Thursday · ictsi form 17-q q2 2012 securities and exchange commission sec form 17-q quarterly report pursuant to section 17 of the securities regulation code and src rule 17(2

ICTSI Form 17-Q Q2 2012

1 4 7 2 1 2SEC Registration Number

I N T E R N A T I O N A L C O N T A I N E R T E R M I N A L

S E R V I C E S , I N C . A N D S U B S I D I A R I E S

(Company’s Full Name)

I C T S I A d m i n i s t r a t i o n B u i l d i n g , M I

C T S o u t h A c c e s s R o a d , M a n i l aI

A(Business Address: No. Street City/Town/Province)

Jose Joel M. Sebastian 245-4101(Contact Person) (Company Telephone Number)

1 2 3 1 S E C 17 Q 0 4 Every 3rd ThursdayMonth Day (Form Type) Month Day

(Fiscal Year) (Annual Meeting)

N/A(Secondary License Type, If Applicable)

Second ArticleDept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

1,581as of June 30, 2012 US$99.8M US$515.7M

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

S T A M P S

Remarks: Please use BLACK ink for scanning purposes.

COVER SHEET


SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-Q

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

1. For the quarterly period ended 30 June 2012

2. Commission identification number: 147212

3. BIR Tax Identification No. 000-323-228

1. Exact name of issuer as specified in its charter:INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.

5. Province, Country or other jurisdiction of incorporation or organization: Philippines

6. Industry Classification Code: ___________________ (SEC Use Only)

7. Address of issuer’s principal office: ICTSI Administration Building, MICT South Access Road,Manila Postal Code: 1012

8. Registrant's telephone number, including area code: (632) 245-4101

9. Former name, former address, and former fiscal year: Not applicable

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

Title of Each ClassNumber of shares outstanding

as of June 30, 2012

Common 1,942,297,860 Shares

11. Are any or all of the Securities listed on a Stock Exchange?Yes [] No [ ]

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

12. Indicate by check mark whether the issuer:

a) has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17 thereunder orSections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The CorporationCode of the Philippines during the preceding 12 months (or for such shorter period that the registrantwas required to file such reports).

Yes [] No [ ]

(b) has been subject to such filing for the past 90 days. Yes [] No [ ]


TABLE OF CONTENTS

PART 1 - FINANCIAL INFORMATION ........................................................................................ 1

Item 1. Financial Statements........................................................................................ 1

Unaudited Consolidated Balance Sheet as at June 30, 2012 andAudited Consolidated Balance Sheet as at December 31, 2011 ...................... 3

Unaudited Consolidated Statements of Income for theThree and Six Months Ended June 30, 2012 and 2011 ................................... 4

Unaudited Consolidated Statements of Comprehensive Income for theThree and Six Months Ended June 30, 2012 and 2011 ................................... 5

Unaudited Consolidated Statements of Changes in Equity for theSix Months Ended June 30, 2012 and 2011 .................................................... 6

Unaudited Consolidated Statements of Cash Flows for theSix Months Ended June 30, 2012 and 2011 .................................................... 7

Notes to Unaudited Consolidated Financial Statements ............................................... 8

Item 2. Management’s Discussion and Analysis of Financial Condition andResults of Operations..................................................................................... 27

PART II - OTHER INFORMATION.............................................................................................. 48

ANNEX 1 - SCHEDULE OF AGING OF RECEIVABLES .......................................................... 49

ANNEX 2 - FINANCIAL SOUNDNESS INDICATORS.............................................................. 50

ANNEX 3 - LIST OF EFFECTIVE PFRS STANDARDS AND INTERPRETATIONS............... 51

ANNEX 4 - MAP OF SUBSIDIARIES .......................................................................................... 53

SIGNATURES ................................................................................................................................ 54

ICTSI Form 17-Q Q2 2012 1

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

The unaudited consolidated financial statements as of June 30, 2012 and for the three and six monthsended June 30, 2012 and 2011 and the audited consolidated balance sheet as of December 31, 2011and the related notes to unaudited consolidated financial statements of International ContainerTerminal Services, Inc. and Subsidiaries (collectively referred to as “the Group”) are filed as part ofthis Form 17-Q on pages 2 to 26.

Operating segments are also reported in the notes to unaudited consolidated financial statements.

There are no other material events subsequent to the end of this interim period that had not beenreflected in the unaudited consolidated financial statements filed as part of this report.


International Container Terminal Services, Inc.and Subsidiaries

Consolidated Financial StatementsJune 30, 2012 (unaudited) and December 31, 2011 (audited)and Three and Six Months Ended June 30, 2012 and 2011 (unaudited)


INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In Thousands)

June 30, 2012(Unaudited)

December 31, 2011(Audited)

ASSETSNoncurrent AssetsIntangibles (Notes 4 and 6) US$957,194 US$853,024Property and equipment (Note 7) 426,864 379,436Investment properties 30,833 30,126Deferred tax assets 21,876 26,593Other noncurrent assets (Note 8) 200,007 67,243

Total Noncurrent Assets 1,636,774 1,356,422Current AssetsCash and cash equivalents (Notes 4, 9 and 10) 330,545 457,636Receivables (Notes 6 and 7) 63,760 56,764Spare parts and supplies 16,571 16,374Prepaid expenses and other current assets (Note 4) 46,970 47,733Derivative assets (Note 9) 8,456 8,369

Total Current Assets 466,302 586,876US$2,103,076 US$1,943,298

EQUITY AND LIABILITIESEquity Attributable to Equity Holders of the ParentCapital stock:

Preferred stock US$236 US$236Common stock 66,037 66,036

Additional paid-in capital (Note 12) 329,225 320,823Cost of shares held by subsidiaries (Note 12) (72,492) (93,510)Treasury shares (Note 12) (4,345) (4,671)Excess of acquisition cost over the carrying value of minority interests (6,148) (6,148)Retained earnings (Note 12) 480,813 452,326Subordinated perpetual capital securities (Note 12) 335,858 193,448Other comprehensive loss (Note 12) (85,415) (90,928)

Total equity attributable to equity holders of the parent 1,043,769 837,612Equity Attributable to Minority Interests (Note 4) 101,981 102,888

Total Equity 1,145,750 940,500Noncurrent LiabilitiesLong-term debt - net of current portion (Note 11) 546,544 589,921Concession rights payable - net of current portion (Note 6) 134,339 140,919Deferred tax liabilities (Note 4) 48,157 45,124Pension liabilities 1,626 1,834

Total Noncurrent Liabilities 730,666 777,798Current LiabilitiesLoans payable (Note 11) 207 2,482Accounts payable and other current liabilities (Note 4) 127,707 127,477Current portion of long-term debt (Note 11) 68,769 58,802Current portion of concession rights payable (Note 6) 15,752 22,154Income tax payable 14,180 13,835Derivative liabilities 45 250

Total Current Liabilities 226,660 225,000US$2,103,076 US$1,943,298

See accompanying Notes to Unaudited Consolidated Financial Statements.


INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF INCOME(In Thousands, Except Per Share Data)

For the Three Months Ended June 30 For the Six Months Ended June 302012 2011 2012 2011

INCOMEGross revenues from port operations US$171,168 US$164,194 US$345,012 US$319,083Foreign exchange gain 2,429 5,355 6,119 9,182Interest income (Note 13) 2,045 1,607 5,239 3,965Other income 886 402 1,521 827

176,528 171,558 357,891 333,057

EXPENSESPort authorities’ share in gross revenues 23,546 21,442 46,904 41,601Manpower costs 33,285 31,367 67,065 58,226Equipment and facilities-related

expenses (Note 13) 22,535 22,692 46,078 41,912Depreciation and amortization 19,467 17,678 38,356 34,564Administrative and other operating

expenses 19,468 16,631 35,907 34,043Interest expense and financing charges on

borrowings (Notes 6, 7 and 11) 4,762 9,222 13,537 19,735Interest expense on concession rights

payable (Note 6) 3,886 4,628 7,799 9,198Foreign exchange loss 1,049 1,690 1,502 4,692Other expenses (Notes 9, 11 and 13) 2,015 1,248 2,709 4,277

130,013 126,598 259,857 248,248

CONSTRUCTION REVENUE(EXPENSE)

Construction revenue 36,765 21,461 111,164 55,104Construction expense (36,765) (21,461) (111,164) (55,104)

– – – –

INCOME BEFORE INCOME TAX 46,515 44,960 98,034 84,809

PROVISION FOR INCOME TAXCurrent 9,870 10,117 20,243 19,892Deferred 1,653 1,841 6,799 3,900

11,523 11,958 27,042 23,792

NET INCOME US$34,992 US$33,002 US$70,992 US$61,017

ATTRIBUTABLE TO:Equity holders of the parent US$34,900 US$31,517 US$70,260 US$60,007Minority interests 92 1,485 732 1,010

US$34,992 US$33,002 US$70,992 US$61,017

Earnings Per Share (Note 14)Basic US$0.015 US$0.017 US$0.031 US$0.032Diluted 0.015 0.016 0.030 0.031



INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In Thousands)

Three Months Ended June 30 Six Months Ended June 302012 2011 2012 2011

NET INCOME FOR THE PERIOD US$34,992 US$33,002 US$70,992 US$61,017

OTHER COMPREHENSIVE INCOME(LOSS)

Exchange differences on translation offoreign operations (16,195) 11,362 2,439 18,091

Net change in unrealized mark-to-marketvalues of derivatives (1,402) (2,335) 4,563 (1,927)

Net unrealized loss removed from equity andrecognized in profit or loss (1,213) – (2,272) –

Net unrealized mark-to-market gain onavailable-for-sale investments (Note 8) 200 4,964 200 4,972

Income tax relating to components of othercomprehensive income 785 700 (687) 578

(17,825) 14,691 4,243 21,714

TOTAL COMPREHENSIVE INCOME FORTHE PERIOD US$17,167 US$47,693 US$75,235 US$82,731

ATTRIBUTABLE TO:Equity holders of the parent US$18,598 US$44,848 US$75,111 US$79,670Minority interests (1,431) 2,845 124 3,061

US$17,167 US$47,693 US$75,235 US$82,731



INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(In Thousands)

Attributable to Equity Holders of the Parent

PreferredStock

CommonStock

AdditionalPaid-inCapital

(Note 12)

PreferredShares Held

by aSubsidiary

CommonShares Held

bySubsidiaries

(Note 12)

TreasuryShares

(Note 12)

Excess ofAcquisition

Cost overthe

CarryingValue of

MinorityInterests

RetainedEarnings(Note 12)

SubordinatedPerpetual

CapitalSecurities

(Note 12)

OtherCompre-

hensiveIncome

(Note 12) Total

MinorityInterests(Note 12)

TotalEquity

Balance at January 1, 2012 US$236 US$66,036 US$320,823 (US$72,492) (US$21,018) (US$4,671) (US$6,148) US$452,326 US$193,448 (US$90,928) US$837,612 US$102,888 US$940,500Total comprehensive income for the period – – – – – – – 70,260 – 4,851 75,111 124 75,235Issuance of subordintated perpetual capital

securities (Note 12) – – – – – – – – 142,410 – 142,410 – 142,410Share-based payments (Note 12) – – 1,359 – – (601) – – – – 758 – 758Sale of common shares held by a subsidiary

(Note 12) – – 7,962 – 21,018 – – – – 662 29,642 – 29,642Issuance of treasury shares

(Note 12) – – (927) – – 927 – – – – – – –Cash dividends – – – – – – – (29,629) – – (29,629) (1,008) (30,637)Distributions on subordinated perpetual securities

(Note 12) – – – – – – – (12,144) – – (12,144) – (12,144)Effect of business combination (Note 4) – – – – – – – – – – – (23) (23)Collection of subscription receivable – 1 8 – – – – – – – 9 – 9Balance at June 30, 2012 US$236 US$66,037 US$329,225 (US$72,492) US$– (US$4,345) (US$6,148) US$480,813 US$335,858 (US$85,415) US$1,043,769 US$101,981 US$1,145,750

Balance at January 1, 2011 US$236 US$66,030 US$295,644 (US$72,492) (US$45,124) (US$5,207) (US$6,148) US$352,201 US$– (US$36,279) US$548,861 US$81,373 US$630,234Total comprehensive income for the period – – – – – – – 60,007 – 19,663 79,670 3,061 82,731Issuance of subordinated perpetual

capital securities (Note 12) – – – – – – – – 193,448 – 193,448 – 193,448Cash dividends (Note 12) – – – – – – – (22,029) – – (22,029) (404) (22,433)Change in minority interest – – – – – – – – – – – 3,866 3,866Additional shares held by subsidiaries (Note 12) – – – – (636) – – – – – (636) – (636)Share-based payments (Note 12) – – 1,328 – – (1,010) – – – – 318 – 318Collection of subscription receivable – 6 10 – – – – – – – 16 – 16Issuance of treasury shares (Note 12) – – (1,546) – – 1,546 – – – – – – –Balance at June 30, 2011 US$236 US$66,036 US$295,436 (US$72,492) (US$45,760) (US$4,671) (US$6,148) US$390,179 US$193,448 (US$16,616) US$799,648 US$87,896 US$887,544



INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands)

For the Six Months Ended June 302012 2011

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax US$98,034 US$84,809Adjustments for:

Depreciation and amortization 38,356 34,564Interest expense on:

Borrowings (Note 11) 13,537 19,735Concession rights payable (Note 6) 7,799 9,198

Interest income (5,239) (3,965)Unrealized foreign exchange gain (2,580) (2,228)Loss on settlement of cross-currency swap and

pretermination of prepayment option (Note 9) 1,271 –Share-based payments 988 811Gain on sale of property and equipment (632) (84)Unrealized mark-to-market loss on derivatives 58 310

Operating income before changes in working capital 151,592 143,150Decrease (increase) in:

Receivables (4,489) (5,040)Spare parts and supplies (430) (1,355)Prepaid expenses and other current assets (10,287) 818

Increase (decrease) in:Accounts payable and other current liabilities (625) (893)Pension liabilities (235) 258

Cash generated from operations 135,526 136,938Income taxes paid (19,808) (23,435)Net cash provided by operating activities 115,718 113,503CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of:

Intangible assets (Note 6) (121,412) (44,994)Property and equipment (69,556) (25,484)Subsidiary, net of cash acquired (Note 4) (3,786) (17,958)Available-for-sale investments (Note 8) – (21,130)

Payments for concession rights (Note 6) (12,512) (10,603)Increase in other noncurrent assets (120,832) (7,202)Interest received 5,830 4,275Proceeds from sale of property and equipment 1,065 443Net cash used in investing activities (321,203) (122,653)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from:

Issuance of subordinated perpetual capital securities (Note 12) 142,411 194,490Long-term borrowings (Note 11) 12,451 2,500Collection of subscription receivable – 17Sale of common shares held by a subsidiary (Note 12) 29,642 –

Payments of:Long-term borrowings (Note 11) (50,848) (29,780)Short-term borrowings (Note 11) (2,275) (589)Interest on borrowings and concession rights payable

(Notes 6 and 11) (20,752) (28,614)Dividends (Note 12) (30,468) (22,677)

Distributions on subordinated perpetual capital securities (Note 12) (12,144) –Settlement of cross-currency swap (Note 9) 1,375 –Acquisition of common shares held by a subsidiary – (636)Change in minority interest – 2,185Net cash provided by financing activities 69,392 116,896EFFECT OF EXCHANGE RATE CHANGES ON CASH AND

CASH EQUIVALENTS 9,002 696NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS (127,091) 108,442CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 457,636 345,380CASH AND CASH EQUIVALENTS AT END OF PERIOD US$330,545 US$453,822



INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESNotes to Unaudited 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 Company is ICTSI AdministrationBuilding, MICT South Access Road, Manila. ICTSI’s common shares were listed with thePhilippine Stock Exchange (PSE) on March 23, 1992 at an offer price of P=6.70. ICTSI has1,942,297,860 listed shares held by 1,581 shareholders on record as of June 30, 2012.

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 of June 30, 2012, the Group is involved in 23 terminaloperating concessions and port development projects in 17 countries worldwide. These are 19operating concessions in six key ports in the Philippines, and a terminal each in Brazil, BruneiDarussalam, China, Croatia, Ecuador, Georgia, India, Indonesia, Japan, Madagascar, Poland,Syria, and the United States of America; the three ongoing port development projects inArgentina, Colombia, and Mexico; and the recently concluded negotiations to manage and operatethe New Container Terminal (NCT)-2 in Subic, Philippines. ICTSI established ICTSI Subic, Inc.(ICTSI Subic) to operate NCT-2. However, as of June 30, 2012, ICTSI Subic has not yet startedcommercial operations pending the issuance by the Subic Bay Metropolitan Authority with thenotice to proceed. On July 3, 2012, ICTSI acquired PT Perusahaan Bongkar Muat (PBM) OlahJasa Andal (OJA) through its indirect majority-owned subsidiary, PT Maharlika Indonesia Tbk(formerly PT Karwell Indonesia Tbk) (see Note 4.1). OJA is an Indonesian limited liabilitycompany engaged in the loading and unloading of general goods and/or containers at the Port ofTanjung Priok, Jakarta, Indonesia. OJA has existing cooperation agreements with PT PelabuhanIndonesia II (Persero) under a profit sharing scheme covering the terminal operations for field300, 301, 302 and 303, which are operated by Persero and located in Terminal III Operation ofTanjung Priok Port. These cooperation agreements have terms of two years that can be extendedpursuant to applicable provision in each agreement. The results of operations of OJA shall beconsolidated starting July 3, 2012 (see Note 17.1).

