to build and operatean all-purpose port terminal at the port of La Plata by the Consorcio de Gestion del Puerto La Plata.

In May 2009, the Company signed a management services contract with the Government of HisMajesty the Sultan and Yang Di-Pertuan of Brunei Darussalam for the operation and maintenance ofthe Muara Container Terminal in Brunei Darussalam. The management services contract is for fouryears, and may be extended for a maximum of two years. Muara Port is the main trade gateway forBrunei Darussalam. Since 2012, ICTSI’s services agreement had been extended annually for periodsof one year each or up to 20 May 2017 as interim operator. The agreement with the Brunei Governmentwas not renewed and termination became effective on 21 February 2017.

In June 2010, the Company, through its subsidiary, CMSA, acquired a concession for the developmentand operation of the second Specialized Container Terminal at the Port of Manzanillo in Mexico. TheConcession agreement lasts for a period of 34 years, starting from the date of the agreement. Civilconstruction commenced in November 2011 and commercial operations started in November 2013.

In May 2010, the Company, through its wholly-owned subsidiary, IOI, entered into a 25-year leasewith the Port of Portland for the container/break bulk facility at Terminal 6 in Portland, Oregon. IOItook over the terminal operations on 12 February 2011. On 8 March 2017, ICTSI Oregon and the Portof Portland have signed a lease termination agreement with both parties mutually agreeing to terminatethe 25-year lease. The effective date of termination was 31 March 2017.

— 112 —

In March 2011, the Company, through its wholly-owned subsidiary, ICTSI Capital B.V. (“ICBV”),entered into a share purchase agreement with Luka Rijeka D.D., a Croatian company, to purchase a51.0% interest in AGCT. The concession period is for 30 years until 2041. The Company took overoperations of the port on 15 April 2011.

In April 2011, the Company, through its wholly-owned subsidiary, ICTS (India) Pte. Ltd., signed acontainer port operation agreement for the management and operation of the Kattupalli ContainerTerminal in Tamil Nadu, India with L&T Shipbuilding Ltd. (“LTSB”). The terminal startedcommercial operations in January 2013. On 30 June 2014, the Company, through its subsidiariesICTSI Ltd. and ICTSI India, and LTSB signed a termination agreement cancelling the Company’scontainer port agreement for the management and operation of the Kattupalli Container Terminal. Inaccordance with the termination agreement, LTSB agreed to pay ICTSI India approximately U.S.$15.9million (INR957.5 million) as reimbursement for the license fee, which the ICTSI India had paid toLTSB to operate the terminal, plus management fees and other amounts due to ICTSI India.

On 1 June 2011, the Company through its wholly-owned subsidiary, ICTSI Far East Ptc. Ltd.(“IFEL”), announced its interest in acquiring the complete ownership interest in Portek InternationalLtd. (“Portek”). At that date, IFEL had a 16.79% interest in Portek through its ownership of 25.445.0shares. IFEL offered to acquire the remaining 83.21% interest, 126,103,540 shares, for a cash offer ofSGD1.2 per share. However, following an offer by another shareholder, Mitsui & Co. Ltd. (“Mitsui”),IFEL sold its interest in Portek to Mitsui for U.S.$29.6 million (SGD35.6 million).

On 27 July 2011, the Subic Bay Metropolitan Authority (“SBMA”) and the Company signed a contractfor the operation and management of the New Container Terminal 2 (“NCT2”) for a period of 25 years.The Company subsequently assigned the contract to ICTSI Subic Inc. and SBMA approved of theassignment on 15 September 2011.

On 22 February 2012, the Company and Lekki Port LFTZ Enterprise (“Lekki Port”) entered into amemorandum of understanding to negotiate the terms of a sub-concession agreement to develop andoperate the container terminal at the deep water port in the Lagos Free Trade Zone at Ibeju-Lekki,Lagos State, Federal Republic of Nigeria. On 10 August 2012, Lekki Port and the Company signed thesub-concession agreement, which granted the Company the exclusive right to develop and operate thecontainer terminal, and to provide certain handling equipment and container terminal services, for aperiod of 21 years from the start date of commercial operations. On 25 May 2017, the Company andLekki Port mutually agreed to terminate the sub-concession agreement, subject to a payment of anagreed amount to LICTSE. The termination of the sub-concession agreement has been finalised andis deemed effective since 24 May 2017.

On 3 May 2012, the Company, through its wholly-owned subsidiary, IFEL, acquired 312,550,000shares of PT Karwell Indonesia Tbk (“Karwell”), Jakarta, Indonesia, amounting to a 53.23% interest,from PT Karya Estetikamulia through the Indonesian Stock Exchange at Indonesian Rupiah 74 pershare. On the same date, IFEL purchased 157,172,500 Karwell shares or 26.77% from various publicshareholders, for an aggregate of 469,722,500 shares or 80% of the outstanding and issued shares ofKarwell thereby effectively becoming the new controlling shareholder. Karwell is a listed textilescompany in Indonesia which has stopped commercial operations. The purpose of the businesscombination was to preserve Karwell as a going concern so that Karwell can engage in thedevelopment, construction and operation of terminals and maritime logistic infrastructure. On 25 July2012, the Minister of Law and Human Rights approved the change in business name of Karwell to PTICTSI Jasa Prima Tbk (“JASA”).

On 3 July 2012, the Company acquired 100.0% of the equity interest of OJA through its indirectlymajority-owned subsidiary, JASA. OJA is an Indonesian limited liability company engaged in theloading and unloading of general goods and containers at the Port of Tanjung Priok, Jakarta,Indonesia. OJA had cooperation agreements with PT Pelabuhan Indonesia II (“Persero”) under a profit

— 113 —

sharing scheme. The scheme covers international containers stevedoring services at berths 300, 301,302 and 303, which are operated by Persero and located in terminal III operation of Tanjung PriokPort. The cooperation agreements between OJA and Persero, which originally had two year terms,were superseded by a 15-year cooperation agreement signed on 5 June 2013 between OJA and Persero.On 3 November 2017, the Company disclosed that it had entered into a conditional share purchaseagreement with PT Samudera Terminal Indonesia (“STI”) for the purchase of the Company’s interestin OJA, subject to certain conditions.

On 6 March 2012, the Company, through its wholly-owned subsidiary, ICTSI Mauritius Limited(“ICTSIML”), announced its intention to acquire from 35.0% to 55.0% of the issued and paid-upordinary shares of PICT. PICT is a company listed on the Karachi Stock Exchange Guarantee Limited.It is a container cargo terminal located at the Karachi Port and has a maximum handling capacity of750.0 TEUs. Consequently, on 30 March 2012, ICTSIML signed a share purchase agreement withsubstantial shareholders of PICT for the purchase of 35.0% of the shares of PICT, involving theconduct of a minimum offer price which was to be determined in accordance with the takeover lawsof Pakistan. On 10 August 2012, ICTSIML commenced a public tender offer at the Karachi StockExchange to purchase outstanding shares of PICT. On 18 October 2012, ICTSIML completed theacquisition of 35.0% of the total issued capital of PICT for a purchase price of PKR5.7 billion(U.S.$60.3 million). In November 2012, ICTSIML entered into a share purchase agreement withanother shareholder to purchase an additional 6.63% of the issued capital of PICT. The acquisition wascompleted in November, bringing ICTSI’s total indirect ownership of PICT to 41.63%.

On 19 December 2012, ICTSIML purchased an additional 6.25% of the issued capital of PICT on theKarachi Stock Exchange, bringing ICTSIML’s direct and indirect ownership in PICT to 47.88%. On28 December 2012, ICTSIML entered into a share purchase agreement for the purchase of AeolinaInvestments Limited (“AIL”), a British Virgin Islands-registered company. AIL owns shares of stockof PICT representing 15.72% of the total issued capital of PICT. As of the date of this OfferingCircular, the total direct and indirect ownership of ICTSIML in PICT is 64.53%.

On 14 November 2012, the Company, through its wholly-owned subsidiary, Abbotsford Holdings, Inc.(“AHI”), acquired subscription rights to 40 million common shares of HIPS, a joint venture companywith Hijo Resources Corp. (“HRC”). HRC is a diversified group involved in leisure and tourism,agribusiness, property development and port operations. The acquisition increased AHI’s ownershipin HIPS to 162.5 million shares, which now constitute a controlling 65.0% of the outstanding capitalstock of HIPS. HIPS owns the Hijo International Port, a private commercial port in Barangay Madaum,Tagum, Davao del Norte in the Gulf of Davao.

On 1 February 2013, the Company won and was awarded the contract for the design, financing,construction, preservation, operation and exploitation of the container and general cargo terminal ofPuerto Cortes (the “PC Agreement”) in the Republic of Honduras for a period of 29 years through apublic hearing held in Tegucigalpa, Honduras. On 13 March 2013, the Company and ICTSI Brazil Ltd.established OPC (formerly Operadora de Puerto Cortes, S.A. de C.V.) to sign the PC Agreement withthe Republic of Honduras acting through the Commission for the Public-Private Alliance Promotion(“COALIANZA”), a decentralised legal entity of the Presidency of the Republic. The PC Agreementwas signed on 21 March 2013 and shall be valid until 30 August 2042. Under the terms of the PCAgreement, OPC will operate the container and general cargo terminal of Puerto Cortes (the “PCTerminal”) and will carry out the design, financing, construction, preservation and exploitation of thePC Terminal and the provision of its services according to certain service and productivity levels. OPCformally took over operations of the terminal in December 2013.

On 23 January 2014, the Company, through its subsidiary ICTSI Cooperatief U.A., entered into abusiness partnership with La Societe de Gestion Immobiliere Lengo (“SIMOBILE”) for theestablishment and formation of a joint venture company, IDRC. On 19 May 2015, the Companytransferred 8.0% of its stake in IDRC to Societe Commerciale Des Transports Et Des Ports SA

— 114 —

(“SCTP”) and transferred its remaining shares in IDRC from ICTSI Cooperatief U.A. to ICTSI AfricaB.V. IDRC, which is 52%-owned by ICTSI Africa B.V., will construct a new terminal along the riverbank of the Congo River in Matadi and manage, develop and operate the same as a container terminal,as well as provide exclusive container handling services and general cargo services therein.Construction of the terminal commenced in January 2015 and was completed in the fourth quarter of2016. Initial operations commenced in the third quarter of 2016 while commercial operationscommenced in January 2017.

On 8 April 2014, the Company, through its wholly owned subsidiary ICTSI (M.E.) DMCC (“ICTSIDubai”), and General Company for Ports of Iraq signed a contract for construction and operation ofthree new quays and management and operation of Quay No. 20 in the port of Umm Qasr in Iraq. Thecontract grants the Company the rights to: (a) manage and operate the existing container facility atBerths 19 and 20 of the port for a period of 13 years, (b) build, under a build-operate-transfer scheme,a new container and general cargo terminal in the port for a concession period of 26 years and (c)provide container and general cargo terminal services in both components. The Company commencedtrial operations at Berth 20 in September 2014 and full-fledged commercial operations in November2014. The Company commenced commercial operations for Berth 19 in June 2016. Phase 1 of theexpansion project (Berth 27) under the build-operate-transfer scheme has 250 metres of berth with anestimated capacity of 300,000 TEUs. When fully developed, the facility is expected have 600 metresof quay with an estimated capacity of 900,000 TEUs. Berth 27 was completed and became fullyoperational in the first quarter of 2017. On 22 October 2017, the Company signed an expansionagreement with the General Company for Ports of Iraq and Basra Mas for the second majordevelopment phase of BGT in the North Port, Umm Qasr, Iraq. The expansion, which will involve theinfusion of U.S.$100 million, is expected to increase BGT’s annual container handling capacity from600,000 TEUs to 1,200,000 TEUs in 18 months. This increase is expected to be achieved through thedevelopment of two new berths, Berths 25 and 26, and is expected to incorporate a 20-hectare yardarea. The berths are expected to be configured and equipped with quay and landside container handlingsystems, and are expected to be able to handle container vessels of up to 10,000 TEUs.

On 2 May 2014, the Company and Anglo Ports, through their 90%-owned subsidiary, VICT, signed acontract with the Port of Melbourne Corporation for the design, construction, commissioning,maintenance, operation and financing of Melbourne’s Webb Dock new international container terminaland empty container park. The contract grants a lease concession until 2040. Phase 1 of the containerterminal and empty container park commenced operations in the second quarter of 2017. Constructionof Phase 2 is expected to be completed by the fourth quarter of 2017.

On 2 March 2015, LGICT commenced operation of its one-stop inland container terminal located inCalamba City, Laguna. LGICT is 60%-owned by IW Cargo Handlers, Inc., a wholly-owned subsidiaryof the Company, and 40%-owned by Nippon Container Terminals Co. Ltd., Transnational DiversifiedCorporation and NYK Fil-Japan Shipping Corp. LGICT primarily operates as an extension of theseaport operations of MICT and is intended to function as a regional logistics hub, which will serviceand support the operations of exporters and importers. LGICT is situated on a 21-hectare property thatis 58 kilometres from Metro Manila, located near various economic export zones and adjacent to arailroad.

On 27 May 2015, the Company acquired 100% of TMT from Grupo TMM, S.A.B. and InmobiliariaTMM, S.A. de C.V. TMT is a Mexican company with a concession to construct and operate a maritimecontainer terminal in the Port of Tuxpan, Mexico and is the owner of the real estate where the maritimecontainer terminal will be constructed. The concession agreement is valid until 25 May 2021, subjectto extension for another 20 years.

On 21 April 2017, the Company, through its wholly-owned subsidiary Cavite Gateway Terminal(“CGT”) and in partnership with the Philippine Department of Transportation, launched the project forthe Philippines’ first container “roll-on, roll-off” barge terminal in Tanza, Cavite. CGT is expected tofacilitate off-the-roads seaborn transport of containers between Port of Manila and Cavite and service

— 115 —

industrial locators in the Cavite area. CGT’s barge terminal is expected have an annual capacity of115,000 TEUs. As of the date of this Offering Circular, site clearing has been fully completed whileearthworks, filling and compaction and rock armour placement for causeway are all ongoing. Thetarget completion for the project is March 2018.

On 21 September 2017, the Board of Directors of the Company approved the acquisition of shares inManila North Harbor Philippines, Inc. (“MNHPI”). In this regard, the Company signed a sharepurchase agreement with Petron Corporation on 21 September 2017 for the acquisition of 10,449,000MNHPI shares from Petron Corporation, representing 34.83% of the total issued and outstandingshares of MNHPI, for a total consideration of P=1.75 billion. The acquisition was completed in October2017.

After the completion of all conditions precedent, the terminal operating agreements signed by theCompany’s Papua New Guinea (“PNG”) subsidiaries, namely Motukea International Terminal Limited(“MITL”) and South Pacific International Container Terminal Limited (“SPICTL”), with the PNGstate-owned enterprise, PNG Ports Corporation Limited (“PNGPCL”), for the operation, managementand development of the international ports in Motukea and Lae for a period of 25 years, will beeffective. Under the agreements, MITL is to provide and deploy cranes, berth and yard equipment forthe Port of Motukea. Newly developed and situated near Port Moresby, the Port of Motukea isenvisioned to service all port and shipping activities previously done at Port Moresby. Also under theagreements, SPICTL is to provide and deploy cranes, berth and yard equipment at the Port of Lae,which is the largest container handling facility in PNG. Lae, the capital of Morobe Province, is PNG’ssecond largest city.

Corporate Structure

The following chart shows the ownership of the Company’s terminals:

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. (ICTSI)

100%

ICTHIInternational ContainerTerminal Holdings, Inc.

Cayman Islands

100%

ICTSILTD.Bermuda

100%

IWIICTSI Warehousing, Inc.

Philippines

99%ICTSI1% IWI

IGC UAICTSI Global Cooperatief U.A.

Netherlands

51% ICTSI49% CGSA Trans.

CGSAContecon Guayaquil S.A.

Ecuador

100%

ICTSIHONDURAS LTD.

Bermuda

99% ICTSILTD.1% ICTSI

ICTSICOOP.ICTSI Cooperatief U.A.

Netherlands

51% ICTSI49% ICTSILTD.

TSSATecon Suape S.A.

Brazil

70% ICTSI Honduras Ltd.30% ICTSI

OPCOperadora Portuaria

Centroamericana S.A. de C.V.Honduras

100%

IHKLICTSI (HongKong) Ltd.

Hong Kong

51%

YICTLYantai International

Container Terminal Ltd.China

100%

CMSAContecon Manzanillo

S.A. de C.V.Mexico

100%

CMSA B.V.Netherlands

100%

CGSA B.V.Netherlands

100%

CGSA TRANS.CGSA Transportadora S.L.

Spain

100%

ICTSI MAURITIUSLTD.

Mauritius

100%

MICTSLMadagascar International

Container TerminalServices, Ltd.

Madagascar

100%

AILAeolina Investments

LimitedBritish Virgin Islands

100%

CRIXUSCrixus Limited

British Virgin Islands

48.11% ICTSI MAURITIUS LTD.15.72% AIL

0.71% CRIXUS

PICTPakistan International

Container Terminal Ltd.Pakistan

100%

GCC BVGlobal Container

Capital B.V.Netherlands

— 116 —

The Company’s rights to operate, manage and develop ports are primarily held in the form ofconcessions granted to it. Concession agreements are contracts entered into with local port authoritiesor local governments, under which the Company is granted the right to use public assets, such as portterminals, for the operation of a cargo handling business in exchange for a schedule of fees. These feescan be periodic flat fees, fees dependent upon the volume of cargo traffic or often both.

As of the date of this Offering Circular, the Company holds the rights to manage, operate and developthe MICT in relation to the Port of Manila. The Company likewise holds direct interests in CGSA(Ecuador), CMSA (Mexico), TMT (Mexico) and its domestic subsidiaries. Its interests in its otherinternational subsidiaries, including BCT (Poland), BICT (Georgia), PTMTS and OJA (Indonesia),SPIA (Colombia), YICT (China), Tecplata (Argentina), TSSA (Brazil), AGCT (Croatia), MICTSL(Madagascar), OPC (Honduras), PICT (Pakistan), VICT (Australia), IDRC (DR Congo), MITL andSPICTL (PNG) are held indirectly by the Company, and ultimately through its wholly-ownedsubsidiaries. With respect to TSSA (Brazil) and MICTSL (Madagascar), the Company has assigned itsbeneficial interests (i.e., the economic rights in the subsidiary) to ICTSI Ltd.

As of the date of this Offering Circular, the Company operates the MICT (Manila) and wholly owns13 companies namely: CGSA (Ecuador), BCT (Poland), TSSA (Brazil), Tecplata (Argentina), MICTSL(Madagascar), CGT (Cavite), BICT (Georgia), CMSA (Mexico), MICTSI (Mindanao), ICTSI Iraq(Iraq), ICTSI Subic, Inc. (Subic), OPC (Honduras), VICT (Australia), TMT (Mexico), MITL (PNG)and SPICTL (PNG).

In addition, the Company has majority and controlling interests in the following companies, namely,96.95% in DIPSSCOR (Davao), 95.0% in PTMTS (Indonesia), 83.33% in SBITC (Subic), 80.16% inOJA (Indonesia), 65.0% in HIPS (Davao), 64.53% in PICT (Pakistan), 60.0% in BIPI (Batangas),60.0% in LGICT (Laguna), 52.0% in IDRC (DR Congo), 51.0% in AGCT (Croatia), 51.0% in YICT(China), 50.1% in SCIPSI (Gen. Santos City), 46.3% in SPIA (Colombia) and 34.83% in MNHPI(Manila).

Each of the Company’s subsidiaries has its own board of directors, many of which include at least twomembers who are concurrently the Chairman, Chief Financial Officer or Chief Administrative Officerof the Company. While the Company approves the annual budget and major capital expenditures foreach subsidiary, local management is responsible for daily operations. The Company generallyencourages operational independence at each terminal. The Company has also established globalofficer roles for certain support operations that can be applied globally, such as for informationtechnology and engineering and human resources. Control over the local subsidiaries is maintainedthrough a financial and operational reporting structure that provides central management with monthlyreports on operations. In addition, regular financial and operational audits are undertaken at each site.

In order to coordinate operations across various terminals, the Company has recently established threeregional executive committees corresponding to the three regional reporting groups. Each committeeconsists of the Chairman, the Chief Financial Officer and the Chief Administrative Officer of theCompany, the head of the relevant region and a rotating member selected from the terminal managersof the relevant region. The duty of the committee is to increase the oversight of each region and createa small core-team to address any problems that may arise.

Business Overview

The Company’s principal business is the management, operation and development of containerterminals. The Company provides different services in each of its ports based on the nature of itsbusiness in the resident country and the general needs of the shipping line and cargo owner customers.The Company primarily handles international containerised cargo (i.e., cargo that is shipped incontainers for international import or export). While the Company does provide limited “roll-on,roll-off” and anchorage services to bulk domestic cargo or general cargo (i.e., bulk cargo that is notplaced into containers for shipments) services in some of the ports in which it operates, the Companybelieves that international containerised cargo provides higher margins.

— 117 —

The Company’s services fall into three general categories:

• On-vessel. This refers to all work performed on board a ship. This includes the loading and

unloading of cargo, rigging gears, opening and closing hatches, securing cargo stored on board

and shifting cargo to or from vessels;

• Off-vessel. This refers to the services involved in moving containers from container yards to the

gate. This includes the receiving, handling, checking and delivery of containers over piers,

wharves, transit sheds, warehouses and open storage areas and the transfer of containers from the

tail of a consignee’s transportation unit; and

• Other Services. At some of the Company’s terminals, the Company provides maintenance

services to ships that are docked in a harbour for which it receives berthing and harbour fees

from shipping lines. The Company also offers ancillary services relating to its core services, such

as container and truck weighing, provision of reefer outlets to provide power to refrigerated

containers and extended storage.

The fee structure for the Company’s services varies across the terminals it operates based upon local

regulations and practice. In some terminals, such as MICT, the Company charges shipping lines fees

for on-vessel services and charges cargo owners separately for off-vessel services. The PPA sets

different tariffs for on-vessel and off-vessel services. In other jurisdictions, the Company charges only

the shipping lines or the cargo owners who have separate arrangements amongst themselves. The

Company charges cargo owners on a cash-on-delivery basis. Containers are not allowed to leave the

port facility until actual cash payment has been made and received. Shipping lines may be granted

credit lines of up to 30 days.

The following table describes the total capacity and throughput of the major terminals the Company

owns or operates for the periods indicated:


2014 2015 2016

Capacity(1) Throughput Utilisation(2) Capacity(1) Throughput Utilisation(2) Capacity(1) Throughput Utilisation(2)

TEUs (% Total) TEUs (% Total) TEUs (% Total)

Asia(3).............................. 6,800,000 3,820,572 56.2% 7,050,000 4,094,580 58.1% 7,050,000 4,552,881 64.6%

Americas(4) ...................... 3,900,000 2,687,447 68.9% 4,130,000 2,738,079 66.3% 4,680,000 3,004,690 64.2%

EMEA(5) .......................... 2,000,000 930,616 46.5% 2,600,000 943,334 36.3% 3,125,000 1,131,792 36.2%

Total................................ 12,700,000 7,438,635 58.6% 13,780,000 7,775,993 56.4% 14,155,000 8,689,363 61.4%


2016 2017

Capacity(1)(6) Throughput Utilisation(2)(6) Capacity(1)(6) Throughput Utilisation(2)(6)

TEUs (% Total) TEUs (% Total)

Asia(3) ................................................... 7,050,000 3,364,342 47.7% 7,700,000 3,577,607 46.57%

Americas(4) ............................................ 4,680,000 2,247,847 48.0% 4,850,000 2,183,308 50.8%(7)

EMEA(5) ................................................ 3,125,000 823,003 26.3% 3,125,000 1,075,696 34.4%

Total ..................................................... 14,155,000 6,435,192 45.5% 14,155,000 6,836,611 43.6%

— 118 —

Notes:

(1) Information regarding throughput capacity for each individual terminal is based upon estimates the Company has made

based upon, among other things, market conditions and available infrastructure and equipment. Such estimates require

significant subjective assessments. Other companies in the industry may calculate and present capacity data in a different

manner. Caution should be used in comparing the Company’s data with data presented by other companies or in making

comparisons across the different ports that the Company owns or operates, as the data may not be directly comparable.

(2) Throughput as a percentage of annual capacity.





(Mexico).



(6) The utilisation rate for the nine months ended 30 September 2016 and 2017 was calculated by comparing the throughput

of each terminal as of the end of the nine-month period with the annual capacity of such terminal for the year.

(7) The utilisation rate for the nine months ended 30 September 2017 of Americas excludes the 550,000 TEUs capacity of

SPIA (Colombia), an unconsolidated entity.

As of the date of this Offering Circular, the Company owned or operated a global network of 31

container terminals across the Philippines, China, Ecuador, Brazil, Poland, Madagascar and other

regions. The table below describes the total throughput and gross revenues of each region in which

the Company operates for the periods indicated.


2014 2015 2016

Throughput Gross Revenues Throughput Gross Revenues Throughput Gross Revenues

(TEUs)(in U.S.$

Mn) (% Total) (TEUs)(in U.S.$

Mn) (% Total) (TEUs)(in U.S.$

Mn) (% Total)

(Audited) (Audited) (Audited)

Asia ................................. 3,820,572 531.5 50.1% 4,094,580 564.6 53.7% 4,552,881 581.4 51.5%

Americas.......................... 2,687,447 424.6 40.0% 2,738,079 377.6 35.9% 3,004,690 387.4 34.3%

EMEA.............................. 930,616 105.1 9.9% 943,334 109.1 10.4% 1,131,792 159.6 14.1%

Total................................ 7,438,635 1,061.2 100.0% 7,775,993 1,051.3 100.0% 8,689,363 1,128.4 100.0%


2016 2017

Throughput Gross Revenues Throughput Gross Revenues

(TEUs) (in U.S.$ Mn) (% Total) (TEUs) (in U.S.$ Mn) (% Total)

(Unaudited) (Unaudited)

Asia ...................................................... 3,364,342 435.1 52.1% 3,577,607 435.1 47.4%

Americas ............................................... 2,247,847 288.0 34.5% 2,183,308 304.3 33.1%

EMEA ................................................... 823,003 112.0 13.4% 1,075,696 178.8 19.5%

Total ..................................................... 6,435,192 835.0 100.0% 6,836,611 918.3 100.0%

— 119 —

Description of Port Operations

ASIA

Philippines —Manila International Container Terminal

Services

The Company has operated MICT since June 1988. The Company has the right to manage, operate andadminister the container terminal, and the obligation to carry out a port construction and developmentprogramme at MICT under the MICT Contract. See “Description of Concession Agreements andCertain Indebtedness”. In April 2005, the PPA and the Company entered into an agreement to renewthe MICT Contract for an additional 25 years after May 2013. Under this agreement, the Companycommitted to construct Berth 6 and its support area, and procure additional port equipment prior toMay 2013. MICT is located in the Port of Manila. The Port of Manila is the largest port in thePhilippines and primarily serves as a feeder port that connects the Philippines to international traderoutes through larger ports, such as those in Singapore, Hong Kong and Kaohsiung, China.

At MICT, the Company provides a full range of container cargo handling services to shipping linestransporting international containerised cargo to and from Manila and to importers and exporters.These services include the loading and unloading of containers to and from container vessels and thehandling of containers within the container terminal premises. MICT operates 24 hours a day and isonly closed on Christmas Day, New Year’s Day and Good Friday.

The Company believes that it had a market share of approximately 67.0% of the total throughput ofinternational containers in the Port of Manila in the nine months ended 30 September 2017. A totalof 2,018 vessels called at the terminal in the year ended 31 December 2016, compared to 1,387 vesselsin the year ended 31 December 2015. A total of 1,440 vessels called at the terminal in the nine monthsended 30 September 2017, compared to 1,514 vessels in the nine months ended 30 September 2016.

Since being granted the concession to operate MICT, the Company has undertaken an extensivedevelopment programme in line with its obligations under the MICT Contract. It completed theconstruction of the terminal’s fifth berth in May 1997, two quay cranes in 2003 and constructed a newterminal gate in 2006. In 2012, MICT commenced operations of Berth 6. The new berth features anadditional 450 metres of quay, 14 hectares of container space, three additional quay cranes foroffloading ships and ten rubber-tyred gantries.

The Company believes that it has significantly improved the efficiency of the port. For example, it hasachieved a substantial reduction in ship turnaround time (the time required to fully load and unloada ship) since acquiring the right to manage MICT. The total capacity of MICT as at 30 September 2017was 2,750,000 TEUs, as compared to a capacity of 200,000 TEUs when MICT first received theconcession. Capacity may be further expanded with the construction of additional quays and/ordevelopment of additional yard area.

In January 1997, the Company entered into an agreement with the PPA to collect storage charges fromcargo owners whose cargo is stored beyond the free storage period (currently five days). The Companygenerally does not promote storage services, as it believes that the space can be more efficiently usedfor other operations. Storage service fees generally do not comprise a large percentage of MICT’srevenues.

The Port of Manila

The Port of Manila is the largest port in the Philippines. A substantial portion of domestic andinternational Philippine trade passes through the Port of Manila, which is itself comprised of four mainterminals: North Harbour, located north of the Pasig River; South Harbour, located south of the PasigRiver; Harbour Centre, located north of North Harbour; and MICT, located west of North Harbour

— 120 —

between North and South Harbour, protruding westwards into Manila Bay. North Harbour operatesfacilities for domestic bulk, break-bulk and container cargo. South Harbour operates facilities forinternational bulk, break-bulk and container cargo and is operated by Asian Terminals, Inc. HarbourCentre, operated by Harbour Centre Port Terminal, Inc., is a private commercial terminal that handlesbulk and break-bulk cargo. MICT operates facilities for international container cargo. Currently onlyMICT and Asian Terminals, Inc. are authorised to handle international container cargo at the Port ofManila. The Port of Manila is used by large international shipping lines including Orient OverseasContainer Line, Nippon Yusen Kaisha, Evergreen Marine Corporation, Maersk, American PresidentLines, Ltd and Kawasaki Kisen Kaisha, Ltd. See “—Customers”.

Facilities and Equipment

The following sets out certain data relating to MICT as of 30 September 2017:

Quay length ....................................................... 1,750 metres

Total land area ................................................... 94 hectares developed; 11 hectares undeveloped

Current capacity................................................. 2,750,000 TEUs/year

Number of cranes............................................... 13

As of 30 September 2017, MICT has a total of 13 quay cranes complemented by seven reach stackers,45 rubber-tyred gantries and a sizeable fleet of transportation equipment. MICT occupies a total landarea of 105.17 hectares, of which 94.08 hectares have been developed, and includes six berths. The1,750 metre long wharf can accommodate six to seven ships, depending on the ship’s size. In 2012,the Company completed development of Berth 6, which was a condition for the extension of the MICTContract and to accommodate the increasing volume. Adjacent to the MICT wharf is a container yard,with a total stacking capacity of 62,625 TEUs. Of this, 1,534 TEUs are refrigeration-ready with reeferplugs where refrigerated containers can be plugged in. MICT also has three one-hectare containerfreight station warehouses. The facility also has a truck holding area, with 400 truck parking bays.MICT has three gates: two with six lanes and one with seven lanes.

In August 2004, MICT completed the construction of a hazardous cargo control area, a control facilityfor hazardous cargo mainly to reinforce compliance with the United Nations International MaritimeOrganisation’s International Ships and Port Facility Security Code (the “ISPS Code”). The hazardouscargo control area is located at the west side of the MICT to prevent the unnecessary movement ofdangerous cargo from the terminal to areas outside of the port zone. It can accommodate 500 fullcontainer load containers containing dangerous cargo stacked four rows at two tiers per block. Thereare also closed and open storage warehouses to facilitate dangerous cargo. The hazardous cargocontrol area is fully equipped with safety and emergency response equipment.

In 2006, the Company completed the construction of a new terminal gate at the entrance of MICT thatimproved the regulation of traffic flow in the harbour more effectively. It is fully equipped with newsecurity features as recommended by the United States Homeland Security Agency, including gammaray scanning devices and a closed-circuit television surveillance system.

On 14 May 2008, the Board of Investments of the Philippines approved the registration of theCompany’s construction of Berth 6 of the MICT with Pioneer status under the Omnibus InvestmentsCode of 1987, which entitles Berth 6 to an income tax holiday for a six-year period beginning inNovember 2011. Berth 6 commenced operations in July 2012, and increased the terminal capacity to2,500,000 TEUs per year.

On 2 July 2015, the Board of Investments of the Philippines approved the registration of theCompany’s construction of Berth 7 of the MICT as on a Non-Pioneer status under the OmnibusInvestment Code of 1987, which entitles Berth 7 to an income tax holiday for a three-year periodbeginning in July 2017 or its actual date of commercial operations, whichever is earlier.

— 121 —

China —Yantai Gongtong Terminal

Services

In January 2007, the Company, through a wholly-owned holding company, ICTSI (Hong Kong) Ltd.,signed a joint venture contract with Yantai Port Group (“YPG”) and SDIC Communications Co. forthe purchase of 60.0% of the shares of Chinese port operator Yantai Gangtong Container Terminal Co.Ltd., which manages the Yantai Gangtong Terminal in Shandong Province. It was then renamedYRDICTL. In 2010, YPG and SDIC consolidated their 40.0% interest in YRDICTL into YPH. Thestate-owned Yantai Port Group Company Limited maintains a 40.0% equity interest in thisSino-foreign joint venture enterprise. The business license of Yantai Rising Dragon InternationalContainer Terminals (“YRDICT”) was issued on 28 February 2008, and the joint venture contract inrespect of YRDICT has a term of 30 years. See “Description of Concession Agreements and CertainIndebtedness”. The terminal primarily handles container cargo and roll-on/roll-off cargo. It alsohandles bulk and break bulk cargo.

On 1 July 2014, the Company, through its subsidiary IHKL, acquired 51.0% of the total equity interestof YICT for a total cash consideration of approximately U.S.$137.3 million (RMB854.2 million),which was paid in four installments. On the same date, the Company sold its 60.0% ownership interestin YRDICTL to Yantai Port Holdings (YPH) for a total cash consideration of approximately U.S.$94.8million (RMB588.1 million), which was paid in two installments in July 2014. All the proceeds fromthe sale of YRDICTL were used to partially fund the acquisition of YICT. The objective of thesetransactions was to consolidate and optimise the overall port operations within the Zhifu Bay PortArea in Yantai, China. YICT became the only foreign container terminal within the Zhifu Bay PortArea. DP World China (Yantai) and YPH hold ownership interests of 12.5% and 36.5%, respectively,in YICT, with the Company as the majority shareholder. YRDICTL became fully owned by YPH andis dedicated to handling local container cargo.

The Port of Yantai

Yantai is in the north-eastern part of the Shandong Peninsula, bordering the Yellow Sea and Bohai Bay.The port area consists of four parts: Zhifu Bay Port Area, Western Port Area, Penglai Port Area andLongkou Port Area. The port lies across the heavy industrial base in north-eastern China, as well asSouth Korea and Japan. Key shipping line customers of YICT include SITC Yantai, CK Ferry, BohaiInternational Ferry, Sinotrans and EAS International Shipping. See “—Customers”.

The Port of Yantai is well connected to the local transportation infrastructure. The port connects to thenational railway network through the railway lines of Jiaozhou-Jinan and Lancun-Yantai. Furthermore,the new railway (Dezhou-Longkou-Yantai) connecting Yantai to the northwestern interior provinces ofChina commenced construction in June 2013 and is expected to be completed by the end of 2017. Thetrial run is expected to start thereafter and formal operation is expected to commence in the middleof 2018. The port road is also connected with the expressway network in Eastern China through theexpressways of G15 (Shenyang-Haikou), G18 (Rongcheng-Wuhai), G20 (Jinan-Qingdao) and NationRoad 206 (Yantai, Shandong-Shantou, Guangdong). In addition, a well-developed local transportationnetwork has been established around the port.


The following sets out certain data relating to the Yantai Gangtong Terminal as of 30 September 2017:

Quay length ....................................................... 1,300 metres

Total land area ................................................... 76.6 hectares


Number of cranes............................................... 7

— 122 —

YICT has a total berth length of 1,300 metres. The controlling depth is up to 17 metres. Seven quaycranes handle loading and unloading of cargoes, with support from three rubber-tyred gantries, 20rail-mounted gantries, five reach stackers, one empty container handler, 20 forklifts, 17 prime moversand 32 chassis.

Pakistan —Pakistan International Container Terminal

PICT is the only container terminal handling company in Pakistan that is listed on the Pakistan StockExchange. It operates as a common user container terminal located at the Karachi Port at East Wharf,Berths 6-9 with a maximum handling capacity of 750,000 TEUs per annum. PICT operates under a21-year concession awarded in 2002 to build and operate a dedicated container terminal at Berths 6-9,Karachi Port, on a “build-operate-transfer” basis. The terminal has a berth length of 600 metres witha design depth of 13.5 metres, six quay cranes, 20 rubber-tyred gantries, 10 reach stackers, threeempty container handlers, 15 forklifts, 30 prime movers, 56 chassis and other equipment handling theexisting operations at the Karachi Port.

On 6 March 2012, the Company, through its wholly-owned subsidiary ICTSIML, announced itsintention to acquire from 35.0% to 55.0% of the issued and paid-up ordinary shares of PICT.Consequently, on 30 March 2012, ICTSIML signed a share purchase agreement with substantialshareholders of PICT for the purchase of 35.0% of the shares of PICT, involving the conduct of aminimum offer price, which was determined in accordance with the takeover laws of Pakistan. On 10August 2012, ICTSIML commenced a public tender offer at the Karachi Stock Exchange to purchaseoutstanding shares of PICT. On 18 October 2012, ICTSIML completed the acquisition of 35.0% of thetotal issued capital of PICT for a purchase price of PKR5.7 billion (U.S.$60.3 million). In November2012, ICTSIML entered into a share purchase agreement with another shareholder to purchase anadditional 6.627% of the issued capital of PICT. The acquisition was completed in November 2012bringing ICTSI’s total indirect ownership of PICT to 41.63%. On 19 December 2012, ICTSIMLpurchased an additional 6.25% of the issued capital of PICT on the Karachi Stock Exchange, bringingICTSIML’s direct and indirect ownership in PICT to 47.88%. On 28 December 2012, ICTSIML enteredinto a share purchase agreement for the purchase of Aeolina Investments Limited (“AIL”), a BritishVirgin Islands-registered company. AIL owns shares of stock of PICT representing 15.72% of the totalissued capital of PICT. As of the date of this Offering Circular, the total direct and indirect ownershipof ICTSIML in PICT was 64.53%.

The Port of Karachi

The Port of Karachi is one of South Asia’s largest and busiest deep-water seaports, handlingapproximately 65% of Pakistan’s container traffic. It is located between the Karachi towns of Kiamariand Saddar, close to the main business district and several industrial areas. The Port of Karachi is inclose proximity to major shipping routes such as the Strait of Hormuz. The port currently has threeterminals: ICTSI’s PICT and KICT and SAPT, which are both operated by Hutchison Port Holdings.Also on the other side of the city of Karachi is QICT, operated by Dubai Ports World, at Port Qasim,which handles approximately 34% of Pakistan’s container traffic.


The following sets out certain data relating to the PICT Terminal as of 30 September 2017:

Quay length ....................................................... 600 metres

Total land area ................................................... 21 hectares

Current capacity................................................. 750,000 TEUs/year

Number of cranes............................................... 6

— 123 —

Other Asian Ports

Philippines —Sasa Wharf

DIPSSCOR began operation in 2007 at the Sasa Warf, in the International Port of Davao in thePhilippines. DIPSSCOR possesses a 10-year contract to provide cargo-handling services, which endedin April 2016. The tender process for the Davao Sasa Port modernisation project has commenced andthe Company is one of the short-listed bidders. On 15 April 2016, the local office of the PPA in DavaoCity granted DIPSSCOR a hold-over authority, for a period of six months until 20 October 2016, tooperate the cargo handling services at Sasa Wharf, Port of Davao. On 8 September 2016, anotherhold-over authority, for a period of six months until 20 April 2017, was granted by the PPA office inDavao City. On 18 April 2017, the hold-over authority was extended by the PPA office in Davao Cityfor a period of ten months until 25 February 2018 or upon award of the terminal management contractto the winning bidder in a public bidding, whichever is first. Currently, DIPSSCOR has a 26.0%market share in the Port of Davao. Recent growth was facilitated by DIPSSCOR through investmentsin operational equipment, as well as a 133-metre berth extension and expansion of its container storageyards. The quay for the berth was also dredged, increasing the depth from 10.6 metres to 12 metres.The total throughput capacity for this facility is 500,000 TEUs.

Philippines — Mindanao Container Terminal

In April 2008, the Phividec Industrial Authority awarded the 25-year Mindanao Container Terminalconcession to MICTSI, which ends in 2033. The container terminal is approximately 20 kilometresfrom Cagayan de Oro City, and is a key gateway in the northern region of the Island of Mindanao. The24-hectare terminal handles containerised and non-containerised cargo. The berth is equipped withtwo quay cranes, supported by four gantries, a reach stacker and two empty container handlers. Theterminal possesses a 300-metre berth, with a controlling depth of 13 metres and can service twovessels at once. The terminal is also supported by a nine-hectare yard, with a storage capacity of 6,816TEUs. The Company implemented its standard port operation system in 2008 and 2009, whichincluded significant upgrades to the terminal’s software infrastructure and intensive training forterminal personnel. The total throughput capacity for this facility is 300,000 TEUs.

Philippines — Makar Wharf

SCIPSI is a stevedoring and cargo handling service provider at the Makar Wharf, Port of GeneralSantos, General Santos City, Southern Cotabato. In February 2006, the PPA granted SCIPSI a 10-yearcontract extension for cargo handling services. In February 2016, the PPA granted SCIPSI holdoverauthority for cargo handling services for one year until February 2017. In July 2008, the Companycompleted its multi-year purchase of the share of Cordilla Properties Holdings, Inc. As of 30September 2017, the Company owned 50.0% of SCIPSI. This agreement was entered into in supportof the Government’s efforts to stimulate the economy through port modernisation, particularly in theSouth Cotabato-Sultan Kudarat-Sarangani-General Santos (Socsargen) Area. The Makar Wharf is ageneral purpose wharf handling domestic and international containerised, general and “roll-on,roll-off” cargo as well as domestic passenger traffic. The wharf’s operations commenced in September1975 and as of 30 September 2017 it has an 850 metre berth, a terminal surface area of 14 hectares,a depth of eight to 12 metres and includes nine berths. It has a total capacity of 250,000 TEUs.

Philippines — New Container Terminal-1

As of 30 September 2017, the Company indirectly owns 83.3% equity interests in SBITC, which is theexclusive container handling operator at the Subic Bay Freeport Zone. SBITC is a joint venturecompany between the SBMA and Subic Bay International Terminal Holdings, Inc., which is theinvestment vehicle of Royal Ports Services, Inc. and the Company in SBITC. SBITC originallypossessed a 25-year concession to develop, manage and operate the NSD Waterfront Area. However,in April 2008, the NSD Waterfront Area was replaced by the New Container Terminal. SBITC

— 124 —

possesses a new 25-year concession to develop, manage and operate this new facility. The New

Container Terminal is a 14-hectare terminal, which includes a 280 metre berth. The berth has a

controlling depth of 13 metres, making it capable of handling post-Panamax vessels. The facility has

a capacity of 300,000 TEUs.

Philippines — New Container Terminal-2

On 27 July 2011, SBMA and ICTSI signed the contract for the operation and management of NCT2

for a period of 25 years. ICTSI subsequently assigned the said contract to ICTSI Subic Inc., and

SBMA approved of the assignment through a resolution dated 11 August 2011. NCT2 is a 14-hectare

terminal, which includes a 280-metre berth with 13 metres depth and two quay cranes. The terminal

has an annual throughput capacity of 300,000 TEUs.

Philippines — Bauan Terminal

BIPI is a joint venture between the Company, Atlantic Gulf and Pacific Co. and Marubeni Corporation

to manage, operate and develop the Bauan Terminal. As of 30 September 2017, the Company owned

a 60.0% equity interest in BIPI, while each of Atlantic Gulf and Pacific Co. and Marubeni Corporation

own 20.0%. The Bauan Terminal is one of several private commercial terminals in Batangas Bay. It

supports cargo movements in and out of the Cavite-Laguna-Batangas-Quezon Area and is an

alternative port to the Port of Manila. The Bauan Terminal is a 20 hectare facility located along the

protected waters of Batangas Bay in Bauan, Batangas and is owned by BIPI which began operations

in April 1999. The facility is a multi-purpose, multi-user terminal with a 240-metre berth offering two

berthing positions. The facility also contains a storage area and a car terminal facility. The car terminal

facility can handle 254,696 completely built units per year.

Philippines — Hijo International Port

On 14 November 2012, the Company, through its wholly-owned subsidiary, AHI, acquired

subscription rights to 40 million common shares in HIPS, a joint venture company with HRC. HRC

is a diversified group involved in leisure and tourism, agribusiness, property development and port

operations. Established in 1959, HRC was one of the pioneers in the cultivation and exportation of

Cavendish bananas to Japan. The acquisition increases AHI’s ownership in HIPS to 162.5 million

shares, which now constitute a controlling 65.0% of the outstanding capital stock of HIPS. HIPS owns

the Hijo International Port, a private commercial port in Barangay Madaum, Tagum, Davao del Norte

in the Gulf of Davao. The existing port sits within a reclaimed land area of about 10.3 hectares. It has

two berths: 120 metres long and 150 metres long. As of 30 September 2017, it has a mobile harbor

crane, an empty container handler and various terminal support facilities. The port currently has total

throughput of 300,000 TEUs.

Philippines — Laguna Gateway Inland Container Terminal

On 2 March 2015, LGICT commenced operation of its one-stop inland container terminal located in

Calamba City, Laguna. LGICT is 60%-owned by IW Cargo Handlers, Inc., a wholly-owned subsidiary

of the Company, and 40% owned by Nippon Container Terminals Co. Ltd., Transnational Diversified

Corporation and NYK Fil-Japan Shipping Corp. LGICT primarily operates as an extension of the

seaport operations of MICT and is intended to function as a regional logistics hub, which will service

and support the operations of exporters and importers. LGICT is situated on a 21-hectare property that

is 58 kilometres from Metro Manila, located near various economic export zones and adjacent to a

railroad. The Company plans to further develop LGICT with state-of-the-art facilities, terminal

systems and equipment. As of 30 September 2017, LGICT has two reach stacker and three side lifters.

— 125 —

Philippines — Cavite Gateway Terminal

On 21 April 2017, the Company, through its wholly-owned subsidiary CGT and in partnership with thePhilippine Department of Transportation, launched the project for the Philippines’ first container“roll-on, roll-off” barge terminal in Tanza, Cavite. CGT is expected to facilitate off-the-roads seaborntransport of containers between Port of Manila and Cavite and service industrial locators in the Cavitearea. CGT’s barge terminal is expected have an annual capacity of 115,000 TEUs, which is equivalentto 140,000 fewer truck trips on city roads each year. As of the date of this Offering Circular, siteclearing has been fully completed while earthworks, filling and compaction and rock armourplacement for causeway are all ongoing. The target completion for the project is March 2018.

Philippines — Manila North Harbor Philippines, Inc.

On 21 September 2017, the Board of Directors of the Company approved the acquisition of shares inMNHPI. In this regard, the Company signed a share purchase agreement with Petron Corporation on21 September 2017 for the acquisition of 10,449,000 MNHPI shares from Petron Corporation,representing 34.83% of the total issued and outstanding shares of MNHPI, for a total consideration ofP=1.75 billion. The acquisition was completed in October 2017.

Indonesia — Makassar Container Terminal

In April 2006 the Company acquired a 95.0% interest in PTMTS through the Company’swholly-owned Singapore subsidiary, ICTSI Far East Pte Ltd. PTMTS supplies and operates equipmentfor PT Pelabuhan Indonesia IV, the governmental agency charged with running terminals in easternIndonesia, including the Makassar Container Terminal. The port operates under a 10-year cooperationagreement with PT Pelabuhan Indonesia IV that was set to expire in August 2013. In December 2012,PTMTS extended the cooperation agreement until January 2023. PTMTS receives a percentage of therevenue from the services it provides with the equipment that it owns. Currently PTMTS has the rightto operate two quay container cranes, three rubber-tyred gantry cranes, ten prime movers and tenchassis at the Makassar Container Terminal. The total throughput capacity for this facility is 250,000TEUs.

Indonesia — PT Perusahaan Bongkar Muat Olah Jasa Andal

On 3 July 2012, the Company acquired 100.0% of the equity interest of OJA through its indirectlymajority-owned subsidiary, JASA (formerly PT Karwell Indonesia Tbk), for a purchase price ofU.S.$41.9 million. OJA is an Indonesian limited liability company engaged in the loading andunloading of general goods and containers at the Port of Tanjung Priok, Jakarta, Indonesia. OJA hasexisting cooperation agreements with Persero under a revenue sharing scheme. The scheme covers theterminal operations for fields 300, 301, 302 and 303, which are operated by Persero and located inTerminal III Operation of Tanjung Priok Port. These cooperation agreements have terms of 15 yearsthat can be extended by the parties. The terminal has a capacity of 400,000 TEUs per year, berth lengthof 600 metres, 5.9 hectares of container yard, seven quay cranes, five rail mounted gantries, tworubber-tyred gantries, seven reach stackers and 30 head trucks with 31 chassis. On 3 November 2017,the Company disclosed that it had entered into a conditional share purchase agreement with STI forthe purchase of the Company’s interest in OJA, subject to certain conditions.

Australia — Victoria International Container Terminal Limited

Port of Melbourne

On 2 May 2014, the Company and Anglo Ports, through their 90%-owned subsidiary, VICT, signed acontract with the Port of Melbourne Corporation for the design, construction, commissioning,maintenance, operation and financing of Melbourne’s Webb Dock new international container terminaland empty container park. The contract grants a lease concession until 2040. Phase 1 of the terminalwill comprise one berth of 330 metres fitted with three neo-Panamax ship-to-shore cranes, 23.7

— 126 —

hectares of yard and off-dock area with fully automated operations from gate to quayside, deliveringan estimated capacity of 350,000 to 500,000 TEUs. The terminal itself will be able to handle vesselswith a capacity in excess of 8,000 TEUs, and will also feature a 10-hectare empty container park witha working capacity of around 200,000 TEUs.

The investment for the development of the new international container terminal and empty containerpark is estimated at approximately AUD439 million (U.S.$407 million) for Phase 1 and 2. Anadditional investment of AUD150 million (U.S.$139 million) is estimated to increase the capacity ofthe terminal to 1.6 million to 1.8 million TEUs. Phase 1 of the container terminal and empty containerpark commenced construction in the fourth quarter of 2014 and commenced commercial operations inthe second quarter of 2017. The second phase, expected to be completed in the last quarter of 2017,is expected to add an additional two neo-Panamax ship-to-shore cranes on a second 330-metre berth.

On full completion and as required, the aggregate 35.4-hectare terminal will comprise up to eightneo-Panamax ship-to-shore cranes in 660 metres of berth, and will be able to handle 1.6 million to 1.8million TEUs annually, with the empty container park’s capacity increasing to 280,000 TEUs.

On 4 February 2015, a share sale agreement between the Company and Anglo Ports for the Company’sacquisition of Anglo Ports’ 10.0% stake in VICT took effect. VICT became a wholly-owned indirectsubsidiary of the Company as a result of the sale.

Papua New Guinea — Motukea International Terminal Limited

In September 2017, MITL entered into a 25-year terminal operating agreement with state-ownedPNGPCL to operate and manage the newly developed Port of Motukea near the capital city of PNG,Port Moresby. The Port of Motukea is envisioned to service all port and shipping activities previouslydone at Port Moresby. The Port of Motukea is segregated into domestic and international terminals.MITL will operate and manage the international terminal. The estimated annual capacity of the Portof Motukea is 250,000 TEUs. The total developed land area is approximately 9 hectares and quaylength is 240 meters. Under the terminal operating agreement, MITL will pay PNGPCL fixed annuallease payments and no variable fees.

Papua New Guinea — South Pacific International Container Terminal Limited

In September 2017, SPICTL entered into a 25-year terminal operating agreement with state-ownedPNGPCL to operate and manage the Lae Tidal Basin in the Port of Lae. The Port of Lae is the largestcontainer handling facility in PNG. Lae is the capital of Morobe Province and is the second largestcity in PNG. The estimated annual capacity of the Lae Tidal Basin is 250,000 TEUs. The totaldeveloped land area is 11.4 hectares and quay length is 250 meters. Under the terminal operatingagreement, SPICTL will pay PNGPCL fixed annual lease payments and no variable fees.

AMERICAS

Ecuador — Guayaquil Container and Multipurpose Terminal

Services

The Company, through its subsidiary CGSA, took over the operations of the Guayaquil Container andMultipurpose Terminal in August 2007. In May 2007, CGSA was awarded a 20-year concession byAutoridad Portuaria de Guayaquil, the port authority of Guayaquil, for the development, operation andmanagement of the container terminal in the Port of Guayaquil. See “Description of ConcessionAgreement and Certain Indebtedness”.

— 127 —

CGSA handles containerised, general and bulk cargo, and the Company believes that CGSA handlesthe majority of the country’s container traffic. Bulk cargo for export includes bananas, of whichEcuador is a major exporter, and CGSA also handles project and general cargo for import. Keyshipping line customers of CGSA include Maersk, MSC, Hapag-Lloyd and Hamburg Sud.

Port of Guayaquil

The Port of Guayaquil, Ecuador’s main international trading gateway, is located at the northeast coastof South America in the interior of the Guayas River, 10 kilometres south of Guayaquil City, thecountry’s economic, industrial and commercial capital. The port is connected to Ecuador’s mainterrestrial highway and has good access to the country’s principal cities.


CGSA’s terminal covers a total area of 148.0 hectares, of which 115.4 hectares have been developed.The total berth length is 1,717.5 metres. The cargo handling is facilitated by six quay cranes, threemobile harbour cranes, 23 rubber-tyred gantries, 14 reach stackers, eight side lifters and a sizable fleetof transportation equipment that handles movement of containerised cargoes at the terminal.

The following sets out certain data relating to the Guayaquil Container Terminal as of 30 September2017:

Quay length ....................................................... 1,717.5 metres

Total land area ................................................... 148.0 hectares (115.4 hectares developed)


Number of cranes............................................... 9

After CGSA assumed control of operations of the Port of Guayaquil in August 2007, CGSA began acomprehensive reorganisation and modernisation programme. Since 2008, CGSA has completed anumber of upgrades to the terminal’s security, inventory and maintenance processes and IT services.It has also made significant capital expenditures to the facility including: container and multipurposeyards improvements, construction of a new, 150-metre long berth, construction of an electricsubstation and the acquisition cranes and rubber-tyred gantries. Additional container capacity wasadded in 2010 and 2012 when CGSA reinforced all container berth positions and resurfaced thegeneral cargo yards for containers usage. New reefer stations and plugs were also added toaccommodate the shift from bananas as break bulk cargo to containerised cargo. As of 30 September2017, the terminal had a capacity of 1,400,000 TEUs with 3,800 reefer plugs.

Brazil —Suape Container Terminal

Services

In April 2002, the Company commenced operation of the Suape Container Terminal in the Port ofSuape in Pernambuco, Brazil under a 30-year concession granted in April 2001 by the Suape PortAuthority to TSSA. TSSA operates in Suape under a 30-year lease contract with Suape-ComplexoIndustrial Portuario, which is the owner of the Suape Container Terminal. TSSA has exclusive rightsto operate in Suape until it handles 250,000 boxes (approximately 400,000 TEUs) for threeconsecutive years or after 15 years from the date of the agreement (i.e. 2016), whichever comes first.See “Description of Concession Agreements and Certain Indebtedness”. As of 30 September 2017, theSuape Container Terminal had an annual capacity of 700,000 TEUs.

The Port of Suape is located along the eastern border of South America’s Atlantic coast, a strategiclocation in relation to main sea routes and international transhipment traffic. TSSA is also exploringopportunities to increase transhipment volumes. Key shipping line customers of TSSA includeAlianca/Hamburg Sud Group, MSC and Maersk/Mercosul Line and Log-In (Brazilian CabotageShipping Line). See “—Customers”.

— 128 —

Port of Suape

Strategically located in relation to main deep-sea routes along the east coast of South America, the

Port of Suape links the east coast of South America with other continents and also connects coastal

traffic from the southern region with north and northeast regions of Brazil. The Port of Suape lies 40

km south of Recife. Connected to major road and rail networks, the Port of Suape covers a hinterland

of 4 million inhabitants around Recife City and its vincinity.


The following sets out certain data relating to the Suape Container Terminal as of 30 September 2017:

Quay length ....................................................... 660 metres (plus 275 metres of public quay)



Number of cranes............................................... 6

TSSA is a dedicated container terminal and its facilities include a 660 metre long two-berth wharf, a

30-hectare container yard for full boxes, six ship-to shore cranes, 14 rubber-tired-gantry cranes, 576

reefer plugs, a 5,000 square metre container freight station and a high-speed scanner and weighing

scale for trucks and containers. The existing facility also has automated gates. Since the

commencement of its operations, TSSA has completed the build-out of the infrastructure of the Suape

Container Terminal, including the acquisition of equipment and the development of civil works, such

as yard expansions.

Honduras — Puerto Cortes

Services

On 1 February 2013, the Company won and was awarded the PC Agreement in the Republic of

Honduras for a period of 29 years through a public hearing held in Tegucigalpa, Honduras. On 31

March 2013, the Company and ICTSI Brazil Ltd. established OPC (formerly Operadora de Puerto

Cortes, S.A. de C.V.) to sign the PC Agreement with the Republic of Honduras acting through the

COALIANZA, a decentralised legal entity of the Presidency of the Republic. The PC Agreement was

signed on 21 March 2013 and shall be valid until 30 August 2042. Under the PC Agreement, OPC will

operate the container and general cargo terminal of Puerto Cortes and it will carry out the design,

financing, construction, preservation and exploitation of the terminal and the provision of its services

according to certain service and productivity levels. OPC formally took over operations of the

terminal and started commercial operations in December 2013. As of 30 September 2017, OPC had an

annual capacity of 900,000 TEUs.

Port of Honduras

Puerto Cortes is located along the Atlantic coast in the north part of Honduras. The port is the

country’s centre of transportation and commerce, and is considered to be one of Central America’s

most important ports. Approximately 92% of all shipment at Puerto Cortes is to Honduras, while 2%

is to El Salvador and 6% is to Nicaragua.

— 129 —


The following sets out certain data relating to the Puerto Cortes terminal as of 30 September 2017:




Number of cranes............................................... 5

The terminal currently has an 800-metre pier with three berthing positions and a depth of 12.5 metres.

OPC has one ship-to-shore crane and four mobile harbor cranes, supported by three straddle carriers,

17 reach stackers, 20 forklifts, 47 prime movers and 61 chassis.

Mexico —Port of Manzanillo

Services

In June 2010, the Company signed a 34-year concession for the development and operation of the

Second Specialized Container Terminal (TEC-II) at the Port of Manzanillo in Mexico. The Company

established CMSA to operate the Port of Manzanillo. The port development project covers about 77

hectares with 1,080 metres of seafront. The development of the container terminal will be done in

three phases. Construction of the Phase 1A development, which commenced in November 2011, was

completed in 2013 and CMSA formally commenced commercial operations in November 2013. The

current annual capacity of CMSA is 850,000 TEUs with 360 reefer plugs. The total berth length of the

first phase is 720 metres with two berthing positions with 16 metres of depth.

Key shipping line customers of CMSA include Maersk, MSC, Hapag-Lloyd, Hamburg Sud, and CMA

CGM.

Port of Manzanillo

The Manzanillo market, where CMSA operates, is currently dominated by SSA de Mexico, S.A. de

C.V which has a 54% market share. CMSA’s entry in the market is designed to address the congestion

at the competing terminals and the competitor’s inability to further expand its capacity to absorb the

growing demand. The Company believes that CMSA has an estimated 30% market share.


The following sets out certain data relating to the Port of Manzanillo terminal as of 30 September

2017:




Number of cranes............................................... 6

As of 30 September 2017, CMSA had six quay cranes, five reach stackers, six empty container

handlers, 16 rubber-tyred gantries, 24 forklifts, 42 prime movers and 42 chassis.

— 130 —

Other American Ports

Colombia — Port of Buenaventura

In July 2007, the Company, through ICTSI Ltd., acquired stakes in two Panamanian companies to gain

effective control of SPIA, which concluded agreements to start the construction and development of

a new multi-user container terminal at the Port of Buenaventura in Colombia. The Colombian National

Institute of Concessions granted SPIA a 30-year concession to develop, construct and operate a

container handling facility in Aguadulce.

The Aguadulce Peninsula is across the channel from the existing Port of Buenaventura. Buenaventura,

located on the west coast of Colombia, is the biggest port in the country. It is the only Colombian port

on the Pacific coast.

On 18 September 2013, PSA and the Company, through ICTSI Ltd., entered into an agreement for the

joint development, construction and operation of the container port terminal and ancillary facilities,

involving PSA’s purchase of an approximately 45.6% ownership stake in SPIA. After completion of

the agreement on 31 October 2013, ICTSI and PSA, through their subsidiaries, controlled

approximately 91.3% of SPIA. Following a series of further share purchases from minority

shareholders, the present combined ownership of ICTSI and PSA is 92.6%. Having been substantially

completed, SPIA commenced initial operations in the fourth quarter of 2016.

The terminal has a total area of 128 hectares and is expected to have an estimated annual capacity of

550,000 TEUs upon completion of phase 1. It is expected to have a berth length of 600 metres with

a depth of 14.5 metres. The terminal can be accessed through a 20.7-kilometre road that circumvents

the urban parts of Buenaventura. It also has 140 hectares along this access road for logistics

development. As of 30 September 2017, the terminal had four neo-Panamax ship-to-shore cranes, 10

rubber-tyred gantries, three reach stackers, three empty container handlers, 32 terminal tractors and

34 terminal trailers.

Argentina — Porta de La Plata

In October 2008, the Company, through ICTSI Ltd., acquired the concession to develop and manage

the container terminal in the Port of La Plata, Argentina, through the acquisition of Edanfer S.A. (later

renamed as International Ports of South America and Logistics S.A.), which is a major stockholder of

Tecplata. Tecplata was granted a concession, which expires in 2038, to build and operate an

all-purpose port terminal by the Consorcio de Gestion del Puerto La Plata. Tecplata signed a civil

works agreement with Dycasa S.A. in September 2010 and began construction of the terminal facility

in October 2010. In March 2016, construction of the terminal was completed and Tecplata obtained

all the required permits. As of 30 September 2017, Tecplata had eight quay cranes, four reach stackers,

six empty container handlers, 14 forklifts, 36 prime movers, 40 chassis and 18 rubber-tyred gantries.

Mexico —Port of Tuxpan

On 27 May 2015, the Company acquired 100.0% of TMT from Grupo TMM, S.A.B. and Inmobiliaria

TMM, S.A. de C.V. TMT is a Mexican company with a concession to construct and operate a maritime

container terminal in the Port of Tuxpan, Mexico and is the owner of the real estate where the maritime

container terminal will be constructed. The concession agreement is valid until 25 May 2021, subject

to extension for another 20 years. The Company’s management is currently formulating a development

plan for TMT.

— 131 —

EMEA

Madagascar —Madagascar International Container Terminal

Services

In June 2005, the Company acquired a 20-year concession from the Société de Gestion du PortAutonome de Toamasina for the operation, management, financing, rehabilitation and development ofthe container terminal in the Port of Toamasina, Madagascar. The Company established MICTSL toown, manage and operate the Madagascar International Container Terminal and commenced operationsin October 2005. See “Description of Concession Agreements and Certain Indebtedness”. TheTerminal’s current capacity is approximately 400,000 TEUs.

Key shipping line customers of MICTSL include Maersk, MSC, Mitsui OSK and CMA CGM. See“—Customers”.

Port of Toamasina

In 2010, the Madagascar International Container Terminal handled substantially all of Madagascar’scontainerised cargo and is its largest and only container-dedicated terminal in Madagascar. TheMadagascar International Container Terminal is located in the Port of Toamasina in the eastern coastof Madagascar. The Company believes the Madagascar International Container Terminal, in additionto handling end-destination cargo, has the potential to become a significant transhipment hub terminalin the Indian Ocean because of its access to both Africa and Asia. The Port of Toamasina isMadagascar’s main port and is well-connected by rail and major roads to Antananarivo, the capital ofMadagascar. Toamasina is the only port in Madagascar with viable rail links for containers and offersthe shortest road network to the capital from any port facility.


The following sets out certain data relating to the Madagascar International Container Terminal as of30 September 2017:




Number of cranes............................................... 4

The Madagascar International Container Terminal covers an area of 19 hectares, and its facilitiesinclude two berths with a combined length of 307 metres and a depth in excess of up to 12 metres.The terminal also operates four mobile harbour cranes, six rubber-tyred gantries, four reach stackers,an empty container handler, four forklifts, 19 prime movers and 21 chassis.

Other EMEA Ports

Poland — Baltic Container Terminal

In May 2003, the Company, through its wholly-owned subsidiary BCT, was awarded a 20-yearconcession by the Port Authority of Gdynia for the development, operation and management of thecontainer terminal in the Port of Gdynia, Poland. BCT also holds the lease to the Gdynia ContainerTerminal. See “Description of Concession Agreements and Certain Indebtedness”. In 2008, BCTinvested in further improvements. In addition to additional equipment investments, the port installedan upgraded Terminal Operating System, developed by Tideworks. It also adopted strict EURO II and

— 132 —

EU NRMM regulations for its equipment fleet. These standards ensure that carbon and soundemissions are kept to a minimum. In 2008 and 2009, BCT implemented a workforce restructuringprogramme to reduce manpower costs. In 2010 and 2011, BCT further reduced costs through theimplementation of improved telecommunication and data warehousing systems.

The Gdynia Container Terminal is the largest container terminal in Poland and has an annual capacityof 1,200,000 TEUs. The Baltic Container Terminal covers an area of 57 hectares and its facilitiesinclude an 790 metre long wharf with five berths (four of which are for container loading andunloading operations and one of which is equipped with a hydraulic ramp for roll-on/roll-offoperations), eight quay cranes, two mobile harbour cranes, two rail-mounted gantries, three reachstackers, 18 rubber-tyred gantries, a container stacking yard, a cargo handling zone, a warehouse anda rail facility with three rail tracks.

In addition to general on- and off-vessel services and project cargo, BCT offers car handling,stuffing/stripping of general cargo, warehousing and empty depot services, including repair andcleaning. Key international shipping lines include international shipping lines with dedicated feederservices to Gdynia, such as MSC, APL, OOCL, and common feeders, such as Unifeeder and TeamLines, that service all other carriers such as Evergreen Marine Corporation, COSCO, Yang Ming, NYKand K-Line.

Georgia — Batumi International Container Terminal

In September 2007, the Company acquired a concession to develop and operate a container terminaland dry cargo and ferry terminal in the Port of Batumi in Georgia. The Company, through ICTSIGeorgia Corp., a subsidiary of ICTSI Ltd., obtained the concession from Batumi Port Holdings Ltd.,which has the exclusive management rights over the state owned shares in Batumi Sea Port Ltd.Pursuant to the concession, Batumi Sea Port Ltd. granted a 48-year lease with an operating agreementto BICTL, the Company’s unit established to run this terminal. BICTL is the exclusive containerterminal operator in the port. BICTL operates the multipurpose container terminal (Berths 4 and 5) andthe dry cargo and ferry terminal (Berth 6) of the Port of Batumi. The total throughput capacity for theterminal is 150,000 TEUs. Two mobile harbour cranes, four reach stackers, two empty containerhandlers, seven prime movers, eight forklifts and a complement of tractors and trailers facilitate theloading and unloading of ships. Aside from containers, the port operates a roll-on/roll-off ferryterminal and a scrap-steel handling facility, and handles liquid bulk and dry general cargo.

Croatia — Adriatic Gate Container Terminal

In March 2011, the Company, through its wholly-owned subsidiary, ICBV, entered into a sharepurchase agreement with Luka Rijeka D.D., a Croatian company, to purchase a 51.0% interest inAGCT. The acquisition entailed a one-time payment of kuna 92,889,600 (approximately euro 12.5million) for 118 AGCT shares and a one-time cash payment of euro 15.0 million for 12,088 new AGCTshares. The concession period is for 30-years until 2041. The Company took over port operations on15 April 2011. In July 2013, AGCT completed the development of an additional 2.9-hectare of yardand 328 metres of quay length with depth of 14.5 metres. The port includes a 17-hectare yard, witha combined 790-metre quay and a depth of 10.5 to 14.2 metres. The terminal has four quay cranes,six rubber-tyred gantries, two rail-mounted gantries, five reach stackers, four forklifts, nine primemovers and 16 chassis to support its operations, with a current capacity of 600,000 TEUs.

Democratic Republic of the Congo

On 23 January 2014, the Company, through its subsidiary ICTSI Cooperatief U.A., entered into abusiness partnership with SIMOBILE for the establishment and formation of a joint venture company,IDRC. On 19 May 2015, the Company sold 8.0% of its stake in IDRC to SCTP and transferred its

— 133 —

remaining shares in IDRC from ICTSI Cooperatief U.A. to ICTSI Africa B.V. IDRC, which is

52%-owned by ICTSI Africa B.V., will construct a new terminal along the river bank of the Congo

River in Matadi and manage, develop and operate the same as a container terminal, as well as provide

exclusive container handling services and general cargo services therein.

The estimated total capital expenditure of the project for the first five years will be approximately

U.S.$100.0 million. The facility to be constructed in the first phase will consist of two berths that will

be able to handle 175,000 TEUs and 350,000 metric tons. The capacity and berth length can, subject

to demand, be doubled in the second phase. The first phase will comprise two berths with an expected

total length of 350 metres, which will service shipping lines, importers and exporters. Construction

of the terminal commenced in January 2015 was completed in the fourth quarter of 2016. Initial

operations commenced in the third quarter of 2016 while commercial operations commenced in

January 2017.

Iraq —Umm Qasr Port

On 8 April 2014, the Company, through its wholly-owned subsidiary ICTSI Dubai, and General

Company for Ports of Iraq signed a contract for construction and operation of three new quays and

management and operation of Berth 20 in the port of Umm Qasr in Iraq. The contract grants the

Company the rights to: (a) manage and operate the existing container facility at Berth 20 of the port

for a period of 10 years, (b) build, under a build-operate-transfer scheme, a new container and general

cargo terminal in the port for a concession period of 26 years and (c) provide container and generalcargo terminal services in both components. On 1 March 2016, the parties entered into an addendumto the contract granting the Company, through ICTSI Dubai, the right to manage and operate anadditional existing Berth 19 for a total of 13 years, with the first three years for the completion ofrehabilitation works. Also, this addendum extended the original term for the management andoperation of Berth 20 from 10 to 13 years. On 26 March 2017, the parties entered into a secondaddendum to the contract granting ICTSI, through ICTSI Dubai, the right to manage and operate Berth21 for a period co-terminus with the contract and the first addendum. The second addendum extendedthe term for the management and operation of Berth 19 and Berth 20 from 13 to 21 years.

The Company commenced trial operations at Berth 20 in September 2014 and full-fledged commercialoperations in November 2014. The Company commenced commercial operations of Berth 19 in June2016. Phase 1 of the expansion project (Berth 27) under the build-operate-transfer scheme has 250metres of berth with an estimated capacity of 300,000 TEUs. When fully developed, the facility isexpected have 600 metres of quay with an estimated capacity of 900,000 TEUs. Berth 27 wascompleted and became fully operational in the first quarter of 2017.

On 22 October 2017, the Company signed an expansion agreement with the General Company forPorts of Iraq and Basra Mas for the second major development phase of BGT in the North Port, UmmQasr, Iraq. The expansion, which will involve the infusion of U.S.$100 million in investments, isexpected to increase BGT’s annual container handling capacity from 600,000 TEUs to 1,200,000 TEUsin 18 months. This increase is expected to be achieved through the development of two new berths,Berths 25 and 26, and is expected to incorporate a 20-hectare yard area. The berths are expected tobe configured and equipped with quay and landside container handling systems, and are expected tobe able to handle container vessels of up to 10,000 TEUs.

The port covers an area of 78.2 hectares, 35.2 hectares of which is still undeveloped. The port has twoberths with length of 400 meters and depth of 12.5 meters. The estimated current handling capacityof the port is 600,000 TEUs per year. As of 30 September 2017, the terminal had two mobile harborcrane, five empty container handler, two quay cranes, 16 forklifts, 14 reach stackers, 24 chassis and28 prime movers.

— 134 —

Revenue Streams

The prices at which the Company offers its services are generally governed by the concessionagreements or other contracts that it has entered into with the relevant port authority or localregulatory bodies. The Company offers only limited financing arrangements. An importer cannotremove his container until the fees have been paid. Exporters are required to pay the port chargesbefore cargo will be loaded to the vessel. Cargo owners must pay in cash although the Company mayextend credit up to 30 days to shipping lines.

The following table sets forth the percentage of total revenue of each revenue stream in the periodindicated:


30 September

2014 2015 2016 2016 2017

Vessel charges.............................. 37.5% 40.1% 39.4% 38.5% 42.0%

Yard charges ................................ 23.5% 21.2% 27.1% 27.8% 26.6%

Storage ........................................ 27.5% 25.8% 21.1% 21.3% 17.5%

Others .......................................... 11.5% 12.9% 12.4% 12.4% 13.9%

Total............................................ 100.0% 100.0% 100.0% 100.0% 100.0%

Vessel charges

Vessel charges, also called on-vessel charges, are billed on a per TEU basis and are comprised of feesthat vary according to specific activities involved in the movement of cargo, containers or equipmenton and off a cargo vessel. These charges may apply to other container, cargo and equipmentmovements that occur purely onboard a ship, such as the opening and closing of hatch covers and theshifting/re-stowing of containers. Vessel charges may vary according to the type, size and weight ofcargo.

Yard charges

Yard handling charges, also called off-vessel charges, are billed on a per TEU basis for the movementof cargo, containers or equipment in the container or storage yard. These movements are generallyrelated to the mounting or dismounting of cargo from the trucks used to receive import cargo or deliverexport cargo. These fees may also include charges for other yard movements not directly related to thedelivery or receipt of a container/cargo. Similar to vessel charges, yard handling charges may varyaccording to the type, size and weight of cargo.

Storage fees

Storage fees are billed on a periodic/time basis depending on the size or weight of the cargo/containerin question in accordance with port-specific guidelines.

Other fees and special services

The Company charges fees for additional services which may be requested by shipping lines or cargoowners from time to time. These services principally include:

• anchorage related fees;

• weighing of trucks and containers;

• provision of power for refrigerated containers; and

— 135 —

• berthing, harbour and wharfage fees.

Customers

The Company’s primary customers are shipping lines, cargo owners, freight forwarders and otheragents. The service agreements with the shipping line customers generally are for one year. Contractswith shipping lines generally dictate service and performance standards but do not include anyobligations for the shipping lines to use the Company’s terminals or require any minimum volumecommitments. The Company does not provide shipping lines with guaranteed time slots for access tothe ports, but it may provide berthing windows to certain large customers. Shipping lines usually makethe Company aware of their intention to use the terminal in advance of their actual berthing. From timeto time, the Company may also enter into agreements with freight forwarders. The Company does notbelieve that its business or profitability is materially dependent on any relationship with anyindividual customer. Although the Company services many of its customers at two or more of itsterminals, the Company negotiates contracts independently at each port and generally does not offerany bulk discounts. The Company conducts limited marketing and sales activities with its shippingline customers, and concentrates such activities in jurisdictions in which it is a new entrant.

In 2016, Maersk, MSC and Hamburg Sud accounted for 9.5%, 6.3% and 2.9% of the Company’sconsolidated gross revenue, respectively. In 2015, MSC, Maersk and Hamburg Sud accounted for6.4%, 6.0% and 2.6% of the Company’s consolidated gross revenue, respectively. No other customeraccounted for more than 9.5% of the Company’s consolidated revenues in the years ended 31December 2016 and 2015. For the nine months ended 30 September 2017, Maersk, MSC and HapagLloyd accounted for 10.0%, 7.0% and 3.9%, respectively, of the Company’s consolidated grossrevenue.

Properties and Equipment

Real Property

The Company does not own the majority of the property on which it operates but rather has the rightto use it on a long-term basis for the purposes specified under the relevant concession or otheragreement.

The following table sets out certain information concerning the principal real properties that theCompany owns:

Establishment Held By Location Area

(hectares)

Original site of proposed inlandcontainer depot project .......................

ICTSI Warehousing,Inc.

Laguna, Philippines 20

Site of inland container depot ................ ICTSI Laguna, Philippines 25

Bauan terminal....................................... BIPI Batangas,Philippines

20

Other than the property the Company utilises under its concession agreements, it does not lease anyproperties that are material to its operations.

Equipment

The Company is responsible for procuring equipment at the terminals that it operates. Under most ofits concession agreements, ownership of the equipment reverts to the port authority upon theexpiration of the concession. At MICT, the PPA has no obligation to reimburse the Company forequipment except for equipment acquired during the last five years prior to the termination of theconcession for which the PPA shall have an option to lease or purchase at book value. The Company

— 136 —

has similar arrangements at most of the other terminals that it operates. Major container handlingequipment that the Company has in place at its terminals includes quay cranes, rubber-tyred gantries,rail mounted gantries, straddle carriers, tractors, terminal trailers, fork lifts and top pick loaders. TheCompany procures certain pieces of equipment, including cranes, through competitive tenders frominternationally recognised suppliers. The Company uses the Arriba suite of products to facilitateon-line bidding for products and services.

In addition, the Company established ICTSI Project Delivery Services Co. Pte. Ltd. (“IPDS”) as itsequipment purchasing vehicle. IPDS’s role is to negotiate volume discounts with suppliers; simplify,coordinate, and optimise the Company’s equipment acquisition processes; formalise corporateassistance for terminals during the procurement process as well as the participation of business unitsduring the fabrication process; allow continuous engagement in claims management and tracking; andaccess the necessary information so as to optimise spare parts deployment and fleet renewal.

Operational and Support Systems

The Company utilises a variety of terminal operating systems to conduct its business and strives touse the most appropriate product at each terminal depending on localised needs. MICT runs on theNavis N4 suite of products for ship planning, yard planning, gate control, yard inventory and vesselbilling, as well as for management control and reporting. Navis products are also being utilised to runthe terminals in Madagascar, Brazil, Ecuador, Argentina, Mexico, Croatia, Iraq, DR Congo, Honduras,Subic and Pakistan. Each of these systems has been installed with locally provided gate and billingmodules. In Poland and Georgia, the ports have implemented Tideworks as the terminal operatingsystem for ship and yard planning, inventory, gates and billing. Navis and Tideworks are softwaresolutions for real-time graphical container terminal management and optimisation. They offer a suiteof interfaced applications for equipment control, planning inventory and billing. MICTSI, a localterminal in Cagayan De Oro, Philippines, makes use of an ICTSI in-house developed system calledGraphical Tracking System (“GTS”). GTS provides ship and yard planning, inventory, gates andbilling. Each terminal uses electronic data interchange to manage ships’ bay plans, load and dischargelists and gate activities. Each terminal also allows customers to access the terminal operating systemon-line to obtain the most current information about each container for delivery time and payment ofbills.

The terminal in MICT has also implemented TABS, a web booking appointment system for trucksentering and exiting the port area, which became key to easing Metro Manila’s traffic by managingflow and scheduling trips of container trucks plying the city’s roads and helped to solve and preventsupply chain backlogs at the Port of Manila. TABS has received a number of awards in the Philippines,including the 2016 Grand Anvil, the highest honor given by the country’s largest organisation forpublic relations professionals.

Each of the terminal operating systems uses radio data terminals for quick and accurate updates to thesystems. These include vehicle mounted terminals in the container handling equipment and hand heldunits for use on the quayside, in the stacks and at the reefer facilities. The Company aims tocontinuously improve its terminal operating systems and provide relevant solutions to keep pace withtechnological advances and improve customer experience, efficiency and productivity in its terminals.

The Integrated Computer Aided Maintenance (“ICAM”) system, employed by 13 ICTSI terminals,facilitates and documents a port’s engineering activity. It provides the engineering manager with thehigh degree of control necessary to implement a successful scheduled maintenance program and toreact quickly when unscheduled maintenance is required. ICAM provides decision-makers with thecomplete life cycle, ownership and operational costing information. It also manages the maintenanceplanning, scheduling and work execution for each piece of container handling equipment and eachbuilding, and the inventory of spare parts for maintenance and warranty tracking. The Company hasimplemented the SAP-Enterprise Asset Management System as the equipment and facilitymanagement tool for MICT, VICT, SPIA and BGT. The Company expects this system to be geared asthe standard for all future ports.

— 137 —

The Company has also embarked on the standardisation of its financial system across its global

operations by creating a “Global Template” in SAP and rolling out this template to its terminals in a

staggered or clustered manner. External systems, where certain financial information reside, are linked

to the Global Template in SAP via the appropriate interfaces in order to consolidate information in one

system. The Global Template has been rolled out in 13 terminals and is currently being deployed to

TSSA, SBITC, ISI and MICTSI as the final wave of its roll out. Upon completion of the roll out, at

least 90% of ICTSI’s financial portfolio will be in a single platform.

The Ariba Spend Management System is used in MICT and has recently been implemented in CMSA,

for the sourcing and procurement of supplies, engineering and IT items and services. The system

includes modules for electronic bidding, contracts management, requisition, ordering, electronic

approvals and supplier performance monitoring.

Intellectual Property

The “ICTSI” name and logo are registered trademarks in the Philippines. The Company also developed

proprietary software systems in-house for (1) billing and invoicing systems, (2) executive dashboards,

(3) customer notifications and advisories, (4) general cargo and stripping systems, and (5) customs and

port authority interface systems.

Insurance

The Company has established a robust Global Port Property Package (for handling equipment and

terminal infrastructure) and Terminal Operator’s Liability Program, which embodies the standard

terms of insurance coverage for port properties and terminal operators’ liability for all its terminals.

The programme provides for automatic coverage of handling equipment and terminal infrastructure of

new properties as well as liability risks with respect to newly acquired ports. With the recent addition

of LGICT, ICTSI Iraq, IDRC, VICT and SPIA, all of the Company’s operating terminal subsidiaries

are currently enrolled in the programme. The Company has also acquired additional coverage for

business interruption risk related to its debt service obligations.

The Company procures its insurance coverage for the programme directly with internationally

recognised re-insurers with a minimum credit rating of “A” as issued by Standard & Poor’s Ratings

Services, a division of The McGraw-Hill Companies, Inc., or its equivalent by Moody’s Investors

Service, Inc. The Company’s insurance coverage for the port property package is based on the

probable maximum loss, which. from time to time. is evaluated and assessed by XL GAPS, an

international risk consulting firm, and Willis Towers Watson, a global advisory, broking and solutions

company, which insurance cover for liability risks is based on forecasted volume per TEU’s and break

bulk cargoes. The coverage for port property package includes, among others, natural catastrophe

perils such as earthquake, seaquake, flood, named windstorm, tsunami, volcanic eruption and tornado,

physical damage, and coverage for strikes, riots, labour disturbances and civil commotion. The

terminal operators’ liability insurance coverage includes, but is not limited to, liabilities for cargo

damage, uncollected cargo, failure in carriage costs, quarantine and disinfection costs, sudden,

unintended and unexpected pollution and disposal costs, containers/ships or other third party property

damage and third party liability for death or bodily injury.

The Company believes that its insurance coverage is more than adequate to cover all normal risks

associated with the operation of its business and is consistent with and at times above industry

standards. The Company constantly reviews its risk exposure to explore potential opportunities to

insure. The Company is currently evaluating its cyber risk insurance for its terminals around the globe.

— 138 —

Safety, Quality and Maintenance

The Company conducts regular inspection and maintenance of its equipment and facilities. It has

established formal procedures for the maintenance and inspection of equipment that follow

international guidelines or manufacturers’ recommendations. Formal corporate policies are

implemented to address maintenance of critical components such as crane structures, hoisting

mechanisms, twist locks, safety devices, interlocks and load path crane components. Audits are

performed to ensure compliance with policy, and the Company provides specialised training to the

staff members that are responsible for critical components such as wire ropes and lifting accessories.

From time to time, the Company commissions professional structural consultants to conduct testing

of equipment such as crane structures.

In the management of the ports, the Company consistently strives to adhere to strict standards of

quality and consistency of service. The operations at MICT received ISO 9001:1994 for Quality

Management Systems Certification in 1998 and ISO 14001:1994 for Environmental Management

Systems Certification in 2000. CGSA (Ecuador) has received five certifications: ISO 9001:2008 for

Quality Management Systems; OHSAS 18001:2007 for Occupational Health and Safety; ISO

28000:2007 for Supply Chain Security Management Systems; and BASC for Safe and Secure

International Trade. BCT (Poland) has received four ISO certificates: ISO 9001:2008 for Quality

Management Systems, ISO 14001:2004 for Environmental Management Systems, ISO 22000:2005 for

Food Safety Management and ISO 5001:2011 Energy Management Systems. TSSA has received two

certifications: ISO 9001:2008 for Quality Management Systems and ISO 14001:2004 for

Environmental Management Systems. MICTSL (Madagascar) has received two certifications: ISO

9001:2008 for Quality Management Systems and ISO 14001:2004 for Environmental Management

Systems. PICT (Pakistan) has received one certification: ISO 9001:2008 for Quality Management

Systems. CMSA has received four certifications: ISO 9001:2008 for Quality Management Systems,

ISO 14001:2004 for Environmental Management Systems, OHSAS 18001:2007 for Occupational

Health and Safety and ISO 28000:2007 for Supply Chain Security Management Systems. PTMTS has

received ISO 9001:2008 for Quality Management Systems. SCIPSI has received three certifications:

ISO 9001:2008 for Quality Management Systems, ISO 14001:2004 for Environmental Management

Systems and OHSAS 18001:2007 for Occupational Health and Safety. DIPSSCOR has received ISO

9001:2008 for Quality Management Systems. YICT has received ISO 9001:2008 for Quality

Management Systems. Each of the Company and its subsidiaries which have been certified on ISO

9001, ISO 14001 and OSHAS 18001 undergo regular surveillance audits and re-certifications.

As part of the Company’s enterprise risk management, which is overseen by the Audit Committee of

the Board, the Company established a division on global health, safety, security and environment

(HSSE) in the third quarter of 2015. This division is in charge of creating and maintaining a global

HSSE manual to provide global guidelines to address occupational health, safety, security and

environmental challenges while allowing for locally customised programs. The division also ensures

implementation and compliance of relevant health, safety, security and environmental regulatory

requirements in all of the Company’s terminals.

All of the Company’s terminals are compliant with the regulations set forth under the International

Ship and Port Facility Security (ISPS) Code, a comprehensive set of required and voluntary measures

implemented under the International Convention for the Safety of Life at Sea to enhance the security

of ships and port facilities, developed in response to the perceived threats to ships and port facilities.

The port facility security plan is assessed regularly for relevance and effectiveness. The Company

maintains its ISPS certifications and renews them prior to their expiry. As part of the Company’s

efforts to be compliant with the ISPS Code, the Company has included weighing and scanning stations

at its port gates.

— 139 —

Employees

As at 31 December 2014, 2015 and 2016 and 30 September 2017, the Company had a total of 7,967,

7,962, 8,009 and 7,537 permanent employees, respectively. The Company generally does not hire

contract employees as the Company believes that the Company can achieve greater efficiency with a

dedicated staff of employees who are familiar with the Company’s internal systems. The following

table shows the number of employees as at the dates indicated by activity and location:


September

2015 2016 2017

Employees by activity:

Operations ......................................................... 5,207 5,129 4,916

Engineering........................................................ 1,064 1,058 1,121

Finance and Administration ................................ 1,059 1,116 1,040

Corporate Offices............................................... 198 164 193

Other ................................................................. 434 542 266

Total.................................................................. 7,962 8,009 7,537

Employees by geographic region:

Asia ................................................................... 3,718 3,792 3,694

Americas............................................................ 3,105 2,947 2,515

EMEA................................................................ 1,139 1,270 2,328

Total.................................................................. 7,962 8,009 7,537

Collective Bargaining Agreements and Labour Relations

As of 30 September 2017, approximately 58.6% of the labour force was unionised. The Company has

a CBA in many of the ports in which it operates.

