2017 Annual Report Ictsi 2017Ictsi a 2017Nnual a Nnual Report R Eport / 1 the Chairman’S Report

R 2 0 1 7 A EPORT NNUAL R 2 0 1 7 A EPORT NNUAL ICTSI ICTSI 2 0 1 7 A NNUAL R EPORT 1 ICTSI Global Operations 2 The Chairman’s Report 10 2017 Timeline 12 Review of Operations 13 ICTSI Group 18 Asia-Pacific 24 Americas 26 Europe, the Middle East and Africa 30 Corporate Citizenship 36 Management Asia Pacific ! Manila International Container 36 Board of Directors Terminal, Philippines ! 37 Corporate Management Manila North Harbor Terminal (NorthPort), Philippines 38 Terminal Heads ! New Container Terminal 1, Subic Bay 40 Investor Relations Freeport, Philippines ! New Container Terminal 2, Subic Bay Freeport, Philippines ! Cavite Gateway Terminal, Cavite, Philippines ! Laguna Gateway Inland Container Terminal, Laguna, Philippines Europe, the Middle East & Africa ! Bauan International Port, Batangas, ! Baltic Container Terminal, Gdynia, Philippines Americas Poland ! Sasa Wharf, Davao City, Philippines ! Pakistan International Container Terminal, ! Contecon Manzanillo, Colima, Mexico ! Batumi International Container Terminal, ! Makar Wharf, Gen. Santos City, Karachi, Pakistan ! Tuxpan Maritime Terminal, Veracruz, Adjara, Georgia Philippines ! Yantai International Container Terminal, Mexico ! Adriatic Gate Container Terminal, Rijeka, ! Mindanao Container Terminal, Misamis Shandong, China ! Puerto Cortes, Cortes, Honduras Croatia Oriental, Philippines ! Motukea International Terminal, Motukea, ! Contecon Guayaquil, Guayas, Ecuador ! Basra Gateway Terminal, Umm Qasr, Iraq ! Hijo International Port, Tagum City, Papua New Guinea ! Tecon Suape, Pernambuco, Brazil ! Madagascar International Container Philippines ! South Pacific International Container ! Puerto Aguadulce, Buenaventura, Terminal, Toamasina, Madagascar ! Makassar Container Terminal, South Terminal, Lae, Papua New Guinea Colombia ! Matadi Gateway Terminal, Kongo Central, Sulawesi, Indonesia ! Victoria International Container Terminal, ! TecPlata, Buenos Aires, Argentina DR Congo ! PT Oja - Tanjung Priok, Jakarta, Indonesia Melbourne, Australia ICTSI 2017 ANNUAL REPORT ICTSI 2017ICTSI A2017NNUAL A NNUALREPORT R EPORT/ 1 THE CHAIRMAN’S REPORT he year 2017 was the first time in many years that we saw synchronized growth in global trade across almost all markets and regions. The last half of the year also Contecon Manzanillo Berth 27 at Basra Gateway Terminal marked a turnaround for the container Victoria International Container Terminal T shipping industry where all the major carriers were profitable again for the first time since 2007. The year was both steady for the Company when we enjoyed organic growth in our operating terminals with a few exceptions, and a year of start-ups where we completed and started up four terminals. As the shipping industry continued its slow recovery from the crisis, a new era has Consolidated Volumes been ushered in with the consolidation of (TEU) 10,000,000 major shipping lines. This has resulted in a major reduction of shipping line companies +5.3% 8,000,000 into only 10 very large lines. To a certain extent, what this translates to are added 6,000,000 complexities in negotiations and redirection of investments into infrastructure and equipment 4,000,000 to accommodate these very large vessels. 9,153,458 8,689,363 2,000,000 2017 2016 2 / ICTSI 2017 ANNUAL REPORT ICTSI 2017 ANNUAL REPORT / 3 Business Development The diversity of our operations allowed us to withstand the otherwise negative impact of volatility in certain regions driven by consolidation. In Colombia, we formally opened Puerto Aguadulce together with our joint venture partner PSA International after a soft opening in November 2016. Leveraging on state-of-the-art equipment and systems, Puerto Aguadulce is setting a new standard in the region, and is now ramping up operations. We further strengthened our market positioning in Iraq as the first fully foreign-funded port infrastructure development Puerto Aguadulce Basra Gateway Terminal in the country. Last year, our Iraqi operations opened its new terminal, Berth 27, representing the first phase of Basra Gateway Terminal’s expansion. The added 300,000 TEUs to BGT’s annual capacity, and is now almost at full capacity. We also reached an agreement with the General Company for Ports in Iraq last October for the second phase expansion, which includes the construction of two new berths . This will be completed in the second quarter of 2019, which by then would further add another 600,000 TEUs to the terminal, raising the total annual capacity to 1.2 million TEUs. In the Oceania region, we reached an accord with the Papua New Guinea government and local stakeholders to operate two terminals – South Pacific International Container Terminal in Lae in the industrial province of Morobe, and Motukea International Terminal near Port Moresby, PNG’s capital. These two new terminals are the main