On the other hand, ICTSI’s concession for the Manila International Container Terminal (MICT)was extended for another 25 years up to May 18, 2038, subject to certain conditions including thecompletion of agreed additional investments in port equipment and infrastructures prior to 2013,payment of upfront fees on May 20, 2013 amounting to P=670.0 million (approximatelyUS$15.6 million), and turnover and execution of Deed of Transfer of port facilities and equipmentcurrently being 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, ICTSI shall be liable and committed to: (i) pay the Philippine Ports Authority (PPA)fixed fee in the amount of US$600.0 million payable in 100 advanced quarterly installments;(ii) pay an adjunct fee of US$9.6 per Twenty-foot Equivalent Unit (TEU) in excess of 2,550,000TEUs in any year payable not later than January 31 of the succeeding year, which shall cease inthe year when ICTSI commences civil works on the additional berth and back-up area to increaseport capacity; (iii) pay variable fee of 20 percent of the gross revenue earned at MICT; (iv)upgrade, expand and develop the MICT, particularly the construction and development of Berth7; (v) continuously align its Management Information System (MIS) with the MIS of the PPA


with the objective towards paperless transaction and reporting system; and (vi) handle foreigntransshipment at 260,000 TEUs (inbound and outbound) per year and to pay a variable fee basedon unattained transshipment volume.

Following the Group’s policy on Intangibles, ICTSI shall recognize concession rights when therenewal agreement is deemed effective to the extent that ICTSI receives a license or right tocharge users for the public service it provides. Concession rights shall consist of: (i) upfront feeof approximately US$15.6 million; and (ii) the present value of fixed fee considerations computedusing the discount rate at the effectivity date of the renewal agreement. The cost of committedport infrastructure including the related borrowing costs and port equipment purchased shall berecognized as Intangibles when construction commences. On the other hand, variable fees shallbe recognized as expense when incurred.

Concessions for port operations entered into by ICTSI and subsidiaries for the last two years aresummarized below:

Deep Water Port, Ibeju-Lekki, Federal Republic of Nigeria. On February 22, 2012, ICTSI andLekki Port LFTZ Enterprise (Lekki Port) entered into a Memorandum of Understanding (MOU)to negotiate the terms of a Sub-concession Agreement to develop and operate the containerterminal at the Deep Water Port in the Lagos Free Trade Zone at Ibeju-Lekki, Lagos State,Federal Republic of Nigeria. Under the MOU, Lekki Port negotiated exclusively with ICTSI, inconnection with the Sub-concession and the works and services to be undertaken under theagreement, for an Exclusivity Fee of US$5.0 million, which is non-refundable but subject to set-off or refund under certain circumstances as provided in the MOU. The Exclusivity Fee isrecorded as part of “Other noncurrent assets” account in the unaudited balance sheet as ofJune 30, 2012 (see Note 8). The container terminal will have a quay length of 1,200 meters, aninitial draft of 14.5 meters with the potential for further dredging to 16 meters, and maximumhandling capacity of 2.5 million TEUs. With these features, shipping lines will be able to callwith the new regional standard large vessels, turning the port into a seminal destination for theWest African region. On August 10, 2012, Lekki Port and ICTSI signed the Sub-concessionAgreement, which grants ICTSI the exclusive right to develop and operate, and to provide certainhandling equipment and container terminal services for a period of 21 years from start ofcommercial operation date.

NCT-2, Subic, Philippines. On July 27, 2011, Subic Bay Metropolitan Authority (SBMA) andICTSI signed the Contract for the Operation and Management of NCT-2 for a period of 25 years.On September 15, 2011, SBMA notified ICTSI of its approval for the assignment of all its rights,interests and obligations in the NCT-2 Contract to ICTSI Subic, which was established onMay 31, 2011, through a resolution for the purpose of operating NCT-2 dated August 19, 2011.As of June 30, 2012, SBMA has not yet given ICTSI Subic the notice to proceed with theoperation and management of NCT-2.

Port of Kattupalli, India. In April 2011, ICTSI, through ICTSI Ltd. and International ContainerTerminal Services (India) Private Limited (ICTSI India), and L&T Shipbuilding Ltd. (LTSB)signed a container port operation agreement for the management and operation of the KattupalliContainer Terminal (KCT) in Tamil Nadu, India. KCT is ICTSI’s first venture in India. Theterminal is located near Chennai in Thiruvallur District. LTSB is the developer of an integratedshipyard cum port with a 1.2 million-TEU annual capacity container terminal in Kattupalli.Terminal operations are scheduled to commence in the third quarter of 2012.

Port of Rijeka, Croatia. In March 2011, the Parent Company, through its wholly-ownedsubsidiary, ICTSI Capital BV, entered into a Share Purchase Agreement (SPA) with Luka RijekaD.D. (Luka Rijeka), a Croatian company, to purchase a 51% interest in the Adriatic GateContainer Terminal (AGCT). AGCT operates the Brajdica Container Terminal in Rijeka, Croatiawith a concession period of 30 years until 2041. Upon signing of the SPA, ICTSI Capital BVpaid US$17.9 million (92.9 million Croatian Kuna) as consideration for 118 AGCT shares or 1%

ICTSI Form 17-Q Q2 2012 1010

ownership and an additional US$21.6 million (€15.0 million) for 12,088 new AGCT shares or50% ownership upon completion of conditions precedent as enumerated in the SPA in March2011. With the acquisition of 51% aggregate interest in AGCT, ICTSI gained control of AGCTeffective April 15, 2011, which was also the day when ICTSI took over the operations of AGCT.Accordingly, ICTSI accounted the transaction as a business combination (see Note 4.2).

1.3 Subsidiaries

The subsidiaries include:Percentage of Ownership

Place of Nature of Functional 2012 2011Incorporation Business Currency Direct Indirect Direct Indirect

AsiaInternational Container Terminal Holdings, Inc.

(ICTHI) and SubsidiariesCayman Islands Holding Company US Dollar 100.00 – 100.00 –

Container Terminal Systems Solutions, Inc.(CTSSI)

Mauritius SoftwareDeveloper

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 – 100.00ICTSI Far East Pte. Ltd. (IFEL) Singapore Holding Company US Dollar – 100.00 – 100.00New Muara Container Terminal Srvices Sdn Bhd

(NMCTS)Brunei Port Management Brunei Dollar – 100.00 – 100.00

PT Maharlika Indonesia Tbk (Maharlika)(a) Indonesia Maritimeinfrastructureand logistics

IndonesianRupiah

– 80.00 – –

PT Makassar Terminal Services, Inc. (MTS) Indonesia Port Management IndonesianRupiah

– 95.00 – 95.00

PT Container Terminal Systems SolutionsIndonesia (PT CTSSI)

Indonesia SoftwareDeveloper

US Dollar – 100.00 – 100.00

ICTSI (Hongkong) Limited Hongkong Holding Company US Dollar – 100.00 – 100.00Yantai Rising Dragon International Container

Terminal Ltd. (YRDITCL)China Port Management Renminbi – 60.00 – 60.00

Pentland International Holdings, Ltd. (PIHL) British VirginIsland

Holding Company US Dollar – 100.00 – 100.00

ICTSI Georgia Corp. Cayman Islands Holding Company US Dollar – 100.00 – 100.00ICTSI Poland Bermuda Holding Company US Dollar – 100.00 – 100.00ICTSI Brazil Bermuda Holding Company US Dollar – 100.00 – 100.00ICTSI Ltd. RHQ Philippines Regional

HeadquartersPhilippine

Peso – 100.00 – 100.00ICTSI India(b) India Port Management Indian Rupee – 100.00 – –Container Terminal de Venezuela Conterven CA

(CTVCC)Venezuela Holding Company US Dollar – 95.00 – 95.00

ICTSI Africa (Pty) Ltd.(c) South Africa BusinessDevelopmentOffice (BDO)

South AfricanRand

– 100.00 – –Australian International Container Terminals

Limited (AICTL)(b)Australia Port Management Australian

Dollar – 70.00 – 70.00Mindanao International Container Terminal

Services, Inc. (MICTSI)Philippines Port Management Philippine

Peso 100.00 − 100.00 −Abbotsford Holdings, Inc. (Abbotsford) Philippines Holding Company Philippine

Peso 100.00 – 100.00 –Davao Integrated Port and Stevedoring Services

Corporation (DIPSSCOR)Philippines Port Management Philippine

Peso – 96.95 – 96.95ICTSI Warehousing, Inc. (IWI) Philippines Warehousing Philippine

Peso 100.00 – 100.00 –IW Cargo Handlers, Inc. (IW Cargo) Philippines Port Equipment

RentalUS Dollar

– 100.00 – 100.00Container Terminal Systems Solutions Philippines,

Inc. (CTSSI Phils.)Philippines Software

DeveloperUS Dollar

– 100.00 – 100.00Bauan International Ports, Inc. (BIPI) Philippines Port Management Philippine

Peso – 60.00 – 60.00Prime Staffing and Selection Bureau, Inc.

(PSSBI)(b)Philippines Manpower

RecruitmentPhilippine

Peso 100.00 – 100.00 –ICTSI Subic(b, c) Philippines Port Management Philippine

Peso 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 – 83.33Cebu International Container

Terminal, Inc. (CICTI)(b)Philippines Port Management Philippine

Peso 51.00 – 51.00 –Cordilla Properties Holdings Inc. (Cordilla) Philippines Holding Company Philippine

Peso 100.00 − 100.00 −South Cotabato Integrated Port Services, Inc.

(SCIPSI)Philippines Port Management Philippine

Peso 35.70 14.38 35.70 14.38ICTSI (M.E.) JLT (ICTSI Dubai) United Arab

EmiratesBDO US Dollar

100.00 − 100.00 −ICTSI Capital B.V. (ICBV) The Netherlands Holding Company US Dollar – 100.00 – 100.00Naha International Container Terminal, Inc.

(NICTI)Japan Port Management Japanese Yen

60.00 – 60.00 –

(Forward)

ICTSI Form 17-Q Q2 2012 1111

Percentage of OwnershipPlace of Nature of Functional 2012 2011Incorporation Business Currency Direct Indirect Direct Indirect

Icon Logistiek B.V.(c) The Netherlands Holding Company US Dollar – 100.00 – –Royal Capital B.V. (RCBV)(c) The Netherlands Holding Company US Dollar – 75.00 – 75.00

Europe, Middle East and Africa (EMEA)Tartous International Container Terminal (TICT) Syria Port Management Syrian Pound 100.00 – 100.00 –Madagascar International Container Terminal

Services, Ltd. (MICTSL)Madagascar Port Management

Euro – 100.00 – 100.00Baltic Container Terminal Ltd. (BCT) Poland Port Management US Dollar – 100.00 – 100.00AGCT(d) Croatia Port Management Croatian

Kuna – 51.00 – 51.00Batumi International Container Terminal Ltd.

( BICTL)Georgia Port Management US Dollar – 100.00 – 100.00

AmericasContecon Guayaquil S.A. (CGSA) Ecuador Port Management US Dollar 99.99 0.01 99.99 0.01Contecon Manzanillo, S.A. de C.V. (CMSA)(b) Mexico Port Management Mexican Peso 100.00 − 100.00 −Tecon Suape, S.A. (TSSA) Brazil Port Management Brazilian

Reais– 100.00 – 100.00

ICTSI Oregon(e) 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 Corporation Panama Holding Company US Dollar – 100.00 – 100.00Sociedad Porturia Industrial de Aguadulce, S.A.

(SPIA)(b)Colombia Port Management Colombian

Peso– 91.29 – 91.29

International Ports of South America and LogisticsSA (IPSAL)

Uruguay Holding Company US Dollar − 100.00 − 100.00

Tecplata, S.A (Tecplata)(b) Argentina Port Management US Dollar − 85.00 − 85.00

(a) Acquired in 2012 and formerly PT Karwell Indonesia Tbk (see Note 4.1).(b) Not yet started commercial operations.(c) Established in 2011.

(d) Acquired in 2011.(e) Started commercial operations in 2011.

2. Basis of Preparation

2.1 Basis of Preparation

The unaudited condensed consolidated financial statements as at and for the three and six monthsended June 30, 2012 have been prepared on a historical cost basis, except for available-for-sale(AFS) investments and derivative financial instruments which have been measured at fair value.The unaudited condensed consolidated financial statements are presented in United States dollar(US dollar, USD or US$), the Parent Company’s functional and presentation currency. All valuesare rounded to the nearest thousand US dollar unit, except when otherwise indicated. Anydiscrepancies in the tables between the listed amounts and the totals thereof are due to rounding.Accordingly, figures shown as totals may not be an arithmetic aggregation of the figures thatprecede them.

2.2 Statement of Compliance

The unaudited condensed consolidated financial statements of the Group have been prepared incompliance with Philippine Financial Reporting Standards (PFRS). PFRS includes PhilippineAccounting Standards (PAS) and International Financial Reporting Interpretations Committee(IFRIC) interpretations issued by the Financial Reporting Standards Council (FRSC).

The unaudited condensed consolidated financial statements as at and for the three and six monthsended June 30, 2012 have been prepared in accordance with PAS 34, Interim FinancialReporting, and do not include all information and disclosures required in the annual auditedconsolidated financial statements, and should be read in conjunction with the Group’s annualaudited consolidated financial statements as at and for the year ended December 31, 2011.

ICTSI Form 17-Q Q2 2012 1212

3. Summary of Significant Accounting Policies

3.1 Basis of Consolidation

Subsidiaries. Subsidiaries are entities controlled by the Parent Company. The unauditedconsolidated financial statements include the accounts of ICTSI and its subsidiaries where theParent Company has control. In assessing control, the existence and effect of potential votingrights that are currently exercisable or convertible are considered. Subsidiaries are consolidatedfrom the date of acquisition or incorporation, being the date on which the Group obtains control,and continue to be consolidated until the date such control ceases.

Minority Interests. Minority interests represent the portion of profit or loss and net assets in MTS,AICTL, CTVCC, SBITC, SBITHI, BIPI, NICTI, CICTI, DIPSSCOR, YRDICTL, SPIA, SCIPSI,Tecplata, RCBV, AGCT and Maharlika not held by the Group and are presented separately in theunaudited consolidated statement of income and the unaudited consolidated statement ofcomprehensive income, separate from equity attributable to equity holders of the parent.

Acquisition, transfer and sale of minority interest are accounted for as an equity transaction. Nogain or loss is recognized in an acquisition of a minority interest. The difference between the fairvalue of the consideration and book value of the share in the net assets acquired is presented under“Excess of acquisition cost over the carrying value of minority interests” account within theequity section of the consolidated balance sheet. If the Group losses control over a subsidiary, theGroup: derecognizes the assets (including goodwill) and liabilities of the subsidiary, the carryingamount of any minority interest and the cumulative translation differences recorded in equity;recognizes the fair value of the consideration received, the fair value of any investment retainedand any surplus or deficit in the consolidated statement of income; and reclassifies the ParentCompany’s share of components previously recognized in other comprehensive income to theconsolidated statement of income or retained earnings, as appropriate.

Transactions Eliminated on Consolidation. All intragroup balances, transactions, income andexpenses, and unrealized gains and losses resulting from intragroup transactions are eliminated infull.

Accounting Policies of Subsidiaries. The financial statements of subsidiaries are prepared for thesame reporting period or year as the Parent Company.

Functional and Presentation Currency. The unaudited 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 policy on change in functional 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 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 consolidated statement of comprehensive income.Upon disposal of the foreign entity, the deferred cumulative translation amount recognized in theunaudited consolidated statement of comprehensive income relating to that particular foreignoperation is recognized in the unaudited consolidated statement of income.