Asia

MICT

On 25 April 2014, the Company and the Nagkakaisang Manggagawa sa Pantalan ng ICTSI — National

Federation of Labor Unions (NMPI-NAFLU), the bargaining unit for MICT workers, renewed its CBA

for another five years effective up to 24 April 2019.

A five-year CBA between the Company and Anchorage Labor Union-ICTSI-NAFLU

(ALU-ICTSI-NAFLU), the bargaining unit for the MICT Anchorage Division, was also signed on 27

February 2014, effective until 26 February 2019.

Both CBAs contain provisions on employee benefits to union members such as: wage increases; rice

and meal allowances; paid leaves; medical, dental and hospitalisation benefits; life insurance; profit

sharing; retirements; uniforms; welfare, education, access to a calamity fund; and union leave with

pay. The CBAs also provide a venue for settling grievances.

On 29 April 2009, MICT was given the Outstanding Achievement on Industrial Peace and Harmony

Award by the Employee Conference of the Philippines, which indicates that the relationship between

the union and MICT has developed into a partnership.

— 140 —

YICT

The right to unionise is guaranteed for the employees of YICT. All employees are unionised by law.Unionism is not a big issue in China since unions are considered as partners in a stable work force.

PICT

The Democratic Employees Union (PICT-DEU) was formed on 23 April 2014 as the bargaining unitfor PICT workers. The first CBA was signed on 16 January 2015, effective for a period of two years.The CBA expired on 17 January 2017 and negotiations for renewal are in progress.

Americas

CGSA

There has been a non-unionised Workers’ Council at CGSA since October 2008 and a CBA wasinitially signed on 16 July 2009. The CBA was last renewed on 20 February 2017 for a period of twoyears. In addition to the statutorily required benefits, the CBA provides employees with additionalbenefits such as transportation, health policy, food service and uniforms. There have been no cases ofstrikes or walkouts since CGSA took over operations in 2007.

TSSA

The employees at TSSA are represented, for administrative and maintenance employees, by theSindicato dos Auxiliares de Administracao de Aramazens Gerais do Estado de Pernambuco. The CBAis renewed every two years and was last signed in July 2017. The Company believes that itsrelationship with the local union is good and there has not been, for many years, any major labourdisturbances such as strikes, slowdown, boycott or mass absences. The employees receive benefitssuch as dental, health insurance, food service, support for professional development, leaves andtransportation services. The CBA will expire on 30 June 2019. From 2013 onwards, the operationsstaff has been represented by casual work unions and there was a CBA between TSSA and the ushersunion for casual workers, specifically for operations in the customs inspections area, from March 2017to February 2019. TSSA recently entered into a new ushers union CBA for the operations employees,which is due to expire in June 2019. There have been no cases of strikes or walkouts throughout thisperiod.

CMSA

CMSA signed a collective work contract (“CWC”) in November 2010 with Union de Estibadores yJornaleros del Pacifico, which is part of Confederacion Regional Obrero Mexicana (“CROM”).CROM has not had a strike since it was founded 95 years ago. The CWC will be effective until 2044and is extendible based on any extension on the concession agreement with Administracion PortuariaIntegral de Manzanillo, S.A., de C.V. Also, CMSA undertakes annual reviews of salaries andcomprehensive biennial reviews of salaries and benefits. In addition to the statutorily requiredbenefits, CMSA provides employees with additional benefits such as savings funds, transportation,uniforms, scholarships, contributions, sports, support and life insurance. An additional 16% ofworkers’ salaries is paid to the union to support administration expenses and the workers’ retirementfunds.

EMEA

MICTSL

MICTSL assumed the CBA entered into by the previous port operator. The agreement sets out theobligations of the port operator with respect to matters such as medical care, housing allowances and

— 141 —

holidays. A salary grid is produced from time to time under the agreement that sets forth applicablewages. Under the CBA and applicable employment regulations, union representatives may only bedismissed after the employer has successfully petitioned the Labour Inspectorate to do so. The rightto strike is protected, provided that at least 48 hours’ notice is given to management.

A new CBA entered into in October 2010 expired in October 2015. This CBA was successfullyrenewed in September 2015 for an additional period of five years, or until October 2020.

Compensation and Training

The Company believes that it offers competitive levels of compensation in the jurisdictions in whichit operates. All of the ports operated by the Company consider financial viability, legal compliance andindustry conditions in determining pay.

The Company generally provides three types of benefits: statutory benefits or those mandated by law,company-initiated benefits or those provided by the company in addition to those required by law andCBA-negotiated benefits, such as medical and dental assistance, life and accident insurance, andemergency loans for education and medical expenses.

The Company believes that its skilled workforce is critical to the efficient and successful operationof its business and, accordingly, emphasises the training and development of its employees. It providesyear-round local and foreign training programmes that are conducted both in-house and externally.

Legal Matters

Due to the nature of the Company’s business, it is involved in various legal proceedings, both asplaintiff and defendant, from time to time. The majority of outstanding litigation involves subrogationclaims under which insurance companies have brought claims against the operator, shipping linesand/or brokerage firms for reimbursement of their payment of insurance claims for damagedequipment, facilities and cargoes. Except as discussed below, the Company is not engaged in any legalor arbitration proceedings (either as plaintiff or defendant), including those which are pending orknown to be contemplated and its Board of Directors has no knowledge of any proceedings pendingor threatened against the Company or any facts likely to give rise to any litigation, claims orproceedings which might materially affect its financial position or business. Management and theCompany’s legal counsels believe that the Company has substantial legal and factual bases for itsposition and is of the opinion that losses arising from these legal actions and proceedings, if any, willnot have a material adverse impact on the Company’s consolidated financial position and results ofoperations.

MICT

The MICT Berth 6 Project is a port development project being undertaken by the Company with theapproval of the PPA and in compliance with the Company’s commitment under its concession contractwith the PPA. The City Council of Manila issued Resolution No. 141 dated 23 September 2010,adopting the Committee Report of the ad hoc committee that investigated the reclamation done in IslaPuting Bato in Manila, which stated that the project should have undergone prior consultation with theCity of Manila, approval and ordinance from the City of Manila and consent from the City Mayor.

The Company and its legal counsels’ position is that Resolution No. 141 of the City Council of Manilais purely recommendatory and is not the final word on the issue whether the MICT Berth 6 Projectis validly undertaken or not.

On 26 November 2010, the PPA, through the Office of the Solicitor General, filed a petition forcertiorari and prohibition with application for the issuance of a temporary restraining order and/or writ

— 142 —

of preliminary injunction assailing City Council Resolution No. 141 before the Supreme Court. The

Supreme Court granted a temporary restraining order enjoining the Mayor of Manila and the City

Council of Manila from stopping or suspending the implementation of the MICT Berth 6 Project of

the PPA, which remains valid and continuing until further orders from the Supreme Court.

The Supreme Court then granted the Company’s motion to intervene in the case of PPA vs. City of

Manila and City Council of Manila. The parties filed their respective comments and replies before the

Supreme Court. As at the date of this Offering Circular, the parties were awaiting the Supreme Court’s

resolution of this case.

Notwithstanding the foregoing legal proceedings, the MICT Berth 6 Project was completed and

inaugurated by the President of the Republic of the Philippines in July 2012.

In 2013, a case was filed by Malayan Insurance Co., Inc. against the Company before the Regional

Trial Court of Manila, Branch 55, for damages allegedly sustained by the assured cargo of Philippine

Long Distance Telephone Company (“PLDT”) consisting of telecommunications equipment. The

amount of the claim was P=223.8 million (approximately U.S.$4.5 million) plus legal interest and

attorney’s fees of P=1.0 million (approximately U.S.$20.1 thousand).

PLDT initially filed a claim against the Company, claiming that the cargo had been dropped while

inside a container at the Company’s terminal and holding the Company responsible for the value of

the equipment. The Company did not pay the claim, arguing that there is no evidence that the cargo

had been damaged. The Company further argued that the containerised equipment was never dropped

to the ground but was merely wedged in between containers while being moved in the container yard.

The case is currently on trial.

PICT

In 2007, the trustees of the Port of Karachi (“KPT”) filed a civil suit against PICT in the High Court

of Sindh (“HCS”) claiming a sum of approximately U.S.$2.9 million along with interest, as default

payment of wharfage and penalty thereon, for the alleged mis-declaration of the category of goods on

the import of ship-to-shore cranes and rubber tyred gantry cranes in 2004. The HCS has passed

judgement and decree in favour of PICT and ordered that KPT is not entitled to the amount of

wharfage charges claimed by it. In June 2017, KPT filed an appeal against the aforesaid judgment

before the Divisional Bench of the HCS. Upon advice of PICT’s legal advisor, management believes

that there is no merit in this claim.

Also in 2007, PICT filed an interpleader civil suit before the HCS against the Deputy District Officer,

Excise and Taxation (“DDO”) and the trustees of KPT in respect of the demand raised by the DDO

on PICT to pay property tax out of the handling, marshalling and storage charges payable to KPT

amounting to approximately U.S.$0.4 million for the period from 2003 to 2007. In compliance with

the Order of HCS, PICT deposited the amounts with HCS. In 2014, another demand was made by the

DDO amounting to approximately U.S.$0.9 million for the period from 2008 to 2014. On an

application filed by PICT for directions, HCS ordered for deposit of the aforementioned amount out

of HMS charges billed by KPT, and PICT subsequently complied with the order of HCS. In 2015, HCS

issued further orders directing PICT to deposit the remaining handling, marshalling and storage

charges due and payable with HCS in quarterly installments and PICT complied accordingly. The

amount deposited with HCS has been netted against the handling, marshalling and storage charges

payable to KPT. The decision of the suit is still pending and, upon advice of PICT’s legal counsel,

management believes that there is full merit in this case and there may be no adverse implication

against PICT.

— 143 —

While completing the tax audit proceedings for tax year 2013, the Deputy Commissioner Inland

Revenue (“DCIR”) modified the deemed assessment of PICT and made certain

disallowances/additions on the taxable income and raised an income tax demand of approximately

U.S.$1.24 million. PICT filed an appeal before the Commissioner Inland Revenue — Appeals

(“CIR-A”) who partially decided the appeal in favour of PICT. Consequently, PICT made the payment

of approximately U.S.$0.95 million in respect of issues confirmed by the CIR-A, and filed a second

appeal before the Appellate Tribunal Inland Revenue, which is now pending for adjudication. Upon

advice of PICT’s tax advisor, management believes that the issues involved in the appeal is expected

to be decided in favour of PICT.

During the period, the Assistant Commissioner Sindh Revenue Board (“AC-SRB”) under Sindh Sales

Tax on Services Act, 2011 raised a demand of approximately U.S.$4.9 million, along with penalty and

default surcharge, for the tax periods of January 2013 to December 2014 on exempt services provided

by PICT. PICT filed an appeal with the Commissioner of Appeals — SRB, which is pending for

hearing. PICT has also filed a petition before the HCS in respect of the subject order passed by

AC-SRB, seeking protection from any adverse action. HCS has granted an interim order restraining

AC-SRB from taking any adverse action relating to recovery of above demand. Upon advice of PICT’s

tax and legal advisors, management believes that PICT has a strong defense and the appeal is expected

to be decided in favour of PICT.

TSSA

In 2008, a civil suit was filed by former customer Interfood Comercio (“Interfood”) against TSSA for

damages to perishable cargo amounting to BRL7.0 million (approximately U.S.$3.0 million).

Interfood’s cargo (garlic and birdseed) was declared improper for human and animal consumption due

to long storage period at TSSA before it was claimed and such cargo was destroyed by Brazilian

customs authorities. The lower court and Court of Appeals ruled in favor of Interfood. The case has

been pending in the Supreme Court for more than four years. An amount of BRL9.3 million

(approximately U.S.$2.8 million) in TSSA’s bank account has been garnished by the lower court.

TSSA made an accrual for this contingency in the amount of BRL1.9 million (U.S.$0.8 million) in

2014 and nil in 2015 and 2016, presented as part of “Other expenses” account in the consolidated

statements of income. The provision aggregating BRL13.8 million (U.S.$5.2 million), BRL13.8

million (U.S.$3.5 million), BRL13.8 million (U.S.$4.2 million) and BRL13.8 million (U.S.$4.1

million) were recognised as part of “Accounts payable and other current liabilities” account in the

consolidated balance sheets as at 31 December 2014, 2015 and 2016 and 30 September 2017,

respectively. In July 2016, the State Court rendered a decision against TSSA. The said judgment,

however, is still subject to a last appeal with the Supreme Court in Brasilia.

Tecplata

Ganmar S.A. (“Ganmar”) challenged, in summary proceedings, the legality of the Concession

Agreement for the construction and operation of the Port of La Plata by Tecplata, requesting also via

three preliminary injunctions the suspension of the works at the terminal. Ganmar alleges that

Tecplata’s concession should have been awarded through a bidding process. The preliminary

injunctions requested by Ganmar were rejected both by the Civil and Commercial Court and the Court

of Appeals due to lack of evidence on the illegality of the Concession Agreement and/or the lack of

urgent reasons to suspend the contract. Management of Tecplata believes that there is no merit in the

action filed by Ganmar and has not provided for possible obligations arising from the aforementioned

legal proceedings.

— 144 —

TICT

On 28 December 2012, TICT filed a Notice of Termination of its 10-year Investment Agreement with

Tartous Port General Co. (“TPGC”) on the grounds of “unforeseen change of circumstances” and

“Force Majeure”. In early 2013, TPGC submitted to arbitration TICT’s termination notice. On 1 April

2014, the arbitration panel decided in favour of TPGC. While the award has become executory on 20

April 2015, management and its legal counsels believe that TPGC will not be able to successfully

enforce the award outside of Syria.

BICTL

In 2015, BICTL filed a case against the Revenue Service with the Tbilisi City Court for the

cancellation of the tax assessment in the amount of U.S.$860.7 thousand (GEL2.3 million). The case

involves value-added tax on fees collected by BICTL for services rendered in relation to the export

of scrap materials. The Revenue Service alleged that such fees are subject to VAT while BICTL, upon

the advice of tax advisors, believes that it has a sound basis to treat the services as a VAT zero-rated

sale of services. In March 2016, the Tbilisi City Court rendered a decision in favor of the Revenue

Service. BICTL has appealed said decision with the appellate court and is awaiting for hearing date

announcement.

IOI

Due to continuing labour disruption caused by the ILWU in Portland commencing in June 2012, IOI

has filed two separate counter-claims in U.S. federal court against the ILWU seeking monetary

damages. The first is a claim for damages caused by the ILWU’s unlawful secondary activity under

the National Labor Relations Act. The second is an antitrust claim brought against the ILWU and the

Pacific Maritime Association (“PMA”). IOI also has a second counterclaim for breach of fiduciary

duty against PMA. In addition, the National Labor Relations Board (“NLRB”) has sought and obtained

two federal court injunctions against the ILWU, prohibiting illegal work stoppages as well as a finding

of contempt of court against the union. IOI’s damage claim for unlawful secondary activity has been

stayed pending completion of administrative proceedings before the NLRB. This is a substantial

claim, seeking a multi-million dollar judgment, and is unlikely to be tried in court for at least a few

years.

IOI’s antitrust claim was dismissed by the federal court. The judge granted IOI permission to appeal

the dismissal to the Ninth Circuit Court of Appeals. The appeal is pending and oral argument was

conducted before the Ninth Circuit Court of Appeals in Portland in October 2016. A decision is likely

to be obtained in 2017. If IOI prevails, its antitrust claim will proceed before the trial court. Under

federal law, successful antitrust plaintiffs may recover treble damages.

As to its claim against the ILWU for damages caused by illegal secondary activity, IOI’s breach of

fiduciary claim against PMA has been stayed by the federal court.

On 6 November 2017, IOI was granted a favourable decision from the U.S. Court of Appeals in

Washington D.C. against the ILWU. The U.S. Court of Appeals found ILWU guilty of violating federal

labour laws and upheld two NLRB decisions declaring that ILWU engaged in deliberate work

stoppages and slowdowns, made false safety claims, and engaged in other coercive conduct against

IOI and its customers.

Management believes that the other cases pending between IOI, ILWU and PMA will be resolved in

favour of IOI.

— 145 —

Governmental Regulations and Licences

The Company’s operations are subject to a variety of laws and regulations promulgated by the national

and local government of each jurisdiction in which it operates. For rights under the concession

agreements, see “Description of Concession Agreements and Certain Indebtedness”. The Company

believes that it is in compliance in all material respects with applicable governmental regulations in

each jurisdiction in which it operates. The Company is not aware of any governmental proceedings or

investigations to which the Company might become a party and which may have a material adverse

effect on the Company’s properties and operations.

Various governmental and quasi-governmental agencies and regulatory bodies require the holding of

certain licences, concessions and permits with respect to port and port-related operations. The

Company’s overseas operations are conducted under valid licences, concessions, permits or

certificates granted by the applicable regulatory body in that jurisdiction.

The Company maintains regular dialogue with local government and regulatory authorities through its

management teams or representatives in each jurisdiction to ensure compliance with the requirements

and conditions for obtaining and maintaining the aforementioned licences, concessions, permits or

certificates.

Competition

The Company faces competition in its ongoing operations. The Company’s primary competitors are

other international port operators, including financial investors, shipping lines and domestic concerns

that operate terminals or that provide alternative routes for shipping lines that would otherwise utilise

the Company’s terminals.

Asia

The Philippines

Currently, South Harbour is MICT’s only competitor in the international marine container service

market in Manila. The PPA authorised Asian Terminals, Inc. (“ATI”) to provide fully integrated cargo

handling services at the South Harbour from March 1992 to May 2013, which was subsequently

extended for another 25 years in May 2013. The PPA’s tariffs are applied uniformly to MICT and the

South Harbour. The Company believes that MICT has a market share of approximately 67% of the

container traffic at the port.

SBITC does not have any direct competitors in Subic. BIPI competes with the Port of Batangas, which

is operated by ATI. The general cargo operation at BIPI competes with a number of private ports

handling petroleum and coal. DIPSSCOR (Davao) primarily competes with DICT and Filports, which

mainly handles domestic cargo, and a private commercial terminal operator that specialises in reefer

vessels for export bananas and some domestic cargo. SCIPSI (General Santos City) does not have any

direct competition.

China

After the Company’s acquisition of 51.0% of YICT and divestment of its holdings in YRDICTL in July

2014, higher yielding international container cargo in the Port of Yantai has been handled exclusively

by YICT. YICT faces competition for international cargo with other ports in the region. Meanwhile,

domestic cargo has been handled exclusively by the YRDICTL.

— 146 —

Pakistan

The Port of Karachi is one of the South Asia’s largest and busiest deep-water seaports, handling

approximately 65% of Pakistan’s container traffic. The port currently has three terminals: ICTSI’s

PICT, KICT and SAPT, of which both KICT and SAPT are operated by Hutchison Port Holdings. Also

on the other side of the city of Karachi is QICT, operated by Dubai Ports World at Port Qasim, which

handles approximately 34% of the country’s containers traffic. The Company believes that PICT

captured approximately 24.0% of the market as of 30 September 2017, with QICT, KICT and SAPT

handling 34.0%, 26.0% and 16%, respectively.

Americas

Ecuador

CGSA operates the Port of Guayaquil, which serves as Ecuador’s main international trading gateway.

The port is connected to the main terrestrial highways of Ecuador and has good access to other

principal cities in the country. As CGSA handles a substantial portion of the country’s container

traffic, it currently faces limited competition, generally from private ports. The Company believes that

CGSA has a market share of 52% of the traffic at the port.

Brazil

TSSA handles all container traffic at Pernambuco, following the cessation of regular container

handling activities of the Port at Recife in 2004. According to ABRATEC — Brazilian Public

Container Terminals Association, TSSA, at 41%, captured the biggest market share in the Northeast

region of Brazil.

Honduras

The Company believes that OPC dominates the Honduras market and a substantial portion of the

potential El Salvador, Nicaragua and Guatemala markets due to its efficiency and competitive tariffs.

OPC faces limited competition from Puerto Castilla and San Lorenzo due to the small capacity of both

ports. The Company believes that OPC has captured 81% of the container traffic in Honduras as of

September 2017.

Mexico

The Manzanillo market where CMSA operates is currently dominated by SSA de Mexico, S.A. de C.V.,

which the Company believes has a 54% market share. CMSA’s entry into the market is designed to

address the congestion at competing terminals and the competitor’s limitations in expanding its

capacity to absorb the growing demand. The Company believes that CMSA had an estimated 30%

market share as of September 2017.

EMEA

Madagascar

The Company believes that MICTSL dominates the Madagascar container market, handling over 90%

of the container traffic in the country at Port Toamasina. The rest is handled by a number of small ports

around the island.

— 147 —

MANAGEMENT

Directors

The Board of Directors is responsible for overall management and direction. The Board of Directorsmeets on a quarterly basis, or more frequently as required, to review and monitor the Company’sfinancial position and operations. The Articles of Incorporation provide that the Board of Directorswill consist of seven Directors. The Directors are elected at the annual shareholders’ meeting and holdoffice until the next succeeding annual meeting and until their respective successors have been electedand qualified. At least two or 20% of the total Directors, whichever is lower, must be independentdirectors. The registered address for each of the Directors is ICTSI Administration Building, MICTSouth Access Road, North Harbour, Manila, Philippines.

The following sets forth information regarding the Directors and the Corporate Secretary as of the dateof this Offering Circular.

Office Name Date of Appointment

Chairman and President ............................... Enrique K. Razon Jr. 24 December 1987(1)

Director ....................................................... Jose C. Ibazeta 24 December 1987

Director ....................................................... Stephen A. Paradies 24 December 1987

Director ....................................................... Andres Soriano III 7 July 1992

Director ....................................................... Jon Ramon M. Aboitiz 17 April 2008

Director (Independent) ................................. Octavio Victor R. Espiritu 18 April 2002

Director (Independent) ................................. Joseph R. Higdon 19 April 2007

Corporate Secretary ..................................... Rafael T. Durian 24 December 1987

Notes:

(1) Mr. Razon was elected Chairman and President in 1995.

None of the Directors or executive officers are related to each other or to the substantial shareholders, save that Mr. StephenA. Paradies is the brother-in-law of Mr. Enrique K. Razon Jr.

Certain information on the business and working experiences of the Directors is set out below:

Enrique K. Razon Jr. Mr. Razon has been a Director of the Company since December 1987 and hasbeen its Chairman since 1995. Concurrently, Mr. Razon is the Chairman and the President of theCompany, ICTSI Warehousing, Inc., ICTSI Foundation, Inc., Razon Industries, Inc., BloomberryResorts Corporation, Prime Metroline Holdings Inc., Quasar Holdings Inc., Falcon Investco HoldingsInc., Achillion Holdings Inc., Collingwood Investment Company Ltd., Bravo International PortHoldings Inc. and Provident Management Group, Inc.; the CEO and the Chairman of BloomberryResorts and Hotels, Inc.; the Chairman of Sureste Realty Corp., Monte Oro and Resources and Energy,Inc., Pilipinas Golf Tournament Inc. and Bloomberry Cultural Foundation, Inc.; and a Director ofSureste Properties, Inc., ICTSI (Hongkong) Ltd., Australian Container Terminals, Ltd., PentlandInternational Holdings Ltd., CLSA Exchange Capital and Xcell Property Ventures, Inc. Mr. Razon isa member of the US-Philippines Society and the ASEAN Business Club, Philippines, Inc. Mr. Razonreceived his Bachelor of Science degree, majoring in Business Administration, from the De La SalleUniversity in 1980.

Jose C. Ibazeta. Mr. Ibazeta has been a Director of the Company since December 1987. In 2009, hewas named as a Trustee and the Vice President of ICTSI Foundation, Inc. He was a member of theCompany’s Audit Committee until April 2010 and has been a member of the Company’s NominationSub-Committee since February 2011. He also served as the Company’s Treasurer until February 2007,when he was appointed as the President of the Power Sector Assets and Liabilities ManagementCorporation (PSALM) by the President of the Republic of the Philippines. He served as PSALMPresident and CEO from 1 March 2007 to 30 March 2010. In April 2010, he declined his nomination

— 148 —

to be a Director of the Company by reason of his appointment as the Acting Secretary of theDepartment of Energy, a position he held from 1 April 2010 until 30 June 2010. He was reinstated asa Director of ICTSI in August 2010. Mr. Ibazeta is a Consultant to the Chairman of the Board and aDirector of A. Soriano Corp. He is likewise a Director of Anscor Consolidated Corp., Anscor PropertyHoldings, Inc., Minuet Realty Corp., Anscor Land, Inc., Phelps Dodge Philippine Energy ProductsCorp., Newco, Inc., Seven Seas Resorts and Leisure, Inc., A. Soriano Air Corp., Vicinetum Holdings,Inc., Vesper Industrial and Development Corp. and AG&P International Holdings, Ltd.; the Chairmanand President of Island Aviation, Inc.; and a Director and the President of both Seven Seas Resorts andLeisure, Inc. and Pamalican Resort, Inc. Mr. Ibazeta is also the founding Chairman and a Director ofPhilippine Stratbase Consultancy, Inc. Mr. Ibazeta is a member of the Finance Committee of theAteneo de Manila University and the Board of Trustees of Radio Veritas and St. James the Great ParishFoundation. Mr. Ibazeta received his Bachelor of Science degree in Economics from the Ateneo deManila University in 1963 and his Master’s Degree in Business Administration from the Universityof San Francisco in 1968. He completed all requirements for an MBA in Banking and Finance fromNew York University in 1975.

Stephen A. Paradies. Mr. Paradies has been a Director of the Company since December 1987. He hasbeen the Chairman of the Nomination Sub-Committee of the Company since February 2011 and theChairman of the Board Risk Oversight Committee of the Company since April 2017. He is also aDirector of ICTSI Warehousing, Inc. and Sociedad Puerto Industrial Aguadulce S.A. Moreover, Mr.Paradies is the Senior Vice President — Finance/ Treasurer of Aboitiz & Company, Inc.; a Trustee ofBloomberry Foundation, Inc.; and a Director of Union Properties Inc., Union Bank of the Philippinesand NapaGapa Beverages, Inc. Mr. Paradies received his Bachelor of Science degree, majoring inBusiness Management, from the Santa Clara University, California, USA.

Andres Soriano III. Mr. Soriano has been a Director of the Company since July 1992 and is currentlythe Chairman of the Company’s Remuneration Sub-Committee. In April 2017, he was appointed as amember of the Company’s Corporate Governance Committee. He is also the Chairman and ChiefExecutive Officer of A. Soriano Corporation; the Chairman and President of Anscor ConsolidatedCorp.; the Chairman of the Andres Soriano Foundation, Inc., Phelps Dodge International Philippines,Inc., Phelps Dodge Philippines Energy Products Corp. and Seven Seas Resorts and Leisure, Inc.; anda Director of Cirrus Medical Staffing, Inc., Anscor Property Holdings, Inc., A. Soriano AirCorporation and the Manila Peninsula Hotel, Inc. Mr. Soriano was formerly the President and ChiefOperating Officer of San Miguel Corporation and later its Chairman and CEO. He was also theChairman of Coca Cola (Philippines), Coca Cola Amatil (Australia) and Nestle (Philippines) and wasa Director of SPI Technologies, Inc. and eTelecare Global Solutions, Inc. He was also a member ofthe G.E. Asian Advisory and Wharton East Asia Executive Board. Mr. Soriano received a Bachelor ofScience degree in Economics, majoring in Finance and International Business, from the WhartonSchool of Finance and Commerce, University of Pennsylvania in 1972.

Jon Ramon M. Aboitiz. Mr. Aboitiz has been a Director of the Company since April 2008 and wasappointed as a member of the Company’s Audit Committee in April 2010 and as Chairman of theCompany’s Related Party Transactions Committee in April 2017. Mr. Aboitiz is also the Chairman ofAboitiz & Company, Inc. and Aboitiz Equity Ventures, Inc., an investment and management enterpriseengaged in numerous and diverse business concerns ranging from power generation and distribution,banking and financial services, real estate development, construction, food, ship building and cement.He was the President of Aboitiz & Company, Inc. from 1991 until 2008 and was the President and CEOof Aboitiz Equity Ventures, Inc. from 1993 to 2008. Presently, he holds various positions in the AboitizGroup including Vice Chairman of Aboitiz Power Corp., Vice Chairman of Union Bank of thePhilippines and Chairman of Union Bank of the Philippines’s committees, namely the ExecutiveCommittee and the Risk Management Committee; as well as Vice Chairman of the Compensation andRemuneration Committee. Mr. Aboitiz is a Director and Chairman of the Audit Committee ofBloomberry Resorts Corporation; the Chairman/President and a Trustee of the Ramon Aboitiz

— 149 —

Foundation, a member of the Board of Advisors of the Coca-Cola Export Corporation (Philippines);and a member of the Board of Trustees of Santa Clara University in California, USA. Mr. Aboitizstarted his career with the Aboitiz Group in 1970, immediately after graduating from Santa ClaraUniversity in California, USA with a degree in B.S. Commerce, majoring in Management.

Octavio Victor R. Espiritu. Mr. Espiritu has been an Independent Director of the Company since April2002 and previously served as the Chairman of the Board Risk Oversight Committee until April 2017.He is the current Chairman of the Company’s Audit Committee and a member of the Company’s BoardRisk Oversight Committee, Related Party Transactions Committee, Remuneration Sub-Committee andNomination Sub-Committee. He is also the Chairman of GANESP Ventures, Inc. and a Director ofBank of the Philippine Islands, Philippine Dealing System Holdings Corp. and Subsidiaries and PhilStratbase Consultancy Inc. Mr. Espiritu was a three-term former President of the Bankers Associationof the Philippines, a former President and CEO of Far East Bank and Trust Company and the Chairmanof the Board of Trustees of the Ateneo de Manila University for 14 years. Mr. Espiritu received hisprimary, secondary and college education from the Ateneo de Manila University, where he obtainedhis AB Economics degree in 1963. In 1966, he received his Master’s Degree in Economics fromGeorgetown University in Washington D.C., USA.

Joseph R. Higdon. Mr. Higdon has been an Independent Director of the Company since April 2007 andwas appointed as Chairman of the Company’s Corporate Governance Committee in April 2017. He isalso an Independent Director of SM Investments Corporation, Security Bank Corporation and TheIsland Institute, a non-profit organisation seeking to preserve island communities along the coast ofMaine. Mr. Higdon was the Senior Vice President of Capital Research and Management, a LosAngeles-based international investment management firm, until June 2006. He joined CapitalResearch and Management in 1974 and has covered Philippine stocks from 1989 to 2006. He was theVice President of the New World Fund, which focused on companies doing business in emergingcountries, and was a Director of Capital Strategy Research. Mr. Higdon received his Bachelor ofScience degree, major in Political Science, from the University of Tennessee in 1968.

Rafael T. Durian. Atty. Durian has been the Company’s Corporate Secretary since 1987. He also servesas Corporate Secretary of International Container Terminal Holdings, Inc. and ICTSI Foundation, Inc.and Corporate Secretary and Director of Razon Industries, Inc., Sureste Realty Corp. and ProvidentManagement Group, Inc. Atty. Durian holds a Bachelor of Laws degree from San Beda College andis a member of the Integrated Bar of the Philippines. He was previously a Partner at Cruz Durian Alday& Cruz-Matters Law Office.

Corporate Governance

The Company adopted a Manual on Corporate Governance in January 2003 and submitted a RevisedManual on Corporate Governance (“CG Manual”) to SEC on 31 May 2017. The Company submitsannual consolidated changes and updates in the Annual Corporate Governance Report (“ACGR”),which states that the Company is in compliance with its Revised Manual of Corporate Governance.The most recent submission of updates and changes to the ACGR to the Philippine Securities andExchange Commission (“Philippine SEC”) and the PSE occurred on 30 May 2017. Ms. Susan S.Domingo, who had been the Company’s Vice President for Audit and Compliance, was originallyappointed as Compliance Officer on 18 April 2013. Upon her retirement in February 2014 and untilFebruary 2016, Mr. Ton van den Bosch has taken over the role. On 9 February 2016, concurrently withhis appointment as Chief Financial Officer, Rafael D. Consing, Jr. was appointed as the newCompliance Officer by the Board of Directors. The Compliance Officer coordinates with thePhilippine SEC with respect to compliance requirements, monitors compliance with the revisedmanual and reports any governance-related issues to the Board. As of the date of this OfferingCircular, the Company has not deviated from its CG Manual and is committed to best practices ofgovernance in the attainment of corporate goals.

— 150 —

Audit Committee

In accordance with the Company’s revised Manual on Corporate Governance, the Board of Directorscreated the Audit Committee and appointed members thereto in December 2002. The Audit Committeeis responsible for assisting the Board of Directors in fulfilling its oversight responsibilities to theshareholders relating to the Company’s financial statements and financial reporting process,governance and internal control systems, the internal and external audit process, and the Company’sprocess for monitoring compliance with contracts, laws and regulations and the code of conduct. TheAudit Committee maintains independence from management and the controlling stockholders. Thecommittee is comprised of three Directors, including one Independent Director who serves as theChairman of the Audit Committee. The Audit Committee reports to the Board of Directors and isrequired to meet at least four times a year. As of the date of this Offering Circular, the AuditCommittee comprises Mr. Octavio Victor R. Espiritu (as Chairman), Mr. Jon Ramon Aboitiz and Mr.Stephen A. Paradies.

Corporate Governance Committee

In accordance with the Company’s revised Manual on Corporate Governance, the Board of Directorscreated the Corporate Governance Committee to assist the Board of Directors in the performance ofits corporate governance responsibilities. As of the date of this Offering Circular, the CorporateGovernance Committee comprises Mr. Joseph R. Higdon (as Chairman), Mr. Stephen A. Paradies andMr. Andres Soriano III.

Nomination Sub-Committee

The Nomination Sub-Committee is responsible for reviewing and evaluating the qualifications of allpersons nominated to the Board of Directors as well as other appointments that require approval bythe Board of Directors. The Nomination Sub-Committee is also responsible for assessing theeffectiveness of the Board of Directors’ processes and procedures in the election or replacement ofDirectors. As of the date of this Offering Circular, the Nomination Sub-Committee comprises Mr.Stephen A. Paradies (as Chairman), Mr. Jose C. Ibazeta and Mr. Octavio Victor R. Espiritu.

Remuneration Sub-Committee

The Remuneration Sub-Committee was organised by the Board of Directors to establish a formal andtransparent procedure for developing a policy on remuneration of Directors and officers to ensure thattheir compensation is consistent with the Company’s culture, strategy and the business environmentin which it operates. As of the date of this Offering Circular, the Remuneration Sub-Committeecomprises Mr. Andres Soriano III (as Chairman), Mr. Stephen A. Paradies and Mr. Octavio Victor R.Espiritu.

Board Risk Oversight Committee

The Company’s Board Risk Oversight Committee assists the Board of Directors in its oversight of thecompany’s risk management framework, including key strategic and operational risks, as well as theadequacy and effectiveness of its risk management system. The Board Risk Oversight Committeecomprises Mr. Stephen A. Paradies (as Chairman), Mr. Octavio Victor R. Espiritu and Mr. Jon RamonAboitiz.

Related Party Transaction Committee

In accordance with the Company’s revised Manual on Corporate Governance, the Board of Directorsset up the Related Party Transaction Committee to assist the Board of Directors in protecting theinterest of the Company by reviewing the integrity and transparency of related party transactionsbetween and among the Company and its joint ventures, subsidiaries, associates, affiliates, major

— 151 —

stockholders, officers and Directors (including their spouses, children, dependent siblings and parents)

and interlocking director relationships by members of the Board of Directors. The Related Party

Transaction Committee comprises Mr. Jon Ramon Aboitiz (as Chairman), Mr. Octavio Victor R.

Espiritu and Mr. Stephen A. Paradies.

Management Reporting Structure

The Company generally operates subsidiaries in a decentralised manner. Each of its operating

subsidiaries has its own board of directors and senior management. At least two of the chairman, chief

financial officer and the chief administrative officer serve on the board of directors of all of the major

foreign subsidiaries. These boards approve of subsidiary budget but are not responsible for day-to-day

operations. Through its shareholdings, the Company has the right to appoint majority of the directors

at each of its operating subsidiaries. The joint venture agreements contain provisions regarding

division of management between the Company and joint venture partners.

In order to coordinate operations across various terminals, the Company has recently established three

regional executive committees corresponding to the three regional reporting groups. Each committee

consists of the chairman, the chief financial officer and the chief administrative officer of the

Company, the head of the relevant region and a rotating member selected from the terminal managers

of the relevant region. The duty of the committee is to increase the oversight of each region and create

a small core-team to address any problems that may arise.

— 152 —

DESCRIPTION OF CONCESSION AGREEMENTS AND CERTAIN INDEBTEDNESS

The following description summarises selected provisions of certain concession and financingagreements of the Company. This description is a summary and should not be considered to be a fullstatement of the terms and conditions of such agreements.

Description of Concession Agreements

The Company and its subsidiaries have entered into concession and related agreements with therelevant port authorities of the terminals where they operate. These agreements generally provide forthe scope of operations, including the fees that may be charged for the provision of services. Belowis a summary of each of the contracts that the Company has entered into in respect of the materialterminals.

Asia

Port of Manila

On 19 May 1988, the Company entered into the MICT Contract with the PPA which granted it theexclusive right to manage, operate and develop MICT for a 25-year term, subject to the control andsupervision of the PPA. On 19 May 2013, the Company’s concession contract for MICT (“MICTContract”) was extended for another 25 years up to 18 May 2038, upon completion of agreedadditional investments in port equipment and infrastructures, payment of upfront fees amounting toP=670.0 million (U.S.$16.4 million), and turnover and execution of Deed of Transfer of port facilitiesand equipment used at MICT and part of committed investment under the original concessionagreement, among others. Under the renewal agreement and for the extended term of the MICTContract, the Company shall be liable and committed to: (i) pay the PPA a fixed fee of U.S.$600.0million payable in 100 advanced quarterly installments; (ii) pay an annual fixed fee on storage andberthside operations of P=55.8 million (approximately U.S.$1.3 million); (iii) pay a variable fee of 20percent of the gross revenue earned at MICT and 30 percent of annual gross storage revenues frominternational cargo operations in excess of P=273.0 million, among others; (iv) upgrade, expand anddevelop the MICT, particularly the construction and development of Berth 7; (v) continuously alignits Management Information System (“MIS”) with the MIS of the PPA with the objective towardspaperless transaction and reporting system; and (vi) pay certain other fees based on the attainment ofagreed volume levels. Gross revenues include all income generated from MICT other than interestincome, whether or not collected, including harbour dues, berthing fees, wharfage fees, cargo handlingrevenues, cranage fees, stripping and stuffing charges and all fees from ancillary services.

The Company may also generate revenue by collecting port dues, rates and charges associated withuse of the facilities and premises of MICT, as prescribed and approved by the PPA and subject toconstitutional and statutory constraints. The Company may request a rate adjustment if: (a) the rateof increase in fuel cost or government mandated wage adjustments increases by 10.0% or more orwhen the exchange rate of the Philippine peso to the U.S. dollar decreases by more than 10.0%, and(b) the last increase in rates was given more than two years prior to the proposed adjustment.

Under the MICT Contract, the Company is obligated to upgrade, expand and develop MICT, both onthe land side and the harbour basin, in accordance with the port development programme it submittedto the PPA. It is also required to maintain and repair all areas and structures on the premises at its ownexpense in accordance with international standards for container terminals and provide and maintainall container handling equipment necessary to operate MICT efficiently in accordance with itssubmission of an equipment acquisition programme. All equipment used at MICT will, upon theexpiration or termination of the contract, automatically become the property of the PPA, which willreimburse the Company only for equipment it acquired within the five years prior to the date ofexpiration or termination.

— 153 —

The Company is also required to meet productivity requirements, including handling a minimum of25 containers per hour per crane during vessel operations and to meet annual transhipment volumelevels. The Company is required to pay an amount equivalent to the variable fee on the unattainedtranshipment volume.

The MICT Contract may be suspended, cancelled or terminated by the PPA on specified grounds,including, but not limited to, non-compliance with the terms of the MICT Contract, the occurrence ofa “change of control” as a result of the sale, assignment, transfer or other disposition of the Company’sShares without the consent of the PPA or if the PPA determines that the public interest may be betterserved by the cancellation of the MICT Contract in accordance with its regulations.

In addition, the PPA has the right to take over the MICT Contract in certain circumstances including:(a) emergencies, such as strikes, lockout and other work stoppages (for the duration of suchemergency); (b) the violation or cancellation or termination of the terms of the MICT Contract; and(c) in other cases where the PPA deems such takeover is warranted in accordance with its regulations.

Lease Agreement

In January 1997, the Company signed a contract with the PPA to lease storage facilities and associatedareas and roadways at the MICT. Under the contract, the Company is obligated to pay the PPA a fixedannual rental of P=55 million in quarterly instalments from January 1997 to January 2007 and a variablefee of 30.0% of annual storage revenues from international cargo storage operations in excess ofP=273.0 million, whether collected or not. In addition, the Company is granted the right to providestorage services in respect of all goods and cargoes (to be maintained at its own expense). The contractis subject to suspension or termination if it fails to remit three consecutive quarterly instalments ofrentals, fails to undertake repair or maintenance, and transfers or assigns the lease without writtenconsent or substantially non-perform the terms and conditions of the agreement. In June 2008, thelease agreement was extended until 18 May 2038, making it co-terminus with the renewed MICTContract.

Contract for Cargo Handling Services

In June 2008, the Company renewed its ten-year contract to manage and handle non-containerisedcargo at the MICT and its anchorage areas, including on-vessel and off-vessel services. The contractfor cargo handling services was extended until 18 May 2038, thus, co-terminus with the renewedMICT Contract. Fees collected by the Company in relation to these services are prescribed in thecontract or by the PPA.

Under this contract, the Company is required to pay the PPA a portion of its gross revenues from bothits anchorage and berthside operations. It is required to pay a fee of 14.0% of its gross revenues frominternational non-containerised anchorage operations and, a fixed fee of P=824,305.56 and a variablefee of 7.5% of its gross revenues from its international non-containerised berthside operations or20.0% of its gross revenues from its berthside operations, whichever is greater. The fixed fee is basedon the Company’s highest annual government share for its handling of non-containerised cargoes atberthside for the first three years plus an additional 10.0%. All port charges, including port dues,dockage at berth or anchorage and wharfage, collectible on non-containerised cargoes and its carryingvessels and vessels loading and unloading for both containerised and non-containerised cargo, accrueto the PPA.

The Company is also required to meet productivity rates for its handling of both bulk cargo (2,000metric tons per day, subject to certain factors) and break-bulk cargo (12 metric tons per hour).

The contract is subject to termination on the occurrence of certain events such as a change of controlarising from the disposition of shares without the prior written consent of the PPA or a determinationthat termination is in the public interest. The PPA can take over operations under the anchoragecontract immediately during emergencies, such as work stoppages, violation or termination of thecontract or to promote public interest.

— 154 —

Port of Yantai

On 9 January 2007, the Company, through its subsidiary, ICTSI (Hong Kong) Limited, entered intoa joint venture agreement with the state-owned Yantai Port Group Company Limited and SDICCommunications Co. for the formation of Yantai Gangtong Container Terminal Company Limited,later renamed Yantai Rising Dragon International Container Terminals Ltd. Under the joint ventureagreement, the Company acquired 60% equity interest in YRDICT, while Yantai Port Group CompanyLimited and SDIC Communications Co. acquired a 20.0% equity interest each. Yantai Port GroupCompany pledged the land use rights for the container terminal to the joint venture. The joint ventureis set to last until January 2037, subject to negotiation for renewal.

On 26 November 2009, the shareholders agreed to increase the capitalisation of the venture toRMB930.0 million by 1 April 2010, which represents a further increase of RMB330.0 million from 31December 2009. Additional arrangements included the agreement to secure a RMB300.0 million loanto acquire new assets, and refinance debt and shareholder advances, which have since been secured.No further capital commitments are currently outstanding under the joint venture agreement.

In 2010, Yantai Port Group Company Limited and SDIC Communications Co. transferred their 40%stockholdings in YRDICT into YPH. As a result, the non-controlling shareholder of YRDICT waschanged from Yantai Port Group Company Limited and SDIC Communication Co. to YPH.

On 1 July 2014, the Company, through its subsidiary IHKL, acquired 51% of the total equity interestof YICT and it sold its 60% ownership interest in YRDICTL to YPH. The Company entered into a jointventure agreement on YICT with DP World and YPH for a period of 29 years until 29 September 2043,and may be extended upon agreement of all parties. The objective of these transactions is toconsolidate and optimise the overall port operations within the Zhifu Bay Port Area in Yantai, China.YICT became the only foreign container terminal within the Zhifu Bay Port Area. DP World China(Yantai) and YPH hold 12.5% and 36.5% ownership interest, respectively, in YICT, with ICTSI as themajority shareholder. Pursuant to the joint venture agreement, the board of directors of YICTcomprises six members, three of which the Company has the right to elect. The chairman of the boardof directors is appointed by the Company is entitled to a casting vote in the event of ties. The Companyis also entitled to appoint the general manager and the financial controller. The land operated by YICTwas contributed by YPH and remains valid until 11 November 2043.

Port of Karachi

On 18 June 2002, Karachi Port Trust (“KPT”) and Premier Mercantile Services (private) Limited(“PMS”) signed the implementation agreement (the “Implementation Agreement”) for the exclusiveconstruction, development, operations and management of a common user container terminal at theKarachi Port for a period of 21 years until 2023. PMS established PICT as the terminal operatingcompany, to develop, operate and maintain the site and terminal in accordance with theImplementation Agreement. The Company, as of the date of this Offering Circular, owns 64.53% ofPICT.

The said Implementation Agreement sets forth the specific equipment and construction works to beperformed; calls for the payment of fixed and variable fees; and requires handing over of specificterminal assets at the end of the term of the Implementation Agreement. Fixed fees are in the form ofLease Payment of Handling, Marshaling and Storage charges (“HMS Charges”) at the current averagerate of PKR829 per square metre per annum in respect of the site occupied by PICT and subject to anindexation of 15% every three years in accordance with the Lease Agreement between KPT and PICT,which is an integral part of the Implementation Agreement. On the other hand, variable fees are in theform of Royalty payments at a current rate of U.S.$14.52 per Cross Berth revenue move, subject toan indexation of 5% every three years.

— 155 —

Americas

Port of Guayaquil

In May 2007, the Company, through CGSA, entered into a concession agreement with the PortAuthority of Guayaquil for the exclusive operation and development of a container terminal in the Portof Guayaquil, Ecuador for a period of 20 years ending in 2027.

CGSA took over the terminal operations on 1 August 2007. The terminal handles containerised andbulk cargo. The Company’s technical plan is to convert the port into a modern multipurpose terminal,comprehensive of two main facilities: a dedicated container terminal of capacity of about one millionTEUs; and a break bulk terminal of about three million tons (bananas are the main cargo componentin this field).

Under the concession agreement, CGSA shall pay APG the following: (i) an upfront fee totalingU.S.$30.0 million payable over five years; (ii) fixed fees of U.S.$2.1 million payable quarterly; and(iii) variable fees of U.S.$10.4 per TEU for containers handled and U.S.$0.50 per ton fornon-containerised general cargo handled payable monthly. The upfront fee, recorded as concessionrights and concession rights payable at inception, is subject to interest based on three-month LIBORrate.

The total variable port fees paid by CGSA to APG shown as part of “Port Authorities’ Share in GrossRevenues” account in the consolidated statements of income, amounted to U.S.$16.3 million in 2014,U.S.$16.5 million in 2015 and U.S.$14.4 million in 2016. Fixed fees formed part of the capitalisedconcession rights which are being amortised over the period of the concession. Related concessionrights payable amounted to U.S.$59.8 million, U.S.$57.2 million and U.S.$54.5 million as at 31December 2014, 2015 and 2016, respectively. The current portion amounting to U.S.$2.5 million,U.S.$2.8 million and U.S.$3.1 million is presented as “Current Portion of Concession Rights Payable”and the noncurrent portion amounting to U.S.$57.2 million, U.S.$54.5 million and U.S.$51.4 millionis presented as “Concession Rights Payable — Net of Current Portion” in the consolidated balancesheets as at 31 December 2014, 2015 and 2016, respectively.

Port of Suape in Pernambuco

On 2 July 2001, TSSA entered into a lease agreement with Suape for the operation and developmentof a container terminal in Port of Suape-Complexo Industrial Portuario (“Suape”), Brazil for a periodof 30 years. In consideration for the lease, TSSA agreed to pay Suape a fee in Brazilian reals (R$)consisting of three components: (i) R$8.2 million, payable within 30 days from the date of agreement;(ii) R$3.1 million, payable in monthly instalments; and (iii) an amount ranging from R$15 to R$50(depending on the type of container handled and traffic, i.e. full, empty/removal and transshipment)for each container handled, payable monthly. For the third component of the fee (which rates percontainer increases by 100 percent every ten years), if the total amount paid for containers handledin the four quarters of the year is less than the assured minimum amount for such component indicatedin the agreement, TSSA will pay the difference to Suape based on a certain formula. The lease fee issubject to readjustment annually, unless there is a change in legislation, which allows a reduction inthe frequency of readjustment, based on a certain formula contained in the agreement. Total variablefees paid to Suape, shown as part of “Port Authorities’ Share in Gross Revenues” account in theconsolidated statements of income, amounted to U.S.$18.6 million (R$43.8 million) in 2014,U.S.$14.8 million (R$49.5 million) in 2015, U.S.$16.3 million (R$56.9 million) in 2016 andU.S.$15.8 million (R$50.2 million) in the nine months ended 30 September 2017. Total fixed fees paidto Suape, also shown as part of the “Equipment and facilities-related expenses” account in theconsolidated statements of income, amounted to U.S.$4.7 million (R$11.1 million) in 2014, U.S.$3.5million (R$11.8 million) in 2015, U.S.$3.7 million (R$12.9 million) in 2016 and U.S.$3.2 million(R$10.2 million) in the nine months ended 30 September 2017.

— 156 —

Under the lease agreement, TSSA undertook to make investments in works, equipment, systems andother necessary infrastructure to develop and operate the Suape port within the agreed time frame.

Upon the expiration of the term of the contract or in the event of pre-termination, the building andother structures constructed in the port by TSSA shall become the property of Suape in addition toassets originally leased by Suape to TSSA. TSSA may remove movable goods from the containerterminal, unless the parties agree otherwise.

Minimum lease payments relating to this agreement are as follows: U.S.$6.9 million (R$22.6 million)due from 2017; U.S.$46.5 million (R$151.3 million) due from 2018 to 2021; and U.S.$189.1 million(R$615.5 million) due from 2022 onwards.

Puerto Cortés in Honduras

On 1 February 2013, the Company was awarded with a 29-year agreement by the Republic ofHonduras, acting on behalf of the Commission for the Public-Private Alliance Promotion(COALIANZA), and Banco Financiera Comercial Hondurena, S.A. (FICOHSA Bank) for the design,financing, construction, maintenance, operation and development of the container terminal andgeneral cargo of Puerto Cortés, Republic of Honduras. The agreement was signed on 21 March 2013and is valid until 30 August 2042. The Container and General Cargo Terminal of Puerto Cortés isexpected to have 1,100 meters of quay for containers and 400 meters of quay for general cargo, 14meters of draft, 62.2 hectares of total surface area and a volume capacity of approximately 1.8 millionTEUs per annum.

Pursuant to the agreement, the Company, through its wholly owned subsidiary OPC, is obliged to paycertain contributions to:

(a) Municipality of Puerto Cortés — 4% of gross income (without considering sales tax), payablemonthly;

(b) National Port Company — (i) U.S.$100,000 for each hectare of existing surfaces occupied (fromcommencement of development of the occupied spaces) and surfaces constructed in relation tothe works of the National Port Company (from their date of occupation), payable annually; (ii)U.S.$75,000 for each hectare of newly constructed and/or earned to the sea surfaces in relationto the mandatory works (from the beginning of the operation exploration of the occupiedsurfaces), payable annually; (iii) a certain amount for each import/export container movement,irrespective of whether such container is full or empty, with a right to receive reimbursementequivalent to 25% of the imposed amount; and (iv) for loads not packed in containers, (A) U.S.$1for each ton of fractioned load that is operated in the terminal, (B) U.S.$5 for each unit of rollingload that is operated in the terminal, (C) U.S.$1 for each passenger operated in the terminal; and(D) upfront payment of U.S.$25.0 million;

(c) COALIANZA — 2% of the total investment size of the project, payable upon execution theagreement; and

(d) FICOHSA Bank (as trustee) — (i) 0.37% of OPC’s annual gross income, payable monthly; and(ii) U.S.$1,584,835, payable upon execution of the agreement.

On October 29, 2015, the concession contract was amended to incorporate new agreements with thegovernment. The most important changes included a reduction in variable and fixed fees. TheAmendment provided that from the date that the OPC works begin and until the Agreement expires,a 10% reduction will be applied to the original payments related to the annual contribution to NationalPort Company per occupied hectare (existing and new built), contributions per movement of containerof importation/exportation, tons of load not packed in containers, units of rolling load and passengers.Notwithstanding that, payments will still be subject to the escalation derived from the inflationaryupdating, following the formula prescribed by the Agreement.

— 157 —

Total payments in relation to this Agreement aggregated U.S.$34.9 million, which are presented aspart of “Intangibles” account in the consolidated balance sheets.

The total variable port fees paid by OPC shown as part of “Port Authorities’ Share in Gross Revenues”account in the consolidated statements of income amounted to U.S.$9.4 million in 2014, U.S.$10.7million in 2015 and U.S.$10.9 million in 2016. Fixed fees formed part of the capitalised concessionrights which are being amortised over the period of the concession. Related concession rights payableamounted to U.S.$44.2 million, U.S.$46.2 million and U.S.$40.2 million as at 31 December 2014,2015 and 2016, respectively, and is presented as “Concession rights payable — net of current portion”in the consolidated balance sheets.

EMEA

Port of Gdynia

On 30 May 2003, the Company and the Gdynia Port Authority (the “Harbour”) signed threeagreements, namely Agreement on Commercial Cooperation, Lease Contract and Contract for Sale ofShares, which marked the completion of the privatisation of BCT. BCT owns the terminal handlingassets and an exclusive lease contract to operate the Gdynia container terminal for 20 years until 31May 2023, extendable for another specified or unspecified period, subject to mutual agreement.

Under the Agreement on Commercial Cooperation, U.S.$78.0 million is the estimated investment forterminal improvements over the life of the concession, of which C= 20.0 million is necessary within thefirst eight-year period. As at 30 September 2017, BCT invested U.S.$109.7 million ( C= 88.2 million),thus exceeding the minimum investment level required.

In the original Lease Contract signed between the Harbour and the original owners of BCT, theHarbour shall lease to BCT its land, buildings and facilities for a period of 20 years for a considerationof Polish zloty equivalent of U.S.$0.62 million per month to be paid in advance. Subsequently, twoamendments to the contract were made, reducing the monthly rent to U.S.$0.61 million and U.S.$0.55million in June 2002 and October 2013, respectively. Under the revised agreement with BCT, theHarbour further reduced the rental fee by U.S.$0.9 million (PLN2.8 million) annually effective 1January 2005. This amount has been translated into U.S. dollar using the average exchange rate of U.S.dollar effective in the National Bank of Poland as at 31 December 2004, and deducted from theexisting rental rate in U.S. dollar. Total fees paid to the Harbour pertaining to the Lease Contract,shown as part of “Equipment and facilities-related expenses” amounted to U.S.$6.5 million in 2014,U.S.$6.1 million in 2015 and U.S.$6.6 million in 2016 in the consolidated statements of income of theCompany.

Minimum lease payments relating to this agreement are as follows: U.S.$6.6 million due in 2017;U.S.$26.5 million due from 2018 to 2021; and U.S.$9.4 million due from 2022 onwards.

Port of Toamasina in Madagascar

On 16 June 2005, the Company and Societe de Gestion du Port Autonome de Toamasina (“SPAT”)signed a 20-year concession agreement for a Public Service Concession for the operation of the Portof Toamasina container terminal. Under the agreement, the Company, through MICTSL, willundertake container handling and related services in the Port of Toamasina. The Company agreed topay SPAT an entry fee of C= 5.0 million (U.S.$6.5 million) and fixed and variable fees converted toMGA using the Euro/MGA weighted exchange rate published by the Central Bank of Madagascar onthe day payment is made. Fixed fees paid in 2005 to 2007 amounted to C= 1.0 million (U.S.$1.3 million)per year; for the years 2008 to 2010, the fixed fees paid amounted to C= 1.5 million (U.S.$1.9 million)per year; for 2011 to 2015, the fixed fees paid amounted to C= 2.0 million (U.S.$2.6 million) per year;and for 2016 to 2025, fixed fees will be C= 2.5 million (U.S.$3.2 million) per year. The part of fixedfees attributable to year 2025 will be prorated up to the anniversary date of the concession handover.

— 158 —

In addition, the Company agreed to pay SPAT C= 5.0 million (U.S.$6.5 million) for two quay cranespayable in three annual installments from the date of the agreement. Annual fixed fee is payable inadvance in semi-annual installments. The variable fee of C= 36.8 (U.S.$47.7) per TEU is payable bylatest on 15th day of every following month.

The total variable fees paid to SPAT shown as part of “Port Authorities’ Share in Gross Revenues”account in the consolidated statements of income, amounted to U.S.$8.1 million ( C= 6.1 million) in2014, U.S.$6.4 million ( C= 5.8 million) in 2015 and U.S.$7.4 million ( C= 6.7 million) in 2016. Fixed feesformed part of the capitalised concession rights which are being amortised over the period of theconcession. Related concession rights payable amounted to U.S.$18.6 million ( C= 15.4 million),U.S.$16.3 million ( C= 15.0 million) and U.S.$14.8 million ( C= 14.1 million) as at 31 December 2014,2015 and 2016, respectively. The current portion amounting to U.S.$0.5 million ( C= 0.4 million),U.S.$1.0 million ( C= 0.9 million) and U.S.$1.1 million ( C= 1.0 million) is presented as “Current Portionof Concession Rights Payable” and the noncurrent portion amounting to U.S.$18.2 million ( C= 15.0million), U.S.$15.3 million ( C= 14.1 million) and U.S.$13.7 million ( C= 13.0 million) is presented as“Concession Rights Payable — Net of Current Portion” in the consolidated balance sheets as at 31December 2014, 2015 and 2016, respectively.

Performance Bonds

The existing contracts and concession agreements entered into by the subsidiaries contain certaincommitments and restrictions including the submission of performance bonds, work completionbonds, and special bonds issued by financial institutions to the relevant port authorities. These bondsare procured either directly by the Company or its subsidiaries. Bonds procured by subsidiaries mayor may not be covered by counter indemnity of the Company. The performance bonds are required toensure that the subsidiaries perform their respective payment obligations under the relevantconcession agreement. Work completion bonds are required to ensure that the subsidiaries complywith their investment commitments, and special bonds are submitted to ensure compliance with socialsecurity and labour obligations by the subsidiaries. From time to time, customs authorities require thesubmission of customs guarantee in lieu of import duties that are normally due on the importation ofcapital equipment. The customs guarantees ensure that equipment used by the subsidiary are not resoldwithin the country. The bonds typically have a maturity of one year and are rolled over annually untilthe expiry of the concession agreement, with the exception of the performance bonds procured byMICTSL which coincide with the length of the concession agreement. The bonds issued by MICTSLare covered by cash deposits, which amounted to EUR5.0 million as of 30 September 2017.

Description of U.S. Dollar-Denominated Notes

On 17 March 2010, the Company issued U.S.$250.0 million 10 year senior notes and on 29 April 2010,the Company issued a further U.S.$200.0 million senior notes (together, the “2020 Notes”). The 2020Notes bear interest at the fixed rate of 7.375% per annum payable semi-annually in arrear and are dueon 17 March 2020. The net proceeds of the 2020 Notes amounting to U.S.$448.1 million were usedto fund the Company’s investments in existing and new terminal construction activities, to refinancecertain of its existing debt and for other general corporate purposes. As of 30 September 2017, the2020 Notes have an outstanding balance of U.S.$179.2 million.

Description of Medium Term Notes

On 16 January 2013, ICTSI Treasury B.V. (“ITBV”) issued, and the Company guaranteed,U.S.$300,000,000 4.625% guaranteed notes due 2023, and on 4 February 2013, ITBV issued, and theCompany guaranteed, an additional U.S.$100,000,000 guaranteed notes as part of the same series(together, the “2023 Guaranteed Notes”). The net proceeds of U.S.$393.8 million were used forrefinancing and general working capital purposes of the Company. In June 2013, the Companypurchased a total of U.S.$6.0 million of ITBV’s U.S.$400.0 million guaranteed notes due 2023 atU.S.$5.7 million. As of 30 September 2017, the 2023 Guaranteed Notes have an outstanding balanceof U.S.$389.6 million.

— 159 —

On 17 September 2013, ITBV issued, and the Company guaranteed, U.S.$207,502,000 5.875%guaranteed notes due 2025, and on 25 April 2014, ITBV issued, and the Company guaranteed, anadditional U.S.$75,000,000 guaranteed notes as part of the same series (together, the “2025Guaranteed Notes”). The initial issuance of the 2025 Guaranteed Notes was offered in exchange forU.S.$178,885,000 (principal amount) of the Company’s 2020 Notes. The net proceeds of the secondissuance of the 2025 Guaranteed Notes, which was approximately U.S.$75.0 million, were used tofund new port projects. On 29 January 2015, ITBV issued, and the Company guaranteed, an additionalU.S.$117.5 million notes to form a single series with the 2025 Guaranteed Notes. Of this issue,U.S.$102.6 million of notes was issued in exchange for U.S.$91.8 million of the Company’s 2020Notes. As of 30 September 2017, the 2025 Guaranteed Notes have an outstanding balance ofU.S.$362.9 million.

Description of the Senior Perpetual Capital Securities

On 29 January 2015, the Issuer issued, and the Company guaranteed, U.S.$300,000,000 6.25% seniorguaranteed perpetual capital securities (the “6.25% Senior Capital Securities”). On 18 August 2015,the Issuer issued, and the Company guaranteed, U.S.$450,000,000 5.50% senior guaranteed perpetualcapital securities (the “5.50% Senior Capital Securities”). On 20 October 2016, the Issuer issued,and the Company guaranteed, U.S.$375,000,000 4.875% senior guaranteed perpetual capital securities(the “4.875% Senior Capital Securities” and, together with the 6.25% Senior Capital Securities andthe 5.50% Senior Capital Securities, the “Senior Capital Securities”). With respect to any claim onthe Senior Capital Securities (including Arrears of Distributions), such Senior Capital Securities rankpari passu with all other outstanding unsecured and unsubordinated obligations of the Issuer and theCompany, senior to Junior Securities (including the Subordinated Capital Securities) as furtherdescribed in the respective terms and conditions of such Senior Capital Securities. The Senior CapitalSecurities confer a right to receive a Distribution Payment (or Distribution) on every DistributionPayment Date as described in the respective terms and conditions of the Senior Capital Securities.These Distributions are payable semi-annually in arrears on the Distribution Payment Dates of eachyear. However, the Issuer may, at its sole and absolute discretion, prior to any Distribution PaymentDate, resolve to defer payment of all or some of the Distribution which would otherwise be payableon that Distribution Payment Date subject to exceptions enumerated in the respective terms andconditions of the Senior Capital Securities. The Senior Capital Securities are perpetual securities inrespect of which there is no fixed redemption date but the Issuer may, at its option change the statusof the Senior Capital Securities or redeem the same on instances defined under its respective termsand conditions. As of 30 September 2017, the 6.25% Senior Capital Securities, the 5.50% SeniorCapital Securities and the 4.875% Senior Capital Securities have outstanding balances of U.S.$130.3million, U.S.$252.8 million and U.S.$372.6 million, respectively.

Description of Financing Agreements

Details of certain debt facilities entered into by the Company are set out below by the borrowingentity. In addition, the Company and its subsidiaries also have financing arrangements for certainshort-term indebtedness.

CGSA

In October 2015, CGSA availed of a three-year unsecured term loan from BBP Bank, S.A. amountingto U.S.$4.0 million at a fixed interest rate of 6.78% per annum. On 29 March 2016, CGSA, theCompany and Metropolitan Bank and Trust Company entered into a two-tranche floating interest rateloan with the first tranche amounting to U.S.$32.5 million and the second tranche amounting toU.S.$7.5 million. The first tranche has a final maturity of March 2021 while the second tranchematured in May 2017. As of 30 September 2017, the outstanding balance under the term loans wasU.S.$26.8 million.

— 160 —

YICT

In July 2014, the Company acquired, through the consolidation of YICT, short and long term loanswith outstanding balances of U.S.$4.6 million (RMB28.0 million) and U.S.$39.0 million (RMB239.2million) as of 30 September 2014, respectively. The short-term loan bears a fixed interest rate of6.15% per annum and matured on 5 December 2014. It was renewed at a lower amount, RMB18.0million, up to 30 April 2015 at the same fixed rate on interest. The short-term loan was repaid in March2015. The long-term loan with Agricultural Bank of China (“ABC”), which was availed of principallyto finance the development project related to the construction of the container terminal, bears a fixedinterest rate of 6.15% per annum and matured on 7 December 2014. It was renewed at the same amountand at the fixed interest rate of 6.0%, repayable in four installments on 30 June 2015, 31 December2015, 30 June 2016 and finally on 31 December 2016. On 5 December 2016, YICT obtained aU.S.$21.6 million (RMB150.0 million) short-term loan from YPH at an interest rate of 4.35% perannum and with a maturity date of 25 January 2017. The loan was used to refinance YICT’s loan withABC. On 12 January 2017 and 1 March 2017, YICT prepaid a total amount of U.S.$3.0 million(RMB20.0 million) and the balance of U.S.$18.9 million (RMB130.0 million) was renewed at aninterest rate of 4.50% per annum, which matured on 30 April 2017. On 26 April 2017, YICT obtaineda U.S.$21.8 million (RMB150.0 million) loan from ABC payable in installments with a final maturityon 21 November 2023 to refinance the maturing loan with YPH. Interest is based on the interest ratepublished by People’s Bank of China less 5.00% of such base rate. The floating rate is subject toadjustment every twelve months. The outstanding balance of the loan amounted to U.S.$15.0 million(RMB100.0 million) as at 30 September 2017.

CMSA

On 21 October 2015, CMSA entered into a U.S.$260.0 million project finance facility withInternational Finance Corporation and Inter-American Development Bank (“IADB”). The projectfinance facility is in relation to the development and operation of a specialised container terminal atthe Port of Manzanillo in Manzanillo, Mexico (the “CMSA Project”). The financing package, whichhas a tenor of 12 years and a long availability period of four years, is expected to help CMSA financethe completion of phases one and two of the CMSA Project. Interest is payable semi-annually basedon floating interest rate computed at 6-month LIBOR plus loan spread with a weighted average of2.80%. As of 30 September 2017, the outstanding principal balance of the loan amounted toU.S.$169.1 million.

AGCT

In March 2013, AGCT signed the first part of a ten-year loan agreement for EUR6.2 million (U.S.$8.1million) with Raiffeisenbank Austria d.d. to partly finance the purchase of port equipment intended forthe Brajdica Container Terminal. The principal is repayable in 112 monthly installments commencing31 January 2014 until 30 April 2023. Interest is payable monthly based on floating interest ratecomputed at 1-month Euro Interbank Offered Rate (EURIBOR) plus a spread of 3.4%. On 22 July2013, AGCT signed the second part of the same loan agreement for EUR4.4 million (U.S.$5.6million). Principal is repayable in 120 monthly installments commencing 31 January 2014 until 31December 2023. Interest is payable monthly based on floating interest rate computed at 1-monthEURIBOR plus a spread of 3.4%. The loan is secured by AGCT’s port equipment. As of 30 September2017, the outstanding balance of the loans amounted to U.S.$7.0 million (EUR5.9 million).

VICT

On 15 July 2016, VICT entered into a syndicated project finance facility with various international andregional banks for the principal amount of U.S.$300.0 million (AUD398.0 million) with interest ratesbased on the Australian Bank Bill Swap Reference Rate (bid) (BBSY) plus average margin of 3.1%per annum and maturity dates in 2023, 2026 and 2031. In 2016, VICT availed of loans from the

— 161 —

facilities amounting to U.S.$196.9 million (AUD266.0 million) from the facility. In 2017, VICT

availed of additional loans from the facilities amounting to U.S.$42.5 million (AUD55.0 million). As

at 30 September 2017, the drawdowns and outstanding principal balance of the loans amounted to

U.S.$251.5 million (AUD321.0 million).

OPC

On 11 July 2017, OPC, the Company and Metropolitan Bank and Trust Company signed a loan

agreement amounting to U.S.$77.0 million with a floating interest rate and a maturity date of July

2020. Proceeds of the loan was used to finance capital expenditures of OPC. As at 30 September 2017,

OPC availed a total of U.S.$16.5 million from the term loan facility.

— 162 —

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The Company engages from time to time in a variety of transactions with related parties. The Companyhas conducted transactions with related parties as it would in comparable arm’s length-transactionswith a non-related party and on a basis substantially as favourable to it as would be obtainable in suchtransactions. The table below summarises the Company’s transactions with shareholders and affiliatesfor the years ended 31 December 2014, 2015 and 2016 and the nine months ended 30 September 2016and 2017.

For the Year Ended 31 December

2014 2015 2016

Audited

Related Party RelationshipNature ofTransaction Amount

OutstandingReceivable

(Payable)Balance Amount




(Payable)Balance

(In Millions)ICBVSPIA Joint venture Interest-bearing

loansU.S.$64.73 U.S.$115.12 U.S.$94.77 U.S.$209.90 U.S.$66.58 U.S.$276.48

YRDICTLYPH Non-controlling

shareholderPort fees 1.46 — 1.10 — 1.77 —

Trade transaction 0.37 (0.01) 0.09 (0.01) — —Management fees — — 0.23 — 0.22 —Interest-bearingloans

— — — — 21.60 (21.60)

Interests on loans — — — — 0.07 (0.03)YPG Common

shareholderPort fees 3.02 (0.77) 3.72 (0.29) 2.36 (0.14)

Trade transaction 1.80 (0.13) 2.09 (0.32) 1.87 (0.02)Purchase ofequipment

— — 2.58 — — —

DP World Non-controllingshareholder

Management fees — — 0.19 — 0.17 —

TecplataNuevos Puertos Purchase of

additional shares6.00 — — — — —

SCIPSIAsian Terminals,

Inc.Non-controllingshareholder

Management fees 0.17 (0.01) 0.16 (0.02) 0.20 (0.03)

AGCTLuka Rijeka Non-controlling

shareholderProvision ofservices

0.27 — 0.29 (0.03) 0.37 (0.02)

PICTPremier

MercantileServices(Private)Limited

Commonshareholder

Stevedoring andstorage charges

3.62 (0.68) 4.47 (0.52) 5.17 (0.03)

Premier Software(Private)Limited

Commonshareholder

Softwaremaintenance

0.01 — 0.01 — 0.01 —

Marine Services(Private)Limited,PortlinkInternational(Private)Limited, andAMI Pakistan(Private)Limited

Commonshareholder

Containerhandling revenue

0.81 0.08 0.57 0.04 0.52 0.03

LGICTNCT Transaction

Corp.Non-controllingshareholder

Management fees — — 0.16 (0.16) 0.41 (0.04)

Maintenance andrepairs

— — 0.04 (0.04) 0.09 (0.02)

BIPIAltantic Gulf and

Pacific Co. ofManila, Inc.

Commonshareholder

Rent expense 0.06 — 0.07 (0.01) 0.05 (0.02)

Revenues 2.09 0.03 0.42 0.25 — —Utilities — — — — 0.03 —

— 163 —

Transaction Amount forthe Six Months

Ended\E30 JuneOutstanding Receivable(Payable) Balance as of

Related Party RelationshipNature ofTransaction 2016 2017

31December

2016

30September

2017

(In Millions)

ICBV

SPIA Joint venture Interest-bearingloans

U.S.$50.17 U.S.$ 38.6 U.S.$276.48 U.S.$315.08

YRDICTL

YPG Commonshareholder

Port fees 1.90 2.17 (0.14) (0.48)

Tradetransaction

1.37 1.20 (0.02) (0.03)

YPH Non-controllingshareholder

Port fees 1.18 0.96 — —

Tradetransaction

0.19 0.19 — —

Managementfees

0.17 0.16 — —

Interest-bearingloans

— — (21.60) —

Interests onloans

— — (0.03) —


Managementfees

0.13 0.13 — —

SCIPSI

Asian Terminals, Inc. Non-controllingshareholder

Managementfees

0.14 0.12 (0.03) (0.01)

AGCT

Luka Rijeka Non-controllingshareholder

Provision ofservices

0.28 0.18 (0.02) (0.01)

PICT

Premier MercantileServices (Private)Limited

Commonshareholder

Stevedoring andstorage charges

3.95 4.30 (0.03) (0.01)

Containerhandlingrevenue

— 0.03 — 0.01

Marine Services (Private)Limited, PortlinkInternational (Private)Limited, and AMIPakistan (Private)Limited

Commonshareholder

Containerhandlingrevenue

0.42 0.31 0.03 0.03

Premier Software(Private) Limited

Commonshareholder

Softwaremaintenancecharges

0.01 — — —

LGICT

NCT Transnational Corp. Non-controllingshareholder

Managementfees

0.35 0.31 (0.04) (0.05)

Maintenance andrepairs

0.08 0.10 (0.02) (0.02)

BIPI

Atlantic, Gulf and PacificCompany of ManilaInc.

Commonshareholder

Rent expense 0.05 0.05 (0.02) (0.05)

Rent income — 0.11 — —

Utilities 0.02 0.01 — —

— 164 —

Certain other related-party transactions are described below:

• The Company retains the law firm of Cruz Durian Alday & Cruz-Matters Law Office for legal

services, of which the Company’s Corporate Secretary, Mr. Rafael T. Durian, is a partner. The

Company pays fees that it believes to be reasonable for the services rendered.

• On various dates from March to April 2015, ICTSI Warehousing, Inc., a subsidiary of the

Company, bought a total of 703,980 shares of the Company. As of 30 September 2017, ICTSI

Warehousing, Inc. owns an aggregate of 734,970 shares of the Company, representing 0.03% of

the Company’s total outstanding shares.

Aside from the transactions described above, the Company does not have any other transactions with

its directors, executive officers, security holders or members of their immediate family. Certain

directors and executive officers of the Company also serve as executive officers of companies with

which the Company does business. None of the Directors or executive officers has or had any interest

in any of the Company’s business transactions that are or were unusual in their nature or conditions

or significant to the Company’s business. For further details regarding certain related party

transactions, see Note 23 of the Company’s audited consolidated financial statements as of and for the

years ended 31 December 2014, 2015 and 2016 and Note 16 of the Company’s unaudited, interim

condensed consolidated financial statements as of 30 September 2017 and for the nine months ended

30 September 2016 and 2017.

— 165 —

SUBSTANTIAL SHAREHOLDERS’ AND DIRECTORS’ INTERESTS

As of 30 September 2017, the Company had 2,734,099,497 shares outstanding (net of 11,078,174treasury shares). The shareholdings of the Company’s directors, substantial shareholders and officersand affiliates (both direct and indirect) as of 30 September 2017 are set out in the table below. Tableincludes the shareholdings of substantial shareholders as filed publicly with the PSE and to the bestof the Company’s knowledge.

As of 30 September 2017

Relationship to the CompanyNumber of

Shares Held

Percentage ofIssued and

OutstandingShares

Directors:Enrique K. Razon Jr.(1) ........... Chairman and President 1,678,105,057 61.377%Andres Soriano III .................. Director 8,150,481 0.298%Stephen A. Paradies ................ Director 4,087,573 0.150%Jose C. Ibazeta ....................... Director 2,800,310 0.102%Octavio Victor R. Espiritu ...... Director (Independent) 300,000 0.011%Joseph R. Higdon ................... Director (Independent) 156,000 0.006%Jon Ramon M. Aboitiz ............ Director 135,000 0.005%

Officers:Martin L. O’Neil .................... Executive Vice President 683,635 0.025%Silverio Benny J. Tan ............. Assistant Corporate Secretary 756,310 0.028%

Vivien F. Minana ....................Vice President — SeniorAdministration Officer 165,925 0.006%

Jose Joel M. Sebastian............ Senior Vice President, Finance 49,997 0.002%Rafael T. Durian ..................... Corporate Secretary 1,000 0.000%

Rafael D. Consing, Jr .............Senior Vice President, ChiefFinancial Officer 3 0.000%

Berlin D. Samonte .................. Data Protection Officer 2,836 0.000%Public Shareholders(2) .............. 1,037,970,400 37.964%

Total.......................................... 2,734,099,497 100.000%Treasury Shares(3) ...................... 11,078,174

Notes:

(1) As of 30 September 2017, Mr. Razon beneficially owned 1,678,105,057 shares through Bravo International Port Holdings,Inc., Razon Group Shareholdings, Inc., Achillion Holdings Inc. (Preferred B Shares) and other corporations controlled byhimself and his immediate family, which owned 503,307,699 shares, 217,634,033 shares, 700,000,000 Preferred B sharesand 257,163,325 shares, respectively.

(2) This category comprises public shareholders holding shares listed on the PSE as of 30 September 2017. Most of theseshares are lodged with PCD Nominee Corporation (Non-Filipino) and PCD Nominee Corporation (Filipino) as custodianof shares which are traded through the scripless trading system of the PSE.

(3) Treasury shares are excluded from the definition of “outstanding capital stock” under Section 137 of the Philippine

Corporation Code.

Except as disclosed above, there are no other relationships between the Company’s directors and itssubstantial shareholders.

Except as disclosed above, the Company is not directly or indirectly owned or controlled by anothercorporation, any government or other natural or legal person, whether severally or jointly. There is noknown arrangement, the operation of which may, at a subsequent date, result in a change in the controlof the Company.

— 166 —

FOREIGN EXCHANGE AND FOREIGN INVESTMENT REGULATIONS

Foreign Exchange Regulations

Since 1992, the foreign exchange rules and regulations of the BSP have been liberalised. Under

present regulations, as a general rule, foreign exchange may be freely sold and purchased outside the

Philippine banking system. If foreign loans are to be serviced with foreign exchange purchased from

the Philippine banking system, the proceeds of such loans intended to fund local costs should be

inwardly remitted and sold within the Philippine banking system or deposited in foreign currency

deposit units or offshore accounts. However, amounts intended to finance foreign exchange costs

should not be inwardly remitted, but may either be paid directly to the supplier/beneficiary concerned

or deposited in an offshore account. The Manual of Regulations on Foreign Exchange Transactions

provides, inter alia, that the foreign exchange payment obligations on only those private sector foreign

currency loans which have been duly approved by and registered with the BSP may use foreign

exchange purchased from within the Philippine banking system.

In addition, guarantees or similar arrangements which may give rise to actual foreign currency

obligations require prior BSP approval to be eligible for servicing using foreign exchange purchased

from within the Philippine banking system.

For purposes of the foregoing, the Philippine banking system comprises banks operating under

Philippine banking laws (principal of which is the General Banking Law of 2000, Republic Act No.

8791) and subsidiaries or affiliates of Philippine banks organised as foreign exchange corporations

which buy, own or sell foreign exchange. The Philippine foreign exchange market outside the

Philippine banking system comprises the market made by various entities, such as Philippine

corporations with foreign currency revenues, non-Philippine banks and individuals and other non-bank

entities owning foreign exchange or deposits in FCDUs.

Registration of Foreign Loans and Foreign Investments

Approval from the BSP for the issuance and guarantee of offshore borrowings is not required.

However, as described above, receiving such approval and registration will allow a borrower or

guarantor to access the Philippine banking system to obtain U.S. dollars to service such debt or

guarantee obligations rather than other sources of U.S. dollars such as the non-banking system or

foreign currency revenue streams. The Company has not sought the approval of, or registered the issue

of the Securities Guarantee with, the BSP as it considers it will have sufficient U.S. dollars to pay

interest and principal (if any) on the Securities pursuant to the Securities Guarantee without having

to access the Philippine banking system. See “Risk Factors —Risks Relating to the Securities —The

Company has not obtained BSP approval for the Securities Guarantee”.

— 167 —

TAXATION

The statements herein regarding taxation are based on the laws in force as of the date of this OfferingCircular and are subject to any changes in law occurring after such date, which changes could bemade on a retroactive basis. The following summary does not purport to be a comprehensivedescription of all of the tax considerations that may be relevant to a decision to purchase, own ordispose of the Securities and does not purport to deal with the tax consequences applicable to allcategories of investors, some of which (such as dealers in securities or commodities) may be subjectto special rules. Prospective purchasers of Securities are advised to consult their own tax advisersconcerning the overall tax consequences of their ownership of Securities.

Philippine Taxation

As used in this section, the term “non-resident alien” means an individual whose residence is notwithin the Philippines and who is not a citizen of the Philippines. A non-resident alien who is actuallywithin the Philippines for an aggregate period of more than 180 days during any calendar year isconsidered a “non-resident alien doing business in the Philippines”. However, a non-resident alienwho is actually within the Philippines for an aggregate period of 180 days or less during any calendaryear may be considered a “non-resident alien not engaged in trade or business within the Philippines”.A “non-resident foreign corporation” is a foreign corporation that is not engaged in trade or businesswithin the Philippines. The term “non-Philippine holders” refers to beneficial owners of the Securitieswho are (1) non-resident aliens not engaged in trade or business within the Philippines or (2)non-resident foreign corporations.

Documentary Stamp Tax

No documentary stamp tax is imposed upon the issuance of the Securities, as the Issuer is anon-resident foreign corporation and the issuance of the Securities takes place outside the Philippines.

No documentary stamp tax is imposed on the subsequent sale or disposition of the Securities, tradingof the Securities in a secondary market or through an exchange.

Repayment of the Principal on the Securities

The Issuer’s payment of the principal on the Securities to a non-Philippine holder will not subject suchnon-Philippine holder to taxation in the Philippines by reason solely of the holding of the Securitiesor the receipt of principal.

Distributions on the Securities

Under the National Internal Revenue Code of 1997, as amended (the “Tax Code”), alien individualsand foreign corporations are subject to Philippine income tax on Philippine-sourced income only. Itfurther provides that interest income derived from bonds, notes or other interest-bearing obligationsof Philippine residents is Philippine-source income subject to Philippine income tax. As the Securitieswill be issued by the Issuer which is a non-resident foreign corporation, distributions on the Securitiesreceived by non-resident holders from the Issuer should not be subject to Philippine income tax oninterest.

Sale or Other Disposition of the Securities

Under Section 32(B)(7)(g) of the Tax Code, gains realised from the sale, exchange or retirement ofbonds, debentures and other certificates of indebtedness with an original maturity date of more thanfive years (as measured from the date of issuance of such bonds, debentures or other certificates ofindebtedness) (“Long Term Bonds”) are exempt from income tax. The Philippine Bureau of Internal

— 168 —

Revenue (“BIR”), however, has not had the occasion to confirm whether perpetual securities such as

the Securities constitute Long Term Bonds for purposes of such exemption. In any case, any gain from

the sale or exchange of the Securities is not subject to Philippine income tax if the sale or exchange

of the Securities by a non-resident holder takes place outside the Philippines.

Provided the Securities are not construed by the BIR as Long Term Bonds, the gross income of a

non-Philippine holder from the sale or exchange of the Securities within the Philippines will be

subject to Philippine income tax at the following tax rates: (1) 25.0% final withholding tax for sellers

who are non-resident aliens not engaged in trade or business in the Philippines; and (2) 30.0% final

withholding tax for sellers which are non-resident foreign corporations. If the Securities are sold by

a seller who is an individual and who is not a dealer in securities and who has held the Securities for

a period of more than 12 months prior to the sale, only 50.0% of any capital gain will be recognised

and included in the seller’s gross taxable income.

Finally, any gain of a non-resident holder arising from the sale of Securities within the Philippines,

regardless of the original maturity date of the bonds, may be exempt from Philippine income tax under

an applicable income tax treaty between the Philippines and the country of domicile or residence of

the non-resident holder, provided that the BIR has issued a ruling confirming the entitlement of the

non-resident holder to tax treaty benefits pursuant to an application for tax treaty relief filed by the

non-resident holder in accordance with the procedures prescribed by the BIR for the availment of tax

treaty benefits.

Estate and Donor’s Tax

As the Securities are issued by a corporation organised outside the Philippines, they should not be

deemed to have a Philippine situs. Having no Philippine situs, the transfer of the Securities (1) to the

estate or heirs of a deceased non-resident alien holder should not be subject to Philippine estate taxes

and (2) by way of donation should not be subject to Philippine donor’s taxes.

However, the following obligations of a foreign corporation are deemed to have a Philippine situs and

are subject to Philippine estate or donor’s gift taxes upon their transfer: (1) obligations of a foreign

corporation, 85% of the business of which is located in the Philippines, and (2) obligations issued by

a foreign corporation, if such obligation has acquired a business situs in the Philippines. The

Securities may acquire a Philippine situs if the foregoing requisites become applicable to the Issuer

or the Securities.

The transfer by a deceased Philippine resident to his heirs of the Securities shall be subject to an estate

tax which is levied on the net estate of the deceased at the rate of 6.0%. A Securityholder who is a

Philippine resident and who shall transfer the Securities by donation shall be subject to donor’s tax

at the rate of 6% based on the total gifts in excess of the P=250,000.00 exempt gift made during the

calendar year.

The estate or donor’s taxes payable in the Philippines may be credited with the amount of any estate

or donor’s taxes imposed by the authority of a foreign country, subject to limitations on the amount

to be credited, and the tax status of the donor. The estate tax and the donor’s tax, in respect of the

Securities, shall not be collected (1) if the deceased, at the time of death, or the donor, at the time of

the donation, was a citizen and resident of a foreign country which, at the time of his death or

donation, did not impose a transfer tax of any character in respect of intangible personal property of

citizens of the Philippines not residing in that foreign country; or (2) if the laws of the foreign country

— 169 —

of which the deceased or donor was a citizen and resident, at the time of his death or donation, allowsa similar exemption from transfer or death taxes of every character or description in respect ofintangible personal property owned by citizens of the Philippines not residing in the foreign country.

In case the Securities are transferred for less than an adequate and full consideration in money ormoney’s worth, and the transfer is not made in the ordinary course of business (i.e., not pursuant toa bona fide transaction), the amount by which the fair market value of the Securities exceeded thevalue of the consideration may be deemed a gift and donor’s taxes may be imposed on the transferorof the Securities, subject to the qualifications discussed above.

Netherlands Taxation

The Issuer has been advised that under existing Netherlands tax law, subject to any change in law,possibly with retrospective effect, the following treatment will apply to the Securities.

Withholding Tax

All payments under the Securities can be made free of withholding or deduction for or on account ofany taxes of whatsoever nature imposed, levied, withheld or assessed by the Netherlands or anypolitical subdivision or taxing authority thereof or therein, provided that the Securities do not actuallyfunction as equity of the Issuer within the meaning of article 10, paragraph 1, under d of the DutchCorporate Income Tax Act 1969 (Wet op de Vennootschapsbelasting 1969).

Personal and Corporate Income Tax

A holder will not be subject to any Netherlands taxation on income or capital gains in respect of anypayment under the Securities or in respect of any gain on the disposal or deemed disposal orredemption of a Security, provided that:

(i) The holder is neither resident nor deemed resident in the Netherlands for Netherlands taxpurposes; and

(ii) the holder is not a qualifying non-resident taxpayer (kwalificerende buitenlandsebelastingplichtige) as defined in the Netherlands Income Tax Act 2001 (Wet op deinkomstenbelasting 2001) who is treated as a resident of the Netherlands for Netherlands taxpurposes; and

(iii) the holder does not have an enterprise or an interest in an enterprise which is, in whole or in part,carry on through a permanent establishment or a permanent representative in the Netherlands andto which enterprise or part of an enterprise the Securities are attributable; and

(iv) the holder is not an individual who derives any income or gain from the Securities which incomeor gain otherwise qualifies as income from miscellaneous activities (belastbaar resultaat uitoverige werkzaamheden) in the Netherlands as defined in the Netherlands Income Tax Act 2001(Wet Inkomstenbelasting 2001); and

(v) the holder is not an individual who has a substantial interest or a deemed substantial interest inthe Issuer; and

(vi) the holder is not a corporate entity who has a substantial interest or a deemed substantial interestin the Issuer or, if such a Holder does have such an interest, it forms part of the assets of anenterprise.