gateways for PNG. In the Philippines, in coordination with the Department of Transportation, we started construction of Cavite Gateway Terminal – the country’s first roll-on, roll-off container barge terminal in Tanza, Cavite. With the first phase development scheduled for completion this year, the USD30 million project will be integrated with other major port facilities in Luzon to improve trade facilitation in the Philippines. Businesses will now have an alternative way to move cargo to and from the Port of Manila and the economic zones of Cavite via container barges plying the Manila Bay. This should significantly relieve Metro Manila road traffic of container trucks. Towards the end of the year, we purchased 34.83 percent of the total outstanding shares of Manila North Harbour Port. The purchase is in sync with our aim to interconnect marine terminals and dry ports in Luzon to facilitate cargo MOA signing with the local community leaders for ICTSI's port projects in Papua New Guinea Consolidated Gross Consolidated EBITDA Consolidated Net Income Consolidated Net Income Revenues (US$) Attributable to Equity (US$) Construction at Cavite Gateway Terminal (US$) 600,000,000 Holders 210,000,000 1,300,000,000 +10.1% (US$) +7.4% 180,000,000 +10.3% 500,000,000 200,000,000 1,100,000,000 +1.2% 150,000,000 900,000,000 400,000,000 160,000,000 120,000,000 700,000,000 300,000,000 120,000,000 90,000,000 500,000,000 200,000,000 80,000,000 300,000,000 60,000,000 180,015,587 1,244,438,207 578,011,556 525,078,344 207,716,799 193,470,378 182,141,250 1,128,394,951 100,000,000 100,000,000 40,000,000 30,000,000 2017 2016 2017 2016 2017 2016 2017 2016 4 / ICTSI 2017 ANNUAL REPORT ICTSI 2017 ANNUAL REPORT / 5 Manila International Container Terminal Earnings per Share Total Assets Total Equity Cash & Cash Equivalents (Diluted) (US$) (US$) (US$) (US$) 0.070 4,500,000,000 2,000,000,000 350,000,000 +6.2% +4.5% +6.0% 0.060 300,000,000 3,500,000,000 1,600,000,000 -14.0% 0.050 250,000,000 0.040 2,500,000,000 1,200,000,000 200,000,000 0.030 150,000,000 1,500,000,000 800,000,000 0.020 100,000,000 0.069 4,370,686,611 1,872,567,958 279,427,071 325,058,592 0.065 0.010 4,182,952,943 500,000,000 1,766,079,998 400,000,000 50,000,000 2017 2016 2017 2016 2017 2016 2017 2016 movement within the country. As part of efforts to improve our core operations and concentrate on terminals that give us leeway in delivering superior services, ICTSI terminated concessions in the Port of Oregon in the United States, Lekki International Container Terminal in Nigeria and New Muara Container Terminal in Brunei. Madagascar International Container Terminal Group Volume The Group handled consolidated volume of 9,153,458 twenty-foot equivalent units (TEUs) in 2017, five percent more than the 8,689,363 TEUs in 2016. The volume increase resulted from continuing improvements in global trade, the ramp-up in Iraq, new liner services in Mexico, and the contribution of new terminals in DR Congo and Australia. Without these new terminals, volume would have increased by four percent in spite of a big drop in Ecuador. Operations in Asia Pacific continue to account for the biggest slice of the Group’s total consolidated volumes for 2017 at 52.6 percent. This is followed by the Americas at 31.2 percent. Europe Middle East and Africa accounted for 16.2 percent. Financial Performance For the year in review, gross revenues amounted to USD1.244 billion, 10 percent higher compared to the USD1.128 billion in 2016. EBITDA was up 10 percent to USD578 million compared to the USD525.1 million in 2016 largely because of the strong operating results from Iraq, Mexico, Honduras, Madagascar, China, Poland, and Brazil. EBITDA would have been much higher if not for start-up costs of the new terminals particularly Melbourne. However, these start-ups will be the drivers of growth in the coming years. EBITDA margin decreased to 46.4 percent, from 46.5 percent in the previous year. Total cash operating expenses in 2017 increased 13 percent to USD475.9 million, from USD419.6 million in the previous year. This was due to the start-up costs of new terminals (higher costs associated with handling higher volumes in most of our terminals), and lower margin volume at start-ups. Adding to the increase were higher fuel 6 / ICTSI 2017 ANNUAL REPORT ICTSI 2017 ANNUAL REPORT / 7 prices and power rates at certain terminals, and the unfavorable translation impact of the Brazilian Real appreciation. The increase was tapered by savings from our cost optimization initiatives and the favorable translation impact of Philippine Peso-denominated expenses at certain Philippine terminals. Overall, positive operating results generated a net income of USD182.1 million compared to the USD180 million in 2016. Adding to this was a one-time gain of USD7.5 million related to the termination of the sub-concession agreement in Nigeria.

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