ICTSI Form 17-Q Q2 2012 1313

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 six months ended June 30:

2012 2011Closing Average Closing Average

Foreign currency to 1 unit of US dollar:Argentinean peso (AR$) 4.53 4.39 4.11 4.05Australian dollar (AUD) 0.98 0.97 0.93 0.97Brazilian reais (BRL or R$) 2.01 1.87 1.56 1.63Brunei dollar (BND) 1.27 1.26 1.23 1.26Chinese renminbi (RMB) 6.35 6.32 6.46 6.54Colombian peso (COP) 1,783.76 1,792.30 1,770.78 1,836.76Croatian kuna (HRK) 5.94 5.82 5.10 5.27Euro (€) 0.79 0.77 0.69 0.71Georgian lari (GEL) 1.64 1.65 1.66 1.71Hong Kong dollar (HKD) 7.76 7.76 7.78 7.78Indian rupee (INR) 55.64 52.27 – –Indonesian rupiah (IDR) 9,433.00 9,197.00 8,579.00 8,745.00Japanese yen (JPY) 79.79 79.73 80.56 81.91Mexican peso (MXN) 13.36 13.26 11.71 11.89Philippine peso (P=) 42.12 42.90 43.33 43.52Polish zloty (PLN) 3.35 3.27 2.74 2.81Singaporean dollar (SGD) 1.27 1.26 1.23 1.26South African rand (ZAR) 8.16 7.94 – –Syrian pound (SYP) 64.10 59.16 47.40 47.19

3.2 Changes in Accounting Policies

The accounting policies adopted for the current interim period-unaudited consolidated financialstatements are consistent with those of the previous financial year except that the Group hasadopted the following standards and interpretations mandatory for financial years beginningJanuary 1, 2012. Except as otherwise indicated, adoption of these amended PFRS have nosignificant impact on the Group’s unaudited consolidated financial statements:

PFRS 7, Financial Instruments: Disclosures - Transfers of Financial Assets (Amendments).The amendments will allow users of financial statements to improve their understanding oftransfer transactions of financial assets (for example, securitizations), including understandingthe possible effects of any risks that may remain with the entity that transferred the assets.The amendments also require additional disclosures if a disproportionate amount of transfertransactions are undertaken around the end of a reporting period.

PAS 12, Income Taxes - Deferred Tax: Recovery of Underlying Assets (Amendment). Theamendment provides a practical solution to the problem of assessing whether recovery of anasset will be through use or sale. It introduces a presumption that recovery of the carryingamount of an asset will normally be through sale.

3.3 Future Changes in Accounting Policies

PFRS 9, Financial Instruments: Classification and Measurement. PFRS 9 as issued reflectsthe first phase on the replacement of PAS 39, Recognition and Measurement, and applies toclassification and measurement of financial assets and financial liabilities as defined in PAS39. The standard is effective for annual periods beginning on or after January 1, 2015 withearly adoption allowed. The adoption of the first phase of PFRS 9 will have an effect on theclassification and measurement of the Group’s financial assets but will potentially have noimpact on classification and measurement of financial liabilities. The Group will not earlyadopt PFRS 9 but will continue to evaluate and conduct a study on the possible impact ofadopting PFRS 9 as it becomes effective in phases.

ICTSI Form 17-Q Q2 2012 1414

4. Business Combinations and Acquisitions

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 PT Karwell Indonesia Tbk (Karwell), Jakarta, Indonesia

On May 3, 2012, IFEL acquired 312,550,000 Karwell shares or 53.23% from PT KaryaEstetikamulia through the Indonesian Stock Exchange at IDR74 per share. On the same date,IFEL purchased 157,172,500 Karwell shares or 26.77% from several parties from the public at aprice ranging from IDR75 to IDR77 per share. Karwell is a listed company in Indonesiaenagaged in garment and textile industry which has stopped commercial operations. IFEL hasacquired and purchased an aggregate of 469,722,500 shares or 80% of the outstanding and issuedshares of Karwell, thereby, effectively becoming the new controlling shareholder. The purpose ofthe business combination is to save and preserve the going concern of Karwell so that Karwell canengage in the development, construction and operation of terminals and maritime logisticinfrastructure and will be able to generate satisfactory returns to all shareholders and other relatedstakeholders of Karwell. On May 29, 2012, the Minister of Law and Human Rights approved thechange in business name of Karwell to PT Maharlika Indonesia Tbk (Maharlika) (see Note 1.2).

The provisional fair values of the identifiable assets and liabilities of Karwell at the date ofacquisition were (amounts in thousands):

ProvisionalFair Value

Recognized onAcquisition

AssetsCash in bank US$5Prepaid expenses and other current assets 2

7LiabilitiesOther current liabilities 5Deferred tax liabilities 58Other noncurrent liabilities 50

113Total identifiable net assets at fair value (106)Minority interest measured at proportionate fair value 21Goodwill arising on acquisition 3,876Purchase consideration transferred and satisfied by cash US$3,791

For the consolidated statements of cash flow purposes, the net cash outflow on the acquisitionamounting to US$3.8 million was derived as follows:

AmountCash paid at acquisition date US$3,791Less cash in banks of acquired subsidiary 5Net cash outflow US$3,786

From the date of acquisition, Karwell reduced net income attributable to equity holders of theparent by US$0.1 million (IDR910.5 million) for the six months ended June 30, 2012. If theacquisition had taken place at the beginning of the year, consolidated net income attributable toequity holders of the parent would have been higher by US$4.5 million (IDR41.6 billion) for thesix months ended June 30, 2012.

ICTSI Form 17-Q Q2 2012 1515

4.2 AGCT, Rijeka, Croatia

On April 15, 2011, ICTSI, through ICTSI Capital BV acquired an aggregate of 51% ownership inAGCT, an unlisted Croatian company, which operates the Brajdica Container Terminal in Rijeka,Croatia (see Note 1.2). The acquisition of AGCT is wholly consistent with ICTSI’s well-articulated business strategy of acquiring, developing and operating small to mid-sized containerterminals, most commonly in emerging markets.

The Group has elected to measure the non-controlling interest in the acquiree at the proportionateshare of the fair value of the net identifiable assets acquired.

The fair values of the identifiable assets and liabilities of AGCT at the date of acquisition were:

Fair ValueRecognized on

AcquisitionAssetsIntangibles US$12,815Property and equipment 2,879Cash and cash equivalents 21,793Receivables 1,723Prepaid expenses and other current assets 141

39,351LiabilitiesTrade and other payables 1,535Other current liabilities 237Deferred tax liabilities 1,281Other noncurrent liabilities 642

3,695Total identifiable net assets at fair value 35,656Minority interest measured at proportionate fair value (17,472)Goodwill arising on acquisition 21,539Purchase consideration transferred and satisfied by cash US$39,723

For the consolidated statements of cash flow purposes, the net cash outflow on the acquisitionamounting to US$17.9 million was derived as follows:

AmountCash paid at acquisition date US$39,723Less cash and cash equivalents of acquired subsidiary 21,793Net cash outflow US$17,930

The net assets recognized in the 2011 (audited ) and 2012 (unaudited) consolidated financialstatements were based on provisional assessment of fair value pending the formal approval of theport authority regarding AGCT’s business plan. The business plan is part of the assumptions usedin computing for the fair value of concession rights recognized as part of intangibles in theconsolidated balance sheet. Approval by the port authority has not been obtained as at June 30,2012.

The valuation of property and equipment was completed in July 2011.

From the date of acquisition, AGCT has contributed US$6.2 million (33.2 million Croatian kuna)and US$1.0 million (5.5 million Croatian kuna) to revenues and net income attributable to equityholders of the parent, respectively, for the year ended December 31, 2011. If the acquisition hadtaken place at the beginning of the year, consolidated revenues and net income attributable toequity holders of the parent would have been higher by US$2.3 million (12.2 million Croatiankuna) and US$0.1 million (0.8 million Croatian kuna), respectively, for the year endedDecember 31, 2011.

ICTSI Form 17-Q Q2 2012 1616

There were no other business combinations and acquisitions as of June 30, 2012, except asdiscussed above.

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).

The Group operates principally in one industry segment which is cargo handling and relatedservices. ICTSI has organized its business into three geographical segments:

Asia - includes MICT, BIPI, DIPSSCOR, SCIPSI, SBITC and MICTSI in the Philippines,YRDICTL in China, MTS in Indonesia, NICTI in Japan, NMCTS in Brunei, and ICTSI Indiain India, ICTHI, ICTSI Ltd and holding companies with regional area headquarters in thePhilippines

EMEA - includes BCT in Poland, MICTSL in Madagascar, TICT in Syria, BICTL inGeorgia, and AGCT in Croatia

Americas - includes TSSA in Brazil, CGSA in Ecuador, SPIA in Colombia, Tecplata inArgentina, CMSA in Mexico and ICTSI Oregon, Inc. in Oregon, U.S.A.

The tables below present financial information on geographical segments:

2012As of and for the Three Months Ended June 30 As of and for the Six Months Ended June 30Asia EMEA Americas Consolidated Asia EMEA Americas Consolidated

Volume(a) 755,574 206,364 397,481 1,359,419 1,483,585 409,040 805,110 2,697,735

Gross revenues US$81,123 US$21,983 US$68,062 US$171,168 US$159,152 US$43,510 US$142,350 US$345,012Capital expenditures(b) 12,883 2,410 79,015 94,308 19,982 4,025 166,961 190,968Other information:

Segment assets(c) 930,803 193,340 957,057 2,081,200 930,803 193,340 957,057 2,081,200Segment liabilities(d) 641,411 70,908 182,670 894,989 641,411 70,908 182,670 894,989

2011As of and for the Three Months Ended June 30 As of and for the Six Months Ended June 30

Asia EMEA Americas Consolidated Asia EMEA Americas Consolidated

Volume(a) 735,527 181,016 395,465 1,312,008 1,422,723 320,483 740,771 2,483,977

Gross revenues US$74,370 US$20,594 US$69,230 US$164,194 US$144,552 US$37,579 US$136,952 US$319,083Capital expenditures(b) 13,203 609 24,268 38,080 30,526 1,336 38,616 70,478Other information:

Segment assets(c) 889,448 196,075 831,182 1,916,705 889,448 196,075 831,182 1,916,705Segment liabilities(d) 686,740 68,885 188,214 943,839 686,740 68,885 188,214 943,839

(a) Measured in twenty-foot equivalent units (TEU)

(b) Capital expenditures include amount spent for the acquisition of port facilities and equipment classified as intangibles under IFRIC 12 and property andequipment as shown in the unaudited statement of cash flows

(c) Segment assets do not include deferred tax assets amounting to US$21.9 million and US$26.6 million as at June 30, 2012 and December 31, 2011,respectively

(d) Segment liabilities do not include income tax payable amounting to US$14.2 million and US$13.8 million, and deferred tax liabilities amounting toUS$48.2 million and US$45.1 million, as at June 30, 2011 and as at December 31, 2011, respectively

ICTSI Form 17-Q Q2 2012 1717

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 unaudited consolidated net incomeattributable to equity holders of the parent for the three and six months ended June 30:


Net income attributable to equityholders of the parent US$34,900 US$31,517 US$70,260 US$60,007

Minority interests 92 1,485 732 1,010Provision for income tax 11,523 11,958 27,042 23,792Income before income tax 46,515 44,960 98,034 84,809Add (deduct):

Depreciation and amortization 19,467 17,678 38,356 34,564Interest and other expenses(a) 11,712 16,788 25,547 37,902Interest and other income(b) (5,360) (7,364) (12,879) (13,974)

EBITDA(c) US$72,334 US$72,062 US$149,058 US$143,301

(a) Interest and other expenses includes the following as shown in the unaudited consolidated statement of income: foreignexchange loss; interest expense on concession rights payable; interest expense and financing charges on borrowings; andother expenses.

(b) Interest and other income includes the following as shown in the unaudited consolidated statement of income: foreignexchange 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 is animportant measure of its performance and liquidity. EBITDA is also frequently used by securities analysts, investors andother 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 has limitations asan analytical tool and should not be considered in isolation or as a substitute for analysis of the Group’s results as reportedunder 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 a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to the Group toinvest in the growth of the business. The Group compensates for these limitations by relying primarily on the PFRS resultsand 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 43.1% and 41.5% of the unauditedconsolidated gross revenues from port operations for the three months ended June 30, 2012 and2011, respectively, and 42.1% and 41.6% of the unaudited consolidated gross revenues from portoperations for the six months ended June 30, 2012 and 2011, respectively.

6. Concession Rights and Concession Rights Payable

6.1 Concession Rights

Concession rights are presented as part of intangibles in the consolidated balance sheet.Concession rights include upfront fee payments recognized on the concession contracts, cost ofport infrastructure constructed and port equipment purchased, and present value of future fixedfee considerations in exchange for the license or right to operate ports. Concession rights areamortized over the term of the concession agreements.

Additions to concession rights under port infrastructure pertain to acquisitions of port facilitiesand equipment and construction of various civil works in MICT, MICTSL, SBITC, CGSA andTecplata, and capitalization of borrowing costs in MICT, CGSA and Tecplata.

ICTSI Form 17-Q Q2 2012 1818

Borrowing costs capitalized amounted to US$11.1 million as at June 30, 2012 with capitalizationrate of 8.85% and US$4.4 million as at June 30, 2011 with capitalization rate of 8.19%(see Note 11.5).

In April 2010, a vessel hit one of the quay cranes of CGSA causing damage to the crane, affectingportion of one of the berths, related infrastructure and third party containers and cargo. Theseproperties were capitalized as intangible assets in the consolidated balance sheet. CGSA andICTSI have taken appropriate steps to replace the equipment, repair the berth and minimizebusiness interruption. As of June 30, 2012, the damaged crane has been replaced and the berth hasbeen repaired. The repaired berth and crane replacement have been operational since October2010 and June 2011, respectively. Security in respect of CGSA’s claims against the vessel hasbeen obtained in relation to the damage caused to CGSA’s equipment, facilities, operations andthird parties’ equipment and goods. Investigations into the circumstances of the incident, whichare continuing, strongly support management’s view that the incident was caused by vesselnegligence. Furthermore, CGSA and the vessel owners have agreed to subject the case to EnglishLaw and the jurisdiction of the English High Court for England is the leading center for theresolution of maritime disputes and the English courts operate under a clearly defined and speedylitigation procedure with specialist maritime judges.

Management is confident of making a substantial recovery from the vessel owners for the damageand losses caused. On August 2, 2010, the Group received US$1.7 million as initial recovery ofthe cost of the damaged crane. In 2011, CGSA further recovered US$2.1 million from its localinsurer. Related claims receivable presented under “Receivables” account in the unaudited andaudited consolidated balance sheets amounted to US$3.5 million and US$4.0 million as ofJune 30, 2012 and December 31, 2011, respectively. Management and the Group’s legal counselsbelieve that recovery of this receivable from vessel owners is assured.

6.2 Concession Rights Payable

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 portion of port fees and upfront fees as at June 30, 2012 are as follows:

Amount2012 US$9,6602013 7,7142014 5,2772015 5,9822016 onwards 121,458Total US$150,091

Total fixed portion of port fees and upfront fees paid by the Group for the three and six monthsended June 30, 2012 and 2011 amounted to US$10.1 million and US$9.9 million andUS$20.3 million and US$19.8 million, respectively. These port fees are allocated to payments ofinterest and reduction to or payments of concession rights payable.

Interest expense on concession rights payable amounted to US$3.9 million and US$4.6 millionand US$7.8 million and US$9.2 million for the three and six months ended June 30, 2012 and2011, respectively. The annualized weighted average interest rate was 9.39% and 10.34% as ofJune 30, 2012 and 2011, respectively.

Reduction to concession rights payable, shown as payments to concession rights in the unauditedconsolidated statement of cash flows for the six months ended June 30, 2012 and 2011 amountedto US$12.5 million and US$10.6 million, respectively.

ICTSI Form 17-Q Q2 2012 1919

7. Property and Equipment

Property and equipment increased due mainly to acquisition of terminal equipment and ongoingconstruction at TSSA, CMSA and SPIA.

On May 17, 2012, a vessel hit one gantry crane of BCT causing damage to the crane and anothergantry crane, some empty dry container vans, portions of the quay and related infrastructure in thearea, and physical injuries to three employees of BCT.

The net book value of the gantry crane as of the date of the incident amounted to US$2.5 million,which is fully recoverable from the insurance company and the vessel owner. The Group believesthat the incident would not result to any significant effect on the operations and profitability of theterminal as the majority of the terminal, including berthing areas, remains fully operational. As ofJune 30, 2012, BCT has recognized claims receivable from the insurance company amounting toUS$3.2 million which corresponds to the net book value of damaged gantry crane and cost ofrestoring the damaged quay and related infrastructure. Claims receivable is presented as part of“Receivables” account in the unaudited consolidated balance sheet.

Borrowing costs capitalized amounted to US$2.9 million as at June 30, 2012 with capitalizationrate of 8.85% and US$1.3 million as at June 30, 2011 with capitalization rate of 8.19%(see Note 11.5).

Except as discussed above, there were no major disposals or write-downs of property andequipment for the six months ended June 30, 2012.

8. Other Noncurrent Assets

This account mainly includes available-for-sale investments which are recognized at their fairmarket values at balance sheet date, advances and deposits to contractors and for investments, andinput value added taxes (VAT) that are expected to be utilized over a period of more than 12months from the balance sheet date.