— 170 —

Generally, a holder will have a substantial interest if he, or his partner (“partner”) holds, alone ortogether, whether directly or indirectly, the ownership of, or certain other rights over, sharesrepresenting five per cent or more of the total issued and outstanding capital (or the issued andoutstanding capital of any class of shares) of the Issuer, or rights to directly or indirectly acquireshares, whether or not already issued, that represent at any time (and from time to time) five per centor more of the total issued and outstanding capital (or the issued and outstanding capital of any classof shares) of the Issuer or the ownership of certain profit participating certificates that relate to fiveper cent or more of the annual profit of the Issuer and/or to five per cent or more of the liquidationproceeds of the Issuer. A substantial interest is also present if a holder of Securities does not, but his,or his partner’s children (including foster children), certain other relatives or certain persons sharinghis household do have a substantial interest in the Issuer. A deemed substantial interest is present if(part of) a substantial interest has been disposed of, or is deemed to have been disposed of, on anon-recognition basis.

Gift, Estate and Inheritance Tax

Netherlands gift, estate or inheritance taxes will not be levied on the occasion of the acquisition ofa Security by way of gift by, or on the death of, a holder unless:

(i) The holder is, or is deemed to be, resident of the Netherlands for the purpose of the relevantprovisions; or

(ii) the holder at the time of the gift has, or at the time of his death had an enterprise that is or was,in whole or in part, carried on through a permanent establishment or a permanent representativein the Netherlands and to which enterprise or part of an enterprise the Securities are or wereattributable; or

(iii) in the case of gift of a Security by any individual who, at the date of gift, was not a residentdeemed resident in the Netherlands, such individual dies within 180 days after the date of gift,while being resident or deemed resident in the Netherlands.

VAT

There is no Netherlands value added or turnover tax payable in respect of the payment by the holderin consideration for the issue of the Securities, in respect of any payment by the Issuer of distributionsor principal under the Securities, or the transfer of the Securities, or by the Company under theSecurities Guarantee.

Other Taxes and Duties

There is no Netherlands registration tax, stamp duty or any other similar tax or duty payable in theNetherlands in respect of the performance by the Issuer or the Company of their obligations under theSecurities or under the Securities Guarantee.

Subject to the exceptions of the “Income tax” section above, a holder will not become resident, ordeemed resident in the Netherlands, or become subject to taxation in the Netherlands by reason onlyor the holding of a Security or the execution, delivery and/or enforcement of the Securities orperformance by the Issuer or the Company of their obligations thereunder or under the Securities orunder the Securities Guarantee, respectively.

U.S. Foreign Account Tax Compliance Withholding

Certain provisions of the United States Internal Revenue Code of 1986 (the “Code”) and applicableU.S. Treasury regulations implementing these provisions (commonly referred to as “FATCA”) mayimpose a 30% withholding tax on “foreign passthru payments” made by a “foreign financialinstitution” (an “FFI”) made on or after 1 January 2019 or six months after final U.S. Treasury

— 171 —

regulations defining the term “foreign passthru payment” are filed with the Federal Register. Under

current guidance, the term “foreign passthru payment” is not defined and it is therefore not clear

whether or to what extent payments on the Securities would be considered foreign passthru payments

if we were considered to be an FFI. The United States has entered into an intergovernmental agreement

with the Netherlands (the “IGA”) which potentially modifies the FATCA withholding regime,

including the definition of an FFI. Under FATAC and the IGA, we may be treated as an FFI and,

therefore, foreign passthru payments on the Securities may be subject to withholding tax under FACTA

or the IGA. Investors in the Securities should consult their tax advisors regarding the potential impact

of FATCA, the IGA and any non-U.S. legislation implementing FATCA, on their investment in the

Securities.

FATCA may affect payments made to custodians or intermediaries in the subsequent payment chain

leading to the ultimate investor if any such custodian or intermediary generally is unable to receive

payments free of FATCA withholding. It also may affect payment to any ultimate investor that is a

financial institution that is not entitled to receive payments free of withholding under FATCA, or an

ultimate investor that fails to provide its broker (or other custodian or intermediary from which it

receives payment) with any information, forms, other documentation or consents that may be

necessary for the payments to be made free of FATCA withholding. The Issuer’s obligations under the

Securities are discharged once it has paid the common depositary or common safekeeper for the

clearing systems and the Issuer has therefore no responsibility for any amount thereafter transmitted

through the clearing systems and custodians or intermediaries.

— 172 —

CLEARANCE AND SETTLEMENT OF THE SECURITIES

The information set out below is subject to any change in or reinterpretation of the rules, regulationsand procedures of Euroclear and Clearstream, Luxembourg (together, the “Clearing Systems”)currently in effect. The information in this section concerning the Clearing Systems has been obtainedfrom sources that the Issuer believes to be reliable, but neither the Issuer, the Company, nor anyManager takes any responsibility for the accuracy of this section. Investors wishing to use thefacilities of any of the Clearing Systems are advised to confirm the continued applicability of the rules,regulations and procedures of the relevant Clearing System. None of the Issuer, the Company or anyother party to the Agency Agreement will have any responsibility or liability for any aspect of therecords relating to, or payments made on account of, beneficial ownership interests in the Securityheld through the facilities of any Clearing System or for maintaining, supervising or reviewing anyrecords relating to such beneficial ownership interests. Custodial and depositary links have beenestablished with Euroclear and Clearstream, Luxembourg to facilitate the initial issue of theSecurities and transfers of the Securities associated with secondary market trading.

THE CLEARING SYSTEMS

Euroclear and Clearstream, Luxembourg

Euroclear and Clearstream, Luxembourg each hold securities for participating organisations andfacilitates the clearance and settlement of securities transactions between their respective participantsthrough electronic book-entry of changes in the accounts of their participants. Euroclear andClearstream, Luxembourg provide their respective participants with, among other things, services forsafekeeping, administration, clearance and settlement of internationally traded securities andsecurities lending and borrowing. Euroclear and Clearstream, Luxembourg participants are financialinstitutions throughout the world, including underwriters, securities brokers and dealers, banks, trustcompanies, clearing corporations and certain other organisations. Indirect access to Euroclear orClearstream, Luxembourg is also available to others, such as banks, brokers, dealers and trustcompanies that clear through or maintain a custodial relationship with a Euroclear or Clearstream,Luxembourg participant, either directly or indirectly.

Distributions of principal with respect to book-entry interests in the Securities held through Euroclearor Clearstream, Luxembourg will be credited, to the extent received by the Principal Paying Agent,to the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with therelevant system’s rules and procedures.

Registration and Form

Book-entry interests in the Securities held through Euroclear and Clearstream, Luxembourg will beevidenced by the Global Certificate, registered in the name of nominee of the common depositary ofEuroclear and Clearstream, Luxembourg. The Global Certificate will be held by a common depositaryfor Euroclear and Clearstream, Luxembourg. Beneficial ownership in Securities will be held throughfinancial institutions as direct and indirect participants in Euroclear and Clearstream, Luxembourg.

The aggregate holdings of book-entry interests in the Securities in Euroclear and Clearstream,Luxembourg will be reflected in the book-entry accounts of each such institution. Euroclear andClearstream, Luxembourg, as the case may be, and every other intermediate holders in the chain to thebeneficial owner of book-entry interests in the Securities, will be responsible for establishing andmaintaining accounts for their participants and customers having interests in the book-entry interestin the Securities. The Registrar will be responsible for maintaining a record of the aggregate holdingsof Securities registered in the name of a common nominee for Euroclear and Clearstream, Luxembourgand/or if individual Certificates are issued in the limited circumstances described under “The Global

— 173 —

Certificate — Registration of Title”, holders of Securities represented by those individual Certificates.

The Principal Paying Agent will be responsible for ensuring that payments received by it from the

Issuer for holders of interests in the Securities holding through Euroclear and Clearstream,

Luxembourg are credited to Euroclear or Clearstream, Luxembourg, as the case may be.

The Issuer will not impose any fees in respect to the Securities; however, holders of book-entry

interest in the Securities may incur fees normally payable in respect of the maintenance and operation

of accounts in Euroclear and Clearstream, Luxembourg.

CLEARANCE AND SETTLEMENT PROCEDURES

Initial Settlement

Upon their original issue, the Securities will be in global form represented by the Global Certificate.

Interests in the Securities will be in uncertificated book-entry form. Purchasers electing to hold

book-entry interests in the Securities through Euroclear and Clearstream, Luxembourg accounts will

follow the settlement procedures applicable to conventional eurobonds. Book-entry interests in the

Securities will be credited to Euroclear and Clearstream, Luxembourg participants’ securities

clearance accounts on the business day following the Closing Date against payment (for value the

Closing Date).

Secondary Market Trading

Secondary market sales of book-entry interests in the Securities held through Euroclear or

Clearstream, Luxembourg to purchasers of book-entry interests in the Securities through Euroclear or

Clearstream, Luxembourg will be conducted in accordance with the normal rules and operating

procedures of Euroclear and Clearstream, Luxembourg and will be settled using the procedures

applicable to conventional participants.

GENERAL

Although the foregoing sets out the procedures of Euroclear and Clearstream, Luxembourg in order

to facilitate the transfers of interests in the Securities among participants of Euroclear and

Clearstream, Luxembourg, none of Euroclear and Clearstream, Luxembourg is under any obligation to

perform or continue to perform such procedures and such procedures may be discontinued at any time.

Neither of the Issuer, the Company nor any of their agents will have any responsibility for the

performance by Euroclear or Clearstream, Luxembourg or their respective participants of their

respective obligations under the rules and procedures governing their operations.

— 174 —

SUBSCRIPTION AND SALE

The Issuer and the Company have entered into a subscription agreement with the Joint Lead Managersdated 10 January 2018 (the “Subscription Agreement”), pursuant to which and subject to certainconditions contained therein, the Issuer agreed to sell to the Joint Lead Managers, and the Joint LeadManagers agreed to severally but not jointly subscribe and pay for, or to procure subscribers tosubscribe and pay for, the aggregate principal amount of the Securities.

The Subscription Agreement provides that each of the Issuer and the Company will indemnify the JointLead Managers against certain liabilities in connection with the offer and sale of the Securities. TheSubscription Agreement provides that the obligations of the Joint Lead Managers are subject to certainconditions precedent, and entitles the Joint Lead Managers to terminate it in certain circumstancesprior to payment being made to the Issuer.

The Joint Lead Managers and their affiliates are full service financial institutions engaged in variousactivities which may include securities trading, commercial and investment banking, financial advice,investment management, principal investment, hedging, financing and brokerage activities. The JointLead Managers and certain affiliates may have performed, and may in the future perform, certaininvestment banking and advisory services for the Company and/or its affiliates from time to time forwhich they have received customary fees and expenses and may, from time to time, engage intransactions with and perform services for the Company and/or its affiliates in the ordinary course oftheir business.

The Joint Lead Managers or certain affiliates may purchase the Securities and be allocated theSecurities for asset management and/or proprietary purposes but not with a view to distribution. TheIssuer or the Joint Lead Managers expect to pay commissions to certain third parties (including,without limitation, commission or rebate to private banks).

The Joint Lead Managers or their respective affiliates may purchase the Securities for its or their ownaccount and enter into transactions, including credit derivatives, such as asset swaps, repackaging andcredit default swaps relating to the Securities and/or other securities of the Issuer, the Company or theCompany’s subsidiaries or associates at the same time as the offer and sale of the Securities or insecondary market transactions. Such transactions would be carried out as bilateral trades with selectedcounterparties and separately from any existing sale or resale of the Securities to which this OfferingCircular relates (notwithstanding that such selected counterparties may also be purchasers of theSecurities).

The distribution of this Offering Circular or any offering material and the offering, sale or deliveryof the Securities is restricted by law in certain jurisdictions. Therefore, persons who may come intopossession of this Offering Circular or any offering material are advised to consult with their ownlegal advisers as to what restrictions may be applicable to them and to observe such restrictions. ThisOffering Circular may not be used for the purpose of an offer or invitation in any circumstances inwhich such offer or invitation is not authorised. If a jurisdiction requires that the offering be made bya licensed broker or dealer and the Joint Lead Managers or any affiliate of the Joint Lead Managersis a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by that JointLead Manager or its affiliate on behalf of the Issuer in such jurisdiction.

United States

The Securities have not been and will not be registered under the Securities Act and may not be offeredor sold within the United States except pursuant to an exemption from, or in a transaction not subjectto, the registration requirements of the Securities Act. Each Joint Lead Manager has represented andwarranted that it has not offered or sold, and has agreed that it will not offer or sell, any Securitiesconstituting part of its allotment within the United States except in accordance with Rule 903 ofRegulation S under the Securities Act. Accordingly, neither it nor its affiliates or any persons actingon its or their behalf have engaged or will engage in any directed selling efforts with respect to the

— 175 —

Securities. Each Joint Lead Manager has represented that it has not entered and has agreed that it willnot enter into any contractual arrangement with any distributor (as that term is defined in RegulationS) with respect to the distribution or delivery of the Securities, except with its affiliates or with theprior written consent of the Issuer.

Terms used in this paragraph have the meanings given to them by Regulation S.

United Kingdom

Each Joint Lead Manager has represented and agreed that:

(1) it has only communicated or caused to be communicated and will only communicate or cause tobe communicated any invitation or inducement to engage in investment activity (within themeaning of Section 21 of the Financial Services and Markets Act 2000, as amended including bythe Financial Services Act 2012 (the “FSA”) (the “FSMA”)) received by it in connection withthe issue or sale of any Securities in circumstances in which Section 21(1) of the FSMA does notapply to the Issuer or the Company; and

(2) it has complied and will comply with all applicable provisions of the FSMA and Sections 89 and90 of the FSA with respect to anything done by it in relation to the Securities in, from orotherwise involving the United Kingdom.

European Economic Area

Each Joint Lead Manager has represented and agreed that it has not offered, sold or otherwise madeavailable and will not offer, sell or otherwise make available any Securities which are the subject ofthe offering contemplated by this Offering Circular in relation thereto to any retail investor in theEuropean Economic Area.

For the purposes of this provision, the expression “retail investor” means a person who is one (ormore) of the following:

(a) a retail client as defined in point (11) of Article 4(1) of MiFID II; or

(b) a customer within the meaning of Directive 2002/92/EC as amended, where that customer wouldnot qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

Hong Kong

Each Joint Lead Manager has represented and agreed that:

(i) it has not offered or sold and will not offer or sell or permit to be offered or sold in Hong Kong,by means of any document, any Securities (except for Securities which are a “structured product”as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong), other than (a)“professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of HongKong (the “SFO”) and any rules made under that Ordinance; or (b) in other circumstances whichdo not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap.32) of Hong Kong or which do not constitute an offer to the public within the meaning of thatOrdinance; and

(ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have inits possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement,invitation or document relating to the Securities, which is directed at, or the contents of which

— 176 —

are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so underthe securities laws of Hong Kong) other than with respect to Securities which are or are intendedto be disposed of only to persons outside Hong Kong or only to “professional investors” asdefined in the SFO and any rules made under that Ordinance.

Singapore

Each Joint Lead Manager has acknowledged that this Offering Circular has not been and will not beregistered as a prospectus with the Monetary Authority of Singapore. Accordingly, each Joint LeadManager has represented, warranted and agreed that it has not offered or sold any Securities or causedthe Securities to be made the subject of an invitation for subscription or purchase and will not offeror sell any Securities or cause the Securities to be made the subject of an invitation for subscriptionor purchase, and has not circulated or distributed, nor will it circulate or distribute, this OfferingCircular or any other document or material in connection with the offer or sale, or invitation forsubscription or purchase, of the Securities, whether directly or indirectly, to any person in Singaporeother than (i) to an institutional investor pursuant to Section 274 of the Securities and Futures Act,Cap 289 of Singapore (the “SFA”), (ii) to a relevant person under Section 275(1) of the SFA, or toany person pursuant to 275(1A) of the SFA, and in accordance with the conditions specified in Section275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any otherapplicable provision of the SFA.

Where the Securities are acquired by persons who are relevant persons specified in Section 275 of theSFA, namely:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the solebusiness of which is to hold investments and the entire share capital of which is owned by oneor more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investmentsand each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights andinterest in that trust shall not be transferred within six months after that corporation or that trust hasacquired the Securities pursuant to an offer made under Section 275 of the SFA, except:

(1) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to anyperson arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law;

(4) as specified in Section 276(7) of the SFA; or

(5) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares andDebentures) Regulations 2005 of Singapore.

Philippines

THE SECURITIES BEING OFFERED OR SOLD HAVE NOT BEEN AND WILL NOT BEREGISTERED WITH THE PHILIPPINE SECURITIES AND EXCHANGE COMMISSIONUNDER THE SECURITIES REGULATION CODE OF THE PHILIPPINES (THE “SRC”). ANYFUTURE OFFER OR SALE OF THE SECURITIES WITHIN THE PHILIPPINES IS SUBJECT

— 177 —

TO THE REGISTRATION REQUIREMENTS UNDER THE SRC UNLESS SUCH OFFER ORSALE OF THE SECURITIES IS MADE UNDER CIRCUMSTANCES IN WHICH THESECURITIES QUALIFY AS EXEMPT SECURITIES OR THE OFFER OR SALE QUALIFIESAS AN EXEMPT TRANSACTION UNDER THE SRC.

The offer or sale of the Securities in the Philippines to (a) “primary institutional lenders” pursuant to

(and subject to compliance with the conditions under) Rule 10.1.4 of the 2015 Implementing Rules and

Regulations of the SRC or (b) persons who are “qualified buyers” pursuant to Section 10.1(l) of the

SRC is exempt from registration. Each of the Joint Lead Managers has represented, warranted and

agreed that it has not and will not sell or offer for sale or distribution any Securities in the Philippines

except to either “primary institutional lenders” pursuant to (and subject to compliance with the

conditions under) Rule 10.1.4 of the 2015 Implementing Rules and Regulations of the SRC or to

“qualified buyers” pursuant to Section 10.1(1) of the SRC.

The Issuer has not obtained any confirmation of exemption from the Philippine SEC in respect of any

offer or sale of the Securities within the Philippines. Unless such confirmation of exemption in respect

of any offer or sale of the Securities is issued by the SEC, any person claiming exemption under

Section 10.1 of the SRC has the burden of proof, if challenged, of showing that it is entitled to the

exemption. The SEC may challenge such exemption anytime.

No securities sold under exempt transactions shall be offered for sale or sold to the public without

prior registration. Notwithstanding that a particular class of securities issued under the SRC is exempt

from registration, the conduct by any person in the purchase, sale, distribution, settlement and other

post-trade activities involving such securities, shall comply with the provisions of the SRC and its

implementing rules. The sale or offer for sale of a security in an exempt transaction shall not be

exempt from civil liability and related liabilities and other applicable provisions of the SRC on fraud,

among others.

General

No action has been or will be taken in any jurisdiction by the Issuer, the Company or any Joint Lead

Manager that would, or is intended to, permit a public offering of the Securities, or possession or

distribution of this Offering Circular or any other offering or publicity material relating to the

Securities, in any country or jurisdiction where action for that purpose is required.

— 178 —

GENERAL INFORMATION

(1) Clearing Systems: The Securities have been accepted for clearance through Euroclear andClearstream, Luxembourg under Common Code number 174000581. The International SecuritiesIdentification Number for the Securities is XS1740005811.

(2) Listing of Securities: Approval-in-principle has been received from the SGX-ST for the listingand quotation of the Securities on the SGX-ST. For so long as the Securities are listed on theSGX-ST and the rules of the SGX-ST so require, the Issuer shall appoint and maintain a payingagent in Singapore, where the Securities may be presented or surrendered for payment orredemption, in the event that the Global Certificate is exchanged for Certificates. In addition, anannouncement of such exchange shall be made by or on behalf of the Issuer through the SGX-STand such announcement will include all material information with respect to the delivery of theCertificates, including details of the paying agent in Singapore.

(3) Authorisations: The Issuer has obtained all necessary consents, approvals and authorisations inconnection with the issue and performance of the Securities. The Company has obtained allnecessary consents, approvals and authorisations in connection with the provision of andperformance of its obligations under the Securities Guarantee. The issue of the Securities wasauthorised by resolutions of the Board of Directors of the Issuer dated as of 10 January 2018.The provision of the Securities Guarantee was authorised by resolutions of the Board ofDirectors of the Company dated as of 5 January 2018.

(4) No Material Adverse Change: Except as disclosed in this Offering Circular, there has been nosignificant change in the financial or trading position of the Company since 30 September 2017and no material adverse change in the financial position, trading position or prospects of theCompany since 30 September 2017.

(5) Litigation: Save as disclosed in this Offering Circular, neither the Issuer nor the Company isinvolved in any litigation or arbitration proceedings which may have, or have had during the 12months preceding the date of this Offering Circular, a significant adverse effect on the financialposition or trading position of the Issuer or the Company nor is Issuer or the Company aware thatany such proceedings are pending or threatened.

(6) Available Documents: Copies of the following documents will be available for inspection fromthe Closing Date during normal business hours at the specified office of the Company at 3/FICTSI Administration Building, MICT South Access Road, Manila 1012, Philippines, so long asany of the Securities is outstanding:

(a) Articles of Incorporation;

(b) Articles of Association of the Issuer;

(c) copies of the annual reports of the Company for the years ended 31 December 2014, 2015and 2016;

(d) the Trust Deed; and

(e) the Agency Agreement.

(7) Reliance on Certificates: The Trustee may rely without liability to Securityholders on anyreport, information, confirmation or certificate from or any opinion or advice of any accountants,auditors, lawyers, valuers, auctioneers, surveyors, brokers, financial advisers, financialinstitution or any other expert, whether or not addressed to it and whether their liability inrelation thereto is limited (by its terms or by any engagement letter relating thereto or in any

— 179 —

other manner) by reference to a monetary cap, methodology or otherwise. The Trustee may

accept and shall be entitled to rely on any such report, information, confirmation, certificate,

opinion or advice, in which case such report, information, confirmation, certificate, opinion or

advice shall be binding on the Issuer, the Guarantor and the Securityholders.

(8) Auditors: The audited consolidated financial statements of the Company and its subsidiaries as

of and for years ended 31 December 2014, 2015 and 2016 and the unaudited interim condensed

consolidated financial statements of the Company and its subsidiaries as of 30 September 2017

and for the nine months ended 30 September 2016 and 2017 appearing in this Offering Circular,

have been audited and reviewed, respectively, by SyCip Gorres Velayo & Co., independent

auditors, as set forth in their reports appearing herein.

(9) Industry Consultant: The information contained in the section “Industry Overview”, including

market and industry statistical data, was provided by Drewry Shipping Consultants Limited, a

consultant firm specialising in the shipping industry. Drewry has consented to the inclusion of

data produced by it in this Offering Circular but did not prepare any data specifically for this

Offering Circular.

— 180 —

GLOSSARY

AFP ............................................. Armed Forces of the Philippines.

AGCT .......................................... Adriatic Gate Container Terminal.

Agency Agreement ....................... The agency agreement to be dated on or about 18 January2018 by and among the Issuer, the Company, the Trustee andthe Agents.

Agents ......................................... Principal Paying Agents, the Registrar and other payingagents named in the Agency Agreement.

AHI ............................................. Abbotsford Holdings, Inc.

Articles of Incorporation .............. Articles of Incorporation of the Company.

BBL............................................. Bangsamoro Basic Law.

BCT............................................. Baltic Container Terminal Ltd.

BICTL ......................................... Batumi International Container Terminal LLC.

BIFF ............................................ Bangsamoro Islamic Freedom Fighters.

BIPI ............................................. Bauan International Port, Inc.

Brazilian Real or R$ .................... The lawful currency of Brazil.

BSP ............................................. Bangko Sentral ng Pilipinas.

BSP Rate ..................................... The Philippine peso/U.S. dollar exchange rate published inthe Reference Exchange Rate Bulletin by the BSP.

CBA ............................................ Collective Bargaining Agreement.

CGSA .......................................... Contecon Guyaquil SA.

CGT............................................. Cavite Gateway Terminal.

Clearing Systems ......................... Euroclear and Clearstream, Luxembourg, together.

Clearstream, Luxembourg............. Clearstream Banking S.A.

Closing Date ................................ 18 January 2018 or such later date as may be agreed by theIssuer and the Joint Lead Managers.

CMSA.......................................... Contecon Manzanillo, S.A. de C.V.

Company...................................... International Container Terminal Services, Inc. and itsconsolidated subsidiaries, as the context requires.

DIPSSCOR .................................. Davao Integrated Port and Stevedoring Services Corp.

DOC ............................................ 2002 ASEAN-China Declaration on the Conduct of Parties inthe South China Sea.

Drewry ........................................ Drewry Shipping Consultants Ltd., a consultant firmspecialising in the shipping industry.

— 181 —

EBITDA ...................................... Earnings before interest expenses, taxes, depreciation andamortisation.

EMEA.......................................... Europe, Middle East and Africa.

Euroclear ..................................... Euroclear Bank SA/NV.

euros............................................ The lawful currency of the European Union.

FIEA............................................ The Financial Instruments and Exchange Act of Japan (LawNo. 25 of 1948, as amended).

Financial year .............................. The financial year ended 31 December.

FSMA .......................................... Financial Services and Markets Act 2000.

Global Certificate ........................ Evidence of the Securities, in registered form which will beregistered in the name of a nominee.

Government ................................. Government of the Republic of the Philippines.

Hamburg Sud ............................... Hamburg-Sudamerikanische Dampfschiffaharts.

HIPS ............................................ Hijo International Port Services, Inc.

HRC ............................................ Hijo Resources Corp.

Hutchison .................................... Hutchison Port Holdings.

ICTSI Dubai ................................ ICTSI (M.E.) DMCC.

ICTSI Iraq ................................... ICTSI (M.E.) JLT.

ICTSIML ..................................... ICTSI Mauritius Limited.

IFRIC .......................................... International Financial Reporting Interpretations Committee.

IHKL ........................................... ICTSI (Hongkong) Limited.

Intercompany Loans ..................... The loans in which the Issuer on-lends the proceeds from thesale of the Securities to the Company or the subsidiaries ofthe Company.

IOI............................................... ICTSI Oregon Inc.

Issuer ........................................... Royal Capital B.V.

ISPS Code ................................... The United Nations International Maritime Organisation’sInternational Ships and Port Facility Security Code.

ITBV ........................................... ICTSI Treasury B.V.

Japanese yen or ¥ ........................ The lawful currency of Japan.

Joint Lead Managers .................... Citigroup Global Markets Limited, Credit Suisse (HongKong) Limited and Standard Chartered Bank

LGICT ......................................... Laguna Gateway Inland Container Terminal, Inc.

LIBOR ......................................... London Interbank Offered Rate.

— 182 —

LICTSLE ..................................... Lekki International Container Terminal Services LFTZEnterprise.

Malagasy Ariary or MGA............. The lawful currency of Madagascar.

Maersk......................................... A.P. Moller-Maersk Sealand.

MICT........................................... Manila International Container Terminal.

MICT Contract ............................. Concession agreement between the Company and the PPAgoverning the operation of MICT.

MICTSI ....................................... Mindanao International Container Terminal Services Inc.

MICTSL ...................................... Madagascar International Container Terminal Services Ltd.

MILF ........................................... Moro Islamic Liberation Front.

MNLF.......................................... Moro National Liberation Front.

MOL ............................................ Mitsui O.S.K. Lines.

MSC ............................................ Mediterranean Shipping Company.

MTS ............................................ PT Makassar Terminal Services.

NICTI .......................................... Naha International Container Terminal, Inc.

NMCTS ....................................... New Muara Container Terminal Services Sdn Bhd.

OFAC .......................................... Office of Foreign Assets Control of the U.S. Department ofTreasury.

Off-vessel .................................... All the services involved in moving containers from containeryards to the gate.

OJA ............................................. PT PBM Olah Jasa Andal.

On-vessel ..................................... All work performed on board a ship. This includes the loadingand unloading of cargo, rigging gears, opening and closinghatches, securing cargo stored on board and shifting cargo toor from vessels.

PAG ............................................. Port Authority of Gdynia.

PFRS ........................................... Philippine Financial Reporting Standards.

Philippine SEC ............................ Philippine Securities and Exchange Commission.

Philippine pesos or P= ................... The lawful currency of the Republic of the Philippines.

PICT ............................................ Pakistan International Container Terminal.

Polish Zloty ................................. The lawful currency of Poland.

PPA ............................................. Philippine Ports Authority.

Principal Paying Agent................. Citibank, N.A., London Branch

PSA ............................................. PSA International Pte Ltd.

— 183 —

PSE ............................................. Philippine Stock Exchange.

PTMTS ........................................ PT Makassar Terminal Services

Registrar ...................................... Citibank, N.A., London Branch

Renminbi or RMB........................ The lawful currency of the People’s Republic of China.

SAF ............................................. Special Action Force.

SBITC ......................................... Subic Bay International Terminal Corp.

SBMA.......................................... Subic Bay Metropolitan Authority.

SCIPSI......................................... South Cotabato Integrated Port Services, Inc.

SCTP ........................................... Societe Commerciale Des Transports Et Des Ports SA.

Securities ..................................... The U.S.$350,000,000 senior guaranteed perpetual capitalsecurities issued by Royal Capital B.V. and unconditionallyand irrevocably guaranteed by International ContainerTerminal Services, Inc.

SFA ............................................. The Securities and Futures Act, Chapter 289 of Singapore.

SFO ............................................. Securities and Futures Ordinance (Cap. 571) of Hong Kong.

SGX-ST ....................................... Singapore Exchange Securities Trading Limited.

SIMOBILE................................... La Societe de Gestion Immobiliere Lengo.

SPIA ............................................ Sociedad Puerto Industrial de Aguadulce S.A.

SRC ............................................. The Securities Regulation Code of the Philippines

Subscription Agreement ............... A subscription agreement dated 10 January 2018 by andamong the Issuer, the Company and the Joint Lead Managers.

Tax Code ..................................... National Internal Revenue Code of 1997 as amended, of thePhilippines.

Tecplata ....................................... Tecplata, S.A.

TEU............................................. Twenty-foot equivalent unit.

TICT............................................ Tartous International Container Terminal jsc.

TMT ............................................ Terminal Maritima de Tuxpan, S.A. de C.V.

Trust Deed ................................... The trust deed to be dated on or about 18 January 2018 madebetween the Issuer, the Company and the Trustee.

Trustee......................................... Citicorp International Limited

TSSA ........................................... Tecon Suape, S.A.

Securities Act .............................. The U.S. Securities Act of 1933, as amended.

UNCLOS ..................................... United Nations Convention on the Law of the Sea.

— 184 —

United States or U.S .................... The United States of America, its territories and possessions,any State of the United States and the District of Columbia.

U.S.$ and U.S. dollars ................. The lawful currency of the United States of America.

YICT ........................................... Yantai International Container Terminals Limited.

YPH............................................. Yantai Port Holdings.

YRDICTL .................................... Yantai Rising Dragon International Container Terminals Ltd

— 185 —

INDEX TO FINANCIAL STATEMENTS

PAGE

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANYAS OF 30 SEPTEMBER 2017 AND FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2016AND 2017

Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Interim Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Interim Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Interim Consolidated Statements of Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Interim Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

Interim Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8

Notes to the Interim Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . F-10

AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AS OF ANDFOR THE YEARS ENDED 31 DECEMBER 2014, 2015 AND 2016

Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-35

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-40

Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-41

Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42

Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-43

Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-45

Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-47

— F-1 —

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIALSTATEMENTS

The Stockholders and the Board of DirectorsInternational Container Terminal Services, Inc.

Introduction

We have reviewed the accompanying interim condensed consolidated balance sheet of InternationalContainer Terminal Services, Inc. and Subsidiaries as at September 30, 2017 and the related interimconsolidated statements of income, statements of comprehensive income, statements of changes in equityand statements of cash flows for the nine-month periods ended September 30, 2017 and 2016, and asummary of significant accounting policies and other explanatory notes. Management is responsible forthe preparation and fair presentation of these interim condensed consolidated financial statements inaccordance with Philippine Accounting Standard (PAS) 34, Interim Financial Reporting. Ourresponsibility is to express a conclusion on this interim condensed consolidated financial statements basedon our review.

Scope of Review

We conducted our review in accordance with Philippine Standard on Review Engagements 2410, Reviewof Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interimfinancial information consists of making inquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. A review is substantially less inscope than an audit conducted in accordance with Philippine Standards on Auditing and consequentlydoes not enable us to obtain assurance that we would become aware of all significant matters that mightbe identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanyinginterim condensed consolidated financial statements are not prepared, in all material respects, inaccordance with PAS 34.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018

— F-2 —

We have audited in accordance with Philippine Standards on Auditing the consolidated balance sheet ofInternational Container Terminal Services, Inc. and Subsidiaries as at December 31, 2016, presented forcomparative purposes, on which we expressed an unqualified opinion in our report dated March 9, 2017.

SYCIP GORRES VELAYO & CO.

Arnel F. De JesusPartnerCPA Certificate No. 43285SEC Accreditation No. 0075-AR-4 (Group A),May 1, 2016, valid until May 1, 2019Tax Identification No. 152-884-385BIR Accreditation No. 08-001998-15-2015,June 26, 2015, valid until June 25, 2018PTR No. 5908688, January 3, 2017, Makati City

November 17, 2017

— F-3 —

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESUNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETAS AT SEPTEMBER 30, 2017(With Comparative Audited Figures as at December 31, 2016)(In Thousands)

December 31, 2016

(Audited)

September 30, 2017

(Unaudited)ASSETSNoncurrent AssetsIntangibles (Note 5) US$1,720,205 US$1,711,723Property and equipment (Note 6) 1,381,483 1,454,132Investment properties 6,255 5,904Investments in and advances to a joint venture and an associate (Notes 8

and 16) 293,638 306,428Deferred tax assets - net 90,572 86,883Other noncurrent assets (Notes 7 and 19) 164,964 166,243

Total Noncurrent Assets 3,657,117 3,731,313Current AssetsCash and cash equivalents (Note 9) 325,059 319,843Receivables (Note 10) 102,930 116,307Spare parts and supplies 33,525 38,200Prepaid expenses and other current assets (Note 11) 56,285 69,810Derivative assets (Note 19) 7,210 6,181

Total Current Assets 525,009 550,341US$4,182,126 US$4,281,654

EQUITY AND LIABILITIESEquity Attributable to Equity Holders of the ParentCapital stock: Preferred stock US$236 US$236 Common stock 67,330 67,330Additional paid-in capital (Note 15) 536,216 547,363Cost of shares held by subsidiaries (Note 15) (74,261) (74,261)Treasury shares (Note 15) (17,904) (15,178)Excess of acquisition cost over the carrying value of non-controlling interests (142,555) (142,555)Retained earnings (Note 15) 779,439 807,632Perpetual capital securities (Note 15) 761,341 761,341Other comprehensive loss - net (Notes 15 and 19) (285,445) (253,002)

Total equity attributable to equity holders of the parent 1,624,397 1,698,906Equity Attributable to Non-controlling Interests (Notes 1, 3 and 15) 141,683 158,800

Total Equity 1,766,080 1,857,706Noncurrent LiabilitiesLong-term debt - net of current portion (Notes 12, 16 and 19) 1,326,280 1,386,054Concession rights payable - net of current portion (Notes 5 and 19) 481,701 472,737Deferred tax liabilities - net 71,377 68,573Other noncurrent liabilities (Note 13) 90,845 111,362

Total Noncurrent Liabilities 1,970,203 2,038,726Current LiabilitiesLoans payable (Notes 12 and 16) 36,598 60,340Accounts payable and other current liabilities (Notes 13, 14 and 16) 347,709 262,537Current portion of long-term debt (Notes 12, 16 and 19) 18,486 22,430Current portion of concession rights payable (Notes 5 and 19) 8,761 10,034Income tax payable 32,314 24,983Derivative liabilities (Note 19) 1,975 4,898

Total Current Liabilities 445,843 385,222Total Liabilities 2,416,046 2,423,948

US$4,182,126 US$4,281,654

See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements.

— F-4 —

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESUNAUDITED INTERIM CONDENSED CONSOLIDATEDSTATEMENTS OF INCOMEFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017(In Thousands, Except Earnings Per Share Data)

2016 2017

INCOMEGross revenues from port operations (Notes 16 and 20) US$835,026 US$918,269Foreign exchange gain (Note 3) 3,690 5,177Interest income (Notes 8, 9 and 16) 12,962 16,490Other income (Notes 1 and 13) 7,749 20,734

859,427 960,670

EXPENSESPort authorities’ share in gross revenues (Note 16) 134,599 139,981Manpower costs (Notes 15 and 16) 144,003 152,465Equipment and facilities-related expenses (Note 16) 87,529 112,678Depreciation and amortization 109,839 129,273Administrative and other operating expenses (Note 16) 78,566 78,288Interest expense and financing charges on borrowings

(Notes 5, 6, 12 and 16) 56,608 74,942Interest expense on concession rights payable (Note 5) 27,531 24,808Equity in net loss of a joint venture (Note 8) 4,677 25,610Foreign exchange loss (Note 3) 5,493 2,635Other expenses (Notes 12 and 16) 10,230 11,971

659,075 752,651

CONSTRUCTION REVENUE (EXPENSE)Construction revenue 41,701 59,553Construction expense (41,701) (59,553)

– –

INCOME BEFORE INCOME TAX 200,352 208,019

PROVISION FOR (BENEFIT FROM) INCOMETAXCurrent 50,975 43,001Deferred (1,436) (3,117)

49,539 39,884

NET INCOME US$150,813 US$168,135

ATTRIBUTABLE TO:Equity holders of the parent US$141,920 US$149,316Non-controlling interests 8,893 18,819

US$150,813 US$168,135

Earnings Per Share (Note 17)Basic US$0.052 US$0.058Diluted 0.052 0.058


— F-5 —

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESUNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOMEFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017(In Thousands)

2016 2017

NET INCOME FOR THE PERIOD US$150,813 US$168,135

OTHER COMPREHENSIVE INCOME (LOSS)Items to be reclassified to profit or loss in subsequent periods:

Exchange differences on translation of foreign operations’ financial statements (Notes 3 and 15) 2,397 43,393Net change in unrealized mark-to-market values of

derivatives (Notes 15 and 19) (13,436) (4,010)Net unrealized mark-to-market gain (loss) on available-forsale investments (Note 15) 177 89Income tax relating to components of other comprehensive income (Notes 15 and 19) 3,999 856

Item not to be reclassified to profit or loss in subsequentperiods-Actuarial gains (losses) on defined benefit plans - net of tax 270 (912)

(6,593) 39,416

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD US$144,220 US$207,551

ATTRIBUTABLE TO:Equity holders of the parent US$138,013 US$181,759Non-controlling interests 6,207 25,792

US$144,220 US$207,551


— F-6 —

INT

ER

NA

TIO

NA

L C

ON

TA

INE

R T

ER

MIN

AL

SE

RV

ICE

S, IN

C.

AN

D S

UB

SID

IAR

IES

UN

AU

DIT

ED

INT

ER

IM C

ON

DE

NSE

D C

ON

SOL

IDA

TE

D S

TA

TE

ME

NT

S O

F C

HA

NG

ES

IN E

QU

ITY

FOR

TH

E N

INE

MO

NT

HS

EN

DE

D S

EPT

EM

BE

R 3

0, 2

016

AN

D 2

017

(In

Thou

sand

s)

Att

ribu

tabl

e to

Equ

ity H

olde

rs o

f the

Par

ent

Pref

erre

d S

tock

Com

mon

Sto

ck

Add

ition

alPa

id-in

Cap

ital

(Not

e 15

)

Pref

erre

dSh

ares

Hel

dby

a S

ubsi

diar

y(N

ote

15)

Com

mon

Shar

es H

eld

by a

Sub

sidi

ary

(Not

e 15

)

Tre

asur

y S

hare

s(N

ote

15)

Exc

ess o

f A

cqui

sitio

nC

ost o

ver

the

Car

ryin

g V

alue

of

Non

-co

ntro

lling

Inte

rest

s(N

otes

1 a

nd 1

5)

Ret

aine

dE

arni

ngs

(Not

e 15

)

Perp

etua

lC

apita

lSe

curi

ties

(Not

e 15

)

Oth

erC

ompr

e-he

nsiv

eL

oss -

net

(Not

e 15

)T

otal

Non

-co

ntro

lling

Inte

rest

s(N

ote

15)

Tot

alE

quity

Bal

ance

s at D

ecem

ber 3

1, 2

015

US$

236

US$

67,3

30

US$

534,

808

(US$

72,4

92)

(US$

1,76

9)(U

S$7,

548)

(US$

142,

555)

U

S$72

3,15

9 U

S$83

1,91

0 (U

S$25

8,63

6)U

S$1,

674,

443

US$

151,

605

U

S$1,

826,

048

Tota

l com

preh

ensiv

e in

com

e(lo

ss) f

or th

e pe

riod

––

––

––

–14

1,92

0–

(3,9

07)

138,

013

6,20

714

4,22

0Sh

are-

base

d pa

ymen

ts (N

ote

15)

––

2,29

0–

––

––

––

2,29

0–

2,29

0Is

suan

ce o

f tre

asur

y sh

ares

––

(508

)–

–50

8–

––

––

––

Acq

uisit

ion

of IC

TSI c

omm

onsh

ares

(Not

e 15

)–

––

––

(4,0

37)

––

––

(4,0

37)

–(4

,037

)C

ash

divi

dend

s (N

ote

15)

––

––

––

– (4

0,04

3)–

–(4

0,04

3)(1

0,84

5)(5

0,88

8)R

edem

ptio

n of

per

petu

al c

apita

lse

curit

ies (

Not

e 15

)–

––

––

––

(7,6

24)

(105

,241

)–

(112

,865

)–

(112

,865

)D

istrib

utio

ns o

n pe

rpet

ual c

apita

lse

curit

ies (

Not

e 15

)–

––

––

––

(21,

750)

––

(21,

750)

–(2

1,75

0)B

alan

ces a

t Sep

tem

ber 3

0, 2

016

US$

236

US$

67,3

30

US$

536,

590

(US$

72,4

92)

(US$

1,76

9)(U

S$11

,077

)(U

S$14

2,55

5)

US$

795,

662

US$

726,

669

(US$

262,

543)

US$

1,63

6,05

1U

S$14

6,96

7 U

S$1,

783,

018

Bal

ance

s at D

ecem

ber 3

1, 2

016

US$

236

US$

67,3

30U

S$53

6,21

6(U

S$72

,492

)(U

S$1,

769)

(US$

17,9

04)

(US$

142,

555)

US$

779,

439

US$

761,

341

(US$

285,

445)

US$

1,62

4,39

7U

S$14

1,68

3U

S$1,

766,

080

Tota

l com

preh

ensiv

e in

com

e fo

rth

e pe

riod

––

––

––

–14

9,31

6–

32,4

4318

1,75

925

,792

207,

551

Shar

e-ba

sed

paym

ents

(Not

e 15

)–

–2,

909

––

––

––

–2,

909

–2,

909

Issu

ance

of t

reas

ury

shar

es–

–(1

,224

)–

–1,

224

––

––

––

–A

cqui

sitio

n of

ICTS

I com

mon

shar

es (N

ote

15)

––

––

–(9

,567

)–

––

–(9

,567

)–

(9,5

67)

Cas

h di

vide

nds (

Not

e 15

)–

––

––

––

(100

,334

)–

–(1

00,3

34)

(8,6

75)

(109

,009

)Sa

le o

f tre

asur

y sh

ares

(Not

e 15

)–

–9,

462

––

11,0

69–

––

–20

,531

–20

,531

Dist

ribut

ions

on

perp

etua

l cap

ital

secu

ritie

s (N

ote

15)

––

––

––

–(2

0,78

9)–

–(2

0,78

9)–

(20,

789)

Bal

ance

s at S

epte

mbe

r 30,

201

7U

S$23

6U

S$67

,330

US$

547,

363

(US$

72,4

92)

(US$

1,76

9)(U

S$15

,178

)(U

S$14

2,55

5)U

S$80

7,63

2U

S$76

1,34

1(U

S$25

3,00

2)U

S$1,

698,

906

US$

158,

800

US$

1,85

7,70

6

See

acco

mpa

nyin

g N

otes

to U

naud

ited

Inte

rim

Con

dens

ed C

onso

lidat

ed F

inan

cial

Sta

tem

ents

.

— F-7 —

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESUNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2017(In Thousands)

2016 2017

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax US$200,352 US$208,019Adjustments for:

Depreciation and amortization 109,839 129,273Interest expense on:

Borrowings (Notes 5, 6, 12 and 16) 56,608 74,942Concession rights payable (Note 5) 27,531 24,808

Equity in net loss of a joint venture (Note 8) 4,677 25,610Write-off of costs of securing a revolving credit facility due to

cancellation (Note 12) – 3,043Share-based payments (Note 15) 2,198 2,536Loss (gain) on disposal of property and equipment (1,872) 223Interest income (Notes 8, 9 and 16) (12,962) (16,490)Unrealized foreign exchange loss (gain) 2,458 (537)Dividend income (199) (198)Unrealized mark-to-market loss on derivatives 409 –

Operating income before changes in working capital 389,039 451,229Increase in:

Receivables (3,915) (8,426)Spare parts and supplies (2,190) (5,036)Prepaid expenses and other current assets (13,751) (29,168)

Increase (decrease) in:Accounts payable and other current liabilities (842) 24,089Pension liabilities 174 1,534

Cash generated from operations 368,515 434,222Income taxes paid (45,142) (44,124)Net cash provided by operating activities 323,373 390,098

CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of:

Intangibles (Note 5) (84,278) (54,772)Property and equipment (Note 6) (205,389) (155,697)Subsidiary, net of cash acquired (Note 1) 340 –

Net proceeds from:Return of amount paid to Concessionaire (Note 1) – 12,500Sale of property and equipment 9,101 608

Interest received 2,394 3,203Dividends received 199 198Payments for concession rights (Note 5) (8,203) (10,097)Payment for pre-termination of lease agreement (Note 1) – (11,450)Increase in other noncurrent assets (10,843) (14,567)Increase in investments and advances to a joint venture (39,541) (25,175)Net cash used in investing activities (336,220) (255,249)

(Forward)

— F-8 —

2016 2017

CASH FLOWS FROM FINANCING ACTIVITIESNet proceeds from:

Long-term borrowings (Note 12) US$252,695 US$81,732Short-term borrowings (Note 12) 33,670 65,250Sale of treasury shares (Note 15) – 20,531

Payments of:Interest on borrowings and concession rights payable (Notes 5 and 12) (90,806) (108,418)Dividends (Note 15) (49,841) (107,951)Short-term borrowings (Note 12) (20,612) (41,960)Long-term borrowings (Note 12) (96,123) (40,669)Distributions on subordinated perpetual capital securities (Note 15) (21,750) (20,789)Redemption of perpetual capital securities (Note 15) (112,865) –

Acquisition of ICTSI common shares (Note 15) (4,037) (9,567)Increase (decrease) in other noncurrent liabilities (274) 13,152Net cash used in financing activities (109,943) (148,689)

EFFECT OF EXCHANGE RATE CHANGES ON CASH ANDCASH EQUIVALENTS (4,966) 8,624

NET DECREASE IN CASH AND CASH EQUIVALENTS (127,756) (5,216)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 354,482 325,059

CASH AND CASH EQUIVALENTS AT END OF PERIOD (Note 9) US$226,726 US$319,843


— F-9 —

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESNOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

1. Corporate Information

1.1 General

International Container Terminal Services, Inc. (ICTSI or the Parent Company) was incorporated inthe Philippines and registered with the Philippine Securities and Exchange Commission (SEC) onDecember 24, 1987. The registered office address of the Company is ICTSI Administration Building,MICT South Access Road, Manila. ICTSI’s common shares were listed with the Philippine StockExchange (PSE) on March 23, 1992 at an offer price of P=6.70. ICTSI has 2,034,099,497 commonshares outstanding held by 1,407 shareholders on record as atSeptember 30, 2017.

The interim condensed consolidated financial statements were authorized for issue in accordancewith a resolution of the Board of Directors (the Board) on November 17, 2017.

1.2 Port Operations

ICTSI and subsidiaries (collectively referred to as “the Group”) entered into various concessions ofport operations which include development, management, and operation of container terminals andrelated facilities around the world. As at November 17, 2017, the Group is involved in 31 terminalconcessions and port development projects in 18 countries worldwide. These are 27 operatingterminals in nine key ports, including the recent acquisition of shares in Manila North HarborPhilippines, Inc. (MNHPI), and an inland container terminal in the Philippines, two in Indonesia andone each in China, Ecuador, Brazil, Poland, Georgia, Madagascar, Croatia, Pakistan, Mexico,Honduras, Iraq, Argentina, Colombia, DR Congo and Australia; an acquisition of an existingconcession to construct and operate a port in Tuxpan, Mexico; and recently, a project to construct abarge terminal in Cavite, Philippines, and agreements to operate two international ports in Papua NewGuinea (PNG).

Concessions for port operations entered into, acquired and terminated by ICTSI and subsidiaries forthe last two years are summarized below:

River Port, Matadi, Democratic Republic of Congo. On January 23, 2014, ICTSI, through itssubsidiary, ICTSI Cooperatief U.A. (ICTSI Cooperatief), forged a business partnership with LaSociete de Gestion Immobiliere Lengo (SIMOBILE) for the establishment and formation of a jointventure company, ICTSI DR Congo S.A. (IDRC). IDRC, which is initially 60 percent-owned byICTSI Cooperatief, will build a new terminal along the river bank of the Congo River in Matadi andmanage, develop and operate the same as a container terminal, as well as provide exclusive containerhandling services and general cargo services therein. On May 19, 2015, ICTSI, through itssubsidiary, ICTSI Cooperatief, and its joint venture partner, SIMOBILE, transferred their respective8% and 2% ownership interest in IDRC to Societe Commerciale Des Transports Et Des Ports S.A.(SCTP SA). SIMOBILE transferred to its subsidiary, La Societe d’Investissement et de Placement(SIP) Sprl, its 10% ownership in IDRC. Thereafter, IDRC is owned 52% by ICTSI, 28% bySIMOBILE, 10% by SIP Sprl and 10% by SCTP SA.

Phase 1 of the facility consists of two berths that can handle 120,000 twenty-foot equivalent units(TEUs) and 350,000 metric tons. The capacity and berth length can, subject to demand, be doubled

— F-10 —

in Phase 2. Phase 1 was completed in the fourth quarter of 2016. Initial operations started in the thirdquarter of 2016 while commercial operations started in January 2017.

Umm Qasr, Iraq. ICTSI, through its wholly owned subsidiary, ICTSI (M.E.) DMCC [formerlyICTSI (M.E.) JLT] (ICTSI Dubai), and General Company for Ports of Iraq (GCPI) signed onApril 10, 2014 the Contract for the Construction and Operation of Three New Quays andManagement and Operation of Quay No. 20 (“Contract”) in the Port of Umm Qasr (“Port”) in Iraq.The Contract grants ICTSI the rights to: (a) manage and operate the existing container facility atBerth 20 of the Port for a period of 10 years, (b) build in three phases, under a build-operate-transfer(BOT) scheme, a new container and general cargo terminal in the Port for a concession period of26 years, and (c) provide container and general cargo terminal services in both components. OnMarch 1, 2016, an addendum to the Contract (“First Addendum”) was signed by the parties grantingICTSI, through ICTSI Dubai, the right to manage and operate an additional existing Quay No. 19 fora total of 13 years, with the first three years for the completion of rehabilitation works. Also, the FirstAddendum extended the original term for the management and operation of Quay No. 20 from 10 to13 years. On March 26, 2017, a second addendum to the Contract (“Second Addendum”) was signedby the parties granting ICTSI, through ICTSI Dubai, the right to manage and operate Quay No. 21 co-terminus with the Contact and the First Addendum. The Second Addendum extended the term for themanagement and operation of Quay No. 19 and 20 from 13 to 21 years.

ICTSI commenced trial operations at Berth 20 in September 2014 and full-fledged commercialoperations in November 2014. ICTSI commenced commercial operations of Berth 19 in June 2016.The rehabilitation works for Berth 21 are on-going and it is expected to operate in the last quarter of2017.

Phase 1 of the expansion project (Berth 27) under the BOT scheme has 250 meters of berth with anestimated capacity of 300,000 TEUs. The facility will have 600 meters of quay with an estimatedcapacity of 900,000 TEUs. Berth 27 was completed and fully operational in the first quarter of 2017.

On October 22, 2017, ICTSI signed an agreement with GCPI for the Phase 2 of expansiondevelopment of the Port. The Phase 2 expansion project will involve development of two new berths,Berths 25 and 26, including a 20-hectare yard area. This expansion will increase the Port’s containerhandling capacity by 600,000 to 1,200,000 TEUs and its capability to handle large container vesselsof up to 10,000 TEUs. The expansion project is expected to be completed in the second quarter of2019.

Port of Melbourne, Australia. On May 2, 2014, ICTSI, through its subsidiary in Australia, VictoriaInternational Container Terminal Ltd. (VICT), signed a contract in Melbourne with Port ofMelbourne Corporation (“POMC”) for the design, construction, commissioning, operation,maintaining and financing of the Webb Dock Container Terminal (Terminal) and Empty ContainerPark (ECP) at Webb Dock East (WDE) in the Port of Melbourne. Initially, VICT was 90% owned byICTSI through ICTSI Far East Pte. Ltd. (IFEL), a wholly owned subsidiary, and 10% by Anglo PortsPty Limited (“Anglo Ports”). On February 4, 2015, IFEL acquired the 10% non-controlling interestfrom Anglo Ports and became 100% owner of VICT. On January 7, 2016, IFEL’s ownership interestin VICT was transferred to another subsidiary, ICTSI Oceania B.V. (IOBV), making IOBV the new100% owner of VICT. The Contract grants VICT the rights to: (a) design, build and commission thenew Terminal at berths WDE 4 and WDE 5, (b) design, build and commission the new ECP at WDE,and (c) operate the Terminal and ECP until June 30, 2040.

Phase 1 of the Terminal and the ECP with capacities of 350,000 TEUs and 250,000 TEUs,respectively, commenced commercial operations in the second quarter of 2017. Phase 2 construction

— F-11 —

of the Terminal with a capacity of 1,000,000 TEUs is expected to be completed in the last quarter of2017.

Tuxpan, Mexico. On May 27, 2015, ICTSI, through its subsidiary, ICTSI Tuxpan B.V., acquiredfrom Grupo TMM S.A.B and Immobiliaria TMM S.A. de C.V 100 percent of the capital stock ofTerminal Maritima de Tuxpan, S.A de C.V (TMT) for US$54.5 million. TMT is a company dulyincorporated in accordance with the laws of Mexico with a concession to construct and operate amaritime container terminal in the Port of Tuxpan, Mexico and is the owner of the real estate wherethe maritime container terminal will be constructed. The concession agreement is valid untilMay 25, 2021, subject to extension for another 20 years. The concession covers an area of29,109.68 square meters, which is adjacent to the 43 hectares of land owned by TMT. Under theconcession agreement, TMT is liable and committed to: (1) pay fixed fee of MXN23.24 plus valueadded tax (VAT), per square meter of assigned area; and (2) pay variable fee starting year 2018. Asof November 17, 2017, management is currently working on a development plan on TMT.

Brunei, Darussalam. On May 21, 2009, ICTSI, through New Muara Container Terminal ServicesSdn Bhd (NMCTS), entered into an Agreement with the Government for the operation andmaintenance of the Muara Container Terminal in Brunei Darussalam. The Agreement was valid for aperiod of four years from commencement date or May 22, 2009. The term was extendible for aperiod of one year at a time, for a maximum of two years subject to the mutual agreement of theparties. Since 2012, the Agreement had been extended yearly for a period of one year or untilMay 20, 2017 as an interim operator. The Agreement with the Brunei Government was no longerrenewed and ended effective February 21, 2017.

Davao, Philippines. On April 21, 2006, the Philippine Ports Authority (PPA) granted DavaoIntegrated Port and Stevedoring Services Corporation (DIPSSCOR) a ten-year contract for cargohandling services at Sasa Wharf, Port of Davao in the Philippines that expired on April 20, 2016. Thetender process for the Davao Sasa Port Modernization project has started and ICTSI is one of theshort-listed bidders. On April 15, 2016, the local office of the PPA in Davao City grantedDIPSSCOR a hold-over authority for a period of six months until October 20, 2016 to operate thecargo handling services at Sasa Wharf, Port of Davao. On September 8, 2016, another hold-overauthority for a period of six months until April 20, 2017 was granted by the PPA office in DavaoCity. On April 18, 2017, the hold-over authority was extended by the PPA office in Davao City for aperiod of ten months until February 25, 2018 or upon award of the Terminal Management contract tothe winning bidder in a public bidding, whichever comes first.

South Cotabato, Philippines. On February 20, 2006, the PPA granted South Cotabato Integrated PortServices, Inc. (SCIPSI) a ten-year contract for the exclusive management and operation of arrastre,stevedoring, bagging and crated cargo handling services at Makar Wharf, Port of General Santos,General Santos City in the Philippines that expired on February 19, 2016. On February 19, 2016, thelocal office of the PPA in General Santos City granted SCIPSI a hold-over authority for a period ofone year until February 19, 2017 over the cargo handling services at Makar Wharf, Port of GeneralSantos. On February 25, 2017, another hold-over authority for a period of one year until February 24,2018 was granted by the PPA office in General Santos City.

Port of Portland, Oregon, U.S.A. In October 2016, the Board of ICTSI Ltd. has authorized themanagement of ICTSI Oregon, Inc. (ICTSI Oregon) to negotiate with the Port of Portland and reachterms mutually acceptable to both parties with respect to the termination of the lease agreement aftertwo major customers, Hanjin Shipping Co. and Hapag-Lloyd stopped calling the Port of Portland inMarch 2015 due to continuing labor disruptions. In late 2016, the Port of Portland and ICTSI Oregonbegan discussions of a mutual agreement to terminate the lease agreement. In 2016, the Company hasprovided for the amount of probable loss on the pre-termination of the lease agreement based on the

— F-12 —

Company’s best estimate of the probable outcome of the negotiations with the Port of Portland. Theestimated amount of probable loss from the pre-termination of the lease agreement charged to theaudited consolidated statement of income for the year ended December 31, 2016 wasUS$23.4 million.

On March 8, 2017, ICTSI, through ICTSI Oregon, and the Port of Portland signed a LeaseTermination Agreement and both parties have mutually agreed to terminate the 25-year LeaseAgreement to operate the container facility at Terminal 6 of the Port of Portland with an effectivedate of March 31, 2017. The Lease Termination Agreement allowed ICTSI Oregon to be relieved ofits long-term lease obligations. In exchange, the Port of Portland received US$11.45 million in cashcompensation on March 29, 2017 and container handling equipment including spare parts and toolson March 31, 2017.

Cavite Gateway Terminal, Philippines. On April 21, 2017, ICTSI, through its wholly-ownedsubsidiary, Cavite Gateway Terminal (CGT), in partnership with the Philippine Department ofTransportation, project launched the country’s soon-to-be first container roll-on roll-off bargeterminal in Tanza, Cavite. CGT will facilitate off-the-roads seaborn transport of containers betweenPort of Manila and Cavite and service industrial locators in Cavite area. CGT’s barge terminal willhave an annual capacity of 115,000 TEUs, which is equivalent to 140,000 fewer truck trips on cityroads each year. As of November 17, 2017, the construction of the terminal is on-going and isexpected to be completed in the first quarter of 2018.

Lekki International Container Terminal Services LFTZ Enterprise, Nigeria. On August 10, 2012,ICTSI, through its wholly-owned subsidiary, Lekki International Container Terminal Services LFTZEnterprise (LICTSLE), and Lekki Port LFTZ Enterprise (Lekki Port, the Concessionaire) signed theSub-concession Agreement (Agreement) that grants LICTSLE, as a sub-concessionaire, an exclusiveright to develop and operate, and to provide handling equipment and container terminal services at thecontainer terminal within Lekki Port located at Ibeju Lekki, Lagos State, Federal Republic of Nigeriafor a period of 21 years. On May 17, 2017, ICTSI and Lekki Port have mutually agreed to terminatethe Agreement subject to a payment by Lekki Port of an agreed amount. On May 23, 2017, ICTSIreceived the agreed amounts of US$12.5 million representing the return of payments made to LekkiPort pursuant to the Agreement, and US$7.5 million representing compensation of costs incurred byICTSI in relation to the project recognized as “Other income” in the unaudited interim consolidatedstatement of income. The termination of the Agreement was finalized and deemed effective onMay 24, 2017.

Motukea and Lae, Papua New Guinea. On July 28, 2017, ICTSI signed two 25-year agreements tooperate the international ports in Motukea and Lae in PNG. The agreements were signed by ICTSI’sPNG subsidiaries, Motukea International Limited (MITL) and South Pacific Container TerminalLimited (SPICTL), with the PNG state-owned enterprise, PNG Ports Corporation Limited (PNGPCL)for the operation, management and development of the two ports. The agreements and other relatedcontracts will take effect after all the parties have complied with the agreed conditions precedent.ICTSI is expected to take over the two ports in the first quarter of 2018.

Manila North Harbor, Philippines. On September 21, 2017, the BOD of ICTSI granted the authorityto acquire shares in MNHPI. On the same date, ICTSI signed a Share Purchase Agreement (SPA)with Petron Corporation for the acquisition of 10,449,000 MNHPI shares, representing 34.83% of thetotal issued and outstanding shares of MNHPI for a total consideration of Php1.75 billion. Thecompletion of the SPA was subject to several conditions, one of which was the approval of theacquisition by the Philippine Ports Authority. The SPA was completed on October 30, 2017. Anadditional investment of Php2.45 billion will be made in relation to this acquisition.

— F-13 —

Port of Tanjung Priok, Indonesia. On November 17, 2017, PT ICTSI Jasa Prima Tbk (IJP), an ICTSIsubsidiary in Indonesia, signed a Conditional Share Purchase Agreement with PT Samudera TerminalIndonesia (STI) for the purchase of IJP’s interest in PT Perusahaan Bongkar Muat Olah Jasa Anda(OJA), subject to certain conditions.

1.3 Subsidiaries and Joint VenturePercentage of Ownership

Place of Nature of Functional December 31, 2016 September 30, 2017Incorporation Business Currency Direct Indirect Direct Indirect

Subsidiaries:

AsiaInternational Container Terminal Holdings,

Inc. (ICTHI) and SubsidiariesCayman Islands Holding Company US Dollar 100.00 – 100.00 –

ICTSI Ltd. Bermuda Holding Company US Dollar – 100.00 – 100.00ICTSI Mauritius Ltd. Mauritius Holding Company US Dollar – 100.00 – 100.00Aeolina Investments Limited British Virgin

IslandsHolding Company US Dollar – 100.00 – 100.00

Pakistan International Container Terminal(PICT)

Pakistan Port Management Pakistani Rupee – 64.53 – 64.53

IFEL Singapore Holding Company US Dollar – 100.00 – 100.00NMCTS Brunei Port Management Brunei Dollar – 100.00 – 100.00IJP and Subsidiaries Indonesia Maritime

infrastructure andlogistics

US Dollar – 80.16 – 80.16

OJA Indonesia Port Management US Dollar – 80.16 – 80.16PT Makassar Terminal Services, Inc. (MTS) Indonesia Port Management Indonesian

Rupiah– 95.00 – 95.00

PT Container Terminal Systems SolutionsIndonesia

Indonesia Software Developer US Dollar – 100.00 – 100.00

ICTSI (Hongkong) Limited (IHKL) Hong Kong Holding Company US Dollar – 100.00 – 100.00Yantai International Container Terminals,

Limited (YICT)China Port Management Renminbi – 51.00 – 51.00

Pentland International Holdings, Ltd. British VirginIslands

Holding Company US Dollar – 100.00 – 100.00

ICTSI Georgia Corp. Cayman Islands Holding Company US Dollar – 100.00 – 100.00Global Procurement Ltd. (formerly

ICTSI Poland)Bermuda Holding Company US Dollar – 100.00 – 100.00

ICTSI Honduras Ltd. Bermuda Holding Company US Dollar – 100.00 – 100.00ICTSI Ltd. Regional Headquarters Philippines Regional

HeadquartersPhilippine Peso – 100.00 – 100.00

International Container Terminal Services(India) Private Limited

India Port Management Indian Rupee – 100.00 – 100.00

Container Terminal de Venezuela ContervenCA (CTVCC)

Venezuela Holding Company US Dollar – 95.00 – 95.00

ICTSI Africa (Pty) Ltd. (i) South Africa BusinessDevelopmentOffice (BDO)

South AfricanRand

– 100.00 – –

Australian International Container TerminalsLimited (AICTL) (a)

Australia Port Management Australian Dollar – 70.00 – 70.00

Mindanao International Container TerminalServices, Inc. (MICTSI)

Philippines Port Management Philippine Peso 100.00 − 100.00 −

Abbotsford Holdings, Inc. Philippines Holding Company Philippine Peso 100.00 – 100.00 –Hijo International Port Services, Inc. (HIPS) Philippines Port Management Philippine Peso – 65.00 – 65.00DIPSSCOR Philippines Port Management Philippine Peso – 96.95 – 96.95ICTSI Warehousing, Inc. (IWI) Philippines Warehousing Philippine Peso 100.00 – 100.00 –IW Cargo Handlers, Inc. Philippines Port Equipment

RentalUS Dollar – 100.00 – 100.00

Container Terminal Systems SolutionsPhilippines, Inc.

Philippines Software Developer US Dollar – 100.00 – 100.00

Bauan International Port, Inc. (BIPI) Philippines Port Management Philippine Peso – 60.00 – 60.00Prime Staffers and Selection Bureau, Inc. (a) Philippines Manpower

RecruitmentPhilippine Peso 100.00 – 100.00 –

ICTSI Subic, Inc. (ICTSI Subic) Philippines Port Management US Dollar 100.00 – 100.00 –Subic Bay International Terminal Holdings,

Inc. (SBITHI)Philippines Holding Company US Dollar 83.33 – 83.33 –

Subic Bay International Terminal Corporation(SBITC)

Philippines Port Management US Dollar – 83.33 – 83.33

Cordilla Properties Holdings Inc. Philippines Holding Company Philippine Peso 100.00 − 100.00 −

SCIPSI Philippines Port Management Philippine Peso 35.70 14.38 35.70 14.38ICTSI Dubai United Arab

EmiratesBDO US Dollar 100.00 − 100.00 −

ICTSI Capital B.V. (ICBV) The Netherlands Holding Company US Dollar – 100.00 – 100.00Icon Logistiek B.V. The Netherlands Holding Company US Dollar – 100.00 – 100.00

(Forward)

— F-14 —

Percentage of OwnershipPlace of Nature of Functional December 31, 2016 September 30, 2017Incorporation Business Currency Direct Indirect Direct Indirect

Royal Capital B.V. (RCBV) The Netherlands Holding Company US Dollar – 75.00 – 75.00ICTSI Cooperatief The Netherlands Holding Company US Dollar 1.00 99.00 1.00 99.00Global Container Capital, B.V. The Netherlands Holding Company US Dollar – 100.00 – 100.00ICTSI Treasury B.V. (ITBV) The Netherlands Holding Company US Dollar – 75.00 – 75.00ICTSI Americas B.V. The Netherlands Holding Company US Dollar – 100.00 – 100.00ICTSI Africa B.V. The Netherlands Holding Company US Dollar – 100.00 – 100.00ICTSI Cameroon B.V. (formerly Global

Procurement B.V.)The Netherlands Holding Company US Dollar – 100.00 – 100.00

CMSA B.V. The Netherlands Holding Company US Dollar – 100.00 – 100.00Tecplata B.V. The Netherlands Holding Company US Dollar – 100.00 – 100.00SPIA Colombia B.V. The Netherlands Holding Company US Dollar – 100.00 – 100.00TSSA B.V. The Netherlands Holding Company US Dollar – 100.00 – 100.00CGSA B.V. The Netherlands Holding Company US Dollar – 100.00 – 100.00SPIA Spain S.L. Spain Holding Company US Dollar – 100.00 – 100.00CGSA Transportadora S.L. Spain Holding Company US Dollar – 100.00 – 100.00Crixus Limited British Virgin

IslandsHolding Company US Dollar – 100.00 – 100.00

VICT Australia Port Management US Dollar – 100.00 – 100.00Asia Pacific Port Holdings Private

Ltd. (APPH)Singapore Holding Company US Dollar – 50.50 – 50.50

ICTSI Global Finance B.V. (IGFBV) The Netherlands Holding Company US Dollar – 75.00 – 75.00IOBV The Netherlands Holding Company US Dollar – 100.00 – 100.00ICTSI Tuxpan B.V. The Netherlands Holding Company US Dollar – 100.00 – 100.00ICTSI Asia Pacific Business Services, Inc. Philippines Business Process

OutsourcingUS Dollar – 100.00 – 100.00

ICTSI Ltd. Regional OperatingHeadquarters

Philippines Regional OperatingHeadquarters

US Dollar – 100.00 – 100.00

ICTSI Project Delivery Services Co.Pte. Ltd.

Singapore Port Equipment Saleand Rental

US Dollar – 100.00 – 100.00

ICTSI QFC LLC Qatar Holding Company US Dollar – 100.00 – 100.00ICTSI South Asia Pte. Ltd. Singapore Holding Company US Dollar – 100.00 – 100.00Laguna Gateway Inland Container Terminal,

Inc. (LGICT)Philippines Port Management Philippine Peso – 60.00 – 60.00

ICTSI Middle East DMCC United ArabEmirates

Holding Company US Dollar – 100.00 – 100.00

ICTSI Global Cooperatief U.A. The Netherlands Holding Company US Dollar 100.00 – 100.00 –Consultports S.A. de C.V. (b) Mexico BDO Mexican Peso – 100.00 – 100.00Asiastar Consultants Limited (d) Hong Kong Management

ServicesUS Dollar − − – 100.00

Intermodal Terminal Holdings, Inc. (ITH) (e) Philippines Holding Company Philippine Peso 100.00 – 100.00 –CGT (f) Philippines Port Management Philippine Peso – 100.00 – 100.00ICTSI Americas B.V. (Multinational

Headquarters) (h)Panama BDO US Dollar − − – 100.00

ICTSI South Pacific Limited (j) Papua New Guinea Holding Company Papua NewGuinean Kina

− − – 100.00

MITL (j) Papua New Guinea Port Management Papua NewGuinean Kina

− − – 100.00

SPICTL (j) Papua New Guinea Port Management Papua NewGuinean Kina

− − – 100.00

Europe, Middle East and Africa (EMEA)Tartous International Container

Terminal, Inc.Syria Port Management US Dollar 100.00 – 100.00 –

Madagascar International ContainerTerminal Services, Ltd. (MICTSL)

Madagascar Port Management Euro – 100.00 – 100.00

Baltic Container Terminal Ltd. (BCT) Poland Port Management US Dollar – 100.00 – 100.00Adriatic Gate Container Terminal (AGCT) Croatia Port Management Euro – 51.00 – 51.00Batumi International Container Terminal

LLC (BICTL)Georgia Port Management US Dollar – 100.00 – 100.00

LICTSLE Nigeria Port Management US Dollar – 100.00 – 100.00IDRC DR Congo Port Management US Dollar – 52.00 – 52.00ICTSI (M.E.) DMCC Iraq Branch

(ICTSI Iraq)Iraq Port Management US Dollar – 100.00 – 100.00

AmericasContecon Guayaquil, S.A. (CGSA) (g) Ecuador Port Management US Dollar 51.00 49.00 51.00 49.00Contecon Manzanillo S.A. (CMSA) (c) Mexico Port Management US Dollar 1.00 99.00 1.00 99.00Tecon Suape, S.A. (TSSA) Brazil Port Management Brazilian Real – 100.00 – 100.00ICTSI Oregon U.S.A. Port Management US Dollar − 100.00 − 100.00C. Ultramar, S.A. Panama Holding Company US Dollar – 100.00 – 100.00Future Water, S.A. Panama Holding Company US Dollar – 100.00 – 100.00Kinston Enterprise, Inc. Panama Holding Company US Dollar – 100.00 – 100.00International Ports of South America and

Logistics SAUruguay Holding Company US Dollar − 100.00 − 100.00

Tecplata S.A. (Tecplata) (a) Argentina Port Management US Dollar − 100.00 − 100.00

(Forward)

— F-15 —

Percentage of OwnershipPlace of Nature of Functional December 31, 2016 September 30, 2017Incorporation Business Currency Direct Indirect Direct Indirect

Nuevos Puertos S. A. Argentina Holding Company US Dollar 4.00 96.00 4.00 96.00Operadora Portuaria Centroamericana,

S.A. (OPC)Honduras Port Management US Dollar 30.00 70.00 30.00 70.00

TMT (a) Mexico Port Management Mexican Peso – 100.00 – 100.00

Joint Venture -Sociedad Puerto Industrial Aguadulce SA

(SPIA)Colombia Port Management US Dollar – 46.30 – 46.30

(a) Has not yet started commercial operations as at September 30, 2017(b) Acquired in March 2016 for US$60.0 thousand. This was not accounted for as a business combination due to immateriality of amount involved.(c) Changed its functional currency from Mexican Peso to US Dollar on July 1, 2016(d) Established in May 2016(e) Established in September 2016(f) Established in November 2016(g) In 2016, the Parent Company’s shareholdings was diluted to 51% as a result of internal restructuring.(h) Established in March 2017(i) Deregistered in June 2017(j) Established in June 2017

2. Basis of Preparation and Statement of Compliance

2.1 Basis of Preparation

The unaudited interim condensed consolidated financial statements as at September 30, 2017 and forthe nine months ended September 30, 2016 and 2017 have been prepared on a historical cost basis,except for available-for-sale (AFS) investments and derivative financial instruments which have beenmeasured at fair value. The unaudited interim condensed consolidated financial statements arepresented in United States dollar (US dollar, USD or US$), the Parent Company’s functional andpresentation currency. All values are rounded to the nearest thousand US dollar unit, except whenotherwise indicated. Any discrepancies in the tables between the listed amounts and the totals thereofare due to rounding. Accordingly, figures shown as totals may not be an arithmetic aggregation ofthe figures that precede them.

2.2 Statement of Compliance

The unaudited interim condensed consolidated financial statements have been prepared in accordancewith Philippine Accounting Standard (PAS) 34, Interim Financial Reporting. Accordingly, theinterim condensed consolidated financial statements do not include all the information anddisclosures required in the annual audited consolidated financial statements, and should be read inconjunction with the Group’s audited annual consolidated financial statements as at and for the yearended December 31, 2016.

3. Summary of Significant Accounting Policies

3.1 Basis of ConsolidationThe unaudited interim condensed consolidated financial statements of the Group include the accountsof ICTSI and its subsidiaries. Subsidiaries are entities controlled by the Parent Company. Control isachieved when the Group is exposed, or has rights, to variable returns from its involvement with theinvestee and has the ability to affect those returns through its power over the investee.

— F-16 —

Specifically, the Group controls an investee if and only if the Group has:

Power over the investee (i.e., existing rights that give it the current ability to direct the relevantactivities of the investee);

Exposure, or rights, to variable returns from its involvement with the investee, and The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Groupconsiders all relevant facts and circumstances in assessing whether it has power over an investee,including:

The contractual arrangement with the other vote holders of the investee Rights arising from other contractual arrangements The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate thatthere are changes to one or more of the three elements of control.

Subsidiaries. Subsidiaries are consolidated from the date of acquisition or incorporation, being thedate on which the Group obtains control, and continue to be consolidated until the date such controlceases.

Non-controlling Interests. Non-controlling interests represent the portion of profit or loss and netassets in PICT, MTS, AICTL, CTVCC, SBITC, SBITHI, BIPI, DIPSSCOR, YICT, SCIPSI, RCBV,AGCT, IJP, OJA, ITBV, HIPS, APPH, IGFBV, IDRC and LGICT not held by the Group and arepresented separately in the unaudited interim consolidated statement of income and the unauditedinterim consolidated statement of comprehensive income, and interim consolidated balance sheetseparate from equity attributable to equity holders of the parent.

An acquisition, transfer or sale of a non-controlling interest is accounted for as an equity transaction.No gain or loss is recognized in an acquisition of a non-controlling interest. The difference betweenthe fair value of the consideration and book value of the share in the net assets acquired is presentedunder “Excess of acquisition cost over the carrying value of non-controlling interests” account withinthe equity section of the interim consolidated balance sheet. If the Group loses control over asubsidiary, it: (i) derecognizes the assets (including goodwill) and liabilities of the subsidiary, thecarrying amount of any non-controlling interest and the cumulative translation differences recorded inequity; (ii) recognizes the fair value of the consideration received, the fair value of any investmentretained and any surplus or deficit in the unaudited interim consolidated statement of income; and(iii) reclassifies the Parent Company’s share of components previously recognized in othercomprehensive income to the unaudited interim consolidated statement of income or retainedearnings, as appropriate.

Transactions Eliminated on Consolidation. All intragroup transactions and balances includingincome and expenses, and unrealized gains and losses are eliminated in full.

Accounting Policies of Subsidiaries. The financial statements of subsidiaries are prepared for thesame reporting period or year using uniform accounting policies as those of the Parent Company.

Functional and Presentation Currency. The unaudited interim condensed consolidated financialstatements are presented in US dollar, which is ICTSI’s functional and presentation currency. Eachentity in the Group determines its own functional currency, which is the currency that best reflects the

— F-17 —

economic substance of the underlying events and circumstances relevant to that entity, and itemsincluded in the financial statements of each entity are measured using that functional currency.

At the reporting date, the assets and liabilities of subsidiaries whose functional currency is not the USdollar are translated into the presentation currency of ICTSI using the Bloomberg closing rate atbalance sheet date and, their unaudited statements of income are translated at the Bloombergweighted average daily exchange rates for the period. The exchange differences arising from thetranslation are taken directly to the unaudited interim consolidated statement of comprehensiveincome. Upon disposal of the foreign entity, the deferred cumulative translation amount recognizedin the unaudited interim consolidated statement of comprehensive income relating to that particularforeign operation is recognized in the unaudited interim consolidated statement of income.

The following rates of exchange have been adopted by the Group in translating foreign currencyincome statement and balance sheet items as at and for the nine months ended September 30:

2016 2017Closing Average Closing Average

Foreign currency to 1 US dollar:Argentine peso (AR$) 15.31 14.56 17.32 16.25Australian dollar (AUD) 1.30 1.35 1.28 1.31Brazilian real (BRL or R$) 3.26 3.54 3.16 3.17Brunei dollar (BND) 1.36 1.37 1.36 1.39Chinese renminbi (RMB) 6.67 6.58 6.65 6.80Colombian peso (COP) 2,882.06 3,062.24 2,937.65 2,940.92Croatian kuna (HRK) 6.69 6.75 6.34 6.70Euro (€) 0.89 0.90 0.85 0.90Georgian lari (GEL) 2.34 2.32 2.47 2.48Honduran lempira (HNL) 23.03 22.70 23.39 23.47Hong Kong dollar (HKD) 7.76 7.76 7.81 7.79Indian rupee (INR) 66.61 67.13 65.28 65.26Indonesian rupiah (IDR) 13,042.00 13,322.00 13,472.00 13,330.00Iraqi dinar (IQD) 1,194.74 1,193.14 1,178.67 1,188.53Japanese yen (JPY) 101.35 108.50 112.51 111.93Malagasy ariary (MGA) 3,128.00 3,153.50 3,053.55 3,128.30Mexican peso (MXN) 19.39 18.30 18.25 18.90

Pakistani rupee (PKR or Rs.) 104.46 104.70 105.39 104.99 Philippine peso (P=) 48.50 46.95 50.82 50.24

Polish zloty (PLN) 3.82 3.90 3.65 3.84Singaporean dollar (SGD) 1.36 1.37 1.36 1.39South African rand (ZAR) 13.72 14.96 13.56 13.21

3.2 Changes in Accounting Policies

3.2.1 New and Amended Standards Adopted in 2017

The accounting policies adopted for the unaudited interim condensed consolidated financialstatements are consistent with those followed in the preparation of the Group’s annual consolidatedfinancial statements as at and for the year ended December 31, 2016 except that the Group hasadopted the following new and amended standards starting January 1, 2017:

New Pronouncements

Impact on the InterimCondensedConsolidated FinancialStatements

PFRS 12, Clarification of the Scope of the Standard (Amendments)

The amendments clarify that the disclosure requirements in PFRS 12, other thanthose relating to summarized financial information, apply to an entity’s interest in

These amendments are notapplicable to the Group since

— F-18 —

New Pronouncements

Impact on the InterimCondensedConsolidated FinancialStatements

a subsidiary, a joint venture or an associate (or a portion of its interest in a jointventure or an associate) that is classified (or included in a disposal group that isclassified) as held for sale.

none of the entities within theGroup has interest in asubsidiary, a joint venture oran associate that is classified(or included in a disposalgroup that is classified) asheld for sale.

PAS 7, Statement of Cash Flows, Disclosure Initiative (Amendments)

The amendments to PAS 7 require an entity to provide disclosures that enableusers of financial statements to evaluate changes in liabilities arising fromfinancing activities, including both changes arising from cash flows and non-cashchanges (such as foreign exchange gains or losses). On initial application of theamendments, entities are not required to provide comparative information forpreceding periods. Early application of the amendments is permitted.

The adoption of theseamendments will result inadditional disclosures in the2017 annual consolidatedfinancial statements.

PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized Losses(Amendments)

The amendments clarify that an entity needs to consider whether tax law restrictsthe sources of taxable profits against which it may make deductions on thereversal of that deductible temporary difference. Furthermore, the amendmentsprovide guidance on how an entity should determine future taxable profits andexplain the circumstances in which taxable profit may include the recovery ofsome assets for more than their carrying amount.

Entities are required to apply the amendments retrospectively. However, on initialapplication of the amendments, the change in the opening equity of the earliestcomparative period may be recognized in opening retained earnings (or in anothercomponent of equity, as appropriate), without allocating the change betweenopening retained earnings and other components of equity. Entities applying thisrelief must disclose that fact. Early application of the amendments is permitted.

The adoption of theseamendments has nosignificant impact on theinterim condensedconsolidated financialstatements.

The Group has not early adopted any other standard, interpretation or amendment that has been issuedbut is not yet effective.

4. Segment Information

A segment is a distinguishable component of the Group that is engaged either in providing types ofservices (business segment) or in providing the services within a particular economic environment(geographic segment).

The Group operates principally in one industry segment, which is cargo handling and related services.ICTSI has organized its business into three geographical segments:

Asia - includes MICT, BIPI, DIPSSCOR, SCIPSI, SBITC, ICTSI Subic, HIPS, MICTSI, LGICTand CGT in the Philippines; YICT in China; OJA, IJP and MTS in Indonesia; VICT in Australia;NMCTS in Brunei; PICT in Pakistan; AICTL, ICTHI, ICTSI Ltd. and other holding companiesand those companies incorporated in The Netherlands for the purpose of supporting the fundingrequirements of the Group;

— F-19 —

EMEA - includes BCT in Poland, BICTL in Georgia, AGCT in Croatia, MICTSL in Madagascar,LICTSLE in Nigeria, IDRC in DR Congo and ICTSI Iraq in Iraq; and

Americas - includes TSSA in Brazil, CGSA in Ecuador, SPIA in Colombia, Tecplata inArgentina, CMSA and TMT in Mexico, OPC in Honduras and ICTSI Oregon in Oregon, U.S.A.

Management monitors the operating results of its operating unit separately for making decisionsabout resource allocation and performance assessment. The Group evaluates segment performancebased on contributions to gross revenues, which is measured consistently with gross revenues fromport operations in the interim consolidated statement of income.

Financing is managed on a group basis and centralized at the Parent Company level or at the entitiescreated solely for the purpose of obtaining funds for the Group. Funding requirements that aresecured through debt are recognized as liabilities of the Parent Company or of the entity issuing thedebt instrument, classified under the geographical region of Asia and are not allocated to othergeographical segments where funds are eventually transferred and used.

The table below presents financial information on geographical segments as at December 31, 2016(audited) and as at September 30, 2017 (unaudited) and for the nine months endedSeptember 30, 2016 and 2017 (unaudited):

2016 2017Asia EMEA Americas Consolidated Asia EMEA Americas Consolidated

Volume (a) 3,364,342 823,003 2,247,847 6,435,192 3,577,607 1,075,696 2,183,308 6,836,611

Gross revenues US$435,112 US$111,957 US$287,957 US$835,026 US$435,072 US$178,848 US$304,349 US$918,269Capital expenditures (b) 177,947 69,263 50,729 297,939 156,641 13,387 44,032 214,060Other information: Segment assets (c) 2,318,975 428,078 1,344,501 4,091,554 2,407,895 431,614 1,355,262 4,194,771 Segment liabilities (d) 1,815,467 76,849 420,039 2,312,355 1,836,424 81,340 412,628 2,330,392

(a) Measured in TEUs.(b) Capital expenditures include amount disbursed for the acquisition of port facilities and equipment classified as intangibles under IFRIC 12 and property and

equipment.(c) Segment assets do not include deferred tax assets amounting to US$90.6 million and US$86.9 million as at December 31, 2016 (audited) and

September 30, 2017 (unaudited), respectively.(d) Segment liabilities do not include income tax payable amounting to US$32.3 million and US$25.0 million and deferred tax liabilities amounting to

US$71.4 million and US$68.6 million as at December 31, 2016 (audited) and September 30, 2017 (unaudited), respectively.

Moreover, management monitors the Group’s earnings before interest, taxes, depreciation andamortization (EBITDA) on a consolidated basis for decision-making purposes. The following tableshows the computation of EBITDA as derived from the unaudited interim consolidated net incomeattributable to equity holders of the parent for the nine months ended September 30:

2016 2017Net income attributable to equity holders of the parent US$141,920 US$149,316Non-controlling interests 8,893 18,819Provision for income tax 49,539 39,884Income before income tax 200,352 208,019Add (deduct):

Depreciation and amortization 109,839 129,273Interest and other expenses (a) 104,539 139,966Interest and other income (b) (24,401) (42,401)

EBITDA (c) US$390,329 US$434,857

(a) Interest and other expenses include the following as shown in the unaudited interim condensed consolidatedstatement of income: foreign exchange loss; interest on concession rights payable; interest expense and financingcharges on borrowings; equity in net loss of a joint venture; and other expenses.

— F-20 —

(b) Interest and other income include the following as shown in the unaudited interim condensed consolidated statementof income: foreign exchange gain; interest income; and other income.

(c) EBITDA is not a uniform or legally defined financial measure. EBITDA is presented because the Group believes itis an important measure of its performance and liquidity. EBITDA is also frequently used by securities analysts,investors and other interested parties in the evaluation of companies in the industry.The Group EBITDA figures are not; however, readily comparable with other companies’ EBITDA figures as they arecalculated differently thus, must be read in conjunction with related additional explanations. EBITDA haslimitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of theGroup’s results as reported under PFRS. Some of the limitations concerning EBITDA are: EBITDA does not reflect cash expenditures or future requirements for capital expenditures or contractual

commitments; EBITDA does not reflect changes in, or cash requirements for working capital needs; EBITDA does not reflect the interest expense, or cash requirements necessary to service interest or principal debt

payments; Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will

often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements;and

Other companies in the industry may calculate EBITDA differently, which may limit its usefulness as acomparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to theGroup to invest in the growth of the business. The Group compensates for these limitations by relying primarily onPFRS results and uses EBITDA only as supplementary information.

All segment revenues are from external customers. Gross revenues from port operations of ICTSIand other Philippine-based subsidiaries comprised 39.9% and 35.8% of the unaudited consolidatedgross revenues from port operations for the nine months ended September 30, 2016 and 2017,respectively. Gross revenues from port operations outside the Republic of the Philippines comprised60.1% and 64.2% of the unaudited consolidated gross revenues from port operations for the ninemonths ended September 30, 2016 and 2017, respectively.

5. Concession Rights and Concession Rights Payable

5.1 Concession Rights

Concession rights are presented as part of intangibles in the consolidated balance sheet. Concessionrights include upfront fee payments recognized on the concession contracts, cost of port infrastructureconstructed and port equipment purchased, and present value of future fixed fee considerations inexchange for the license or right to operate ports. Concession rights are amortized over the term ofthe concession agreements.

Additions to concession rights under port infrastructure mainly pertain to construction of various civilworks and acquisitions of port facilities and equipment in ICTSI, ICTSI Iraq and OPC as atSeptember 30, 2017.

Borrowing costs capitalized amounted to US$2.4 million for the nine months endedSeptember 30, 2016 with capitalization rate of 6.43 percent and nil for the nine months endedSeptember 30, 2017.

— F-21 —

5.2 Concession Rights Payable

Upon recognition of the fair value of fixed fee on concession contracts, the Group also recognized thecorresponding concession rights payable. Maturities of concession rights payable arising from thecapitalization of fixed portion of port fees as at September 30, 2017 are as follows (amount inthousands):

Amount2017 (1) US$3,5282018 15,2672019 16,5842020 18,0222021 onwards 429,370Total US$482,771

(1) October 1, 2017 through December 31, 2017

Total fixed portion of port fees paid by the Group for the nine months ended September 30, 2016 and2017 amounted to US$35.7 million and US$34.8 million, respectively. These port fees are allocatedto payments of interest and reduction to or payments of concession rights payable.

Interest expense on concession rights payable amounted to US$27.5 million and US$24.8 million fornine months ended September 30, 2016 and 2017, respectively. The annualized weighted averageinterest rate was 7.28% and 6.85% as at September 30, 2016 and 2017, respectively.

Reduction to concession rights payable, shown as payments to concession rights in the unauditedinterim consolidated statement of cash flows for the nine months ended September 30, 2016 and 2017amounted to US$8.2 million and US$10.1 million, respectively.

6. Property and Equipment

Property and equipment increased due to construction of various civil works and acquisitions ofterminal equipment in various ports, mainly in VICT as at September 30, 2017. There were no majordisposals or write-downs of property and equipment for the nine months ended September 30, 2016and 2017.

Borrowing costs capitalized amounted to US$16.3 million for the nine months endedSeptember 30, 2016 with capitalization rate of 6.43 percent and US$8.6 million for the nine monthsended September 30, 2017 with capitalization rates ranging from 5.79 to 6.73 percent. Borrowingcosts capitalized in 2016 mainly pertains to VICT and IDRC which started construction in November2014 and January 2015, respectively, while borrowing costs capitalized in 2017 pertains to VICT.

7. Other Noncurrent Assets

This account includes noncurrent portion of input tax, restricted cash, advances to suppliers andcontractors, advanced rent and deposits, AFS investments, pension assets and others.

— F-22 —

8. Investments in and Advances to a Joint Venture and an Associate

This account mainly pertains to ICTSI’s investment in and advances to SPIA. This account increasedin 2017 mainly due to additional interest-bearing loans extended to SPIA (see Note 16.1). The loanswere used by SPIA to finance its start-up operations and the remaining construction of its terminal inColombia.

9. Cash and Cash Equivalents

For the purpose of unaudited interim consolidated statements of cash flows, balances of cash and cashequivalents as at September 30 were as follows:

2016(Unaudited)

2017(Unaudited)

Cash on hand and in banks US$144,065 US$178,383Cash equivalents 82,661 141,460

US$226,726 US$319,843

Cash in banks earns interest at the prevailing bank deposit rates. Cash equivalents are short-terminvestments, which are made for varying periods of up to three months depending on the immediatecash requirements of the Group and earn interest at the prevailing short-term investment rates.

10. Receivables

This account consists of:

December 31,2016

(Audited)

September 30,2017

(Unaudited)Trade US$93,477 US$111,356Advances and nontrade 16,858 11,489

110,335 122,845Less allowance for doubtful accounts 7,405 6,538

US$102,930 US$116,307

Trade receivables are noninterest-bearing and are generally on 30-60 days’ credit terms.

Advances and nontrade receivables mainly include noninterest-bearing advances to suppliers andvendors that may be applied against payable or collectible within 12 months.

11. Prepaid Expenses and Other Current Assets

This account includes input tax, tax credit certificates, creditable withholding taxes, and prepaid portfees, insurance, bonds and other expenses. This account increased in 2017 mainly because of incometax credit recognized by OPC in 2017 amounting to US$5.8 million. Tax credit certificates can beapplied against certain future tax liabilities of the entities within the Group, as allowed by theirrespective tax authorities.

— F-23 —

12. Long-term Debt and Loans Payable

12.1 Maturities of Long-term Debt

Maturities of long-term debt, net of unamortized debt issue costs, premium and discount ofUS$59.8 million, as at September 30, 2017 are as follows (amounts in thousands):

Amount2017 (1) US$4,1182018 21,0682019 36,6952020 237,5502021 and onwards 1,109,053Total US$1,408,484

(1) October 1, 2017 through December 31, 2017

12.2 US Dollar-denominated Revolving Credit Facility

On July 24, 2014, the Board of ICTSI approved the establishment of a loan facility programmepursuant to which a subsidiary, IGFBV, may from time to time enter into one or more loan facilitieswith one or more lenders under the said programme, to be guaranteed by ICTSI. In connection withthe establishment of the said programme, the Board also approved the first loan facility under theprogramme with IGFBV as the borrower and ICTSI as the guarantor. The loan facility is a revolvingcredit facility with a principal amount of US$350.0 million and a tenor of five years from signingdate, July 24, 2014.

In April and June 2016, IGFBV availed of loans amounting to US$150.0 million andUS$10.0 million, respectively, from the US$350.0 million five year revolving credit facility bearinginterest ranging from 2.39 to 2.94 percent per annum. In August, November and December 2016,IGFBV partially paid loans drawn in April and June 2016 totaling US$145.0 million. The remainingbalance of US$15.0 million was fully paid on May 31, 2017.

The revolving credit facility was cancelled on June 8, 2017. As a result of the cancellation, theunamortized portion of the costs of securing the loan facility amounting to US$3.0 million wascharged to profit or loss and recognized as “Other expenses” in the unaudited interim consolidatedstatement of income.

12.3 US Dollar-denominated Loans

On March 29, 2016, CGSA (as “Borrower”), Metropolitan Bank and Trust Company (as “Lender”)and ICTSI (as “Surety”) signed a loan agreement which consists of two tranches of loans amountingto US$32.5 million (Tranche I) and US$7.5 million (Tranche II) with floating interest rates.Tranche I has a final maturity in March 2021 while Tranche II matured in May 2017. The loans werefully drawn in 2016. Portion of the proceeds of these loans was used to refinance the unsecuredUS$ short-term and term-loan of CGSA amounting to US$9.2 million in April 2016. In 2017, CGSAhas paid a total amount of US$5.7 million and US$3.0 million of the loan under Tranche I and II,respectively. The outstanding balance of the loan amounted to US$26.8 million as atSeptember 30, 2017.

In 2017, BCT availed loans from its overdraft facility with HSBC Bank Polska S.A with interestbased on prevailing market rate. The outstanding balance of the loan amounted to US$1.1 million asat September 30, 2017.

— F-24 —

On March 30, 2017, CGSA availed one-year loans from Citibank, Banco Bolivariano and BancoGuayaquil totaling to US$8.5 million at prevailing market rates. The outstanding balance of the loanamounted to US$4.3 million as at September 30, 2017.

On May 15, 2017, ICTSI availed of short-term loans from The Bank of Tokyo-Mitsubishi UFJ, Ltd.,Citibank N.A., The Hongkong and Shanghai Banking Corporation Limited, and Standard CharteredBank totaling to US$55.0 million with interest based on prevailing market rate and maturity date ofAugust 11, 2017. These loans were renewed to mature on November 9, 2017. As atSeptember 30, 2017, the outstanding balance of the loan amounted to US$55.0 million.

On November 28, 2016, OPC availed of a US$15.0 million short-term loan from Metropolitan Bankand Trust Company. The loan bears interest at prevailing market rate and matures onNovember 23, 2017. On July 26, 2017, OPC prepaid the US$15.0 million short-term loan.

On July 11, 2017, OPC (as “Borrower”), Metropolitan Bank and Trust Company (as “Lender”) andICTSI (as “Surety”) signed a loan agreement amounting to US$77.0 million with floating interest rateand maturity date of July 2020. Proceeds of the loan was used to finance capital expenditures. As atSeptember 30, 2017, OPC availed a total of US$16.5 million from the term loan facility.

12.4 Foreign Currency-denominated Loans

On July 15, 2016, VICT signed the syndicated project finance facilities with various international andregional banks for principal amount of US$300.0 million (AUD398.0 million) with interest ratesbased on Australian Bank Bill Swap Reference Rate (bid) (BBSY) plus average margin of3.10 percent per annum and maturities until 2023, 2026 and 2031. In 2017, VICT availed additionalloans from the facilities amounting to US$42.5 million (AUD55.0 million). As atSeptember 30, 2017, the outstanding principal balance of the loans amounted to US$251.5 million(AUD321.0 million).

On December 5, 2016, YICT obtained a US$21.6 million (RMB150.0 million) short-term loan fromYantai Port Holdings (YPH) at an interest rate of 4.35 percent per annum and a maturity date ofJanuary 25, 2017. The loan was used to refinance YICT’s loan with Agricultural Bank of China(ABC). On January 12 and March 1, 2017, YICT prepaid a total amount of US$3.0 million(RMB20.0 million) and the balance of US$18.9 million (RMB130.0 million) was renewed with aninterest rate of 4.50 percent per annum and matured on April 30, 2017. On April 26, 2017, YICTobtained a US$21.8 million (RMB150.0 million) loan from ABC payable in installments with a finalmaturity on November 21, 2023 to refinance the maturing loan with YPH. Interest is based on theinterest rate published by People's Bank of China (PBOC) less 5.00 percent of such base rate. Thefloating rate is subject to adjustment every twelve months. The outstanding balance of the loanamounted to US$15.0 million (RMB100.0 million) as at September 30, 2017.

12.5 Loan Covenants and Capitalized Borrowing Costs

The loans from local and foreign banks impose certain restrictions with respect to corporatereorganization, disposition of all or a substantial portion of ICTSI’s and subsidiaries’ assets,acquisitions of futures or stocks, and extending loans to others, except in the ordinary course ofbusiness. ICTSI is also required to comply with a specified financial ratio relating to their debt toEBITDA up to 4 times when incurring additional debt. As at September 30, 2017, ICTSI andsubsidiaries are in compliance with their loan covenants.

Interest expense, net of amount capitalized as intangible assets and property and equipment,amounted to US$56.6 million and US$74.9 million for the nine months ended September 30, 2016

— F-25 —

and 2017, respectively (see Notes 5 and 6). Interest expense includes amortization of debt issue costsamounting to US$4.0 million and US$5.6 million for the nine months ended September 30, 2016 and2017, respectively.

There was no material change in the covenants related to the Group’s long-term debts. As atSeptember 30, 2017, the Group has complied with its loan covenants.

There were no other significant transactions pertaining to the Group’s long-term debt as atSeptember 30, 2017, except as discussed above.

13. Other Noncurrent Liabilities

This account consists of:December 31,

2016(Audited)

September 30,2017

(Unaudited)Accrued rental US$64,576 US$84,919Government grant 15,742 13,917Pension liabilities 7,487 9,107Finance lease payable 147 814Others 2,893 2,605

US$90,845 US$111,362

Accrued RentalThe accrued rental of VICT amounted to US$149.6 million (AUD207.5 million) as atDecember 31, 2016 and US$117.3 million (AUD149.8 million) as at September 30, 2017, calculatedusing the straight-line method from the inception of the contract in June 2014. The current portion ofaccrued rental amounting to US$85.0 million (AUD117.9 million) as at December 31, 2016 andUS$32.4 million (AUD41.4 million) as at September 30, 2017 was classified as Trade payable under“Accounts payable and other current liabilities” (see Note 14).

Government GrantOn March 29, 2012, BCT and Centrum Unijnych Projektow Transportowych (CUPT), a Polish grantauthority, signed a grant agreement (the “EU Grant”) whereby CUPT would grant BCT a subsidyamounting to US$17.3 million (PLN53.9 million) and on October 21, 2013, BCT and CUPT signed asecond EU Grant whereby CUPT would grant BCT a subsidy amounting to US$4.8 million (PLN14.6million). The confirmation of the availability of the EU Grant is a condition precedent to anyborrowing under the facility agreement of BCT. In December 2015, BCT finalized capitalexpenditure projects supported by the EU Grant with an estimated total of US$19.5 million. In 2017,BCT did not avail any additional grant. As at September 30, 2017, BCT has availed a total ofUS$19.5 million of the EU Grant. The EU Grant is treated as deferred income and is amortized overthe duration of the existing concession agreement ending on May 31, 2023. The unamortizeddeferred income from government grant amounted to US$15.7 million and US$13.9 million as atDecember 31, 2016 and September 30, 2017, respectively. Amortization of deferred income includedunder “Other income” account of the unaudited interim consolidated statements of income amountedto US$1.8 million both for the nine months ended September 30, 2016 and 2017.

— F-26 —

14. Accounts Payable and Other Current Liabilities

This account includes trade payables, output and other taxes payables, accruals for interest, salariesand benefits and others, customers’ deposits, provisions for claims and losses and other currentliabilities. This account decreased in 2017 mainly due to payment of VICT’s accrued rentalamounting to US$89.3 million (AUD117.9 million) in January 2017 (see Note 13).

15. Equity

15.1 Stock Incentive Plan

On March 7, 2016, the Board approved the extension of the SIP for a further 10 years untilMarch 2027 and the amendment of vesting period of the SIP. The vesting period of the SIP wasamended from two years where 50% is to vest on the first anniversary date of the award and the other50% to vest on the second anniversary date of the award, to three years where 25% is to vest on thefirst anniversary date of the award, 25% to vest on the second anniversary date of the award, and 50%to vest on the third anniversary date of the award.

The shares covered by the SIP are held under treasury until they are awarded and issued to theofficers and employees as determined by the Stock Incentive Committee.

On March 14 and May 17, 2017, the Stock Incentive Committee granted 2,627,463 and113,673 shares of stock awards, respectively, to officers and employees of ICTSI and ICTSI Ltd.,including its regional operating headquarters. As of these dates of the grant, the fair values of theshares were US$1.57 (P=79.20) and US$2.00 (P=99.50), respectively. The fair value per share wasdetermined based on the market price of stock at the date of grant.

As at September 30, 2017, there were 41,228,601 ICTSI common shares granted in aggregate underthe SIP since it became effective in 2007. Also, as at September 30, 2017, 11,078,174 ICTSIcommon shares were held under treasury and allotted for the SIP.

Total compensation expense recognized on the vesting of the fair value of stock awards amounted toUS$2.2 million and US$2.5 million for the nine months ended September 30, 2016 and 2017,respectively.

15.2 Dividends Declared

On April 20, 2017, the Board of ICTSI declared a US$0.05 (P=2.47) cash dividend per share tostockholders of record dated May 5, 2017 paid on May 17, 2017.

15.3 Cost of Shares Held by Subsidiaries

As at December 31, 2016 and September 30, 2017, ICTHI held 3,800,000 of ICTSI’s preferred Ashares while IWI held 734,970 common shares of ICTSI.

15.4 Treasury Shares

In 2016, the Company acquired 3,102,960 of its own common shares totaling US$4.0 million.

In 2017, the Company acquired 5,400,000 of its own common shares totaling US$9.6 million.

— F-27 —

On September 8, 2017, the Board of ICTSI approved the sale of 10 million treasury shares. Theapproval of sale is in response to a reverse inquiry from an investor who expressed serious interest fora sizable ownership of the Company. The Company may use the proceeds in a number of itsexpansion and acquisition opportunities currently under review. On the same date, ICTSI’s 10 milliontreasury shares were sold at US$2.07 (Php105.10) per share with net proceeds amounting to US$20.5million. The said transaction resulted in the increase of US$9.5 million in additional paid-in capitaland the reduction in treasury shares of US$11.1 million.

15.5 Other Comprehensive Loss


Cumulative Translation

Adjustments

Mark-to-Market

Gains(Losses) onDerivatives

RevaluationIncrement

Unrealized Mark-to-

Market Gain on

Available-for-Sale

Investments

ActuarialGains onDefinedBenefit

Plans

TotalComprehensive Income (Loss)

Balance at January 1, 2016 (US$260,859) (US$494) US$610 US$1,126 US$981 (US$258,636)Translation differences arising

from translation offoreign operations’financial statements 5,083 – – – – 5,083

Net actuarial gains on definedbenefit plans – – – – 270 270

Net change in unrealized mark-to-market values ofderivatives – (13,436) – – – (13,436)

Net change in unrealized mark-to-market values of AFSinvestments – – – 177 – 177

Income tax relating tocomponents of othercomprehensive income – 3,999 – – – 3,999

Balance at September 30, 2016 (US$255,776) (US$9,931) US$610 US$1,303 US$1,251 (US$262,543)

Cumulative Translation

Adjustments

Mark-to-Market

Gains(Losses) onDerivatives

RevaluationIncrement

Unrealized Mark-to-

Market Gain on

Available-for-Sale

Investments

ActuarialGains

(Losses) onDefinedBenefit

Plans

TotalComprehensive Income (Loss)

Balance at January 1, 2017 (US$291,425) US$3,683 US$610 US$952 US$735 (US$285,445)Translation differences arising

from translation offoreign operations’financial statements 36,420 – – – – 36,420

Net actuarial losses on definedbenefit plans – – – – (912) (912)

Net change in unrealized mark-to-market values ofderivatives – (4,010) – – – (4,010)

Net change in unrealized mark-to-market values of AFSinvestments – – – 89 – 89

Income tax relating tocomponents of othercomprehensive income 856 – – – – 856

Balance at September 30, 2017 (US$254,149) (US$327) US$610 US$1,041 (US$177) (US$253,002)

— F-28 —

15.6 Perpetual Capital Securities

On May 5, 2016, RCBV redeemed the remaining US$108.3 million of the US$350 million Originaland Further Securities and paid the accrued distributions amounting to US$4.5 million. Thedifference amounting to US$7.6 million between the total of the redemption price and accrueddistributions of US$112.8 million and the carrying amount of the remaining Original and FurtherSecurities of US$105.2 million was directly charged against retained earnings.

On October 3, 2016, RCBV tendered its US$300.0 million 6.25 percent and US$450.0 million5.50 percent Senior Guaranteed Perpetual Capital Securities for redemption at a price of 106.75 and105.75, respectively. On October 20, 2016, RCBV redeemed a total of US$345.5 million of thetendered securities and paid the associated accrued distributions of US$9.3 million. Together withthe redemption, RCBV issued US$375.0 million 4.875 percent Senior Guaranteed Perpetual CapitalSecurities unconditionally and irrevocably guaranteed by ICTSI at a price of 99.225. The new issuewas used to finance the redemption and payment of accrued distributions of the tendered securities.The difference amounting to US$41.2 million between the redemption price of US$376.2 million,including accrued distributions of US$9.3 million, and the carrying value of the redeemed perpetualcapital securities amounting to US$335.0 million was directly charged to retained earnings. Theamount equivalent to the proceeds from the new issue, net of debt issuance costs, was recognized asadditional perpetual capital securities.

Interest expense on Perpetual Capital Securities amounted to US$35.8 million and US$31.2 millionfor the nine months ended September 30, 2016 and 2017. However, the interest expense has not beenrecognized in the unaudited interim consolidated statements of income but instead directly chargedagainst retained earnings since the Perpetual Capital Securities are presented as equity attributable toequity holders of the parent.

15.7 Non-controlling Interests

The dividends distributed to non-controlling shareholders for the nine months period endedSeptember 30 are as follows (in thousands):

2016 2017PICT US$9,298 US$6,489AGCT – 959BIPI 847 800SCIPSI 668 397DIPSSCOR 32 30

US$10,845 US$8,675

— F-29 —

16. Related Party Transactions

16.1 Transactions with the Shareholders and Affiliates

2016 2017

Related Party Relationship Nature of Transaction

Transaction Amountfor the Nine Months

Ended September 30


(Payable)Balance

as atDecember 31

TransactionAmount for the

Nine MonthsEnded

September 30


(Payable)Balance

as atSeptember 30

ICBVSPIA Joint venture Interest-bearing loans (see Note 8) US$39.60 US$249.20 US$25.40 US$274.60

Interest income (converted into interest-bearing loan) (see Note 8)

10.57 27.28 13.20 40.48

Parent CompanyYICTYantai Port Group

(YPG)Common

shareholderPort fees (i) 1.90 (0.14) 2.17 (0.48)

Trade transactions (ii) 1.37 (0.02) 1.20 (0.03)YPH Non-

controllingshareholder

Port fees (i) 1.18 – 0.96 –

Trade transactions (ii) 0.19 – 0.19 –Management fees (iii) 0.17 – 0.16 –Interest-bearing loans (iv) – (21.60) – –Interests on loans (iv) – (0.03) – –


Management fees (iii) US$0.13 US$– US$0.13 US$–

SCIPSIAsian Terminals,

Inc.Non-


Management fees 0.14 (0.03) 0.12 (0.01)

AGCTLuka Rijeka D.D.

(Luka Rijeka)Non-


Provision of services (v) 0.28 (0.02) 0.18 (0.01)

PICTPremier

MercantileServices(Private)Limited

Commonshareholder

Stevedoring and storage charges (vi) 3.95 (0.03) 4.30 (0.01)

Container handlingrevenue (vii)

– – 0.03 0.01

Marine Services(Private)Limited,PortlinkInternational(Private)Limited, andAMI Pakistan(Private)Limited

Commonshareholder

Container handlingrevenue (vii)

0.42 0.03 0.31 0.03

Premier Software(Private)Limited

Commonshareholder

Software maintenance charges 0.01 – – –

LGICTNCT

TransnationalCorp.

Non-controllingshareholder

Management fees 0.35 (0.04) 0.31 (0.05)

Maintenance and repairs 0.08 (0.02) 0.10 (0.02)BIPIAtlantic, Gulf and

PacificCompany ofManila Inc.

Commonshareholder

Rent expense 0.05 (0.02) 0.05 (0.05)

Rent income – – 0.11 –Utilities expense 0.02 – 0.01 –

(i) YICT is authorized under the Joint Venture Agreement to collect port charges levied on cargoes; port construction fees and facility security fee in accordance with governmentregulations. Port fees remitted by YICT for YPH /YPG are presented as part of “Port authorities’ share in gross revenues” in the unaudited interim condensed consolidated

— F-30 —

statements of income. Outstanding payable to YPH/YPG related to these port charges are presented under “Accounts payable and other current liabilities” account in theunaudited interim condensed consolidated balance sheets.

(ii) Trade transactions include utilities, rental and other transactions paid by YICT to YPH and YPG.(iii) The Board of YICT approved a management fee of RMB4.5 million (US$0.7 million) and RMB3.7 million (US$0.5 million) for the nine-months ended September 30, 2016 and

2017, respectively, allocated among the shareholders namely: ICTSI, DP World and YPH.(iv) On December 5, 2016, YICT obtained a US$21.6 million (RMB150.0 million) short-term loan from YPH at an interest rate of 4.35 percent per annum and a maturity date of

January 25, 2017. The loan was used to refinance YICT’s maturing loan with Agricultural Bank of China (ABC). On January 12 and March 1, 2017, YICT prepaid a total amountof US$3.0 million (RMB20.0 million) and the balance of US$18.9 million (RMB130 million) was renewed with an interest rate of 4.50 percent per annum and a maturity date ofApril 30, 2017. The remaining loan from YPH was fully paid upon the availment of a long-term loan from ABC on April 26, 2017.

(v) AGCT has entered into agreements with Luka Rijeka, a non-controlling shareholder, for the latter’s provision of services such as equipment maintenance, power and fuel andsupply of manpower, among others. Total expenses incurred by AGCT in relation to these agreements were recognized and presented in the unaudited interim condensedconsolidated statements of income as part of Manpower costs, Equipment and facilities-related expenses and Administrative and other operating expenses.

(vi) PICT has entered into an agreement with Premier Mercantile Services (Private) Limited for the latter to render stevedoring and other services, which are settled on a monthlybasis.

(vii) Premier Mercantile Services (Private) Limited, Marine Services (Private) Limited, Portlink International (Private) Limited, and AMI Pakistan (Private) Limited are customers ofPICT.

The outstanding balance arising from these related party transactions are current and payable withoutthe need for demand.

16.2 Compensation of Key Management Personnel

Compensation of key management personnel consists of the following for the nine months endedSeptember 30 (amounts in thousands):

2016 2017Short-term employee benefits US$937 US$1,179Share-based payments 1,419 924Post-employment pension 24 22Total compensation to key management personnel US$2,380 US$2,125

17. Earnings Per Share Computation

The table below shows the computation of basic and diluted earnings per share for the nine monthsended September 30 (amounts are in thousands, except number of shares and per share data):

2016 2017Net income attributable to equity holders of the parent US$141,920 US$149,316Adjustment for the effect of cumulative distributions on subordinated perpetual capital

securities (see Note 15.6) (35,775) (31,184)Net income attributable to equity holders of the parent, as adjusted (a) US$106,145 US$118,132

Common shares outstanding at beginning of period 2,045,177,671 2,045,177,671Weighted average treasury shares (11,638,223) (17,628,017)Weighted average shares held by a subsidiary (734,970) (734,970)Weighted average common shares issued during the period – –Weighted average shares outstanding (b) 2,032,804,478 2,026,814,684Effect of dilutive stock awards 12,065,581 11,078,174Weighted average shares outstanding adjusted for potential common shares (c) 2,044,870,059 2,037,892,858

Basic earnings per share (a/b) US$0.052 US$0.058

Diluted earnings per share (a/c) US$0.052 US$0.058

18. Contingencies

Due to the nature of the Group’s business, it is involved in various legal proceedings, both as plaintiffand defendant, from time to time. Management and its legal counsels believe that the Group hassubstantial legal and factual bases for its position and is of the opinion that losses arising from theexisting legal actions and proceedings, if any, will not have a material adverse impact on the Group’sconsolidated financial position and results of operations.

— F-31 —

19. Financial Instruments

19.1 Fair values

Set out below is a comparison of the carrying amounts and fair values of the Group’s financialinstruments by category whose fair value is different from its carrying amount:

December 31, 2016 September 30, 2017Carrying Amount Fair Value

Carrying Amount Fair Value

Financial LiabilitiesOther financial liabilities: Long-term debt US$1,344,766 US$1,429,710 US$1,408,484 US$1,529,253 Concession rights payable 490,462 548,769 482,771 534,249

US$1,835,228 US$1,978,479 US$1,891,255 US$2,063,502

Carrying values of cash and cash equivalents, receivables, accounts payable and other currentliabilities and loans payable approximate their fair values due to the short-term nature of the relatedtransactions.

The fair value of quoted AFS equity shares is based on quoted prices. For unquoted equity securities,the fair values are not reasonably determinable due to unavailability of required information forvaluation. These are presented based on cost less allowance for impairment losses. The unquotedequity securities pertain mainly to investments in golf clubs whose securities are not quoted andholding company whose shares are not publicly listed.

The fair values of the US dollar-denominated notes and US dollar-denominated medium-term notesare based on quoted prices. The fair value of other fixed interest-bearing loans and concession rightspayable were estimated at the present value of all future cash flows discounted using the applicablerates for similar types of loans ranging from 1.23 percent to 12.63 percent as at December 31, 2016and 1.40 percent to 12.16 percent as at September 30, 2017.

For variable interest-bearing loans repriced monthly or quarterly, the carrying amount approximatesthe fair value due to the regular repricing of interest rates.

19.2 Fair Value Hierarchy

The following tables below present the fair value hierarchy of the Group’s financial instruments:

December 31, 2016

Amount

Quoted prices inactive market

(Level 1)

Significantobservable

inputs(Level 2)

Significantunobservable

inputs(Level 3)

Assets and Liabilities Measured at FairValue:Derivative assets US$7,210 US$− US$7,210 US$−Derivative liabilities 1,975 − 1,975 −AFS investments 1,513 1,513 − −

Liabilities for which Fair Values areDisclosed:Other financial liabilities:Long-term debt 1,429,710 1,018,582 − 411,128Concession rights payable 548,769 − − 548,769

— F-32 —

September 30, 2017

Amount


(Level 1)


inputs(Level 2)


inputs(Level 3)

Assets and Liabilities Measured atFair Value:Derivative assets US$6,181 US$− US$6,181 US$−Derivative liabilities 4,898 − 4,898 −AFS investments 2,297 2,297 − −

Liabilities for which Fair Values areDisclosed:

Other financial liabilities: Long-term debt 1,529,253 1,052,517 − 476,736 Concession rights payable 534,249 − − 534,249

In 2016 and 2017, there were no transfers between Level 1 and Level 2 fair value measurements andno transfers into and out of Level 3 fair value measurements.

19.3 Derivative Instruments

Interest Rate Swaps. In 2014, AGCT entered into an interest rate swap transaction to hedge theinterest rate exposure on its floating rate Euro denominated loan maturing in 2023. A notionalamount of EUR5.1 million (US$6.2 million) and EUR3.8 million (US$4.6 million) out of the totalEUR10.6 million (US$12.8 million) floating rate loan was swapped to fixed rate. Under the interestrate swap, AGCT pays fixed interest of 6.19 percent for EUR5.1 million and 5.55 percent for EUR3.8million and receives floating rate of one-month EURIBOR plus 4.20 bps on the notional amount. Asat September 30, 2017, the market valuation loss on the outstanding interest rate swap amounted toEUR0.5 million (US$0.4 million). The effective portion of the fair value of the interest rate swapamounting to EUR0.4 million (US$0.3 million), net of EUR0.1 million (US$0.1 million) deferred taxfor the nine months period ended September 30, 2017, was taken to equity under othercomprehensive loss.

In January 2016, CMSA entered into interest rate swap transactions to hedge the interest rateexposure on its floating rate US$-denominated floating rate loan maturing in 2027. A total notionalamount of US$181.0 million floating rate loan was swapped to fixed rate. Under the interest rateswap arrangements, CMSA pays annual fixed interest of an average 2.44% and receives floating rateof six-month LIBOR on the notional amount. As of September 30, 2017, the net market valuation losson the outstanding interest rate swaps amounted to US$2.6 million. The effective portion of the fairvalue of the interest rate swap amounting to US$1.8 million, net of US$0.8 million deferred tax, forthe nine months period ended September 30, 2017, was taken to equity under other comprehensiveloss.

In August 2016, VICT entered into interest rate swap transactions to hedge the interest rate exposureson its floating rate AUD-denominated loans maturing in 2023, 2026 and 2031. A total notionalamount of AUD320.4 million floating rate loan was swapped to fixed rate. Under the interest rateswap arrangements, VICT pays annual fixed interest of a range of 2.10% to 2.5875% and receivesfloating rate of six-month Bank Bill Swap Bid Rate (BBSY) basis points on the notional amount. Asat September 30, 2017, the market valuation gain on the outstanding interest rate swaps amounted toAUD7.7 million (US$6.0 million). The effective portion of the fair value of the interest rate swapamounting to AUD5.0 million (US$4.0 million), net of AUD2.7 million (US$2.0 million) deferredtax, for the nine months period ended September 30, 2017, was taken to equity under othercomprehensive loss.

— F-33 —

In November 2016, ICTSI entered into an interest rate swap transaction to hedge the interest rateexposures of the CGSA’s floating rate US$-denominated floating rate loan maturing in 2021. A totalnotional amount of US$32.5 million floating rate loan was swapped to fixed rate. Under the interestrate swap arrangements, ICTSI pays annual fixed interest of 3.045 percent and receives floating rateof six-month LIBOR plus 160 basis points on the notional amount. As of September 30, 2017, themarket valuation gain on the outstanding interest rate swaps amounted to US$144.8 thousand. Theeffective portion of the fair value of the interest rate swap amounting to US$101.4 thousand, net ofUS$43.4 thousand deferred tax, for the nine months period ended September 30, 2017, was taken toequity under other comprehensive loss.

Net Investment Hedging. In March 2017, ICTSI entered into a cross currency swap that converts theUS dollar bond with a coupon of 7.375% maturing on March 17, 2020 to a Euro liability that has acoupon of 5.05% with the same maturity. The EUR15.0 million cross currency swap was designatedas a net investment hedge to offset the movement of the Group’s Euro net investment in its subsidiaryin Madagascar, MICTSL. As of September 30, 2017, the market valuation loss on the outstandingcross currency swap amounted to EUR2.2 million (US$1.9 million). The effective portion of the fairvalue of the cross currency swap amounting to EUR1.5 million (US$1.3 million), net of EUR0.7million (US$0.6 million) deferred tax, for the nine months period ended September 30, 2017, wastaken to equity under other comprehensive loss.

20. Trends, Events, or Uncertainties Affecting Recurring Revenues and Profit

The Group is exposed to a number of trends, events and uncertainties which can affect its recurringrevenues and profits. These include levels of general economic activity and containerized tradevolume in countries where it operates, as well as certain cost items, such as labor, fuel and power. Inaddition, the Group operates in a number of jurisdictions other than the Philippines and collectsrevenues in various currencies. Continued appreciation of the US dollar relative to other majorcurrencies, particularly the Philippine peso, Brazilian real, Mexican peso and the Euro, may have anegative impact on the Group’s reported levels of revenues and profits.

— F-34 —

INDEPENDENT AUDITOR’S REPORT

The Stockholders and the Board of DirectorsInternational Container Terminal Services, Inc.ICTSI Administration BuildingMICT South Access Road, Manila

Opinion

We have audited the consolidated financial statements of International Container TerminalServices, Inc. and its subsidiaries (the Group), which comprise the consolidated balance sheets asat December 31, 2014, 2015 and 2016, and the consolidated statements of income, consolidatedstatements of comprehensive income, consolidated statements of changes in equity andconsolidated statements of cash flows for each of the three years in the period then ended, andnotes to the consolidated financial statements, including a summary of significant accountingpolicies.

In our opinion, the accompanying consolidated financial statements present fairly, in all materialrespects, the consolidated financial position of the Group as at December 31, 2014, 2015 and2016, and its consolidated financial performance and its consolidated cash flows for each of thethree years in the period then ended in accordance with Philippine Financial Reporting Standards(PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities forthe Audit of the Consolidated Financial Statements section of our report. We are independent ofthe Group in accordance with the Code of Ethics for Professional Accountants in the Philippines(Code of Ethics), together with the ethical requirements that are relevant to our audit of theconsolidated financial statements in the Philippines, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of our audit of the consolidated financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on these matters. Foreach matter below, our description of how our audit addressed the matter is provided in thatcontext.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018

— F-35 —

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit ofthe Consolidated Financial Statements section of our report, including in relation to thesematters. Accordingly, our audit included the performance of procedures designed to respond toour assessment of the risks of material misstatement of the consolidated financial statements.The results of our audit procedures, including the procedures performed to address the mattersbelow, provide the basis for our audit opinion on the accompanying consolidated financialstatements.

Impairment assessment of goodwill and finite life intangible assets and property and equipment

Under PFRS, the Group is required to perform an impairment test on goodwill annually and onfinite life intangible assets and property and equipment when impairment indicators exist. Theseimpairment tests are significant to our audit because the balance of goodwill and finite lifeintangible assets and property and equipment of certain subsidiaries as disclosed in Notes 6, 7and 11 to the consolidated financial statements aggregating US$348.7 million as ofDecember 31, 2016, is material to the consolidated financial statements. In addition,management’s assessment process is highly judgmental and involves significant estimationbased on assumptions, specifically the forecasted revenue growth, earnings before interest, tax,depreciation and amortization (EBITDA) margins and weighted average cost of capital, whichare affected by expected future market or economic conditions, in the country where the cashgenerating unit operates.

Audit Response

We obtained an understanding of the Group’s impairment assessment process and the relatedcontrols. We involved our internal specialist to assist us in evaluating the assumptions andmethodologies used by the Group in its value-in-use calculation. These assumptions include theforecasted revenue growth, EBITDA margins and weighted average cost of capital. We alsoreviewed the basis and assumptions for estimates of free cash flows, in particular those relatingto the forecasted revenue growth and EBITDA margins, which we compared against theavailable comparable market data in the country where it is situated, regionally and worldwide orwith the other subsidiaries of the Group in the region. We tested the parameters used in thederivation of the discount rate against market data. We also focused on the Group’s disclosuresabout those assumptions to which the outcome of the impairment test is most sensitive,specifically those that have the most significant effect on the determination of the recoverableamount of the goodwill and finite life non-financial assets.

Provision for probable loss on pre-termination of lease agreement with The Port of Portland

As discussed in Note 25 to the consolidated financial statements, the Group and The Port ofPortland reached an agreement to pre-terminate the lease agreement between ICTSI Oregon,Inc., a subsidiary in the United States of America, and The Port of Portland on March 8, 2017.Such an event was considered by the Group as an adjusting event after the balance sheet date andaccordingly recognized a provision for the probable loss on pre-termination of such lease

— F-36 —

agreement amounting to $23.4 million as of December 31, 2016, which is material to theconsolidated financial statements. This matter is important to our audit because the provisioninvolves significant management judgment and estimation.

Audit Response

Our audit procedures included, among others, discussion with management about the details ofthe plan, status of negotiation with the counterparty and reading the minutes of meeting of theBoard of Directors’ approving the termination plan and the lease termination agreement signedon March 8, 2017. We evaluated management’s estimate of the provision by reading the termsof the lease agreement with respect to the consequences of early termination and comparing suchterms against the subsequent settlement agreement.

Other Information

Management is responsible for the other information. The other information comprises the SECForm 17 A for the year ended December 31, 2016 but does not include the consolidated financialstatements and our auditor’s report thereon, which we obtained prior to the date of this auditor’sreport, and the SEC Form 20 IS (Definitive Information Statement) and Annual Report for theyear ended December 31, 2016, which is expected to be made available to us after that date.

Our opinion on the financial statements does not cover the other information and we do notexpress any form of assurance conclusion thereon.

In connection with our audits of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistentwith the financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.

If, based on the work we have performed on the other information that we obtained prior to thedate of this auditor’s report, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the ConsolidatedFinancial Statements

Management is responsible for the preparation and fair presentation of the consolidated financialstatements in accordance with PFRSs, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free frommaterial misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern, disclosing, as applicable, matters related to goingconcern and using the going concern basis of accounting unless management either intends toliquidate the Group or to cease operations, or has no realistic alternative but to do so.

— F-37 —

Those charged with governance are responsible for overseeing the Group’s financial reportingprocess.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financialstatements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with PSAs will alwaysdetect a material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financialstatements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financialstatements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion. The risk of not detecting a material misstatement resulting from fraud is higherthan for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we arerequired to draw attention in our auditor’s report to the related disclosures in the consolidatedfinancial statements or, if such disclosures are inadequate, to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor’s report.However, future events or conditions may cause the Group to cease to continue as a goingconcern.

Evaluate the overall presentation, structure and content of the consolidated financialstatements, including the disclosures, and whether the consolidated financial statementsrepresent the underlying transactions and events in a manner that achieves fair presentation.

— F-38 —

Obtain sufficient appropriate audit evidence regarding the financial information of theentities or business activities within the Group to express an opinion on the consolidatedfinancial statements. We are responsible for the direction, supervision and performance of thegroup audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significantdeficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied withrelevant ethical requirements regarding independence, and to communicate with them allrelationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.

From the matters communicated with those charged with governance, we determine thosematters that were of most significance in the audit of the consolidated financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in our auditor’sreport unless law or regulation precludes public disclosure about the matter or when, inextremely rare circumstances, we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected to outweighthe public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Arnel F. DeJesus.

SYCIP GORRES VELAYO & CO.

Arnel F. De JesusPartnerCPA Certificate No. 43285SEC Accreditation No. 0075-AR-4 (Group A), May 1, 2016, valid until May 1, 2019Tax Identification No. 152-884-385BIR Accreditation No. 08-001998-15-2015, June 26, 2015, valid until June 25, 2018PTR No. 5908688, January 3, 2017, Makati City

March 9, 2017

— F-39 —

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

December 31, 2014 December 31, 2015 December 31, 2016

ASSETS

Noncurrent AssetsIntangibles (Notes 1, 4, 6, 16, 21 and 25) US$1,770,539,612 US$1,715,582,534 US$1,720,204,617Property and equipment (Notes 1, 4, 7, 16, 21 and 25) 934,435,672 1,148,856,114 1,381,483,081Investment properties (Notes 1, 8 and 21) 12,227,571 6,840,870 6,255,304Investments in and advances to a joint venture and an associate

(Notes 1 and 9) 140,718,921 231,915,840 293,638,405Deferred tax assets (Notes 1, 4, 5, 21 and 22) 57,882,550 76,372,445 90,571,814Other noncurrent assets (Notes 1, 4, 7, 10, 16, 21, 24, 25 and 27) 125,342,996 137,513,798 164,963,515

Total Noncurrent Assets 3,041,147,322 3,317,081,601 3,657,116,736

Current AssetsCash and cash equivalents (Notes 1, 4, 12, 21 and 28) 194,297,656 354,481,813 325,058,592Receivables (Notes 1, 4, 13, 21 and 28) 90,819,288 87,200,481 102,930,437Spare parts and supplies (Notes 1, 4 and 21) 26,139,888 27,595,895 33,525,428Prepaid expenses and other current assets (Notes 1, 4, 14 and 21) 48,366,228 44,108,114 56,285,515Derivative assets (Note 27) – 331,154 7,209,706

Total Current Assets 359,623,060 513,717,457 525,009,678US$3,400,770,382 US$3,830,799,058 US$4,182,126,414

EQUITY AND LIABILITIES

Equity Attributable to Equity Holders of the ParentCapital stock:

Preferred stock (Note 15) US$236,222 US$236,222 US$236,222Common stock (Note 15) 67,330,188 67,330,188 67,330,188

Additional paid-in capital (Notes 15 and 20) 530,677,807 534,808,153 536,216,117Cost of shares held by subsidiaries (Note 15) (72,492,481) (74,261,595) (74,261,595)Treasury shares (Notes 15 and 20) (1,176,660) (7,547,826) (17,904,401)Excess of acquisition cost over the carrying value of non-controlling

interests (Note 15) (135,447,513) (142,555,041) (142,555,041)Retained earnings (Note 15) 763,314,929 723,158,999 779,439,375Perpetual capital securities (Note 15) 337,032,372 831,910,439 761,341,287Other comprehensive loss - net (Notes 10, 15, 24 and 27) (173,432,739) (258,636,420) (285,445,364)

Total equity attributable to equity holders of the parent 1,316,042,125 1,674,443,119 1,624,396,788

Equity Attributable to Non-controlling Interests (Notes 4, 15 and 25) 157,523,057 151,604,756 141,683,210Total Equity 1,473,565,182 1,826,047,875 1,766,079,998

Noncurrent LiabilitiesLong-term debt - net of current portion (Notes 4, 6, 7, 10, 16 and 27) 998,193,586 1,026,578,274 1,326,280,115Concession rights payable - net of current portion

(Notes 1, 4, 6, 21, 25 and 27) 518,730,363 503,207,718 481,700,775Deferred tax liabilities (Notes 4, 5 and 22) 68,065,690 66,860,253 71,376,805Other noncurrent liabilities (Notes 17, 24 and 25) 58,670,555 119,353,699 90,845,390

Total Noncurrent Liabilities 1,643,660,194 1,715,999,944 1,970,203,085

Current LiabilitiesLoans payable (Notes 4, 18 and 27) 24,479,272 2,027,231 36,598,275Accounts payable and other current liabilities

(Notes 1, 4, 19, 21, 23 and 27) 185,665,716 200,870,158 347,709,086Current portion of long-term debt (Notes 4, 6, 7, 16 and 27) 47,773,885 54,465,076 18,485,813Current portion of concession rights payable (Notes 6, 25 and 27) 7,505,989 8,830,040 8,760,661Income tax payable (Notes 4, 5 and 22) 17,368,716 22,004,517 32,314,007Derivative liabilities (Note 27) 751,428 554,217 1,975,489

Total Current Liabilities 283,545,006 288,751,239 445,843,331Total Liabilities 1,927,205,200 2,004,751,183 2,416,046,416

US$3,400,770,382 US$3,830,799,058 US$4,182,126,414

See accompanying Notes to Consolidated Financial Statements.

— F-40 —

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME

Years Ended December 312014 2015 2016

INCOMEGross revenues from port operations (Note 25) US$1,061,152,193 US$1,051,324,893 US$1,128,394,951Interest income (Note 12) 10,915,149 13,382,788 17,651,096Foreign exchange gain (Note 28) 1,156,709 3,672,109 4,658,987Gain on sale of subsidiaries (Notes 1 and 4) 44,956,617 323,414 –Other income (Notes 1, 8, 17, 21, 23 and 27) 14,203,365 6,482,728 13,393,566

1,132,384,033 1,075,185,932 1,164,098,600

EXPENSESPort authorities’ share in gross revenues

(Notes 1, 21, 23, 25 and 27) 163,648,155 169,003,118 183,702,136Manpower costs (Notes 20, 23 and 24) 205,398,916 193,163,997 192,536,167Equipment and facilities-related expenses (Notes 23 and 25) 135,480,833 124,753,827 119,877,144Administrative and other operating expenses (Notes 23 and 26) 113,615,160 114,381,768 107,201,160Depreciation and amortization (Notes 6, 7 and 8) 121,686,193 126,453,035 147,830,235Interest expense and financing charges on borrowings

(Notes 10, 16 and 18) 58,855,664 61,230,778 75,050,456Interest expense on concession rights payable (Note 6) 38,065,934 37,301,423 34,049,611Equity in net loss of a joint venture (Note 9) 2,188,511 3,229,754 5,571,997Foreign exchange loss (Note 28) 4,259,091 3,742,129 4,886,956Impairment losses (Notes 3 and 6) 38,147,779 114,561,125 –Other expenses (Notes 1, 9, 10, 16, 21, 23, 26 and 27) 5,643,111 7,747,908 36,351,260

886,989,347 955,568,862 907,057,122

CONSTRUCTION REVENUE (EXPENSE) (Note 25)Construction revenue 106,174,672 116,078,526 55,946,602Construction expense (106,174,672) (116,078,526) (55,946,602)

– – –

INCOME BEFORE INCOME TAX 245,394,686 119,617,070 257,041,478

PROVISION FOR INCOME TAX (Note 22)Current 60,759,365 60,705,444 69,631,408Deferred (6,877,551) (10,067,819) (6,060,308)

53,881,814 50,637,625 63,571,100

NET INCOME US$191,512,872 US$68,979,445 US$193,470,378

Attributable ToEquity holders of the parent US$181,988,167 US$58,545,218 US$180,015,587Non-controlling interests 9,524,705 10,434,227 13,454,791

US$191,512,872 US$68,979,445 US$193,470,378

Earnings Per Share (Note 29)Basic US$0.075 US$0.011 US$0.066Diluted 0.075 0.011 0.065


— F-41 —

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


NET INCOME FOR THE YEAR US$191,512,872 US$68,979,445 US$193,470,378

OTHER COMPREHENSIVE LOSSItems to be reclassified to profit or loss in subsequent periodsExchange differences on translation of foreign operations’

financial statements (Note 15) (58,470,094) (97,151,895) (39,958,650)Net change in unrealized mark-to-market values of derivatives

(Note 27) (6,933,792) 93,060 6,133,973Net unrealized loss (gain) on derivatives removed from equity

and capitalized as construction in-progress (Note 27) 6,240,237 1,855,269 (345,539)Net unrealized mark-to-market gain (loss) on available-for-sale

investments (Notes 10 and 27) (5,167) 72,395 (173,874)Net unrealized loss on derivatives removed from equity and

recognized in profit or loss (Note 27) 2,831,048 104,151 –Income tax relating to components of other comprehensive

income (loss) 149,244 (89,335) (1,611,411)(56,188,524) (95,116,355) (35,955,501)

Items not to be reclassified to profit or loss in subsequent periodsActuarial gains (losses) on defined benefit plans - net of tax

(Note 24) (1,716,070) 1,360,510 (245,391)(57,904,594) (93,755,845) (36,200,892)

TOTAL COMPREHENSIVE INCOME (LOSS)FOR THE YEAR US$133,608,278 (US$24,776,400) US$157,269,486

Attributable ToEquity holders of the parent US$128,862,532 (US$26,658,463) US$153,206,643Non-controlling interests 4,745,746 1,882,063 4,062,843

US$133,608,278 (US$24,776,400) US$157,269,486


— F-42 —

INT

ER

NA

TIO

NA

L C

ON

TA

INE

R T

ER

MIN

AL

SE

RV

ICE

S, IN

C. A

ND

SU

BSI

DIA

RIE

SC

ON

SOL

IDA

TE

D S

TA

TE

ME

NT

S O

F C

HA

NG

ES

IN E

QU

ITY

FOR

TH

E Y

EA

RS

EN

DE

D D

EC

EM

BE

R 3

1, 2

014,

201

5 A

ND

201

6

Att

ribu

tabl

e to

Equ

ity H

olde

rs o

f the

Par

ent(

Not

e 15

)

Pref

erre

d St

ock

Com

mon

Sto

ck

Add

ition

alPa

id-in

Cap

ital

Pref

erre

dSh

ares

Hel

dby

a S

ubsid

iary

Com

mon

Shar

es H

eld

by a

Sub

sidia

ryTr

easu

ry S

hare

s

Exce

ss o

f A

cqui

sitio

nC

ost o

ver t

heC

arry

ing

Val

ueof

Non

-co

ntro

lling

Inte

rest

sR

etai

ned

Earn

ings

Per

petu

al C

apit

al S

ecur

ities

Oth

er C

ompr

ehen

sive

Los

s - n

etTo

tal

Non

-con

trol

ling

Inte

rest

s(N

ote

15)

Tota

l Equ

ity

Bala

nce

at D

ecem

ber 3

1, 2

013

US$

236,

222

US$

67,3

29,9

51U

S$52

6,49

0,73

6(U

S$72

,492

,481

)U

S$–

(US$

1,37

4,48

6)(U

S$13

7,03

7,64

8)U

S$64

9,70

0,11

0U

S$33

7,03

2,37

2(U

S$12

0,30

7,10

4)U

S$1,

249,

577,

672

US$

103,

659,

705

US$

1,35

3,23

7,37

7N

et in

com

e fo

r the

yea

r–

––

––

––

181,

988,

167

––

181,

988,

167

9,52

4,70

519

1,51

2,87

2O

ther

com

preh

ensiv

e lo

ss (N

ote

15)

––

––

––

––

–(5

3,12

5,63

5)(5

3,12

5,63

5)(4

,778

,959

)(5

7,90

4,59

4)To

tal c

ompr

ehen

sive

inco

me

for t

he y

ear (

Not

e 15

)–

––

––

––

181,

988,

167

–(5

3,12

5,63

5)12

8,86

2,53

24,

745,

746

133,

608,

278

Cash

div

iden

ds (N

ote

15)

––

––

––

–(3

9,06

0,84

8)–

–(3

9,06

0,84

8)(1

1,61

1,68

3)(5

0,67

2,53

1)D

istrib

utio

ns o

n su

bord

inat

ed p

erpe

tual

secu

ritie

s (N

ote

15)

––

––

––

–(2

9,31

2,50

0)–

–(2

9,31

2,50

0)–

(29,

312,

500)

Sale

of s

ubsi

diar

ies (

Not

es 1

and

4)

––

––

––

––

––

–(6

1,40

0,95

2)(6

1,40

0,95

2)Ch

ange

in n

on-c

ontro

lling

inte

rests

(Not

es 4

and

15)

––

––

––

1,59

0,13

5–

––

1,59

0,13

5(2

,590

,146

)(1

,000

,011

)Sh

are-

base

d pa

ymen

ts (N

ote

20)

––

4,38

3,53

7–

––

––

–4,

383,

537

–4,

383,

537

Col

lect

ion

of su

bscr

iptio

ns re

ceiv

able

–23

71,

360

––

––

––

–1,

597

–1,

597

Issu

ance

of t

reas

ury

shar

es fo

r sha

re-b

ased

pay

men

ts(N

otes

15

and

20)

––

(197

,826

)–

–19

7,82

6–

––

––

––

Effe

ct o

f bus

ines

s co

mbi

natio

n (N

ote

4)–

––

––

––

––

––

124,

720,

387

124,

720,

387

Bala

nce

at D

ecem

ber 3

1, 2

014

US$

236,

222

US$

67,3

30,1

88U

S$53

0,67

7,80

7(U

S$72

,492

,481

)U

S$–

(US$

1,17

6,66

0)(U

S$13

5,44

7,51

3)U

S$76

3,31

4,92

9U

S$33

7,03

2,37

2(U

S$17

3,43

2,73

9)U

S$1,

316,

042,

125

US$

157,

523,

057

US$

1,47

3,56

5,18

2

Bala

nce

at D

ecem

ber 3

1, 2

014

US$

236,

222

US$

67,3

30,1

88U

S$53

0,67

7,80

7(U

S$72

,492

,481

)U

S$–

(US$

1,17

6,66

0)(U

S$13

5,44

7,51

3)U

S$76

3,31

4,92

9U

S$33

7,03

2,37

2(U

S$17

3,43

2,73

9)U

S$1,

316,

042,

125

US$

157,

523,

057

US$

1,47

3,56

5,18

2N

et in

com

e fo

r the

yea

r–

––

––

––

58,5

45,2

18–

–58

,545

,218

10,4

34,2

2768

,979

,445

Oth

er c

ompr

ehen

sive

loss

(Not

e 15

)–

––

––

––

––

(85,

203,

681)

(85,

203,

681)

(8,5

52,1

64)

(93,

755,

845)

Tota

l com

preh

ensiv

e in

com

e fo

r the

yea

r (N

ote

15)

––

––

––

–58

,545

,218

–(8

5,20

3,68

1)(2

6,65

8,46

3)1,

882,

063

(24,

776,

400)

Cash

div

iden

ds (N

ote

15)

––

––

––

–(4

1,15

6,54

9)–

–(4

1,15

6,54

9)(9

,944

,112

)(5

1,10

0,66

1)D

istri

butio

ns o

n pe

rpet

ual c

apita

l sec

uriti

es (N

ote

15)

––

––

––

–(3

3,42

2,87

9)–

–(3

3,42

2,87

9)–

(33,

422,

879)

Sale

of s

ubsi

diar

ies (

Not

es 1

and

4)

––

––

––

––

––

–(2

68,0

56)

(268

,056

)Ch

ange

in n

on-c

ontro

lling

inte

rests

(Not

es 4

and

15)

––

––

––

(7,1

07,5

28)

––

–(7

,107

,528

)2,

411,

804

(4,6

95,7

24)

Shar

e-ba

sed

paym

ents

(Not

e 20

)–

–4,

292,

926

––

––

––

–4,

292,

926

–4,

292,

926

Issu

ance

of t

reas

ury

shar

es fo

r sha

re-b

ased

pay

men

ts(N

otes

15

and

20)

––

(219

,641

)–

–21

9,64

1–

––

––

––

Acq

uisit

ion

of IC

TSI c

omm

on sh

ares

(Not

e 15

)–

––

–(3

,598

,405

)(6

,590

,807

)–

––

–(1

0,18

9,21

2)–

(10,

189,

212)

Sale

of s

hare

s hel

d by

a su

bsid

iary

(Not

e 15

)–

–57

,061

–1,

829,

291

––

––

–1,

886,

352

–1,

886,

352

Issu

ance

and

exc

hang

e of

per

petu

al c

apita

lse

curit

ies (

Not

e 15

)–

––

––

––

(23,

233,

696)

506,

219,

964

–48

2,98

6,26

8–

482,

986,

268

Acq

uisit

ion

of p

erpe

tual

cap

ital s

ecur

ities

(Not

e 15

)–

––

––

––

(888

,024

)(1

1,34

1,89

7)–

(12,

229,

921)

–(1

2,22

9,92

1)Ba

lanc

e at

Dec

embe

r 31,

201

5U

S$23

6,22

2U

S$67

,330

,188

US$

534,

808,

153

(US$

72,4

92,4

81)

(US$

1,76

9,11

4)(U

S$7,

547,

826)

(US$

142,

555,

041)

US$

723,

158,

999

US$

831,

910,

439

(US$

258,

636,

420)

US$

1,67

4,44

3,11

9U

S$15

1,60

4,75

6U

S$1,

826,

047,

875

— F-43 —

Att

ribu

tabl

e to

Equ

ity H

olde

rs o

f the

Par

ent(

Not

e 15

)

Pref

erre

d St

ock

Com

mon

Sto

ck

Add

ition

alPa

id-in

Cap

ital

Pref

erre

dSh

ares

Hel

dby

a S

ubsid

iary

Com

mon

Shar

es H

eld

by a

Sub

sidia

ryTr

easu

ry S

hare

s

Exce

ss o

f A

cqui

sitio

nC

ost o

ver t

heC

arry

ing

Val

ueof

Non

-co

ntro

lling

Inte

rest

sR

etai

ned

Earn

ings

Per

petu

al C

apit

al S

ecur

ities

Oth

er C

ompr

ehen

sive

Los

s - n

etTo

tal

Non

-con

trol

ling

Inte

rest

s(N

ote

15)

Tota

l Equ

ity

Bala

nce

at D

ecem

ber 3

1, 2

015

US$

236,

222

US$

67,3

30,1

88U

S$53

4,80

8,15

3(U

S$72

,492

,481

)(U

S$1,

769,

114)

(US$

7,54

7,82

6)(U

S$14

2,55

5,04

1)U

S$72

3,15

8,99

9U

S$83

1,91

0,43

9(U

S$25

8,63

6,42

0)U

S$1,

674,

443,

119

US$

151,

604,

756

US$

1,82

6,04

7,87

5N

et in

com

e fo

r the

yea

r–

––

––

––

180,

015,

587

––

180,

015,

587

13,4

54,7

9119

3,47

0,37

8O

ther

com

preh

ensiv

e lo

ss (N

ote

15)

––

––

––

––

–(2

6,80

8,94

4)(2

6,80

8,94

4)(9

,391

,948

)(3

6,20

0,89

2)To

tal c

ompr

ehen

sive

inco

me

for t

he y

ear (

Not

e 15

)–

––

––

––

180,

015,

587

–(2

6,80

8,94

4)15

3,20

6,64

34,

062,

843

157,

269,

486

Cash

div

iden

ds (N

ote

15)

––

––

––

–(3

9,89

3,19

0)–

–(3

9,89

3,19

0)(1

3,98

4,38

9)(5

3,87

7,57

9)D

istri

butio

ns o

n pe

rpet

ual c

apita

l sec

uriti

es (N

ote

15)

––

––

––

–(3

4,16

0,58

4)–

–(3

4,16

0,58

4)–

(34,

160,

584)

Shar

e-ba

sed

paym

ents

(Not

e 20

)–

–2,

641,

929

––

––

––

–2,

641,

929

–2,

641,

929

Issu

ance

of t

reas

ury

shar

es fo

r sha

re-b

ased

pay

men

ts(N

otes

15

and

20)

––

(1,2

33,9

65)

––

1,23

3,96

5–

––

––

–A

cqui

sitio

n of

ICTS

I com

mon

shar

es (N

ote

15)

––

––

–(1

1,59

0,54

0)–

––

–(1

1,59

0,54

0)–

(11,

590,

540)

Issu

ance

and

exc

hang

e of

per

petu

al c

apita

lse

curit

ies (

Not

e 15

)–

––

––

––

(49,

681,

437)

(70,

569,

152)

–(1

20,2

50,5

89)

–(1

20,2

50,5

89)

Bala

nce

at D

ecem

ber 3

1, 2

016

US$

236,

222

US$

67,3

30,1

88U

S$53

6,21

6,11

7(U

S$72

,492

,481

)(U

S$1,

769,

114)

(US$

17,9

04,4

01)(

US$

142,

555,

041)

US$

779,

439,

375

US$

761,

341,

287

(US$

285,

445,

364)

US$

1,62

4,39

6,78

8U

S$14

1,68

3,21

0U

S$1,

766,

079,

998

See

acco

mpa

nyin

g No

tes t

o Co

nsol

idat

ed F

inan

cial

Sta

tem

ents.

— F-44 —

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS


CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax US$245,394,686 US$119,617,070 US$257,041,478Adjustments for:

Depreciation and amortization (Notes 6, 7 and 8) 121,686,193 126,453,035 147,830,235Interest expense on:

Borrowings (Notes 16 and 18) 58,855,664 61,230,778 75,050,456Concession rights payable (Note 6) 38,065,934 37,301,423 34,049,611

Loss (gain) on:Pre-termination of lease agreement (Note 21) – – 23,432,184Sale of property and equipment - net (Note 21) (547,960) 233,952 (1,501,293)Sale of subsidiaries (Notes 1 and 4) (44,956,617) (323,414) –Termination of management contract (Notes 1, 6 and 21) (2,880,829) – –Termination of pre-payment option (Notes 21 and 27) 737,581 – –Settlement of insurance claims - net (Note 21) (724,871) –

Interest income (Note 12) (10,915,149) (13,382,788) (17,651,096)Equity in net loss of a joint venture (Note 9) 2,188,511 3,229,754 5,571,997Share-based payments (Notes 15 and 20) 4,370,775 4,268,260 2,882,755Unrealized foreign exchange loss (gain) 1,059,336 (617,469) 1,104,768Unrealized mark-to-market loss (gain) on derivatives

(Notes 21 and 27) – (331,154) 408,960Dividend income (Note 21) (1,578,798) (646,559) (198,706)Impairment losses (Notes 3 and 6) 38,147,779 114,561,125 –

Operating income before changes in working capital 448,902,235 451,594,013 528,021,349Decrease (increase) in: Receivables 2,440,585 (2,572,580) (17,586,640)

Prepaid expenses and other current assets 12,530,779 2,213,257 (9,243,104)Spare parts and supplies (4,944,583) (3,996,345) (2,882,808)

Increase (decrease) in:Accounts payable and other current liabilities (13,684,428) 14,950,833 28,246,083Pension liabilities 1,760,843 1,724,747 1,215,591

Cash generated from operations 447,005,431 463,913,925 527,770,471Income taxes paid (59,184,221) (56,177,186) (60,822,253)Net cash flows provided by operating activities 387,821,210 407,736,739 466,948,218

CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of:

Property and equipment (Note 7) (146,004,075) (252,613,499) (275,203,651)Intangible assets (Notes 6 and 25) (133,045,049) (143,423,774) (105,775,868)Subsidiaries, net of cash acquired (Notes 1 and 4) (135,422,490) (54,500,000) –

Proceeds from:Sale of property and equipment (Notes 7 and 21) 5,042,277 1,173,861 9,018,966Sale of subsidiaries, net of cash held by subsidiaries

(Notes 1 and 4) 94,579,587 (110,947) – Termination of management contract (Notes 1, 6 and 21) 15,879,734 – –Interest received 7,090,360 4,616,281 3,133,709Dividends received 1,651,566 646,559 198,706Increase in investment in and advances to a joint venture

(Notes 9 and 23) (61,286,055) (86,007,868) (52,365,327)Decrease (increase) in other noncurrent assets (Note 10) 18,770,249 (8,000,757) (34,767,221)Payments for concession rights (8,033,121) (9,390,879) (12,705,362)Net cash flows used in investing activities (340,777,017) (547,611,023) (468,466,048)

(Forward)

— F-45 —


CASH FLOWS FROM FINANCING ACTIVITIESProceeds from:

Long-term borrowings (Note 16) US$112,934,078 US$212,237,826 US$473,106,139Short-term borrowings (Note 18) 15,000,000 7,231,507 71,233,855Issuance of perpetual capital securities (Note 15) – 482,986,268 1,874,063Sale of common shares held by a subsidiary (Note 15) – 1,886,352 –

Payments of:Long-term borrowings (Notes 4 and 16) (46,764,112) (178,008,493) (207,128,087)Acquisition of perpetual capital securities (Note 15) – (12,229,921) (122,124,651)Interest on borrowings and concession rights payable (92,351,339) (92,822,617) (99,397,410)Dividends (Note 15) (49,551,834) (52,284,328) (53,669,360)Distributions on subordinated perpetual capital securities

(Note 15) (29,312,500) (33,422,879) (34,160,584) Short-term borrowings (Notes 4 and 18) (7,030,474) (29,745,248) (35,697,231)Acquisition of own common shares (Note 15) – (6,590,807) (11,590,540)Increase in other noncurrent liabilities (Note 16) 8,938,126 6,135,470 (4,124,707)Change in non-controlling interests (Note 15) (6,000,011) (4,695,724) –Acquisition of ICTSI common shares by a subsidiary (Note 15) – (3,598,405) –Net cash flows provided by (used in) financing activities (94,138,066) 297,079,001 (21,678,513)

EFFECT OF EXCHANGE RATE CHANGES ON CASHAND CASH EQUIVALENTS (843,010) 2,979,440 (6,226,878)

NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS (47,936,883) 160,184,157 (29,423,221)

CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 242,234,539 194,297,656 354,481,813

CASH AND CASH EQUIVALENTSAT END OF YEAR (Note 12) US$194,297,656 US$354,481,813 US$325,058,592


— F-46 —

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

1.1 General

International Container Terminal Services, Inc. (ICTSI or the Parent Company) was incorporatedin the Philippines and registered with the Philippine Securities and Exchange Commission (SEC)on December 24, 1987. The registered office address of the Parent Company is ICTSIAdministration Building, Manila International Container Terminal South Access Road, Manila.ICTSI’s common shares are publicly traded in the Philippine Stock Exchange (PSE).

The consolidated financial statements were authorized for issue in accordance with a resolution ofthe Board of Directors (the Board) on March 9, 2017.

1.2 Port Operations

ICTSI and subsidiaries (collectively referred to as “the Group”) entered into various concessionsof port operations which include development, management, and operation of container terminalsand related facilities around the world. As at March 9, 2017, the Group is involved in 28 terminalconcessions and port development projects in 18 countries worldwide. These are 25 operatingterminals in eight key ports and an inland container terminal in the Philippines, two in Indonesiaand one each in China, Ecuador, Brazil, Poland, Georgia, Madagascar, Croatia, Pakistan, Mexico,Honduras, Iraq, Argentina, Colombia and DR Congo; an ongoing port development project inAustralia; a sub-concession agreement to develop, manage and operate a port in Nigeria; and arecent acquisition of an existing concession to construct and operate a port in Tuxpan, Mexico.The projects in DR Congo and Colombia started initial operations in the third quarter and fourthquarter of 2016, respectively. Phase 1 of the project in Australia is expected to commencecommercial operations in the second quarter of 2017. Construction of the port in accordance withthe sub-concession agreement in Nigeria is currently in the planning stage.

Concessions for port operations entered into, acquired and terminated by ICTSI and subsidiariesfor the last three years are summarized below:

River Port, Matadi, Democratic Republic of Congo. On January 23, 2014, ICTSI, through itssubsidiary, ICTSI Cooperatief U.A. (ICTSI Cooperatief), forged a business partnership with LaSociete de Gestion Immobiliere Lengo (SIMOBILE) for the establishment and formation of a jointventure company, ICTSI DR Congo S.A. (IDRC). IDRC, which is initially 60 percent-owned byICTSI Cooperatief, will build a new terminal along the river bank of the Congo River in Matadiand manage, develop and operate the same as a container terminal, as well as provide exclusivecontainer handling services and general cargo services therein. On May 19, 2015, ICTSI, throughits subsidiary, ICTSI Cooperatief, and its joint venture partner, SIMOBILE, transferred theirrespective 8% and 2% ownership interest in IDRC to Societe Commerciale Des Transports Et DesPorts S.A. (SCTP SA). SIMOBILE transferred to its subsidiary, La Societe d’Investissement et dePlacement (SIP) Sprl, its 10% ownership in IDRC. Thereafter, IDRC is owned 52% by ICTSI,28% by SIMOBILE, 10% by SIP Sprl and 10% by SCTP SA.

— F-47 —

Phase 1 of the facility consists of two berths that can handle 120,000 twenty-foot equivalent units(TEUs) and 350,000 metric tons. The capacity and berth length can, subject to demand, bedoubled in Phase 2. Phase 1 was completed in the fourth quarter of 2016. Initial operationsstarted in the third quarter of 2016 while commercial operations started in January 2017.

Umm Qasr, Iraq. ICTSI, through its wholly owned subsidiary, ICTSI (M.E.) DMCC [formerlyICTSI (M.E.) JLT] (ICTSI Dubai), and General Company for Ports of Iraq (GCPI) signed onApril 8, 2014 the Contract for the Construction and Operation of Three New Quays andManagement and Operation of Quay No. 20 (“Contract”) in the Port of Umm Qasr (“Port”) inIraq. The Contract grants ICTSI the rights to: (a) manage and operate the existing containerfacility at Berth 20 of the Port for a period of 10 years, (b) build in three phases, under a build-operate-transfer (BOT) scheme, a new container and general cargo terminal in the Port for aconcession period of 26 years, and (c) provide container and general cargo terminal services inboth components. On March 1, 2016, an addendum to the Contract (“Addendum”) was signed bythe parties granting ICTSI, through ICTSI Dubai, the right to manage and operate an additionalexisting Quay No. 19 for a total of 13 years, with the first three years for the completion ofrehabilitation works. Also, the Addendum extended the original term for the management andoperation of Quay No. 20 from 10 to 13 years.

ICTSI commenced trial operations at Berth 20 in September 2014 and full-fledged commercialoperations in November 2014. ICTSI commenced commercial operations of Berth 19 inJune 2016.

Phase 1 of the expansion project under the BOT scheme will have 250 meters of berth with anestimated capacity of 300,000 TEUs. When fully developed, the facility will have 600 meters ofquay with an estimated capacity of 900,000 TEUs. Phase 1 is expected to be completed and fullyoperational by first quarter of 2017.

Port of Melbourne, Australia. On May 2, 2014, ICTSI, through its subsidiary in Australia,Victoria International Container Terminal Ltd. (VICT), signed a contract in Melbourne with Portof Melbourne Corporation (“POMC”) for the design, construction, commissioning, operation,maintaining and financing of the Webb Dock Container Terminal (Terminal) and EmptyContainer Park (ECP) at Webb Dock East (WDE) in the Port of Melbourne. Initially, VICT was90% owned by ICTSI through ICTSI Far East Pte. Ltd. (IFEL), a wholly owned subsidiary, and10% by Anglo Ports Pty Limited (“Anglo Ports”). On February 4, 2015, IFEL acquired the 10%non-controlling interest from Anglo Ports and became 100% owner of VICT. On January 7, 2016,IFEL’s ownership interest in VICT was transferred to another subsidiary, ICTSI Oceania B.V.(IOBV), making IOBV the new 100% owner of VICT. The Contract grants VICT the rights to:(a) design, build and commission the new Terminal at berths WDE 4 and WDE 5, (b) design,build and commission the new ECP at WDE, and (c) operate the Terminal and ECP untilJune 30, 2040.

Phase 1 of the Terminal and the ECP with capacities of 350,000 TEUs and 250,000 TEUs,respectively, are expected to commence commercial operations in the second quarter of 2017.Phase 2 construction of the Terminal with a capacity of 1,000,000 TEUs is expected to becompleted in the last quarter of 2017.

Port of Kattupalli, India. On June 30, 2014, ICTSI, through its subsidiaries, ICTSI Ltd. andInternational Container Terminal Services (India) Private Limited (ICTSI India), and L&TShipbuilding Ltd. (LTSB) signed a termination agreement cancelling ICTSI’s container portagreement for the management and operation of the Kattupalli Container Terminal in Tamil,

— F-48 —

Nadu, India. In accordance with the termination agreement, LTSB agreed to pay ICTSI Indiaapproximately US$15.9 million (INR957.5 million) as reimbursement of the license fee the latterpaid to operate the terminal plus management fees and other amounts due to the latter. Thetransaction resulted to recognition of a gain on termination of management contract ofUS$2.9 million (INR175.1 million) in 2014 presented under “Other income” account, whichrepresents the difference between the US$13.0 million book value of the intangible assetderecognized and the US$15.9 million proceeds from the termination collected on July 9, 2014.

Yantai, China. On July 1, 2014, ICTSI, through its subsidiary, ICTSI (Hongkong) Limited(IHKL), acquired 51 percent of the total equity interest of Yantai International ContainerTerminals, Limited (YICT). On the same date, ICTSI sold its 60 percent ownership interest inYantai Rising Dragon International Container Terminal, Ltd. (YRDICTL) (see Note 4.1). Theobjective of these transactions is to consolidate and optimize the overall port operations withinthe Zhifu Bay Port Area. YICT became the only foreign container terminal and YRDICTL isdedicated to handling local container cargo within the Zhifu Bay Port Area.

Laguna Gateway Inland Container Terminal, Philippines. On March 2, 2015, Laguna GatewayInland Container Terminal, Inc. (LGICT) started operating the first one-stop inland containerterminal (ICT) located in Barangays Banlic and San Cristobal, Calamba City, Laguna. LGICT is60%-owned by IW Cargo Handlers, Inc. (IW Cargo) and 40%-owned by Nippon ContainerTerminals Co. Ltd., Transnational Diversified Corporation and NYK - Fil-Japan Shipping Corp.The ICT primarily operates as an extension of the seaport operations of the Parent Company. Inparticular, the said ICT is intended to function as a regional logistics hub, which will service andsupport the operations of exporters and importers, both within and outside the economic zones inthe LABARZON area. Only fifty-eight (58) kilometers from Metro Manila, the ICT is situatedon a twenty-one (21)-hectare property, strategically located near various economic export zoneswith an already existing adjacent railroad. Of the said twenty-one (21) hectares, twelve (12)hectares have already been developed and now being used for operations. Envisioned to be thefirst of its kind in magnitude and operations, the ICT is being developed as a 24/7 state-of-the-artfacility with cutting edge terminal systems and equipment.

Tuxpan, Mexico. On May 27, 2015, ICTSI, through its subsidiary, ICTSI Tuxpan B.V., acquiredfrom Grupo TMM S.A.B and Immobiliaria TMM S.A. de C.V 100 percent of the capital stock ofTerminal Maritima de Tuxpan, S.A de C.V (TMT) for US$54.5 million. TMT is a company dulyincorporated in accordance with the laws of Mexico with a concession to construct and operate amaritime container terminal in the Port of Tuxpan, Mexico and is the owner of the real estatewhere the maritime container terminal will be constructed. The concession agreement is validuntil May 25, 2021, subject to extension for another 20 years. The concession covers an area of29,109.68 square meters, which is adjacent to the 43 hectares of land owned by TMT. Under theconcession agreement, TMT is liable and committed to: (1) pay fixed fee of MXN23.24 plusvalue added tax (VAT), per square meter of assigned area; and (2) pay variable fee starting year2018. As of March 9, 2017, management is currently working on a development plan on TMT.

Brunei, Darussalam. On May 21, 2009, ICTSI, through New Muara Container TerminalServices Sdn Bhd (NMCTS), entered into an Agreement with the Government for the operationand maintenance of the Muara Container Terminal in Brunei Darussalam. The Agreement wasvalid for a period of four years from commencement date or May 22, 2009. The term wasextendible for a period of one year at a time, for a maximum of two years subject to the mutualagreement of the parties. Since 2012, the Agreement had been extended yearly for a period ofone year or until May 20, 2017 as an interim operator. The Agreement with the BruneiGovernment was no longer renewed and ended effective February 21, 2017.

— F-49 —

Davao, Philippines. On April 21, 2006, the Philippine Ports Authority (PPA) granted DavaoIntegrated Port and Stevedoring Services Corporation (DIPSSCOR) a ten-year contract for cargohandling services at Sasa Wharf, Port of Davao in the Philippines that expired onApril 20, 2016. The tender process for the Davao Sasa Port Modernization project has startedand ICTSI is one of the short-listed bidders. On April 15, 2016, the local office of the PPA inDavao City granted DIPSSCOR a hold-over authority for a period of six months untilOctober 20, 2016 over the cargo handling services at Sasa Wharf, Port of Davao. OnSeptember 8, 2016, another hold-over authority for a period of six months until April 20, 2017was granted by the PPA office in Davao City.

South Cotabato, Philippines. On February 20, 2006, the PPA granted South Cotabato IntegratedPort Services, Inc. (SCIPSI) a ten-year contract for the exclusive management and operation ofarrastre, stevedoring, bagging and crated cargo handling services at Makar Wharf, Port of GeneralSantos, General Santos City in the Philippines that expired on February 19, 2016. OnFebruary 19, 2016, the local office of the PPA in General Santos City granted SCIPSI a hold-overauthority for a period of one year until February 19, 2017 over the cargo handling services atMakar Wharf, Port of General Santos. On February 25, 2017, another hold-over authority for aperiod of one year until February 24, 2018 was granted by the PPA office in General Santos City.

Port of Portland, Oregon, U.S.A. In October 2016, the Board of ICTSI Ltd. has authorized themanagement of ICTSI Oregon to negotiate with the Port of Portland and reach terms mutuallyacceptable to both parties with respect to the termination of the lease agreement after two majorcustomers, Hanjin Shipping Co. and Hapag-Lloyd stopped calling the Port of Portland inMarch 2015 due to continuing labor disruptions. In late 2016, the Port of Portland and ICTSIOregon began discussions of a mutual agreement to terminate the lease agreement. As ofDecember 31, 2016, the Group has provided for the amount of probable loss on thepre-termination of the lease agreement based on the Group’s best estimate of the probableoutcome of the negotiations with the Port of Portland. The estimated amount of probable lossfrom the pre-termination of the lease agreement charged to the 2016 consolidated statement ofincome was US$23.4 million (see Notes 21 and 25.20).

On March 8, 2017, ICTSI, through ICTSI Oregon, and the Port of Portland have signed a LeaseTermination Agreement and both parties have mutually agreed to terminate the 25-year LeaseAgreement to operate the container facility at Terminal 6 of the Port of Portland with an effectivedate of March 31, 2017. The Lease Termination Agreement allows ICTSI Oregon to be relievedof its long-term lease obligations. In exchange, the Port of Portland will receive US$11.45 millionin cash compensation and container handling equipment including spare parts and tools.

1.3 Subsidiaries and Joint Venture

Percentage of OwnershipPlace of Nature of Functional 2014 2015 2016Incorporation Business Currency Direct Indirect Direct Indirect Direct Indirect

AsiaInternational Container Terminal

Holdings, Inc. (ICTHI)and Subsidiaries

Cayman Islands HoldingCompany

US Dollar

100.00 – 100.00 – 100.00 –Container Terminal Systems Solutions,

Inc. (CTSSI) (g)Mauritius Software

DeveloperUS Dollar

– 100.00 – – – –ICTSI Ltd. Bermuda Holding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00ICTSI Mauritius Ltd. Mauritius Holding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00Aeolina Investments Limited British Virgin

IslandsHolding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00Pakistan International Container

Terminal (PICT)Pakistan Port

ManagementPakistani

Rupee – 64.53 – 64.53 – 64.53IFEL Singapore Holding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00

— F-50 —


NMCTS Brunei PortManagement

Brunei Dollar– 100.00 – 100.00 – 100.00

PT ICTSI Jasa Prima Tbk (JASA) andSubsidiaries

Indonesia Maritimeinfrastructureand logistics

US Dollar

– 80.16 – 80.16 – 80.16PT PBM Olah Jasa Andal (OJA) Indonesia Port

ManagementUS Dollar

– 80.16 – 80.16 – 80.16PT Makassar Terminal Services, Inc.

(MTS)Indonesia Port

ManagementIndonesian

Rupiah – 95.00 – 95.00 – 95.00PT Container Terminal Systems

Solutions Indonesia (PT CTSSI)Indonesia Software

DeveloperUS Dollar

– 100.00 – 100.00 – 100.00IHKL Hong Kong Holding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00YICT (c) China Port

ManagementRenminbi

– 51.00 – 51.00 – 51.00Pentland International Holdings, Ltd. British Virgin

IslandsHolding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00ICTSI Georgia Corp. (IGC) Cayman Islands Holding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00Global Procurement Ltd. (GPL, formerly

ICTSI Poland)Bermuda Holding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00ICTSI Honduras Ltd. Bermuda Holding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00ICTSI Ltd. Regional Headquarters Philippines Regional

HeadquartersPhilippine

Peso – 100.00 – 100.00 – 100.00ICTSI India India Port

ManagementIndian Rupee

– 100.00 – 100.00 – 100.00Container Terminal de Venezuela

Conterven CA (CTVCC)Venezuela Holding

CompanyUS Dollar

– 95.00 – 95.00 – 95.00ICTSI Africa (Pty) Ltd. South Africa Business

DevelopmentOffice (BDO)

SouthAfricanRand – 100.00 – 100.00 – 100.00

Australian International ContainerTerminals Limited (AICTL) (a)

Australia PortManagement

AustralianDollar – 70.00 – 70.00 – 70.00

Mindanao International ContainerTerminal Services, Inc. (MICTSI)

Philippines PortManagement

PhilippinePeso 100.00 100.00 100.00

Abbotsford Holdings, Inc. Philippines HoldingCompany

PhilippinePeso 100.00 – 100.00 – 100.00 –

Hijo International Port Services, Inc.(HIPS)


PhilippinePeso – 65.00 – 65.00 – 65.00

DIPSSCOR Philippines PortManagement

PhilippinePeso – 96.95 – 96.95 – 96.95

ICTSI Warehousing, Inc. (IWI) Philippines Warehousing PhilippinePeso 100.00 – 100.00 – 100.00 –

IW Cargo Philippines Port EquipmentRental

US Dollar– 100.00 – 100.00 – 100.00

Container Terminal Systems SolutionsPhilippines, Inc. (CTSSI Phils.)

Philippines SoftwareDeveloper

US Dollar– 100.00 – 100.00 – 100.00

Bauan International Ports, Inc. (BIPI) Philippines PortManagement

PhilippinePeso – 60.00 – 60.00 – 60.00

Prime Staffers and Selection Bureau,Inc. (PSSBI) (a)

Philippines ManpowerRecruitment

PhilippinePeso 100.00 – 100.00 – 100.00 –

ICTSI Subic, Inc. (ICTSI Subic) Philippines PortManagement

US Dollar100.00 – 100.00 – 100.00 –

Subic Bay International TerminalHoldings, Inc. (SBITHI)

Philippines HoldingCompany

US Dollar83.33 – 83.33 – 83.33 –

Subic Bay International TerminalCorporation (SBITC)


US Dollar– 83.33 – 83.33 – 83.33

Cordilla Properties Holdings Inc.(Cordilla)

Philippines HoldingCompany

PhilippinePeso 100.00 100.00 100.00

SCIPSI Philippines PortManagement

PhilippinePeso 35.70 14.38 35.70 14.38 35.70 14.38

ICTSI Dubai United ArabEmirates

BDO US Dollar100.00 100.00 100.00

ICTSI Capital B.V. (ICBV) TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

Naha International Container Terminal,Inc. (NICTI) (j)

Japan PortManagement

Japanese Yen60.00 – – – – –

Icon Logistiek B.V. TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

Royal Capital B.V. (RCBV) TheNetherlands

HoldingCompany

US Dollar– 75.00 – 75.00 – 75.00

ICTSI Cooperatief TheNetherlands

HoldingCompany

US Dollar1.00 99.00 1.00 99.00 1.00 99.00

Global Container Capital, B.V. TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

ICTSI Treasury B.V. (ITBV) (b) TheNetherlands

HoldingCompany

US Dollar– 75.00 – 75.00 – 75.00

— F-51 —


ICTSI Americas B.V. (b) TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

ICTSI Africa B.V. (b) TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

ICTSI Cameroon B.V. (formerly GlobalProcurement B.V.) (b)

TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

CMSA B.V. (b) TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

Tecplata B.V. (b) TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

SPIA Colombia B.V. (b) TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

TSSA B.V. (b) TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

CGSA B.V. (b) TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

SPIA Spain SL (b) Spain HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

CGSA Transportadora SL (b) Spain HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

Crixus Limited British VirginIslands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

VICT (a) Australia PortManagement

US Dollar– 90.00 – 100.00 – 100.00

Asia Pacific Port Holdings Private Ltd.(APPH) (d)

Singapore HoldingCompany

US Dollar– 50.50 – 50.50 – 50.50

ICTSI Global Finance B.V. (IGFBV) (b) TheNetherlands

HoldingCompany

US Dollar– 75.00 – 75.00 – 75.00

IOBV (b) TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

ICTSI Tuxpan B.V. (b) TheNetherlands

HoldingCompany

US Dollar– 100.00 – 100.00 – 100.00

ICTSI Asia Pacific Business Services,Inc. (h)

Philippines Business ProcessOutsourcing

US Dollar– – – 100.00 – 100.00

ICTSI Ltd. Regional OperatingHeadquarters (ROHQ) (h)

Philippines RegionalOperatingHeadquarters

US Dollar

– – – 100.00 – 100.00ICTSI Project Delivery Services Co. Pte.

Ltd. (IPDS) (h)Singapore Port Equipment

Sale andRental

US Dollar

– – – 100.00 – 100.00ICTSI QFC LLC (h) Qatar Holding

CompanyUS Dollar

– – – 100.00 – 100.00ICTSI South Asia Pte. Ltd. (h) Singapore Holding

CompanyUS Dollar

– – – 100.00 – 100.00LGICT (h) Philippines Port

ManagementPhilippine

Peso – – – 60.00 – 60.00ICTSI Middle East DMCC (h) United Arab

EmiratesHolding

CompanyUS Dollar

– – – 100.00 – 100.00ICTSI Global Cooperatief U.A. (h) The

NetherlandsHolding

CompanyUS Dollar

– – 100.00 – 100.00 –Consultports S.A. de C.V. (k) Mexico BDO Mexican

Peso – – – – – 100.00Cavite Gateway Terminal, Inc. (CGT) (m) Philippines Port

ManagementPhilippine

Peso – – – – – 100.00Intermodal Terminal Holdings, Inc. (m) Philippines Holding

CompanyPhilippine

Peso – – – – – 100.00

Europe, Middle East and Africa(EMEA)

Tartous International ContainerTerminal, Inc. (TICT)

Syria PortManagement

US Dollar100.00 – 100.00 – 100.00 –

Madagascar International ContainerTerminal Services, Ltd. (MICTSL)

Madagascar PortManagement

Euro– 100.00 – 100.00 – 100.00

Baltic Container Terminal Ltd. (BCT) Poland PortManagement

US Dollar– 100.00 – 100.00 – 100.00

Adriatic Gate Container Terminal(AGCT) (f)

Croatia PortManagement

Euro– 51.00 – 51.00 – 51.00

Batumi International Container TerminalLLC (BICTL)

Georgia PortManagement

US Dollar– 100.00 – 100.00 – 100.00

Lekki International Container TerminalServices LFTZ Enterprise(LICTSLE) (a)

Nigeria PortManagement

US Dollar

– 100.00 – 100.00 – 100.00IDRC (a) DR Congo Port

ManagementUS Dollar

– 60.00 – 52.00 – 52.00ICTSI (M.E.) DMCC Iraq Branch

(ICTSI Iraq) (b)Iraq Port

ManagementUS Dollar

– 100.00 – 100.00 – 100.00

— F-52 —


AmericasContecon Guayaquil, S.A. (CGSA) (n) Ecuador Port

ManagementUS Dollar

99.99 0.01 99.99 0.01 51.00 49.00Contecon Manzanillo S.A. (CMSA) (l) Mexico Port

ManagementUS Dollar

1.00 99.00 1.00 99.00 1.00 99.00Tecon Suape, S.A. (TSSA) Brazil Port

ManagementBrazilian

Real – 100.00 – 100.00 – 100.00ICTSI Oregon, Inc. (ICTSI Oregon) U.S.A. Port

ManagementUS Dollar

100.00 100.00 100.00C. Ultramar, S.A. Panama Holding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00Future Water, S.A. Panama Holding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00Kinston Enterprise, Inc. Panama Holding

CompanyUS Dollar

– 100.00 – 100.00 – 100.00International Ports of South America

and Logistics SA (IPSAL)Uruguay Holding

CompanyUS Dollar

100.00 100.00 100.00Tecplata S.A. (Tecplata) (a) Argentina Port

ManagementUS Dollar

100.00 100.00 100.00Nuevos Puertos S. A. (NPSA) Argentina Holding

CompanyUS Dollar

4.00 96.00 4.00 96.00 4.00 96.00OPC Honduras Port

ManagementUS Dollar

30.00 70.00 30.00 70.00 30.00 70.00TMT(i) Mexico Port

ManagementMexican

Peso – – – 100.00 – 100.00Sociedad Puerto Industrial Aguadulce

SA (SPIA) (e)Colombia Port

ManagementUS Dollar

– 45.65 – 46.30 – 46.30

(a) Has not yet started commercial operations as at December 31, 2016 (b) Established in 2014 (c) Acquired in 2014(d) Acquired in March 2014 for US$89.1 thousand. This was not accounted for as a business combination due to immateriality of amount involved.(e) Became a joint venture starting November 1, 2013 and changed its functional currency from Colombian Peso to US Dollar in 2014(f) Changed its functional currency from Croatian Kuna to Euro in 2014(g) Dissolved on January 5, 2015(h) Established in 2015(i) Acquired in 2015(j) Disposed in 2015(k) Acquired in 2016 for US$60.0 thousand. This was not accounted for as a business combination due to immateriality of amount involved.(l) Changed its functional currency from Mexican Peso to US Dollar on July 1, 2016(m) Established in 2016(n) In 2016, the Parent Company’s shareholdings was diluted to 51% as a result of internal restructuring.