In 2012, this account increased mainly due to advances and deposits to contractors and higherinput VAT in CMSA and Tecplata associated with payments for the purchase of terminalequipment and civil works in relation to the ongoing construction activities, Exclusivity Fee toLekki Port, and deposits for investments (see Notes 1.2 and 17).

On June 1, 2011, IFEL announced, through its financial adviser, The Hongkong and ShanghaiBanking Corporation Limited, Singapore Branch, its intention to make a voluntary conditionalcash offer (The Offer) for all issued and paid-up ordinary shares in the capital of PortekInternational Limited (Portek), other than those already owned, controlled or agreed to beacquired by IFEL and parties acting in concert with it. The Offer Price is SGD1.20 per share,payable in cash but subject to conditions precedent. As of June 30, 2011, the Group held25,445,000 shares representing approximately 16.79% ownership in Portek for a total cost ofUS$21.1 million (SGD26.2 million) classified as available-for-sale investments and presented aspart of “Other noncurrent assets” account in the unaudited consolidated balance sheet. The fairvalue of the investments in Portek amounted to US$26.1 million as of June 30, 2011. The Grouprecognized an unrealized mark-to-market gain of US$5.0 million in the unaudited consolidatedstatement of comprehensive income for the three and six months ended June 30, 2011 related tothese available-for-sale investments. On July 13, 2011, Mitsui & Co. Ltd (Mitsui), a shareholderof Portek, announced its intention to make a voluntary conditional offer for all shares of Portekwhich it did not own and control. On August 1, 2011, IFEL announced that it is withdrawing theOffer. Any previous acceptance to the Offer was deemed not to have been made. Portek shareswere subsequently sold.

ICTSI Form 17-Q Q2 2012 2020

9. Financial Instruments

9.1. Derivative Instruments Accounted for as Cash Flow Hedges

Cross-Currency Swaps. The movements in derivative assets and liabilities include the change infair values of floating-to-fixed and fixed-to-fixed cross-currency swaps entered into by ICTSI in2009 to hedge both the foreign currency and interest rate exposures on the Group’s foreigncurrency-denominated term loan facilities. As of June 30, 2012, the net market valuation gain onthe outstanding cross-currency swaps amounting to US$5.5 million (net of US$2.4 million tax)was taken directly to equity under other comprehensive income. Derivative assets as a result ofthe valuation amounted to US$7.9 million as of June 30, 2012. On January 4, 2012, ICTSI pre-terminated its fixed-to-fixed cross-currency swap with a notional amount of US$11.1 million(P=475.3 million) which was used to hedge its Philippine peso-denominated loan maturing inNovember 2015. Fair value of swap at settlement date amounted to US$1.5 million. Proceedsarising from the settlement transaction of the cross-currency swap amounted to US$1.4 million.Loss on settlement of cross-currency swap amounting to US$0.1 million was recognized in theunaudited consolidated statement of income for the six months ended June 30, 2012.

Translation Hedging. In 2011, ICTSI designated its Mexican peso-denominated short-terminvestments as cash flow hedges of the currency risk on Mexican peso-denominated payables thatwould arise from forecasted Mexican peso-denominated monthly fixed port fees toAdministracion Portuaria Integral de Manzanillo, S.A., de C.V. (API) in Mexico and portconstruction costs to a contractor. The hedging covers forecasted Mexican peso-denominatedmonthly fixed port fees from November 2011 until October 2012 and approximately 24% of thetotal Mexican peso-denominated port construction costs. Foreign currency translation gains orlosses deferred in equity would form part of the cost of the port (including port fees during theconstruction period) and would be recycled to profit and loss through depreciation.

As of June 30, 2012, an aggregate of US$4.7 million (MXN62.8 million) and US$12.9 million(MXN173.0 million) equivalent of Mexican peso-denominated short-term investments are hedgedagainst the Mexican peso-denominated payables that would arise from forecasted Mexican peso-denominated monthly fixed port fees and civil work payments to a contractor, respectively(see Note 10). Foreign currency translation loss on Mexican peso-denominated short-terminvestments designated as cash flow hedges aggregating to US$4.0 million (net of deferredincome tax of US$1.7 million) have been recognized under equity as of June 30, 2012. Noineffectiveness was recognized in the unaudited consolidated statement of income for the threeand six months ended June 30, 2012. No amount has been recycled from equity to foreignexchange gain or loss in the unaudited consolidated statement of income for the three and sixmonths ended June 30, 2012.

Except as discussed above, the Group has not entered into other material hedging transactions thatsignificantly affect its financial position and results of operations as at and for the three and sixmonths ended June 30, 2012.

9.2. Other Derivative Instruments Not Designated as Hedges

Embedded Prepayment Options. In May 2012, ICTSI exercised the prepayment option on its5.5-year loan with The Hongkong and Shanghai Banking Corporation Limited (HSBC) withoutstanding principal amount of US$16.5 million (P=693.6 million). Fair value of the embeddedderivative amounting to US$1.2 million as of exercise date was charged to “Other expense”account in the unaudited consolidated statement of income for the six months ended June 30,2012 (see Notes 11.4 and 13.2).

ICTSI Form 17-Q Q2 2012 2121

10. Cash and Cash Equivalents

This account mainly includes cash equivalents or short-term investments, which are made forvarying periods of up to three months and earn interest at the prevailing short-term investmentrates. Total cash and cash equivalents amounted to US$330.5 million and US$457.6 million as atJune 30, 2012 and December 31, 2011, respectively.

As of June 30, 2012, Mexican peso-denominated cash equivalents aggregating US$4.7 million(MXN62.8 million) and US$12.9 million (MXN173.0 million) have been designated by theParent Company as cash flow hedges of the variability of Mexican peso cash flows that isrequired to settle Mexican peso-denominated payables that would arise from forecasted Mexicanpeso-denominated monthly fixed port fees to the API from November 2011 until October 2012and civil work payments to contractors, respectively (see Note 9).

11. Long-term Debt and Loans Payable

11.1. Maturities of Long-term Debt

Maturities of long-term debt, net of unamortized debt issue costs of US$3.5 million, as atJune 30, 2012 are as follows:

Amount2012 US$25,9862013 84,2102014 12,3802015 24,1612016 and onwards 468,576Total US$615,313

11.2. US Dollar-denominated Securities

In February 2012, CGSA placed the balance of the US$60.0 million securities, through a specialpurpose trust approved in 2011, amounting to US$4.2 million. The securities were issued in threeseries to mature within five years from date of issue with principal and interest payable quarterly.Series A bears variable interest at the rate of 2.5% p.a. 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 fixed rate of 7.5% p.a. During the three and six months ended June 30,2012, CGSA paid US$2.5 million and US$5.0 million of the outstanding securities, respectively.As of June 30, 2012, outstanding balance of securities amounted to US$54.1 million.

11.3. US Dollar-denominated Term Loans

On March 29, 2012, BCT and The State Treasury - Centre for European Union (EU) TransportProjects (CETP) signed a Co-Financing Agreement (“EU grant”) whereby CEPT will grant BCTa subsidy amounting to US$17.3 million (53.9 million Polish zloty). The EU grant is a conditionprecedent to any borrowing under the facility agreement with Bank Polska Kasa Opieki S.A.(“Bank Polska”) that was signed on October 27, 2011 to provide: (i) term loan facility up toUS$9.2 million; (ii) capital expenditures (capex) facility up to US$36.3 million to finance or re-finance project costs and fees; and (iii) overdraft facility up to US$1.0 million to finance workingcapital requirements. The purpose of the term loan facility is to refinance all existing financialindebtedness under BCT’s loan agreement in November 2004.

On April 27, 2012, BCT availed: (i) US$7.9 million from the term loan facility; and(ii) US$0.9 million from the capex facility that was discussed in the preceding paragraph, withBank Polska. Both the term loan and capex facilities bear interest at 2.65% over London

ICTSI Form 17-Q Q2 2012 2222

Interbank Offered Rate (LIBOR). As of June 30, 2012, aggregate outstanding balance under theterm loan and capex facilities amounted to US$8.6 million.

11.4. Foreign Currency-denominated Loans

On April 24, 2012, ICTSI delivered an irrevocable prepayment notice to the noteholders of theCorporate Notes Facility Agreement, arranged by The Hongkong and Shanghai BankingCorporation Limited, Manila, for the outstanding balance of US$16.5 million (P=693.1 million),net of unamortized debt issuance cost of US$0.01 million (P=0.4 million) as of date of pre-termination (see Note 9.2).

On May 28, 2012, the term loan facility was prepaid and the related penalty on prepaymentamounting to US$0.3 million (P=13.8 million) was charged to “Other expense” account in theunaudited consolidated statement of income for the six months ended June 30, 2012(see Note 13.2). Also, ICTSI paid an aggregate of US$17.2 million of the outstanding term loanfacility as of June 30, 2012.

11.5. Loan Covenants and Capitalized Borrowing Costs

Interest expense, net of amount capitalized as intangible assets and property and equipmentamounted to US$4.8 million and US$9.2 million, and US$13.5 million and US$19.7 million forthe three and six months ended June 30, 2012 and 2011, respectively (see Notes 6.1 and 7).Interest expense includes amortization of debt issue costs amounting to US$0.4 million andUS$0.3 million, and US$0.6 million for the three and six months ended June 30, 2012 and 2011,respectively.

There were no material changes in the covenants related to the Group’s long-term debts. As atJune 30, 2011, the Group is in compliance with all its loan covenants.

There were no other significant transactions pertaining to the ICTSI’s long-term debt as ofJune 30, 2010, except as discussed above.

11.6. Loans Payable

There were no additional availments of short-term loans within the six months ended June 30,2012. Movements pertain only to repayment of loans payable of SPIA and CGSA totalingUS$2.3 million in 2012. Interest expense on loans payable amounted to US$0.01 million, andUS$0.02 million for the three and six months ended June 30, 2012 and 2011, respectively.

12. Equity

12.1. Stock Incentive Plan

On March 9, 2012, the Stock Incentive Committee granted another 1,750,000 shares of stockawards to officers and employees of ICTSI and ICTSI Ltd., 50% of which will vest onMarch 9, 2013 while another 50% will vest on March 9, 2014. The fair value of the shares wasUS$1.34 (P=57.00) at the date of grant.

Total number of shares granted under the Stock Incentive Plan (SIP) aggregated 29,831,000shares as at June 30, 2012. Also, on March 9, 2012, 2,417,500 shares vested under the SIP.

Total compensation expense recognized on the vesting of the fair value of stock awards amountedto US$0.6 million and US$0.4 million, and US$1.0 million and US$0.8 million for the three andsix months ended June 30, 2012 and 2011, respectively.

ICTSI Form 17-Q Q2 2012 2323

12.2. Dividends Declared

The details of ICTSI’s declaration of cash dividends are as follows:

Date of Board approval April 19, 2012Cash dividends per share US$0.015 (P=0.65)Record date May 4, 2012Payment date May 18, 2011

12.3. Cost of Shares Held by Subsidiares

On April 16, 2012, IWI sold 19,365,940 ICTSI shares for US$29.6 million (P=1,267.9 million).ICTSI recognized the gain on sale of US$8.0 million as additional paid-in capital in the unauditedconsolidated balance sheet as of June 30, 2012.

In 2011, IWI acquired 702,300 ICTSI shares for US$0.6 million (P=27.7 million).

12.4. Other Comprehensive Loss

This account consists of:

CumulativeTranslation

AdjustmentsRevaluation

Increment

UnrealizedMark-to-Market

Gain onAvailable-for-

Sale Investments

TotalComprehensiveIncome (Loss)

Balance at January 1, 2012 (US$92,009) US$610 US$471 (US$90,928)Translation differences arising from

translation of foreign operations’financial statements 3,709 – – 3,709

Net change in unrealized mark-to-marketvalues of derivatives 2,291 – – 2,291

Net change in unrealized mark-to-marketvalues of available-for-saleinvestments – – 200 200

Income tax relating to components ofother comprehensive income (687) – – (687)

Balance at June 30, 2012 (US$86,696) US$610 US$671 (US$85,415)

CumulativeTranslation

AdjustmentsRevaluation

Increment

UnrealizedMark-to-Market

Gain onAvailable-for-

Sale Investments

TotalComprehensiveIncome (Loss)

Balance at January 1, 2011 (US$37,358) US$610 US$469 (US$36,279)Translation differences arising from

translation of foreign operations’financial statements 16,040 – – 16,040

Net change in unrealized mark-to-marketvalues of derivatives(see Note 9) (1,927) – – (1,927)

Net change in unrealized mark-to-marketvalues of available-for-saleinvestments – – 4,972 4,972

Income tax relating to components ofother comprehensive income 578 – – 578

Balance at June 30, 2011 (US$22,667) US$610 US$5,441 (US$16,616)

12.5. Subordinated Perpetual Capital Securities

On April 20, 2011, the Board of ICTSI approved the investment by its wholly owned subsidiary,ICTSI Ltd., in RCBV common shares. The Board also approved for ICTSI to guarantee undersuch terms and conditions, as the Board may reasonably determine, the issuance, offer and sale byRCBV of subordinated perpetual capital securities in such amount, with interest rate and undersuch other terms and conditions as the Board and/or RCBV may subsequently approve or ratify.RCBV was incorporated with limited liability in the Netherlands on April 19, 2011 whoseprimary purpose, among others, is to act as a financing subsidiary of ICTSI. RCBV is 75%-owned

ICTSI Form 17-Q Q2 2012 2424

by ICTSI Ltd. and its ultimate parent company is ICTSI. On April 28, 2011, RCBV (the “Issuer”)and ICTSI (the “Guarantor”) signed a Subscription Agreement with HSBC and Citigroup GlobalMarkets Limited (Citi) for the issuance of US$200,000,000 8.375% subordinated guaranteedperpetual capital securities (the “Original Securities”). The Original Securities confer a right toreceive a return on the Original Securities (the “Distribution”) every Distribution Payment Date asdescribed in the terms and conditions of the Original Securities. These distributions are payablesemi-annually in arrears on the Distribution Payment Dates of each year. However, the Issuermay, at its sole and absolute discretion, prior to any Distribution Payment Date, resolve to deferpayment of all or some of the Distribution which would otherwise be payable on that DistributionPayment Date subject to exceptions enumerated in the terms and conditions of the OriginalSecurities. The Original Securities are perpetual securities in respect of which there is no fixedredemption date but the Issuer may, at its option change the status of the Securities or redeem thesame on instances defined under its terms and conditions.

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 toUS$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% (plus interest accrued on the Securities from and including November 5, 2011 to butexcluding January 17, 2012). The net proceeds from the issue of the Further Securities amountingto US$142.4 million, after deducting commissions, will be used for the same purpose as theOriginal Securities.

The Securities were not registered with the Philippine SEC. The Securities were offered inoffshore transactions outside the United States in reliance on Regulation S under the U.S.Securities Act of 1933, as amended, and, subject to certain exceptions, may not be offered or soldwithin the United States. The Securities are traded and listed in the Singapore Stock Exchange.The Securities shall be treated as a liability in the financial statements of the Issuer or RCBVsince it has the obligation to pay the accumulated distributions should the Guarantor declaredividends to its common stockholders. On the other hand, the Securities shall be treated as part ofequity attributable to equity holders of the parent in the consolidated financial statements of theGroup because nothing in the terms and conditions of the Securities gives rise to an obligation ofthe Group to deliver cash or another financial asset in the future as defined by PAS 32, FinancialInstruments: Presentation. However, should the Issuer decide to exercise its option to redeem theSecurities, the Securities shall be treated as a financial liability from the date the redemptionoption is exercised. Should the Issuer also opt to not defer payment of distributions on aDistribution Payment Date, all distributions in arrears as of that date will be recognized as afinancial liability until payment is made.

RCBV paid distributions amounting to US$12.1 million to the holders of the Securities on May 5,2012. Related interest expense accrued by the Issuer or RCBV amounted to US$4.5 million forthe three and six months ended June 30, 2012, respectively. The interest expense has not beenrecognized in the unaudited consolidated statement of income since the Securities are presented asequity attributable to equity holders of the parent.

13. Income and Expenses

13.1. Interest income

This account mainly arises from short-term investments, which earn interest at prevailing marketrates (see Note 10). Interest income amounted to US$2.0 million and US$1.6 million, andUS$5.2 million and US$4.0 million for the three and six months ended June 30, 2012 and 2011,respectively. Interest income earned for the three and six months ended June 30, 2012 increased

ICTSI Form 17-Q Q2 2012 2525

from the same period a year ago due to the US$350.0 million subordinated perpetual capitalsecurities issued in May 2011 and January 2012 combined with higher net cash generated fromoperations resulting in higher average cash balance during the first quarter of 2012 compared withthe same period in 2011.