In 2014, ICTSI, through its subsidiaries ICTSI Ltd. and IPSAL, purchased 45.08 percentownership in NPSA, non-controlling shareholder of Tecplata, for US$6.0 million. The purchasewas accounted for as an acquisition of non-controlling interests. This transaction effectivelyincreased ICTSI’s ownership in Tecplata to 100.00 percent in 2014 (see Note 15.4).

On November 28, 2013, ICTSI and the other shareholders of CICTI (the “Sellers”) entered into aconditional Share Purchase Agreement (SPA) with Cebu Asian Rim Property and DevelopmentCorporation and Hongkong Land (Philippines) BV (the “Buyers”) for the sale of its entireownership in CICTI. On January 13, 2014, and upon fulfillment of conditions under the SPA, theSellers executed a Deed of Absolute Sale in favor of the Buyers. ICTSI’s share in the netproceeds from the sale amounted to US$26.6 million (P=1.2 billion). Net cash inflow from the saleof CICTI, which excludes the cash and cash equivalents of CICTI as at date of sale, amounted toUS$26.5 million. The sale resulted in the recognition of gain on sale amounting toUS$13.2 million in the 2014 consolidated statement of income shown as part of “Gain on sale ofsubsidiaries” account.

On February 4, 2015, IFEL acquired the 10% non-controlling interest from Anglo Ports andbecame 100% owner of VICT for US$5.8 million. This resulted in the reduction ofnon-controlling interests account and the difference between the purchase price and carrying valueof the non-controlling interest of US$6.2 million was recognized under “Excess of acquisition costover the carrying value of non-controlling interests” account in the 2015 consolidated balancesheet.

— F-53 —

On April 27, 2015, NICTI purchased ICTSI’s 60 percent ownership interest in NICTI forJPY107.0 million (approximately US$0.9 million) as part of its treasury shares. The 10-year leaseagreement of NICTI expired end of 2015 and ICTSI was no longer interested in participating inthe negotiation for the renewal of the lease agreement. The transaction resulted in the recognitionof gain on sale amounting to US$0.3 million in the 2015 consolidated statement of income.

In the 2015 consolidated statement of cash flows, the net cash outflow at disposal date on the saleof NICTI amounting to US$0.1 million was derived as follows:

AmountCash proceeds from sale US$873,569Less cash and cash equivalents of NICTI 984,516Net cash outflow for the sale of NICTI (US$110,947)

On May 19, 2015, ICTSI, through its subsidiary, ICTSI Cooperatief, and its joint venture partner,SIMOBILE, transferred their respective 8% and 2% ownership interest in IDRC to SocieteCommerciale Des Transports Et Des Ports S.A. (SCTP SA) in exchange for the latter’scontribution of technical knowledge, skills and substantial experience in the port and port systemin DRC and operation of railroad system and undertaking to facilitate the activities of IDRC and toassist in its relations with the public authorities. SIMOBILE transferred to its subsidiary, SIP Sprl,its 10% ownership in IDRC. Thereafter, IDRC is owned 52% by ICTSI, 28% by SIMOBILE,10% by SIP Sprl and 10% by SCTP SA. The transaction was accounted for as a change innon-controlling interest and was recorded as an increase of US$0.9 million in the “Excess ofacquisition cost over the carrying value of non-controlling interests” account in the 2015consolidated balance sheet.

On May 27, 2015, ICTSI, through its subsidiary, ICTSI Tuxpan B.V., acquired from Grupo TMMS.A.B and Immobiliaria TMM S.A. de C.V 100 percent of the capital stock of TMT forUS$54.5 million. The acquisition did not qualify as an acquisition of a business in accordancewith Philippine Financial Reporting Standards (PFRS) 3, Business Combination, and wastherefore accounted for as acquisition of assets, mainly composed of land and concession rights.

The fair values of the identifiable assets and liabilities of TMT at the date of acquisition were:

Fair Value Recognized on

AcquisitionAssetsProperty and equipment - land US$51,411,762Intangibles - concession rights 3,246,838Prepaid expenses and other current assets 162,744

54,821,344

LiabilitiesAccounts payable and other current liabilities 321,344Purchase consideration transferred and satisfied by cash US$54,500,000

— F-54 —

2. Basis of Preparation and Consolidation and Statement of Compliance

2.1 Basis of Preparation

The consolidated financial statements have been prepared on a historical cost basis, except foravailable-for-sale (AFS) investments and derivative financial instruments, which have beenmeasured at fair value. The consolidated financial statements are presented in United Statesdollars (US dollar, USD or US$), the Parent Company’s functional and presentation currency. Allvalues are rounded to the nearest US dollar unit, except when otherwise indicated.

2.2 Basis of Consolidation

The consolidated financial statements of the Group include the accounts of ICTSI and itssubsidiaries where the Parent Company has control. Control is achieved when the Group isexposed, or has rights, to variable returns from its involvement with the investee and has theability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if and only if the Group has:Power over the investee (i.e., existing rights that give it the current ability to direct therelevant activities of the investee)Exposure, or rights, to variable returns from its involvement with the investee, andThe ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Groupconsiders all relevant facts and circumstances in assessing whether it has power over an investee,including:

The contractual arrangement with the other vote holders of the investeeRights arising from other contractual arrangementsThe Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicatethat there are changes to one or more of the three elements of control.

Subsidiaries. Subsidiaries are entities controlled by the Parent Company. Subsidiaries areconsolidated from the date of acquisition or incorporation, being the date on which the Groupobtains control, and continue to be consolidated until the date such control ceases.

Non-controlling Interests. Non-controlling interests represent the portion of profit or loss and netassets in PICT, MTS, AICTL, CTVCC, SBITC, SBITHI, BIPI, NICTI (until April 2015),DIPSSCOR, YRDICTL (until June 30, 2014), YICT, SCIPSI, RCBV, AGCT, JASA, OJA, ITBV,HIPS, VICT (until February 2015), APPH, IGFBV, IDRC, Tecplata and NPSA (both untilMarch 2014) and LGICT, not held by the Group and are presented separately in the consolidatedstatement of income and the consolidated statement of comprehensive income, and consolidatedbalance sheet separate from equity attributable to equity holders of the parent.

An acquisition, transfer or sale of a non-controlling interest is accounted for as an equitytransaction. No gain or loss is recognized in an acquisition of a non-controlling interest. Thedifference between the fair value of the consideration and book value of the share in the net assetsacquired is presented under “Excess of acquisition cost over the carrying value of non-controllinginterests” account within the equity section of the consolidated balance sheet. If the Group losescontrol over a subsidiary, it: (i) derecognizes the assets (including goodwill) and liabilities of the

— F-55 —

subsidiary, the carrying amount of any non-controlling interest and the cumulative translationdifferences recorded in equity; (ii) recognizes the fair value of the consideration received, the fairvalue of any investment retained and any surplus or deficit in the consolidated statement ofincome; and (iii) reclassifies the Parent Company’s share of components previously recognized inother comprehensive income to the consolidated statement of income or retained earnings, asappropriate.

Transactions Eliminated on Consolidation. All intragroup transactions and balances includingincome and expenses, and unrealized gains and losses are eliminated in full.

Accounting Policies of Subsidiaries. The financial statements of subsidiaries are prepared for thesame reporting year using uniform accounting policies as those of the Parent Company.

Functional and Presentation Currency. The Group’s consolidated financial statements arepresented in US dollar, which is ICTSI’s functional and presentation currency. Each entity in theGroup determines its own functional currency, which is the currency that best reflects theeconomic substance of the underlying transactions, events and conditions relevant to that entity,and items included in the financial statements of each entity are measured using that functionalcurrency. When there is a change in those underlying transactions, events and conditions, theentity reassesses its functional currency. When there is a change in functional currency, the entityaccounts for such change in accordance with the Group’s accounting policy on Change inFunctional Currency.

At the reporting date, the assets and liabilities of subsidiaries whose functional currency is not theUS dollar are translated into the presentation currency of ICTSI using the Bloomberg closing rateat balance sheet date and, their statements of income are translated at the Bloomberg weightedaverage daily exchange rates for the year. The exchange differences arising from the translationare taken directly and deferred to the consolidated statement of comprehensive income under the“Exchange differences on translation of foreign operations’ financial statements” account. Upondisposal of the foreign entity, the deferred cumulative translation amount recognized in theconsolidated statement of comprehensive income relating to that particular foreign operation isrecognized in the consolidated statement of income.

2.3 Statement of Compliance

The consolidated financial statements of the Group have been prepared in compliance with PFRS.PFRS includes Philippine Accounting Standards (PAS) and International Financial ReportingInterpretations Committee (IFRIC) interpretations issued by the Financial Reporting StandardsCouncil (FRSC).

— F-56 —

3. Summary of Significant Accounting Policies, Significant Accounting Judgments, Estimatesand Assumptions

3.1 Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous financial year exceptthat the Group has adopted the following amended standards as at January 1, 2016:

Amendments to PFRS 10, Consolidated Financial Statements, PFRS 12, Disclosure ofInterests in Other Entities, and PAS 28, Investments in Associates and Joint Ventures,Investment Entities: Applying the Consolidation ExceptionThese amendments clarify that the exemption in PFRS 10 from presenting consolidatedfinancial statements applies to a parent entity that is a subsidiary of an investment entity thatmeasures all of its subsidiaries at fair value. They also clarify that only a subsidiary of aninvestment entity that is not an investment entity itself and that provides support services tothe investment entity parent is consolidated. The amendments also allow an investor (that isnot an investment entity and has an investment entity associate or joint venture) to retain thefair value measurement applied by the investment entity associate or joint venture to itsinterests in subsidiaries when applying the equity method.

These amendments are not applicable to the Group since none of the entities within the Groupis an investment entity nor does the Group have investment entity associates or joint venture.

Amendments to PFRS 11, Joint Arrangements, Accounting for Acquisitions of Interests inJoint OperationsThe amendments to PFRS 11 require a joint operator that is accounting for the acquisition ofan interest in a joint operation, in which the activity of the joint operation constitutes abusiness (as defined by PFRS 3), to apply the relevant PFRS 3 principles for businesscombinations accounting. The amendments also clarify that a previously held interest in ajoint operation is not remeasured on the acquisition of an additional interest in the same jointoperation while joint control is retained. In addition, a scope exclusion has been added toPFRS 11 to specify that the amendments do not apply when the parties sharing joint control,including the reporting entity, are under common control of the same ultimate controllingparty.

The amendments apply to both the acquisition of the initial interest in a joint operation and theacquisition of any additional interests in the same joint operation.

The adoption of these amendments has no impact on the consolidated financial statements ofthe Group.

PFRS 14, Regulatory Deferral AccountsPFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferralaccount balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14 mustpresent the regulatory deferral accounts as separate line items on the statement of financialposition and present movements in these account balances as separate line items in thestatement of income and other comprehensive income. The standard requires disclosures onthe nature of, and risks associated with, the entity’s rate-regulation and the effects of that rate-regulation on its financial statements.

Since the Group is an existing PFRS preparer, this standard is not applicable.

— F-57 —

Amendments to PAS 1, Presentation of Financial Statements, Disclosure InitiativeThe amendments are intended to assist entities in applying judgment when meeting thepresentation and disclosure requirements in PFRSs. They clarify the following:• That entities shall not reduce the understandability of their financial statements by either

obscuring material information with immaterial information; or aggregating material itemsthat have different natures or functions

• That specific line items in the statement of income and other comprehensive income andthe statement of financial position may be disaggregated

• That entities have flexibility as to the order in which they present the notes to financialstatements

• That the share of other comprehensive income of associates and joint ventures accountedfor using the equity method must be presented in aggregate as a single line item, andclassified between those items that will or will not be subsequently reclassified to profit orloss.

The adoption of these amendments has no significant impact on the consolidated financialstatements.

Amendments to PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets,Clarification of Acceptable Methods of Depreciation and AmortizationThe amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern ofeconomic benefits that are generated from operating a business (of which the asset is part)rather than the economic benefits that are consumed through use of the asset. As a result, arevenue-based method cannot be used to depreciate property, plant and equipment and mayonly be used in very limited circumstances to amortize intangible assets.

The adoption of these amendments has no impact on the consolidated financial statementsgiven that the Group has not used a revenue-based method to depreciate its noncurrent assets.

Amendments to PAS 16 and PAS 41, Agriculture: Bearer PlantsThe amendments change the accounting requirements for biological assets that meet thedefinition of bearer plants. Under the amendments, biological assets that meet the definition ofbearer plants will no longer be within the scope of PAS 41. Instead, PAS 16 will apply. Afterinitial recognition, bearer plants will be measured under PAS 16 at accumulated cost (beforematurity) and using either the cost model or revaluation model (after maturity). Theamendments also require that produce that grows on bearer plants will remain in the scope ofPAS 41 measured at fair value less costs to sell. For government grants related to bearerplants, PAS 20, Accounting for Government Grants and Disclosure of Government Assistance,will apply.

The adoption of these amendments has no impact on the consolidated financial statementssince the Group does not have any bearer plants.

Amendments to PAS 27, Separate Financial Statements, Equity Method in Separate FinancialStatementsThe amendments allow entities to use the equity method to account for investments insubsidiaries, joint ventures and associates in their separate financial statements. Entitiesalready applying PFRS and electing to change to the equity method in its separate financialstatements will have to apply that change retrospectively.

— F-58 —

The adoption of these amendments has no impact on consolidated financial statements asthese amendments apply to separate financial statements. The Group did not elect to changethe method of accounting from cost to equity in the respective separate financial statements ofthe parent company and its subsidiaries that are issuing separate financial statements.

Annual Improvements to PFRSs (2012-2014 cycle)These improvements are effective for annual periods beginning on or after January 1, 2016.Unless otherwise stated, these amendments have no significant impact on the Group’sconsolidated financial statements. They include:

Amendment to PFRS 5, Non-current Assets Held for Sale and Discontinued Operations,Changes in Methods of DisposalThe amendment is applied prospectively and clarifies that changing from a disposal throughsale to a disposal through distribution to owners and vice-versa should not be considered to bea new plan of disposal, rather it is a continuation of the original plan. There is, therefore, nointerruption of the application of the requirements in PFRS 5. The amendment also clarifiesthat changing the disposal method does not change the date of classification.

Amendment to PFRS 7, Financial Instruments: Disclosures, Servicing ContractsPFRS 7 requires an entity to provide disclosures for any continuing involvement in atransferred asset that is derecognized in its entirety. The amendment clarifies that a servicingcontract that includes a fee can constitute continuing involvement in a financial asset. Anentity must assess the nature of the fee and arrangement against the guidance for continuinginvolvement in PFRS 7 in order to assess whether the disclosures are required. Theamendment is to be applied such that the assessment of which servicing contracts constitutecontinuing involvement will need to be done retrospectively. However, comparativedisclosures are not required to be provided for any period beginning before the annual periodin which the entity first applies the amendments.

Amendment to PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed InterimFinancial StatementsThis amendment is applied retrospectively and clarifies that the disclosures on offsetting offinancial assets and financial liabilities are not required in the condensed interim financialreport unless they provide a significant update to the information reported in the most recentannual report.

Amendment to PAS 19, Employee Benefits, Discount Rate: Regional Market IssueThis amendment is applied prospectively and clarifies that market depth of high qualitycorporate bonds is assessed based on the currency in which the obligation is denominated,rather than the country where the obligation is located. When there is no deep market for highquality corporate bonds in that currency, government bond rates must be used.

Amendment to PAS 34, Interim Financial Reporting, Disclosure of Information ‘Elsewhere inthe Interim Financial Report’The amendment is applied retrospectively and clarifies that the required interim disclosuresmust either be in the interim financial statements or incorporated by cross-reference betweenthe interim financial statements and wherever they are included within the greater interimfinancial report (e.g., in the management commentary or risk report).

The Group has not early adopted any other standard, interpretation or amendment that has beenissued but is not yet effective.

— F-59 —

3.2 Significant Accounting Judgments, Estimates and Assumptions

JudgmentsIn the process of applying the Group’s accounting policies, management has made the followingjudgments, in addition to those involving estimations, that can have significant effects on theamounts recognized in the consolidated financial statements:

Determination of Control or Joint Control over an Investee Company. Control is presumed toexist when an investor is exposed, or has rights, to variable returns from its involvement with theinvestee and has the ability to affect those returns through its power over the investee. On theother hand, joint control is presumed to exist when the investors contractually agreed sharing ofcontrol of an arrangement, which exists only when decisions about the relevant activities requirethe unanimous consent of the parties sharing control.

In 2013, after the sale of the 45.64 percent equity interest in SPIA, management had determinedthat it has joint control with PSA International Pte. Ltd. (PSA) over the operation of SPIA. Basedon the significant provisions of the agreement between ICTSI and PSA, all significant resolutionsshould be passed with the consent of each party. This joint arrangement is classified as a jointventure since the parties have rights to the net assets of the arrangement.

Determination of Acquisition of Group of Assets as a Business in Accordance with PFRS 3.Management uses judgment in assessing if the group of assets and liabilities acquired wouldconstitute a business. In accordance with PFRS 3, business is defined as an integrated set ofactivities and assets that is capable of being conducted and managed for the purpose of providing areturn in the form of dividends, lower costs or other economic benefits directly to investors orother owners, members or participants.

On May 27, 2015, ICTSI, through its subsidiary, ICTSI Tuxpan B.V., acquired from Grupo TMMS.A.B and Immobiliaria TMM S.A. de C.V 100 percent of the capital stock of TMT forUS$54.5 million. The acquisition did not qualify as an acquisition of a business in accordancewith PFRS 3 since ICTSI obtains control of an input or set of inputs without any processes. Themain purpose of the acquisition of TMT is acquisition of land and concession rights. Thus, it isunlikely that the acquired inputs would be considered a business, even if a market participant hadall the processes necessary to operate the inputs as a business.

Functional Currency. Management uses judgment in assessing the functional currency of theParent Company and its subsidiaries. Each entity in the Group determines its own functionalcurrency, which is the currency that best reflects the economic substance of the underlying eventsand circumstances relevant to that entity (see Note 1.3).

Service Concession Arrangements. The Group has determined that the concession contracts of theParent Company, SBITC, MICTSL, TICT, CGSA, Tecplata, AGCT, ICTSI Subic, LICTSLE,PICT, OPC and ICTSI Iraq are within the scope of IFRIC 12, Service Concession Arrangements,accounted for under the intangible asset model. The intangible assets pertaining to concessionrights as at December 31, 2014, 2015 and 2016 are presented in Note 6 to the consolidatedfinancial statements.

Gross versus Net Revenue Recognition. The Group assesses its revenue arrangements againstspecific criteria in order to determine if it is acting as principal or agent. The Group has concludedthat it is acting as principal in all of its revenue arrangements because the Group is the primaryobligor who is responsible for providing the services to the customers and the Group bears thecredit risk. The Group accounts and presents its revenues from port operations and the portauthorities’ share in revenues on a gross basis.

— F-60 —

Operating Lease. The evaluation of whether an arrangement is, or contains, a lease is based onthe substance of the arrangement at inception date. An arrangement is, or contains, a lease whenthe fulfillment of the arrangement depends on the use of a specific asset or assets and thearrangement conveys a right to use the asset.

Concession contracts outside the scope of IFRIC 12 and accounted by the Group in accordancewith IFRIC 4, Determining whether an Arrangement Contains a Lease, were determined asoperating leases.

The Group has also entered into operating lease agreements on property, office spaces and/orequipment as a lessor and as a lessee. The Group, as a lessee, has determined that the lessorretains all significant risks and rewards of ownership of these properties which are on operatinglease agreements. As a lessor, the Group retains substantially all the risks and benefits ofownership of the assets.

Deferred Tax Assets. Deferred tax assets are recognized for unused tax losses to the extent that itis probable that taxable profit will be available against which the losses can be utilized. Significantmanagement judgement is required to determine the amount of deferred tax assets that can berecognized, based upon the likely timing and the level of future taxable profits together with futuretax planning strategies.

Deferred tax assets recognized as at December 31, 2014, 2015 and 2016 are disclosed in Note 22to the consolidated financial statements. Unrecognized deferred tax assets on net operating losscarry-over (NOLCO) and other losses of certain subsidiaries amounted to US$5.2 million,US$11.0 million and US$15.0 million as at December 31, 2014, 2015 and 2016, respectively.These losses relate to subsidiaries that have a history of losses, do not expire and may not be usedto offset taxable income elsewhere in the Group. The subsidiaries neither have any taxabletemporary difference nor any tax planning opportunities available that could partly support therecognition of these losses as deferred tax assets. On this basis, the Group has determined that itcannot recognize deferred tax assets on the tax losses carried forward.

Contingencies. The Group is currently a party in a number of legal cases and negotiationsinvolving cargo, labor, tax, contracts and other issues. The Group’s estimate of the probable costsfor the resolution of these cases and negotiations has been developed in consultation with outsidecounsels handling the defense for these matters and is based upon an analysis of probable results.Management and its legal counsels believe that the Group has substantial legal and factual basesfor its position and is of the opinion that losses arising from these actions, if any, will not have amaterial adverse impact on the Group’s consolidated financial position and results of operations.It is possible, however, that future results of operations could be materially affected by changes inestimates or in the effectiveness of strategies relating to these proceedings. Provision for claimsand losses amounted to US$9.6 million, US$13.3 million and US$36.6 million as atDecember 31, 2014, 2015 and 2016, respectively (see Notes 19 and 26).

Estimates and AssumptionsThe key estimates and assumptions concerning the future and other key sources of estimationuncertainty at the balance sheet date that may have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilities within the next financial year arediscussed below.

Concession Rights. The determination of the cost of concession rights on service concessionarrangements requires management to make estimates and assumptions to determine the extent towhich the Group receives a right or license to charge users of the public service. Management isalso required to make estimates and assumptions in determining the fair value of concession rights

— F-61 —

acquired through business combinations. In making those estimates, management is required todetermine a suitable discount rate to calculate the present value of these cash flows. While theGroup believes that the assumptions used are reasonable and appropriate, these estimates andassumptions can materially affect the consolidated financial statements. The carrying amounts ofconcession rights as at December 31, 2014, 2015 and 2016 are disclosed in Note 6 to theconsolidated financial statements.

Construction Revenue and Cost Recognition. The Group’s revenue from construction services inrelation to its service concession arrangement is recognized using the percentage-of-completionmethod and measured by reference to the percentage of costs incurred to date to estimated totalcosts for each contract.

Expenditures to cover the work program for the development of the concession area or committedinvestments for each port development or project are provided in the concession agreement.When the costs incurred to date exceed the committed investments, an assessment is conducted todetermine the cause of the cost overrun. Cost overruns arising from uncontrollable factors such asoil price, wage increases and changes in technical work programs due to unforeseen economic,political and geological conditions are capitalized while all other cost overruns are treated asperiod costs.

Impairment of Nonfinancial Assets and Assets Not Yet Available for Use. PFRS requiresnonfinancial assets to be tested for impairment when certain impairment indicators are present andintangible asset that has not yet been brought into use to be tested for impairment annually,irrespective of whether there are any indications of impairment. Nonfinancial assets includeintangible assets already in use, except goodwill and intangible assets not yet available for use,property and equipment, investment properties, and investments in a joint venture and anassociate.

Management is required to make estimates and assumptions to determine the future cash flows tobe generated from the continued use and ultimate disposition of these assets in order to determinethe value of these assets. While the Group believes that the assumptions used are reasonable andappropriate, these estimates and assumptions can materially affect the consolidated financialstatements. Future adverse events may cause management to conclude that the affected assets areimpaired and may have a material impact on the financial condition and results of operations ofthe Group. The carrying amounts of intangible assets, including intangible assets not yet availablefor use, property and equipment, investment properties and investments in and advances to a jointventure and an associate are disclosed in Notes 6, 7, 8 and 9 to the consolidated financialstatements, respectively. There was no impairment loss in 2014 and 2016. In 2015, the Grouprecognized an impairment charge of US$88.0 million in respect of the concession rights - portinfrastructure in Tecplata, as a result of the lower projected cash flows on its updated businessplan caused by the prevailing and challenging economic conditions in Argentina. The constructionof the terminal in Argentina was completed and Tecplata has obtained all the required permits andis ready to operate and is yet to service its first international shipping line (see Note 6).

Impairment of Goodwill. Purchase accounting requires extensive use of accounting estimates toallocate the purchase price to the fair market values of the acquiree’s identifiable assets andliabilities at the acquisition date. It also requires the acquirer to recognize goodwill. The Group’sbusiness acquisitions have resulted in goodwill which is subject to a periodic impairment test. TheGroup determines whether goodwill is impaired at least on an annual basis. This requires anestimation of the value-in-use of the cash-generating units to which goodwill is allocated.Estimating the value-in-use requires the Group to make an estimate of the expected future cashflows from the cash-generating unit and also to choose a suitable discount rate to calculate thepresent value of those cash flows. In 2014, the Group recognized an impairment charge of

— F-62 —

US$38.1 million in respect of the goodwill in Tecplata as a result of the lower projected cashflows on its updated business plan caused by the prevailing and challenging economic conditionsin Argentina. In 2015, the Group recognized an impairment charge of US$26.6 million in respectof the goodwill in JASA and subsidiaries as a result of the lower projected cash flows on itsupdated business plan than originally expected (see Note 6).

The carrying amounts of goodwill as at December 31, 2014, 2015 and 2016 are disclosed inNote 6 to the consolidated financial statements.

Estimating Useful Lives. Management determines the estimated useful lives and the relateddepreciation and amortization charges for its concession rights, computer software, property andequipment, and investment properties based on the period over which these assets are expected toprovide economic benefits. Management’s estimation of the useful lives of concession rights,property and equipment, and investment properties is based on collective assessment of industrypractice, internal technical evaluation, and experience with similar assets. These estimations arereviewed periodically and could change significantly due to physical wear and tear, technical orcommercial obsolescence and legal or other limits on the use of these assets. Management willincrease the depreciation and amortization charges where useful lives are less than what havepreviously been estimated.

A reduction in the estimated useful lives of intangible assets (including concession rights),property and equipment, and investment properties will increase recorded expenses and decreasenoncurrent assets. The carrying values of concession rights, property and equipment, andinvestment properties are disclosed in Notes 6, 7 and 8 to the consolidated financial statements,respectively.

Fair Value of Financial Instruments. When the fair values of financial assets and financialliabilities recorded in the consolidated balance sheet cannot be measured based on quoted prices inactive markets, their fair value is measured using valuation techniques including the discountedcash flow (DCF) model. The inputs to these models are taken from observable markets wherepossible, but where this is not feasible, a degree of judgment is required in establishing fair values.Judgments include considerations of inputs such as liquidity risk, credit risk and volatility.Changes in assumptions about these factors could affect the reported fair value of financialinstruments.

The fair values of financial assets and liabilities by category and the fair value hierarchy are setout in Note 27 to the consolidated financial statements.

Estimating Allowance for Doubtful Accounts. Allowance for doubtful accounts is calculated usingtwo methods, each of these methods are combined to determine the total amount of reserve. Thefirst method is specific evaluation of information available that certain customers are unable tomeet their financial obligations. In these cases, management uses judgment, based on the bestavailable facts and circumstances, including but not limited to, the length of relationship withcustomer and the customer’s current credit status based on third party credit reports and knownmarket factors, to record specific reserves for customers against amounts due and to reducereceivable amounts to expected collection. These specific reserves are re-evaluated and adjustedas additional information received affects the amounts estimated. Second, a provision isestablished as a certain percentage of receivables not provided with specific reserves. Thispercentage is based on a collective assessment of historical collection, write-off experience,current economic trends, and changes in customer payment terms and other factors that may affectthe Group’s ability to collect payments. Full allowance is provided for receivables with contestedstatus.

— F-63 —

The amounts and timing of recorded provision for doubtful accounts for any period would differ ifthe Group made different assumptions or utilized different estimates. An increase in the Group’sallowance for doubtful accounts would increase the recorded operating expenses and decrease itscurrent assets. The carrying values of receivables are disclosed in Note 13 to the consolidatedfinancial statements.

Estimating Net Realizable Value of Spare Parts and Supplies. The Group carries spare parts andsupplies at net realizable value when such value is lower than cost due to damage, physicaldeterioration, obsolescence, changes in price levels or other causes. The carrying amounts ofspare parts and supplies carried at net realizable value as at December 31, 2014, 2015 and 2016amounted to US$26.1 million, US$27.6 million and US$33.5 million, respectively.

The cost of these spare parts and supplies amounted to US$27.2 million, US$28.5 million andUS$34.9 million as at December 31, 2014, 2015 and 2016, respectively.

Write-downs of spare parts and supplies amounted to US$0.3 million in 2014, US$0.1 millionin 2015 and US$0.5 million in 2016 were recognized in the consolidated statements of incomeunder “Equipment and facilities-related expenses” account.

Pension Cost. The determination of the obligation and cost for pension benefits is dependent onthe selection of certain assumptions provided by the Group to its actuaries in calculating suchamounts. Those assumptions were described in Note 24 and included among others, discount rateand future salary increases. In accordance with Revised PAS 19, Employee Benefits, actual resultsthat differ from the Group’s assumptions are included in other comprehensive income and are notreclassified to profit or loss in subsequent periods. While it is believed that the Group’sassumptions are reasonable and appropriate, significant differences in actual experience orsignificant changes in assumptions may materially affect the Group’s pension and other pensionobligations.

The carrying values of pension assets and pension liabilities as at December 31, 2014, 2015 and2016 are disclosed in Note 24 to the consolidated financial statements.

3.3 Significant Accounting Policies

IntangiblesIntangible assets acquired separately are measured on initial recognition at cost. The cost ofintangible assets acquired in a business combination is recognized at fair value at acquisition date.Following initial recognition, intangible assets, except goodwill, are carried at cost less anyaccumulated amortization and any accumulated impairment losses. Internally generated intangibleassets are not capitalized and expenditure is reflected in the consolidated statement of income inthe year in which the expenditure is incurred. The Group accounts for goodwill following theaccounting policy on Business Combinations and Goodwill.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortized over their useful economic life and assessed forimpairment whenever there is an indication that intangible assets may be impaired. Theamortization period and method for an intangible asset with a finite useful life is reviewed at leastannually. Changes in expected useful life or the expected pattern of consumption of futureeconomic benefits embodied in the asset are accounted for by changing the amortization periodand method, as appropriate, and treated as changes in accounting estimates. The amortizationexpense on intangible assets with finite lives is recognized in the consolidated statement of incomeunder the “Depreciation and amortization” account, which is consistent with the function of theintangible assets.

— F-64 —

Intangible assets with indefinite useful lives such as goodwill and intangible assets not yet broughtinto use are not amortized but tested for impairment annually, either individually or at the cash-generating unit level, irrespective of whether there is any indication of impairment. The useful lifeof an intangible asset with an indefinite life is reviewed annually to determine whether theindefinite life assessment continues to be supportable. If not, the change in the useful lifeassessment from indefinite to finite is made on a prospective basis.

The following intangibles are recognized and determined by the Group to have finite useful lives:

Concession Rights. Concession rights are either purchased or acquired through businesscombinations or recognized on service concession arrangements.

Concession rights purchased or acquired through business combinations are recognized at fairvalue at the date of acquisition and are categorized as upfront fees.

Concession rights on service concession arrangements are recognized when the Group effectivelyreceives a license or right to charge users for the public service it provides. Concession rightsconsist of:

a. Upfront fees payments on the concession contracts;

b. The cost of port infrastructure constructed and under construction, including related borrowingcosts, and port equipment purchased and committed in accordance with the terms andconditions of the concession arrangements accounted for under IFRIC 12. These are notrecognized as property and equipment of the Group but as an intangible asset; and

c. Future fixed fee considerations in exchange for the license or right for concessionarrangements accounted for under IFRIC 12. Fixed fees are recognized at present value usingthe discount rate at the inception date with a corresponding liability recognized. Interest onthe unwinding of discount of the liability and foreign exchange differences arising fromtranslations are recognized in the consolidated statement of income.

Subsequent costs and expenditures related to port infrastructure and equipment arising from theGroup’s commitments to the concession contracts, or that increase future revenue are recognizedas additions to the intangible asset and are stated at cost. Capital expenditures necessary tosupport the Group’s operation as a whole are recognized as property and equipment and accountedfor in accordance with the accounting policy on Property and Equipment. When the Group hascontractual obligations that it must fulfill as a condition of its license to: (i) maintain theinfrastructure to a specified level of serviceability or, (ii) to restore the infrastructure to a specifiedcondition before it is handed over to the grantor at the end of the service concession arrangement,it recognizes and measures these contractual obligations in accordance with the accounting policyon Provisions. Repairs and maintenance and other expenses that are routinary in nature areexpensed and recognized in the consolidated statement of income as incurred in accordance withthe accounting policy on Equipment and Facilities-related Expenses.

Concession rights are amortized using the straight-line method over the term of the concessionarrangements ranging from 6 to 39 years. Upfront fees are amortized upon the effectivity of theconcession agreement while port infrastructure and fixed fees are amortized when the terminal isready for use or upon start of commercial operations, whichever is earlier.

Computer Software Cost. Computer software cost includes costs incurred in the development andacquisitions of computer software used in operations. Computer software is amortized when it isavailable for use on a straight-line method over five years.

— F-65 —

Gains and losses arising from derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds and the carrying amount of the asset and are recognized in theconsolidated statement of income when the asset is derecognized.

Business Combinations and GoodwillBusiness combinations are accounted for using the acquisition method.

Initial MeasurementThe cost of an acquisition is measured as the aggregate of the consideration transferred measuredat acquisition date fair value and the amount of any non-controlling interest in the acquiree. Foreach business combination, the Group elects to measure the non-controlling interest in theacquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.Acquisition-related costs incurred such as finder’s fees; advisory, legal, accounting, valuation andother professional or consulting fees; general administrative costs, including the costs ofmaintaining an internal acquisitions department or business development offices are expensed andincluded as part of “Administrative and other operating expenses” account in the consolidatedstatement of income.

When the Group acquires a business, it assesses the financial assets acquired and liabilitiesassumed for appropriate classification and designation in accordance with the contractual terms,economic circumstances and pertinent conditions as at the acquisition date. This includes theseparation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest in theacquiree is remeasured at its acquisition date fair value and any resulting gain or loss is recognizedin the consolidated statement of income.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value atthe acquisition date. Contingent consideration classified as an asset or liability that is a financialinstrument and within the scope of PAS 39 is measured at fair value with the changes in fair valuerecognized in the consolidated statement of income. If the contingent consideration is not withinthe scope of PAS 39, it is measured in accordance with appropriate PFRS. Contingentconsideration that is classified as equity is not remeasured until it is finally settled within equity.

Goodwill is initially measured at cost being the excess of the aggregate of the considerationtransferred and the amount recognized for non-controlling interest over the net identifiable assetsacquired and liabilities assumed. If the fair value of the net assets acquired is in excess of theaggregate consideration transferred, the Group re-assesses whether it has correctly identified all ofthe assets acquired and all of the liabilities assumed and reviews the procedures used to measurethe amounts to be recognized at the acquisition date. If the reassessment still results in an excessof the fair value of net assets acquired over the aggregate consideration transferred, then the gainis recognized in the consolidated statement of income.

If the initial accounting for business combination can be determined only provisionally by the endof the period by which the combination is effected because either the fair values to be assigned tothe acquiree’s identifiable assets, liabilities or contingent liabilities or the cost of the combinationcan be determined only provisionally, the Group accounts for the combination using provisionalvalues. Adjustments to these provisional values because of completing the initial accounting shallbe made within 12 months from the acquisition date. The carrying amount of an identifiable asset,liability or contingent liability that is recognized as a result of completing the initial accountingshall be calculated as if the asset, liability or contingent liability’s fair value at the acquisition datehad been recognized from that date. Goodwill or any gain recognized shall be adjusted from theacquisition date by an amount equal to the adjustment to the fair value at the acquisition date ofthe identifiable asset, liability or contingent liability being recognized or adjusted.

— F-66 —

Subsequent MeasurementFollowing initial recognition, goodwill is measured at cost less any accumulated impairmentlosses. For purposes of impairment testing, goodwill acquired in a business combination is, fromthe acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective ofwhether other assets or liabilities of the Group are assigned to those units or group of units. Eachunit or group of units to which the goodwill is allocated:

represents the lowest level within the Group at which the goodwill is monitored for internalmanagement purposes; and

is not larger than a segment based on the Group’s format determined in accordance withPFRS 8, Operating Segments.

Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part ofthe operation within that unit is disposed of, the goodwill associated with the operation disposedof is included in the carrying amount of the operation when determining the gain or loss ondisposal of the operation. Goodwill disposed of in this circumstance is measured based on therelative values of the operation disposed of and the portion of the cash-generating unit retained.

When subsidiaries are sold, the difference between the selling price and the net assets pluscumulative translation differences and goodwill is recognized as gain or loss in the consolidatedstatement of income.

Goodwill is shown as part of “Intangibles” account in the consolidated balance sheet.

Acquisition of AssetsWhen assets are acquired, through corporate acquisitions or otherwise, management considers thesubstance of the assets and activities of the acquired entity in determining whether the acquisitionrepresents an acquisition of a business.

When such an acquisition is not judged to be an acquisition of a business, it is not treated as abusiness combination. Rather, the cost to acquire the entity is allocated between the identifiedassets and liabilities of the entity based on their relative fair values at the acquisition date.Accordingly, no goodwill or additional deferred tax arises.

Property and EquipmentProperty and equipment, except land, are stated at cost less accumulated depreciation,amortization and any impairment in value. Land is stated at cost less any impairment in value.

The initial cost of property and equipment comprises its purchase price and any directlyattributable costs of bringing the asset to its working condition and location for its intended use.Such cost also includes the cost of replacing part of the property and equipment and borrowingcosts for long-term construction projects if the recognition criteria are met, and any obligationrelated to the retirement of the asset. Expenditures incurred after the property and equipment havebeen put into operations, such as repairs and maintenance and overhaul costs, are generallyrecognized in the consolidated statement of income in accordance with the accounting policy onEquipment and Facilities-related Expenses. In situations where it can be clearly demonstrated thatthe expenditures have resulted in an increase in the future economic benefits expected to beobtained from the use of an item of property and equipment beyond its originally assessedstandard of performance, the expenditures are capitalized as additional costs of property andequipment. When significant parts of property and equipment are required to be replaced atintervals, the Group recognizes such parts as individual assets with specific useful lives and

— F-67 —

depreciates them accordingly. When assets are sold or retired, their costs and accumulateddepreciation, amortization and impairment losses, if any, are eliminated from the accounts and anygain or loss resulting from their disposal is included in the consolidated statement of income ofsuch period.

Depreciation and amortization start when the property and equipment are available for use andcomputed using the straight-line method over the estimated useful lives of the assets or the termsof the operating contract with port authorities or concessions, whichever is shorter.

The estimated useful lives of property and equipment are as follows:

Land improvements 7-25 yearsLeasehold rights and improvements 5-48 years or terms of the operating contract

with port authorities or concessions,whichever is shorter

Port facilities and equipment 5-25 years or terms of the operating contractwith port authorities or concessions,whichever is shorter

Transportation equipment 3-5 yearsOffice equipment, furniture and fixtures 3-5 yearsMiscellaneous equipment 5 years

The useful lives, depreciation and amortization method, and any residual values are reviewedperiodically and adjusted prospectively, if appropriate, to ensure that the periods and method ofdepreciation and amortization are consistent with the expected pattern of economic benefits fromitems of property and equipment.

Fully depreciated assets are retained in the accounts until they are no longer in use and no furtherdepreciation and amortization is charged to current operations.

An item of property and equipment and any significant part initially recognized are derecognizedupon disposal or when no future economic benefits are expected from its use or disposal. Anygain or loss arising on derecognition of the asset (calculated as the difference between the netdisposal proceeds and the carrying amount of the property and equipment) is included in theconsolidated statement of income when the asset is derecognized.

Construction in progress represents structures under construction and is stated at cost. Thisincludes cost of construction and other direct costs. Construction in progress is not depreciateduntil such time the relevant assets are completed and available for operational use.

Port equipment spare parts represent major components or parts of port equipment such as quaycranes, which generally include insurance spares, that are critical for the continuous operations ofthe terminal equipment and facilities that have significantly different patterns of consumption ofeconomic benefits. Spare parts are classified as property and equipment if the expected time ofuse is more than twelve months and provided that the capitalization thresholds are met.

Borrowing CostsBorrowing costs that are directly attributable to the acquisition or construction of a qualifyingasset including intangibles and property and equipment while the qualifying asset is underconstruction are capitalized as part of the cost of that asset. Borrowing costs consist of interestand other costs that an entity incurs in connection with the borrowing of funds. Capitalization ofborrowing cost should commence when: (i) expenditures for the asset and borrowing costs arebeing incurred; and (ii) activities that are necessary to prepare the asset for its intended use or sale

— F-68 —

are in progress. Capitalization ceases when the asset is substantially ready for its intended use orsale. If active development is interrupted for an extended period, capitalization is suspended.When construction occurs piecemeal and use of each part is possible as construction continues,capitalization of each part ceases upon substantial completion of that part. For borrowing of fundsassociated with a specific asset, the actual rate on that borrowing is used. Otherwise, a weightedaverage cost of borrowing is used.

All other borrowing costs are expensed as incurred.

However, if the carrying amount of the asset after capitalization of borrowing costs exceeds itsrecoverable amount, an impairment loss is recognized.

Investment PropertiesInvestment properties consisting mainly of land and improvements are initially measured at costincluding transaction costs. Subsequent to initial recognition, improvements are stated at cost lessdepreciation and amortization, and any impairment in value.

Depreciation and amortization are computed using the straight-line method over the estimateduseful lives of the assets ranging from 15 to 25 years.

Investment properties are derecognized when either they have been disposed of or when they arepermanently withdrawn from use and no future economic benefit is expected from their disposal.Any gains or losses are measured as the difference between the net disposal proceeds and thecarrying amount of the asset and recognized in the consolidated statement of income uponretirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For atransfer from investment property to owner-occupied property, the cost and the carrying amount ofthe property transferred do not change. If an owner-occupied property becomes an investmentproperty, the Group accounts for such property in accordance with the accounting policy onProperty and Equipment up to the date of change in use.

Investments in an Associate and a Joint VentureInvestment in an associate in which the Group exercises significant influence and which is neithera subsidiary nor a joint venture of the Group is accounted for under the equity method ofaccounting.

A joint venture is a type of joint arrangement whereby the parties that have joint control of thearrangement have rights to the net assets of the joint venture. Joint control is the contractuallyagreed sharing of control of an arrangement, which exists only when decisions about the relevantactivities require unanimous consent of the parties sharing control. The Group’s investment in ajoint venture is accounted for using the equity method.

Under the equity method, the cost of investment in an associate and a joint venture is carried in theconsolidated balance sheet at cost plus post acquisition changes in the Group’s share of net assetsof the associate and the joint venture. Goodwill, if any, relating to an associate or a joint ventureis included in the carrying amount of the investment and is not amortized or separately tested forimpairment. The consolidated statement of income reflects the share of the results of operationsof the associate and joint venture. Where there has been a change recognized directly in the equityof the associate and the joint venture, the Group recognizes its share of any changes and disclosesthis, when applicable, in the consolidated statement of changes in equity. Unrealized profits orlosses resulting from transactions between the Group and the associate and joint venture areeliminated to the extent of the interest in the associate and joint venture.

— F-69 —

The reporting dates of the associate, the joint venture and the Parent Company are identical andthe accounting policies of the associate and joint venture conform to those used by the Group forlike transactions and events in similar circumstances.

After application of the equity method, the Group determines whether it is necessary to recognizean impairment loss on its investment in its associate or joint venture. At each reporting date, theGroup determines whether there is objective evidence that the investment in the associate or jointventure is impaired. If there is such evidence, the Group calculates the amount of impairment asthe difference between the recoverable amount of the associate or joint venture and its carryingvalue, and then recognizes the loss as “Equity in net losses of a joint venture and associate” in theconsolidated statement of income.

Upon loss of joint control over the joint venture and loss of significant influence over theassociate, the Group measures and recognizes any retained investment at its fair value. Anydifference between the carrying amount of the joint venture and the associate upon loss of jointcontrol and significant influence, respectively, and the fair value of the retained investment andproceeds from disposal is recognized in the consolidated statement of income.

Impairment of Nonfinancial AssetsIntangibles, except intangibles not yet brought into use, property and equipment, investmentproperties, and investment in an associate and a joint venture are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying amount of an asset maynot be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, animpairment loss is recognized in the consolidated statement of income. The recoverable amount isthe higher of an asset’s or cash-generating unit’s fair value less costs of disposal or value-in-use.Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to which the asset belongs. Fair value less costs of disposal is the price that wouldbe received to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date less costs of disposal while value-in-use is the present valueof estimated future cash flows expected to arise from the continuing use of an asset or from itsdisposal at the end of its useful life.

In assessing value-in-use, the estimated future cash flows are discounted to their present valueusing the pre-tax discount rate that reflects current market assessments of the time value of moneyand the risks specific to the asset. In determining fair value less costs of disposal, recent markettransactions are taken into account. If no such transactions can be identified, an appropriatevaluation model is used. These calculations are corroborated by valuation multiples, quoted pricesfor publicly traded companies or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations, whichare prepared separately for each of the Group’s cash generating unit to which the individual assetsare allocated. These budgets and forecast calculations generally cover a period of five years. Forlonger periods, a long-term growth rate is calculated and applied to project future cash flows afterthe fifth year.

Impairment losses of continuing operations, including impairment on spare parts and supplies, arerecognized in the consolidated statement of income in expense categories consistent with thefunction of the impaired asset.

For these nonfinancial assets excluding goodwill and intangibles not yet brought into use, anassessment is made at each reporting date as to whether there is any indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indicationexists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously

— F-70 —

recognized impairment loss is reversed only if there has been a change in the assumptions used todetermine the asset’s recoverable amount since the last impairment loss was recognized. In suchinstance, the carrying amount of the asset is increased to its recoverable amount. However, thatincreased amount cannot exceed the carrying amount that would have been determined, net ofdepreciation, had no impairment loss been recognized for the asset in prior years. Such reversal isrecognized in the consolidated statement of income.

Intangibles not yet brought into use are tested for impairment annually irrespective of whetherthere is any impairment indicator.

The following assets have specific characteristic for impairment testing:

Goodwill. Goodwill is reviewed for impairment, annually or more frequently, if events or changesin circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of the cash-generatingunit, which is also the operating entity acquired through business combination and to which thegoodwill relates or has been allocated. When the recoverable amount of the cash-generating unitis less than its carrying amount, an impairment loss is recognized. Impairment losses relating togoodwill cannot be reversed in future periods.

The Group performs its annual impairment test for intangibles not yet brought into use andgoodwill at December 31.

Investments in an Associate and a Joint Venture. After application of the equity method, theGroup determines whether it is necessary to recognize additional impairment loss of the Group’sinvestment in its associate and joint venture. The Group determines at each balance sheet datewhether there is any objective evidence that the investment in an associate and a joint venture isimpaired. If this is the case, the Group calculates the amount of impairment as being thedifference between the recoverable amount of the associate and joint venture and the carryingamount of the investment, and recognizes the amount in the consolidated statement of income.The Group’s investment in an associate has been fully provided with an allowance for probableloss (see Note 9).

Fair Value MeasurementThe Group measures financial instruments, such as, derivatives, at fair value at each balance sheetdate. Also, fair values of non-financial assets such as investment properties and financialinstruments measured at amortized cost are disclosed in Notes 8 and 27.1, respectively.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:

• In the principal market for the asset or liability, or• In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in theireconomic best interest.

— F-71 —

A fair value measurement of a non-financial asset takes into account a market participant's abilityto generate economic benefits by using the asset in its highest and best use or by selling it toanother market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financialstatements are categorized within the fair value hierarchy, described as follows, based on thelowest level input that is significant to the fair value measurement as a whole:

• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is directly or indirectly observable• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is unobservable

For assets and liabilities that are recognized in the consolidated financial statements on a recurringbasis, the Group determines whether transfers have occurred between Levels in the hierarchy byre-assessing categorization (based on the lowest level input that is significant to the fair valuemeasurement as a whole) at the end of each reporting period.

For the purpose of the fair value disclosures, the Group has determined classes of assets andliabilities on the basis of the nature, characteristics and risks of the asset or liability and the levelof the fair value hierarchy as explained above.

Financial Instruments

Financial Assets and Financial Liabilities. Financial assets and financial liabilities are recognizedinitially at fair value. Transaction costs are included in the initial measurement of all financialassets and liabilities, except for financial instruments measured at fair value through profit or loss(FVPL).

The Group recognizes a financial asset or a financial liability in the consolidated balance sheetwhen it becomes a party to the contractual provisions of the instrument. In the case of a regularway purchase or sale of financial assets, recognition and derecognition, as applicable, is doneusing trade date accounting.

Financial instruments are classified as liabilities or equity in accordance with the substance of thecontractual arrangement. Interest, dividends, gains and losses relating to a financial instrument ora component that is a financial liability, are reported as expense or income. Distributions toholders of financial instruments classified as equity are charged directly to equity, net of anyrelated income tax benefits.

Financial assets are classified into the following categories: financial assets at FVPL, loans andreceivables, held-to-maturity (HTM) investments, and AFS investments. Financial liabilities areclassified as either financial liabilities at FVPL or as other financial liabilities. The Groupdetermines the classification at initial recognition and, where allowed and appropriate,re-evaluates this designation at every reporting date.

— F-72 —

There were no reclassifications within the categories of the financial assets and liabilities in 2014,2015 and 2016.

Financial Assets and Financial Liabilities at FVPL. These include financial assets and liabilitiesheld for trading and financial assets and liabilities designated upon initial recognition as at FVPL.Financial assets and financial liabilities are classified as held for trading if they are acquired forthe purpose of selling or repurchasing in the near term. Derivatives, including separatedembedded derivatives, are also classified as held for trading unless they are designated as effectivehedging instruments or a financial guarantee contract.

Financial assets or financial liabilities may be designated by management at initial recognition asat FVPL if any of the following criteria are met: (i) the designation eliminates or significantlyreduces the inconsistent treatment that would otherwise arise from measuring the assets orliabilities or recognizing gains or losses on them on a different basis; or (ii) the assets andliabilities are part of a group of financial assets, financial liabilities or both which are managed andtheir performance evaluated on a fair value basis, in accordance with a documented riskmanagement strategy; or (iii) the financial instrument contains an embedded derivative, unless theembedded derivative does not significantly modify the cash flows or it is clear, with little or noanalysis, that it would not be separately recorded.

Financial assets and financial liabilities at FVPL are recorded in the consolidated balance sheet atfair value with gains or losses recognized in the consolidated statement of income.

This category includes derivative assets and liabilities (see Note 27).

Derivative Financial Instruments and HedgingDerivative financial instruments are initially recognized at fair value on the date in which aderivative transaction is entered into or bifurcated, and are subsequently re-measured andaccounted for in the consolidated balance sheet at fair value. The method of recognizing theresulting gain or loss depends on whether the derivative is designated as a hedge of an identifiedrisk and qualifies for hedge accounting treatment or accounted for as derivative not designated forhedges.

The objective of hedge accounting is to match the impact of the hedged item and the hedginginstrument in the consolidated statement of income. To qualify for hedge accounting, the hedgingrelationship must comply with strict requirements such as the designation of the derivative as ahedge of an identified risk exposure, hedge documentation, probability of occurrence of theforecasted transaction in a cash flow hedge, assessment and measurement of hedge effectiveness,and reliability of the measurement bases of the derivative instruments.

At the inception of a hedge relationship, the Group formally designates and documents the hedgerelationship to which it wishes to apply hedge accounting and the risk management objective andstrategy for undertaking the hedge. The documentation includes identification of the hedginginstrument, the hedged item or transaction, the nature of the risk being hedged and how the entitywill assess the hedging instrument’s effectiveness in offsetting the exposure to changes in thehedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected tobe highly effective in achieving offsetting changes in fair value or cash flows and are assessed onan on-going basis to determine that they actually have been highly effective throughout thefinancial reporting periods for which they were designated.

The Group’s derivative financial instruments are accounted for as either cash flow hedges ortransactions not designated as hedges.

— F-73 —

Cash Flow Hedges. Cash flow hedges are hedges of the exposure to variability in cash flows thatis attributable to a particular risk associated with a recognized asset, liability or a highly probableforecast transaction and could affect the consolidated statement of income. Changes in the fairvalue of a hedging instrument that qualifies as a highly effective cash flow hedge are recognizedas “Net change in unrealized mark-to-market values of derivatives” in the consolidated statementof comprehensive income, whereas any hedge ineffectiveness is immediately recognized in theconsolidated statement of income.

Amounts taken to equity are transferred to the consolidated statement of income when the hedgedtransaction affects profit or loss, such as when the hedged financial income or financial expense isrecognized or when a forecast sale or purchase occurs. Where the hedged item is the cost of anon-financial asset or liability, the amounts taken to equity are reclassified to profit or loss as areclassification adjustment in the same period or periods during which the asset acquired orliability assumed affects profit or loss (such as in the periods that depreciation expense or cost ofsales is recognized). However, if an entity expects that all or a portion of a loss recognized inother comprehensive income will not be recovered in one or more future periods, it shall reclassifyfrom equity to profit or loss as a reclassification adjustment the amount that is not expected to berecovered.

Hedge accounting is discontinued prospectively when the hedge ceases to be highly effective.When hedge accounting is discontinued, the cumulative gains or losses on the hedging instrumentthat has been reported as “Net change in unrealized mark-to-market values of derivatives” isretained in the consolidated statement of comprehensive income until the hedged transactionimpacts the consolidated statement of income. When the forecasted transaction is no longerexpected to occur, any net cumulative gains or losses previously reported in the statement ofcomprehensive income is recognized immediately in the consolidated statement of income.

Other Derivative Instruments not Accounted for as Hedges. Certain freestanding derivativeinstruments that provide economic hedges under the Group’s policies either do not qualify forhedge accounting or are not designated as accounting hedges. Changes in the fair values ofderivative instruments not designated as hedges are recognized immediately in the consolidatedstatement of income. Derivatives are carried as assets when the fair value is positive and asliabilities when the fair value is negative. For bifurcated embedded derivatives in financial andnon-financial contracts that are not designated or do not qualify as hedges, changes in the fairvalue of such transactions are recognized in the consolidated statement of income.

Embedded DerivativesAn embedded derivative is separated from the host contract and accounted for as a derivative if allof the following conditions are met: a) the economic characteristics and risks of the embeddedderivative are not closely related to the economic characteristics and risks of the host contract;b) a separate instrument with the same terms as the embedded derivative would meet the definitionof a derivative; and c) the hybrid or combined instrument is not recognized at FVPL.

Subsequent reassessment is prohibited unless there is a change in the terms of the contract thatsignificantly modifies the cash flows that otherwise would be required under the contract, in whichcase reassessment is required. The Group determines whether a modification to cash flows issignificant by considering the extent to which the expected future cash flows associated with theembedded derivative, the host contract or both have changed and whether the change is significantrelative to the previously expected cash flow on the contract.

— F-74 —

Loans and Receivables. Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. After initial measurement, loansand receivables are subsequently carried at amortized cost using the effective interest rate (EIR)method less any allowance for impairment. Amortized cost is calculated by taking into accountany discount or premium on acquisition and includes fees that are integral part of the EIR andtransaction costs. Gains and losses are recognized in the consolidated statement of income whenthe loans and receivables are derecognized or impaired, as well as through the amortizationprocess. Loans and receivables are included in current assets if maturity is within 12 months fromthe balance sheet date otherwise; these are classified as noncurrent assets.

This category includes cash and cash equivalents and receivables (see Notes 12 and 13).

HTM Investments. HTM investments are quoted non-derivative financial assets with fixed ordeterminable payments and fixed maturities and which the Group has the positive intention andability to hold to maturity. After initial measurement HTM investments are measured at amortizedcost. This cost is computed as the amount initially recognized minus principal repayments, plus orminus the cumulative amortization using the EIR method of any difference between the initiallyrecognized amount and the maturity amount, less allowance for impairment. This calculationincludes all fees and points paid or received between parties to the contract that are an integral partof the effective interest rate, transaction costs and all other premiums and discounts. Gains andlosses are recognized in the consolidated statement of income when the investments arederecognized or impaired, as well as through the amortization process. Assets under this categoryare classified as current assets if maturity is within 12 months from the balance sheet dateotherwise these are classified as noncurrent assets.

The Group had no HTM investments.

AFS Investments. AFS investments are non-derivative financial assets that are designated as AFSor are not classified in any of the three preceding categories. They are purchased and heldindefinitely, and may be sold in response to liquidity requirements or changes in marketconditions. After initial measurement, AFS investments are measured at fair value with unrealizedgains or losses being recognized directly in other comprehensive income (OCI). When theinvestment is disposed of or is determined to be impaired, the cumulative gain or loss previouslyrecorded in the consolidated statement of comprehensive income is recognized in the consolidatedstatement of income. Interest earned on the investments is reported as interest income using theEIR method. Dividends earned on investments are recognized in the consolidated statement ofincome when the right of payment has been established. AFS investments are classified asnoncurrent assets unless the intention is to dispose such assets within 12 months from balancesheet date.

The fair value of investments that are actively traded in organized financial markets is determinedby reference to quoted market bid prices at the close of business on balance sheet date. Whencurrent prices are not available, the price of the most recent transaction provides evidence of thecurrent fair value as long as there has not been a significant change in economic circumstancessince the time of the transaction.

For investments where there is no active market, except investments in unquoted equity securities,fair value is determined using valuation techniques. Such techniques include using recent arm’s-length market transactions; reference to the current market value of another instrument which issubstantially the same; net present value techniques and other relevant valuation models.Investments in unquoted equity securities are carried at cost, net of accumulated impairmentlosses.

— F-75 —

AFS investments consist of the Group’s investments in quoted and unquoted equity shares(see Note 10).

Other Financial Liabilities (including Interest-bearing Loans and Borrowings)Other financial liabilities are initially recognized at the fair value of the consideration received lessdirectly attributable transaction costs. Financial liabilities are classified under this category if theyare not held for trading or not designated as FVPL upon the inception of the liability.

After initial recognition, other financial liabilities are subsequently measured at amortized costusing the effective interest method. Amortized cost is calculated by taking into account any issuecosts, and any discount or premium on settlement.

Gains and losses are recognized in the consolidated statement of income when the liabilities arederecognized as well as through the amortization process.

The Group’s loans payable, accounts payable and other current liabilities, other noncurrentliabilities, concession rights payable and long-term debt are included under this classification.

Impairment of Financial AssetsThe Group assesses at each balance sheet date whether a financial asset or group of financialassets is impaired.

An impairment exists if one or more events that has occurred since the initial recognition of theasset (an incurred “loss event”), has an impact on the estimated future cash flows of the financialasset or the group of financial assets that can be reliably estimated. Evidence of impairment mayinclude indications that the debtors or a group of debtors is experiencing significant financialdifficulty, default or delinquency in interest or principal payments, the probability that they willenter bankruptcy or other financial reorganization and observable data indicating that there is ameasurable decrease in the estimated future cash flows, such as changes in arrears or economicconditions that correlate with defaults.

Assets Carried at Amortized Cost. If there is an objective evidence that an impairment loss onloans and receivables carried at amortized cost has been incurred, the amount of the loss ismeasured as the difference between the asset’s carrying amount and the present value of estimatedfuture cash flows (excluding future credit losses that have not been incurred) discounted at thefinancial asset’s original effective interest rate (i.e., the effective interest rate computed at initialrecognition). The carrying amount of the asset shall be reduced either directly or through use ofan allowance account. The amount of the loss shall be recognized in the consolidated statement ofincome. Receivables, together with the associated allowance accounts, are written off when thereis no realistic prospect of future recovery.

The Group first assesses whether an objective evidence of impairment exists individually forfinancial assets that are individually significant, and individually or collectively for financialassets that are not individually significant. If it is determined that no objective evidence ofimpairment exists for an individually assessed financial asset, whether significant or not, the assetis included in the group of financial assets with similar credit risk characteristics and the group offinancial assets is collectively assessed for impairment. Assets that are individually assessed forimpairment and for which an impairment loss is or continues to be recognized are not included inthe collective assessment of impairment. The Group considers factors such as the age of thereceivable, payment status and collection experience in determining individually impairedfinancial assets. For the purpose of a collective evaluation of impairment, financial assets aregrouped on the basis of such credit risk characteristics as customer type, location and past duestatus.

— F-76 —

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can berelated objectively to an event occurring after the impairment was recognized, the previouslyrecognized impairment loss is reversed. Any subsequent reversal of an impairment loss isrecognized in the consolidated statement of income, to the extent that the carrying value of theasset does not exceed its amortized cost at the reversal date.

AFS Investments - Carried at Fair Value. If an AFS investment is impaired, an amountcomprising the difference between its cost (net of any principal payment and amortization) and itscurrent fair value, less any impairment loss previously recognized in the consolidated statement ofincome, is transferred from other comprehensive income to the consolidated statement of income.

An AFS investment is considered impaired if there is prolonged or significant decline in marketvalue against cost. “Significant” is to be evaluated against the original cost of the investment and“prolonged” against the period in which the fair value has been below its original cost.

AFS Investment - Carried at Cost. If there is an objective evidence that an impairment loss on anunquoted equity instrument that is not carried at fair value because its fair value cannot be reliablymeasured, or on a derivative asset that is linked to and must be settled by delivery of such anunquoted equity instrument, has been incurred, the amount of the loss is measured as thedifference between the asset’s carrying amount and the present value of the estimated future cashflows discounted at the current market rate of return for a similar financial asset.

Reversals of impairment losses in respect of equity instruments classified as AFS are notrecognized in the consolidated statement of income, increases in their fair value after impairmentare recognized directly in other comprehensive income. Reversals of impairment losses on debtinstruments are reversed through the consolidated statement of income; if the increase in fair valueof the instrument can be objectively related to an event occurring after the impairment loss wasrecognized in the consolidated statement of income.

Derecognition of Financial Assets and Liabilities

Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part of agroup of similar financial assets) is derecognized when:

the rights to receive cash flows from the asset have expired; or

the Group has transferred its rights to receive cash flows from the asset or has assumed anobligation to pay the received cash flows in full without material delay to a third party under a“pass-through” arrangement; and either: a) has transferred substantially all the risks andrewards of ownership of the asset; or b) has neither transferred nor retained substantially allthe risks and rewards of ownership of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into apass-through agreement, and has neither transferred nor retained substantially all the risks andrewards of ownership of the asset nor transferred control of the asset, the asset is recognized to theextent of the Group’s continuing involvement in the asset. In that case, the Group also recognizesan associated liability. The transferred asset and the associated liability are measured on a basisthat reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measuredat the lower of the original carrying amount of the asset and the maximum amount ofconsideration that the Group could be required to repay.

— F-77 —

Financial Liabilities. A financial liability is derecognized when the obligation under the liabilityis discharged or cancelled or has expired.

Where an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as a derecognition of the original liability and the recognition of a newliability, and the difference in the respective carrying amount of a financial liability (or part of afinancial liability) extinguished or transferred to another party and the consideration paid,including any non-cash assets transferred or liabilities assumed, is recognized in the consolidatedstatement of income. Otherwise, where the net present value of the cash flows under the newterms discounted using the effective interest rate of the original debt is less than 10 percentdifferent from the discounted present value of the remaining cash flows of the original debtinstrument, the financial liability is not derecognized.

Day 1 DifferenceWhere the transaction price in a non-active market is different from the fair value of otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Group recognizes the differencebetween the transaction price and fair value (a Day 1 difference) in the consolidated statement ofincome unless it qualifies for recognition as some other type of asset. In case where data used arenot observable, the difference between the transaction price and model value is recognized in theconsolidated statement of income when the inputs become observable or when the instrument isderecognized. For each transaction, the Group determines the appropriate method of recognizingthe Day 1 difference.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount reported in the consolidatedbalance sheet if, and only if, there is a currently enforceable legal right to set off the recognizedamounts and there is an intention to settle on a net basis, or to realize the asset and settle theliability simultaneously. The Group has currently enforceable right when if the right is notcontingent on a future event, and is legally enforceable in the normal course of business, event ofdefault, and event of insolvency or bankruptcy of the Group and all of the counterparties.

Classification of Financial Instruments Between Debt and EquityA financial instrument is classified as debt, if it provides for a contractual obligation to:

deliver cash or another financial asset to another entity; orexchange financial assets or financial liabilities with another entity under conditions that arepotentially unfavorable to the Company; orsatisfy the obligation other than by the exchange of a fixed amount of cash or another financialasset for a fixed number of own equity shares.

If the Group does not have an unconditional right to avoid delivering cash or another financialasset to settle its contractual obligation, the obligation meets the definition of a financial liability.

The components of issued financial instruments that contain both liability and equity elements areaccounted for separately, with the equity component being assigned the residual amount, afterdeducting from the instrument as a whole the amount separately determined as the fair value of theliability component on the date of issue.

— F-78 —

Cash and Cash EquivalentsCash includes cash on hand and in banks. Cash equivalents are short-term, highly liquidinvestments that are readily convertible to known amounts of cash with original maturities of threemonths or less and that are subject to an insignificant risk of change in value.

Cash does not include restricted cash, which is classified in the consolidated balance sheet eitheras a current or noncurrent asset depending on the relationship to the asset for which the funds arerestricted. If cash is restricted for investments, the restricted portion is classified as noncurrent.

Spare Parts and SuppliesSpare parts and supplies inventories are valued at the lower of cost or net realizable value. Netrealizable value is the current replacement cost.

Cost is determined by using the first-in, first-out method. If the cost of spare parts and suppliesinventories exceeds its net realizable value, provisions are made currently for the differencesbetween the cost and the net realizable value.

PrepaymentsPrepayments are expenses paid in advance and recorded as asset before they are utilized. Thisaccount comprises the following:

Input Tax. Input tax is recognized when an entity in the Group purchases goods or services from aValue Added Tax (VAT)-registered supplier or vendor. This account is offset, on a per entitybasis, against any output tax previously recognized.

Prepaid Port Fees, Insurance, Bonds and Other Expenses, and Advanced Rent and Deposits.Prepaid insurance, port fees, bonds and other expenses, and advanced rent and deposits areapportioned over the period covered by the payment and charged to the appropriate account in theconsolidated statement of income when incurred.

Creditable Withholding Tax. Creditable withholding tax is deducted from income tax payable onthe same year the revenue was recognized.

Tax Credit Certificates. Tax credit certificates are issued by tax authorities in lieu of taxrefunds, which can be used to offset against future tax liabilities and customs duties. In somejurisdictions, tax credit certificates can be sold or exchanged for cash and cash equivalents.

Advances to Suppliers and Contractors. Advances to suppliers and contractors are reclassified tothe proper asset or expense account and deducted from the contractors’ billings as specified in theprovisions of the contract.

Prepayments that are expected to be realized within 12 months from the balance sheet date areclassified as current assets. Otherwise, these are classified as noncurrent assets.

Capital Stock and Additional Paid-in CapitalCapital stock is measured at par value for all shares issued. When the Parent Company issuesmore than one class of stock, a separate account is maintained for each class of stock and thenumber of shares issued.

When the shares are sold at a premium, the difference between the proceeds and the par value iscredited to “Additional paid-in capital” account. When shares are issued for a consideration otherthan cash, the proceeds are measured by the fair value of the consideration received. In case theshares are issued to extinguish or settle the liability of the Parent Company, the shares shall bemeasured either at the fair value of the shares issued or fair value of the liability settled, whicheveris more reliably determinable.

— F-79 —

Direct costs incurred related to equity issuance, such as underwriting, accounting and legal fees,printing costs and taxes are chargeable to “Additional paid-in capital” account. If additional paid-in capital is not sufficient, the excess is charged against the retained earnings.

Cost of Shares Held by SubsidiariesOwn equity instruments which are held by subsidiaries are treated as treasury shares andrecognized and deducted from equity at cost. No gain or loss is recognized in the consolidatedstatement of income on the purchase, sale, issue or cancellation of the Group’s own equityinstruments. Any difference between the carrying amount and the consideration is recognized asadditional paid-in capital.

Treasury SharesOwn equity instruments which are reacquired (treasury shares) are recognized at cost anddeducted from equity. No gain or loss is recognized in the consolidated statement of income onthe purchase, sale, issue or cancellation of the Parent Company’s own equity instruments. Anydifference between the carrying amount and the consideration, if reissued, is recognized asadditional paid-in capital. Voting rights related to treasury shares are nullified for the ParentCompany and no dividends are allocated to them respectively. Shares vested during the reportingperiod are satisfied with treasury shares.

Retained EarningsRetained earnings are the result of Group’s accumulated profits or losses, declaration of dividendsand the effects of retrospective application or retrospective restatement recognized in accordancewith PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

Foreign Currency TransactionsTransactions in foreign currencies are initially recorded by each entity at its functional currencyruling at the date the transaction first qualifies for recognition. Monetary assets and liabilitiesdenominated in foreign currencies are retranslated at the entity’s functional currency rate ofexchange at the balance sheet date. All foreign currency differences are taken to the consolidatedstatement of income except exchange differences on foreign currency borrowings that provide ahedge against a net investment in a foreign operation. These foreign currency borrowings includelong-term receivables or loans to a foreign operation denominated in either the functional currencyof the parent or of the foreign operations. Related exchange differences arising from netinvestment in foreign operations are taken directly to equity until the disposal of the netinvestment, at which time they are recognized in the consolidated statement of income. Taxcharges and credits attributable to exchange differences on those borrowings are also dealt with inequity.

Non-monetary items that are measured in terms of historical cost in a foreign currency aretranslated using the exchange rates as at the dates of the initial transactions. Nonmonetary itemsmeasured at fair value in a foreign currency are translated using the exchange rates at the datewhen the fair value was determined.

Any goodwill arising from the acquisition of a foreign operation and any fair value adjustmentsmade to the carrying amounts of assets and liabilities arising from the acquisition are treated asassets and liabilities of the foreign operations and translated at the closing exchange rate at thebalance sheet date.

— F-80 —

Year-End Exchange RatesThe following rates of exchange have been adopted by the Group in translating foreign currencybalance sheet and statement of income items as at and for the years ended December 31:

2014 2015 2016Closing Average Closing Average Closing Average

Foreign currency to 1 unit ofUS dollar (USD or US$):

Argentine peso (AR$) 8.465 8.121 12.932 9.264 15.880 14.779 Australian dollar (AUD) 1.223 1.108 1.372 1.329 1.387 1.344 Brazilian real (BRL or R$) 2.658 2.355 3.961 3.338 3.255 3.481 Brunei dollar (BND or B$) 1.325 1.267 1.418 1.375 1.448 1.381 Chinese renminbi (RMB) 6.206 6.162 6.494 6.285 6.945 6.648 Colombian peso (COP) 2,376.510 2,001.650 3,174.500 2,748.667 3,002.000 3,051.900 Croatian kuna (HRK) 6.335 5.756 7.036 6.859 7.177 6.807 Euro (EUR or €) 0.827 0.753 0.921 0.901 0.951 0.903 Georgian lari (GEL) 1.885 1.766 2.400 2.275 2.658 2.366 Honduran lempira (HNL) 21.020 20.507 22.368 21.846 23.492 22.835 Hong Kong dollar (HKD) 7.755 7.755 7.751 7.753 7.756 7.763 Indian rupee (INR) 63.044 61.032 66.154 64.153 67.924 67.206 Indonesian rupiah (IDR or Rp) 12,388.000 11,881.000 13,788.000 13,398.000 13,473.000 13,305.000 Iraqi dinar (IQD) 1,195.025 1,188.193 1,165.000 1,202.306 1,197.155 1,194.412 Japanese yen (JPY or ¥) 119.780 105.920 120.220 121.045 116.960 108.780 Malagasy ariary (MGA) 2,585.000 2,475.430 3,216.000 3,093.696 3,364.500 3,181.032 Mexican peso (MXN) 14.752 13.314 17.208 15.881 20.727 18.689 Pakistani rupee (PKR or Rs) 100.523 101.034 104.731 102.749 104.370 104.715 Philippine peso (P=) 44.720 44.395 47.060 45.523 49.720 47.475 Polish zloty (PLN) 3.544 3.156 3.923 3.771 4.187 3.944 Singaporean dollar (SGD) 1.326 1.267 1.419 1.375 1.447 1.381 South African rand (ZAR) 11.571 10.850 15.469 12.780 13.740 14.694

Change in Functional CurrencyWhen there is a change in an entity’s functional currency, the entity should apply the translationprocedures applicable to the new functional currency prospectively from the date of change. Anentity translates all items into the new functional currency using the exchange rate at the date ofthe change. The resulting translated amounts for nonmonetary items are treated as their historicalcost. Exchange differences arising from the translation at the date of change are recognized ascumulative translation adjustment reported under the consolidated statement of comprehensiveincome and presented in the equity section of the consolidated balance sheet. Exchangedifferences arising from translation of a foreign operation recognized in other comprehensiveincome are not reclassified from equity to the consolidated statement of income until the disposalof the foreign operation.

The comparative financial statements shall be presented into the new presentation currency inaccordance with the translation procedures described in PAS 21, The Effects of Changes inForeign Exchange Rates, as follows:

a. all assets and liabilities at the exchange rates prevailing at the balance sheet date;

b. equity items at historical exchange rates;

c. revenue and expense items at the approximate exchange rates prevailing at the time oftransactions; and

d. all resulting exchange differences are recognized in cumulative translation adjustmentsaccount, presented as part of the consolidated statement of comprehensive income.

— F-81 —

Concession Rights PayableConcession rights payable is recognized at the date of inception as the present value of the fixedportion of port fees or rental fees to the port authorities if the arrangement qualifies underIFRIC 12, Service Concession Arrangements, or IFRIC 4, Determining whether an Agreementcontains a Lease, as a finance lease, respectively. This account is debited upon payment of portfees or rental fees to the port authorities. Such payments are apportioned between interestpayment and payment of the principal. Interest arising from the accretion of concession rightspayable is presented under “Interest expense on concession rights payable” account in theconsolidated statement of income.

Concession rights payable that are expected to be settled for no more than 12 months after thereporting period are classified as current liabilities presented as Current portion of concessionrights payable. Otherwise, these are classified as noncurrent liabilities.

Accounts Payable and Other Current LiabilitiesAccounts payable is part of the working capital used in the normal operating cycle of the Group.Other current liabilities are not settled as part of the Group’s normal operating cycle but are duefor settlement within 12 months after the balance sheet date. Accounts payable and other currentliabilities are recognized in the period when incurred. This account classification includes thefollowing:

Trade Payable. Trade payable represents payable to port authorities other than concession rightspertaining to upfront fees payable in installments and fixed fees, such as accrual of variableportion of port fees and those payable to suppliers and vendors of goods and services.

Accrued Expenses. Accrued expenses are comprised of accruals relating to interest, salaries andbenefits, and output and other taxes, among others.

Provisions for Claims and Losses. Provisions for claims and losses pertain to estimated probablelosses on cargo, labor-related and other claims from third parties. Provision for losses not settledat the balance sheet date is reassessed and adjusted, if necessary.

Customers’ Deposits. Customers’ deposits represent advance payment of customers subject torefund or for future billing applications.

LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance ofthe arrangement at inception date, of whether the fulfillment of the arrangement is dependent onthe use of a specific asset or assets or the arrangement conveys a right to use the asset or assets,even if that right is not explicitly specified in an arrangement.

A reassessment is made after inception of the lease only if one of the following applies:

a. There is a change in contractual terms, other than a renewal or extension of the arrangement;

b. A renewal option is exercised or extension granted, unless the term of the renewal orextension was initially included in the lease term;

c. There is a change in the determination of whether fulfillment is dependent on a specifiedasset; or

d. There is substantial change in the asset.

— F-82 —

Where a reassessment is made, lease accounting shall commence or cease from the date when thechange in circumstances gives rise to the reassessment for scenarios a, c, or d, and at the date ofrenewal or extension period for scenario b.

Group as Lessee. Finance leases which transfer to the Group substantially all the risks andbenefits incidental to ownership of the leased item, are capitalized at the commencement of thelease at the fair value of the leased property or, if lower, at the present value of the minimum leasepayments. Lease payments are apportioned between the finance charges and reduction of the leaseliability so as to achieve a constant rate of interest on the remaining balance of the liability.Finance charges are reflected in the consolidated statement of income.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonablecertainty that the Group will obtain ownership by the end of the lease term, the asset is depreciatedover the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognized as an operating expense in the consolidated statement ofincome on a straight-line basis over the lease term.

Group as Lessor. Leases where the Group does not transfer substantially all the risks and benefitsof ownership of the asset are classified as operating leases. Initial direct costs incurred innegotiating an operating lease are added to the carrying amount of the leased asset and recognizedover the lease term on the same bases as rental income. Contingent rents are recognized asrevenue in the period in which they are earned.

Pension BenefitsDefined Benefit Plans. The Parent Company, BCT, BIPI, DIPSSCOR, SBITC, ROHQ, MTS,JASA, OJA, SCIPSI, MICTSL, MICTSI, AGCT, CGSA, CMSA and APBS have separate,noncontributory, defined benefit retirement plans covering substantially all of its regularemployees. The pension plans of the Parent Company, BIPI, DIPSSCOR, SBITC and SCIPSI arefunded.

The cost of providing benefits under the defined benefit plans is determined separately for eachplan using the projected unit credit actuarial valuation method. Projected unit credit methodreflects services rendered by employees to the date of valuation and incorporates assumptionsconcerning employees’ projected salaries.

Defined benefit costs comprise service cost, net interest on the net defined benefit liability or assetand remeasurements of net defined benefit liability or asset.

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognizedwhen plan amendment or curtailment occurs. These amounts are calculated periodically byindependent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined byapplying the discount rate based on government bonds to the net defined benefit liability or asset.Net interest on the net defined benefit liability or asset is recognized as expense or income inprofit or loss.

Remeasurements comprising actuarial gains and losses, difference between the return on planassets and interest income and any change in the effect of the asset ceiling (excluding net intereston defined benefit liability) are recognized immediately in other comprehensive income in theperiod in which they arise. Remeasurements are not reclassified to profit or loss in subsequentperiods.

— F-83 —

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Group, nor can they be paid directly tothe Group. Fair value of plan assets is based on market price information. When no market priceis available, the fair value of plan assets is estimated by discounting expected future cash flowsusing a discount rate that reflects both the risk associated with the plan assets and the maturity orexpected disposal date of those assets (or, if they have no maturity, the expected period until thesettlement of the related obligations). If the fair value of the plan assets is higher than the presentvalue of the defined benefit obligation, the measurement of the resulting defined benefit asset islimited to the present value of economic benefits available in the form of refunds from the plan orreductions in future contributions to the plan.

Defined Contribution Plan. YICT, ICTSI Oregon and PICT have defined contribution plans undera state pension scheme. Contributions under the plan are recorded as expense in the consolidatedstatement of income. There are no further obligations beyond the contribution.

Share-based Payment TransactionsCertain qualified officers and employees of the Parent Company and subsidiaries receiveremuneration for their services in the form of equity shares of the Parent Company (“equity-settledtransactions”).

The cost of equity-settled transactions with officers and employees is measured by reference to thefair value of the stock at the date on which these are granted.

The cost of equity-settled transactions is recognized, together with a corresponding increase inequity, over the period in which the performance and/or service conditions are fulfilled, ending onthe date on which the relevant employees become fully entitled to the award (“the vesting date”).

Revenue RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theGroup and the revenue can be reliably measured, regardless of when payment is being made.Revenue is measured at the fair value of the consideration received or receivable, taking intoaccount contractually defined terms of payment, excluding discounts, rebates, output tax, andother sales taxes or duty. The Group assesses its revenue arrangements against specific criteria todetermine if it is acting as principal or agent. The Group has concluded that it is acting asprincipal in substantially all its revenue arrangements. The following specific recognition criteriamust also be met before revenue is recognized:

Gross Revenues from Port Operations. Revenue is generally recognized when services arerendered.

Construction Revenue and Cost. When the Group provides construction or upgrade services onconcession arrangements accounted for within the scope of IFRIC 12, the consideration ismeasured at the fair value of the construction services provided. The Group recognizes revenueand costs relating to construction or upgrade services by reference to the stage of completion ofthe contract in accordance with PAS 11, Construction Contracts.

Interest Income. Revenue is recognized as the interest accrues taking into account the effectiveyield of the asset.

Dividend Income. Revenue is recognized when the Group’s right to receive the payment isestablished, which is generally when the Board approve the dividend, and is included as part of“Other income” account in the consolidated statement income.

— F-84 —

Rental Income. Rental income arising from operating leases on investment properties is accountedfor on a straight-line basis over the lease terms and is included as part of “Other income” accountin the consolidated statement of income.

Government GrantsGovernment grants are recognized where there is reasonable assurance that the grant will bereceived and all attached conditions will be complied with. When the grant relates to an expenseitem, it is initially recognized as a liability in the consolidated balance sheet and recognized asincome on a systematic basis over the periods that the related costs, for which it is intended tocompensate, are expensed. When the grant relates to the acquisition or construction of a fixedasset, it is initially recognized as a liability in the consolidated balance sheet and recognized asincome in equal amounts over the period of depreciation of the related asset.

ExpensesExpenses are recognized as incurred. Expenses constitute the following:

Port Authorities’ Share in Gross Revenues. Port authorities’ share in gross revenues includesvariable fees paid to port authorities as stipulated in the concession agreements.

Manpower Costs. Manpower costs include remunerations and benefits provided by the Group toits officers and employees such as salaries, wages, allowances, and bonuses, among others.

Equipment and Facilities-related Expenses. Equipment and facilities-related expenses includefixed fees paid to port authorities as stipulated in the concession agreements that qualify as leasesunder IFRIC 4 and expenses incurred for general repairs and maintenance of the Group’s portfacilities and other equipment such as consumption of fuel, oil and lubricants, contracted services,power, light and water, and technology and systems development expenses.

Administrative and Other Operating Expenses. Administrative and other operating expensesnormally include costs of administering the business as incurred by administrative departmentssuch as professional fees, transportation and travel, taxes and licenses, security and janitorialservices, insurance and bonds, representation, utilities and general office expenses. This accountalso includes costs of business development offices in relation to the acquisition of new terminalsor projects under exploratory stage.

TaxesCurrent Tax. Income tax assets and liabilities for the current period are measured at the amountexpected to be recovered from or paid to the taxation authorities. The tax rates and tax laws usedto compute the amount are those that are enacted or substantively enacted at the balance sheet datein the countries where the Group operates and generates taxable income.

Current tax relating to items recognized directly in equity is recognized in equity and not in theconsolidated statement of income. Management periodically evaluates positions taken in the taxreturns with respect to situations in which applicable tax regulations are subject to interpretationand establishes provisions where appropriate.

Deferred Tax. Deferred tax is provided using the liability method on temporary differences at thebalance sheet date between the tax bases of assets and liabilities and their carrying amounts forfinancial reporting purposes.

— F-85 —

Deferred tax liabilities are recognized for all taxable temporary differences, except:

where the deferred tax liability arises from the initial recognition of goodwill or of an asset orliability in a transaction that is not a business combination and, at the time of the transaction,affects neither the accounting income nor taxable income or loss; and

in respect of taxable temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, when the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will not reversein the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences and carryforwardbenefits of unused tax credits and unused tax losses or NOLCO, to the extent that it is probablethat sufficient future taxable income will be available against which the deductible temporarydifferences, and the carryforward benefits of unused tax credits and NOLCO can be utilizedexcept:

where the deferred tax asset relating to the deductible temporary difference arises from theinitial recognition of an asset or liability in a transaction that is not a business combinationand, at the time of the transaction, affects neither the accounting income nor taxable income orloss; and

in respect of deductible temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, deferred tax assets are recognized only to the extentthat it is probable that the temporary differences will reverse in the foreseeable future andtaxable income will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced tothe extent that it is no longer probable that sufficient taxable profit will be available to allow all orpart of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed ateach balance sheet date and are recognized to the extent that it has become probable that futuretaxable income will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in theyear when the asset is realized or the liability is settled, based on tax rates and tax laws that havebeen enacted or substantively enacted at the balance sheet date.

Deferred tax relating to items recognized outside the consolidated statement of income isrecognized outside of the consolidated statement of income. Deferred tax items are recognized incorrelation to the underlying transaction either in other comprehensive income or directly inequity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to setoff current income tax assets against current income tax liabilities and the deferred taxes relate tothe same taxable entity and the same taxation authority.

Tax benefits acquired as part of business combination, but not satisfying the criteria for separaterecognition at that date, are recognized subsequently if new information about facts andcircumstances change. The adjustment is treated as a reduction to goodwill (as long as it does notexceed goodwill) if it was incurred during the measurement period; otherwise, these shall berecognized in profit or loss.

— F-86 —

Project Development CostsProject development costs that do not qualify for capitalization as port infrastructure recognized asconcession rights or property and equipment are expensed as incurred.

Preoperating ExpensesPreoperating expenses are expensed as incurred.

Earnings Per ShareBasic earnings per common share is computed by dividing the net income attributable to equityholders of the parent, adjusted by the effect of cumulative distributions on subordinated perpetualcapital securities classified as equity in accordance with PAS 32 by the weighted average numberof common shares outstanding during each year after giving retroactive effect to stock dividendsdeclared during the year.

Diluted earnings per common share is computed in the same manner, adjusted for the effect of theshares issuable to qualified officers and employees under the Parent Company’s stock incentiveplan which are assumed to be exercised at the date of grant.

Where the effect of the vesting of stock under the stock incentive plan is anti-dilutive, basic anddiluted earnings per share are stated at the same amount.

Geographical SegmentsThe Group operates principally in one industry segment which is cargo handling and relatedservices. The Group’s operating business is organized and managed separately according tolocation, namely Asia, EMEA, and Americas. Financial information on geographical segments ispresented in Note 5 to the consolidated financial statements.

ProvisionsGeneral. Provisions are recognized when the Group has a present obligation (legal orconstructive) as a result of a past event, it is probable that an outflow of resources embodyingeconomic benefits will be required to settle the obligation and a reliable estimate can be made ofthe amount of the obligation. Where the Group expects some or all of a provision to bereimbursed, for example under an insurance contract, the reimbursement is recognized as aseparate asset but only when the reimbursement is virtually certain. The expense relating to anyprovision is presented in the consolidated statement of income, net of any reimbursement. If theeffect of the time value of money is material, provisions are discounted using a current pre-tax ratethat reflects, where appropriate, the risks specific to the liability. Where discounting is used, theincrease in the provision due to the passage of time is recognized as a borrowing cost.

Contingent Liabilities Recognized in a Business Combination. A contingent liability recognized ina business combination is initially measured at its fair value. Subsequently, it is measured at thehigher of the amount that would be recognized in accordance with the requirements for provisionsabove or the amount initially recognized less, when appropriate, cumulative amortizationrecognized in accordance with the requirements for revenue recognition.

ContingenciesContingent assets and liabilities are not recognized in the consolidated financial statements.Contingent assets are disclosed in the notes to consolidated financial statements when an inflow ofeconomic benefits is probable and recognized in the consolidated balance sheet and the relatedincome in the consolidated statement of income when an inflow of economic benefits is virtuallycertain. On the other hand, contingent liabilities are disclosed in the notes to consolidatedfinancial statements unless the possibility of an outflow of resources embodying economicbenefits is remote.

— F-87 —

Events after the Balance Sheet DatePost year-end events that provide additional information about the Group’s position at the balancesheet date (adjusting events) are reflected in the consolidated financial statements. Post year-endevents that are not adjusting events are disclosed in the notes to consolidated financial statementswhen material.

3.4 Future Changes in Accounting Policies

Pronouncements Issued but Not yet EffectivePronouncements issued but not yet effective as at December 31, 2016 are listed below. The Groupintends to adopt the following pronouncements when they become effective.

DeferredAmendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor andits Associate or Joint VentureThe amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss ofcontrol of a subsidiary that is sold or contributed to an associate or joint venture. Theamendments clarify that a full gain or loss is recognized when a transfer to an associate orjoint venture involves a business as defined in PFRS 3, Business Combinations. Any gain orloss resulting from the sale or contribution of assets that does not constitute a business,however, is recognized only to the extent of unrelated investors’ interests in the associate orjoint venture.

On January 13, 2016, the FSRC postponed the original effective date of January 1, 2016 of thesaid amendments until the International Accounting Standards Board has completed itsbroader review of the research project on equity accounting that may result in thesimplification of accounting for such transactions and of other aspects of accounting forassociates and joint ventures.

Effective January 1, 2017Amendment to PFRS 12, Clarification of the Scope of the Standard (Part of AnnualImprovements to PFRSs 2014 - 2016 Cycle)The amendments clarify that the disclosure requirements in PFRS 12, other than those relatingto summarized financial information, apply to an entity’s interest in a subsidiary, a jointventure or an associate (or a portion of its interest in a joint venture or an associate) that isclassified (or included in a disposal group that is classified) as held for sale.

Amendments to PAS 7, Statement of Cash Flows, Disclosure InitiativeThe amendments to PAS 7 require an entity to provide disclosures that enable users offinancial statements to evaluate changes in liabilities arising from financing activities,including both changes arising from cash flows and non-cash changes (such as foreignexchange gains or losses). On initial application of the amendments, entities are not requiredto provide comparative information for preceding periods. Early application of theamendments is permitted.

Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for UnrealizedLossesThe amendments clarify that an entity needs to consider whether tax law restricts the sourcesof taxable profits against which it may make deductions on the reversal of that deductibletemporary difference. Furthermore, the amendments provide guidance on how an entityshould determine future taxable profits and explain the circumstances in which taxable profitmay include the recovery of some assets for more than their carrying amount.

— F-88 —

Entities are required to apply the amendments retrospectively. However, on initial applicationof the amendments, the change in the opening equity of the earliest comparative period maybe recognized in opening retained earnings (or in another component of equity, asappropriate), without allocating the change between opening retained earnings and othercomponents of equity. Entities applying this relief must disclose that fact. Early application ofthe amendments is permitted.

These amendments are not expected to have any impact on the Group.

Effective January 1, 2018Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based Payment TransactionsThe amendments to PFRS 2 address three main areas: the effects of vesting conditions on themeasurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; andthe accounting where a modification to the terms and conditions of a share-based paymenttransaction changes its classification from cash settled to equity settled.

On adoption, entities are required to apply the amendments without restating prior periods, butretrospective application is permitted if elected for all three amendments and if other criteriaare met. Early application of the amendments is permitted.

The Group is assessing the potential effect of the amendments on its consolidated financialstatements.

Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, withPFRS 4The amendments address concerns arising from implementing PFRS 9, the new financialinstruments standard before implementing the forthcoming insurance contracts standard. Theyallow entities to choose between the overlay approach and the deferral approach to deal withthe transitional challenges. The overlay approach gives all entities that issue insurancecontracts the option to recognize in other comprehensive income, rather than profit or loss, thevolatility that could arise when PFRS 9 is applied before the new insurance contracts standardis issued. On the other hand, the deferral approach gives entities whose activities arepredominantly connected with insurance an optional temporary exemption from applyingPFRS 9 until the earlier of application of the forthcoming insurance contracts standard orJanuary 1, 2021.

The overlay approach and the deferral approach will only be available to an entity if it has notpreviously applied PFRS 9.

The amendments are not applicable to the Group since none of the entities within the Grouphave activities that are predominantly connected with insurance or issue insurance contracts.

PFRS 15, Revenue from Contracts with CustomersPFRS 15 establishes a new five-step model that will apply to revenue arising from contractswith customers. Under PFRS 15, revenue is recognized at an amount that reflects theconsideration to which an entity expects to be entitled in exchange for transferring goods orservices to a customer. The principles in PFRS 15 provide a more structured approach tomeasuring and recognizing revenue.

— F-89 —

The new revenue standard is applicable to all entities and will supersede all current revenuerecognition requirements under PFRSs. Either a full or modified retrospective application isrequired for annual periods beginning on or after January 1, 2018. The Group is currentlyassessing the impact of adopting this standard.

PFRS 9, Financial InstrumentsPFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, FinancialInstruments: Recognition and Measurement, and all previous versions of PFRS 9. Thestandard introduces new requirements for classification and measurement, impairment, andhedge accounting. PFRS 9 is effective for annual periods beginning on or after January 1,2018, with early application permitted. Retrospective application is required, but providingcomparative information is not compulsory. For hedge accounting, the requirements aregenerally applied prospectively, with some limited exceptions.

The adoption of PFRS 9 will have an effect on the classification and measurement of theGroup’s financial assets and impairment methodology for financial assets, but will have noimpact on the classification and measurement of the Group’s financial liabilities. The adoptionwill also have an effect on the Group’s application of hedge accounting and on the amount ofits credit losses. The Group is currently assessing the impact of adopting this standard.

Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part ofAnnual Improvements to PFRSs 2014 - 2016 Cycle)The amendments clarify that an entity that is a venture capital organization, or otherqualifying entity, may elect, at initial recognition on an investment-by-investment basis, tomeasure its investments in associates and joint ventures at fair value through profit or loss.They also clarify that if an entity that is not itself an investment entity has an interest in anassociate or joint venture that is an investment entity, the entity may, when applying the equitymethod, elect to retain the fair value measurement applied by that investment entity associateor joint venture to the investment entity associate’s or joint venture’s interests in subsidiaries.This election is made separately for each investment entity associate or joint venture, at thelater of the date on which (a) the investment entity associate or joint venture is initiallyrecognized; (b) the associate or joint venture becomes an investment entity; and (c) theinvestment entity associate or joint venture first becomes a parent. The amendments should beapplied retrospectively, with earlier application permitted.

The amendments are not applicable to the Group since none of the entities within the Groupare considered as venture capital organization or other qualifying entities.

Amendments to PAS 40, Investment Property, Transfers of Investment PropertyThe amendments clarify when an entity should transfer property, including property underconstruction or development into, or out of investment property. The amendments state that achange in use occurs when the property meets, or ceases to meet, the definition of investmentproperty and there is evidence of the change in use. A mere change in management’sintentions for the use of a property does not provide evidence of a change in use. Theamendments should be applied prospectively to changes in use that occur on or after thebeginning of the annual reporting period in which the entity first applies the amendments.Retrospective application is only permitted if this is possible without the use of hindsight.

Adoption of these amendments is not expected to have significant impact on the consolidatedfinancial statements.

— F-90 —

Philippine Interpretation IFRIC 22, Foreign Currency Transactions and AdvanceConsiderationThe interpretation clarifies that in determining the spot exchange rate to use on initialrecognition of the related asset, expense or income (or part of it) on the derecognition of anon-monetary asset or non-monetary liability relating to advance consideration, the date of thetransaction is the date on which an entity initially recognizes the nonmonetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments orreceipts in advance, then the entity must determine a date of the transactions for each paymentor receipt of advance consideration. The interpretation may be applied on a fully retrospectivebasis. Entities may apply the interpretation prospectively to all assets, expenses and income inits scope that are initially recognized on or after the beginning of the reporting period in whichthe entity first applies the interpretation or the beginning of a prior reporting period presentedas comparative information in the financial statements of the reporting period in which theentity first applies the interpretation.

Adoption of these amendments is not expected to have significant impact on the consolidatedfinancial statements.

Effective January 1, 2019PFRS 16, LeasesUnder the new standard, lessees will no longer classify their leases as either operating orfinance leases in accordance with PAS 17, Leases. Rather, lessees will apply the single-assetmodel. Under this model, lessees will recognize the assets and related liabilities for mostleases on their balance sheets, and subsequently, will depreciate the lease assets and recognizeinterest on the lease liabilities in their profit or loss. Leases with a term of 12 months or less orfor which the underlying asset is of low value are exempted from these requirements.

The accounting by lessors is substantially unchanged as the new standard carries forward theprinciples of lessor accounting under PAS 17. Lessors, however, will be required to disclosemore information in their financial statements, particularly on the risk exposure to residualvalue.

Entities may early adopt PFRS 16 but only if they have also adopted PFRS 15. Whenadopting PFRS 16, an entity is permitted to use either a full retrospective or a modifiedretrospective approach, with options to use certain transition reliefs. The Group is currentlyassessing the impact of adopting PFRS 16.

4. Business Combinations and Disposals

The Group, in the process of acquiring new ports, recognizes goodwill from business combinationrepresenting the expected synergies and other benefits from combining the acquiree’s net assetswith those of the acquirer.

4.1 Acquisition of YICT and Sale of YRDICTL in 2014

On July 1, 2014, ICTSI, through its subsidiary IHKL, acquired 51 percent of the total equityinterest of YICT for a total cash consideration of approximately US$137.3 million(RMB854.2 million) paid in four installments. On the same date, ICTSI sold its 60 percentownership interest in YRDICTL to Yantai Port Holdings (YPH) for a total cash consideration ofapproximately US$94.8 million (RMB588.1 million) paid in two installments in July 2014. Allthe proceeds from the sale of YRDICTL were used to partially fund the acquisition of YICT. The

— F-91 —

contracts also provide for contingent consideration for the sale and acquisition transactions, basedon the change in net asset value of YICT and YRDICTL from August 31, 2013 to June 30, 2014subject to external audit. IHKL expected to receive from Yantai Port Group (YPG) a net amountof US$1.0 million (RMB6.1 million) in 2015 representing the additional consideration for the saleand acquisition transactions based on the change in net asset value of YICT and YRDICTL fromAugust 31, 2013 to June 30, 2014 in accordance with the contract. On June 12, 2015, IHKLreceived from YPG a net amount of US$0.8 million (RMB5.2 million). The receipt of the finalnet contingent consideration in 2015 resulted in the reduction of gain on sale of YRDICTL byUS$0.2 million (RMB0.9 million).

The objective of these transactions is to consolidate and optimize the overall port operationswithin the Zhifu Bay Port Area in Yantai, China. YICT became the only foreign containerterminal and YRDICTL is dedicated to handling local container cargo within the Zhifu Bay PortArea. DP World China (Yantai) and YPH owns 12.5 percent and 36.5 percent ownership interest,respectively, in YICT, with ICTSI as the majority shareholder. YRDICTL is now 100 percentowned by YPH and dedicated to handling local container cargo.

The fair values of the identifiable assets and liabilities of YICT at the date of acquisition were:

FinalFair Value

Recognized on Acquisition

AssetsProperty and equipment US$222,168,465Intangibles 81,736,381Other noncurrent assets 433,653Cash and cash equivalents 1,888,381Receivables - net of allowance for doubtful accounts of

US$74.8 thousand 5,307,382Spare parts and supplies 599,354Prepaid expenses and other current assets 63,120

312,196,736LiabilitiesDeferred tax liabilities US$11,663,798Loans payable 4,513,872Accounts payable and other current liabilities 2,735,273Current portion of long-term debt 38,566,201

57,479,144Total identifiable net assets at fair value 254,717,592Non-controlling interest measured at proportionate

fair value (124,811,620)Goodwill arising on acquisition 10,239,388Purchase consideration transferred and satisfied by cash US$140,145,360

In the 2014 consolidated statement of cash flows, the net cash outflow on the acquisitionamounting to US$135.4 million was derived as follows:

AmountCash paid at acquisition date US$137,310,871Less cash and cash equivalents of YICT 1,888,381Net cash outflow at acquisition date 135,422,490Add cash paid for contingent consideration in 2015 2,834,489Net cash outflow US$138,256,979

— F-92 —

Net cash inflow from the sale of YRDICTL amounted to US$68.0 million, which excludes thecash and cash equivalents of YRDICTL as at date of sale amounting to US$26.7 million(RMB165.8 million). This amount also excludes the additional amount received from YPG in2015 amounting to US$3.7 million (RMB23.7 million). Adjusted gain on sale of YRDICTL afterthe receipt of the final net contingent consideration in 2015 is US$31.7 million.

The carrying values of the assets and liabilities of YRDICTL at the date of disposal were:

Carrying Value at Disposal Date

AssetsProperty and equipment US$75,936,567Intangibles 27,044,395Deferred tax assets 418,463Other noncurrent assets 17,731Cash and cash equivalents 26,725,571Receivables 4,222,680Spare parts and supplies 380,263Prepaid expenses and other current assets 98,433

US$134,844,103

LiabilitiesDeferred tax liabilities US$1,269,212Accounts payable and other current liabilities 1,130,400

US$2,399,612

Gross revenues and net income attributable to equity holders of the parent of YICT fromacquisition date to December 31, 2014 amounted to US$16.5 million (RMB101.9 million) andUS$0.4 million (RMB2.7 million). If the acquisition and sale had taken place at the beginning ofthe year, consolidated revenues would have been higher by US$0.7 million (RMB4.2 million) andnet income attributable to equity holders of the parent would have been lower by US$0.8 million(RMB4.9 million) for the year ended December 31, 2014.

4.2 Sale of NICTI

On April 27, 2015, NICTI purchased ICTSI’s 60 percent ownership interest in NICTI forJPY107.0 million (approximately US$0.9 million) as part of its treasury shares. The 10-year leaseagreement of NICTI expired at yearend and ICTSI was no longer interested in participating in thenegotiation for the renewal of the lease agreement. The transaction resulted in the recognition ofgain on sale amounting to US$0.3 million in the 2015 consolidated statement of income.

5. Segment Information

A segment is a distinguishable component of the Group that is engaged either in providing typesof services (business segment) or in providing the services within a particular economicenvironment (geographic segment).

— F-93 —

The Group operates principally in one industry segment which is cargo handling and relatedservices. ICTSI has organized its cargo handling and related business into three geographicalsegments:

Asia - includes MICT, BIPI, DIPSSCOR, SCIPSI, SBITC, ICTSI Subic, HIPS, MICTSI,LGICT and CGT in the Philippines; YRDICTL (until June 30, 2014) and YICT (startingJuly 1, 2014) in China; OJA, JASA and MTS in Indonesia; VICT in Australia; NICTI (untilApril 27, 2015) in Japan; NMCTS in Brunei; PICT in Pakistan; AICTL, ICTHI, ICTSI Ltd.and other holding companies and those companies incorporated in The Netherlands for thepurpose of supporting the funding requirements of the Group;

EMEA - includes BCT in Poland, BICTL in Georgia, AGCT in Croatia, MICTSL inMadagascar, LICTSLE in Nigeria, IDRC in DR Congo and ICTSI Iraq in Iraq; and

Americas - includes TSSA in Brazil, CGSA in Ecuador, SPIA in Colombia, Tecplata inArgentina, CMSA and TMT in Mexico, OPC in Honduras and ICTSI Oregon in Oregon,U.S.A.

Management monitors the operating results of its operating unit separately for making decisionsabout resource allocation and performance assessment. The Group evaluates segmentperformance based on contributions to gross revenues, which is measured consistently with grossrevenues from port operations in the consolidated statement of income.

Financing is managed on a group basis and centralized at the Parent Company level or at theentities created solely for the purpose of obtaining funds for the Group. Funding requirements thatare secured through debt are recognized as liabilities of the Parent Company or of the entityissuing the debt instrument, classified under the geographical region of Asia and are not allocatedto other geographical segments where funds are eventually transferred and used.

The tables below present financial information on geographical segments as at and for the yearsended December 31:

2014Asia EMEA Americas Consolidated

Volume (a) 3,820,572 930,616 2,687,447 7,438,635

Gross revenues US$531,484,228 US$105,092,686 US$424,575,279 US$1,061,152,193

Capital expenditures (b) 84,371,708 57,890,248 136,787,168 279,049,124

Other information:Segment assets (c) 1,670,614,107 264,308,937 1,407,964,788 3,342,887,832Segment liabilities (d) 1,541,031,122 101,750,427 198,989,245 1,841,770,794


Volume (a) 4,094,580 943,334 2,738,079 7,775,993




— F-94 —


Volume (a) 4,552,881 1,131,792 3,004,690 8,689,363




(a) Measured in twenty-foot equivalent units (TEUs).(b) Capital expenditures include amount disbursed for the acquisition of port facilities and equipment classified as intangibles

under IFRIC 12 and property and equipment as shown in the consolidated statements of cash flows.(c) Segment assets do not include deferred tax assets amounting to US$57.9 million, US$76.4 million and US$90.6 million as at

December 31, 2014, 2015 and 2016, respectively.

(d) Segment liabilities do not include income tax payable amounting to US$17.4 million, US$22.0 million and US$32.3 million,and deferred tax liabilities amounting to US$68.1 million, US$66.9 million and US$71.4 million as at December 31, 2014,2015 and 2016, respectively.

Moreover, management monitors the Group’s earnings before interest, taxes, depreciation andamortization (EBITDA) on a consolidated basis for decision-making purposes. The followingtable shows the computation of EBITDA as derived from the consolidated net income attributableto equity holders of the parent for the years ended December 31:

2014 2015 2016Net income attributable to equity

holders of the parent US$181,988,167 US$58,545,218 US$180,015,587Non-controlling interests 9,524,705 10,434,227 13,454,791Provision for income tax 53,881,814 50,637,625 63,571,100Income before income tax 245,394,686 119,617,070 257,041,478Add (deduct):

Depreciation and amortization 121,686,193 126,453,035 147,830,235Interest and other expenses (a) 147,160,090 227,813,117 155,910,280Interest and other income (b) (71,231,840) (23,861,039) (35,703,649)

EBITDA (c) US$443,009,129 US$450,022,183 US$525,078,344(a) Interest and other expenses include the following as shown in the consolidated statements of income: foreign exchange

loss; interest expense on concession rights payable; interest expense and financing charges on borrowings; impairmentlosses; equity in net loss of a joint venture; and other expenses.

(b) Interest and other income include the following as shown in the consolidated statements of income: gain on sale ofsubsidiaries; foreign exchange gain; interest income; and other income.

(c) EBITDA is not a uniform or legally defined financial measure. EBITDA is presented because the Group believes it isan important measure of its performance and liquidity. EBITDA is also frequently used by securities analysts, investorsand other interested parties in the evaluation of companies in the industry.The Group EBITDA figures are not, however, readily comparable with other companies’ EBITDA figures as they arecalculated differently and thus must be read in conjunction with related additional explanations. EBITDA haslimitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Group’sresults as reported under PFRS. Some of the limitations concerning EBITDA are:

EBITDA does not reflect cash expenditures or future requirements for capital expenditures or contractualcommitments;EBITDA does not reflect changes in, or cash requirements for working capital needs;EBITDA does not reflect the interest expense, or cash requirements necessary to service interest or principal debtpayments;Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will oftenhave to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; andOther companies in the industry may calculate EBITDA differently, which may limit its usefulness as a comparativemeasure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to theGroup to invest in the growth of the business. The Group compensates for these limitations by relying primarily onPFRS results and uses EBITDA only as supplementary information.

— F-95 —

All segment revenues are from external customers. Gross revenues from port operations of ICTSIand other Philippine-based subsidiaries comprised 38.9 percent, 41.2 percent and 39.5 percent ofthe consolidated gross revenues from port operations for the years ended December 31, 2014,2015 and 2016, respectively. Gross revenues from port operations outside the Republic of thePhilippines comprised 61.1 percent, 58.8 percent and 60.5 percent of the consolidated grossrevenues from port operations for the years ended December 31, 2014, 2015 and 2016,respectively.

6. Intangibles


2014Concession Rights

Upfront Fees(See Note 25)

Fixed Fees(See Note 25)

PortInfrastructure(See Note 25) Subtotal

Computer Software

Goodwill(See Note 4) Total

CostBalance at beginning of year US$270,936,455 US$563,264,220 US$988,907,866 US$1,823,108,541 US$26,341,138 US$123,382,523 US$1,972,832,202Acquisitions or additions

(see Notes 25.6 and 25.11) – – 130,519,963 130,519,963 2,525,086 – 133,045,049Effect of business combination

(see Note 4.1) 90,861,849 – – 90,861,849 – 10,239,388 101,101,237Effect of deconsolidation of

subsidiaries (see Note 4.1) (34,517,481) – – (34,517,481) (65,550) (1,291,320) (35,874,351)Effect of termination of

management contract(see Note 1.2) (14,196,942) – – (14,196,942) – – (14,196,942)

Transfers from (to) other accounts(see Note 7) – – (5,738,343) (5,738,343) 3,394,658 – (2,343,685)

Translation adjustments (2,771,577) (3,282,522) (1,348,595) (7,402,694) (1,392,603) (798,680) (9,593,977)Balance at end of year 310,312,304 559,981,698 1,112,340,891 1,982,634,893 30,802,729 131,531,911 2,144,969,533Accumulated Amortization

and Impairment LossesBalance at beginning of year 50,358,908 54,625,165 151,670,373 256,654,446 13,796,260 277,080 270,727,786Amortization for the year 12,151,179 23,277,728 29,919,555 65,348,462 4,619,308 – 69,967,770Impairment loss for the year – – – – – 38,147,779 38,147,779Effect of business combination

(see Note 4.1) 9,125,468 – – 9,125,468 – – 9,125,468Effect of deconsolidation of

subsidiaries (see Note 4.1) (8,811,125) – – (8,811,125) (18,831) – (8,829,956)Effect of termination of

management contract(see Note 1.2) (1,198,038) – – (1,198,038) – – (1,198,038)

Transfers from other accounts(see Note 7) – – (222,637) (222,637) (379,632) – (602,269)

Translation adjustments (949,153) (847,915) (38,938) (1,836,006) (1,072,613) – (2,908,619)Balance at end of year 60,677,239 77,054,978 181,328,353 319,060,570 16,944,492 38,424,859 374,429,921Net Book Value US$249,635,065 US$482,926,720 US$931,012,538 US$1,663,574,323 US$13,858,237 US$93,107,052 US$1,770,539,612




PortInfrastructure(See Note 25) Subtotal

Computer Software


CostBalance at beginning of year US$310,312,304 US$559,981,698 US$1,112,340,891 US$1,982,634,893 US$30,802,729 US$131,531,911 US$2,144,969,533Acquisitions or additions

(see Notes 25.6 and 25.12) 88,394 – 136,695,487 136,783,881 6,639,893 – 143,423,774Effect of acquisition of TMT

(see Note 1.3) 3,246,838 – – 3,246,838 – – 3,246,838Transfers from (to) other accounts

(see Note 7) – – (571,726) (571,726) 57,901 – (513,825)Translation adjustments (8,592,209) (3,659,187) (4,499,988) (16,751,384) (4,111,171) (3,834,333) (24,696,888)Balance at end of year 305,055,327 556,322,511 1,243,964,664 2,105,342,502 33,389,352 127,697,578 2,266,429,432Accumulated Amortization

and Impairment LossesBalance at beginning of year 60,677,239 77,054,978 181,328,353 319,060,570 16,944,492 38,424,859 374,429,921Amortization for the year 12,636,606 23,034,124 31,889,549 67,560,279 4,671,208 – 72,231,487Impairment losses for the year 11,011,825 – 76,988,175 88,000,000 – 26,561,125 114,561,125Transfers to other accounts

(see Note 7) – – – – (2,630,929) – (2,630,929)Translation adjustments (1,942,189) (1,348,056) (2,420,168) (5,710,413) (2,034,293) – (7,744,706)Balance at end of year 82,383,481 98,741,046 287,785,909 468,910,436 16,950,478 64,985,984 550,846,898Net Book Value US$222,671,846 US$457,581,465 US$956,178,755 US$1,636,432,066 US$16,438,874 US$62,711,594 US$1,715,582,534

— F-96 —




PortInfrastructure

(See Note 25) SubtotalComputer Software


CostBalance at beginning of year US$305,055,327 US$556,322,511 US$1,243,964,664 US$2,105,342,502 US$33,389,352 US$127,697,578 US$2,266,429,432Acquisitions or additions – – 104,094,895 104,094,895 1,704,547 – 105,799,442Disposals – – – – (1,325,380) – (1,325,380)Change in accounting estimate

(see Note 25.11) – (6,360,128) – (6,360,128) – – (6,360,128)Transfers from (to) other accounts

(see Note 7) – – (7,981,412) (7,981,412) 10,001,901 – 2,020,489Translation adjustments (6,244,578) (651,140) (581,211) (7,476,929) 1,089,175 (1,242,787) (7,630,541)Balance at end of year 298,810,749 549,311,243 1,339,496,936 2,187,618,928 44,859,595 126,454,791 2,358,933,314Accumulated Amortization

and Impairment LossesBalance at beginning of year 82,383,481 98,741,046 287,785,909 468,910,436 16,950,478 64,985,984 550,846,898Amortization for the year 11,361,724 22,909,765 49,585,489 83,856,978 6,315,539 – 90,172,517Disposals – – – – (1,305,672) – (1,305,672)Transfers from other accounts

(see Note 7) – – – – 16,314 – 16,314Translation adjustments (1,098,610) (305,265) (320,594) (1,724,469) 723,109 – (1,001,360)Balance at end of year 92,646,595 121,345,546 337,050,804 551,042,945 22,699,768 64,985,984 638,728,697Net Book Value US$206,164,154 US$427,965,697 US$1,002,446,132 US$1,636,575,983 US$22,159,827 US$61,468,807 US$1,720,204,617

Concession RightsAdditions to concession rights under upfront fees pertain to the acquisition through businesscombination of YICT on July 1, 2014, representing land use rights with useful life of 30 years,partially offset by the sale of YRDICTL in 2014 (see Note 4.1). Additions to concession rightsunder port infrastructure pertain to acquisitions of port equipment and construction mainly inTecplata and OPC in 2014 and in Tecplata and ICTSI Iraq in 2015; acquisition of TMT onMay 27, 2015; and in ICTSI Iraq, CGSA and Parent Company in 2016. Additions to concessionrights under port infrastructure which are not yet available for use are not amortized but tested forimpairment at December 31 in accordance with the Group’s accounting policy on ImpairmentTesting on Nonfinancial Assets (see Note 11). As discussed in Note 1.2, ICTSI signed atermination agreement cancelling ICTSI’s container port agreement for the management andoperation of the Kattupalli Container Terminal in Tamil, Nadu, India on June 30, 2014.

Concession rights have remaining amortization periods ranging from 6 to 39 years.

Upon recognition of the fair value of fixed fee on concession contracts, the Group also recognizedthe corresponding concession rights payable. Maturities of concession rights payable arising fromthe capitalization of fixed and upfront fees as at December 31, 2016 are as follows:

Amount2017 US$8,760,6612018 15,111,3672019 16,413,0242020 17,833,5772021 onwards 432,342,807Total US$490,461,436

Interest expense on concession rights payable amounted to US$38.1 million in 2014,US$37.3 million in 2015 and US$34.0 million in 2016.

Capitalized borrowing costs amounted to US$24.3 million in 2014 at a capitalization rate of6.82 percent, US$20.6 million in 2015 at a capitalization rate of 6.64 percent and US$3.1 millionin 2016 at a capitalization rate of 6.42 to 6.45 percent. Unamortized borrowing costs amounted toUS$88.3 million, US$107.7 million and US$109.3 million as at December 31, 2014, 2015 and2016, respectively.

— F-97 —

Computer SoftwareComputer software have remaining amortization periods ranging from one to five years.

GoodwillGoodwill arises from the excess of acquisition costs over fair values of net assets at acquisitiondates of the following subsidiaries:

2014 2015 2016PICT US$30,243,084 US$29,027,938 US$29,128,210AGCT 17,329,864 15,602,740 15,295,983YRDICTL/YICT (see Note 4.1) 10,624,814 10,153,269 9,493,491DIPSSCOR 6,815,417 6,476,528 6,130,027JASA and subsidiaries 26,561,125 – –Others 1,532,748 1,451,119 1,421,096

US$93,107,052 US$62,711,594 US$61,468,807

Goodwill is not amortized but subject to an annual impairment testing as at December 31(see Note 11).

Impairment of Goodwill and Concession RightsTecplata. An impairment charge of US$38.1 million in 2014 and US$88.0 million in 2015 wasrecorded in respect of the Group’s goodwill and concession rights, respectively, in Tecplata basedon value-in-use calculation using discounted cash flows throughout the concession period. Therecoverable amount of Tecplata is US$413.0 million and US$353.3 million based on the saidvalue-in-use calculation as of December 31, 2014 and 2015, respectively. The remaining carryingvalue of goodwill and concession rights - port infrastructure in Tecplata after the impairmentcharge is nil and US$352.7 million, respectively as at December 31, 2015. The reportablesegment of Tecplata is Americas. The impairment charges in Tecplata were as a result of lowerprojected cash flows on its updated business plan caused by the prevailing and unfavorableeconomic conditions in Argentina (see Note 3). The remaining carrying value of concessionrights - port infrastructure in Tecplata after the impairment charge approximates the prevailingdepreciated replacement cost as determined by an independent technical consultant.

JASA and subsidiaries. In 2015, an impairment charge of US$26.6 million was recorded inrespect of the Group’s goodwill in JASA and subsidiaries based on value-in-use calculation usingdiscounted cash flows throughout the concession period. The recoverable amount of JASA andsubsidiaries is US$20.6 million as of December 31, 2015 based on the said value-in-usecalculation. The remaining carrying value of goodwill in JASA and subsidiaries after theimpairment charge is nil. The reportable segment of JASA and subsidiaries is Asia. Theimpairment charge in JASA and subsidiaries was as a result of lower projected cash flows on itsupdated business plan than originally expected (see Note 3).

The discount rate used is the pre-tax rate that reflects current market assessments of the time valueof money and the risks specific to the asset. The Group used discount rates based on theindustry’s Weighted Average Cost of Capital (WACC). Management assumed a discount rate of12.54 percent and 10.3 percent for Tecplata as of December 31, 2014 and 2015, respectively, and7.59 percent for JASA and subsidiaries as at December 31, 2015. Management recognizes thatunfavorable conditions can materially affect the assumptions used in the determination ofvalue-in-use. A reduction of 0.86 percent and 1.79 percent in the discount rate would give avalue-in-use equal to the carrying amount of the net assets of Tecplata as of December 31, 2014and 2015, respectively. A reduction of 9.59 percent in the discount rate would give a value-in-useequal to the carrying amount of the net assets of JASA and subsidiaries.

— F-98 —

7.Pr

oper

ty a

nd E

quip

men

t

This

acco

unt c

onsi

sts o

f:

2014

Land

Leas

ehol

dR

ight

s and

Impr

ovem

ents

Port

Faci

litie

san

dEq

uipm

ent

(See

Not

es 1

and

4)Tr

ansp

orta

tion

Equi

pmen

t

Offi

ceEq

uipm

ent,

Furn

iture

and

Fixt

ures

Misc

ella

neou

sEq

uipm

ent

Port

Equi

pmen

tSp

are

Parts

Con

stru

ctio

nin

Pro

gres

sTo

tal

Cos

tB

alan

ce a

t beg

inni

ng o

f yea

rU

S$22

,568

,996

US$

204,

024,

407

US$

455,

241,

574

US$

67,7

35,8

97U

S$38

,236

,379

US$

7,72

5,11

0U

S$3,

366,

429

US$

130,

298,

555

US$

929,

197,

347

Add

ition

s7,

635,

000

1,34

7,53

931

,378

,648

2,96

6,40

94,

322,

279

2,57

4,11

654

4,43

814

3,15

7,11

619

3,92

5,54

5D

ispo

sals

–(1

6,09

6)(3

,938

,272

)(1

,327

,597

)(1

33,7

47)

(75,

305)

(1,0

25,2

76)

–(6

,516

,293

)Ef

fect

of b

usin

ess c

ombi

natio

n (s

ee N

ote

4.1)

–87

,182

,424

43,0

88,2

792,

317,

355

1,17

2,67

61,

295,

580

–12

7,24

8,83

426

2,30

5,14

8Ef

fect

of d

econ

solid

atio

n of

subs

idia

ries (

see

Not

es 1

.3, 4

.1 a

nd 4

.2)

–(7

0,94

5,51

2)(4

7,55

5,84

2)(1

,196

,908

)(1

,015

,017

)(2

99,0

06)

––

(121

,012

,285

)Tr

ansf

ers f

rom

(to)

oth

er a

ccou

nts (

see

Not

e 6)

–83

,620

,879

90,6

93,1

2071

5,32

1(3

2,87

3)2,

472,

401

748,

181

(176

,550

,369

)1,

666,

660

Tran

slat

ion

adju

stm

ents

(164

,019

)(1

5,95

5,92

3)(2

9,75

4,36

6)(7

88,7

07)

(981

,917

)(1

56,9

68)

(184

,069

)(1

3,80

8,50

2)(6

1,79

4,47

1)B

alan

ce a

t end

of y

ear

30,0

39,9

7728

9,25

7,71

853

9,15

3,14

170

,421

,770

41,5

67,7

8013

,535

,928

3,44

9,70

321

0,34

5,63

41,

197,

771,

651

Acc

umul

ated

Dep

reci

atio

n, A

mor

tizat

ion

and

Impa

irm

ent L

osse

sB

alan

ce a

t beg

inni

ng o

f yea

r–

39,9

49,5

2311

7,16

7,96

931

,640

,707

26,2

83,0

704,

794,

529

1,21

3,32

2–

221,

049,

120

Dep

reci

atio

n an

d am

ortiz

atio

n fo

r the

yea

r–

12,3

34,0

6726

,188

,907

7,55

1,88

94,

342,

660

682,

954

270,

165

–51

,370

,642

Dis

posa

ls–

–(8

83,1

74)

(970

,565

)(8

4,47

8)(4

7,16

5)(2

6,74

6)–

(2,0

12,1

28)

Effe

ct o

f dec

onso

lidat

ion

of su

bsid

iarie

s (se

e N

otes

1.3

, 4.

1 an

d 4.

2)–

(18,

837,

284)

(24,

022,

845)

(1,0

57,6

81)

(908

,763

)(2

49,1

45)

––

(45,

075,

718)

Effe

ct o

f bus

ines

s com

bina

tion

(see

Not

e 4.

1)–

20,7

43,8

9415

,563

,630

1,94

8,30

395

2,52

592

8,33

1–

–40

,136

,683

Tran

sfer

s fro

m (t

o) o

ther

acc

ount

s–

444,

752

(62,

330)

24,1

00(5

96,5

08)

652,

199

(17,

461)

–44

4,75

2Tr

ansl

atio

n ad

just

men

ts–

(1,7

39,7

08)

189,

293

(509

,243

)(3

83,4

38)

(59,

556)

(74,

720)

–(2

,577

,372

)B

alan

ce a

t end

of y

ear

–52

,895

,244

134,

141,

450

38,6

27,5

1029

,605

,068

6,70

2,14

71,

364,

560

–26

3,33

5,97

9N

et B

ook

Val

ueU

S$30

,039

,977

US$

236,

362,

474

US$

405,

011,

691

US$

31,7

94,2

60U

S$11

,962

,712

US$

6,83

3,78

1U

S$2,

085,

143

US$

210,

345,

634

US$

934,

435,

672

— F-99 —

2015

Land

Leas

ehol

dR

ight

s and

Impr

ovem

ents

Port

Faci

litie

san

dEq

uipm

ent

(See

Not

es 1

,4

and

23)

Tran

spor

tatio

nEq

uipm

ent

Offi

ceEq

uipm

ent,

Furn

iture

and

Fixt

ures

(See

Not

e 4)

Misc

ella

neou

sEq

uipm

ent

(See

Not

e 4)

Port

Equi

pmen

tSp

are

Parts

Con

stru

ctio

nin

Pro

gres

sTo

tal

Cos

tB

alan

ce a

t beg

inni

ng o

f yea

rU

S$30

,039

,977

US$

289,

257,

718

US$

539,

153,

141

US$

70,4

21,7

70U

S$41

,567

,780

US$

13,5

35,9

28U

S$3,

449,

703

US$

210,

345,

634

US$

1,19

7,77

1,65

1A

dditi

ons

776,

000

3,61

7,47

78,

113,

472

1,38

2,71

12,

983,

044

1,33

4,38

933

5,55

729

9,70

3,76

831

8,24

6,41

8D

ispo

sals

–(5

47,9

94)

(2,9

38,4

86)

(1,3

03,0

63)

(412

,952

)(1

14,5

28)

(162

,510

)(8

1,29

3)(5

,560

,826

)Ef

fect

of a

cqui

sitio

n of

TM

T (s

ee N

ote

1.3)

51,4

11,7

62–

––

––

––

51,4

11,7

62Ef

fect

of d

econ

solid

atio

n of

a su

bsid

iary

(see

Not

e 1.

3)–

––

(28,

120)

(68,

273)

(219

,884

)–

–(3

16,2

77)

Tran

sfer

s fro

m (t

o) o

ther

acc

ount

s (se

e N

otes

6 a

nd 8

)4,

805,

661

76,0

93,6

9031

,735

,004

4,67

0,14

767

0,56

43,

741,

306

1,64

2,91

1(1

18,4

16,3

19)

4,94

2,96

4Tr

ansl

atio

n ad

just

men

ts(6

,863

,393

)(3

0,02

4,75

8)(5

5,38

4,57

8)(2

,095

,374

)(1

,655

,627

)(3

22,2

46)

(971

,800

)(2

6,81

7,80

9)(1

24,1

35,5

85)

Bal

ance

at e

nd o

f yea

r80

,170

,007

338,

396,

133

520,

678,

553

73,0

48,0

7143

,084

,536

17,9

54,9

654,

293,

861

364,

733,

981

1,44

2,36

0,10

7A

ccum

ulat

ed D

epre

ciat

ion,

Am

ortiz

atio

n an

d Im

pair

men

t Los

ses

Bal

ance

at b

egin

ning

of y

ear

–52

,895

,244

134,

141,

450

38,6

27,5

1029

,605

,068

6,70

2,14

71,

364,

560

–26

3,33

5,97

9D

epre

ciat

ion

and

amor

tizat

ion

for t

he y

ear

–15

,243

,055

25,3

97,5

817,

414,

086

4,30

2,68

71,

252,

195

264,

341

–53

,873

,945

Dis

posa

ls–

(18,

235)

(2,5

78,8

49)

(1,0

79,9

10)

(365

,820

)(1

10,1

99)

––

(4,1

53,0

13)

Effe

ct o

f dec

onso

lidat

ion

of a

subs

idia

ry (s

ee N

ote

1.3)

––

–(1

6,29

9)(5

5,31

2)(7

3,99

7)–

–(1

45,6

08)

Tran

sfer

s fro

m (t

o) o

ther

acc

ount

s (N

otes

6 a

nd 8

)–

6,12

9,39

5(5

,078

,664

)(2

0,86

3)(5

69,9

13)

412,

552

––

872,

507

Tran

slat

ion

adju

stm

ents

–(8

,689

,095

)(9

,432

,793

)(9

44,1

73)

(905

,047

)(1

42,5

81)

(166

,128

)–

(20,

279,

817)

Bal

ance

at e

nd o

f yea

r–

65,5

60,3

6414

2,44

8,72

543

,980

,351

32,0

11,6

638,

040,

117

1,46

2,77

3–

293,

503,

993

Net

Boo

k V

alue

US$

80,1

70,0

07U

S$27

2,83

5,76

9U

S$37

8,22

9,82

8U

S$29

,067

,720

US$

11,0

72,8

73U

S$9,

914,

848

US$

2,83

1,08

8U

S$36

4,73

3,98

1 U

S$1,

148,

856,

114

2016

Lan

d an

d L

and

Impr

ovem

ents

Lea

seho

ldR

ight

s an

dIm

prov

emen

ts

Port

Fac

ilitie

san

dE

quip

men

t(S

ee N

otes

1,

4 an

d 19

)T

rans

port

atio

nE

quip

men

t

Off

ice

Equ

ipm

ent,

Furn

iture

and

Fixt

ures

Mis

cella

neou

sE

quip

men

t

Port

Equ

ipm

ent

Spar

e Pa

rts

Con

stru

ctio

nin

Pro

gres

sT

otal

Cos

tB

alan

ce a

t beg

inni

ng o

f yea

rU

S$80

,170

,007

US$

338,

396,

133

US$

520,

678,

553

US$

73,0

48,0

71U

S$43

,084

,536

US$

17,9

54,9

65U

S$4,

293,

861

US$

364,

733,

981

US$

1,44

2,36

0,10

7A

dditi

ons

14,

555,

500

596

,602

73,

011,

203

1,2

35,6

65 1

,647

,193

10,

250,

970

759

,318

238

,207

,447

340,

263,

898

Dis

posa

ls–

(1,9

41)

(1,4

55,4

99)

(23,

644,

870)

(531

,524

) (2

82,9

37)

(76,

668)

–(2

5,99

3,43

9)Tr

ansf

ers f

rom

(to)

oth

er a

ccou

nts (

see

Not

e 6)

11,6

60,5

40 (1

8,01

2,17

6) 2

2,67

6,89

566

1,83

7 3

,735

,583

(1,4

86,8

13)

(161

,177

) (2

1,09

5,17

8)(2

,020

,489

)Tr

ansl

atio

n ad

just

men

ts(9

,434

,928

) (7

,878

,427

) (5

74,6

47)

710

,657

(169

,306

) 4

66,7

20 1

51,1

96 (2

4,59

6,14

5)(4

1,32

4,88

0)B

alan

ce a

t end

of y

ear

96,9

51,1

1931

3,10

0,19

161

4,33

6,50

552

,011

,360

47,7

66,4

8226

,902

,905

4,96

6,53

055

7,25

0,10

51,

713,

285,

197

Acc

umul

ated

Dep

reci

atio

n, A

mor

tizat

ion

and

Impa

irm

ent L

osse

sB

alan

ce a

t beg

inni

ng o

f yea

r–

65,5

60,3

6414

2,44

8,72

543

,980

,351

32,0

11,6

638,

040,

117

1,46

2,77

3–

293,

503,

993

Dep

reci

atio

n an

d am

ortiz

atio

n fo

r the

yea

r–

17,

624,

736

25,

897,

023

6,4

69,4

00 4

,702

,819

2,3

84,5

20 2

31,9

03–

57,3

10,4

01D

ispo

sals

– (1

,941

) (1

,083

,271

) (1

6,65

6,17

4) (4

83,1

91)

(233

,109

)–

–(1

8,45

7,68

6)Tr

ansf

ers

from

(to)

oth

er a

ccou

nts (

Not

e 6)

– (8

,208

,022

)8,

139,

547

467,

191

1,0

20,0

20 (1

,435

,050

)–

–(1

6,31

4)Tr

ansl

atio

n ad

just

men

ts–

495

,188

(109

,481

)(1

,310

,051

) 1

2,52

0 3

02,6

29 7

0,91

7–

(538

,278

)B

alan

ce a

t end

of y

ear

–75

,470

,325

175,

292,

543

32,9

50,7

1737

,263

,831

9,05

9,10

71,

765,

593

–33

1,80

2,11

6N

et B

ook

Val

ueU

S$96

,951

,119

US$

237,

629,

866

US$

439,

043,

962

US$

19,0

60,6

43U

S$10

,502

,651

US$

17,8

43,7

98U

S$3,

200,

937

US$

557,

250,

105

US$

1,38

1,48

3,08

1

— F-100 —

Capitalized borrowing costs amounted to US$0.6 million in 2014 at a capitalization rate of6.82 percent, US$6.9 million in 2015 at a capitalization rate of 6.64 percent and US$19.0 millionin 2016 at a capitalization rate of 6.45 percent. Borrowing costs capitalized in 2015 and 2016mainly pertains to VICT. Unamortized borrowing costs amounted to US$28.9 million,US$35.2 million and US$53.7 million as at December 31, 2014, 2015 and 2016, respectively.

Construction in progress is mainly composed of ongoing port development and expansion projectsin Australia, China, Poland and Mexico as of December 31, 2014; Australia, DR Congo andMexico as of December 31, 2015; and Australia and Mexico as of December 31, 2016 (seeNote 1.2).

Fully depreciated property and equipment with cost amounting to US$41.7 million,US$56.8 million and US$98.0 million as at December 31, 2014, 2015 and 2016, respectively, arestill being used in the Group’s operations.

Port equipment of BCT with a total carrying value of US$54.0 million as at December 31, 2014and both nil as at December 31, 2015 and 2016 were pledged as collateral for its outstanding termloan facility (see Note 16.2.2); port equipment of AGCT with a total carrying value ofHRK166.0 million (approximately US$26.2 million), HRK160.4 million (approximatelyUS$22.8 million) and HRK153.8 million (approximately US$21.4 million) were pledged ascollateral for its outstanding foreign currency-denominated loan (see Note 16.2.4) as atDecember 31, 2014, 2015 and 2016, respectively; and all present and future plant machinery, toolsand equipment of PICT of up to Rs.2.0 billion (approximately US$19.9 million), Rs.2.0 billion(approximately US$19.1 million) and Rs.2.0 billion (approximately US$19.2 million) were usedto secure its long-term debt from a commercial bank in Pakistan (see Note 16.2.4) as atDecember 31, 2014, 2015 and 2016, respectively; and port equipment and intangible assets ofYICT with a respective total carrying value of RMB307.5 million (approximatelyUS$49.6 million), RMB156.1 million (approximately US$24.0 million) and nil; andRMB87.6 million (approximately US$14.1 million), RMB82.9 million (approximatelyUS$12.8 million) and nil were pledged as collateral for its outstanding foreign currency-denominated loan (see Note 16.2.4) as at December 31, 2014, 2015 and 2016, respectively; andcertain port equipment of CMSA with a total carrying value of US$32.8 million andUS$31.1 million as at December 31, 2015 and 2016, respectively, were pledged as security for itslong-term loans from the project finance facility (see Note 16.2.2).

8. Investment Properties

The details of investment properties are as follows:

2014Land and

ImprovementsBuilding and

Others TotalCostBalance at beginning of year US$16,330,507 US$673,791 US$17,004,298Additions – 803 803Translation adjustments (34,847) – (34,847)Balance at end of year 16,295,660 674,594 16,970,254Accumulated Depreciation and AmortizationBalance at beginning of year 4,030,013 365,336 4,395,349Amortization during the year 315,872 31,909 347,781Translation adjustments – (447) (447)Balance at end of year 4,345,885 396,798 4,742,683Net Book Value US$11,949,775 US$277,796 US$12,227,571

— F-101 —

2015Land and


Others TotalCostBalance at beginning of year US$16,295,660 US$674,594 US$16,970,254Transfer to property and equipment (see Note 7) (4,805,661) – (4,805,661)Translation adjustments (236,695) – (236,695)Balance at end of year 11,253,304 674,594 11,927,898Accumulated Depreciation and AmortizationBalance at beginning of year 4,345,885 396,798 4,742,683Amortization during the year 315,872 31,731 347,603Translation adjustments – (3,258) (3,258)Balance at end of year 4,661,757 425,271 5,087,028Net Book Value US$6,591,547 US$249,323 US$6,840,870

2016Land and


Others TotalCostBalance at beginning of year US$11,253,304 US$674,594 US$11,927,898Translation adjustments (234,791) (7,219) (242,010)Balance at end of year 11,018,513 667,375 11,685,888Accumulated Depreciation and AmortizationBalance at beginning of year 4,661,757 425,271 5,087,028Amortization during the year 340,629 6,688 347,317Translation adjustments – (3,761) (3,761)Balance at end of year 5,002,386 428,198 5,430,584Net Book Value US$6,016,127 US$239,177 US$6,255,304

Land and improvements mainly include land held for capital appreciation and land improvementssubject to operating leases. Investment properties of MICT and IWI located in Cabuyao, Lagunahave a fair value of US$14.8 million as at February 3, 2017 as determined based on valuationsperformed by qualified independent appraiser whose report was dated February 22, 2017. InMarch 2015, LGICT used the investment property of MICT in Calamba, Laguna to operate thefirst one-stop ICT. As a result, the Group reclassified the US$4.8 million land used by LGICTfrom investment property to property and equipment. The fair value of the land located inCalamba, Laguna used by LGICT amounted to US$16.2 million as at February 3, 2017 asdetermined based on valuations performed by qualified independent appraiser whose report wasdated February 22, 2017.

Fair value of the investment properties was determined using the sales comparison approach. Thismeans that valuations performed by qualified independent appraiser are based on sales of similaror substitute properties, significantly adjusted for differences in the nature, location or condition ofthe specific property. This is categorized as Level 3 in the fair value hierarchy as ofDecember 31, 2014, 2015 and 2016. The significant unobservable input to the valuation is theprice per square meter which ranges from US$51.6 (P=2,565) to US$76.4 (P=3,800).

Significant increases (decreases) in estimated price per square meter in isolation would result in asignificantly higher (lower) fair value on linear basis.

Rental income derived from rental-earning investment properties presented as part of “Otherincome” account in the consolidated statements of income amounted to US$0.2 million in 2014,nil in 2015 and 2016 (see Note 21.1). There were no restrictions on realizability of investmentproperties and no significant repairs and maintenance were made to maintain the Group’s

— F-102 —

investment properties in 2014, 2015 and 2016. The rent agreement covering rental-earninginvestment properties is renewable at the option of both parties yearly.

Operating expenses related to the investment property amounted to US$45 thousand in 2014,US$34 thousand in 2015 and US$57 thousand in 2016, respectively, which pertains mainly to realproperty taxes.

9. Investments in and Advances to a Joint Venture and an Associate


2014 2015 2016Investment in and advances to a joint venture US$140,718,921 US$231,915,840 US$293,638,405Investment in an associate 7,474,994 7,474,994 7,474,994

148,193,915 239,390,834 301,113,399Less allowance for probable losses 7,474,994 7,474,994 7,474,994

US$140,718,921 US$231,915,840 US$293,638,405

Investment in and Advances to a Joint VentureInvestment in a joint venture pertains to the Group’s 46.30 percent ownership interest in SPIA asat December 31, 2016. The advances to SPIA mainly represent interest-bearing loans used bySPIA to finance the construction of the terminal in Colombia which was substantially completedin the fourth quarter of 2016 (see Note 23.1).

SPIA started its initial operations in the fourth quarter of 2016.

The movements and details of this account are as follows:

2014 2015 2016Investment in a Joint Venture:

Balance at beginning of year US$27,785,209 US$25,596,698 US$22,019,569Acquisition of additional shares in SPIA

(see Note 1.3) – 307,871 –Translation adjustments – (655,246) 3,024Equity in net loss during the year (2,188,511) (3,229,754) (5,571,997)Balance at end of year 25,596,698 22,019,569 16,450,596

Advances to a joint venture (see Note 23.1) 115,122,223 209,896,271 277,187,809US$140,718,921 US$231,915,840 US$293,638,405

The summarized financial information of SPIA as at and for the years ended December 31follows:

2014 2015 2016Current assets, including cash and cash equivalents (a) US$27,044,606 US$3,535,750 US$7,181,633Noncurrent assets 304,781,051 503,157,022 627,306,201Current liabilities (b) 260,188,415 434,743,660 296,183,118Noncurrent liabilities (c) 18,280,291 23,429,685 301,819,841(a) Current assets include cash and cash equivalents amounting to US$24.3 million, US$0.5 million and US$3.0 million as at

December 31, 2014, 2015 and 2016, respectively.(b) Current liabilities include income tax payable amounting to US$43.7 thousand, US$48.2 thousand and US$101.3 thousand

as at December 31, 2014, 2015 and 2016, respectively.(c) Noncurrent liabilities include deferred tax liabilities amounting to US$7.4 million as at December 31, 2014, 2015 and

2016, respectively.

— F-103 —

2014 2015 2016Gross revenues from port operations US$– US$– US$1,037,994Operating expenses (2,576,869) (3,337,605) (8,732,070)Depreciation and amortization (217,526) (312,256) (343,175)Other income (d) 2,674,872 2,269,911 2,277,119Other expenses (e) (5,142,315) (6,285,984) (6,890,233)Benefit from income tax 467,728 672,859 615,813Net loss (US$4,794,110) (US$6,993,075) (US$12,034,552)(d) Other income includes interest income amounting to US$34.8 thousand in 2014, US$65.2 thousand in 2015 and

US$51.3 thousand in 2016.(e) Other expenses include interest expense on concession rights payable amounting to US$1.3 million in 2014, 2015 and

2016.

The difference between the carrying value of investment in SPIA against the share in net assets ofSPIA represents the fair value of the concession rights of SPIA.

Investment in an AssociateThe Group also has a 49 percent investment in Asiaview Realty and Development Corporation(ARDC), an associate. ARDC had stopped commercial operations. The investment in ARDC wascovered with a full allowance for probable losses amounting to US$7.5 million.

10. Other Noncurrent Assets


2014 2015 2016Input tax (see Note 14) US$61,375,338 US$67,693,033 US$68,107,935Advance rent and deposits 25,394,012 22,519,676 40,707,414Advances to suppliers and contractors (net of allowance for

probable losses of US$0.7 million, US$0.7 million andUS$3.1 million as at December 31, 2014, 2015 and2016, respectively) 11,286,677 13,037,815 25,094,374

Restricted cash (see Notes 16, 21.2, 25.15 and 26) 15,155,886 25,003,088 20,933,562Debt issuance costs (see Note 16.2.6) 7,074,391 5,101,594 3,666,403AFS investments (see Note 27):

Quoted equity shares - at fair value 1,574,744 1,690,929 1,512,807 Unquoted equity shares - at cost 749,133 728,124 710,666Pension assets (see Note 24) 4,980 125,948 981Prepayments and others 2,727,835 1,613,591 4,229,373

US$125,342,996 US$137,513,798 US$164,963,515

Input TaxInput tax arises when an entity purchases goods or services from a VAT-registered supplier orvendor. This mainly includes input tax recognized by Tecplata associated with payments for thepurchase of terminal equipment and civil works in relation to the completed and ongoingconstruction activities at these terminals. The input tax is classified as noncurrent because it is notexpected to be utilized within 12 months from the balance sheet date (see Note 14).

Advance Rent and DepositsAdvance rent and deposits mainly pertain to advance payments for future rental and deposits forfuture acquisition of properties and investments. The advance rent shall be reduced upon offsetagainst related rent liability or upon recognition of rent expense. On the other hand, another assetaccount shall be recognized according to the nature of the properties acquired upon the applicationand allocation of such deposits. As at December 31, 2014, 2015 and 2016, this account comprisedmainly of advances and deposits to contractors and for investments amounting to US$19.1 million,US$16.5 million and US$40.2 million, respectively.

— F-104 —

Advances to Suppliers and ContractorsAdvances to suppliers and contractors mainly pertain to advance payments for the acquisition oftransportation equipment and construction of port facilities.

Restricted CashRestricted cash pertained mainly to cash deposits placed by the Group as required by theconcession agreements for MICTSL, SCIPSI and DIPSSCOR. In 2014 and 2015, this accountincluded the cash of CGSA placed in a special purpose trust to pay principal and interest due toholders of the securities and other expenses in accordance with the securitization agreement(see Note 16.2.3). The garnished cash of TSSA arising from a civil suit filed by a former customerof TSSA is likewise included in this account (see Note 26). In 2015 and 2016, this account alsoincluded the US$13.0 million cash of CMSA placed in special purpose debt service and operatingand maintenance reserve accounts in accordance to the project finance loan documents(see Note 16.2.2).

Debt Issuance CostsOn July 24, 2014, the Board of ICTSI approved the establishment of a loan facility programmepursuant to which a subsidiary, IGFBV, may from time to time enter into one or more loanfacilities with one or more lenders under the said programme, to be guaranteed by ICTSI. Inconnection with the establishment of the said programme, the Board also approved the first loanfacility under the programme with IGFBV as the borrower and ICTSI as the guarantor. The loanfacility is a revolving credit facility with a principal amount of US$350.0 million and a tenor offive years from signing date, July 24, 2014. In 2015, IGFBV drew down a total ofUS$100.0 million from the US$350.0 million five year revolving credit facility bearing interestranging from 2.13 to 2.14 percent per annum. In August 2015, IGFBV prepaid theUS$100.0 million loan.

In April and June 2016, IGFBV availed of loans amounting to US$150.0 million andUS$10.0 million, respectively, from the US$350.0 million five year revolving credit facilitybearing interest ranging from 2.39 to 2.71 percent per annum. In August, November andDecember 2016, IGFBV partially paid loans drawn in April and June 2016 totalingUS$145.0 million. As at December 31, 2016, outstanding balance of the loan amounted toUS$15.0 million.

The related debt issuance costs of the revolving facility amounting to US$7.1 million are beingamortized over five years (see Note 16.2.6). Commitment fees amounting to US$1.4 million in2014, US$2.3 million in 2015 and US$2.2 million in 2016, representing 0.78 percent per annum ofthe amount of undrawn facility, is recorded as part of “Interest expense and financing charges onborrowings” account in the consolidated statements of income.

AFS InvestmentsQuoted Equity Shares. The net movement in unrealized mark-to-market gain on quoted AFSinvestments is as follows:

2014 2015 2016Balance at beginning of year US$1,058,668 US$1,053,501 US$1,125,896Change in fair value of quoted AFS

investments (5,167) 72,395 (173,874)Balance at end of year (see Note 15.7) US$1,053,501 US$1,125,896 US$952,022

— F-105 —

Prepayments and OthersAs at December 31, 2016, this account includes the minimum presumed income tax of Tecplataamounting to US$3.9 million (AR$62.7 million) that is expected to be offset against its futureincome tax payable more than 12 months from the balance sheet date.

11. Impairment Testing on Nonfinancial Assets

The Group reviews all assets annually or more frequently to look for any indication that an assetmay be impaired. These assets include property and equipment, intangible assets, investments in ajoint venture and an associate, intangible assets not yet available for use and goodwill. If any suchindication exists, or when the annual impairment testing for an asset is required, the Groupcalculates the asset’s recoverable amount. Irrespective of whether there is any indication ofimpairment, intangible assets not yet available for use and goodwill acquired in a businesscombination are tested for impairment annually. ICTSI and its subsidiaries used a discounted cashflow analysis to determine value-in-use. Value-in-use reflects an estimate of the future cash flowsthe Group expects to derive from the cash-generating unit, expectations about possible variationsin the amount or timing of those future cash flows, the time value of money, the price for bearingthe uncertainty inherent in the asset and other factors such as illiquidity that market participantswould reflect in pricing the future cash flows the Group expects to derive from the cash-generatingunit. The calculation of the value-in-use is based on reasonable and supportable assumptions, themost recent budgets and forecasts and extrapolation for periods beyond budgeted projections.These represent management’s best estimate of the economic conditions that will exist over theremaining useful life of the asset.

The recoverable amount of non-financial assets of the Group subject to impairment testing hasbeen determined based on value-in-use calculation using cash flow projections based on financialbudgets approved by senior management covering a five year period or remaining concessionperiod. Projections beyond five years were used for the newly established terminals and/orgreenfield projects.

Key assumptions used to determine the value-in-use are discount rates including cost of debt andcost of capital, growth rates, EBITDA margins, working capital and capital expenditure.

Discount RatesThe discount rate used is the pre-tax rate that reflects current market assessments of the time valueof money and the risks specific to the asset. The Group used discount rates based on theindustry’s WACC. The rates used to discount the future cash flows are based on risk-free interestrates in the relevant markets where the subsidiaries are domiciled taking into consideration thedebt premium, market risk premium, gearing, corporate tax rate and asset betas of thesesubsidiaries. Management assumed discount rates of 7.0 percent to 12.7 percent in 2014,4.2 percent to 11.5 percent in 2015 and 7.10 percent to 10.72 percent in 2016.

Growth RatesAverage growth rates in revenues are based on ICTSI’s expectation of market developments andthe changes in the environment in which it operates. ICTSI uses revenue growth rates rangingfrom 3 percent to 18 percent, based on past historical performance as well as expectations on theresults of its strategies. On the other hand, the perpetual growth rate used to compute for theterminal value is based on the forecasted long-term growth of real gross domestic product (GDP)of the economy in which the business operates.

— F-106 —

EBITDA MarginThe EBITDA margin represents the operating margin before depreciation and amortization and isestimated based on the margin achieved in the period immediately before the budget period and onestimated future development in the market. Committed operational efficiency programs are takeninto consideration. Changes in the outcome of these initiatives may affect future estimatedEBITDA margin.

Capital ExpenditureIn computing the value-in-use, estimates of future cash flows include future cash outflowsnecessary to maintain the level of economic benefits expected to arise from the asset in its currentcondition. Capital expenditures that improve or enhance the asset’s performance therefore are notincluded. However, for the newly established terminals and/or greenfield projects, managementtakes into consideration the capital expenditures necessary to meet the expected growth involumes and revenues. These expansionary capital expenditures of which the Group has incurredcash outflows, for the newly established terminals are deducted from the future cash flows.

Management recognizes that unfavorable conditions can materially affect the assumptions used inthe determination of value-in-use. An increase of 2.05 percent to over 100 percent, 1.41 percent toover 100 percent and 1.09 percent to over 100 percent in the discount rates, or a reduction ofgrowth rates of 2.66 percent to over 100 percent, 0.16 percent to over than 100 percent and0.94 percent to over 100 percent would give a value-in-use equal to the carrying amount of thecash generating units in 2014, 2015 and 2016, respectively.

12. Cash and Cash Equivalents


2014 2015 2016Cash on hand and in banks US$113,124,658 US$222,125,582 US$248,562,837Cash equivalents 81,172,998 132,356,231 76,495,755

US$194,297,656 US$354,481,813 US$325,058,592

Cash in banks earns interest at the prevailing bank deposit rates. Cash equivalents are short-terminvestments, which are made for varying periods of up to three months depending on theimmediate cash requirements of the Group and earn interest at the prevailing short-terminvestment rates. The carrying value of cash and cash equivalents approximates their fair value asat the balance sheet date.

As at December 31, 2014, an aggregate of US$2.0 million (AR$17.2 million) equivalent ofArgentine peso-denominated cash and cash equivalents remained designated by Tecplata as cashflow hedges of the variability of Argentine peso cash flows that is required to settle Argentinepeso-denominated payments for the civil works construction and operating expenses at theterminal in Argentina (see Note 27.4). As at December 31, 2015 and 2016, ICTSI did not haveany outstanding Argentine peso-denominated cash and cash equivalents designated as cash flowhedge.

Interest income derived from interest-earning bank deposits and short-term investments amountedto US$7.5 million, US$4.3 million and US$3.1 million for the years ended December 31, 2014,2015 and 2016, respectively.

— F-107 —

13. Receivables


2014 2015 2016Trade (see Notes 1.2 and 21.3) US$87,688,106 US$81,757,051 US$93,476,622Advances and nontrade 8,202,282 10,991,992 16,858,404

95,890,388 92,749,043 110,335,026Less allowance for doubtful accounts 5,071,100 5,548,562 7,404,589

US$90,819,288 US$87,200,481 US$102,930,437

Trade receivables are noninterest-bearing and are generally on 30-60 days’ credit terms.

Advances and nontrade receivables mainly include noninterest-bearing advances to suppliers andvendors that may be applied against payable or collectible within 12 months.

Movements in the allowance for doubtful accounts are summarized below:

2014

TradeAdvances

and Nontrade TotalBalance at beginning of year US$3,268,447 US$52,758 US$3,321,205Provision during the year 1,973,585 1,973,585Write-off (10,473) (10,473)Translation adjustments (213,217) (213,217)Balance at end of year US$5,018,342 US$52,758 US$5,071,100

2015

TradeAdvances

and Nontrade TotalBalance at beginning of year US$5,018,342 US$52,758 US$5,071,100Provision during the year 1,558,686 1,558,686Write-off (412,187) (412,187)Translation adjustments (669,037) (669,037)Balance at end of year US$5,495,804 US$52,758 US$5,548,562

2016

TradeAdvances

and Nontrade TotalBalance at beginning of year US$5,495,804 US$52,758 US$5,548,562Provision during the year 1,901,534 1,901,534Write-off (591,310) (591,310)Translation adjustments 545,803 545,803Balance at end of year US$7,351,831 US$52,758 US$7,404,589

Allowance for doubtful accounts are based on specific assessment by the Group.

— F-108 —

14. Prepaid Expenses and Other Current Assets


2014 2015 2016Input tax (see Note 10) US$23,679,699 US$18,712,935 US$27,756,471Prepaid port fees, insurance, bonds

and other expenses 10,781,152 12,839,753 12,572,638Creditable withholding taxes 6,052,672 6,020,411 8,894,553Tax credit certificates 4,418,417 3,121,327 3,236,372Others 3,434,288 3,413,688 3,825,481

US$48,366,228 US$44,108,114 US$56,285,515

Input TaxThis account includes input tax expected to be applied against output tax within 12 months fromthe balance sheet date pertaining to input tax recognized mainly by the Parent Company, VICT,IDRC and CMSA associated with the purchase of terminal equipment and payments of civil worksin relation to the construction activities at these terminals (see Note 10).

Tax Credit CertificatesTax credit certificates pertain to tax credit certificates issued to ICTSI and TSSA amounting toUS$4.4 million, US$3.1 million and US$3.2 million as at December 31, 2014, 2015 and 2016,respectively. These tax credit certificates can be applied against certain future tax liabilities ofICTSI and TSSA, as allowed by their respective tax authorities.

15. Equity

The Group was listed with the PSE on March 23, 1992. In its initial public offering, the ParentCompany offered its common shares at a price of P=6.70. As at December 31, 2014, 2015 and2016, the Parent Company had 1,470, 1,444 and 1,427 shareholders on record, respectively.

15.1 Capital Stock and Treasury Shares

The Parent Company’s common shares are listed and traded in the PSE.

The details and movements of ICTSI’s capital stock and treasury shares as at December 31 wereas follows:

Number of SharesAuthorized Issued and Subscribed

2014 2015 2016 2014 2015 2016Preferred A Shares - nonvoting,

non-cumulative, P=1.00(US$0.048) par value 993,000,000 993,000,000 993,000,000 3,800,000 3,800,000 3,800,000

Preferred B Shares - voting,non-cumulative, P=0.01(US$0.0002) par value 700,000,000 700,000,000 700,000,000 700,000,000 700,000,000 700,000,000

Common Stock -P=1.00 (US$0.048) par value 4,227,397,381 4,227,397,381 4,227,397,381 2,045,177,671 2,045,177,671 2,045,177,671

— F-109 —

Number of SharesIssued and Subscribed

2014 2015 2016

Treasury SharesBalance at beginning of year (11,252,311) (9,114,811) (10,469,155)Acquisitions during the year – (3,510,400) (8,175,510)Issuance for share-based payments (see Note 20) 2,137,500 2,156,056 1,514,398Balance at end of year (9,114,811) (10,469,155) (17,130,267)

Amount Issued and Subscribed2014 2015 2016

Preferred Stock US$236,222 US$236,222 US$236,222

Common Stock US$67,781,529 US$67,781,529 US$67,781,529

Subscription ReceivableBalance at beginning of year (451,578) (451,341) (451,341)Collections during the year 237 – –Balance at end of year (451,341) (451,341) (451,341)

US$67,330,188 US$67,330,188 US$67,330,188Treasury SharesBalance at beginning of year (US$1,374,486) (US$1,176,660) (US$7,547,826)Issuance of treasury shares for share-based payments

(see Note 20) 197,826 219,641 1,233,965Acquisitions during the year – (6,590,807) (11,590,540)Balance at end of year (US$1,176,660) (US$7,547,826) (US$17,904,401)

Preferred SharesThe Preferred A shares, which were subscribed by ICTHI, are nonvoting, entitled to dividend atrates to be fixed by the Board, non-cumulative, convertible to common shares under such terms tobe provided by the Board, redeemable at such price and terms determined by the Board and havepreference over common shares in the distribution of the assets of the Parent Company(see Note 15.3). As at March 9, 2017, the Board has not fixed the dividend rate and terms ofconversion of Preferred A shares.

The Preferred B shares were issued to Achillion Holdings, Inc. (Achillion). As at March 9, 2017,Preferred B shares have the following features: voting; issued only to Philippine Nationals; notconvertible into common shares; earn no dividend and redeemable at the option of the Board.

Achillion is a Philippine corporation owned and controlled by ICTSI’s Chairman and Presidentand controlling stockholder, Mr. Enrique K. Razon, Jr. The ICTSI contract with PPA on theoperation, management and development of the MICT requires the Razon Group to retain controlof ICTSI.

Treasury SharesTreasury shares came from the acquisition or transfer of ICTSI common shares held bysubsidiaries. These treasury shares are subsequently reissued upon vesting of stock awards underthe Stock Incentive Plan (SIP) (see Note 20).

On September 16, 2015 and November 17, 2016, the Board of Directors of ICTSI approved andauthorized the re-purchase from the open market of up to 10 million and 20 million ICTSI shares,respectively. The purpose of the said authorization is to provide management the flexibility toacquire shares from the open market either for the SIP or as and when management deems theprice of the shares to be undervalued. In 2015 and 2016, the Company acquired3,510,400 treasury shares totaling US$6.6 million and 8,175,510 treasury shares totalingUS$11.6 million, respectively.

— F-110 —

15.2 Additional Paid-in Capital

Additional paid-in capital is increased when ICTSI grants stock awards and these stock awardsvest under the SIP. Aggregate increase in additional paid-in capital amounted to US$4.2 million,US$4.1 million and US$1.4 million in 2014, 2015 and 2016, respectively, as a result of grantingand vesting of stock awards (see Note 20).

15.3 Cost of Shares Held by Subsidiaries

Details and movements in preferred and common shares held by subsidiaries as at December 31are as follows:

2014 2015 2016Number

of Shares AmountNumber

of Shares AmountNumber

of Shares Amount

Preferred Shares 3,800,000 US$72,492,481 3,800,000 US$72,492,481 3,800,000 US$72,492,481

Common SharesBalance at beginning of year – US$– – US$– 734,970 US$1,769,114Acquisition of ICTSI common shares

by subsidiaries – – 1,494,940 3,598,405 – –Sale of shares held by subsidiaries – – (759,970) (1,829,291) – –Balance at end of year – – 734,970 1,769,114 734,970 1,769,114Total 3,800,000 US$72,492,481 4,534,970 US$74,261,595 4,534,970 US$74,261,595

In March and April 2015, IWI acquired a total of 1,494,940 ICTSI common shares forUS$3.6 million. In June 2015, IWI sold 759,970 ICTSI common shares for US$1.9 million andthe related gain was credited to additional paid-in capital account amounting to US$57 thousand.

As at December 31, 2014, 2015 and 2016, cost of preferred shares held by a subsidiary pertains topreference A shares held by ICTHI.

15.4 Non-controlling Interests

In March 2014, ICTSI, through its subsidiaries ICTSI Ltd. and IPSAL, purchased the remaining45.08 percent ownership in NPSA for US$6.0 million. The purchase was accounted for as anacquisition of non-controlling interests. This transaction effectively increased ICTSI’s ownershipin Tecplata from 96.25 percent to 100.00 percent.

As discussed in Note 1.2, on January 23, 2014, the Group, through its subsidiary ICTSICooperatief, forged a business partnership with SIMOBILE for the establishment and formation ofa joint venture company, IDRC. IDRC is 60 percent-owned by ICTSI Cooperatief. Atincorporation, the share capital of IDRC amounted to US$12.5 million represented by12,500 ordinary voting shares. ICTSI contributed US$2.0 million cash upon incorporation and theUS$5.5 million cash in tranches while SIMOBILE, non-controlling shareholder, contributed landvalued at US$5.0 million.

On July 1, 2014, ICTSI, through its subsidiary IHKL, acquired 51 percent of the total equityinterest of YICT (see Note 1.2). On the same date, the Company sold its 60 percent ownershipinterest in YRDICTL to YPH (see Note 4.1).

On February 4, 2015, IFEL acquired the 10% non-controlling interest from Anglo Ports andbecame 100% owner of VICT for US$5.8 million (see Note 1.2). This resulted in the reduction ofnon-controlling interests account and the difference between the purchase price and carrying valueof the non-controlling interest of US$6.2 million was recognized under “Excess of acquisition costover the carrying value of non-controlling interests” account in the 2015 consolidated balancesheet.

— F-111 —

On March 2, 2015, LGICT started operating the first one-stop ICT located in Barangays Banlicand San Cristobal, Calamba City, Laguna. LGICT is 60%-owned by IW Cargo and 40%-ownedby Nippon Container Terminals Co. Ltd., Transnational Diversified Corporation and NYK- Fil-Japan Shipping Corp (see Note 1.2). The non-controlling shareholders contributed US$1.2 millionto LGICT.

On May 19, 2015, ICTSI, through its subsidiary, ICTSI Cooperatief, and its joint venture partner,SIMOBILE, transferred their respective 8% and 2% ownership interest in IDRC to SocieteCommerciale Des Transports Et Des Ports S.A. (SCTP SA) in exchange for the latter’scontribution of technical knowledge, skills and substantial experience in the port and port systemin DRC and operation of railroad system and undertaking to facilitate the activities of IDRC and toassist in its relations with the public authorities. SIMOBILE transferred to its subsidiary, SIP Sprl,its 10% ownership in IDRC. Thereafter, IDRC is owned 52% by ICTSI, 28% by SIMOBILE,10% by SIP Sprl and 10% by SCTP SA (see Notes 1.2 and 1.3). The transaction was accountedfor as a change in non-controlling interest and was recorded as an increase of US$0.9 million inthe “Excess of acquisition cost over the carrying value of non-controlling interests” account in the2015 consolidated balance sheet.

The dividends distributed to non-controlling shareholders are as follows:

2014 2015 2016PICT US$8,355,030 US$8,273,229 US$11,164,344SCIPSI 1,034,495 688,595 1,281,148BIPI 1,621,804 – 846,489YICT 524,461 915,800 618,740DIPSSCOR 75,893 66,488 73,668

US$11,611,683 US$9,944,112 US$13,984,389

15.5 Retained Earnings

The details of ICTSI’s declaration of cash dividends are as follows:

2014 2015 2016Date of Board approval April 10, 2014 April 16, 2015 April 21, 2016Cash dividends per share US$0.019 (P=0.85) US$0.020 (P=0.90) US$0.020 (P=0.91)Record date April 28, 2014 May 4, 2015 May 5, 2016Payment date May 9, 2014 May 15, 2015 May 18, 2016

Retained earnings were reduced by distributions paid out by RCBV to holders of Perpetual CapitalSecurities discussed in Note 15.6 below aggregating US$29.3 million in 2014, US$33.4 million in2015 and US$34.2 million in 2016.

Of the total retained earnings of US$763.3 million, US$723.2 million and US$779.4 million, as atDecember 31, 2014, 2015 and 2016, respectively, undistributed cumulative earnings ofsubsidiaries in retained earnings position amounting to US$562.5 million, US$650.6 million andUS$840.7 million, as at December 31, 2014, 2015 and 2016, respectively, were not available fordividend distribution (see Note 22).

On December 29, 2014, the existing appropriation of US$313.2 million was released fromappropriation due to the completion of foreign and local projects such as CMSA and wasre-appropriated for the same amount for new and ongoing projects, among others, in Subic,Australia, Colombia and Iraq. On the same date, the Parent Company appropriated additionalUS$73.6 million of its retained earnings for additional working capital requirements and domesticand foreign expansion projects in the ensuing year. On December 23, 2015, the Parent Company

— F-112 —

appropriated US$40.3 million for additional working capital requirements and its continuingforeign expansion projects in 2016. On April 21, 2016, the Parent Company releasedUS$90.0 million from appropriated retained earnings.

As at December 31, 2014, 2015 and 2016, total appropriated retained earnings of the ParentCompany amounted to US$386.8 million, US$427.1 million and US$337.1 million, respectively.

15.6 Perpetual Capital Securities

On April 28, 2011, RCBV (the “Issuer”) and ICTSI (the “Guarantor”) signed a SubscriptionAgreement with The Hong Kong and Shanghai Banking Corporation Limited (HSBC) andCitigroup Global Markets Limited (Citi) for the issuance of US$200,000,000 8.375 percentSubordinated Guaranteed Perpetual Capital Securities (the “Original Securities”). The OriginalSecurities confer a right to receive a return on the Original Securities (the “Distribution”) everyDistribution Payment Date as described in the terms and conditions of the Original Securities.These distributions are payable semi-annually in arrears on the Distribution Payment Dates ofeach year. However, the Issuer may, at its sole and absolute discretion, prior to any DistributionPayment Date, resolve to defer payment of all or some of the Distribution which would otherwisebe payable on that Distribution Payment Date subject to exceptions enumerated in the terms andconditions of the Original Securities. The Original Securities are perpetual securities in respect ofwhich there is no fixed redemption date but the Issuer may, at its option change the status of theSecurities or redeem the same on instances defined under its terms and conditions.

On April 29, 2011, the Board approved the terms and conditions of the Original Securities, whichwere subsequently issued on May 5, 2011. The net proceeds from the issue of the OriginalSecurities amounting to US$193.4 million were used for the development of greenfield projects,potential acquisitions and general corporate purposes.

On January 9, 2012, ICTSI tapped a further US$150.0 million (the “Further Securities”) of theOriginal Securities discussed in the preceding paragraphs, increasing the size to US$350.0 million.The Further Securities were issued on January 17, 2012. The Original and Further Securities arecollectively referred to as the “Securities”. The Further Securities were issued at a price of98.375 percent (plus interest accrued on the Securities from and including November 5, 2011 tobut excluding January 17, 2012). The net proceeds from the issue of the Further Securitiesamounting to US$143.6 million were used for the same purpose as the Original Securities.

The Securities were not registered with the Philippine SEC. The Securities were offered inoffshore transactions outside the United States in accordance with Regulation S under theU.S. Securities Act of 1933, as amended, and, subject to certain exceptions, may not be offered orsold within the United States. The Securities are traded and listed in the Singapore StockExchange.

The Securities are treated as a liability in the financial statements of the Issuer or RCBV since ithas the obligation to pay the accumulated distributions should the Guarantor declare dividends toits common stockholders. On the other hand, the Securities are treated as part of equityattributable to equity holders of the parent in the consolidated financial statements of the Groupbecause nothing in the terms and conditions of the Securities gives rise to an obligation of theGroup to deliver cash or another financial asset in the future as defined by PAS 32. However,should the Issuer decide to exercise its option to redeem the Securities, the Securities shall betreated as a financial liability from the date the redemption option is exercised. Should the Issueralso opt to not defer payment of distributions on a Distribution Payment Date, all distributions inarrears as at that date will be recognized as a financial liability until payment is made.

— F-113 —

On January 29, 2015, RCBV issued US$300.0 million 6.25 percent Senior Guaranteed PerpetualCapital Securities unconditionally and irrevocably guaranteed by ICTSI at a price of99.551 percent or US$298.7 million. The new issue was partly used to finance the tenderedUS$230.0 million 8.375 percent Subordinated Guaranteed Perpetual Capital Securities (“OriginalSecurities”) at a tender price of 107.625 or US$247.5 million. The cash proceeds received byRCBV amounted to US$46.7 million, net of debt issuance cost. Exchange premium andunamortized debt issuance cost of the Original Securities amounting to US$23.2 million, wasdirectly charged against retained earnings as a result of the transaction. The transaction did nothave an impact on the 2015 consolidated statement of income of the Company and was treated asan equity transaction since the perpetual capital securities are treated as part of equity in the2015 consolidated balance sheet.

On August 26, 2015, RCBV issued US$450.0 million 5.50 percent Senior Guaranteed PerpetualCapital Securities (“New Securities”) unconditionally and irrevocably guaranteed by ICTSI. Thecash proceeds received by RCBV amounted to US$436.3 million, net of debt issuance cost, willbe used for refinancing, funding capital expenditures and general corporate purposes.

In July and August 2015, RCBV redeemed and cancelled a total of US$11.3 million of theSubordinated Guaranteed Perpetual Capital Securities.

On May 5, 2016, RCBV redeemed the remaining US$108.3 million of the US$350 millionOriginal and Further Securities and paid the accrued distributions amounting to US$4.5 million.The difference amounting to US$7.6 million between the total of the redemption price and accrueddistributions of US$112.8 million and the carrying amount of the remaining Original and FurtherSecurities of US$105.2 million was directly charged against retained earnings.

On October 3, 2016, RCBV tendered its US$300.0 million 6.25 percent and US$450.0 million5.50 percent Senior Guaranteed Perpetual Capital Securities for redemption at a price of 106.75and 105.75, respectively. On October 20, 2016, RCBV redeemed a total of US$345.5 million ofthe tendered securities and paid the associated accrued distributions of US$9.3 million. Togetherwith the redemption, RCBV issued US$375.0 million 4.875 percent Senior Guaranteed PerpetualCapital Securities unconditionally and irrevocably guaranteed by ICTSI at a price of 99.225. Thenew issue was used to finance the redemption and payment of accrued distributions of thetendered securities. The difference amounting to US$41.2 million between the redemption priceof US$376.2 million, including accrued distributions of US$9.3 million, and the carrying value ofthe redeemed perpetual capital securities amounting to US$335.0 million was directly charged toretained earnings. The amount equivalent to the proceeds from the new issue, net of debt issuancecosts, was recognized as additional perpetual capital securities.

RCBV paid distributions totaling US$29.3 million, US$33.4 million and US$34.2 million to theholders of the Securities in 2014, 2015 and 2016, respectively (see Note 15.5). Related interestexpense accrued by the Issuer or RCBV amounted to US$4.5 million, US$8.0 million andUS$6.4 million as at December 31, 2014, 2015 and 2016. However, the interest expense has notbeen recognized in the consolidated statements of income since the Securities are presented asequity attributable to equity holders of the parent.

— F-114 —

15.7 Other Comprehensive Loss - Net

The details of other comprehensive net loss, net of applicable tax, as at December 31 are asfollows:

2014 2015 2016Cumulative translation adjustments* (see Note 3.3) (US$172,258,897) (US$260,858,628) (US$291,425,330)Unrealized mark-to-market gain (loss) on derivatives

(see Notes 27.4 and 27.6) (2,457,453) (494,308) 3,682,715Unrealized mark-to-market gain on AFS investments

(see Note 10) 1,053,501 1,125,896 952,022Business combination revaluation reserve 609,969 609,969 609,969Actuarial gains (losses) on defined benefit plans (see Note 24) (379,859) 980,651 735,260

(US$173,432,739) (US$258,636,420) (US$285,445,364)*Cumulative translation adjustments arise from the change in functional currency of the Parent Company and some of itssubsidiaries’ translation of foreign operations.

16. Long-term Debt

16.1 Outstanding Balances and Maturities

A summary of outstanding balance of long-term debt (net of debt issuance costs) as atDecember 31 is presented below:

2014 2015 2016US dollar-denominated notes (see Note 16.2.1) US$271,691,732 US$179,218,130 US$179,228,914US dollar-denominated term loans (see Note 16.2.2) 47,384,334 95,815,693 210,314,320US dollar-denominated securities (see Note 16.2.3) 26,477,470 13,775,607Foreign currency-denominated loans (see Note 16.2.4) 62,159,825 46,505,167 190,719,874US dollar-denominated medium-term notes

(see Note 16.2.5) 638,254,110 745,728,753 749,502,820Revolving credit facility (see Note 16.2.6) 15,000,000

1,045,967,471 1,081,043,350 1,344,765,928Less current portion 47,773,885 54,465,076 18,485,813

US$998,193,586 US$1,026,578,274 US$1,326,280,115

The balances of and movements in unamortized debt issuance costs, premium and discounts, netof the recognized fair value of prepayment option as at and for the years ended December 31 areshown below:

2014 2015 2016Balance at beginning of year US$40,223,720 US$37,978,896 US$57,110,867Debt issuance costs during the year 921,431 10,902,688 14,043,796Amortization during the year (3,166,255) (5,877,737) (6,344,213)Premium on exchange of notes (see Note 16.2.1) 14,107,020Balance at end of year US$37,978,896 US$57,110,867 US$64,810,450

Amortization of debt issuance costs is presented as part of “Interest expense and financing chargeson borrowings” in the consolidated statements of income.

— F-115 —

Principal maturities of long-term debt (gross of unamortized debt issuance cost) as atDecember 31, 2016 were as follows:

Amount2017 US$21,016,5422018 23,375,8452019 48,550,2972020 221,842,0442021 onwards 1,094,791,650

US$1,409,576,378

16.2 Details and Description

16.2.1 US Dollar-denominated Notes

On March 10, 2010, ICTSI signed a Subscription Agreement with HSBC and JP MorganSecurities, Ltd. for the issuance of ten-year senior notes (the “Original Notes”). The OriginalNotes were issued on March 17, 2010 with an aggregate principal amount of US$250.0 millionmaturing on March 17, 2020. The Original Notes bear interest at a fixed rate of 7.375 percent, netof applicable taxes, payable semi-annually in arrears.

On April 29, 2010, ICTSI tapped a further US$200.0 million (the “Further Notes”) of the OriginalNotes discussed in the preceding paragraph, increasing the size to US$450.0 million. The FurtherNotes were issued on May 6, 2010. The Original and Further Notes are collectively referred to asthe “Notes”. The Further Notes bear interest at the fixed rate of 7.375 percent, net of applicabletaxes, and was set at a price of 102.627 for an effective yield of 7.0 percent.

The net proceeds of the Notes amounting to US$448.1 million were used to fund ICTSI’sinvestments in existing and new terminal construction activities, refinance some of its existingdebt and for other general corporate purposes.

The Notes were not registered with the Philippine SEC. The Notes were offered in offshoretransactions outside the United States in reliance on Regulation S under the Securities Act of1933, as amended, and, subject to certain exceptions, may not be offered or sold within the UnitedStates. The Notes are traded and listed in the Singapore Stock Exchange.

On September 17, 2013, ITBV exchanged newly issued US$207.5 million 5.875 percent Notesdue 2025 for ICTSI’s US$178.9 million 7.375 percent Notes due 2020. The Notes due 2020 werethen reduced from US$450.0 million to US$271.1 million. The Notes due 2025 were issued byITBV under its US$1.0 billion Medium Term Note Programme (the “MTN Programme”), and areunconditionally and irrevocably guaranteed by ICTSI (see Note 16.2.5).

In January 2015, a total of US$117.5 million 5.875 percent Notes due 2025 from the MTNProgramme were issued at a price of 102.625 and US$102.6 million of which was used toexchange with holders of US$91.8 million 7.375 percent Notes due 2020. The cash proceedsreceived by ITBV amounted to US$11.6 million, net of debt issuance cost. These new Notes wereconsolidated and formed a single series with the US$282.5 million 5.875 percent guaranteed Notesdue 2025 issued on September 17, 2013 and April 30, 2014 (see Note 16.2.5).

As at December 31, 2016, the outstanding balance of the Notes due 2020 amounted toUS$179.2 million, net of debt issuance costs.

— F-116 —

16.2.2 US Dollar-denominated Term Loans

CMSA. On October 21, 2015, CMSA signed a US$260.0 million Project Finance Facility withInternational Finance Corporation (IFC) and Inter-American Development Bank (IADB), andparticipated by Standard Chartered Bank and KfW Ipex Bank.

The CMSA Project (the Project) is for the development and operation of a Specialized Containerterminal at the Port of Manzanillo in Manzanillo, Mexico. The terminal will have a capacity of2.2 million TEUs when completely built. The development will be done in three phases with phaseone creating capacity of 750,000 TEUs. Phase two, which is expected to be completed by 2020,will increase the terminal’s capacity to 1.4 million TEUs.

The financing package, which has a tenor of 12 years and a long availability period of four years,will help CMSA finance the completion of phases one and two of the Project. Interest is payablesemi-annually based on floating interest rate computed at 6-month LIBOR plus loan spread with aweighted average of 2.80 percent.

In accordance with the project finance loan documents, CMSA is required to maintain specialpurpose debt service and operating and maintenance reserve accounts to guarantee the debtpayments and project costs disbursements (see Note 2) and to pledge certain major port equipmentas security (see Note 7).

In December 2015, CMSA availed US$95.0 million from the US$260.0 million facility. InNovember 2016, CMSA availed an additional US$86.0 million from the same facility. As ofDecember 31, 2016, the outstanding balance of the loan amounted to US$172.4 million, net ofdebt issuance costs.