13.2. Other Expenses

In 2012, this account mainly includes penalty on prepayment and loss on prepayment option ofHSBC loan totaling US$1.5 million (see Notes 9.2 and 11.4).

In 2011, this account mainly includes SPIA’s equity tax amounting to US$2.5 million(COP4.6 billion). This equity tax is temporary and is imposed on legal entities and individuals inColombia who owned net equity in excess of COP1.0 billion. The tax rate is determined based onnet equity as of January 1, 2011. The effective net equity tax rate that applies to SPIA is 6%,including surcharge. The equity tax is payable in eight equal installments until 2014 and isneither deductible nor creditable for income tax purposes.

14. Earnings Per Share Computation


Net income attributable to equity holders of theparent, as presented in the unaudited statementof income* US$34,900 US$31,517 US$70,260 US$60,007

Adjustment for the effect of cumulative distributionson subordinated perpetual capital securities(see Note 12.5)* (5,938) (10,125)

Net income attributable to equity holders of theparent, as adjusted (a)* US$28,962 US$31,517 US$60,135 US$60,007

Common shares outstanding at beginning of year 1,992,066,860 1,992,066,860 1,992,066,860 1,992,066,860Weighted shares held by subsidiaries and treasury

shares (67,688,377) (88,070,650) (67,688,377) (88,070,650)Weighted average shares outstanding (b) 1,924,378,483 1,903,996,210 1,924,378,483 1,903,996,210Effect of dilutive stock options 47,306,500 63,135,424 47,306,500 63,135,424Weighted average shares outstanding adjusted for

potential common shares (c) 1,971,684,983 1,967,131,634 1,971,684,983 1,967,131,634

Basic earnings per share (a/b) US$0.015 US$0.017 US$0.031 US$0.032

Diluted earnings per share (a/c) US$0.015 US$0.016 US$0.030 US$0.031

* Figures are in thousands.

15. Contingencies

There are certain lawsuits and labor cases filed against the Parent Company and certainsubsidiaries in the normal course of business. Management and its legal counsel believe that theGroup has substantial legal and factual bases for its position and is of the opinion that lossesarising from these cases, if any, will not have a material adverse impact on the Group’s financialcondition and results of operations.

16. Seasonality

The container terminal industry has historically experienced seasonal variations. This seasonalitymay result in quarter-to-quarter or period-to-period volatility in our operating results. Tradevolumes in the jurisdictions in which the Group operates tend to be stronger in the third andfourth quarters and weaker in the first quarter. Management believes that such seasonal variationshave no material effect on the results of operations of the Group.

ICTSI Form 17-Q Q2 2012 2626

17. Other Matters

17.1. PT PBM Olah Jasa Andal (OJA)

On May 18, 2012, Karwell signed a Conditional Sale Purchase Agreement with PT Temas Lestarifor the purchase of 100% shares of OJA, a limited liability company operating in loading andunloading of general cargo and/or container at Tanjung Priok, Jakarta, Indonesia. On July 3,2012, ICTSI, through Karwell, a majority-owned subsidiary of ICTSI Ltd. through IFEL,completed the acquisition of 100% of the equity interest in OJA for a purchase price ofUS$41.9 million. Net assets of OJA at the date of acquisition amounted to US$9.3 million(IDR87.3 billion), which include total assets (mainly property and equipment) totalingUS$38.7 million (IDR362.7 billion) net of total liabilities (mainly short-term debt) aggregatingUS$29.4 million (IDR275.4 billion). Provisional goodwill arising from the acquisition amountedto US$32.6 million. The financial position and results of operations of OJA were not included inthe unaudited consolidated financial statements of ICTSI and subsidiaries as of and for the sixmonths ended June 30, 2012 as ICTSI only gained control of OJA on July 3, 2012.

If the acquisition had taken place at the beginning of the year, the unaudited revenues would havebeen higher by US$12.1 million (IDR110.9 billion) and net income attributable to equity holdersof the parent would have been lower by US$1.3 million (IDR12.2 billion) for the six monthsended June 30, 2012 (see Note 1.2).

17.2. Pakistan International Container Terminal Limited (PICT)

On March 6, 2012, ICTSI Mauritius Limited (ICTSI Mauritius or the “Acquirer”), a whollyowned subsidiary of ICTSI through ICTSI Ltd., announced in the Karachi Stock Exchange itsintention to acquire 35% to 55% of the issued and paid-up ordinary shares of PICT. PICT is acompany listed in the Karachi Stock Exchange Guarantee Limited (KSE). It is a container cargoterminal located at the Karachi Port in Pakistan and has a maximum handling capacity of 750,000TEUs. Consequently, on March 30, 2012, ICTSI Mauritius signed a Share Purchase Agreement(SPA) with substantial shareholders of PICT for the purchase of 35% of the shares of PICT(“Tendered Shares”) which shall involve the conduct of a minimum offer price, which shall bedetermined in accordance with the Takeover Laws of Pakistan. The Tender Offer shall be madethrough a public announcement and undertaken after the fulfilment of certain conditions such asclearance from relevant government agencies in Pakistan, issuance of consent from PICT’slenders, fulfilment of certain pre-completion covenants by the sellers, non-occurrence of anymaterial adverse change, and a determination that the warranties from the sellers are correct in allmaterial respects, among others. The completion of the transaction is likewise subject to thefulfilment of certain conditions including the issuance of a certificate to the effect that ICTSIMauritius has fulfilled all its obligations under the Takeover Laws in respect to the offer for theTendered Shares. The SPA provides for a maximum of 180 business days for the transaction tobe completed. On August 10, 2012, ICTSI Mauritius has commenced a public tender offer at theKSE to purchase outstanding shares of PICT at a price of 150 Pakistani Rupee per share. Thetender offer will expire on October 10, 2012, unless, the offer is extended.

ICTSI Form 17-Q Q2 2012 2727

Item 2. Management’s Discussion and Analysis of Financial Conditionand Results of Operations.

The following discussion and analysis relate to the consolidated financial condition and results ofoperations of ICTSI and its wholly and majority-owned subsidiaries (collectively known as “ICTSIGroup”) and should be read in conjunction with the accompanying interim unaudited consolidatedfinancial statements and related notes. References to “ICTSI”, “the Company”, and “ParentCompany” pertain to ICTSI Parent Company, while references to “the Group” pertain to ICTSI andits subsidiaries.

2.1 OVERVIEW

The Group is an international operator of common user container terminals serving the globalcontainer shipping industry. Its business is the acquisition, development, operation and managementof container terminals focusing on facilities with total annual throughputs ranging from 50,000 to2,500,000 twenty-foot equivalent units (TEUs). It also handles break bulk cargoes (BBC) andprovides a number of ancillary services such as storage, container packing and unpacking, inspection,weighing and services for refrigerated containers or reefers. As of June 30, 2012, the Group isinvolved in 23 terminal concessions and port development projects in 17 countries worldwide, sevenin the Philippines and one each in Brazil, Poland, Madagascar, Japan, Indonesia, India, China,Ecuador, Syria, Georgia, Brunei, The United States of America, Croatia, Mexico, Colombia andArgentina. Agreements were concluded in 2009 to operate the existing Muara Container Terminal(Muara Terminal) and design, construct and develop the new Pulau Mauara Besar Container Terminalin Brunei. The Group is also awarded the concessions to develop and manage the container terminalsin the Port of Buenventura in Colombia, Port of La Plata in Argentina and Port of Manzanillo inMexico. It recently concluded negotiations to operate and manage ports in Croatia, India and Subic,Philippines. The 25-year concession agreement to operate and manage the New Container Terminal 2(NCT-2) in Subic, Philippines was signed on July 27, 2011.

ICTSI was established in 1987 in connection with the privatization of the Manila InternationalContainer Terminal (MICT) in the Port of Manila, and has built upon the experience gained inrehabilitating, developing and operating MICT to establish an extensive international networkconcentrated in emerging market economies. International acquisitions principally in Brazil, Poland,Madagascar, Ecuador and China, substantially contributed to the growth in volume, revenues and netincome. ICTSI’s business strategy is to continue to develop its existing portfolio of terminals andproactively seek acquisition opportunities that meet its investment criteria.

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 Manila - Manila International Container Terminal, Port of Manila (MICT) Zambales - NCT 1 and 2, Subic Bay Freeport Zone, Olongapo City (SBITC) Batangas - Bauan Terminal, Bauan (BIPI) Davao - Sasa International Port, Davao City (DIPSSCOR) General Santos - Makar Wharf, Port of General Santos (SCIPSI) Misamis Oriental - Phividec Industrial Estate, Tagaloan (MICTSI) Japan - Naha Port Public International Container Terminal, Okinawa, Japan (NICTI) Indonesia - PT Makassar Port Container Terminal, Makassar, South Sulawesi, Indonesia

(MTS) China - Yantai Gangtong Terminal, Shandong Province, China (YRDICTL) Brunei - Muara Container Terminal, Brunei Darussalam (NMCTS) India - Kattupalli Container Terminal, Tamil Nadu, India (ICTSI India)

ICTSI Form 17-Q Q2 2012 2828

Europe, Middle East and Africa (EMEA) Poland - Baltic Container Terminal, Gdynia, Poland (BCT) Syria - Tartous International Container Terminal, Tartous, Syria (TICT) Georgia - Batumi Port, Batumi, Georgia (BICT) Croatia - Adriatic Gate Container Terminal, Rijeka, Croatia (AGCT) Madagascar - Port of Toamasina in Toamasina, Madagascar (MICTSL)

Americaso Brazil - Suape Container Terminal, Suape, Brazil (TSSA)o Ecuador - Port of Guayaquil, Guayaquil, Ecuador (CGSA)o Argentina - Port of La Plata, Buenos Aires Province, Argentina (Tecplata)o Oregon, USA - Port of Portland, Oregon, USA (ICTSI Oregon)o Mexico - Port of Manzanillo, Manzanillo, Mexico (CMSA)o Colombia – Port of Buenaventura, Buenaventura, Colombia (SPIA)

On February 22, 2012, ICTSI and Lekki Port LFTZ Enterprise (Lekki Port) entered into aMemorandum of Understanding (MOU) to negotiate the terms of a Sub-concession Agreement todevelop and operate the container terminal at the Deep Water Port in the Lagos Free Trade Zone atIbeju-Lekki, Lagos State, Federal Republic of Nigeria. Under the MOU, Lekki Port negotiatedexclusively with ICTSI, in connection with the Sub-concession and the works and services to beundertaken under the agreement, for an Exclusivity Fee of US$5.0 million, which is non-refundablebut subject to set-off or refund under certain circumstances as provided in the MOU. The Exclusivityfee is recorded as part of “Other noncurrent assets” account in the unaudited balance sheet as ofJune 30, 2012. The container terminal will have a quay length of 1,200 meters, an initial draft of 14.5meters with the potential for further dredging to 16 meters, and maximum handling capacity of2.5 million TEUs. With these features, shipping lines will be able to call with the new regionalstandard large vessels, turning the port into a seminal destination for the West African region. OnAugust 10, 2012, Lekki Port and ICTSI signed the Sub-concession Agreement, which grants ICTSIthe exclusive right to develop and operate, and to provide certain handling equipment and containerterminal services for a period of 21 years from start of commercial operation date.

On March 6, 2012, ICTSI Mauritius Limited (ICTSI Mauritius or the “Acquirer”), a wholly ownedsubsidiary of ICTSI through ICTSI Ltd., announced in the Karachi Stock Exchange its intention toacquire 35% to 55% of the issued and paid-up ordinary shares of Pakistan International ContainerTerminal (PICT). PICT is a company listed in the Karachi Stock Exchange Guarantee Limited(KSE). It is a container cargo terminal located at the Karachi Port in Pakistan and has a maximumhandling capacity of 750,000 TEUs. Consequently, on March 30, 2012, ICTSI Mauritius signed aShare Purchase Agreement (SPA) with substantial shareholders of PICT for the purchase of 35% ofthe shares of PICT (“Tendered Shares”) which shall involve the conduct of a minimum offer price,which shall be determined in accordance with the Takeover Laws of Pakistan. The Tender Offer shallbe made through a public announcement and undertaken after the fulfilment of certain conditions suchas clearance from relevant government agencies in Pakistan, issuance of consent from PICT’s lenders,fulfilment of certain pre-completion covenants by the Sellers, non-occurrence of any material adversechange, and a determination that the warranties from the sellers are correct in all material respects,among others. The completion of the transaction is likewise subject to the fulfilment of certainconditions including the issuance of a certificate to the effect that ICTSI Mauritius has fulfilled all itsobligations under the Takeover Laws in respect to the offer for the Tendered Shares. The SPAprovides for a maximum of 180 business days for the transaction to be completed. On August 10,2012, ICTSI Mauritius has commenced a public tender offer at the KSE to purchase outstandingshares of PICT at a price of 150 Pakistani Rupee per share. The tender offer will expire onOctober 10, 2012, unless, the offer is extended.

On July 27, 2011, Subic Bay Metropolitan Authority (SBMA) and ICTSI signed the concessionagreement for the operation and management of NCT-2 at Cubi Point in Subic, Philippines for 25years. On August 19, 2011, SBMA approved the assignment of ICTSI’s rights, interests and

ICTSI Form 17-Q Q2 2012 2929

obligations in the NCT-2 contract to ICTSI Subic, Inc. (ICTSI Subic), which was incorporated onMay 31, 2011. The NCT-2 was constructed by SBMA in accordance with the SBMA Port MasterPlan and the Subic Bay Port Development Project. As of June 30, 2012, SBMA has not yet givenICTSI Subic the notice to proceed with the operation and management of NCT-2.

In April 2011, ICTSI and L&T Shipbuilding Ltd. (LTSB) signed a container port operation agreementfor the management and operation of the Kattupalli Container Terminal in Tamil Nadu, India. TheKattupalli Container Terminal is ICTSI’s first venture in India. The terminal is located near Chennaiin Thiruvallur District. LTSB is the developer of an integrated shipyard cum port with a 1.2 millionTEU annual capacity container terminal in Kattupalli. Terminal operations are scheduled tocommence in the third quarter of 2012.

In March 2011, the Company, through its wholly-owned subsidiary, ICTSI Capital BV, entered into aShare Purchase Agreement with Luka Rijeka D.D. (Luka Rijeka), a Croatian company, to purchase a51% interest in the Adriatic Gate Container Terminal (AGCT). AGCT operates the BrajdicaContainer Terminal in Rijeka, Croatia with a concession period of 30 years until 2041. ICTSI CapitalBV paid a total of US$39.5 million (296.2 million Croatian Kuna) as consideration for the 51%ownership in AGCT. With the acquisition of 51% aggregate interest, ICTSI gained control of AGCTeffective April 15, 2011, the same date of ICTSI’s formal take-over of AGCT’s operations.

On May 12, 2010, ICTSI Oregon, Inc. (ICTSI Oregon), a subsidiary of ICTSI, signed a 25-year leasewith the Port of Portland (the Port) for the container/break-bulk facility at Terminal 6. Under theterms of the agreement, ICTSI Oregon paid the Port US$8.0 million at closing date in addition to anannual rent payment of US$4.5 million, subject to any increases in the consumer price index. Asterminal volume increases over time, ICTSI will pay the Port additional incremental revenue percontainer moved. The US$8.0 million upfront fee was paid in two tranches: US$2.0 million onMay 12, 2010 as a signing deposit; and the remaining US$6.0 million on August 12, 2010. ICTSIestablished ICTSI Oregon on April 15, 2010 to operate the Port. ICTSI Oregon took over the portoperations on February 12, 2011.

2.2 RESULTS OF OPERATIONS

The following table shows a summary of the results of operations for the second quarter and sixmonths ended June 30, 2012 as compared with the same periods in 2011. The comparative analysesof the 2012 versus 2011 accounts were derived from the accompanying unaudited consolidatedfinancial statements.

Table 2.1 Unaudited Consolidated Statements of Income

For the Three Months Ended June 30 For the Six Months Ended June 30(In thousands, except % change data) 2012 2011 % Change 2012 2011 % ChangeGross revenues from port operations US$171,168 US$164,194 4.2 US$345,012 US$319,083 8.1Revenues from port operations,

net of port authorities’ share 147,622 142,752 3.4 298,108 277,482 7.4Total income (net revenues, interest and

other income) 152,982 150,116 1.9 310,987 291,456 6.7Total expenses (operating, financing and

other expenses) 106,467 105,156 1.2 212,953 206,647 3.1EBITDA1 72,334 72,062 0.4 149,058 143,301 4.0EBIT2 52,867 54,384 ( 2.8) 110,702 108,737 1.8Net income attributable to equity holders of

the parent 34,900 31,517 10.7 70,260 60,007 17.1

Earnings per shareBasic US$0.015 US$0.017 (9.1) US$0.031 US$0.032 (0.8)Diluted 0.015 0.016 (8.3) 0.030 0.031 (0.0)

__________________1 EBITDA is not a uniform or legally defined financial measure. It generally represents earnings before interest, taxes, depreciation

and amortization. EBITDA is presented because the Group believes it is 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 theindustry.

ICTSI Form 17-Q Q2 2012 3030

The Group’s EBITDA figures are not, however, readily comparable with other companies’ EBITDA figures as they are calculateddifferently and thus, must be read in conjunction with related additional explanations. EBITDA has limitations as an analytical tooland should not be considered in isolation or as a substitute for analysis of the Group’s results as reported under PFRS. Some of thelimitations 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 the 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 a comparative

measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to the Group to investin the growth of the business. The Group compensates for these limitations by relying primarily on the PFRS results and usesEBITDA only as supplementary information.

2 EBIT, or Earnings Before Interest and Taxes, is calculated by taking net revenues from port operations and deducting cash operatingexpenses and depreciation and amortization.

__________________

The following table shows the computation of EBITDA as derived from the Group’s unauditedconsolidated net income attributable to equity holders of the parent for the period:

Table 2.2 EBITDA Computation

For the Three Months Ended June 30 For the Six Months Ended June 30(In thousands, except % change data) 2012 2011 % Change 2012 2011 % ChangeNet income attributable to equity holders

of the parent US$34,900 US$31,517 10.7 US$70,260 US$60,007 17.1Minority interests 92 1,485 (93.8) 732 1,010 (27.5)Provision for income tax 11,523 11,958 ( 3.6) 27,042 23,792 13.7Income before income tax 46,515 44,960 3.5 98,034 84,809 15.6Add (deduct):

Depreciation and amortization 19,467 17,678 10.1 38,356 34,564 11.0Interest and other expenses 11,712 16,788 (30.2) 25,547 37,902 (32.6)Interest and other income (5,360) (7,364) (27.2) (12,879) (13,974) ( 7.8)

EBITDA US$72,334 US$72,062 0.4 US$149,058 US$143,301 4.0

KEY PERFORMANCE INDICATORS

The Group’s key performance indicators (KPIs) include gross moves per hour per crane, craneavailability and berth utilization, which indirectly affect the operations of the Group, and TEU volumegrowth and gross revenue growth, which are both financial in nature. These KPIs are discussed indetail in the succeeding paragraphs.

Gross moves per hour per crane at key terminals such as MICT, CGSA, TSSA, BCT, YRDICTL andMICTSL ranged from 19.9 to 28.3 moves per hour during the second quarter of 2011 to 17.1 to 30.3moves per hour for the same period in 2012. Crane availability ranged from 96.6 percent to 99.0percent for the second quarter of 2011 to 90.7 percent to 99.9 percent for the same period in 2012.Berth utilization was at 21.6 percent to 80.2 percent for the second quarter of 2011 and 19.5 percent to81.6 percent for the same period 2012.

2.3 COMPARISON OF OPERATING RESULTS FOR THE SECONDQUARTERS ENDED JUNE 30, 2012 AND 2011

2.3.1 TEU Volume

Consolidated volume increased by 3.6 percent from 1,312,008 TEUs for the second quarter of 2011 to1,359,419 TEUs for the same period in 2012 due to continuous but modest growth in domestic andinternational trade in countries where the Group’s container terminals are positioned, new shippinglines and routes, and the continuous shift in the containerization of breakbulk cargoes. Key terminals,such as MICT, CGSA, TSSA, BCT, YRDICTL and MICTSL reported a combined growth of6.9 percent year-on-year.

ICTSI Form 17-Q Q2 2012 3131

The Group’s Asia operations, comprised of container terminals in the Philippines, China andIndonesia, reported a 2.7 percent increase in volume from 735,527 TEUs for the second quarter of2011 to 755,574 TEUs for the same period in 2012 due to modest growth in international anddomestic trade, new routes opened and new shipping lines. The Group’s terminal operations in Asiaaccounted for 55.6 percent and 56.1 percent of the consolidated volume for the second quarters of2012 and 2011, respectively.

The Group’s EMEA operations, comprised of container terminals in Madagascar, Poland, Syria,Georgia and Croatia, registered a 14.0 percent growth in volume to 206,364 TEUs for the secondquarter of 2012 from 181,016 TEUs for the same period in 2011 due to stronger international tradeand new shipping lines. The growing short sea business and unifeeder operations at BCT, higherimportation of second-hand cars at BICT, and higher importation and containerization of goods whichwere previously shipped in BBC at MICTSL also contributed to the growth in volume. EMEAoperations accounted for 15.2 percent and 13.8 percent of the consolidated volume for the secondquarters of 2012 and 2011, respectively.

Throughput handled by the Americas segment, comprised of container terminal operations in Brazil,Ecuador and The United States of America, marginally increased by 0.5 percent from 395,465 TEUsfor the second quarter of 2011 to 397,481 TEUs for the same period in 2012. The marginal increase involume was due to modest growth in international trade and continuous banana containerization atCGSA. The soft Brazil market resulted to a decline in TSSA’s throughput from 100,791 TEUs for thesecond quarter of 2011 to 89,530 TEUs for the same period in 2012. The segment captured29.2 percent and 30.1 percent of the consolidated volume for the second quarters of 2012 and 2011,respectively.

2.3.2 TOTAL INCOME

Total income consists of: (1) Revenues from port operations, net of port authorities’ share; (2) Interestincome; (3) Foreign exchange gain; and (4) Other income.

The table below illustrates the consolidated total income for the second quarters ended June 30, 2012and 2011:

For the Three Months Ended June 30(In thousands, except % change data) 2012 2011 % ChangeGross revenues from port operations US$171,168 US$164,194 4.2Port authorities’ share in gross revenues 23,546 21,442 9.8Net revenues 147,622 142,752 3.4Interest income 2,045 1,607 (54.6)Foreign exchange gain 2,429 5,355 27.3Other income 886 402 120.4Total income US$152,982 US$150,116 1.9

Net revenues accounted for 96.5 percent of the total consolidated income while foreign exchange gainrepresented 1.6 percent. For the same period in 2011, net revenues and foreign exchange gain stoodat 95.1 percent and 3.6 percent of total consolidated income, respectively.

2.3.2.1 Gross Revenues from Port Operations

Gross revenues from port operations include fees received for cargo handling, wharfage, berthing,storage, and special services.

Consolidated gross revenues from port operations increased by 4.2 percent from US$164.2 million forthe second quarter of 2011 to US$171.2 million for the same period in 2012 mainly due to volumegrowth on all geographical segments. Tariff rate increases in certain key terminals, favorable volumemix, mainly import and export-laden containers, new shipping lines, and higher revenues fromancillary services and storage, also contributed to the increase in consolidated gross revenues.However, the 14.4 percent depreciation of Brazilian Reais (BRL) against the US dollar tapered the

ICTSI Form 17-Q Q2 2012 3232

increase in consolidated gross revenues. Excluding the foreign exchange impact of BRL,consolidated gross revenues would have increased by 6.2 percent in 2012. The Asia and EMEAsegments reported growth at 9.1 percent and 6.7 percent, respectively, while the Americas segmentdeclined by 1.7 percent.

Gross revenues from Asia terminal operations increased by 9.1 percent from US$74.4 million for thesecond quarter of 2011 to US$81.1 million for the same period in 2012 due to volume growth frominternational and domestic trade, tariff rate increases at MICT in November 2011 and May 2012,favorable container mix, and higher revenues from ancillary services. The Asia segment captured47.4 percent and 45.3 percent of the consolidated gross revenues for the second quarters of 2012 and2011, respectively.

EMEA operations increased by 6.7 percent to US$22.0 million for the second quarter of 2012 fromUS$20.6 million for the same period in 2011 due to volume growth, surge in storage revenues due tolonger container dwell time, and tariff rate increase at MICTSL. EMEA operations captured 12.8percent and 12.5 percent of the total consolidated gross revenues for the second quarters of 2012 and2011, respectively.

Meanwhile, the Americas segment reported a 1.7 percent decline in gross revenues fromUS$69.2 million during the second quarter of 2011 to US$68.1 million for the same period in 2012mainly due to unfavorable volume mix, lower storage revenues, and a weaker BRL against the USdollar. In addition, the soft Brazil market also contributed to the drop in the segment’s grossrevenues. Excluding the foreign exchange impact of TSSA, gross revenues for this segment wouldhave increased by 3.0 percent in 2012. The Americas segment accounted for 39.8 percent and 42.2percent of the total consolidated gross revenues for the second quarters of 2012 and 2011,respectively.

2.3.2.2 Foreign Exchange Gain, Interest Income and Other Income

Foreign exchange gain decreased by 54.6 percent to US$2.4 million for the second quarter of 2012from US$5.4 million in 2011 due to a less favorable restatement of SPIA’s US dollar-denominatedconcession rights payable arising from a lower appreciation of the Colombian peso (COP) againt theUS dollar (2012: +0.3%; 2011:+5.4%), and net derivative gains on the Parent Company’s US$/MXNdual currency deposits which matured at the end of 2011.

Consolidated interest income increased by 27.3 percent to US$2.0 million for the second quarter of2012 from US$1.6 million for the same period in 2011 due to higher average cash balance mainlybrought about by the proceeds from the additional issuance of subordinated perpetual capitalsecurities amounting to US$150.0 million in January 2012.

Other income grew by 120.4 percent to US$0.9 million for the second quarter of 2012 fromUS$0.4 million for the same period a year ago mainly due to gain on sale of equipment. Other incomeis also composed of the Group’s rental and other sundry income accounts.

2.3.3 Total Expenses

Total expenses consist of: (1) Manpower costs; (2) Equipment and facilities-related expenses;(3) Administrative and other operating expenses; (4) Depreciation and amortization; (5) Interestexpense and financing charges on borrowings; (6) Interest expense on concession rights payable; and(7) Foreign exchange loss and others.

ICTSI Form 17-Q Q2 2012 3333

The table below shows the breakdown of total expenses for the second quarters ended June 30, 2012and 2011.

Table 2.6 Total Expenses

For the Three Months Ended June 30In thousands, except % change data 2012 2011 % ChangeManpower costs US$33,285 US$31,367 6.1Equipment and facilities-related expenses 22,535 22,692 (0.7)Administrative and other expenses 19,468 16,631 17.1Total cash operating expenses 75,288 70,690 6.5Depreciation and amortization 19,467 17,678 10.1Interest expense and financing charges on borrowings 4,762 9,222 (48.4)Interest expense on concession rights payable 3,886 4,628 (16.0)Foreign exchange loss and others 3,064 2,938 4.3Total expenses US$106,467 US$105,156 1.2

Total cash operating expenses of the Group increased by 6.5 percent to US$75.3 million for thesecond quarter of 2012 from US$70.7 million for the same period in 2011 due to higher manpowercosts resulting from government-mandated and contracted salary rate increases at certain terminalsand higher administrative expenses.

2.3.3.1 Manpower Costs

Manpower costs increased by 6.1 percent from US$31.4 million for the second quarter of 2011 toUS$33.3 million for the same period in 2012 due to higher headcount and government-mandated andcontracted salary rate increases in certain terminals such as MICT, YRDICTL, DIPSSCOR, CGSAand TSSA.

Manpower costs stood at 44.2 percent and 44.4 percent of cash operating expenses for the secondquarters of 2012 and 2011, respectively.

2.3.3.2 Equipment and Facilities-related Expenses

Equipment and facilities-related expenses consist mainly of repairs and maintenance costs of portequipment and facilities, fixed fees, power and light, technical and systems development andmaintenance expenses, tools expenses, equipment rentals and fuel, oil and lubricants.

Despite the increase in volume-related expenses such as fuel, power, and repairs and maintenance,equipment and facilities-related expenses resulted to a net decrease of 0.7 percent to US$22.5 millionfor the second quarter of 2012 from US$22.7 million for the same period in 2011 due mainly tosignificant reductions in port facility maintenance costs at ICTSI Oregon which are beingcontinuously negotiated with the Port of Portland.

This expense account represented 29.9 percent and 32.1 percent of cash operating expenses for thesecond quarters of 2012 and 2011, respectively.

2.3.3.3 Administrative and Other Operating Expenses

Administrative and other operating expenses increased by 17.1 percent from US$16.6 million for thesecond quarter of 2011 to US$19.5 million for the same period in 2012 due to higher travel andtransportation expenses and professional fees related to increased business development activities inAsia and EMEA regions.

This expense account captured 25.9 percent and 23.5 percent of the total cash operating expenses forthe second quarters of 2012 and 2011, respectively.

ICTSI Form 17-Q Q2 2012 3434

2.3.3.4 Depreciation and Amortization

Depreciation and amortization expense increased by 10.1 percent to US$19.5 million for the secondquarter of 2012 from US$17.7 million for the same period in 2011 due mainly to the acquisition ofport equipment and completion of yard facilities improvements at key terminals, particularly at MICT,CGSA and TSSA.

2.3.3.5 Interest and Financing Charges on Borrowings

Financing charges declined by 48.4 percent from US$9.2 million for the second quarter of 2011 toUS$4.8 million for the same period in 2012 primarily due to higher capitalized borrowing costs.Financing charges are net of capitalized borrowing costs on qualifying assets under constructionprincipally at MICT, CMSA, CGSA, SPIA and Tecplata amounting to US$7.6 million and US$3.2million for the second quarters of 2012 and 2011, respectively. Capitalization rate also increased inthe latter part of 2011 from 8.1 percent to 8.9 percent.

2.3.3.6 Interest Expense on Concession Rights Payable

Interest expense on concession rights payable decreased by 16.0 percent to US$3.9 million for thesecond quarter of 2012 from US$4.6 million for the same period in 2011 due principally to thedeclining principal balance of MICT’s concession rights payable which is approaching its maturity inMay 2013.

2.3.3.7 Foreign Exchange Loss and Others

Foreign exchange loss and others showed a net increase of 4.3 percent to US$3.1 million for thesecond quarter of 2012 from US$2.9 million for the same period in 2011. The net increase mainlyresulted from the penalty on prepayment and loss on the pretermination of prepayment option ofHSBC loan totaling US$1.5 million in May 2012. Meanwhile, foreign exchange loss decreased by37.9 percent due to the continuous appreciation of the Philippine peso (2012: +1.9%; 2011:+0.1%)against the US dollar during the second quarter of 2012 compared to the same period in 2011.

Foreign exchange loss mainly results from the translation or restatement as well as from thesettlement of foreign currency-denominated monetary assets and liabilities.

2.3.3.8 EBITDA and EBIT

Consolidated EBITDA increased marginally by 0.4 percent to US$72.3 million for the second quarterof 2012 from US$72.1 million for the same period in 2011. The marginal increase was primarilyattributed to a modest growth in volume and revenues combined with a moderate increase in cashoperating expenses which is aimed to continuously control operating costs. Excluding the foreignexchange impact of a weaker BRL against US dollar, EBITDA would have increased by 2.0 percent.However, EBITDA margin dropped from 43.9 percent in 2011 to 42.3 percent in 2012 due mainly tohigher variable concession fee at TSSA, which rate doubled effective July 2011.

Consolidated EBIT for the second quarter of 2012 decreased by 2.8 percent to US$52.9 million fromthe US$54.4 million reported in the same period in 2011 due mainly to higher depreciation expenseduring the period. Consequently, EBIT margin dropped to 30.9 percent for the second quarter of 2012from 33.1 percent for the same period in 2011 due to higher depreciation expense and variableconcession fee at TSSA.

ICTSI Form 17-Q Q2 2012 3535

2.3.4 Income Before Income Tax and Provision for Income Tax

Consolidated income before income tax increased by 3.5 percent to US$46.5 million for the secondquarter of 2012 from US$45.0 million for the same period in 2011 primarily due to the growth involume and revenues and favorable effect of non-operating items such as lower interest expense andfinancing charges on borrowings and interest expense on concession rights payable, and higherinterest income. The ratio of income before income tax to total gross revenues stood at 27.2 percentand 27.4 percent for the second quarters of 2012 and 2011, respectively.

Consolidated provision for current and deferred income taxes for the second quarter of 2012decreased by 3.6 percent to US$11.5 million from US$12.0 million for the same period in 2011mainly due to tax benefits and deductions with no deferred income tax effect which also resulted to adecrease in effective income tax rate to 24.8 percent for the second quarter of 2012 from 26.6 percentin the previous period.

2.3.5 Net Income

Consolidated net income grew by 6.0 percent to US$35.0 million for the second quarter of 2012 fromUS$33.0 million for the same period in 2011. The increase was mainly caused by the growth inoperating income and favorable effect of non-operating items. Consolidated net income stood at 20.4percent and 20.1 percent of gross revenues for the second quarters of 2012 and 2011, respectively.

Net income attributable to equity holders or net profits excluding minority interests increased by 10.7percent to US$34.9 million for the second quarter of 2012 from US$31.5 million in 2011.