ICTSI Unsecured Medium-Term Loan. In October 2013, ICTSI availed of unsecuredmedium-term loan from Australia and New Zealand Banking Group Limited, Manila Branch,amounting to US$20.0 million. The loan bears interest at prevailing market rates, ranging from1.1246 percent to 1.1270 percent in 2014 and 1.1406 percent to 1.1798 percent in 2015. The loanmatured in November 2014 and was renewed for another year until December 4, 2015, when itwas settled.

BCT. On October 27, 2011, BCT entered into a facilities agreement with Bank Polska KasaOpieki S.A. (“Bank Polska”) under which Bank Polska agreed to provide (i) term loan facility upto US$9.2 million, (ii) a capital expenditure facility up to US$36.3 million to finance or refinanceproject costs and fees, and (iii) an overdraft facility up to US$1.0 million to finance workingcapital requirements. Both the term loan and capital expenditure facility bear interest at2.65 percent over LIBOR. The utilization under the overdraft facility will bear interest at1.75 percent over LIBOR or Warsaw Interbank Offered Rate (WIBOR), as the case may be.WIBOR is determined by the Financial Markets Association-ACI Polska for utilizations requestedin Polizh Zloty.

The purpose of the term loan facility under the facilities agreement is to refinance all existingfinancial indebtedness under the 2004 loan agreement. The 2011 loan agreement provided forsubstantially the same security arrangement and restrictions on the payment of dividends to ICTSI,as provided for in the 2004 loan agreement. One of the conditions precedent to any borrowingunder the facilities agreement is for BCT to confirm the availability of the grant by the CentrumUnijnych Projektow Transportowych (CUPT), a Polish grant authority (the “EU Grant”), in anamount not lower than PLN50.0 million (approximately equivalent to US$16.2 million) to partlyfinance the cost of BCT’s projected capital expenditure requirements.

— F-117 —

On March 29, 2012, BCT and CUPT signed the EU Grant whereby CUPT would grant BCT asubsidy amounting to US$17.3 million (PLN53.9 million). The confirmation of the availability ofthe EU Grant is a condition precedent to any borrowing under the facilities agreement with BankPolska, as discussed above. In July 2014, BCT finalized capital expenditure projects supported bythe EU Grant with an estimated total of US$20.0 million. As at December 31, 2016, BCT hasavailed a total of US$19.5 million of the EU Grant.

On April 27, 2012, BCT availed: (i) US$7.9 million from the term loan facility; and(ii) US$0.9 million from the capital expenditure facility with Bank Polska, as discussed in thepreceding paragraph. On October 28, 2013, BCT availed of another US$2.0 million from thesame capital expenditure facility. Both the term loan and capital expenditures facilities bearinterest at 2.65 percent over LIBOR. In 2014, BCT availed a total of US$10.4 million from thecapital expenditure facility, which bears interest at 2.65 percent over LIBOR.

In July 2014, BCT entered into a term loan facility agreement for US$36.0 million with HSBC torefinance its current loan with Bank Polska and finalize capital expenditure projects supported bythe EU Grant with an estimated total of US$20.0 million. The new term loan will bear interest at1.70 percent over LIBOR. On September 2, 2014, the Company availed of US$19.6 million fromthe HSBC term loan facility agreement to prepay the loan from Bank Polska. As atDecember 31, 2014, the aggregate outstanding balance under the term loan and capital expenditurefacilities, net of related debt issuance cost, amounted to US$23.5 million. As a result of theprepayment of the loan from Bank Polska, the related debt issuance cost and commitment feestotaling US$1.2 million were derecognized and charged to the 2014 consolidated statement ofincome.

In December 2015, BCT prepaid in full its HSBC loans totaling US$29.8 million and the relateddebt issuance cost and commitment fees totaling US$0.4 million were derecognized and chargedto the 2015 consolidated statement of income. As at December 31, 2016, BCT has no outstandingloans.

CGSA. In 2014, CGSA availed of two-year unsecured term loans with local banks, namely,Banco Bolivariano and Banco De Guayaquil (“Local Banks in Ecuador”) totaling US$4.5 millionto finance capital expenditures and working capital requirements. The term loans with localbanks in Ecuador bear a fixed interest rate of 7.5 percent, respectively, with the principal payablein monthly installments. In September 2015, CGSA obtained two-year unsecured loans fromBanco Del Pacifico amounting to US$2.0 million at a fixed interest rate of 8.75 percent and,Banco Bolivariano amounting to US$2.0 million at a fixed interest rate of 8.83 percent. InOctober 2015, CGSA availed of a three-year unsecured term loan with BBP Bank, S.A.amounting to US$4.0 million at a fixed interest rate of 6.78 percent. In November 2015, CGSAobtained a two-year unsecured term loan from Banco del Pacifico amounting to US$0.5 million ata fixed interest rate of 8.75 percent.

The outstanding balance of the term loans with local banks in Ecuador amounted toUS$4.0 million, US$9.6 million and US$2.4 million as at December 31, 2014, 2015 and 2016,respectively.

In January and February 2016, CGSA obtained two-year fixed-term loans with a total ofUS$0.6 million from Banco del Pacifico at an interest rate of 8.75% per annum. The loans werefully paid in April 2016.

— F-118 —

On March 29, 2016, CGSA (as “Borrower”), Metropolitan Bank and Trust Company (as“Lender”) and ICTSI (as “Surety”) signed a loan agreement which consists of two tranches ofUS$32.5 million (Tranche I) and US$7.5 million (Tranche II) with floating interest rates.Tranche I has a final maturity in March 2021 while Tranche II matures in May 2017. In 2016,CGSA availed of loans with a total amount of US$40.0 million. Portion of the proceeds of theseloans was used to refinance the unsecured term loans of CGSA amounting to US$9.2 million inApril 2016. In 2016, CGSA paid a total amount of US$4.5 million of the loan under Tranche II.As at December 31, 2016, the outstanding balance of the loan with MBTC amounted toUS$35.5 million.

16.2.3 US Dollar-denominated Securities

On September 23, 2011, CGSA engaged in a fiduciary contract as originator for a securitizationarrangement under which it transferred its receivables and future operating revenues from selectedcustomers such as shipping lines and banana exporters (the “securitized assets”) to a specialpurpose trust administered by Administradora de Fondos de Inversión y Fideicomisos FuturaFUTURFID S.A. (formerly named Administradora de Fondos de Inversion Y Fideicomisos BGS.A.) as trustee and handling agent. On October 24, 2011, the special purpose trust was officiallyapproved to issue securities in three series against the securitized assets in the aggregate principalamount of US$60.0 million with each series to mature within five years from date of issue.Series A bears variable interest at the rate of 2.5 percent plus the reference interest rate for savingsposted by Central Bank of Ecuador subject to a readjustment every quarter, while Series B andSeries C bear interest at a fixed rate of 7.5 percent. Principal and interest are payable quarterly foreach series.

The proceeds of the securitization issue, which were remitted to CGSA as consideration for thesecuritized assets, were used to finance capital expenditures and expansion of port operations. Onthe other hand, regular cash flows from the securitized assets were used by the special purposetrust to pay principal and interest due to holders of the securities and other expenses. Any excessin the cash flows remaining with the special purpose trust, after all obligations to holders ofsecurities and relevant third parties are fully paid, will revert to CGSA as the originator. Thesecurities issued pursuant to the securitization agreement are currently registered with and tradedin the Ecuadorian stock market.

As at December 31, 2011, CGSA has received proceeds from the issuance and placement ofsecurities under the securitization agreement amounting to US$55.0 million, net of debt issuancecost of US$0.8 million. In February 2012, CGSA placed the balance of the US$60.0 millionsecurities, through a special purpose trust approved in 2011, amounting to US$4.2 million. CGSAhad paid US$11.9 million in 2014, US$12.8 million in 2015 and US$13.8 million in 2016 of theoutstanding securities. As at December 31, 2016, CGSA has no outstanding securities.

16.2.4 Foreign Currency-denominated Loans

PICT. On July 11, 2011, PICT signed a five-year Rs.2.5 billion (equivalent to US$29.1 million)Agreement for Financing on Mark-up Basis (Term Finance) with Faysal Bank Limited. The loancarries mark-up at the rate of six months Karachi Interbank Offered Rate (KIBOR) plus1.75 percent and is secured against all present and future property and equipment and underlyingport infrastructures of the concession right. Principal is repayable in nine equal semi-annualinstallments commencing in July 2012. Proceeds of the loan were partially used to fully pay theloans with IFC and Organization of the Petroleum Exporting Countries Fund for InternationalDevelopment (OFID) amounting to Rs.2.4 billion (US$27.9 million) on July 22, 2011, which wereoriginally maturing in January 2018. The loan with remaining balance of Rs.1.5 billion was

— F-119 —

refinanced by Habib Bank Limited. The new loan carries a mark-up at the rate of six monthsKarachi Interbank Offered Rate (KIBOR) plus 0.75 percent and is secured against all present andfuture property and equipment and underlying port infrastructures of the concession right (seeNote 7). Principal is repayable in five equal semi-annual installments commencing in June 2015.As at December 31, 2016, outstanding principal balance of the loan amounted to Rs.0.3 billion(US$2.9 million).

Corporate Notes Facility Agreement (FXCN Note). In November 2008, ICTSI completed anFXCN Note for US$18.4 million (P=855.0 million), which amount was increased by an AccessionAgreement up to US$25.0 million (P=1.2 billion), with several institutions arranged by HSBCManila. The net proceeds of the FXCN Note were used for capital expenditures and workingcapital requirements. The FXCN Note is unsecured and has maturities of five and a half, andseven years. Interest rate is at 9.5 percent for the five and a half-year FXCN Note and10.25 percent for the seven-year FXCN Note. One percent of principal is payable every year andthe remaining balance is due in 2014 for the five and a half-year FXCN Note and in 2015 for theseven-year FXCN Note. The entire facility was fully drawn in 2008. In May 2012, ICTSI prepaidthe five and a half-year FXCN note. In November 2014, ICTSI prepaid the seven-year FXCNNote.

AGCT. In March 2013, AGCT signed the first part of a ten-year loan agreement forEUR6.2 million (US$8.1 million) with Raiffeisenbank Austria d.d. to partly finance the purchaseof port equipment intended for the Brajdica Container Terminal. The principal is repayable in112 monthly installments from January 31, 2014 up to April 30, 2023. Interest is payable monthlybased on floating interest rate computed at 1-month Euro Interbank Offered Rate plus a spread of4.2 percent. The loan is secured by AGCT’s port equipment (see Note 7).

On July 22, 2013, AGCT signed the second part of the same loan agreement for EUR4.4 million(US$5.6 million). Principal is repayable in 120 monthly installments from January 31, 2014 up toDecember 31, 2023. Interest is payable monthly based on floating interest rate computed at1-month Euro Interbank Offered Rate plus a spread of 4.2 percent. The loan is secured byAGCT’s port equipment (see Note 7).

On April 6, 2016, AGCT signed a loan agreement for US$1.1 million (EUR 0.95 million).Principal is repayable in 12 monthly installments from November 30, 2016 up toOctober 31, 2017. Interest is payable monthly based on fixed interest rate of 3.90%. AGCT fullypaid the loan on August 31, 2016.

On July 1, 2016, the spread on the interest of AGCT’s loans was reduced from 4.2 percent to3.4 percent. As at December 31, 2016, the total outstanding balance of the loans amounted toUS$7.8 million (EUR7.4 million).

YICT. The Company acquired, through the consolidation of YICT, the long-term loan withoutstanding balance US$35.8 million (RMB222.2 million) as at December 31, 2014. The long-term loan with Agricultural Bank of China (ABC), which was availed principally to finance thedevelopment project related to the construction of the container terminal, bears an interest rate of6.15 percent per annum and matured on December 7, 2014. On December 4, 2014, YICT signed atwo-year loan agreement to refinance the loan bearing a lower interest rate of 6.0 percent perannum, which was repriced at 4.75 percent per annum in 2015.

Upon maturity of the loan from ABC in December 2016, YICT obtained a US$21.6 million(RMB150.0 million) short-term loan from YPH to fully pay the loan with ABC (see Note 18).

— F-120 —

VICT. On July 15, 2016, VICT signed the syndicated project finance facilities with internationaland regional banks, namely: Citibank N.A., KFW IPEX-Bank, Standard Chartered Bank asMandated Lead Arrangers and Bookrunners, Bank of China Limited, DBS Bank Ltd., InvestecBank PLC as Mandated Lead Arrangers, and Cathay United Bank as Lead Arranger, for principalamount of US$300.0 million (AUD398.0 million) with interest rates based on Australian BankBill Swap Reference Rate (bid) (BBSY) plus average margin of 3.1% per annum and maturitiesuntil 2023, 2026 and 2031. On July 25, October 4 and November 30, 2016, VICT availed of loansfrom the facilities amounting to US$67.7 million (AUD91.0 million), US$25.8 million(AUD35.0 million) and US$103.4 million (AUD140.0 million), respectively. The financefacilities are secured against IOBV’s shares in VICT, all present assets of VICT, and will besecured against future assets of VICT, among others. The carrying value of VICT’s assets as atDecember 31, 2016 amounted to AUD887.3 million (US$639.6 million).

As at December 31, 2016, the total outstanding balance of the loans amounted toUS$180.1 million (AUD249.9 million), net of debt issuance costs.

16.2.5 US Dollar-denominated Medium Term Note Programme (the “MTN Programme”)

On January 9, 2013, ITBV, a majority owned subsidiary through ICTSI Ltd., established the MTNProgramme that would allow ITBV from time to time to issue medium term notes (MTN),unconditionally and irrevocably guaranteed by ICTSI. The aggregate nominal amount of theMTN outstanding will not at any time exceed US$750.0 million (or its equivalent in othercurrencies), subject to increase as described in the terms and conditions of the ProgrammeAgreement. This was increased to US$1.0 billion in August 2013.

Also, on January 9, 2013, ITBV and ICTSI signed a Subscription Agreement with HSBC andUBS AG, Hong Kong Branch, for the issuance of ten-year US$300.0 million guaranteed MTN(the “Original MTN”) under the MTN Programme. The Original MTN were issued onJanuary 16, 2013 to mature on January 16, 2023 at a fixed interest rate of 4.625 percent, net ofapplicable taxes, and were set at a price of 99.014 and payable semi-annually in arrears.

Moreover, on January 28, 2013, ITBV and ICTSI signed a Subscription Agreement with UBS AG,Hong Kong Branch, for the issuance of an additional ten-year US$100.0 million guaranteed MTNunder the MTN Programme (the “MTN Tap”) to form a single series with the Original MTN asdiscussed in the preceding paragraph. The MTN Tap were issued onFebruary 4, 2013 to mature on January 16, 2023 at a fixed interest rate of 4.625 percent, net ofapplicable taxes, and were set at a price of 101.25 and payable semi-annually in arrears.

The aggregate net proceeds of the MTN amounting to US$393.8 million were used to refinancesome of ICTSI’s existing debt and for other general corporate purposes.

In June 2013, ICTSI purchased a total of US$6.0 million of ITBV’s US$400.0 million MTN atUS$5.7 million.

On April 25, 2014, the Board of ICTSI confirmed, ratified and approved the issuance of additionalnotes under the US$1.0 billion medium term note programme of ITBV, in the aggregate nominalamount of US$75.0 million. These new notes were consolidated and formed a single series withthe US$207.5 million, 5.875 percent guaranteed Notes due 2025 issued on September 17, 2013(see Note 16.2.1). The said notes were issued on April 30, 2014.

— F-121 —

In January 2015, a total of US$117.5 million 5.875 percent Notes due 2025 from the MTNProgramme were issued at a price of 102.625 and US$102.6 million of which was used toexchange with holders of US$91.8 million 7.375 percent Notes due 2020. The cash proceedsreceived by ITBV amounted to US$11.6 million, net of debt issuance cost. The2025 Notes were issued by ITBV under its US$1.0 billion MTN programme, and areunconditionally and irrevocably guaranteed by ICTSI. These new Notes were consolidated andformed a single series with the US$282.5 million 5.875 percent guaranteed Notes due 2025issued on September 17, 2013 and April 30, 2014.

As at December 31, 2016, outstanding notes under the programme was US$749.5 million, whichincludes the US$207.5 million 5.875 percent Notes due 2025 and US$117.5 million 5.875 percentNotes due 2025 discussed in Note 16.2.1.

The MTN were not registered with the Philippine SEC. The MTN were offered in offshoretransactions outside the United States in accordance with Regulation S under the Securities Act of1933, as amended, and, subject to certain exceptions, may not be offered or sold within the UnitedStates. The MTN are traded and listed in the Singapore Stock Exchange.

16.2.6 Revolving Credit Facility Programme

IGFBV. On July 24, 2014, the Board of Directors of ICTSI approved the establishment of a loanfacility programme pursuant to which IGFBV, may from time to time enter into one or more loanfacilities with one or more lenders under the said programme, to be guaranteed by ICTSI. Inconnection with the establishment of the said programme, the Board also approved the first loanfacility under the programme with IGFBV as the borrower and ICTSI as the guarantor. The loanfacility is a revolving credit facility with a principal amount of US$350.0 million and a tenor offive years from signing date, July 24, 2014. In 2015, IGFBV has drawn down a total ofUS$100.0 million from the US$350.0 million five year revolving credit facility bearing interestranging from 2.13 to 2.14 percent per annum. In August 2015, IGFBV prepaid theUS$100.0 million loan.

In April and June 2016, IGFBV availed of loans amounting to US$150.0 million andUS$10.0 million, respectively, from the US$350.0 million five year revolving credit facilitybearing interest ranging from 2.39 to 2.71 percent per annum. In August, November andDecember 2016, IGFBV partially paid loans drawn in April and June 2016 totalingUS$145.0 million. As at December 31, 2016, outstanding balance of the loan amounted toUS$15.0 million.

The related debt issuance cost of the revolving facility amounting to US$7.1 million is beingamortized over five years (see Note 10). Commitment fees amounting to US$1.4 million in 2014,US$2.3 million in 2015 and US$2.2 million in 2016, representing 0.78 percent per annum of theamount of undrawn facility, is recorded as part of “Interest expense and financing charges onborrowings” account in the consolidated statements of income.

16.3 Loan Covenants and Capitalized Borrowing Costs

The loans from local and foreign banks impose certain restrictions with respect to corporatereorganization, disposition of all or a substantial portion of ICTSI’s and subsidiaries’ assets,acquisitions of futures or stocks, and extending loans to others, except in the ordinary course ofbusiness. ICTSI is also required to maintain specified financial ratios relating to their debt toEBITDA up to 4 times. As at December 31, 2014, 2015, and 2016, ICTSI and subsidiaries werein compliance with their loan covenants.

— F-122 —

Interest expense, net of amount capitalized as intangible assets and property and equipment,presented as part of “Interest expense and financing charges on borrowings” account in theconsolidated statements of income, amounted to US$55.1 million in 2014, US$55.0 million in2015 and US$68.0 million in 2016 (see Notes 6 and 7).

17. Other Noncurrent Liabilities


2014 2015 2016Accrued rental (see Note 19) US$38,660,114 US$92,855,916 US$64,575,728Government grant 10,740,113 17,635,847 15,741,736Pension liabilities (see Note 24) 6,388,013 6,509,459 7,487,607Finance lease payable 2,123,641 905,557 146,843Others 758,674 1,446,920 2,893,476

US$58,670,555 US$119,353,699 US$90,845,390

Accrued RentalThe accrued rental of VICT amounted to US$38.7 million (AUD47.3 million), US$92.9 million(AUD127.4 million) and US$149.6 million (AUD207.5 million) as at December 31, 2014, 2015and 2016, respectively, calculated using the straight-line method from the inception of the contractin June 2014. As at December 31, 2016, the current portion of accrued rental amounting toUS$85.0 million (AUD117.9 million) classified as Trade payable under “Accounts payable andother current liabilities” was paid on January 3, 2017 (see Note 19).

Government GrantOn March 29, 2012, BCT and Centrum Unijnych Projektow Transportowych (CUPT), a Polishgrant authority, signed a grant agreement (the “EU Grant”) whereby CUPT would grant BCT asubsidy amounting to US$17.3 million (PLN53.9 million) and on October 21, 2013, BCT andCUPT signed a second EU Grant whereby CUPT would grant BCT a subsidy amounting toUS$4.8 million (PLN14.6 million). The confirmation of the availability of the EU Grant is acondition precedent to any borrowing under the facility agreement of BCT. In December 2015,BCT finalized capital expenditure projects supported by the EU Grant with an estimated total ofUS$19.5 million. In 2016, BCT availed of an additional US$0.6 million EU Grant. As atDecember 31, 2016, BCT has availed a total of US$19.5 million of the EU Grant. The EU Grantis treated as deferred income and is amortized over the duration of the existing concessionagreement ending on May 31, 2023. The unamortized deferred income from government grantamounted to US$10.7 million, US$17.6 million and US$15.7 million as at December 31, 2014,2015 and 2016, respectively. Amortization of deferred income include under “Other income”amounted to US$0.3 million in 2014, US$1.0 million in 2015 and US$2.5 million in 2016 (seeNote 21.1).

18. Loans Payable

Loans payable are unsecured loans obtained by ICTSI and various subsidiaries.

In 2014, ICTSI renewed its US$10.0 million unsecured US$-denominated short-term loan withBank of Tokyo - Mitsubishi UFJ, Manila Branch and availed of an additional US$10.0 millionloan, which were fully outstanding as at December 31, 2014 at the amount of US$20.0 million. InSeptember 2015, ICTSI prepaid these short-term loans with Bank of Tokyo.

— F-123 —

In 2014, CGSA availed one-year loans from Citibank, Banco Bolivariano and Banco del Pacificototaling US$5.0 million at interest rates ranging from 7.50 percent to 7.75 percent p.a. Outstandingbalance under the loans was US$1.7 million as at December 31, 2014. In April 2015, CGSAavailed one-year loans from Banco Bolivariano and Banco Guayaquil totaling US$6.0 million atfixed interest rate of 8.0 percent per annum. In February 2016, CGSA obtained short-termunsecured US$ loans with a total of US$3.5 million from Banco Guayaquil S.A., Citibank andBanco Bolivariano at annual fixed interest rates ranging from 8.89 percent to 9.12 percent. Theshort-term loans were fully paid in 2016.

On July 1, 2014, the ICTSI acquired, through the consolidation of YICT, the short-term loan withoutstanding balance of US$2.9 million (RMB 18.0 million) (see Note 4.1). The short-term loanbears an interest rate of 6.15 percent per annum and had been fully repaid on February 4, 2015.

On June 18, 2015, TSSA availed of a short-term loan amounting to US$1.3 million from BancoBradesco S.A. bearing fixed interest of 8.73 percent per annum and was settled on July 31, 2015.

On May 17, 2016, ICTSI availed of a US$30.2 million (P=1.4 billion) short-term loan withMetropolitan Bank and Trust Company at an annual interest rate of 2.5 percent. On July 7 andOctober 7, 2016, ICTSI fully paid the short-term loan.

On December 5, 2016, YICT obtained a US$21.6 million (RMB150.0 million) short-term loanfrom YPH at an interest rate of 4.35 percent per annum and a maturity date of January 25, 2017.The loan was used to refinance YICT’s maturing loan with ABC (see Note 16.2.4). OnJanuary 12, 2017, YICT prepaid US$1.5 million (RMB10 million) and the balance ofUS$20.1 million (RMB140 million) was renewed with an interest rate of 4.50 percent per annumand a maturity date of March 31, 2017.

On November 28, 2016, OPC availed of a US$15.0 million short-term loan from MetropolitanBank and Trust Company. The loan bears interest at LIBOR plus a spread of 1.6 percent andmatures on November 23, 2017.

Interest expense incurred related to these loans payable amounted to US$0.6 million in 2014,US$0.4 million in 2015 and US$0.7 million in 2016.

19. Accounts Payable and Other Current Liabilities


2014 2015 2016Trade (see Notes 17, 21.3 and 23.1) US$94,990,286 US$104,775,892 US$200,324,689Accrued expenses: Output and other taxes 20,132,905 23,945,495 34,693,099 Interest (see Notes 16.3 and 18) 20,489,465 19,608,480 22,905,888 Salaries and benefits 15,448,106 15,280,886 21,413,326 Others 11,935,721 11,231,931 15,596,870Provisions for claims and losses

(see Notes 25 and 26) 9,644,043 13,322,197 36,587,263Customers’ deposits 7,582,449 9,028,839 11,106,128Dividends payable 3,661,080 2,477,694 3,203,531Finance lease payable 1,261,631 1,184,146 738,489Others (see Note 21.3) 520,030 14,598 1,139,803

US$185,665,716 US$200,870,158 US$347,709,086

Trade payables are noninterest-bearing and are generally settled on 30-60 day terms.

— F-124 —

Provisions for claims and losses pertain to estimated probable losses in connection with legalcases and negotiations involving cargo, labor, contracts and other issues. The movements in thisaccount follow:

2014 2015 2016Balance at beginning of year US$11,279,320 US$9,644,043 US$13,322,197Provision during the year (see Note 25.20) 4,537,286 5,490,460 25,613,823Settlement during the year (5,363,050) (1,213,914) (3,434,325)Translation adjustment (809,513) (598,392) 1,085,568Balance at end of year US$9,644,043 US$13,322,197 US$36,587,263

20. Share-based Payment Plan

Certain officers and employees of the Group receive remuneration in the form of share-basedpayment transactions, whereby officers and employees are given awards, in the form of ICTSIcommon shares, in lieu of cash incentives and bonuses under the SIP (“equity-settledtransactions”). The SIP was approved by the stockholders of ICTSI on March 7, 2007, effectivefor a period of ten years unless extended by the Board. On March 7, 2016, the Board approved forthe extension of the SIP for a further 10 years until March 2027 and the amendment of vestingperiod of the SIP. The vesting period of the SIP was amended from two years where 50% is tovest on the first anniversary date of the award and the other 50% to vest on the second anniversarydate of the award, to three years where 25% is to vest on the first anniversary date of the award,25% to vest on the second anniversary date of the award, and 50% to vest on the third anniversarydate of the award. The shares covered by the SIP are held under treasury until they are awardedand issued to the officers and employees as determined by the Stock Incentive Committee. As atDecember 31, 2016, there were 38,601,138 ICTSI common shares granted in aggregate under theSIP since it became effective in 2007. Also, as at December 31, 2016, 17,130,267 ICTSI commonshares were held under treasury and allotted for the SIP (see Note 15.1).

The grant of shares under the SIP does not require an exercise price to be paid by the awardee.Awardees who resign or are terminated will lose any right to unvested shares. A change in controlin ICTSI will trigger the automatic vesting of unvested awarded shares. There are no cashsettlement alternatives.

The SIP covers permanent and regular employees of ICTSI with at least one year tenure; officersand directors of ICTSI, its subsidiaries or affiliates; or other persons who have contributed to thesuccess and profitability of ICTSI or its subsidiaries or affiliates.

Stock awards granted by the Stock Incentive Committee to officers and employees of ICTSI andICTSI Ltd. for the past three years are shown below:

Grant DateNumber of Shares

GrantedFair value per Share

at Grant DateMarch 14, 2014 1,892,000 US$2.24 (P=100.00)March 20, 2015 1,740,375 US$2.51 (P=112.60)March 14, 2016 2,567,763 US$1.39 (P=65.00)

Fair value per share was determined based on the quoted market price of stock at the date of grant.

— F-125 —

Movements in the stock awards (number of shares) in 2014, 2015 and 2016 follow:

2014 2015 2016Balance at beginning of year 3,382,500 3,137,000 2,721,319Stock awards granted 1,892,000 1,740,375 2,567,763Stock awards vested, issued and cancelled (2,137,500) (2,156,056) (1,810,957)Balance at end of year 3,137,000 2,721,319 3,478,125

Total compensation expense recognized on the vesting of the fair value of stock awards andpresented as part of manpower costs in the consolidated statements of income amounted toUS$4.4 million in 2014, US$4.3 million in 2015 and US$2.8 million in 2016, respectively, underthe SIP. A corresponding increase in additional paid-in capital, net of applicable tax, was alsorecognized in the consolidated statements of changes in equity (see Note 15.2).

21. Income and Expenses

21.1 Other Income


2014 2015 2016Reversal of accrued and other expenses

(see Notes 1.2 and 25.20) US$3,385,818 US$1,908,130 US$4,572,561Income from amortization of government grant

(see Note 17) 276,994 1,007,593 2,463,140Gain on sale of property and equipment

(see Note 7) 568,911 26,890 1,682,668Rental income (see Notes 7 and 8) 915,838 791,390 752,760Dividend income 1,578,798 646,559 198,706Gain on settlement of insurance and other claims 1,589,680 616,578 571,342Mark-to-market gain on derivatives - net

(see Note 27) 331,154Gain on termination of management contract

(see Note 1.2) 2,880,829Others 3,006,497 1,154,434 3,152,389

US$14,203,365 US$6,482,728 US$13,393,566

21.2 Port Authorities’ Share in Gross Revenues

This account consists of port authorities’ share in gross revenues of the Group as stipulated inagreements with the port authorities where the Group operates (see Note 25). Port authorities’share in gross revenues includes variable fees aggregating US$163.6 million in 2014,US$169.0 million in 2015 and US$183.7 million in 2016 (see Note 25).

On May 20, 2013, ICTSI hedged Philippine peso-denominated variable fees that were to bepayable from January to October 2014. Foreign currency translation losses previously deferred inequity formed part of variable fees upon accrual of the hedged port fees. ICTSI recognizedforeign currency losses amounting to US$3.1 million as part of “Port authorities’ share in grossrevenues” account in the 2014 consolidated statement of income (see Notes 12 and 27.4).

— F-126 —

21.3 Other Expenses

2014 2015 2016Loss on pre-termination of lease agreement (see

Notes 1.2 and 25.20) US$– US$– US$23,432,184Probable losses on non-trade advances and

receivables – 1,138,707 3,125,248Solidarity contribution on equity of CGSA

(see Note 22) – – 1,455,876Pre-termination cost and other bank charges

(see Notes 16.1, 16.2.2, 16.2.4 and 27.5) 3,677,007 2,700,106 2,257,130Mark-to-market loss on derivatives - net – – 1,031,447Wealth tax on equity of SPIA – 1,126,785 929,543Management fees (see Note 23.1) 214,199 651,386 637,836Loss on sale of property and equipment

(see Note 7) 20,951 717,485 178,543Loss on settlement of insurance claim

(see Note 13) 864,809 – –Others 866,145 1,413,439 3,303,453

US$5,643,111 US$7,747,908 US$36,351,260

22. Income Tax

The components of recognized deferred tax assets and liabilities are as follows:

2014 2015 2016Deferred tax assets on: Unrealized foreign exchange losses US$20,281,411 US$33,347,387 US$57,424,745

Intangible assets and concession rights payableunder IFRIC 12 11,588,311 13,651,856 14,173,405

NOLCO 14,363,418 20,641,974 12,353,824 Accrued retirement cost and other expenses 1,488,685 935,782 1,435,954 Allowance for doubtful accounts and other provisions 3,251,201 3,154,213 1,076,888 Allowance for obsolescence 119,476 104,548 139,508 Share-based payments 9,593 12,156 59,274 Others 6,780,455 4,524,529 3,908,216

US$57,882,550 US$76,372,445 US$90,571,814

Deferred tax liabilities on:Excess of fair value over book value of net assets of

BCT, MTS, YRDICTL/YICT, DIPSSCOR, SPIA,SCIPSI, Tecplata and AGCT US$28,060,329 US$24,759,382 US$21,486,453

Capitalized borrowing costs 16,246,367 15,857,615 18,373,108Difference in depreciation and amortization periods of

port infrastructure classified as concession rights 10,119,728 11,332,408 12,745,917Accelerated depreciation and translation difference

between functional and local currency 11,970,379 11,730,982 6,394,075 Nonmonetary assets – 2,347,545 4,152,228

Unrealized mark-to-market gain on derivatives – – 2,266,574 Unrealized foreign exchange gain – 68,620 74,405 Others 1,668,887 763,701 5,884,045

US$68,065,690 US$66,860,253 US$71,376,805

Other deferred taxes mainly pertain to difference in tax and accounting bases for lease anddepreciation.

— F-127 —

The Parent Company is subject to income tax based on its Philippine peso books even as itsfunctional currency is US dollars. As a result, the Parent Company’s US dollar-denominated netmonetary liabilities were translated to Philippine peso giving rise to the recognition of deferred taxasset on net unrealized foreign exchange losses. The deferred tax asset on net unrealized foreignexchange losses amounting to US$20.2 million, US$33.3 million and US$56.4 million as atDecember 31, 2014, 2015 and 2016, respectively, mainly pertains to Parent Company.

Deferred tax assets on NOLCO of certain subsidiaries amounting to US$5.2 million,US$11.0 million and US$15.0 million as at December 31, 2014, 2015 and 2016, respectively,were not recognized, as management believes that these subsidiaries may not have sufficientfuture taxable profits against which the deferred tax assets can be utilized. Deferred tax assets arerecognized for subsidiaries when there is expectation of sufficient future taxable profits fromwhich these deferred tax assets can be utilized.

As at December 31, 2014, 2015 and 2016, deferred tax liability has not been recognized onundistributed cumulative earnings of subsidiaries in retained earnings position amounting toUS$562.5 million, US$650.6 million and US$840.7 million, respectively, because the ParentCompany has control over such earnings, which have been earmarked for reinvestment in foreignport projects and are not expected to reverse in the foreseeable future (see Note 15.5).

ICTSI recognized deferred tax asset amounting to US$9.6 thousand in 2014, US$12.2 thousand in2015 and US$59.3 thousand in 2016, on the excess of the tax deduction (or estimated futurededuction) on stock awards over the related cumulative compensation expense (see Notes 15.2and 20). The Group recognized deferred tax asset on actuarial loss amounting to US$0.7 millionin 2014, and US$0.2 million in 2016 and deferred tax liability on actuarial gain amounting toUS$0.6 million in 2015. The related deferred tax asset and liability were taken to equity.

A reconciliation of income tax expense on income before income tax at the statutory tax rates toprovision for income tax for the years presented is as follows:

2014 2015 2016Income tax expense computed at statutory tax rates US$65,578,674 US$63,699,946 US$74,047,123Add (deduct): Income tax incentive (12,322,197) (11,890,970) (10,326,374) Nondeductible tax losses of subsidiaries - net 478,201 407,890 207,875 Interest income already subjected to final tax (346,730) (927,960) (588,979) Unallowable interest expense 174,078 189,773 90,339 Others - net 319,788 (841,054) 141,116Provision for income tax US$53,881,814 US$50,637,625 US$63,571,100

The statutory income tax rates applicable to each subsidiary are as follows:

Name of Company Tax Rate Tax RulesNICTI 42.0% Combined tax rate of 42 percent is composed of 28 percent imposed by Japan

Government and the other 14 percent imposed by the City and Prefecture.Tecplata and IDRC 35.0% Tecplata’s nominal tax rate is 35 percent. In addition, Tecplata is subject to

minimum presumed income tax by applying the effective 1% rate oncomputable assets as at each year-end (see Note 10). This tax issupplementary to income tax. Tecplata’s obligation for each fiscal yearshall be the higher of these two taxes. However, should the minimumpresumed income tax exceed income tax in a given fiscal year, such excessmay be computed as payment on account of any income tax excess overminimum presumed income tax that may occur in any of the tensubsequent fiscal years. Tax losses can be carried forward for five years.

— F-128 —

Name of Company Tax Rate Tax RulesThe regular corporate income tax rate in Democratic Republic of Congo is

35 percent. The minimum tax payable is the higher of 1% of revenue andCDF2.5 million for large corporations. IDRC is entitled to an income taxholiday for four years starting from 2017.

ICTSI Oregon 34.0% ICTSI Oregon is subject to federal tax rate of about 34 percent to 35 percent.ICTSI Oregon is also subject to state tax of 7.6 percent and city/county taxof 3.65 percent based on taxable income less federal tax. Under thefederal and local state corporate income tax systems, corporations that arenot an exempt and small corporation are subject to an AlternativeMinimum Tax (AMT) at a rate of 20 percent. Corporations pay theminimum amount of tax subject to federal and state regulations. There isno minimum tax on corporation in a net operating loss position. However,certain states require taxes to be remitted on a gross revenue basis. Netoperating losses can be carried forward for 20 years and carried back fortwo years.

PICT 33.0% Corporate tax rate in Pakistan that applies to PICT is 33 percent. In 2014, anew provision (Section 113(c) of Income Tax Ordinance (Ordinance)2001) is added by which companies are required to pay AlternativeCorporate Tax (ACT) at 17 percent of accounting profits if the actual taxliability is less than ACT. The differential excess can be carried forwardfor ten years.

The Government of Pakistan through Finance Act 2015 has imposed atemporary super tax in 2015. This tax was approved by the Parliament onJune 30, 2015. The super tax has been levied at the rate of 3% on alltaxpayers earning income amounting to PKR500.0 million or more in theprevious year. PICT paid super tax amounting to US$1.0 million(PKR100.6 million) in 2015 and US$1.3 million (PKR123.4 million) in2016.

In Pakistan, deductible depreciation is computed by applying the applicablerates, as provided in the Third Schedule to the Ordinance, to the particularcategory of assets on a diminishing balance method. The rate of taxdepreciation ranges from 10 to 30 percent depending on the category ofthe assets. An initial depreciation allowance at the rate of 15 percent and25 percent, depending on the category of assets, is also available foreligible depreciable assets, in accordance with section 23 of the Ordinance.

ICTSI India 30.9% The corporate tax rate is 30.9 percent for companies with income less thanINR10 million, 33.063 percent with income more than INR10 million andless than INR100 Million and 33.99 percent for companies with incomemore than INR100 million. A Minimum Alternate Tax (MAT) is imposedat 18.5 percent (plus any applicable surcharge and cess) on the adjustedbook profits of corporations whose tax liability is less than 18.5 percent oftheir book profits. A credit is available for MAT paid against tax payableon normal income; the credit may be carried forward for offset againstincome tax payable in the following 10 years.

ICTSI and otherPhilippinesubsidiaries,excluding SBITC,ICTSI Subic, APBS,VICT, AICTL,CMSA and TMT

30.0% The corporate income tax rate of Philippine entities is 30 percent.On May 14, 2008, the Board of Investments (BOI) approved the registration

of ICTSI’s construction of Berth 6 of the MICT as “New Operator of PortInfrastructure (Berth 6)” on a Pioneer status under the OmnibusInvestment Code of 1987. From November 2011, Berth 6 is entitled,among others, to an income tax holiday for a period of six years. Berth 6was completed, inaugurated and started full commercial operations in July2012 (see Note 25.1). In 2014, 2015 and 2016, Berth 6 recognized grossrevenues from port operations amounting to US$85.8 million,US$81.2 million and US$70.0 million and availed of tax incentive arisingfrom the income tax holiday of US$12.3 million, US$11.9 million andUS$10.5 million, respectively. On July 2, 2015, the BOI approved theregistration of ICTSI’s construction of Berth 7 of the MICT as “ExpandingOperator of Container Yard” on a Non-Pioneer status under the Omnibus

— F-129 —

Name of Company Tax Rate Tax RulesInvestment Code of 1987. Berth 7 is entitled to an income tax holiday ofthree years starting from July 2017 or actual date of commercialoperations, whichever is earlier.

On December 18, 2008, the Bureau of Internal Revenue issued RevenueRegulations No. 16-2008, which implemented the provisions of RepublicAct 9504 on Optional Standard Deductions (OSD). This regulation allowsboth individuals and corporate taxpayers to use OSD in computing fortaxable income. Corporations may elect a standard deduction equivalentto 40% of gross income, as provided by law, in lieu of the itemizedallowed deductions. For the years ended December 31, 2014, 2015 and2016, BIPI, MICTSI and SCIPSI have elected to use OSD in computingfor their taxable income. DIPSSCOR opted to use OSD for the years endedDecember 31, 2014 and 2015 and itemized deductions method for the yearended December 31, 2016 in computing for its taxable income.

On March 3, 2014, HIPS was registered with the BOI as a new operator ofseaport and container yard/terminal on a non-pioneer status under theOmnibus Investment Code of 1987. HIPS is entitled, among others, to anincome tax holiday for four years from January 2016 or start ofcommercial operations, whichever is earlier. On September 26, 2016,HIPS has requested the BOI to cancel its registration in light ofdevelopments affecting the economics of the project.

On March 28, 2016, LGICT was registered with the BOI as a new exportservices provider on a non-pioneer status under the Omnibus InvestmentCode of 1987. LGICT is entitled, among others, to an income tax holidayfor four years from March 2016 or start of commercial operations,whichever is earlier.

VICT and AICTL are subject to corporate income tax rate of 30 percent. Taxlosses can be carried forward indefinitely.

CMSA’s corporate income tax rate is 30 percent applicable until 2012 and29 percent in 2013. Effective January 1, 2014, the tax rate is 30 percent.

RCBV, ITBV and othersubsidiaries in TheNetherlands

25.0% The corporate income tax rate in the Netherlands is 20.0 percent on taxableincome of up to €200,000 and 25.0 percent on taxable income exceeding€200,000. Tax losses in Netherlands can be carried forward for nine years.

OPC 25.0% OPC’s corporate income tax rate is 25 percent. An additional solidaritycontribution is levied on OPC calculated as 5 percent of the surplus of thenet taxable income above HNL1.0 million. The Net asset tax is levied to a1.0 percent tax rate applicable over the surplus of HNL3.0 million of thevalue of the total assets reflected on the balance sheet. A 5 percenttemporary social contribution is levied in addition to the corporate incometax applied to the excess of net taxable income above HNL1.0 million. AnAlternate Minimum Tax (AMT) is levied on a taxpayer that has operatinglosses in two of the past five years and whose gross income in the pastyear is HNL100.0 million or more. AMT is computed by applying the1.0 percent rate to gross income. OPC is exempt from AMT during itsfirst five years of operations. A Minimum tax is levied on the 1.5% overthe total gross income greater or equal to HNL.10.0 million during the taxperiod, when the Corporate income tax resulting is lower than the 1.5% ofthe gross income declared. Companies are exempted from the applicationof this minimum tax during their first 2 years of establishment or pre-operational period.

MTS, JASA, OJA, PTCTSSI and YICT

25.0% Registered as a Sino-foreign joint venture in China, Berths 61 and 62 ofYICT are entitled to a full tax holiday in the first five years and 50 percentexemption in the subsequent five years starting 2008 and 2006,respectively. YICT’s tax exemption is until December 2015 and startingyear 2016, YICT is subjected to the 25 percent regular income tax rate.Tax losses can be carried forward for five years.

In January 2015, Berths 51 and 52 of YICT were granted a full tax holiday inthe first three years and 50 percent exemption in the subsequent threeyears.

— F-130 —

Name of Company Tax Rate Tax RulesMTS, JASA and OJA are subject to corporate income tax rate in Indonesia of

25%.CGSA 22.0% CGSA’s corporate income tax rate applicable starting 2013 was 22 percent.

This tax is calculated after deducting 15 percent of social contribution onprofits for workers.

In 2016, the government of Ecuador passed a law with the purpose of raisingfunds in order to recover from the effects of the earthquake that occurred inApril 2016. The law introduced the collection of solidarity contributionsfrom various sources, increase in value-added tax rate by 2%, among others.In 2016, CGSA paid solidarity contributions from profits amounting toUS$1.0 million while ICTSI, through CGSA, paid solidarity contributionsfrom equity amounting to US$1.5 million (see Note 21.3).

MICTSL 20.0% MICTSL is subject to statutory corporate income tax rate of 20 percent. Aminimum tax of MGA0.3 million plus 0.5 percent of the annual turnover islevied if the company incurs a loss or if the corporate tax rate calculatedusing the 20 percent rate is less than the minimum tax.

BCT 19.0% BCT is subject to statutory corporate income tax rate of 19 percent.NMCTS 18.5% The first B$100,000 of chargeable income of NMCTS is taxed at a reduced

rate of one quarter of the full rate, while the next B$150,000 is taxed athalf the full rate. The balance of chargeable income is taxed at the full rate.Income tax rate in 2014 and 2015 was 20% and was reduced to 18.5% in2016.

TSSA 15.25% TSSA’s nominal tax rate is 25.0 percent and was granted a tax rate reductionresulting to a tax rate of 15.25 percent. The tax incentive is applicable forthe years 2005 to 2022 on profits from port operating services in Suape,Pernambuco.

BICTL, SPIA, AGCTand ICTSI Iraq

15.0% BICTL is subject to statutory corporate income tax rate of 15 percent.SPIA is incorporated in Colombia. However, on June 26, 2012, the

Colombian Government issued the formal resolution granting SPIA a FreeTrade Zone status. Effective 2012, the income tax applicable to SPIA is15 percent instead of 33 percent general corporate income tax rate in forcein 2012. Subsequently, a structural tax reform passed in December 2016increased the income tax rate for Free Trade Zone users by 5 percent, from15% to 20% effective starting 2017.

The statutory corporate income tax rate in Croatia for entities which operatein the free-trade zone is 10 percent until 2013, 15 percent from 2014 up to2016 and 18 percent from 2017 onwards.

ICTSI Iraq is subject to statutory corporate income tax rate of 15 percent.Tax losses can be carried forward up to five years provided that losses maynot offset more than half of the taxable income of each of the five yearsand the loss may offset only income from the same source from which theloss arose.

SBITC, ICTSI Subic,Inc. and APBS

5.0% SBITC and ICTSI Subic are registered with the Subic Bay MetropolitanAuthority as Subic Bay Free Port Zone Enterprises that are entitled tocertain tax incentives including a preferential income tax rate of5.0% percent based on gross revenues less allowable deductions.

APBS is registered with the Philippine Economic Zone Authority as anEcozone IT Enterprise that is entitled to certain tax incentives including apreferential income tax rate of 5.0% on gross income from PhilippineEconomic Zone Authority (PEZA)-registered activities, in lieu of allnational and local taxes. APBS is also entitled to an income tax holiday offour years from start date of commercial operations.

LICTSLE 0.0% LICTSLE is located in a free trade zone governed by the Nigeria ExportProcessing Zones Authority. LICTSLE is exempt from all taxes, includingcorporate income tax.

— F-131 —

23. Related Party Transactions

23.1 Transactions with the Shareholders and Affiliates

2014 2015 2016

Related Party Relationship Nature of Transaction Amount






(Payable)Balance

(In Millions)ICBVSPIA Joint venture Interest-bearing loans and

interests US$64.73 US$115.12 US$94.77 US$209.90 US$66.58 US$276.48Parent CompanyYRDICTL/YICTYPH Non-controlling

shareholderPort fees (i)

1.46 – 1.10 – 1.77 –Trade transactions (ii) 0.37 (0.01) 0.09 (0.01) – –Management fees (iii) – – 0.23 – 0.22 –Interest-bearing loans (iv) – – – – 21.60 (21.60)Interests on loans (iv) – – – – 0.07 (0.03)

YPG Commonshareholder

Port fees (i)

3.02 (0.77) 3.72 (0.29) 2.36 (0.14)Trade transactions (ii) 1.80 (0.13) 2.09 (0.32) 1.87 (0.02)Purchase of equipment – – 2.58 – – –


Management fees (iii)

– – 0.19 – 0.17 –

TecplataNPSA Purchase of additional

shares 6.00 – – – – –SCIPSIAsian Terminals,

Inc.Non-controlling

shareholderManagement fees

0.17 (0.01) 0.16 (0.02) 0.20 (0.03)AGCTLuka Rijeka D.D.

(Luka Rijeka)Non-controlling

shareholderProvision of services (v)

0.27 – 0.29 (0.03) 0.37 (0.02)PICTPremier Mercantile

Services (Private)Limited

CommonShareholder

Stevedoring and storagecharges (vi) 3.62 (0.68) 4.47 (0.52) 5.17 (0.03)

Premier Software(Private) Limited

Commonshareholder

Software maintenancecharges 0.01 – 0.01 – 0.01 –

Marine Services(Private) Limited,PortlinkInternational(Private) Limited,and AMI Pakistan(Private) Limited

Commonshareholder

Container handlingrevenue (vii) 0.81 0.08 0.57 0.04 0.52 0.03

LGICTNCT Transnational

Corp.Non-controlling

shareholder Management fees – – 0.16 (0.16) 0.41 (0.04)Maintenance and repairs – – 0.04 (0.04) 0.09 (0.02)

BIPIAtlantic Gulf and

Pacific Co. ofManila, Inc.(AG&P)

Commonshareholder Rent expense 0.06 – 0.07 (0.01) 0.05 (0.02)

Revenues 2.09 0.03 0.42 0.25 – –Utilities – – – – 0.03 –

(i) YICT is authorized under the Joint Venture Agreement to collect port charges levied on cargoes; port construction fees and facility security fee in accordance withgovernment regulations. Port fees remitted by YICT for YPH /YPG are presented as part of “Port authorities’ share in gross revenues” in the consolidated statements ofincome. Outstanding payable to YPH/YPG related to these port charges are presented under “Accounts payable and other current liabilities” account in the consolidatedbalance sheets.

(ii) Trade transactions include utilities, rental and other transactions paid by YICT to YPH and YPG.

(iii) The Board of YICT approved a management fee of RMB6.1 million and RMB5.7 million in 2015 and 2016, respectively, allocated among the shareholders namely: ICTSI,DP World and YPH.

(iv) On December 5, 2016, YICT obtained a US$21.6 million (RMB150.0 million) short-term loan from YPH at an interest rate of 4.35 percent per annum and maturity date ofJanuary 25, 2017. The loan was used to refinance YICT’s maturing loan with ABC (see Notes 16.2.4 and 18).

(v) AGCT has entered into agreements with Luka Rijeka, a non-controlling shareholder, for the latter’s provision of services such as equipment maintenance, power and fueland supply of manpower, among others. Total expenses incurred by AGCT in relation to these agreements were recognized and presented in the consolidated statements ofincome as part of Manpower costs, Equipment and facilities-related expenses and Administrative and other operating expenses.

(vi) PICT has entered into an agreement with Premier Mercantile Services (Private) Limited for the latter to render stevedoring and other services, which are settled on amonthly basis.

(vii) Marine Services (Private) Limited, Portlink International (Private) Limited, and AMI Pakistan (Private) Limited are customers of PICT.

— F-132 —

The outstanding balances arising from these related party transactions are current and payablewithout the need for demand.

Outstanding balances at year-end are unsecured and interest-free and settlement occurs in cash.There have been no guarantees provided or received for any related party receivables or payables.For the years ended December 31, 2014, 2015 and 2016, the Group has not recorded anyimpairment of receivables relating to amounts owed by related parties. This assessment isundertaken each financial year through examining the financial position of the related party andthe market in which the related party operates.

23.2 Compensation of Key Management Personnel

Compensation of key management personnel consists of:

2014 2015 2016Short-term employee benefits US$1,308,292 US$1,247,348 US$1,193,221Post-employment pension 36,657 207,407 29,659Share-based payments 2,210,114 2,866,424 1,052,078Total compensation to key management personnel US$3,555,063 US$4,321,179 US$2,274,958

24. Pension Plans

Defined Benefit Pension PlansThe Parent Company, BCT, BIPI, DIPSSCOR, SBITC, ROHQ, MTS, JASA, OJA, SCIPSI,MICTSL, MICTSI, AGCT, CGSA, CMSA and APBS have separate, noncontributory, definedbenefit retirement plans covering substantially all of its regular employees. The benefits are basedon employees’ salaries and length of service. Net pension expense charged to operations includedas manpower costs amounted to US$1.8 million in 2014, US$2.4 million in 2015 and US$1.9million in 2016.

Pension plans consist of:

2014 2015 2016Pension Assets (presented as “Other noncurrent assets”)

Asia US$4,980 US$125,948 US$981

Pension liabilities (presented as“Other noncurrent liabilities”)

Asia US$2,779,733 US$2,328,102 US$3,407,307EMEA 1,458,896 1,481,287 1,284,721Americas 2,149,384 2,700,070 2,795,579

US$6,388,013 US$6,509,459 US$7,487,607

Pension Liabilities. The following tables summarize the components of the Group’s net pensionexpense recognized in the consolidated statements of income and the funded status and amountsrecognized in the consolidated balance sheets.

2014 2015 2016

Net pension expense: Current service cost US$1,841,442 US$1,091,454 US$1,546,120 Net interest cost 79,092 299,036 274,747 Effect of curtailment (163,571) (72,941) –

US$1,756,963 US$1,317,549 US$1,820,867

— F-133 —

2014 2015 2016Pension liabilities: Present value of defined benefit obligation US$18,225,723 US$6,780,186 US$16,197,260 Fair value of plan assets (11,837,710) (270,727) (8,709,653)

US$6,388,013 US$6,509,459 US$7,487,607

Changes in the present value of the defined benefitobligation:

Balance at beginning of year US$3,869,264 US$18,225,723 US$6,780,186 Current service cost 1,841,442 1,091,454 1,546,120 Interest cost 665,491 308,967 763,864 Actuarial loss (gain) on obligations - net 2,116,986 (549,299) 350,441 Past service cost – – 2,201 Effect of curtailments (163,571) (72,941) – Benefits paid (1,551,089) (277,143) (2,662,704) Translation adjustment 118,029 (201,495) (672,113) Change in plan position 11,329,171 (11,745,080) 10,089,265 Balance at end of year US$18,225,723 US$6,780,186 US$16,197,260

Changes in fair value of plan assets: Balance at beginning of year US$145,601 US$11,837,710 US$270,727 Interest income 586,399 9,931 489,117 Actuarial loss on plan assets (246,703) (5,761) (190,175) Benefits paid (882,159) (4,177) (2,312,809) Actual contributions 135,873 – 657,527 Translation adjustment (86,660) (14,166) (508,326) Change in plan position 12,185,359 (11,552,810) 10,303,592 Balance at end of year US$11,837,710 US$270,727 US$8,709,653

Actual return on plan assets US$339,696 US$4,170 US$298,942

Pension Assets. The following tables summarize the components of the Group’s net pensionexpense recognized in the consolidated statements of income and the funded status and amountsrecognized in the consolidated balance sheets.

2014 2015 2016

Net pension expense: Current service cost US$51,559 US$1,055,196 US$45,172 Net interest cost (income) (6,237) 41,231 (2,034)

US$45,322 US$1,096,427 US$43,138

Pension assets: Fair value of plan assets US$699,013 US$10,946,740 US$576,359 Present value of defined benefit obligation (694,033) (10,820,792) (575,378)

US$4,980 US$125,948 US$981

Changes in the present value of the defined benefitobligation:

Balance at beginning of year US$11,918,500 US$694,033 US$10,820,792 Current service cost 51,559 1,055,196 45,172 Interest cost 28,527 592,983 28,795 Actuarial loss (gain) on obligations - net 58,300 (2,230,239) (44,295) Benefits paid (28,601) (451,434) (23,348) Translation adjustment (5,081) (584,827) (162,473) Change in plan position (11,329,171) 11,745,080 (10,089,265) Balance at end of year US$694,033 US$10,820,792 US$575,378

— F-134 —

2014 2015 2016

Changes in fair value of plan assets:Balance at beginning of year US$12,902,148 US$699,013 US$10,946,740Interest income 34,764 551,752 30,829Actuarial loss on plan assets (18,822) (819,692) (41,391)Benefits paid (28,601) (451,434) (23,348)Translation adjustment (5,117) (585,709) (32,879)Change in plan position (12,185,359) 11,552,810 (10,303,592)Balance at end of year US$699,013 US$10,946,740 US$576,359

Actual return (loss) on plan assets US$15,942 (US$267,940) (US$10,562)

The Group does not expect significant contributions to the retirement plans of the Parent Companyand its subsidiaries in 2017.

The principal assumptions used in determining pension benefits obligation of the Parent Company,BIPI, SBITC, ROHQ, DIPSSCOR, MTS, OJA, JASA, SCIPSI, MICTSI, AGCT, BCT, MICTSL,CMSA and CGSA are shown below (in percentage):

2014 2015 2016Discount rate

Asia 4.20% - 8.50% 4.54% - 8.50% 4.54% - 8.65%EMEA 2.75% - 8.98% 2.50% - 10.42% 3.50% - 10.46%Americas 6.54% - 7.30% 6.31% - 7.26% 7.46% - 8.13%

Future salary increasesAsia 3.00% - 10.00% 4.00% - 10.00% 4.00% - 10.00%EMEA 2.50% - 5.00% 3.00% - 5.00% 2.50% - 5,00%Americas 2.37% - 3.00% 3.00% - 6.00% 3.00% - 6.00%

A quantitative sensitivity analysis for significant assumption as at December 31, 2016 is shownbelow (amounts in millions):

Discount rate Future salary increases

Sensitivity level0.5%increase

0.5%decrease

0.5%increase

0.5%decrease

Impact on the net definedbenefit obligation (US$0.9) US$1.0 US$1.3 (US$0.9)

The sensitivity analyses above have been determined based on a method that extrapolates theimpact on net defined benefit obligation as a result of reasonable changes in key assumptionsoccurring at the end of the reporting period.

The following payments are expected to be made in the future years out of the defined benefit planobligation:

2014 2015 2016Within the next 12 months US$1,796,785 US$1,790,512 US$1,393,826Between 2 and 5 years 5,703,310 4,041,206 4,689,252Between 5 and 10 years 7,478,648 6,569,806 7,306,481Beyond 10 years 47,715,985 38,405,548 26,792,519Total expected payments US$62,694,728 US$50,807,072 US$40,182,078

The average duration of the defined benefit plan obligation as at December 31, 2016 is 16 years.

— F-135 —

The amount of experience adjustments on pension obligations amounted to US$0.9 million in2014, US$0.5 million in 2015 and US$0.7 million in 2016. The amount of experience adjustmentson plan assets amounted to nil in 2014, US$0.1 thousand in 2015 and nil in 2016.

The plan assets of Group are being held by various trustee banks. The investing decisions of theseplans are made by the respective trustees.

The following table presents the carrying amounts and fair values of the combined assets of theplans less liabilities:

2014 2015 2016Cash and cash equivalents US$3,880,455 US$3,752,941 US$3,794,515Investments in debt securities 2,026,955 969,928 1,074,112Investments in government securities 5,441,558 4,843,259 3,665,428Investments in equity securities 1,456,117 1,584,013 688,606Others 115,568 280,473 86,445

12,920,653 11,430,614 9,309,106Liabilities (383,930) (213,147) (23,094)

US$12,536,723 US$11,217,467 US$9,286,012

The plan assets’ carrying amount approximates its fair value since these are either short-term innature or stated at fair market values.

The plans’ assets and investments consist of the following:

Cash and cash equivalents, which includes regular savings and time deposits;

Investments in corporate debt instruments, consisting of both short-term and long-termcorporate loans, notes and bonds, which bear interest ranging from 3.92 percent to7.20 percent and have maturities from 2017 to 2027;

Investments in government securities, consisting of retail treasury bonds that bear interestranging from 2.125 percent to 11.375 percent and have maturities from 2017 to 2035; and

Investments in equity securities include investment in shares of stock of ICTSI amounting toUS$1.1 million, US$0.6 million and US$0.6 million as at December 31, 2014, 2015 and 2016,respectively. For each of the years ended December 31, 2014, 2015 and 2016, gain arisingfrom investment in ICTSI shares amounted to US$0.1 million.

The carrying amounts of investments in equity securities also approximate their fair valuesgiven that they are stated at fair market values. The voting rights over these equity securitiesare exercised by the authorized officers of the respective subsidiary.

Other financial assets held by these plans are primarily accrued interest income on cashdeposits and debt securities held by the plan.

Liabilities of the plan pertain to trust fee payable and retirement benefits payable.

Defined Contribution Pension PlanThe employees of YRDICTL/YICT are members of a state-managed retirement benefit schemeoperated by the local government. YRDICTL/YICT is required to contribute a specifiedpercentage of its payroll costs to the retirement benefit scheme to fund the benefits. The onlyobligation of YRDICTL/YICT with respect to the retirement benefit scheme is to make thespecified contributions.

— F-136 —

PICT operates a recognized provident fund scheme for all its eligible employees. Equal monthlycontributions are made by PICT and the employees to the fund at a rate of 8.33 percent of thebasic salary.

In addition, ICTSI Oregon maintains a Safe Harbor 401k plan (401k plan), covering all of itsemployees, which became effective January 1, 2011. Participants who are eligible can contributeup to 84 percent of their eligible compensation and those who have reached the age of 21 years oldare eligible to make contributions on their first day of service. All participants in the 401k planare eligible for matching contributions of 100 percent of each dollar contributed up to 6 percent ofa participant’s earnings. Participant’s voluntary contributions and actual earnings thereon areimmediately vested. ICTSI Oregon’s matching contributions to the 401k plan are immediatelyvested and cannot be forfeited.

Contributions made by YRDICTL/YICT, ICTSI Oregon and PICT to the plans and recognized asexpense under manpower costs totaled US$0.7 million in 2014, US$0.8 million in 2015 andUS$0.9 million in 2016.

25. Significant Contracts and Agreements

The Group has entered into a number of contracts and agreements mainly related to the operation,development and management of ports and container terminals. As at December 31, 2016, ICTSIand its subsidiaries and joint venture are in compliance with their concession agreements.

Agreements within the Scope of IFRIC 12

A service concession agreement is within the scope of IFRIC 12 if: (a) the grantor regulates theservices, customers and the pricing of the services to be provided; and (b) the grantor controls anysignificant residual interest in the infrastructure at the end of the term of the arrangement.

25.1 Contract for the Management, Operation and Development of the MICT

The Parent Company has a contract with the PPA for the exclusive management, operation, anddevelopment of the MICT for a period of 25 years starting May 18, 1988, which was extended foranother 25 years until May 18, 2038.

Under the provisions of the contract, “Gross Revenues” shall include all income generated by theParent Company from the MICT from every source and on every account except interest income,whether collected or not, to include but not limited to harbor dues, berthing fees, wharfage, cargohandling revenues, cranage fees, stripping/stuffing charges, and all other revenues from ancillaryservices. Harbor dues, berthing fees, and wharfage included in gross revenues defined in theMICT contract amounted to US$14.9 million in 2014, US$15.6 million in 2015 andUS$17.1 million in 2016.

In addition, under the original contract, the Parent Company agreed to pay the PPA a fixed fee ofUS$313.8 million payable in advance in quarterly installments converted to Philippine peso usingthe closing Philippine Dealing System (PDS) rate of the day before payment is made (net ofharbor dues, berthing fees and wharfage allowed by PPA as deduction) and a variable fee based onpercentages of the Parent Company’s gross revenues ranging from 12 percent to 20 percent duringthe term of the contract. Under the renewal contract effective May 19, 2013, the Parent Companyagreed to pay the PPA a fixed fee of US$600.0 million payable in 100 advanced quarterlyinstallments and pay a variable fee of 20 percent of the gross revenues.

— F-137 —

The total variable fees paid to the PPA shown as part of “Port authorities’ share in gross revenues”account in the consolidated statements of income amounted to US$81.5 million in 2014,US$84.4 million in 2015 and US$82.5 million in 2016. Fixed fees formed part of the capitalizedconcession rights which are being amortized over the period of the concession. Relatedconcession rights payable amounted to US$332.2 million, US$323.8 million andUS$314.4 million, as at December 31, 2014, 2015 and 2016, respectively. The current portionamounting to US$3.3 million, US$3.4 million and US$2.9 million is presented as “Current portionof concession rights payable” and the noncurrent portion amounting to US$329.0 million,US$320.4 million and US$311.5 million is presented as “Concession rights payable - net ofcurrent portion” in the consolidated balance sheets as at December 31, 2014, 2015 and 2016,respectively.

Both the original and renewal contracts contain commitments and restrictions which include,among others, prohibition on the change of Parent Company’s controlling ownership without priorconsent of the PPA and adherence to a container terminal equipment acquisition program anddeployment schedule. Moreover, upon expiration of the term of the contract or in the event of pre-termination, all the structures, buildings, facilities and equipment of the Parent Company beingused at the MICT shall automatically become the property of the PPA. The PPA has no obligationto reimburse the Parent Company for the equipment, except for those acquired during the last fiveyears prior to the termination of the contract for which the PPA shall have the option to purchaseat book value or to pay rentals. Upon expiration of the original contract of MICT in May 2013,the Parent Company executed a deed of absolute transfer to effect the transfer of ownership of thesaid structures, improvements, buildings, facilities and equipment, except equipment purchasedduring the last five years of the original contract. Berth 6 was included in the said transfer.However, ICTSI shall continue to have possession, control and use of the transferred assets foranother 25 years in accordance with the terms of the renewal contract in consideration for theupfront fee payment made by the Parent Company.

In 1997, the Parent Company signed a contract for leasehold rights over the storage facilities at theMICT. Under the contract, the Parent Company is committed to pay the PPA P=55.0 million(equivalent to US$1.1 million as at December 31, 2016) a year from January 16, 1997 up toJanuary 15, 2007 and a variable fee of 30 percent of revenues in excess of P=273.0 million(equivalent to US$5.5 million as at December 31, 2016) generated from the operation of thestorage facilities. This contract was renewed on June 11, 2008 and has been made co-terminuswith the MICT Management Contract, or up to May 18, 2038.

In 1998, the Parent Company also acquired a contract to handle non-containerized cargoes and theanchorage operations for a period of ten years starting January 1998. Such contract was renewedon June 11, 2008 and has been made co-terminus with the 1988 MICT Management Contract, orup to May 18, 2038. Under this contract, the Parent Company is required to pay a variable fee of14 percent of its gross revenues from anchorage operations and 20 percent of its gross revenuesfrom berthside operations for the first three years of the contract. Thereafter, the consideration tobe paid by the Parent Company shall be a fixed fee plus a variable fee of 7.5 percent of its grossrevenues from berthside operations or 20 percent of its gross revenues, whichever is higher. Thefixed fee shall be determined based on the highest annual government share by the ParentCompany for the handling of non-containerized cargoes at berthside for the first three years, plus10 percent thereof.

— F-138 —

25.2 Contract with Subic Bay Metropolitan Authority (SBMA) andRoyal Port Services, Inc. (RPSI)

On February 20, 2007, SBITC was awarded by the SBMA the contract to operate the NewContainer Terminal 1 (NCT-1) at Cubi Point in Subic for a period of 25 years. The NCT-1 wasconstructed by SBMA in accordance with the SBMA Port Master Plan and the Subic Bay PortDevelopment Project. In consideration for the concession, SBITC shall pay: (i) base rent ofUS$0.70 per square meter per month with 6 percent escalation on the 5th year and every threeyears thereafter; (ii) fixed fee of US$500,000 every year except for the first two years of thecontract; and, (iii) variable fee of 12 percent to 16 percent of SBITC’s gross revenue based on thevolume of containers handled at the terminal.

Total variable fees paid to SBMA, shown as part of “Port authorities’ share in gross revenues”account in the consolidated statements of income, amounted to US$0.8 million in 2014 andUS$1.4 million both in 2015 and 2016. Fixed fees pertaining to the contract to operate NCT-1formed part of the capitalized concession rights which are being amortized over the concessionperiod. Related concession rights payable amounted to US$19.4 million, US$19.1 million andUS$18.7 million as at December 31, 2014, 2015 and 2016, respectively. The current portionamounting to US$382.8 thousand, US$653.0 thousand and US$459.5 thousand is presented as“Current portion of concession rights payable” and the noncurrent portion amounting toUS$19.4 million, US$19.0 million and US$18.2 million is presented as “Concession rightspayable - net of current portion” in the consolidated balance sheets as at December 31, 2014, 2015and 2016, respectively.

25.3 Agreement for Public Concession with Societe de Gestiondu Port Autonome de Toamasina (SPAT)

On June 16, 2005, the Parent Company and SPAT signed a 20-year concession agreement for aPublic Service Concession for the operation of a container terminal in the Port of Toamasina.Under the agreement, the Parent Company, through MICTSL (a wholly owned subsidiary), willundertake container handling and related services in the Port of Toamasina. The Parent Companyagreed to pay SPAT an entry fee of €5.0 million (US$6.5 million) and fixed and variable feesconverted to MGA using the Euro/MGA weighted exchange rate published by the Central Bank ofMadagascar on the day payment is made. Fixed fees paid in 2005 to 2007 amounted to€1.0 million (US$1.3 million) per year; for the years 2008 to 2010, the fixed fees paid amountedto €1.5 million (US$1.9 million) per year; for 2011 to 2015, the fixed fees paid amounted to€2.0 million (US$2.6 million) per year; and for 2016 to 2025, fixed fees will be €2.5 million(US$3.2 million) per year. The part of fixed fees attributable to year 2025 will be prorated up tothe anniversary date of the concession handover. In addition, the Parent Company agreed to paySPAT €5.0 million (US$6.5 million) for two quay cranes payable in three annual installmentsfrom the date of the agreement. Fixed and variable fees will be updated annually based oninflation rate of the Euro zone of the previous year. Annual fixed fee is payable in advance insemi-annual installments. The variable fee of €36.8 (US$47.7) per twenty-foot equivalents (TFE)is payable every 15th day of the following month. However, variable fee will be reduced by20 percent after 12 consecutive months of operations with container traffic of more than200,000 TFEs.

The total variable fees paid to SPAT shown as part of “Port authorities’ share in gross revenues”account in the consolidated statements of income, amounted to US$8.1 million (€6.1 million) in2014, US$6.4 million (€5.8 million) in 2015 and US$7.4 million (€6.7 million) in 2016. Fixedfees formed part of the capitalized concession rights which are being amortized over the period ofthe concession. Related concession rights payable amounted to US$18.6 million (€15.4 million),

— F-139 —

US$16.3 million (€15.0 million) and US$14.8 million (€14.1 million) as at December 31, 2014,2015 and 2016, respectively. The current portion amounting to US$0.5 million (€0.4 million),US$1.0 million (€0.9 million) and US$1.1 million (€1.0 million) is presented as “Current portionof concession rights payable” and the noncurrent portion amounting to US$18.2 million(€15.0 million), US$15.3 million (€14.1 million) and US$13.7 million (€13.0 million) is presentedas “Concession rights payable - net of current portion” in the consolidated balance sheets as atDecember 31, 2014, 2015 and 2016, respectively.

25.4 Investment Agreement with Tartous Port General Co. (TPGC)

On March 24, 2007, ICTSI, through TICT entered into a ten-year Investment Agreement with theTPGC to manage, operate, maintain, finance, rehabilitate, develop and optimize the Tartouscontainer terminal in Syria with an option to extend it for five additional years. An entry fee ofUS$5.0 million was made upon the approval of the Investment Agreement which was amortizedover the period of the concession. Under the Investment Agreement, ICTSI is committed to makeall necessary investment under a development plan to be approved by the port authority. Underthe plan, ICTSI is expected to invest approximately US$39.5 million for facilities improvementand equipment acquisition over the concession period, including the rehabilitation anddevelopment of existing facilities and the construction of an administration building, workshop,reefer racks and terminal gates.

Pursuant to the Investment Agreement, TICT was granted the right to operate Tartous containerterminal. As a consideration for the right to operate Tartous container terminal, TICT should payannual fees of US$3,008,000 payable on a quarterly basis at the end of each quarter and variablefees of US$11.48 per full TEU and US$5.74 per empty TEU, which were re-evaluated each yearon the basis of the official European Union inflation rate.

TICT filed a Notice of Termination of the above-mentioned Investment Agreement onDecember 28, 2012. As a result of the termination of the Investment Agreement, ICTSI wrote-offits investment in TICT equivalent to the net assets of TICT as at December 28, 2012, amounting toUS$0.8 million. Management believes that TICT has no obligation to settle the concession rightspayable corresponding to the present value of fixed fees, which was recognized at inception of theInvestment Agreement upon filing the Notice of Termination on the basis discussed in Note 26.TICT formally ceased operating the Tartous container terminal on January 27, 2013.

25.5 Concession Agreement with Autoridad Portuaria de Guayaquil (APG)

In May 2007, ICTSI, through CGSA, entered into a concession agreement with the Port Authorityof Guayaquil for the exclusive operation and development of a container terminal in the Port ofGuayaquil, Ecuador for a period of 20 years ending in 2027.

CGSA took over the terminal operations on August 1, 2007. The terminal handles containerizedand bulk cargo. ICTSI’s technical plan is to convert the port into a modern multipurpose terminal,comprehensive of two main facilities: a dedicated container terminal of about one millionTEUs capacity; and a break bulk terminal of about three million tons (banana and other fruits arethe main cargo component in this field). ICTSI’s development plan covers a period of five toseven years for the terminal to reach the said capacities.

Under the concession agreement, CGSA shall pay APG the following: (i) upfront fee totalingUS$30.0 million payable over five years; (ii) fixed fees of US$2.1 million payable quarterly; and(iii) variable fees of US$10.4 per TEU for containers handled and US$0.50 per ton fornoncontainerized general cargo handled payable monthly. The upfront fee, recorded as concessionrights and concession rights payable at inception, is subject to interest based on three-monthLIBOR rate.

— F-140 —

The total variable port fees paid by CGSA to APG shown as part of “Port authorities’ share ingross revenues” account in the consolidated statements of income, amounted to US$16.3 millionin 2014, US$16.5 million in 2015 and US$14.4 million in 2016. Fixed fees formed part of thecapitalized concession rights which are being amortized over the period of the concession.Related concession rights payable amounted to US$59.8 million, US$57.2 million andUS$54.5 million as at December 31, 2014, 2015 and 2016, respectively. The current portionamounting to US$2.5 million, US$2.8 million and US$3.1 million is presented as “Current portionof concession rights payable” and the noncurrent portion amounting to US$57.2 million,US$54.5 million and US$51.4 million is presented as “Concession rights payable - net of currentportion” in the consolidated balance sheets as at December 31, 2014, 2015 and 2016, respectively.

25.6 Concession Agreement with La Plata

ICTSI, through Tecplata, entered into a concession agreement with La Plata on October 16, 2008.The concession is for 30 years starting from taking bare possession of the terminal or until 2038and renewable for another 30 years with the following considerations: (i) fixed rent fee - payableon a monthly basis and in advance for AR$4.77 (equivalent to US$0.30) per square meter (sqm)per month (ii) variable royalty - payable monthly and based on annual traffic volume at the start ofcommercial operations; and (iii) assured royalty - payable annually once the terminal becomesoperative to cover fixed rent fee, variable royalty, tariff for the use of waterways and port andservice of containerized cargoes for the amount of US$4.0 million. The port of La Plata shall beoperated by ICTSI through Tecplata. Tecplata took over bare possession of the terminal onNovember 10, 2008. On July 17, 2014, an addendum to the concession agreement was signedwhich indicated that the terminal is considered in commercial operations for purposes of paymentof US$4.0 million assured royalty once the terminal accepts calls from post panamax vessels. Asat March 9, 2017, the construction of the terminal is completed and Tecplata has obtained all therequired permits and is ready to operate but still not considered in commercial operations.

For the years ended December 31, 2014, 2015 and 2016, Tecplata has paid La Plata fixed rent feeamounting to US$1.7 million, US$1.6 million and US$1.0 million, respectively.

The contract contains commitments and restrictions which include works and investments to becompleted at different stages of the concession, to wit:, among others: (i) First Stage - constructionof a dock with a length of 500 meters, a yard for handling and storage with an area of227,600 square meters, access pavements and parking lots for trucks, service facilities and internalparking lots, margins protection to avoid erosion, and a 600-meter secondary road for access to theterminal; (ii) Second stage - extension of the main dock by 300 meters and expansion of the yardby 31,000 square meters; (iii) Third stage - expansion of the yard for handling and storage by44,000 square meters and construction of CFS facilities with an area of 10,000 square meters; and(iv) work completion and performance bonds amounting to US$1.0 million and US$2.5 million,respectively.

25.7 Agreement on Concession of Container and Ro-Ro Terminal Brajdica

In March 2011, ICTSI, through its wholly-owned subsidiary, ICBV, entered into a Share PurchaseAgreement (SPA) with Luka Rijeka, a Croatian company, to purchase a 51.0 percent interest inthe AGCT. AGCT operates the Brajdica Container Terminal in Rijeka, Croatia with a concessionperiod of 30 years until 2041. The concession agreement calls for a payment of fixed port fees inthe amount of US$0.60 per square meter of the occupied concession area until second quarter of2013 and variable port fees equivalent to 1.0 percent of annual gross revenues. After the deliveryor handover of the new area, port fees shall be as follows: fixed port fees of €4.0 (US$5.2) persquare meter; and variable fees based on annual volume handled. Variable fees shall be calculated

— F-141 —

in the following manner based on annual throughput: €6.4 (US$8.3) per TEU until 350,000TEU-volume has been handled; €4.8 (US$6.2) per TEU for annual throughput of 350,001 to400,000 TEUs; and €3.2 (US$4.1) per TEU for volume handled above 400,000 TEUs.

Total variable fees paid by AGCT to the port authority shown as part of “Port authorities’ share ingross revenues” account in consolidated statements of income amounted to US$1.2 million(HRK7.2 million) in 2014, US$1.2 million (HRK8.0 million) in 2015 and US$1.2 million(HRK8.4 million) in 2016. Fixed fees formed part of the capitalized concession rights which arebeing amortized over the period of the concession. Related concession rights payable amounted toUS$14.3 million (HRK90.7 million), US$12.7 million (HRK89.2 million) and US$12.1 million(HRK86.9 million) as at December 31, 2014, 2015 and 2016, respectively. The current portionamounting to US$0.2 million (HRK1.2 million), US$0.2 million (HRK1.3 million) andUS$0.2 million (HRK1.3 million) is presented as “Current portion of concession rights payable”and the noncurrent portion amounting to US$14.1 million (HRK89.5 million), US$12.5 million(HRK88.0 million) and US$11.9 million (HRK85.6 million) is presented as “Concession rightspayable - net of current portion” in the consolidated balance sheets as at December 31, 2014, 2015and 2016, respectively.

25.8 Contract for the Operation and Managementon the New Container Terminal 2 (NCT-2 Contract)

On July 27, 2011, SBMA and ICTSI signed the concession agreement for the operation andmanagement of NCT-2 at Cubi Point in Subic, Philippines for 25 years. On August 19, 2011,SBMA approved the assignment of ICTSI’s rights, interests and obligations in the NCT-2 contractto ICTSI Subic, which was incorporated on May 31, 2011.

The NCT-2 was constructed by SBMA in accordance with the SBMA Port Master Plan and theSubic Bay Port Development Project. In consideration for the concession, ICTSI Subic shall pay:(i) base rent of US$1.005 per square meter per month with 6.0 percent escalation on the fifth yearand every three years thereafter; (ii) fixed fee of US$502,500 every year; and (iii) variable fee of12.0 percent to 17.0 percent of ICTSI Subic’s gross revenue depending on the volume ofcontainers handled at the terminal. Under the NCT-2 Contract, ICTSI Subic shall manage andprovide container handling and ancillary services to shipping lines and cargo owners at NCT-2.While SBMA shall provide the equipment at NCT-2, ICTSI Subic shall also provide additionalequipment and facilities it may deem necessary to efficiently manage NCT-2 and pay certain feesto SBMA in consideration for the NCT-2 Contract. Furthermore, ICTSI Subic is committed toinvest a total of P=658.0 million (approximately US$16.0 million) for the entire duration of theconcession agreement.

On August 2, 2012, SBMA issued the Notice to Proceed with the operation and management ofthe NCT-2 to ICTSI Subic. Consequently, ICTSI Subic recognized the present value of fixed portfees as concession rights and concession rights payable both amounting to US$28.7 million(see Note 6).

Total variable fees paid by ICTSI Subic to SMBA shown as part of “Port authorities’ share ingross revenues” account in consolidated statements of income amounted to US$0.1 million both in2014 and 2015 and US$0.2 million in 2016. Fixed fees formed part of the capitalized concessionrights which are being amortized over the period of the concession. Related concession rightspayable amounted to US$28.6 million, US$28.4 million and US$28.1 million as atDecember 31, 2014, 2015 and 2016, respectively. The current portion amounting toUS$0.2 million, US$0.3 million and US$0.3 million is presented as “Current portion ofconcession rights payable” and the noncurrent portion amounting to US$28.0 million,

— F-142 —

US$27.5 million and US$27.8 million is presented as “Concession rights payable - net of currentportion” in the consolidated balance sheets as at December 31, 2014, 2015 and 2016, respectively.

25.9 Sub-Concession Agreement (SCA) betweenICTSI and Lekki Port LFTZ Enterprise (Lekki Port)

On August 10, 2012, ICTSI and Lekki Port signed the SCA, which grants ICTSI the exclusiveright to develop and operate the Deep Water Port in the LFTZ, and to provide certain handlingequipment and container terminal services for a period of 21 years from start of commercialoperation date. As considerations for the SCA, ICTSI shall: (i) pay royalties calculated as apercentage of Gross Revenue as defined in the SCA; (ii) pay sub-concession fee amounting toUS$25.0 million, payable in two equal tranches; (iii) pay infrastructure fee of aboutUS$37.2 million; and (iv) transfer certain equipment as specified in the SCA. The containerterminal will have a quay length of 1,200 meters, an initial draft of 14.5 meters with the potentialfor further dredging to 16 meters, and maximum handling capacity of 2.5 million TEUs. Withthese features, shipping lines will be able to call with the new regional standard large vessels,turning the port into a seminal destination for the West African region. On November 7, 2012,ICTSI through ICBV, established Lekki International Container Terminal Services LFTZEnterprise (LICTSLE) to operate the Deep Water Port in the LFTZ. In 2012, ICTSI paidUS$12.5 million sub-concession fee to Lekki Port, which is recognized as Concession Rights inthe consolidated balance sheets (see Note 6). On January 26, 2014, ICBV executed a SharePurchase Agreement with CMA Terminals (CMAT), a member of CMA-CGM Group. Under thesaid Agreement, ICBV agreed to sell its 25 percent shareholdings in LICTSLE to CMAT, subjectto certain conditions precedent to completion. As at March 9, 2017, the conditions precedent havenot been satisfied.

Construction of the terminal in accordance with the SCA is currently in the planning stage.

25.10 Implementation Agreement between Karachi Port Trust (KPT) andPremier Mercantile Services (PVT) Ltd. (PMS)

On June 18, 2002, KPT and PMS signed the Implementation Agreement for the exclusiveconstruction, development, operations and management of a common user container terminal atthe Karachi Port for a period of 21 years until 2023. PMS established PICT as the terminaloperating company to develop, operate and maintain the site and the terminal in accordance withthe Implementation Agreement. The Implementation Agreement sets forth the specific equipmentand construction works to be performed based on the terminal’s productivity level; calls for thepayment of fixed and variable fees; and requires the turnover of specific terminal assets at the endof the term of the Implementation Agreement. Fixed fees are in the form of Lease Payments orHandling, Marshalling and Storage charges (“HMS Charges”) at a unit rate of Rs.411 per squaremeter per annum in respect of the site occupied by PICT and subject to an escalation of 15 percentevery three years in accordance with the Lease Agreement between KPT and PICT, which is anintegral part of the of the Implementation Agreement. On the other hand, variable fees are in theform of Royalty payments at a rate of US$12.54 per Cross Berth revenue move, subject to anescalation of 5 percent every three years.

Total variable fees paid to KPT shown as part of “Port authorities’ share in gross revenues”account in the consolidated statements of income, amounted to US$6.9 million (Rs.700.5 million)in 2014, US$8.5 million (Rs.873.7 million) in 2015 and US$8.3 million (Rs.866.4 million) in2016. Fixed fees formed part of the capitalized concession rights which are being amortized overthe period of the concession. Related concession rights payable amounted to US$9.1 million(Rs.917.9 million), US$8.3 million (Rs.874.3 million) and US$7.8 million (Rs.816.9 million) as at

— F-143 —

December 31, 2014, 2015 and 2016, respectively. The current portion amounting toUS$0.4 million (Rs.43.6 million), US$0.5 million (Rs.57.4 million) and US$0.7 million(Rs.73.4 million) is presented as “Current portion of concession rights payable” and thenoncurrent portion amounting to US$8.7 million (Rs.874.3 million), US$7.8 million(Rs.816.9 million) and US$7.1 million (Rs.743.5 million) is presented as “Concession rightspayable - net of current portion” in the consolidated balance sheets as at December 31, 2014, 2015and 2016, respectively.

25.11 Agreement between OPC, the Republic of Honduras andBanco Financiera Commercial Hondurena, S.A

On February 1, 2013, ICTSI was awarded with a 29-year agreement by the Republic of Honduras,acting on behalf of the Commission for the Public-Private Alliance Promotion (COALIANZA),and Banco Financiera Comercial Hondurena, S.A. (FICOHSA Bank) for the design, financing,construction, maintenance, operation and development of the container terminal and general cargoof Puerto Cortés, Republic of Honduras (the “Agreement”). The Agreement was signed onMarch 21, 2013 and is valid until August 30, 2042. The Container and General Cargo Terminal ofPuerto Cortés (the “Terminal”) will have 1,100 meters of quay for containers and 400 meters ofquay for general cargo, 14 meters of draft, 62.2 hectares of total surface area, nine ship-to-shorecranes, and a volume capacity of approximately 1.8 million TEUs.

Pursuant to the Agreement, OPC is obliged to pay certain contributions to the following:(a) Municipality of Puerto Cortés - 4% of the gross income without considering the tax over sales,payable monthly; (b) National Port Company - US$100,000 for each hectare occupied of theexisting surfaces, from the beginning of the development of the occupied spaces and the new builtsurfaces referring to the Works of the National Port Company from the date of Occupation,payable annually; US$75,000 for each hectare of the new built and/or earned to the sea surfacesreferring to the mandatory works from the beginning of the operation exploration of the occupiedsurfaces, payable annually; a certain amount for each movement of the container ofimportation/exportation regardless if it is full or empty, with a right to reimbursement in anamount equivalent to 25% of the imposed amount; for the load not packed in containers -US$1 for each ton of fractioned load that is operated in the Terminal, US$5 for each unit of rollingload that is operated in the Terminal, US$1 for each passenger operated in the Terminal; Upfrontpayment of US$25.0 million; (c) COALIANZA - 2% of the total of the Reference Investment ofthe Project, paid on execution date of the Agreement; and (d) Trustee (FICOHSA Bank) - 0.37%of the annual gross income, payable monthly; and US$1,584,835 paid on execution date of theAgreement. Total payments in relation to this Agreement aggregated US$34.9 million, which arepresented as part of “Intangibles” account in the consolidated balance sheets (see Note 6).

On October 29, 2015, the Agreement was amended to incorporate the following, among others:(a) OPC shall carry out the Works of the National Port Company relating to the construction anddevelopment of Berth 6 with a length of 550 meters out of the 1,100 meters of quay for containersunder the Agreement. OPC shall complete the first phase of construction of Berth 6 by the secondquarter of 2018 while second phase shall be completed no later than the second quarter of 2023;(b) 10% reduction from the original variable and fixed rates related to the annual contribution paidto the National Port Company as well as contributions per movement of container ofimportation/exportation, ton of load not packed in containers, unit of rolling load and terminalpassenger. The reduction in variable and fixed rates shall be effective upon the commencement ofthe first phase of berth construction subject to annual escalation based on inflation calculated asprescribed in the amended agreement; (c) reduction in the number of port equipment investmentcommitment; and (d) modification in the timing of committed investment in infrastructure andequipment.

— F-144 —

The total variable port fees paid by OPC shown as part of “Port authorities’ share in grossrevenues” account in the consolidated statements of income amounted to US$9.4 million in 2014,US$10.7 million in 2015 and US$10.9 million in 2016. Fixed fees formed part of the capitalizedconcession rights which are being amortized over the period of the concession. Relatedconcession rights payable amounted to US$44.2 million, US$46.2 million and US$40.2 million asat December 31, 2014, 2015 and 2016, respectively, and is presented as “Concession rightspayable - net of current portion” in the consolidated balance sheets.

25.12 Contract for the Construction and Operation of Three New Quays andManagement and Operation of Quay No. 20 in the Port of Umm Qasr in Iraq

On April 8, 2014, ICTSI Dubai and GCPI signed a contract for the management and operation ofQuay No. 20 in the Port of Umm Qasr North and the construction and operation of three newquays. The contract grants ICTSI the rights to: (a) manage and operate the existing containerfacility at Berth 20 of the Port for a period of 10 years, (b) build, under a build-operate-transfer(BOT) scheme, a new container and general cargo terminal in the Port for a concession period of26 years, and (c) provide container and general cargo terminal services in both components. OnMarch 1, 2016, an addendum to the Contract (“Addendum”) was signed by the parties grantingICTSI, through ICTSI Dubai, the right to manage and operate an additional existing Quay No. 19for a total of 13 years, with the first three years for the completion of rehabilitation works. Also,the Addendum extended the original term for the management and operation of Quay No. 20 from10 to 13 years. The parties will share a fixed percentage of revenues.