Both basic and diluted earnings per share decreased to US$0.015 for the second quarter of 2012 fromUS$0.017 and US$0.016 for the same period in 2011, respectively, due to the effect of thedistributions on the additional US$150.0 million and the initial US$200.0 million subordinatedperpetual capital securities issued in January 2012 and May 2011, respectively.

There were no significant elements of income or expense outside the Group’s continuing operations inthe second quarter of 2012.

2.4 COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHSENDED JUNE 30, 2012 WITH THE SAME PERIOD IN 2011

2.4.1 TEU Volume

Consolidated volume increased by 8.6 percent from 2,483,977 TEUs for the first half of 2011 to2,697,735 TEUs for the same period in 2012 due to the continuous growth in international anddomestic trade. New shipping lines and routes, continuous shift in the containerization of breakbulkcargoes, and the full period contribution of ICTSI Oregon and AGCT also contributed to the increasein consolidated volume. Excluding ICTSI Oregon and AGCT, consolidated volume would haveincreased by 6.5 percent in 2012.

The Asia segment grew by 4.3 percent from 1,422,722 TEUs for the first half of 2011 to 1,483,585TEUs for the same period in 2012 mainly due to modest growth in international and domestic trade,new routes opened and new shipping lines. The Asia terminals captured 55.0 percent and 57.3percent of the consolidated volume for the first half of 2012 and 2011, respectively.

The EMEA segment reported the highest growth at 27.6 percent from 320,483 TEUs handled for thefirst half of 2011 to 409,040 TEUs for the same period in 2012 due to stronger international trade,continuous shift of BBC to containerized cargoes and new shipping lines. The growing short seabusiness and unifeeder operations at BCT, higher importation of second-hand cars at BICT, higherimports at MICTSL, and the full period contribution of AGCT also resulted in the increase in volume.Excluding AGCT, volume growth for this segment would have been 20.6 percent in 2012. The

ICTSI Form 17-Q Q2 2012 3636

segment captured 15.2 percent and 12.9 percent of the consolidated volume for the first half of 2012and 2011, respectively.

Throughput handled by the Americas segment increased by 8.7 percent to 805,110 TEUs for the firsthalf of 2012 from 740,771 TEUs for the same period in 2011 due to the continuous bananacontainerization and higher importation of laden containers in CGSA and the full period contributionof ICTSI Oregon. However, volume at TSSA slightly declined from 196,887 TEUs for the first half of2011 to 195,039 TEUs for the same period in 2012 due to the effects of the soft Brazil market.Excluding ICTSI Oregon, volume for this segment would have increased by 5.2 percent in 2012. Thissegment accounted for 29.8 percent of the consolidated volume for the first half of 2012 and 2011.

2.4.2 Total Income

Table 2.8 Total Income

For the Six Months Ended June 30(In thousands, except % change data) 2012 2011 % ChangeGross revenues from port operations US$345,012 US$319,083 8.1Port authorities’ share in gross revenues 46,904 41,601 12.7Net revenues 298,108 277,482 7.4Foreign exchange gain 6,119 9,182 (33.4)Interest income 5,239 3,965 32.1Other income 1,521 827 83.9Total income US$310,987 US$291,456 6.7

Net revenues accounted for 95.9 percent of the total consolidated income while foreign exchange gainrepresented 2.0 percent. For the same period in 2011, net revenues were 95.2 percent and foreignexchange gain was 3.2 percent of the total consolidated income.

2.4.2.1 Gross Revenues from Port Operations

Gross revenues from port operations include fees received for cargo handling, wharfage, berthing,storage, and special services.

Consolidated gross revenues from port operations increased by 8.1 percent from US$319.1 million forthe first half of 2011 to US$345.0 million for the same period in 2012 mainly due to volume growthon all geographical segments. Tariff rate increases in certain key terminals, favorable volume mix,mainly import and export-laden containers, new shipping lines, higher revenues from ancillaryservices and storage, and new terminals also contributed to the increase in consolidated grossrevenues. ICTSI Oregon and AGCT contributed 2.0 percent to the growth in consolidated grossrevenues. However, the depreciation of BRL against US dollar tapered the increase in consolidatedgross revenues. Excluding the impact of BRL, consolidated gross revenues would have increased by10.5 percent in 2012. The EMEA segment reported the highest growth at 15.8 percent, followed byAsia at 10.1 percent and Americas at 3.9 percent.

Gross revenues from the EMEA operations increased by 15.8 percent to US$43.5 million for the firsthalf of 2012 from US$37.6 million for the same period in 2011 due to volume growth, tariff rateincrease and surge in storage revenues at MICTSL and the full period contribution of AGCT.Excluding AGCT, gross revenues of the segment would have increased by 10.5 percent in 2012.EMEA operations captured 12.6 percent and 11.8 percent of the total consolidated gross revenues forthe first half of 2012 and 2011, respectively.

Gross revenues from the Asia terminal operations increased by 10.1 percent from US$144.6 millionfor the first half 2011 to US$159.2 million for the same period in 2012 due to volume growth, arrastreand vessel tariff rate increases at MICT in November 2011 and May 2012, respectively, and higherrevenues from ancillary services. The Asia segment captured 46.1 percent and 45.3 percent of theconsolidated gross revenues for the six months ended June 30, 2012 and 2011, respectively.

ICTSI Form 17-Q Q2 2012 3737

The Americas segment reported a 3.9 percent increase in gross revenues from US$137.0 million forthe first half of 2011 to US$142.4 million for the same period in 2012 mainly due to volume growth,surge in storage revenues and the full period contribution of ICTSI Oregon. Excluding ICTSIOregon, gross revenues for this segment would remain relatively flat with 2011. Meanwhile, thedepreciation of BRL against US dollar tapered the increase in gross revenues. Excluding the impactof BRL, gross revenues for the segment would have increased by 9.5 percent in 2012. The Americassegment accounted for 41.3 percent and 42.9 percent of the total consolidated gross revenues for thesix months ended June 30, 2012 and 2011, respectively.

2.4.2.2 Foreign Exchange Gain, Interest Income and Other Income

Foreign exchange gain decreased by 33.4 percent from US$9.2 million for the first half of 2011 toUS$6.1 million for the same period in 2012 mainly due to decline in the Parent Company’s peso-denominated net monetary assets, despite the continuous appreciation of Philippine peso against USdollar (2012:+3.9%; 2011:+1.2%), and net derivative gains on the Parent Company’s US$/MXN dualcurrency deposits which matured at the end of 2011.

Foreign exchange gain mainly arises from the settlement of foreign currency-denominated liabilitiesand translation or restatement adjustments of monetary assets and liabilities.

Consolidated interest income increased by 32.1 percent to US$5.2 million for the first half of 2012from US$4.0 million for the same period in 2011 due to higher average cash balance brought about bythe proceeds from the additional issuance of subordinated perpetual capital securities amounting toUS$150.0 million in January 2012, proceeds from CGSA’s debt securities issued in the fourth quarterof 2011 amounting to US$55.8 million, and higher cash generated from operations. Interest earned onAGCT’s short-term investments also contributed to the increase in consolidated interest income forthe period.

Other income increased to US$1.5 million for the first half of 2012 from US$0.8 million for the sameperiod in 2011 primarily due to gain on sale of equipment. Other income is also composed of rentalsand other sundry income accounts of ICTSI and subsidiaries.

2.4.3 Total Expenses

Total expenses consist of: (1) Manpower costs; (2) Equipment and facilities-related expenses;(3) Administrative and other operating expenses; (4) Depreciation and amortization; (5) Interestexpense and financing charges on borrowings; (6) Interest expense on concession rights payable; and(7) Foreign exchange loss and others.

The table below shows the breakdown of total expenses for the six months ended June 30, 2012 and2011.

Table 2.10 Total Expenses

For the Six Months Ended June 30(In thousands, except % change data) 2012 2011 % ChangeManpower costs US$67,065 US$58,226 15.2Equipment and facilities-related expenses 46,078 41,912 9.9Administrative and other expenses 35,907 34,043 5.5Total cash operating expenses 149,050 134,181 11.1Depreciation and amortization 38,356 34,564 11.0Interest expense and financing charges on borrowings 13,537 19,735 (31.4)Interest expense on concession rights payable 7,799 9,198 (15.2)Foreign exchange loss and others 4,211 8,969 (53.0)Total expenses US$212,953 US$206,647 3.1

ICTSI Form 17-Q Q2 2012 3838

Total cash operating expenses of the Group increased by 11.1 percent to US$149.1 million for thefirst half of 2012 from US$134.2 million for the same period in 2011 due to higher volume-relatedexpenses such as on-call labor, fuel and power consumption and repairs and maintenance. Inaddition, government-mandated and contracted salary rate increases in certain terminals and the fullperiod contribution of ICTSI Oregon and AGCT also contributed to the increase in cash operatingexpenses. Excluding ICTSI Oregon and AGCT, total cash operating expenses would have increasedby 7.1 percent in 2012.

2.4.3.1 Manpower Costs

Manpower costs increased by 15.2 percent from US$58.2 million for the first half of 2011 toUS$67.1 million for the same period in 2012 due to higher headcount, increased on-call labor costsrelated to volume growth and government-mandated and contracted salary rate increases in certainterminals such as MICT, YRDICTL, DIPSSCOR, CGSA and TSSA, and full period contribution ofICTSI Oregon and AGCT. Excluding ICTSI Oregon and AGCT, manpower costs would haveincreased by 7.6 percent in 2012.

Manpower costs stood at 45.0 percent and 43.4 percent of cash operating expenses for the first half of2012 and 2011, respectively.

2.4.3.2 Equipment and Facilities-related Expenses

Equipment and facilities-related expenses consist mainly of repairs and maintenance costs of portequipment and facilities, fixed fees, power and light, technical and systems development andmaintenance expenses, tools expenses, equipment rentals and fuel, oil and lubricants.

Equipment and facilities-related expenses increased by 9.9 percent to US$46.1 million for the firsthalf of 2012 from US$41.9 million for the same period in 2011 due to higher volume-related expensessuch as fuel, power and repairs and maintenance. The increase in fixed fee and equipment rental inTSSA, and full period contribution of ICTSI Oregon and AGCT also contributed to the increase inequipment and facilities-related expenses. Excluding ICTSI Oregon and AGCT, equipment andfacilities-related expenses would have increased by 9.4 percent in 2012.

This expense account represented 30.9 percent and 31.2 percent of cash operating expenses for thefirst half of 2012 and 2011, respectively.

2.4.3.3 Administrative and Other Operating Expenses

Administrative and other operating expenses increased by 5.5 percent from US$34.0 million for thefirst half of 2011 to US$35.9 million for the same period in 2012 due to higher travel expenses andprofessional fees related to increased business development activities in Asia and EMEA regions, andthe full period contribution of ICTSI Oregon and AGCT. Excluding ICTSI Oregon and AGCT,consolidated administrative expenses and other operating expenses would have increased by4.1 percent in 2012.

This expense account captured 24.1 percent and 25.4 percent of the total cash operating expenses forthe six months ended June 30, 2012 and 2011, respectively.

2.4.3.4 Depreciation and Amortization

Depreciation and amortization expense increased by 11.0 percent to US$38.4 million for the first halfof 2012 from US$34.6 million for the same period in 2011 due mainly to the acquisition of portequipment and completion of yard facilities improvements at key terminals, particularly at MICT,CGSA and TSSA, and the addition of AGCT.

ICTSI Form 17-Q Q2 2012 3939

2.4.3.5 Interest and Financing Charges on Borrowings

Financing charges decreased by 31.4 percent from US$19.7 million for the first half of 2011 toUS$13.5 million for the same period in 2012 primarily due to higher capitalized borrowing costs.Financing charges are net of capitalized borrowing costs on qualifying assets under constructionprincipally at MICT, CMSA, CGSA, SPIA and Tecplata amounting to US$14.0 million andUS$5.6 million for the first half of 2012 and 2011, respectively. Capitalization rate also increased inthe latter part of 2011 from 8.1 percent to 8.9 percent.

2.4.3.6 Interest Expense on Concession Rights Payable

Interest expense on concession rights payable dropped by 15.2 percent to US$7.8 million for the firsthalf of 2012 from US$9.0 million for the same period in 2011 due principally to the decliningprincipal balance of MICT’s concession rights payable which is approaching its maturity in May2013.

2.4.3.7 Foreign Exchange Loss and Others

Foreign exchange loss and others declined by 53.0 percent to US$4.2 million for the first half of 2012from US$9.0 million for the same period in 2011 due mainly to the continuous appreciation of thePhilippine peso (2012: +3.9%; 2011:+1.2%) and COP (2012:+8.0%; 2011:+7.2%) against the USdollar during the first half of 2012 compared to the same period in 2011. Other expenses in 2012consist mainly of the penalty on prepayment and loss on pretermination of prepayment option ofHSBC loan totaling US$1.5 million in May 2012. Other expenses in 2011 include a one-timerecognition of equity tax at SPIA amounting to US$2.5 million in January 2011.

Foreign exchange loss mainly results from the translation or restatement as well as from thesettlement of foreign currency-denominated monetary assets and liabilities.

2.4.4 EBITDA and EBIT

Consolidated EBITDA increased by 4.0 percent to US$149.1 million for the first half of 2012 fromUS$143.3 million for the same period in 2011 primarily attributed to the growth in volume, tariff rateincreases and higher revenues from storage and ancillary services despite the increase in cashoperating expenses and unfavorable translation impact of BRL against US dollar. Excluding theimpact of BRL, EBITDA would have increased by 6.1 percent in 2012. However, EBITDA margindropped from 44.9 percent in 2011 to 43.2 percent in 2012 due mainly to higher variable concessionfee at TSSA, which rate doubled in July 2011.

Despite the increases in depreciation and amortization and cash operating expenses, respectively,consolidated EBIT for the first half of 2012 grew by 1.8 percent to US$110.7 million fromUS$108.7 million reported in 2011 due mainly to higher revenues. However, EBIT margin dropped to32.1 percent for the first half of 2012 from 34.1 percent for the same period in 2011 due to highervariable concession fee at TSSA and depreciation expense.

2.4.5 Income Before Income Tax and Provision for Income Tax

Consolidated income before income tax grew by 15.6 percent to US$98.0 million for the first half of2012 from US$84.8 million for the same period in 2011 primarily due to the growth in volume andrevenues and favorable effect of non-operating items such as lower interest expense and financingcharges on borrowings and interest expense on concession rights payable and higher interest income.The ratio of income before income tax to total gross revenues stood at 28.4 percent and 26.6 percentfor the six months ended June 30, 2012 and 2011, respectively.

ICTSI Form 17-Q Q2 2012 4040

Consolidated provision for current and deferred income taxes for the first half of 2012 increased by13.7 percent to US$27.0 million from US$23.8 million for the same period in 2011 mainly due tohigher operating income. Effective income tax rate for the first half of 2012 remained relatively flat at28.0 percent.

2.4.6 Net Income

Consolidated net income increased by 16.3 percent to US$71.0 million for the first half of 2012 fromUS$61.0 million for the same period in 2011. The increase was mainly caused by higher operatingincome and favorable effect of non-operating items. Consolidated net income stood at 20.6 percentand 19.1 percent of gross revenues for the six months ended June 30, 2012 and 2011, respectively.

Net income attributable to equity holders or net profits excluding minority interests grew by 17.1percent to US$70.3 million for the first half of 2012 from US$60.0 million for the same period in2011.

Basic earnings per share and diluted earnings per share decreased to US$0.031 and US$0.030 for thefirst half of 2012 from US$0.032 and US$0.031 for the same period in 2011, respectively, due to theeffect of the distributions on the additional US$150.0 million and the initial US$200.0 millionsubordinated perpetual capital securities issued in January 2012 and May 2011, respectively.

There were no significant elements of income or expense outside the Group’s continuing operationsfor the six months ended June 30, 2012.

2.5 TRENDS, EVENTS OR UNCERTAINTIES AFFECTING RECURRINGREVENUES AND PROFITS

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 a number of currencies. Continued appreciation of the US dollar relative to other majorcurrencies, particularly the Philippine peso may have a negative impact on the Group’s reported levelsof revenues and profits.

2.6 FINANCIAL CONDITION

Table 2.11 Consolidated Condensed Balance Sheets

In thousands, except % change data June 30, 2012 December 31, 2011 % ChangeTotal assets US$2,103,076 US$1,943,298 8.2Current assets 466,302 586,876 (20.5)Total equity 1,145,750 940,500 21.8Total equity attributable to equity

holders of the parent 1,043,769 837,612 24.6Total interest-bearing debt 615,520 651,205 (5.5)Current liabilities 226,660 225,000 0.7Total liabilities 957,326 1,002,798 (4.5)

Current assets/total assets 22.17% 30.20%Current ratio 2.06 2.61Debt equity ratio1 0.54 0.69

1 Debt includes interest-bearing debts. Equity includes total equity.

Total assets grew by 8.2 percent to US$2.1 billion as of June 30, 2012 from US$1.9 billion as ofDecember 31, 2011. The increase was due to higher capital expeditures, particularly at CMSA andTecplata. Noncurrent assets stood at 77.8 percent and 69.8 percent of the total consolidated assets asof June 30, 2012 and December 31, 2011, respectively.