ICTSI commenced trial operations at Berth 20 in September 2014 and full-fledged commercialoperations in November 2014. ICTSI commenced commercial operations of berth 19 inJune 2016.

Phase 1 of the expansion project under the BOT scheme will have 250 meters of berth with anestimated capacity of 300,000 TEUs. When fully developed, the facility will have 600 meters ofquay with an estimated capacity of 900,000 TEUs. Phase 1 is expected to be completed and fullyoperational by first quarter of 2017.

The total variable port fees paid by ICTSI Iraq shown as part of “Port authorities’ share in grossrevenues” account in the consolidated statements of income amounted to US$1.7 million in 2014,US$7.7 million in 2015 and US$18.1 million in 2016.

Agreements outside the Scope of IFRIC 12and Accounted by the Group in Accordance with IFRIC 4

Agreements outside the scope of IFRIC 12 are assessed in accordance with IFRIC 4. Anarrangement is within the scope of IFRIC 4 if: (a) the fulfillment of the arrangement is dependenton the use of a specific asset or assets (the asset); and (b) the arrangement conveys a right to usethe asset.

25.13 Lease Agreement for the Installation and Exploitation of a Container Terminal forMixed Private Use of the Port of Suape-Complexo Industrial Portuario (Suape)

On July 2, 2001, TSSA entered into a lease agreement with Suape for the operation anddevelopment of a container terminal in a port in Suape, Brazil for a period of 30 years startingfrom the date of agreement. In consideration for the lease, TSSA shall pay Suape a fee inBrazilian Reais (R$) consisting of three components: (i) R$8.2 million, payable within 30 daysfrom the date of agreement; (ii) R$3.1 million, payable in quarterly installments; and (iii) an

— F-145 —

amount ranging from R$15 to R$50 (depending on the type of container and traffic, i.e., full,empty/ removal and transshipment) handled for each container, payable quarterly. For the thirdcomponent of the fee (which rates per container increase by 100 percent every ten years), if thetotal amount paid for containers handled in the four quarters of the year is less than the assuredminimum amount for such component indicated in the agreement, TSSA will pay the difference toSuape based on a certain formula. The lease fee is subject to readjustment annually, unless thereis a change in legislation, which allows a reduction in the frequency of readjustment, based on acertain formula contained in the agreement. Total variable fees paid to Suape, shown as part of“Port authorities’ share in gross revenues” account in the consolidated statements of income,amounted to US$18.6 million (R$43.8 million) in 2014, US$14.8 million (R$49.5 million) in 2015and US$16.3 million (R$56.9 million) in 2016. Total fixed fees paid to Suape, shown as part of“Equipment and facilities-related expenses” account in the consolidated statements of income,amounted to US$4.7 million (R$11.1 million) in 2014, US$3.5 million (R$11.8 million) in 2015and US$3.7 million (R$12.9 million) in 2016.

Under the lease agreement, TSSA undertakes to make the investment in works, equipment,systems and others necessary to develop and operate the Suape port within the agreed time frame.

Upon the expiration of the term of the contract or in the event of pre-termination, the building andother structures constructed in the port by TSSA shall become the property of Suape in addition toassets originally leased by Suape to TSSA. TSSA may remove movable goods from the containerterminal, unless the parties agree otherwise.

Minimum lease payments relating to this agreement are as follows: due in 2017 amounted toUS$6.9 million (R$22.6 million); due starting 2018 up to 2021 totaled US$46.5 million(R$151.3 million); and due starting 2022 onwards totaled US$189.1 million (R$615.5 million).

25.14 Contracts with Gdynia Port Authority (the “Harbour”)

On May 30, 2003, the Parent Company and the Harbour signed three Agreements, namelyAgreement on Commercial Cooperation, Lease Contract and Contract for Sale of Shares, whichmarked the completion of the privatization of BCT. BCT owns the terminal handling assets andan exclusive lease contract to operate the Gdynia container terminal for 20 years until 2023,extendable for another specified or unspecified period, depending on the agreement.

Under the Agreement on Commercial Cooperation, US$78.0 million is the estimated investmentfor terminal improvements over the life of the concession, of which €20.0 million is necessarywithin the first eight-year period. As at December 31, 2016, BCT invested US$109.0 million(€87.6 million), thus exceeding the minimum investment level required.

In the original Lease Contract signed between the Harbour and the original owners of BCT, theHarbour shall lease to BCT its land, buildings and facilities for a period of 20 years for aconsideration of Polish zloty (PLN) equivalent of US$0.62 million per month to be paid inadvance. Subsequently, twenty two amendments in the contract were made reducing the monthlyrental to US$0.61 million and US$0.55 million in May 2004 and October 2013, respectively.Under the revised Agreement with BCT, the Harbour further reduced the rental fee byUS$0.9 million (PLN2.8 million) annually effective January 1, 2005. This amount has beentranslated into US dollar using the average exchange rate of US dollar effective in the NationalBank of Poland as at December 31, 2004, and deducted from the existing rental rate in US dollar.Total fees paid to the Harbour pertaining to the Lease Contract, shown as part of “Equipment andfacilities-related expenses” account in the consolidated statements of income, amounted toUS$6.5 million in 2014, US$6.1 million in 2015 and US$6.6 million in 2016.

— F-146 —

Minimum lease payments relating to this agreement are as follows: due in 2017 amounted toUS$6.6 million; due starting 2018 up to 2021 totaled US$26.5 million; and due starting 2022onwards totaled US$9.4 million.

25.15 Contract with Naha Port Authority (NPA)

On January 25, 2005, NPA and NICTI signed the basic agreement to operate Terminals 9 and 10at the Naha port. Another agreement, a 10-year Lease Agreement, was signed on May 12, 2005after the authorization for the project was obtained from the office of the Japanese Prime Ministerpursuant to the law on Special Zones for Structural Reform. Actual port operations commencedon January 1, 2006. NICTI has committed to achieve annual handling volume of containers over850,000 TEUs which shall include empty containers. In addition, NICTI has agreed to design,construct, operate and maintain the port facilities and terminal site including NPA’s facilities andhas set up a performance bond with a local bank for a sum of ¥100.0 million as required by NPA.NICTI deposited ¥50.0 million to guarantee the performance bond. Such performance bond isclassified as restricted cash and is presented under “Other noncurrent assets” account in theconsolidated balance sheet as of December 31, 2014. NICTI is also committed to pay fixed feesamounting to ¥87.5 million annually, starting 2009, plus a variable fee based on volume achievedpayable semi-annually. In 2009, NPA and NICTI agreed to reduce the annual fixed fees asfollows: ¥42.9 million for the period starting April 1, 2009 until March 30, 2010; and¥43.08 million for the period starting April 1, 2010 until the end of the lease term.

On April 27, 2015, NICTI purchased ICTSI’s 60 percent ownership interest in NICTI forJPY107.0 million (approximately US$0.9 million) as part of its treasury shares. The 10-year leaseagreement of NICTI expired at yearend and ICTSI was no longer interested in the negotiation forthe renewal of the lease agreement.

Total fixed fees paid to NPA pertaining to the contract, shown as part of “Equipment andfacilities-related expenses” account in the consolidated statements of income, amounted toUS$0.5 million (¥50.6 million) in 2014 and US$0.2 million (¥28.8 million) for the period endedApril 27, 2015. Variable fees paid to NPA, shown as part of “Port authorities’ share in grossrevenues” account in the consolidated statements of income, amounted to US$0.3 million(¥33.4 million) in 2014 and US$0.1 million (¥11.6 million) for the period ended April 27, 2015.

25.16 Concession Agreement with Batumi Port Holdings Limited (BPHL)

In September 2007, IGC obtained the concession from BPHL to develop and operate a containerterminal and a ferry and dry bulk handling facility in the Port of Batumi in Georgia. BPHL has theexclusive management right over the State-owned shares in Batumi Sea Port Limited (BSP). IGCestablished BICTL to operate the concession.

In relation to the concession, BICTL, through IGC, entered into a lease and operating agreementwith BSP for a 48-year lease over a total area of 13.6 hectares of land in Batumi Port, consisting ofBerths 4 and 5 for a container terminal, and Berth 6 as ferry terminal and for dry bulk generalcargo. The lease and operating agreement will expire on June 30, 2055. IGC paid BPHLUS$31.0 million, shown as “Intangible assets” account in the consolidated balance sheets andamortized up to year 2055, in consideration of the procurement for the lease between BICTL andBSP. Under the lease and operating agreement between BICTL and BPHL, BICTL shall pay BSPan annual rent of US$0.1 million from November 2, 2007 to 2008, US$0.2 million fromNovember 2, 2008 to 2009, US$0.5 million from November 2, 2009 to 2011 and US$0.8 millionfrom November 2, 2011 to expiration date of the contract as stipulated in the agreement.

— F-147 —


Total fixed fees shown as part of “Equipment and facilities-related expenses” account in theconsolidated statements of income, amounted to US$0.8 million both in 2014 and 2015 andUS$0.6 million in 2016.

25.17 Concession Contract for the Management and Operation of the MCT

On April 25, 2008, Phividec Industrial Authority (PIA) awarded the management and operation ofMCT in Misamis Oriental, in the Philippines to ICTSI. The concession contract is for a period of25 years starting from the date of the agreement. ICTSI established MICTSI to operate theconcession. Under the contract, MICTSI shall be responsible for planning, supervising andproviding full terminal operations for ships, container yards and cargo handling. MICTSI shallalso be responsible for the maintenance of the port infrastructure, facilities and equipment set forthin the contract and shall procure any additional equipment that it may deem necessary for theimprovement of MCT’s operations. In consideration for the contract, MICTSI shall pay PIA fixedfee of P=2,230.0 million (equivalent to US$46.9 million) payable in advance in quarterlyinstallments and variable fees based on percentages of MICTSI’s gross revenue ranging from15 percent to 18 percent during the term of the contract. The said fixed fees will be subject torenegotiation by both parties after five years and every five years thereafter, taking intoconsideration variances between the projected and actual cargo volumes. The total variable feespaid to PIA, shown as part of “Port authorities’ share in gross revenues” account in theconsolidated statements of income, amounted to US$1.9 million (P=85.8 million) in 2014,US$1.7 million (P=78.9 million) in 2015 and US$2.0 million (P=96.4 million) in 2016. Total fixedfees paid to PIA, shown as part of “Equipment and facilities-related expenses” account in theconsolidated statements of income amounted to US$1.4 million (P=60.0 million) in 2014,US$1.3 million (P=60.0 million) in 2015 and US$1.3 million (P=60.0million) in 2016.

Minimum lease payments relating to this agreement are as follows: due in 2017 amounted toUS$1.6 million (P=80.0 million); due starting 2018 up to 2021 totaled US$8.6 million(P=430.0 million); and due starting 2022 onwards totaled US$26.5 million (P=1.3 billion).

25.18 Deed of Usufruct between Tecplata and Compañia Fluvial del Sud, S.A.

In 2008, Tecplata entered into an operating lease agreement with Compañia Fluvial del Sud, S.A.for the use of land and real property in relation to Tecplata’s contract to operate the port of LaPlata in Argentina. The lease agreement is for 20 years, starting in 2010, subject to renewal foranother 20 years at the option of Tecplata. This agreement is accounted for as an operating lease.Consequently, Tecplata capitalized the related rental expense as part of the cost of port facilities tobe recognized under “Intangibles” account in the consolidated balance sheet during the period ofconstruction until such time that the port facilities will be available for use. OnDecember 20, 2010, Tecplata and Compañia Fluvial del Sud, S.A. executed an amendment to thelease agreement which provided that: (i) in 2010, Tecplata should not have to make any paymentsin connection with the lease; (ii) from January 2011, Tecplata shall pay a monthly lease ofUS$17,500 (approximately AR$87,500); and (iii) from the month following the commencement ofoperations in the terminal, monthly payments shall be US$35,000 (approximately AR$175,000),which was the amount originally agreed upon by both parties. In addition, the accumulateddiscount as a result of the amendment in 2010 relating to lease payments in 2011, 2012 and 2013with respect to the original values of the lease amounting approximately US$0.5 million (as atDecember 31, 2013) will be paid in 36 installments once Tecplata starts operations. Tecplata paid

— F-148 —

US$0.9 million in 2014 and US$0.4 million both in 2015 and 2016 to Compañia Fluvial del Sud,S.A. included as part of “Equipment and facilities-related expenses” in the consolidated statementsof income.


25.19 Contract Granting Partial Rights and Obligations to Contecon Manzanillo, S.A. de C.V.

In November 2009, ICTSI was declared by the Administracion Portuaria Integral de Manzanillo,S.A., de C.V. (API) the winner of a 34-year concession for the development and operation of thesecond Specialized Container Terminal (TEC-II) at the Port of Manzanillo. ICTSI establishedCMSA on January 6, 2010 to operate the Port of Manzanillo. The concession agreement wassigned on June 3, 2010. CMSA paid upfront fees of MXN50.0 million (US$4.1 million) to API intwo installments: MXN25.0 million (US$2.0 million) on June 3, 2010, the date of signing of thecontract; and another MXN25.0 million (US$2.0 million) on September 17, 2010.

Under the terms of the contract granting partial rights and obligations, CMSA will build, equip,operate and develop the terminal that will specialize in the handling and servicing of containerizedcargo. Investments in the Port of Manzanillo include maritime works, dredging, quay (includingcrossbeams and fenders), maneuver yards, storage installations, land access and signals, as well asall those works necessary to fulfill the productivity indexes contained in the contract.

The port facilities will be turned over by API to CMSA in three phases: (a) Phase I, North Area,Position 18: 379,534.217 square meters (sqm) of the federal land area and 18,000 sqm of themaritime area; (b) Phase II, Centre Area Position 19: 158,329.294 sqm of the federal land area and18,000 sqm of the maritime area; (c) Phase III, South Area (Position 20): 186,355.22 sqm of thefederal land area and 18,000 sqm of the maritime area. On November 30, 2010, the first phase ofthe ceded area was formally delivered to CMSA while a portion of the second phase of the cededarea equivalent to 42,000 sqm of the federal land area and 18,000 sqm of the maritime area weredelivered in advance to CMSA. The remaining portion of the second phase of the ceded areaequivalent to 116,329.294 sqm will be delivered to CMSA on June 30, 2017. CMSA willformally request for the delivery of the third phase of the ceded area not later thanJanuary 1, 2020.

For the first part of the ceded area, CMSA will pay fixed fees of MXN163.0 million(US$13.2 million) divided into 12 monthly payments, payable in advance. When CMSA receivesthe second and third phases of the ceded area, CMSA will pay additional annual fixed fees ofUS$5.9 million (MXN72.3 million) and US$6.8 million (MXN83.8 million), respectively.Further, CMSA shall pay monthly variable fees of US$16.2 (MXN200) per TEU, for a maximumof 1,500,000 TEUs per year.

CMSA started commercial operations in November 2013. The total variable fees paid by CMSA,shown as part of “Port authorities’ share in gross revenues” account in the consolidated statementsof income amounted to US$10.2 million (MXN135.5 million) in 2014, US$11.3 million(MXN179.2 million) in 2015 and US$12.0 million in 2016. Total fixed fees paid by CMSA,shown as part of “Equipment and facilities-related expenses” account in the consolidatedstatements of income amounted to US$13.2 million (MXN176.0 million) in 2014,US$11.6 million (MXN184.3 million) in 2015 and US$10.6 million in 2016.

— F-149 —

Minimum lease payments relating to this agreement are as follows: due in 2017 amounted toUS$13.8 million, due starting 2018 up to 2021 totaled US$69.5 million; and due starting 2022onwards totaled US$1.1 billion.

25.20 Lease Agreement between the Port of Portland and ICTSI Oregon

On May 12, 2010, ICTSI Oregon signed a 25-year lease with the Port of Portland for thecontainer/break bulk facility at Terminal 6. Under the terms of the agreement, ICTSI Oregon andICTSI paid the Port of Portland US$8.0 million (US$2.0 million on May 12, 2010 as a signingdeposit; and the remaining US$6.0 million on August 12, 2010) in addition to an annual rentpayment of US$4.5 million, subject to any increases in the consumer price index. As terminalvolume increases over time, ICTSI will pay the Port of Portland additional incremental revenueper container moved. Furthermore, the Port of Portland shall; (a) demise and lease the terminalland, the improvements, cranes, and all appurtenances pertaining thereto or arising in connectiontherewith to ICTSI, for and during the term of the lease; (b) grant an exclusive right to conductstevedoring services at the terminal and to operate, manage, maintain and rehabilitate the portinfrastructure, as well as to provide terminal services and collect and retain user fees; and (c) granta non-exclusive right during the term of the lease to use the common areas in connection withpermitted uses of the terminal.

The US$8.0 million upfront fee was allocated to concession rights and property and equipmentamounting to US$4.2 million and US$3.8 million, respectively. ICTSI Oregon took over theoperations of the Terminal 6 of the Port of Portland on February 12, 2011.

Total fees paid to the Port of Portland pertaining to the lease agreement, shown as part of“Equipment and facilities-related expenses” account in the consolidated statements of income,amounted to US$4.8 million in 2014, 2015 and 2016.


In October 2016, the Board of ICTSI Ltd. has authorized the management of ICTSI Oregon tonegotiate with the Port of Portland and reach terms mutually acceptable to both parties withrespect to the termination of the lease agreement after two major customers, Hanjin Shipping Co.and Hapag-Lloyd stopped calling the Port of Portland in March 2015 due to continuing labordisruptions. In late 2016, the Port of Portland and ICTSI Oregon began discussions of a mutualagreement to terminate the lease agreement. As of December 31, 2016, the Group has providedfor the amount of probable loss on the pre-termination of the lease agreement based on theGroup’s best estimate of the probable outcome of the negotiations with the Port of Portland. Theestimated amount of probable loss from the pre-termination of the lease agreement charged to the2016 consolidated statement of income was US$23.4 million (see Notes 1.2, 19and 21).

On March 8, 2017, ICTSI, through ICTSI Oregon, and the Port of Portland have signed a LeaseTermination Agreement and both parties have mutually agreed to terminate the 25-year LeaseAgreement to operate the container facility at Terminal 6 of the Port of Portland with an effectivedate of March 31, 2017. The Lease Termination Agreement allows ICTSI Oregon to be relievedof its long-term lease obligations. In exchange, the Port of Portland will receive US$11.45 millionin cash compensation and container handling equipment including spare parts and tools.

— F-150 —

25.21 Development Agreement between VICT and POMC

On May 2, 2014, ICTSI, through its subsidiary in Australia, VICT, signed a contract in Melbournewith POMC for the design, construction, commissioning, operation, maintaining and financing ofthe Webb Dock Container Terminal (Terminal) and Empty Container Park (ECP) at Webb DockEast (WDE) in the Port of Melbourne. The Contract grants VICT the rights to: (a) design, buildand commission the new Terminal at berths WDE 4 and WDE 5, (b) design, build andcommission the new ECP at WDE, and (c) operate the Terminal and ECP until June 30, 2040.

Phase 1 of the Terminal and the ECP with capacities of 350,000 TEUs and 250,000 TEUs,respectively, are expected to commence commercial operations in the second quarter of 2017.Phase 2 construction of the Terminal with a capacity of 1,000,000 TEUs is expected to becompleted in the last quarter of 2017.

Minimum lease payments relating to this agreement are as follows: due in 2017 amounted toUS$85.0 million (AUD117.9 million); due starting 2018 up to 2021 totaled US$111.1 million(AUD154.1 million); and due starting 2022 onwards totaled US$1.3 billion (AUD1.8 billion).Accrued rent amounted to US$38.7 million (AUD47.3 million), US$92.9 million(AUD127.4 million) and US$149.6 million (AUD207.5 million) as at December 31, 2014, 2015and 2016, respectively, calculated using the straight-line method from the inception of the contactin June 2014. The noncurrent portion of the accrued rent was included as part of “Othernoncurrent liabilities” account while the current portion was included as part of “Accounts payableand other current liabilities” account in the 2014, 2015 and 2016 consolidated balance sheets. Thecurrent portion of accrued rent amounting to US$85.0 million (AUD117.9 million) as atDecember 31, 2016 was paid on January 3, 2017. The current portion of the accrued rent as ofDecember 31, 2015 and 2014 was nil.

25.22 Concession to Construct and Operate aMaritime Container Terminal in the Port of Tuxpan

On May 27, 2015, ICTSI, through its subsidiary, ICTSI Tuxpan B.V., acquired from Grupo TMMS.A.B and Immobiliaria TMM S.A. de C.V 100 percent of the capital stock of Terminal Maritimade Tuxpan, S.A de C.V (TMT) for US$54.5 million. TMT is a company duly incorporated inaccordance with the laws of Mexico with a concession to construct and operate a maritimecontainer terminal in the Port of Tuxpan, Mexico and is the owner of the real estate where themaritime container terminal will be constructed. The concession agreement is valid untilMay 25, 2021, subject to extension for another 20 years. The concession covers an area of29,109.68 square meters, which is adjacent to the 43 hectares land owned by TMT. Under theconcession agreement, TMT is liable and committed to: (1) pay fixed fee of MXN23.24 plusVAT, per square meter of assigned area and (2) pay variable fee starting year 2018. As ofMarch 9, 2017, management is currently working on a development plan on TMT.

Total fees paid to the Port pertaining to the concession agreement, shown as part of “Equipmentand facilities-related expenses” account in the consolidated statements of income, amounted toUS$0.3 million (MXN4.7 million) in 2015 and US$0.4 million (MXN8.3 million) in 2016.

Minimum lease payments relating to this agreement are as follows: due in 2017 amounted toUS$0.4 million (MXN8.1 million) and due starting 2018 up to 2021 totaled US$1.3 million(MXN27.7 million).

— F-151 —

Agreements outside the Scope of IFRIC 12 and IFRIC 4

25.23 Shareholders’ Agreement (Agreement)with Atlantic Gulf & Pacific Company of Manila, Inc. (AG&P)

On September 30, 1997, IWI entered into an Agreement with AG&P forming BIPI. BIPIdeveloped the property acquired from AG&P at Bauan, Batangas into an international commercialport duly licensed as a private commercial port by the PPA.

Simultaneous with the execution of the Agreement, AG&P executed a Deed of Conditional Sale infavor of IWI conveying to the latter a parcel of land for a total purchase price of P=632.0 million(equivalent US$14.2 million as at December 31, 2013). The said land was transferred by IWI toBIPI under a tax-free exchange of asset for shares.

25.24 Cooperation Agreement for the Procurement, Installation and Operationof Container Handling Equipment under a Revenue Sharing Schemeat the Makassar Container Terminal Port of Makassar, South Sulawesi, Indonesia

MTS has an existing agreement with PT Pelabuhan Indonesia IV (Pelindo), the Indonesiangovernment-owned corporation that owns and operates the Makassar Container Terminal, for theprocurement, installation and operation of Container Handling Equipment (CHE) at the MakassarContainer Terminal under a revenue sharing scheme for ten years until 2013, renewable foranother 10 years by mutual agreement. In December 2012, MTS extended the joint operationcontract, which will originally expire on September 30, 2013, until February 1, 2023. Under theagreement, MTS provides and operates CHE at the Port of Makassar. For the services provided,MTS is paid by Pelindo 60 percent of the gross revenue based on the published tariff for theoperation of CHE owned by MTS, with a minimum guaranteed revenue equivalent to50,000 TEUs production annually. MTS’ share in gross revenues included under “Gross revenuesfrom port operations” account in the consolidated statements of income amounted toUS$3.0 million (IDR35.1 billion) in 2014, US$2.3 million (IDR30.4 billion) in 2015 and US$2.7million (IDR35.7 billion) in 2016.

25.25 Long-term Contract for the Operations of Cargo Handling Services at Makar Wharf

On February 20, 2006, the PPA granted SCIPSI a ten-year contract for the exclusive managementand operation of arrastre, stevedoring, bagging and crated cargo handling services at MakarWharf, Port of General Santos, General Santos City in the Philippines and on all vessels berthedthereat, under the terms, conditions, stipulations and covenants in the contract. SCIPSI agreed topay PPA 10 percent of the gross income for handling domestic cargo and 20 percent of the grossincome for handling foreign cargo whether billed/unbilled or collected/uncollected. OnFebruary 19, 2016, the local office of the PPA in General Santos City granted SCIPSI a hold-overauthority for a period of one year until February 19, 2017 over the cargo handling services atMakar Wharf, Port of General Santos. On February 25, 2017, another hold-over authority for aperiod of one year until February 24, 2018 was granted by the PPA office in General Santos City.The total fees paid by SCIPSI to PPA shown as part of “Port authorities’ share in gross revenues”account in the consolidated statements of income, amounted to US$1.0 million (P=46.5 million) in2014, US$1.1 million (P=50.0 million) in 2015 and US$1.3 million (P=61.5 million) in 2016.

— F-152 —

25.26 Long-term Contract for the Operations of Cargo Handling Services at Sasa Wharf

On April 21, 2006, the PPA granted DIPSSCOR a ten-year contract for cargo handling services atSasa Wharf, Port of Davao in the Philippines. The contract provides, among others, forDIPSSCOR to maintain a required amount of working capital, to put up a performance bond to besecured from the Government Services Insurance System, to comply with the commitments andconditions in the business plan and to maintain a determined level of handling efficiency.DIPSSCOR agreed to pay PPA 10 percent of the gross income for handling domestic cargo and20 percent of the gross income for handling foreign cargo whether billed/unbilled orcollected/uncollected. The concession contract expired on April 20, 2016, however, onApril 15, 2016, the local office of the PPA in Davao City granted DIPSSCOR a hold-overauthority for a period of six months until October 20, 2016 over the cargo handling services atSasa Wharf, Port of Davao. On September 8, 2016, another hold-over authority for a period of sixmonths until April 20, 2017 was granted by the PPA office in Davao City. The total fees paid byDIPSSCOR to PPA, shown as part of “Port authorities’ share in gross revenues” account in theconsolidated statements of income, amounted to US$1.4 million (P=64.1 million) in 2014,US$1.4 million(P=65.4 million) in 2015 and US$1.4 million (P=66.3 million) in 2016.

25.27 Joint Venture Contract on YRDICTL and YICT

In January 2007, the Group (through ICTSI (Hong Kong) Limited) entered into a joint venturecontract with YPG and SDIC Communications, Co. on YRDICTL to operate and manage theYantai port in Shandong Province, China. The registered capital of YRDICTL isRMB600.0 million (equivalent to US$99.1 million as at December 31, 2013) and the term of thejoint venture is 30 years, and may be extended upon agreement of all parties. The joint venturebecame effective on February 28, 2007.

In 2010, YPG and SDIC invested its 40 percent stock holdings in YRDICTL into Yantai PortHoldings (YPH). As such, the non-controlling shareholder of the Company was changed fromYPG and SDIC to YPH (see Note 23.1).

Pursuant to a joint venture agreement, the Board of YRDICTL shall be comprised of fivemembers, three of which the Group has the right to elect. The land operated by YRDICTL wascontributed as an in-kind capital contribution by YPG for a period of 30 years.

As discussed in Note 4.1, on July 1, 2014, the Group, through its subsidiary IHKL, acquired51 percent of the total equity interest of YICT and the Group sold its 60 percent ownership interestin YRDICTL to YPH. The Group entered into a joint venture agreement on YICT with DP Worldand YPH for a period of 29 years until September 29, 2043, and may be extended upon agreementof all parties. The objective of these transactions is to consolidate and optimize the overall portoperations within the Zhifu Bay Port Area in Yantai, China. YICT became the only foreigncontainer terminal within the Zhifu Bay Port Area. DP World China (Yantai) and YPH owns12.5 percent and 36.5 percent ownership interest in YICT, with ICTSI as the majority shareholder.

Pursuant to the said joint venture agreement, the Board of YICT shall be comprised of sixmembers, three of which the Group has the right to elect. The Chairman of the Board shall beappointed by the Group and the said Chairman shall be entitled to a casting vote in the event ofequality of votes. The Group is also entitled to appoint the General Manager and FinancialController. The land operated by YICT was contributed by YPH and is valid untilAugust 28, 2043.

— F-153 —

YICT is authorized by YPH to collect, on its behalf, the port charges (including port chargeslevied on cargoes and facilities security fees) in accordance with the state regulations and shall,after retaining 50% of the port charges levied on cargoes (as the fees for maintaining the facilitieswithin the port owned by YICT) and 80% of the facilities security fees (as the fees for maintainingand improving the security facilities within the terminal owned by YICT) collected, pay to YPHthe remaining parts no later than the fifteenth (15th) day of the following month.

The total fees paid by YICT to YPH, shown as part of “Port authorities’ share in gross revenues”account in the consolidated statements of income, amounted to US$0.9 million (RMB5.8 million)in 2014, US$1.9 million (RMB12.1 million) in 2015 and US$2.1 million (RMB13.7 million) in2016.

25.28 Cooperation Agreement for Operation of Terminal Area III of the Tanjung Priok Port atJakarta, Indonesia between PT Pelabuhan Indonesia II (Pelindo) and OJA

OJA has existing cooperation agreements with Pelindo under a revenue sharing scheme coveringthe terminal operations of berths 300, 301, 302 and 303 located in Terminal Area III (referred to as“Cooperation Area”) of the Tanjung Priok Port, Jakarta, Indonesia. OJA and Pelindo share a fixedpercentage based on various activities or services with container handling equipment and otherfacilities provided and operated by OJA in the Cooperation Area including stevedoring, lift-on/liftoff, reefer container plugging and monitoring, trucking, and container customs inspection. Thecooperation agreement was signed on March 7, 2011 and expired on March 7, 2013. OnJune 5, 2013, OJA signed a 15-year Cooperation Agreement with Pelindo for internationalcontainer stevedoring services wherein the parties will share a fixed percentage of revenues.

OJA’s share in gross revenues included under “Gross revenues from port operations” account inthe consolidated statements of income amounted to US$2.6 million (IDR30.8 billion) in 2014,US$3.1 million (IDR41.7 billion) in 2015 and US$8.4 million (IDR112.4 billion) in 2016.

25.29 Shareholders’ Agreement on IDRC

On January 23, 2014, the Group, through its subsidiary, ICTSI Cooperatief, forged a businesspartnership with La Societe de Gestion Immobiliere Lengo (SIMOBILE) for the establishment andformation of a joint venture company, ICTSI DR Congo (IDRC). IDRC, which is then 60 percent-owned by ICTSI Cooperatief, will build a new terminal along the river bank of the Congo River inMatadi and manage, develop and operate the same as a container terminal, as well as provideexclusive container handling services and general cargo services therein.

At incorporation, the share capital of IDRC amounted to US$12.5 million represented by12,500 ordinary voting shares. IDRC was incorporated for an initial term of 99 years, subject toearly dissolution or prorogation. ICTSI contributed US$2.0 million cash upon incorporation andthe US$5.5 million cash in tranches while SIMOBILE contributed land valued at US$5.0million.On May 19, 2015, ICTSI, through its subsidiary, ICTSI Cooperatief, and its joint venturepartner, SIMOBILE, transferred their respective 8% and 2% ownership interest in IDRC toSociete Commerciale Des Transports Et Des Ports S.A. (SCTP SA) in exchange for the latter’scontribution of technical knowledge, skills and substantial experience in the port and port systemin DRC and operation of railroad system and undertaking to facilitate the activities of IDRC and toassist in its relations with the public authorities. SIMOBILE transferred to its subsidiary, SIP Sprl,its 10% ownership in IDRC. Thereafter, IDRC is owned 52% by ICTSI, 28% by SIMOBILE,10% by SIP Sprl and 10% by SCTP SA. The transaction was accounted for as a change in non-controlling interest and was recorded as an increase of US$0.9 million in the “Excess ofacquisition cost over the carrying value of non-controlling interests” account in the 2015consolidated balance sheet.

— F-154 —

Pursuant to the shareholders’ agreement, the Board of IDRC shall be comprised of six members,four of which will be appointed by the Group.

The facility to be constructed in Phase 1 will consist of two berths that will be able to handle120,000 TEUs and 350,000 metric tons. The capacity and berth length can, subject to demand, bedoubled in Phase 2. Phase 1 is expected to be completed within 18 to 24 months from the start ofconstruction. The construction of the terminal started in January 2015 and initial operationsstarted in the third quarter of 2016.

Other Contracts and Agreements

25.30 Services Agreement (“Agreement”) with the Government ofHis Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam (the Government)

On May 21, 2009, ICTSI entered into an Agreement with the Government for the operation andmaintenance of the Muara Container Terminal in Brunei Darussalam. The Agreement was validfor a period of four years from commencement date or May 22, 2009. The term was extendiblefor a period of one year at a time, for a maximum of two years subject to the mutual agreement ofthe parties. In consideration for the services, the Government paid the operator US$7.0 million forthe first year, US$6.9 million for the second year, US$7.3 million for the third year, andUS$7.7 million for the fourth year. On the optional fifth and sixth years, the operation fees wereUS$8.1 million and US$8.5 million, respectively. The operation fees for each year were paid in12 equal monthly installments. Since 2012, the Agreement had been extended yearly for a periodof one year or until May 20, 2017 as an interim operator. However, as part of the Government'songoing overall restructuring, state-owned enterprise Darusalam Assets Sdn Bhd will take over theMuara Container Terminal operations from the Brunei Ports Department effective February 21,2017. The future plans for Muara Container Terminal contemplate its integration with thedevelopment of a Special Economic Zone, which is not ICTSI’s core competency and will requirehuge investments on the part of NMCTS. As part of ICTSI's efforts at rationalising its portfolio toachieve the best possible sources of long term growth and return for its shareholders, ICTSI,through NMCTS, is no longer interested in signing a new contract with the state-owned enterpriseDarusalam Assets Sdn Bhd. Thus, the Agreement was pre-terminated effective February 21, 2017.

The Agreement contained commitments and restrictions which included, among others,accomplishment of service levels consisting of crane productivity, haulage turnaround time,equipment availability, reefer services and submission of calculation and documents for billing, aswell as penalties for failure to meet the service level requirements.

25.31 Operation of Container Port Agreement in L&T Shipbuilding Limited (LTSB)and ICTSI India and ICTSI Ltd.

On April 6, 2011, L&T Shipbuilding Limited (LTSB) and the subsidiaries of ICTSI namely,ICTSI Ltd. and ICTSI India, signed the Container Port Agreement for the Management andOperations of the Kattupalli Container Terminal in Tamil Nadu, India, which was originallyscheduled to commence operations in March 2012 (see Note 1.2). The contract is effective untilNovember 30, 2038.

Under the contract, ICTSI India has agreed to supervise, direct and manage the operations andmaintenance of the Kattupalli Container Terminal and all activities incidental thereto, includingundertaking recruitment and training of personnel of LTSB, developing operations andmaintenance plans, procedures and manuals and achieve the Operations, Maintenance, Safety andPerformance Standards in accordance with Good Industry Practices. ICTSI India agreed to pay

— F-155 —

LTSB the Contractor License Fee of US$18.0 million in installments as follows: Indian Rupees(INR) equivalent to US$12.0 million within 90 days from effective date of the agreement; andINR equivalent to US$6.0 million on or prior to 90 days prior to the scheduled date ofcommencement. ICTSI India has made an aggregate payment to LTSB amounting toUS$16.2 million in 2011 and the remaining US$1.8 million was paid in January and February2013 for US$1.0 million and US$0.8 million, respectively. The terminal has started commercialoperations in January 2013.

In exchange for the Contract License Fee, ICTSI India shall receive the following fee: years one totwo, US$1.15 million per year; years three to five, 3.3 percent of gross revenue; years six to 15,8.25 percent of gross revenues; and years 16 to 27, 9.9 percent of gross revenues. ICTSI India hasstarted earning this fee in April 2012.

As discussed in Note 1.2, ICTSI, through its subsidiaries ICTSI Ltd. and ICTSI India, and LTSBsigned a termination agreement cancelling ICTSI’s container port agreement for the managementand operation of the Kattupalli Container Terminal in Tamil, Nadu, India on June 30, 2014.

The existing contracts and agreements entered into by certain subsidiaries contain certaincommitments and restrictions which include, among others, the prohibition of the change insubsidiaries’ shareholders without the prior consent of the port authority, maintenance ofminimum capitalization and certain financial ratios, investment in the works stipulated in theinvestment program, provisions for insurance, submission of performance bonds, non-competearrangements, and other related matters.

26. Contingencies and Contingent Liabilities

Due to the nature of the Group’s business, it is involved in various legal proceedings, both asplaintiff and defendant, from time to time. The majority of outstanding litigation cases involvesubrogation claims under which insurance companies have brought claims against the operator,shipping lines and/or brokerage firms for reimbursement of their payment of insurance claims fordamaged equipment, facilities and cargoes. Except as discussed below, ICTSI is not engaged inany legal or arbitration proceedings (either as plaintiff or defendant), including those which arepending or known to be contemplated and its Board has no knowledge of any proceedings pendingor threatened against the Group or any facts likely to give rise to any litigation, claims orproceedings which might materially affect its financial position or business. Management and itslegal counsels believe that the Group has substantial legal and factual bases for its position and isof the opinion that losses arising from these legal actions and proceedings, if any, will not have amaterial adverse impact on the Group’s consolidated financial position and results of operations.

MICTThe MICT Berth 6 Project is a port development project being undertaken by the Company withthe approval of the PPA and in compliance with the Parent Company’s commitment under itsconcession contract with the PPA. The City Council of Manila issued Resolution No. 141 datedSeptember 23, 2010, adopting the Committee Report of the ad hoc committee that investigated thereclamation done in Isla Puting Bato in Manila, which stated that the project should have had priorconsultation with the City of Manila, approval and ordinance from the City of Manila, and consentfrom the City Mayor. The Parent Company and its legal counsels’ position is that Resolution No.141 of the City Council of Manila is purely recommendatory and is not the final word on the issuewhether the MICT Berth 6 Project is validly undertaken or not.

— F-156 —

On November 26, 2010, the PPA, through the Office of the Solicitor General, filed a petition forcertiorari and prohibition with application for the issuance of a temporary restraining order and/orwrit of preliminary injunction assailing City Council Resolution No. 141 before the SupremeCourt. The Supreme Court granted a temporary restraining order (“TRO”) enjoining the Mayor ofManila and the City Council of Manila from stopping or suspending the implementation of theMICT Berth 6 Project of the PPA.The TRO is still valid and continuing until further orders fromthe Supreme Court. The Supreme Court also granted the Company’s motion to intervene in thecase of PPA vs. City of Manila and City Council of Manila. The parties filed their respectivecomments and replies before the Supreme Court. As at March 9, 2017, the parties still await theSupreme Court’s resolution on this case.

Notwithstanding the foregoing legal proceedings, the MICT Berth 6 Project was completed andinaugurated by the President of the Republic of the Philippines in July 2012 (see Notes 22and 25.32).

In 2013, a case was filed by Malayan Insurance Co., Inc. (MICO) against ICTSI before theRegional Trial Court of Manila, Branch 55, for damages allegedly sustained by the assured cargoof Philippine Long Distance Telephone Company (PLDT) consisting of telecommunicationsequipment. The amount of claim is P=223.8 million (approximately US$4.5 million) plus legalinterest and attorney's fees of P=1.0 million (US$20.1 thousand).

PLDT initially filed a claim against ICTSI, claiming that the cargo had been dropped while insidea container at the terminal of ICTSI and holding the latter responsible for the value of theequipment. ICTSI did not pay the claim, arguing that there is no evidence that the cargo had beendamaged. ICTSI further argued that the containerized equipment was never dropped to the groundbut was merely wedged in between containers while being moved in the container yard. The caseis currently on trial.

PICTIn 2007, the Trustees of the Port of Karachi (KPT) filed a civil suit against the PakistanInternational Container Terminal (PICT) in the Honorable High Court of Sindh claiming a sum ofapproximately US$2.9 million with interest, as default payment and penalty thereon, for thealleged mis-declaration of the category of goods on the import of Ship to Shore Cranes andRubber Tyred Gantry Cranes in 2004. Upon advice of PICT’s legal advisor, management isconfident that there is no merit in this claim and hence there is a remote possibility that the casewould be decided against PICT.

Also in 2007, PICT has filed an interpleader civil suit before the High Court of Sindh (HCS)against the Deputy District Officer, Excise and Taxation (DDO) and the Trustees of KPT inrespect of the demand by the DDO on PICT to pay property tax out of the Handling, Marshallingand Storage (HMS) Charges payable to KPT amounting to approximately US$0.4 million for theperiod 2003 to 2007. In 2014, another demand was made by the DDO amounting toapproximately US$0.9 million for the period 2008 to 2014. In compliance with the Order of HCS,PICT deposited the amounts with Nazir HCS. In 2015, HCS issued further orders directing PICTto deposit the remaining HMS charges due and Payable with Nazir HCS in quarterly instalmentuntil the disposal of the suit. Accordingly PICT complied with the orders of HCS. Upon advice ofPICT’s legal counsel, management believes that there is full merit in this case and there may be noadverse implication against PICT.

Further, while completing the tax audit proceedings for the tax year 2013, the DeputyCommissioner Inland Revenue (CIR) modified the deemed assessment of PICT and made certaindisallowances/additions on the taxable income and raised an income tax demand of

— F-157 —

US$1.25 million. PICT filed an appeal before the Commissioner Inland Revenue - Appeals(CIR-A) who partly decided the appeal in favour of PICT. Consequently, PICT made the paymentof US$0.95 million in respect of issues confirmed by the CIR-A, and filed a second appeal beforethe Appellate Tribunal Inland Revenue, which is now pending for adjudication. Upon advice ofPICT’s legal counsel, management is of the view that there is full merit in PICT’s arguments andthe appeal case will be decided in its favour.

TSSAIn 2008, a civil suit was filed by former customer Interfood Comercio (Interfood) against TSSAfor damages to perishable cargo amounting to BRL7.0 million (approximately US$3.0 million).Interfood’s cargo (garlic and birdseed) was declared improper for human and animal consumptiondue to long storage period at TSSA before it was claimed and such cargo was destroyed byBrazilian customs authorities. The lower court and Court of Appeals ruled in favor of Interfood.The case has been pending in the Supreme Court for more than four years. An amount ofBRL6.9 million (approximately US$2.1 million) in TSSA’s bank account is now garnished by thelower court. TSSA made an accrual for this contingency in the amount of BRL1.9 million(US$0.8 million) in 2014 and nil in 2015 and 2016, presented as part of “Other expenses” accountin the consolidated statements of income. The provision aggregating BRL13.8 million(US$5.2 million), BRL13.8 million (US$3.5 million) and BRL13.8 million (US$4.2 million) wererecognized as part of “Accounts payable and other current liabilities” account in the consolidatedbalance sheets as at December 31, 2014, 2015, and 2016, respectively (see Note 19). In July 2016,the State Court has decided the case against TSSA, however, the said judgment is still subject to alast appeal with the Supreme Court in Brasilia.

TecplataGanmar S.A. (Ganmar) challenged, in summary proceedings, the legality of the ConcessionAgreement for the construction and operation of the Port of La Plata by Tecplata requesting alsovia three preliminary injunctions the suspension of the works at the terminal. Ganmar alleges thatTecplata’s concession should have been awarded through a bidding process. The preliminaryinjunctions requested by Ganmar were rejected both by the Civil and Commercial Court and theCourt of Appeals due to lack of evidence on the illegality of the Concession Agreement and/or thelack of urgent reasons to suspend the contract. Management of Tecplata believes that there is nomerit in the action filed by Ganmar and has not provided for possible obligations arising from theaforementioned legal proceedings.

TICTOn December 28, 2012, TICT filed a Notice of Termination of its 10-year Investment Agreementwith Tartous Port General Company (TPGC) on the grounds of “unforeseen change ofcircumstances” and “Force Majeure”. In early 2013, TPGC submitted to arbitration TICT’stermination notice. On April 1, 2014, the arbitration panel decided in favour of TPGC. While theaward has become executory on April 20, 2015, management and its legal counsels believe thatTPGC will not be able to successfully enforce the award outside of Syria.

BICTLIn 2015, BICTL filed a case against Revenue Service with the Tbilisi City Court for thecancellation of the tax assessment in the amount of US$860.7 thousand (GEL2.3 million). Thecase involves Value-Added Tax on fees collected by BICTL for services rendered in relation tothe export of scrap materials. The Revenue Service alleged that such fees are subject to VATwhile BICTL believes that it has good legal basis to treat the services as a VAT zero-rated sale ofservices. In March 2016, the Tbilisi City Court rendered a decision in favor of Revenue Service.As of March 9, 2017, BICTL is awaiting the release of the written decision afterwhich an appealwill be filed with the appellate court.

— F-158 —

ICTSI OregonDue to continuing labor disruption caused by the International Longshore and Warehouse Union(ILWU) in Portland commencing in June 2012, ICTSI Oregon has filed two separate counter-claims in federal court against the ILWU seeking monetary damages. The first is a claim fordamages caused by the ILWU's unlawful secondary activity under the National Labor RelationsAct. The second is an antitrust claim brought against the ILWU and the Pacific MaritimeAssociation (PMA). ICTSI Oregon also has a second counterclaim for breach of fiduciary dutyagainst PMA. In addition, the National Labor Relations Board (NLRB) has sought and obtainedtwo federal court injunctions against the ILWU, prohibiting illegal work stoppages as well as afinding of contempt of court against the union.

ICTSI Oregon's damage claim for unlawful secondary activity has been stayed pendingcompletion of administrative proceedings before the NLRB. This is a substantial claim, seeking amulti-million dollar judgment, and is unlikely to be tried in court for at least a couple of years.

ICTSI Oregon's antitrust claim was dismissed by the federal court. The judge granted ICTSIOregon permission to appeal the dismissal to the Ninth Circuit Court of Appeals. The appeal ispending and oral argument was conducted before the Ninth Circuit Court of Appeals in Portland inOctober 2016. A decision is likely to be obtained in 2017. If ICTSI Oregon prevails, its antitrustclaim will proceed before the trial court. Under federal law, successful antitrust plaintiffs mayrecover treble damages.

As to its claim against the ILWU for damages caused by illegal secondary activity, ICTSIOregon's breach of fiduciary claim against PMA has been stayed by the federal court.

Management believes that the claims against and between ICTSI, ILWU and PMA will befavorably resolved.

27. Financial Instruments

27.1 Fair Values

Set out below is a comparison of carrying amounts and fair values of the Group’s financialinstruments by category whose fair value is different from its carrying amount as at December 31:

2014 2015 2016Carrying Amount Fair Value



Financial LiabilitiesOther financial liabilities: Long-term debt US$1,045,967,471 US$1,127,987,745 US$1,081,043,350 US$1,189,662,762 US$1,344,765,928 US$1,429,709,827 Concession rights payable 526,236,352 613,893,908 512,037,758 591,765,695 490,461,436 548,769,262

US$1,572,203,823 US$1,741,881,653 US$1,593,081,108 US$1,781,428,457 US$1,835,227,364 US$1,978,479,089

Carrying values of cash and cash equivalents, receivables, accounts payable and other currentliabilities and loans payable approximate their fair values due to the short-term nature of thetransactions.

The fair value of quoted AFS equity shares is based on quoted prices. For unquoted equitysecurities, the fair values are not reasonably determinable due to unavailability of requiredinformation for valuation. These are presented based on cost less allowance for impairmentlosses. The unquoted equity securities pertain mainly to investments in golf clubs whosesecurities are not quoted and holding company whose shares are not publicly listed.

— F-159 —

The fair values of the US dollar-denominated notes and US dollar-denominated medium termnotes are based on quoted prices. The fair value of other fixed interest-bearing loans andconcession rights payable were estimated at the present value of all future cash flows discountedusing the applicable rates for similar types of loans ranging from 0.04 percent to 15.95 percent in2014, 1.73 percent to 15.85 percent in 2015 and 1.23 percent to 12.63 percent in 2016.

For variable interest-bearing loans repriced monthly or quarterly, the carrying amountapproximates the fair value due to the regular repricing of interest rates.

The fair values of derivative assets and liabilities, specifically forward contracts and prepaymentoptions, are calculated using valuation techniques with inputs and assumptions that are based onmarket observable data and conditions. For cross-currency swap, interest rate swaps, currencyforwards and other structured derivatives, fair values are based on counterparty bank valuation.

27.2 Fair Value Hierarchy

The following tables below present the fair value hierarchy of the Group’s financial instruments asof December 31:

2014

Amount


(Level 1)


inputs(Level 2)


inputs(Level 3)

Assets and Liabilities Measured at FairValue:AFS investments US$1,574,744 US$1,574,744 US$ US$Derivative liabilities 751,428 751,428


Other financial liabilities:Long-term debt 1,127,987,745 990,846,666 137,141,079Concession rights payable 613,893,908 613,893,908

2015

Amount


(Level 1)


inputs(Level 2)


inputs(Level 3)

Assets and Liabilities Measured at FairValue:AFS investments US$1,690,929 US$1,690,929 US$ US$Derivative assets 331,154 331,154Derivative liabilities 554,217 554,217


Other financial liabilities:Long-term debt 1,189,662,762 1,032,128,641 157,534,121Concession rights payable 591,765,695 591,765,695

— F-160 —

2016

Amount


(Level 1)


inputs(Level 2)


inputs(Level 3)

Assets Measured at Fair Value:Derivative assets US$7,209,706 US$ US$7,209,706 US$Derivative liabilities 1,975,489 1,975,489AFS investments 1,512,807 1,512,807


Other financial liabilities:Long-term debt 1,429,709,827 1,018,581,996 411,127,831Concession rights payable 548,769,262 548,769,262

In 2014, 2015 and 2016, there were no transfers between Level 1 and Level 2 fair valuemeasurements and no transfers into and out of Level 3 fair value measurements

27.3 Derivative Financial Instruments

ICTSI enters into derivative transactions as economic hedges of certain underlying exposuresarising from its foreign currency-denominated loans, revenues and expenses. Such derivatives,which include interest rate swaps and currency forwards, are accounted for either as cash flowhedges or transactions not designated as hedges.

27.4 Derivative Instruments Accounted for as Cash Flow Hedges

Translation hedging. On May 20, 2013, ICTSI designated US$39.4 million (P=1.75 billion) of itsPhilippine peso-denominated cash equivalents as cash flow hedges of the currency risk onPhilippine peso-denominated payables that would arise from forecasted Philippine peso-denominated variable port fees. The hedging covers forecasted Philippine peso-denominatedvariable port fees payments from January to October 2014.

Foreign currency translation gains or losses on the Philippine peso-denominated short-terminvestments that qualify as highly effective cash flow hedges are deferred in equity. Anyineffective portion is recognized directly in earnings. Foreign currency translation gains or lossesdeferred in equity would form part of variable fees, presented as “Port authorities’ share in grossrevenues” in the consolidated statement of income, when the hedged variable PPA fee isrecognized. As at December 31, 2013, US$39.4 million (P=1.75 billion) of cash equivalents arehedged against the remaining forecasted Philippine peso-denominated variable port fees to thePPA (see Note 12). Foreign currency translation loss on Philippine peso-denominated cashequivalents designated as cash flow hedges aggregating to US$3.1 million have been recognizedunder equity as of December 31, 2013. Foreign currency losses amounting to US$3.1 million in2014 was presented as part of “Port authorities’ share in gross revenues” in the 2014 consolidatedstatement of income (see Note 21.2).

As at December 31, 2014, 2015 and 2016, ICTSI does not have any outstanding Philippine pesodesignated as cash flow hedge.

Tecplata designated an aggregate of US$173.0 million (AR$927.9 million) in 2013 andUS$40.3 million (AR$308.5 million) in 2014 of its Argentine peso-denominated cash and cashequivalents as cash flow hedges of the currency risk on Argentine peso-denominated payables thatwould arise from forecasted Argentine peso-denominated capital expenditures. The hedging in2013 and 2014 covered forecasted Argentine peso-denominated expenditures from April 2013 to

— F-161 —

June 2014 and from March 2014 to December 2014, respectively. Foreign currency translationgains or losses deferred in equity would form part of the cost of the port infrastructure (includingport fees during the construction period) and would be recycled to profit and loss throughdepreciation.

Foreign currency translation loss on Argentine peso-denominated cash and cash equivalentsdesignated as cash flow hedges aggregating to US$6.2 million have been recognized under equityin 2014, and US$6.2 million, US$1.9 million and nil have been transferred from equity toconstruction in-progress under “Intangible assets” account in the consolidated balance sheets as atDecember 31, 2014, 2015 and 2016, respectively. No ineffectiveness was recognized in theconsolidated statements of income for the years ended December 31, 2014, 2015 and 2016,respectively.

As at December 31, 2016, Tecplata does not have any outstanding Argentine peso designated ascash flow hedge.

Interest Rate Swap. In November 2014, BCT entered into an interest rate swap transaction tohedge the interest rate exposure on its floating rate US dollar-denominated loan maturing in 2021.A notional amount of US$21.5 million floating rate loan was swapped to fixed rate. Under theinterest rate swap, BCT pays fixed interest rate of 1.87 percent and receives floating rate ofsix-month LIBOR on the notional amount. As at December 31, 2014, the market valuation loss onthe outstanding interest rate swap amounted to US$0.1 million. The effective portion of thechange in the fair value of the interest rate swap amounting to US$84 thousand (net ofUS$20 thousand deferred tax) for the year ended December 31, 2014 was taken to equity underother comprehensive loss (see Note 15.7). The swap was terminated on December 24, 2015 due tothe full prepayment of the HSBC loans. BCT paid US$0.4 million as net compensation for theswap cancellation.

In 2014, AGCT entered into an interest rate swap transaction to hedge the interest rate exposure onits floating rate Euro denominated loan maturing in 2023. A notional amount of EUR5.1 million(US$6.2 million) and EUR3.8 million (US$4.6 million) out of the total EUR10.6 million(US$12.8 million) floating rate loan was swapped to fixed rate. Under the interest rate swap,AGCT pays fixed interest of 6.19 percent for EUR5.1 million and 5.55 percent for EUR3.8 millionand receives floating rate of one-month EURIBOR plus 4.20 bps on the notional amount. Themarket valuation loss on the outstanding interest rate swap amounted to EUR0.5 million(US$0.6 million) as at December 31, 2014 and 2015, and EUR0.5 million (US$0.5 million) as atDecember 31, 2016. The effective portion of the change in the fair value of the interest rate swapamounting to EUR0.4 million (US$0.5 million), net of EUR0.1 million (US$0.1 million) deferredtax, EUR0.4 million (US$0.5 million), net of EUR0.1 million (US$0.1 million) deferred tax and,EUR0.4 million (US$0.4 million), net of EUR0.1 million (US$0.1 million) deferred tax for theyear ended December 31, 2014, 2015 and 2016, respectively, was taken to equity under othercomprehensive loss (see Note 15.7).

In August 2016, VICT entered into interest rate swap transactions to hedge the interest rateexposures on its floating rate AUD-denominated loans maturing in 2023, 2026 and 2031. A totalnotional amount of AUD320.4 million floating rate loan was swapped to fixed rate. Under theinterest rate swap arrangements, VICT pays annual fixed interest of a range of 2.10% to 2.5875%and receives floating rate of six-month Bank Bill Swap Bid Rate (BBSY) basis points on thenotional amount. As of December 31, 2016, the market valuation gain on the outstanding interestrate swaps amounted to AUD9.8 million (US$7.1 million). The effective portion of the change inthe fair value of the interest rate swap amounting to AUD6.9 million (US$5.1 million), net ofAUD2.9 million (US$2.0 million) deferred tax for the year ended December 31, 2016 was taken toequity under other comprehensive loss (see Note 15.7).

— F-162 —

In January 2016, CMSA entered into interest rate swap transactions to hedge the interest rateexposure on its floating rate US$-denominated floating rate loan maturing in 2027. A totalnotional amount of US$181.0 million floating rate loan was swapped to fixed rate. Under theinterest rate swap arrangements, CMSA pays annual fixed interest of an average 2.44% andreceives floating rate of six-month LIBOR on the notional amount. As of December 31, 2016, themarket valuation loss on the outstanding interest rate swaps amounted to US$1.5 million. Theeffective portion of the change in the fair value of the interest rate swap amounting toUS$1.0 million, net of US$0.5 million deferred tax for the year ended December 31, 2016 wastaken to equity under other comprehensive loss (see Note 15.7).

In November 2016, ICTSI entered into an interest rate swap transaction to hedge the interest rateexposures of the CGSA’s floating rate US$-denominated floating rate loan maturing in 2021. Atotal notional amount of US$32.5 million floating rate loan was swapped to fixed rate. Under theinterest rate swap arrangements, ICTSI pays annual fixed interest of 3.045 percent and receivesfloating rate of six-month LIBOR plus 160 basis points on the notional amount. As ofDecember 31, 2016, the market valuation loss on the outstanding interest rate swaps amounted toUS$0.1 million. The effective portion of the change in the fair value of the interest rate swapamounting to US$78.5 thousand, net of US$33.6 thousand deferred tax for the year endedDecember 31, 2016 was taken to equity under other comprehensive loss (see Note 15.7).

27.5 Other Derivative Instruments Not Designated as Hedges

Embedded Prepayment Options. In 2008, embedded prepayment options were identified inICTSI’s two loan contracts with HSBC or the FXCN Note with outstanding principal amounts ofUS$15.0 million (P=715.0 million) (the 5.5-year loan) and US$10.3 million (P=490.0 million)(the 7-year loan) as at December 31, 2008 (see Note 16.2.4). The prepayment options areexercisable on the third (for the 5.5-year loan) and fourth (for the seven-year loan) anniversary ofissue or any interest payment date thereafter. The 5.5-year loan can be preterminated at102 percent of the outstanding principal if the remaining term at the time of prepayment is at least18 months; and at 101 percent if the remaining term is less than 18 months. The seven-year loancan be preterminated at 103 percent of the outstanding principal if the remaining term at the timeof prepayment is at least 36 months; 102 percent if the remaining term is less than 36 but morethan 12 months; or 101 percent if the remaining term is 12 months or less.

The fair value of the embedded derivatives at inception aggregating to US$0.2 million wasrecorded as a derivative asset and a corresponding amount was recorded as a premium on the hostloan contracts. The derivative asset is marked-to-market through profit or loss while the loanpremium is amortized over the life of the respective loans.

In November 2014, ICTSI exercised the prepayment option on its 7-year FXCN Note withoutstanding principal amount of US$10.3 million (P=463.1 million). Fair value of the embeddedderivative as of exercise date amounting to US$0.7 million in 2014 was charged to “Otherexpense” account in the 2014 consolidated statement of income (see Note 21.3).

Currency Options and Forwards. In 2015, ICTSI entered into AUD put and US$ call currencyoptions with Australia and New Zealand Banking Group Limited and Deutsche Bank AG, LondonBranch. ICTSI also entered into sell US$ and buy AUD forward contracts with HSBC. As ofDecember 31, 2016, there were no outstanding forward contacts.

— F-163 —

27.6 Fair Value Changes on Derivatives

The net movements in fair value changes of ICTSI’s derivative instruments are as follows:

2014 2015 2016Balance at beginning of year US$737,581 (US$751,428) (US$223,063)Net changes in fair value of derivatives: Designated as accounting hedges (751,428) 93,060 5,234,217

Not designated as accounting hedges 331,154 (331,154)(13,847) (327,214) 4,680,000

Less fair value of settled instruments 737,581 (104,151) (554,217)Balance at end of year (US$751,428) (US$223,063) US$5,234,217

The net movement in fair value changes of freestanding derivative instruments designated as cashflow hedges are presented in the consolidated statements of comprehensive income as follows:

2014 2015 2016Balance at beginning of year (US$4,744,190) (US$2,457,453) (US$494,308)Changes in fair value of cash flow hedges: Designated derivatives (751,428) 93,060 6,133,973 Designated cash equivalents (6,182,364)Transferred to construction in-progress 6,240,237 1,855,269 (345,539)Transferred to consolidated statements of income 2,831,048 104,151Tax effects 149,244 (89,335) (1,611,411)Balance at end of year (US$2,457,453) (US$494,308) US$3,682,715

The net changes in fair value of the derivatives not designated as accounting hedges and thechange in fair value of cash flow hedges transferred to profit or loss are presented in theconsolidated statements of income under the following accounts:

2014 2015 2016Foreign exchange gain US$241,297 US$ US$Port authorities’ share in gross revenues (3,072,345)Other income (expense) 227,003 (331,154)

(US$2,831,048) US$227,003 (US$331,154)

Fair value changes on freestanding derivatives as at December 31 are presented as follows:

2014 2015 2016Derivative assets US$ US$331,154 US$7,209,706Derivative liabilities (751,428) (554,217) (1,975,489)Total (US$751,428) (US$223,063) US$5,234,217

28. Financial Risk Management Objectives and Policies

The principal financial instruments of the Group comprise mainly of bank loans and cash and cashequivalents. The main purpose of these financial instruments is to raise working capital and majorcapital investment financing for the Group’s port operations. The Group has various otherfinancial assets and liabilities such as trade receivables and trade payables, which arise directlyfrom its operations.

ICTSI had port operations and development projects in 18 countries as at December 31, 2016.Short-term treasury activities are carried out at the subsidiary level; however, overall policydecisions concerning the Group’s financial risks are centralized at the Parent Company in Manila.

— F-164 —

The Board reviews and approves the Group’s policies for managing each of these risks, assummarized below, as well as authority limits. Treasury operations are regularly reviewedannually by Internal Audit to ensure compliance with the Group’s policies.

ICTSI finances its business activities through a mix of cash flows from operations and long-termloans from banks. It is the Group’s policy to minimize the use of short-term loans. The Group’sborrowings are in US Dollar, Philippine Peso, Euro, Chinese Renminbi, Pakistani Rupee andAustralian Dollar at fixed and floating rates of interest. The Group minimizes its currencyexposure by matching its currency of borrowing to the currency of operations and functionalcurrency at the relevant business unit whenever possible. It is, and has been throughout the yearunder review, the Group’s policy that no trading in financial instruments shall be undertaken.

In the context of PFRS 7, the main risks arising from the normal course of the Group’s businessare interest rate risk, liquidity risk, foreign currency risk and credit risk.

Working Capital ManagementThe Parent Company has minimal working capital requirements due to the short cash collectioncycle of its business. Working capital requirements are well within the credit facilities establishedwhich are adequate and available to the Parent Company to meet day-to-day liquidity and workingcapital requirements. The credit facilities are regularly reviewed by the Treasury Group to ensurethat they meet the objectives of the Group. Most of the foreign operating subsidiaries currently donot access short-term credit facilities as their respective cash flows are sufficient to meet workingcapital needs.

Interest Rate RiskThe Group’s exposure to market risk for changes in interest rates relates primarily to the Group’sbank loans and is addressed by a periodic review of the Group’s debt mix with the objective ofreducing interest cost and maximizing available loan terms.

— F-165 —

The

follo

win

g ta

ble

sets

out

the

carr

ying

am

ount

, by

mat

urity

, of t

he G

roup

’s li

abili

ties

that

are

expo

sed

to in

tere

st ra

te ri

sk a

s at

Dec

embe

r 31:

2014

Less

than

1 Y

ear

to 2

yea

rs>2

Yea

rsto

3 y

ears

>3 Y

ears

to 4

yea

rs>4

Yea

rsto

5 y

ears

Ove

r 5 Y

ears

Tota

lN

et D

ebt*

(In O

rigi

nal C

urre

ncy)

(In U

S D

olla

r)L

iabi

litie

sLo

ng-te

rm D

ebt

Floa

ting

Rat

e:U

S$ L

oan

–1,

880,

000

4,23

0,00

05,

170,

000

12,2

20,0

0023

,500

,000

US$

23,5

00,0

00U

S$23

,458

,852

Inte

rest

rate

LIB

OR

+1.7

0% sp

read

US$

Loa

n20

,000

,000

––

––

20,0

00,0

0020

,000

,000

19,9

14,3

63In

tere

st ra

tePr

evai

ling

mar

ket r

ates

US$

Sec

uriti

es3,

200,

958

3,43

1,98

8–

––

6,63

2,94

66,

632,

946

6,56

3,69

7In

tere

st ra

tePa

ssiv

e R

efer

entia

l R

ate

from

Ecu

ador

Cen

tral B

ank

(PR

ECB

)+2.

5%PK

R lo

an59

7,51

0,93

459

7,51

0,93

429

8,75

5,46

8–

–1,

493,

777,

336

14,8

60,1

3014

,860

,130

Inte

rest

rate

KIB

OR

+0.7

5% sp

read

Euro

loan

1,10

4,28

61,

012,

262

1,10

4,28

61,

196,

310

5,07

8,57

19,

495,

715

11,4

87,9

1511

,487

,915

Inte

rest

rate

EUR

IBO

R+4

.2%

spre

adR

MB

loan

35,0

00,0

0018

7,23

0,00

0–

––

222,

230,

000

35,8

11,7

8035

,811

,780

Inte

rest

rate

Prev

ailin

g m

arke

t rat

es

* Net

of D

ebt I

ssua

nce

Costs

2015

Less

than

1 Y

ear

to 2

yea

rs>2

Yea

rsto

3 y

ears

>3 Y

ears

to 4

yea

rs>4

Yea

rsto

5 y

ears

Ove

r 5 Y

ears

Tota

lN

et D

ebt*

(In O

rigi

nal C

urre

ncy)

(In U

S D

olla

r)L

iabi

litie

sLo

ng-te

rm D

ebt

Floa

ting

Rat

e:U

S$ S

ecur

ities

3,43

1,98

8–

––

–3,

431,

988

US$

3,43

1,98

8U

S$3,

417,

041

Inte

rest

rate

Pass

ive

Ref

eren

tial

Rat

e fro

m E

cuad

or C

entra

l Ban

k (P

REC

B)+

2.5%

PKR

loan

597,

510,

934

298,

755,

468

––

–89

6,26

6,40

28,

557,

836

8,55

7,83

6In

tere

st ra

teK

IBO

R+0

.75%

spre

adEu

ro lo

an1,

012,

262

1,10

4,28

61,

196,

310

1,10

4,28

63,

974,

286

8,39

1,43

09,

114,

770

9,11

4,77

0In

tere

st ra

teEU

RIB

OR

+4.2

% sp

read

RM

B lo

an18

7,23

0,00

0–

––

–18

7,23

0,00

028

,832

,561

28,8

32,5

61In

tere

st ra

tePr

evai

ling

mar

ket r

ates

* Net

of D

ebt I

ssua

nce

Costs

— F-166 —

2016

Les

s tha

n 1

Yea

rto

2 y

ears

>2 Y

ears

to 3

yea

rs>3

Yea

rsto

4 y

ears

>4 Y

ears

to 5

yea

rsO

ver 5

Yea

rsT

otal

Net

Deb

t*

(In O

rigi

nal C

urre

ncy)

(In U

S D

olla

r)L

iabi

litie

sLo

ng-te

rm D

ebt

Floa

ting

Rat

e:U

S$ L

oan

––

15,0

00,0

00–

–15

,000

,000

US$

15,0

00,0

00U

S$15

,000

,000

Inte

rest

rate

LIB

OR

+ 1

.95%

spre

ad

US$

Loa

n3,

000,

000.

00–

––

–3,

000,

000

3,00

0,00

03,

000,

000

I

nter

est r

ate

LIB

OR

+ 1

.60%

spre

adPK

R lo

an29

8,75

5,46

8–

––

–29

8,75

5,46

82,

862,

465

2,86

2,46

5In

tere

st ra

teK

IBO

R+0

.75%

spr

ead

* Net

of D

ebt I

ssua

nce

Costs

— F-167 —

Re-pricing of floating rate financial instruments is mostly done monthly, quarterly orsemi-annually. Interest on fixed rate financial instruments is fixed until maturity of theinstrument. Financial instruments not included in the above tables are either noninterest-bearing,therefore not subject to interest rate risk, or has minimal interest rate exposure due to theshort-term nature of the account (i.e., cash equivalents).

The sensitivity to a reasonably possible change in interest rates, with all other variables heldconstant, of ICTSI’s income before income tax (through the impact on unhedged floating rateborrowings), at December 31 are as follows (amounts in millions unless otherwise indicated):

Effect on Profit Before TaxIncrease/Decrease in

Interest Rates (%) 2014 2015 2016Loans +1.0 (US$0.9) (US$0.5) (US$0.2)

-1.0 0.9 0.5 0.2

Liquidity RiskThe Group monitors and maintains a certain level of cash and cash equivalents and bank creditfacilities deemed adequate by management to finance the Group’s operations, ensure continuity offunding and to mitigate the effects of fluctuations in cash flows. The Group’s policy is that notmore than 25 percent of borrowings should mature in any 12-month period. Seven percent, sevenpercent and five percent of the Group’s total borrowings, gross of debt issuance costs as atDecember 31, 2014, 2015 and 2016, respectively, will mature in the ensuing 12 months. TheGroup is reassessing its policy in mitigating liquidity risk in line with the current developmentsand demands of its rapidly growing business.

The tables below summarize the maturity profile of the Group’s financial liabilities as atDecember 31 based on contractual undiscounted payments (amounts in millions unless otherwiseindicated).

2014Less than3 Months

3 to 6 Months

>6 to 12 Months

>1 to5 Years

More than5 Years Total

Long-term debt US$34.2 US$8.2 US$62.3 US$613.7 US$815.3 US$1,533.7Accounts payable and other current

liabilities* 134.8 0.1 13.4 – – 148.3Other noncurrent liabilities* – – – 47.1 5.3 52.4Loans payable – 4.6 19.9 – – 24.5Derivative liabilities – – 0.7 0.1 – 0.8Concession rights payable 11.8 12.3 22.9 249.9 766.8 1,063.7Total US$180.8 US$25.2 US$119.2 US$910.8 US$1,587.4 US$2,823.4*Excludes statutory liabilities and provisions for claims and losses


3 to 6 Months

>6 to 12 Months

>1 to5 Years


Long-term debt US$36.6 US$10.6 US$73.8 US$566.0 US$1,113.1 US$1,800.1Accounts payable and other current

liabilities* 145.7 0.2 4.6 2.1 2.0 154.6Other noncurrent liabilities* – – – 104.4 8.4 112.8Loans payable 1.5 0.5 – – – 2.0Derivative liabilities 0.1 – 0.1 0.4 – 0.6Concession rights payable 11.7 12.5 23.3 250.9 710.2 1,008.6Total US$195.6 US$23.8 US$101.8 US$923.8 US$1,833.7 US$3,078.7*Excludes statutory liabilities and provisions for claims and losses

— F-168 —


3 to 6 Months

>6 to 12 Months

>1 to5 Years


Long-term debt US$34.4 US$7.5 US$47.2 US$666.5 US$1,178.8 US$1,934.4Accounts payable and other current

liabilities* 245.0 11.4 8.9 265.3Other noncurrent liabilities* 76.7 6.7 83.4Loans payable 21.6 15.0 36.6Derivative liabilities 0.3 0.2 1.5 2.0Concession rights payable 11.4 12.2 22.7 235.0 627.2 908.5Total US$312.7 US$31.1 US$93.8 US$978.4 US$1,814.2 US$3,230.2* Excludes statutory liabilities and provisions for claims and losses

The financial liabilities in the above tables are gross undiscounted cash flows. However, thoseamounts may be settled using cash on hand and in banks, aggregating US$113.1 million,US$222.1 million and US$248.6 million as at December 31, 2014, 2015 and 2016, respectively.Furthermore, cash equivalents, amounting to US$81.2 million, US$132.4 million andUS$76.5 million as at December 31, 2014, 2015 and 2016, respectively, may also be used tomanage liquidity.

Foreign Currency RiskAs a result of operations in subsidiaries whose functional currency is not the US dollar, theGroup’s consolidated balance sheets can be affected significantly by movements in thesubsidiaries’ functional currency and US dollar exchange rates (see Note 1.3).

In respect of financial assets and liabilities held in currencies other than the functional currenciesof the Parent Company and the operating subsidiaries, the net exposure is kept to an acceptablelevel by buying or selling foreign currencies at spot/forward rates where necessary to addressshort-term imbalances.

The Group recognized in the consolidated statements of income net foreign exchange lossamounting to US$3.1 million in 2014, US$70.0 thousand in 2015 and US$228.0 thousand in 2016arising from net foreign-currency denominated financial assets and liabilities as atDecember 31, 2014, 2015 and 2016, respectively, which resulted mainly from the movements ofPhilippine peso, Brazilian real, Mexican peso and Colombian peso against the US dollar andMalagasy ariary against Euro.

The following table shows the Group’s significant foreign currency-denominated financial assetsand liabilities and their US Dollar equivalents at December 31:

2014 2015 2016Foreign

Currency US DollarForeign


Currency US DollarCurrent Financial AssetsCash and cash equivalents: AUD 1,951,743 US$1,595,550 1,440,013 US$1,049,193 140,817,070 US$101,500,944 Philippine peso 2,337,570,433 52,271,253 2,821,310,538 59,951,350 950,897,686 19,125,054 EUR 366,740 443,682 1,684,231 1,829,412 16,463,959 17,315,145 PKR 724,044,010 7,202,805 816,351,666 7,794,784 462,705,166 4,433,316 RMB 23,952,248 3,859,842 15,504,781 2,387,665 23,469,361 3,379,318 BND 1,620,340 1,223,268 1,702,328 1,200,598 4,610,355 3,183,727 USD 1,081,420 1,081,420 98,542,879 98,542,879 1,990,045 1,990,045 IDR 4,493,918,380 362,764 3,477,724,327 252,228 21,387,090,632 1,587,404 BRL 1,416,818 399,824 2,429,959 619,429 4,745,355 1,457,777 HRK 2,087,392 329,522 2,556,467 363,351 2,552,159 355,607 MXN 84,565,915 5,732,699 68,079,210 3,956,368 3,470,302 167,427 PLN 3,143,494 887,091 2,738,233 698,013 454,107 108,449 ARS 22,254,446 2,628,995 14,204,997 1,098,480 678,162 42,705 MGA 1,589,883,146 615,042 2,890,926,894 898,920 6,058,886 1,801 INR 999,929,186 15,860,890 24,793,335 374,784 29 – JPY 171,257,938 1,429,771 – – – –

(Forward)

— F-169 —

2014 2015 2016Foreign



Currency US DollarReceivable: EUR 907,257 US$1,097,599 1,093,157 US$1,187,387 9,186,168 US$9,661,093 BRL 31,460,030 8,877,986 29,208,215 7,445,567 32,383,802 9,948,329 PKR 406,238,467 4,041,269 695,274,938 6,638,705 608,022,824 5,825,647 RMB 30,111,796 4,852,437 28,822,694 4,438,563 32,554,261 4,687,439

Philippine peso 274,581,790 6,140,022 480,355,808 10,207,306 201,463,663 4,051,964 BND 1,003,665 757,711 3,259,636 2,298,918 2,658,675 1,835,975 IDR 8,366,103,644 675,339 25,884,219,838 1,877,301 4,194,324,435 311,313 MXN 36,999,169 2,508,163 48,685,086 2,829,295 4,543,855 219,222 PLN 3,575,676 1,009,052 7,648,719 1,949,761 736,070 175,786 HRK 1,651,382 260,692 1,533,161 217,909 1,095,441 152,634 MGA 5,500,274,365 2,127,766 4,912,273,273 1,527,448 2,116,720 629 USD 8,093,370 8,093,370 6,598,209 6,598,209 – –

136,365,824 228,233,823 191,518,750Current Financial

LiabilitiesAccounts payable and other

current liabilities: AUD 10,209,742 8,346,464 – – 142,570,858 102,765,075 USD 196,628 196,628 16,575,366 16,575,366 18,913,941 18,913,941 PKR 859,622,162 8,551,540 1,232,359,783 11,766,962 1,133,443,198 10,859,856 EUR 463,984 561,328 453,263 492,334 9,827,499 10,335,580 BRL 41,242,935 11,638,711 40,676,672 10,369,031 21,786,975 6,692,976

Philippine peso 4,212,535,467 94,198,020 4,271,849,411 90,774,531 212,639,689 4,276,744 RMB 26,666,748 4,297,276 30,611,564 4,714,040 14,883,954 2,143,118 MXN 159,250,583 10,795,552 267,444,776 15,542,338 18,162,594 876,269 HRK 11,593,636 1,830,208 8,129,277 1,155,416 4,842,152 674,686 PLN 7,601,616 2,145,168 10,929,904 2,786,180 2,506,764 598,659 BND 509,564 384,693 990,894 698,847 620,532 428,515 IDR 8,394,001,052 677,591 14,459,365,871 1,048,692 3,222,902,552 239,212

Georgian lari 2,175,433 1,154,076 3,081,984 1,284,160 411,392 154,804 MGA 19,559,397,889 7,566,498 17,311,465,476 5,382,918 5,910,849 1,757 JPY 181,811,564 1,517,879 146,490,653 1,218,521 – –Noncurrent Financial

LiabilitiesOther noncurrent liabilities: USD – – 92,855,916 92,855,916 – – AUD 47,290,660 38,660,114 – – 89,588,968 64,575,728 PLN 4,050,851 1,143,146 73,492,907 18,734,331 16,728,916 3,995,156 IDR 3,570,447,533 288,218 5,584,981,653 405,061 3,568,854,267 264,889

Philippine peso 6,118,854 136,826 16,373,167 347,921 9,712,524 195,344 EUR 8,877,594 10,740,113 164,580 178,766 94,281 99,156 MXN 5,282,245 358,082 7,331,088 426,040 372,892 17,990 MGA 601,814,508 232,810 – – 217,212 65 PKR 44,215,071 439,852 – – – – HRK 889,219 140,375 – – – –Long-term debt

AUD – – – – 249,856,742 180,096,739 EUR 1,493,777,418 14,860,130 9,495,714 11,487,915 7,379,167 7,760,670 PKR 222,230,000 35,811,780 1,493,777,418 14,860,130 298,755,468 2,862,465 RMB – – 222,230,000 35,811,780 – – PHP 9,495,714 11,487,915 – – – –Concession rights payable EUR – – 106,055,601 32,934,983 14,063,368 14,790,444 PKR 106,055,601 32,934,983 917,892,047 9,131,210 816,915,915 7,827,116

301,095,976 380,983,389 441,446,954Net foreign currency-

denominated financialliabilities (US$156,243,313) (US$81,993,363) (US$249,928,204)

In translating the foreign currency-denominated monetary assets and liabilities into US dollaramounts, the Group used the exchange rates as shown in the table of exchange rates(see Note 3.3).

— F-170 —

The following tables present the impact on the Group’s income before income tax (due to changein the fair value of foreign currency denominated financial assets and liabilities) and equity (due totranslation hedging), of changes in the exchange rate between the foreign currencies and theUS dollar (holding all other variables held constant) as at December 31 (amounts in millionsunless otherwise indicated):

2014Effect on Profit

Before TaxEffect

on EquityChange in US dollar to other foreign currency exchange rates:

5% appreciation US$2.4 (US$3.1)5% depreciation (2.7) 3.4


Before TaxEffect




Before TaxEffect



The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio offixed to float interest rates of the debt and derivatives and the proportion of the financialinstruments in foreign currencies are all constant and on the basis of hedge designation in place ateach balance sheet date.

Credit RiskThe Group trades only with recognized, creditworthy third parties and the exposure to credit riskis monitored on an ongoing basis with the result that the Group’s exposure to bad debts is notsignificant. Since the Group trades only with recognized third parties, collateral is not required inrespect of financial assets. Moreover, counterparty credit limits are reviewed by management onan annual basis. The limits are set to minimize the concentration of risks and mitigate financiallosses through potential counterparty failure.

With respect to credit risk arising from the other financial assets of the Group, which comprise ofcash and cash equivalents, and available-for-sale investments, the Group’s exposure to credit riskarises from default of the counterparty, with a maximum exposure equal to the carrying amount ofthese instruments.

As at December 31, 2014, 2015 and 2016, about 28 percent, 62 percent and 32 percent,respectively, of cash and cash equivalents of the Group is with Philippine local banks.Investments of funds are made only with counterparties approved by the Board. The maximumexposure to credit risk is represented by the carrying amount of each financial asset in theconsolidated balance sheets.

— F-171 —

At December 31, the following tables provide credit information and maximum exposure ofICTSI’s financial assets (amounts in millions unless otherwise indicated):

2014Neither Past Due

nor ImpairedPast Due but

Not Impaired Impaired TotalLoans and ReceivablesCash and cash equivalents:

Cash in banks US$111.3 US$– US$– US$111.3 Cash equivalents 81.2 – – 81.2Receivables Trade 67.7 15.0 5.0 87.7

Advances and nontrade 6.4 1.7 0.1 8.2AFS InvestmentsUnquoted equity shares 0.7 – – 0.7Quoted equity shares 1.6 – – 1.6

US$268.9 US$16.7 US$5.1 US$290.7





Advances and nontrade 9.4 1.5 0.1 11.0AFS InvestmentsUnquoted equity shares 0.7 – – 0.7Quoted equity shares 1.7 – – 1.7Derivative Assets 0.3 – – 0.3

US$420.2 US$22.9 US$5.6 US$448.7





Advances and nontrade 9.3 7.2 0.4 16.9AFS InvestmentsUnquoted equity shares 0.7 – – 0.7Quoted equity shares 1.5 – – 1.5Derivative Assets 7.2 – – 7.2

US$389.1 US$43.8 US$10.5 US$443.4

— F-172 —

At December 31, the credit quality per class of financial assets that were neither past due norimpaired follow (amounts in millions unless otherwise indicated):

2014Neither Past Due nor Impaired

Grade A Grade B Grade C TotalLoans and ReceivablesCash and cash equivalents:

Cash in banks US$111.3 US$– US$– US$111.3 Cash equivalents 81.2 – – 81.2Receivables: Trade 59.3 6.4 2.0 67.7

Advances and nontrade 6.3 0.1 – 6.4AFS InvestmentsUnquoted equity shares 0.7 – – 0.7Quoted equity shares 1.6 – – 1.6

US$260.4 US$6.5 US$2.0 US$268.9




Advances and nontrade 9.2 0.2 – 9.4AFS InvestmentsUnquoted equity shares 0.7 – – 0.7Quoted equity shares 1.7 – – 1.7Derivative Assets 0.3 – – 0.3

US$409.5 US$5.6 US$5.1 US$420.2




Advances and nontrade 9.2 0.1 – 9.3AFS InvestmentsUnquoted equity shares 0.7 – – 0.7Quoted equity shares 1.5 – – 1.5Derivative Assets 7.2 – – 7.2

US$378.5 US$5.6 US$5.0 US$389.1

The credit quality of the financial assets was determined as follows:

Cash and cash equivalents, derivative financial assets and AFS Investments - based on the creditstanding of the counterparty.

Receivables - Grade A receivables pertains to those receivables from clients or customers thatalways pay on time or even before the maturity date. Grade B includes receivables that arecollected on their due dates provided that they were reminded or followed up by the Group. Thosereceivables which are collected consistently beyond their due dates and require persistent effortfrom the Group are included under Grade C.

— F-173 —

At December 31, the aging analyses of the receivables that were past due but not impaired follow(amounts in millions unless otherwise indicated):

2014Past Due but Not Impaired

1 to 30Days

31 to 60Days

61 to120Days

More than120 Days Total

Trade US$10.6 US$3.1 US$0.5 US$0.8 US$15.0Advances and nontrade – 0.1 – 1.6 1.7

US$10.6 US$3.2 US$0.5 US$2.4 US$16.7


1 to 30Days

31 to 60Days

61 to 120Days


Trade US$14.5 US$4.7 US$1.8 US$0.4 US$21.4Advances and nontrade – – – 1.5 1.5

US$14.5 US$4.7 US$1.8 US$1.9 US$22.9


1 to 30Days

31 to 60Days

61 to 120Days


Trade US$29.4 US$4.4 US$2.8 US$– US$36.6Advances and nontrade 6.5 – 0.4 0.3 7.2

US$35.9 US$4.4 US$3.2 US$0.3 US$43.8

Capital ManagementThe primary objective of the Group’s management is to ensure that it maintains a strong creditrating and healthy capital ratios in order to support its business and maximize shareholder value.

The Group considers the total equity and debt as its capital. The Group manages its capitalstructure and makes adjustments to it, in light of changes in economic conditions. To maintain oradjust the capital structure, the Group may adjust the dividend payment to shareholders, returncapital to shareholders or issue new shares and raise additional debt through either the bond orloan markets or prepay existing debt. No changes were made in the objectives, policies orprocesses during the years ended December 31, 2014, 2015 and 2016.

The Group monitors capital using gearing ratio. Gearing ratio is total debt over net worth (totalequity) where total debt includes long-term debt and loans payable. Some creditor banks computegearing ratio as total debt less cash and cash equivalents over net worth for the computation of theGroup’s financial covenants.

The Group’s policy is to keep the gearing ratio within two times.

2014 2015 2016Long-term debt US$1,045,967,471 US$1,081,043,350 US$1,344,765,928Loans payable 24,479,272 2,027,231 36,598,275

Total debt (a) 1,070,446,743 1,083,070,581 1,381,364,203

Net worth or total equity (b) 1,473,565,182 1,826,047,875 1,766,079,997

Gearing ratio (a/b) 0.73 times 0.59 times 0.78 times

— F-174 —

29. Earnings Per Share Computation

The following table presents information necessary to calculate earnings per share:

2014 2015 2016Net income attributable to equity holders of the

parent US$181,988,167 US$58,545,218 US$180,015,587Adjustment for the effect of cumulative distribution

on subordinated perpetual capital securities(see Note 15.6) (29,312,500) (36,976,498) (46,276,661)

Net income attributable to equity holdersof the parent, as adjusted (a) US$152,675,667 US$21,568,720 US$133,738,926

Common shares outstanding at beginning of year 2,045,177,671 2,045,177,671 2,045,177,671Weighted shares held by subsidiaries – (652,553) (734,970)Weighted treasury shares (9,649,186) (8,388,527) (11,998,887)Weighted average shares outstanding (b) 2,035,528,485 2,036,136,591 2,032,443,814Effect of dilutive stock grants 9,114,811 10,469,155 17,130,267Weighted average shares outstanding adjusted

for potential common shares (c) 2,044,643,296 2,046,605,746 2,049,574,081

Basic earnings per share (a/b) US$0.075 US$0.011 US$0.066

Diluted earnings per share (a/c) US$0.075 US$0.011 US$0.065

— F-175 —

THE ISSUER

Royal Capital B.V.Hofplein 20, 5th Floor, Office 5.27

3032AC RotterdamThe Netherlands

THE COMPANY

International Container Terminal Services, Inc.ICTSI Administration Building

Manila International Container TerminalMICT South Access Road

Manila 1012Philippines

TRUSTEE

Citicorp International Limited39th Floor, Champion TowerThree Garden Road, Central

Hong Kong

PRINCIPAL PAYING AGENTAND TRANSFER AGENT

Citibank, N.A., London Branchc/o Citibank, N.A., Dublin Branch

1 North Wall QuayDublin 1, Ireland

REGISTRAR

Citibank, N.A., London BranchCitigroup CentreCanada SquareCanary Wharf

London E14 5LBUnited Kingdom

LEGAL ADVISERS

To the Issuer as to English law To the Issuer as to Philippine law To the Issuer as to Dutch Law

Milbank, Tweed, Hadley &McCloy LLP

30/F, Alexandra House18 Chater Road

Central Hong Kong

Picazo Buyco Tan Fider & SantosPenthouse, Liberty Center

104 H.V. dela Costa St., SalcedoVillage

1227 Makati City, Metro ManilaPhilippines

Norton Rose Fulbright LLP24th Floor, Rembrandt Tower

Amstelplein 11096 HA Amsterdam

The Netherlands

To the Joint Lead Managers as to English law To the Joint Lead Managers as to Philippine law

Linklaters Singapore Pte. Ltd.One George Street

#17-01Singapore 049145

SyCip Salazar Hernandez & GatmaitanSyCipLaw Center

105 Paseo de RoxasMakati City 1226

Metro ManilaPhilippines

To the Trustee as to English law

Linklaters10th Floor

Alexandra HouseChater RoadHong Kong

INDEPENDENT AUDITORS OF THE COMPANY

SyCip Gorres Velayo & CompanyCertified Public Accountants

6760 Ayala Ave.Makati City 1226

Philippines

LISTING AGENT

Allen & Gledhill LLPOne Marina Boulevard

#28-00Singapore 018989

You must read the following befo - Singapore Exchange

Documents

Transcript of You must read the following befo - Singapore Exchange