ICTSI Form 17-Q Q2 2012 4141

Current assets decreased by 20.5 percent to US$466.3 million as of June 30, 2012 fromUS$586.9 million as of December 31, 2011. The decline was attributed to the net decrease in cashand cash equivalents coming from the net cash flows from financing and investing activities whichinclude: payment of the Parent Company’s loans to DBP/LBP amounting to US$17.2 million(P=750.0 million) and HSBC amounting to US$16.5 million (P=696.0 million); net outflows fromCGSA’s additional drawdown and repayment of loans and debt securities totaling to US$5.7 million;full payment of SPIA’s short-term loan of US$2.0 million; interest payments on the US$450.0 millionsenior corporate bonds amounting to US$20.7 million and on DBP/LBP term loans amounting toUS$1.2 million (P=53.7 million); dividend payments of US$30.5 milion; distributions to holders ofperpetual capital securities amounting to US$12.1 million; capital expenditures totalingUS$191.0 million; and deposits for investments. Meanwhile, the net proceeds from the furtherissuance of US$150.0 million subordinated perpetual capital securities amounting toUS$142.4 million in January 2012, proceeds from sale of ICTSI shares held by IWI in April 2012 ofUS$29.6 million, and net cash generated from operations tapered the decline in current assets.Current assets accounted for 22.2 percent and 30.2 percent of the total consolidated assets as ofJune 30, 2012 and December 31, 2011, respectively. Current ratio stood at 2.06 as of June 30, 2012and 2.61 as of December 31, 2011.

Total equity as of June 30, 2012 increased to US$1.1 billion, 21.8 percent higher compared to theUS$940.5 million reported as of December 31, 2011. The increase mainly resulted from the netincome generated from operations for the first half of 2012 and further issuance of US$150.0 millionperpetual capital securities in January 2012 which is presented as part of equity attributable to equityholders of the parent.

Total liabilities decreased by 4.5 percent from US$1.0 billion as of December 31, 2011 toUS$957.3 million as of June 30, 2012 due to the net effect of the following transactions:repayment of the Parent Company’s long-term loans from DBP/LBP and HSBC amounting toUS$17.2 million (P=750.0 million) and US$16.5 million (P=693.6 million), respectively; net outflowsfrom CGSA’s additional drawdown and repayment of loans and debt securities totalingUS$5.7 million; settlement of SPIA’s short-term loan amounting to US$2.0 million; interest paymenton the US$450.0 million senior notes and DBP/LBP term loans amounting to US$20.7 million andUS$1.2 million (P=53.7 million), respectively; and the declining balance of concession rights payable.Financial leverage, the ratio of total interest-bearing debt to total assets, stood at 29.3 percent as ofJune 30 2012 and 33.5 percent as of December 31, 2011.

Meanwhile, current liabilities grew marginally by 0.7 percent mainly due to the increase in currentportion of long-term debt, tapered by short-term loan repayments and declining balance of concessionrights payable.

2.6.1 Material Variances Affecting the Balance Sheet

Balance sheet accounts as of June 30, 2012 with variances of plus or minus 5 percent againstDecember 31, 2011 balances are discussed, as follows:

Noncurrent Assets1. Property and equipment grew by 12.5 percent to US$426.9 million as of June 30, 2012 mainly

due to acquisition of terminal equipment and construction-in-progress at TSSA, CMSA and SPIA.2. Intangibles, net of amortization, increased by 12.2 percent to US$957.2 million as of June 30,

2012 due to acquisition of port equipment and yard improvements at MICT, CGSA and Tecplata.3. Deferred tax assets declined by 17.7 percent to US$21.9 million as of June 30, 2012 mainly due to

lower unrealized foreign exchange loss on MXN-denominated short-term investments and thedeclining balance of concession rights payable of the Parent Company.

4. Other noncurrent assets increased by US$132.8 million to US$200.0 million mainly due toadvances and deposits to contractors and higher input VAT in CMSA and Tecplata associatedwith payments for the purchase of terminal equipment and civil works in relation to the ongoingconstruction activities, Exclusivity Fee to Lekki Port and advances, and deposits for investments.

ICTSI Form 17-Q Q2 2012 4242

Current Assets5. Cash and cash equivalents decreased by 27.8 percent to US$330.5 million as of June 30, 2012

mainly resulting from the following transactions: payment of the Parent Company’s long-termloans from DBP/LBP and HSBC amounting to US$17.2 million (P=750.0 million) andUS$16.5 million (P=693.6 million), respectively; net outflows from CGSA’s additional drawdownand repayment of loans debt securities totaling US$5.7 million; full settlement of SPIA’s short-term loan amounting to US$2.0 million; interest payment on the US$450.0 million senior notesand DBP/LBP term loans amounting to US$20.7 million and US$1.2 million, respectively;dividend payments of US$30.5 million; distributions to holders of perpetual capital securitiesamounting to US$12.1 million; capital expenditures totaling US$191.0 million; and deposits forinvestments. On the other hand, the net proceeds from the issuance of a further US$150.0 millionsubordinated perpetual capital securities amounting to US$142.4 million, proceeds from sale ofICTSI shares held by IWI in April 2012 of US$29.6 million, and net cash flows from operationsfor the first half of 2012 tapered the decline in cash and cash equivalents.

6. Receivables increased by 12.3 percent to US$63.8 million mainly due to BCT’s insurance claimrelated to a crane accident in May 2012 and higher revenues in June 2012.

Equity7. Treasury shares decreased by 7.0 percent to US$4.3 million mainly due to the issuance of stock

awards.8. Retained earnings increased by 6.3 percent to US$480.8 million due to income generated for the

first half of 2012 amounting to US$70.3 million offset by dividends declared by the ParentCompany amounting to US$29.6 million and distributions to holders of perpetual capitalsecurities amounting to US$12.1 million.

9. Subordinated perpetual capital securities increased by 73.6 percent to US$335.9 million primarilydue to the issuance of a further US$150.0 million in January 2012, increasing the size of theperpetual capital securities to US$350.0 million.

10. Cost of shares held by subsidiaries decreased by 22.5 percent to US$72.5 million mainly due tothe sale of ICTSI shares held by IWI in April 2012 amounting to US$21.0 million.

11. Other comprehensive loss declined by 6.1 percent to US$85.4 million from US$90.9 million in2011 primarily due to the favorable translation of financial statements at SPIA and CMSA,brought about by stronger COP and MXN against the US dollar at the end of the first half of2012.

Noncurrent Liabilities12. Pension liabilities decreased by 11.3 percent to US$1.6 million mainly due to pension costs

adjustments at CGSA and BCT.13. Deferred tax liabilities increased by 6.7 percent to US$48.2 million due to higher and increased

capitalized borrowing costs.

Current Liabilities14. Loans payable dropped by 91.7 percent mainly due to the settlement of SPIA’s short-term loan

amounting to US$2.0 million.15. Current portion of long-term debt and debt securities grew by 17.0 percent to US$68.8 million as

a result of the Group’s scheduled principal repayment and amortization for 2012.16. Current portion of concession rights payable decreased by 28.9 percent to US$15.8 million due to

the declining principal balance of the Parent Company’s concession rights payable as itsconcession contract approaches maturity in May 2013.

ICTSI Form 17-Q Q2 2012 4343

2.7 LIQUIDITY AND CAPITAL RESOURCES

This section discusses the Group’s sources and uses of funds as well as its debt and equity capitalprofile.

2.7.1 Liquidity

The table below shows the Group’s consolidated cash flows for the six months ended June 30, 2012and 2011:

Table 2.12 Consolidated Cash Flows

For the Six Months Ended June 30(In thousands, except % change data) 2012 2011 % ChangeNet cash provided by operating activities US$115,718 US$113,503 2.0Net cash used in investing activities (321,203) (122,653) 161.9Net cash provided by financing activities 69,392 116,896 (40.6)Effect of exchange rate changes on cash 9,002 696 1193.4Net increase (decrease) in cash and cash

equivalents (127,091) 108,442 (217.2)Cash and cash equivalents, beginning 457,636 345,380 32.5Cash and cash equivalents, end US$330,545 US$453,822 (27.2)

Consolidated cash and cash equivalents decreased by 27.2 percent or by US$123.3 million because ofthe net effect of the following transactions: net cash generated from operations, net outflows fromCGSA’s US-dollar denominated debt securities and loans, prepayments of term loan facilities of theParent Company, full settlement of SPIA’s short-term loan, interest payments on theUS$450.0 million senior notes and term loans, dividend payments, distributions to holders ofperpetual capital securities, capital expenditures and investments, and proceeds from the issuance of afurther US$150.0 million subordinated perpetual capital securities in January 2012.

Net cash provided by operating activities increased by 2.0 percent to US$115.7 million due to higheroperating income for the first half of 2012.

Net cash used in investing activities increased by 161.9 percent to US$321.2 million mainly due toacquisition of port equipment and construction costs related to Berth 6 at MICT, CGSA, TSSA,Tecplata, SPIA and CMSA, and advances and deposits to contractors and for investments. Capitalexpenditures for the first half of 2012 amounted to US$191.0 million comprising 34.7 percent of thecapital expenditure budget for 2012 projected at US$550.0 million. The established budget is mainlyallocated for green field projects in SPIA, Tecplata and CMSA, civil works, systems improvements,and purchase of major cargo handling equipment for key terminals such as MICT, CGSA and TSSA.The Group expects to finance these requirements through existing cash; cash generated fromoperations; external borrowings; and capital securities offerings.

Net cash used in financing activities amounted to US$69.4 million for the first half of 2012, a 40.6percent drop from the US$116.9 million net cash used for the same period in 2011. The decrease wasdue mainly to the following transactions: payment of the Parent Company’s long-term loans withDBP/LPB and HSBC amounting to US$17.2 million (P=750.0 million) and US$16.5 million(P=693.6 million), respectively; net outflows from CGSA’s additional drawdown and payment of loansand debt securities totaling US$5.7 million; settlement of SPIA’s short-term loan amounting toUS$2.0 million; interest payments on the US$450.0 senior notes and DBP/LBP term loans ofUS$20.7 million and US$1.2 million (P=53.7 million), respectively; dividend payments ofUS$30.5 million; and distributions to holders of perpetual capital securities amounting toUS$12.1 million. Meanwhile, the net proceeds from a further US$150.0 million subordinatedperpetual capital securities tapped in January 2012 amounting to US$142.4 million and the proceeds

ICTSI Form 17-Q Q2 2012 4444

from sale of ICTSI shares held by IWI amounting to US$29.6 million offset the decline in net cashused in financing activities. In 2011, financing activities comprised of the net proceeds from theUS$200.0 million perpetual capital securities amounting to US$194.5 million; proceeds from CGSA’sUS$2.5 million loan; full settlement of TSSA’s long-term loans of US$8.0 million; quarterly paymentof the Parent Company’s long-term loans with DBP/LBP amounting to US$17.4 million(P=750.0 million); and payment for semi-annual interest on the US$450.0 million senior notes ofUS$20.7 million.

2.7.2 Capital Resources

The table below shows the Group’s capital resources as of June 30, 2012 and December 31, 2011:

Table 2.13 Capital Sources

(In thousands, except % change data) June 30, 2012 December 31, 2011 % ChangeLoans payable US$207 US$2,482 (91.7)Current portion of long-term debt 68,769 58,802 17.0Long-term debt, net of current portion 546,544 589,921 (7.4)Total short and long-term debt 615,520 651,205 (5.5)Equity 1,145,750 940,500 21.8

US$1,761,270 US$1,591,705 10.7

Total debt and equity capital of the Group grew by 10.7 percent as of June 30, 2012 as againstDecember 31, 2011. The increase mainly resulted from the net proceeds from a furtherUS$150.0 million subordinated perpetual capital securities tapped in January 2012, payments of termloan facilities of the Parent Company, and full settlement of SPIA’s short-term loan.

Total equity increased by 21.8 percent from US$940.5 million as of December 31, 2011 toUS$1.1 billion as of June 30, 2012, resulting mainly from a further US$150.0 million subordinatedperpetual capital securities issued in January 2012, increasing the size of the initial perpetual capitalsecurities issued in May 2011 to US$350.0 million. These securities were treated as equity andpresented as part of equity attributable to equity holders of the Parent in the consolidated financialstatements of the Group in accordance with PAS 32, Financial Instruments: Presentation. The sale ofICTSI shares held by IWI amounting to US$29.6 million in April 2012 also contributed to theincrease in total equity for the period.

2.7.2.1 Debt Financing

The table below provides the breakdown of the Group’s outstanding loans as of June 30, 2011:

Table 2.14 Outstanding Loans

(In thousands) Company MaturityInterestRate Amount

Short-Term DebtUSD – denominated CGSA 2012 Fixed 207

Long-Term DebtUnsecured Peso Term Loans Parent 2014-15 Fixed 11,238Unsecured Peso Term Loan Parent 2013 Floating 88,568Unsecured US Dollar Bond Parent 2020 Fixed 448,013US Dollar Term Loan BCT 2014 Floating 8,574Unsecured US Dollar Term Loan CGSA 2013 Fixed 4,835Unsecured US Dollar Securities CGSA 2016 Fixed 54,085Total Debt 615,520Less current portion 68,976Long-term debt, net of current portion US$546,544

ICTSI Form 17-Q Q2 2012 4545

As of June 30, 2012, 89.0 percent of the Group’s total debt capital is at the Parent level and theUS$450.0 million senior notes issued in 2010 and due in 2020 formed 72.8 percent of the Group’stotal debt capital.

Table 2.15 Outstanding Debt Maturities

(In thousands) Amount2012 US$25,9862013 84,2102014 12,3802015 24,1612016 and onwards 468,576Total US$615,313

2.7.2.2 Loan Covenants

The loans from local and foreign banks impose certain restrictions with respect to corporatereorganization, disposition of all or a substantial portion of ICTSI’s, BCT’s and CGSA’s assets,acquisitions of futures or stocks, and extending loans to others, except in the ordinary course ofbusiness. ICTSI and BCT are also required to maintain specified financial ratios relating to their debtto equity and cash flow and earnings level relative to current debt service obligations. As ofJune 30, 2012 and December 31, 2011, ICTSI, BCT and CGSA are in compliance with these loancovenants.

There were no events that will trigger a direct or contingent financial obligation that is material to theGroup, including any default or acceleration of an obligation. There are no material off-balance sheettransactions, arrangements, obligations (including contingent obligations), and other relations of theCompany with unconsolidated entities or other persons created during the reporting period.

2.8 RISKS

ICTSI and its subsidiaries’ geographically diverse operations expose the Group to various marketrisks, particularly foreign exchange risk, interest rate risk and liquidity risk, which movements maymaterially impact the financial results of the Group. 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 Group has incorporated a financial riskmanagement function in its organization, particularly in the treasury operations.

2.8.1 Foreign Exchange Risk

Fluctuations in the exchange rates between the US dollar and Philippine peso, Euro and localcurrencies wherein the Group’s ports operate will affect the US dollar value of the Group’s revenuesand assets and liabilities that are denominated in currencies other than US dollar.

The Group’s non-US dollar currency-linked revenues were 52.5percent and 56.6 percent of grossrevenues for the first half of June 30, 2012 and 2011, respectively. Foreign currency-linked revenuesinclude the following: (1) arrastre charges of MICT; and (2) the total non-US dollar revenues ofinternational subsidiaries. ICTSI incurs expenses in foreign currency for all the operating and start uprequirements of its international subsidiaries. Concession fees payable to port authorities in certaincountries are either denominated in or linked to the US dollar.

ICTSI Form 17-Q Q2 2012 4646

The table below provides the currency breakdown of the Group’s revenue for the six months endedJune 30, 2011.

Table 2.16 Revenue Currency Profile

Subsidiary USD Composition Local CurrencyICTSI 43% USD 57% PhPSBITC 100% PhPDIPSSCOR 100% PhPSCIPSI 100% PhPBIPI 100% PhPMICTSI 100% PhPBCT 63% USD 36% PLN/1% EURTSSA 100% BRLMICTSL 100% EUR*PTMTS 100% IDRYRDICTL 100% RMBCGSA 100% USDBICTL 100% USDTICT 100% USDSPIA 100% USDICTSI India 100% INRNICTI 100% JPY

On a limited basis, the Group enters into foreign currency forwards and/or cross currency swapsagreements in order to manage its exposure to foreign currency rate fluctuations.

Under the floating-to-fixed cross-currency swaps, ICTSI pays fixed interest on the US dollar notionalamount and receives floating rate on the Philippine peso notional amount, on a quarterly basissimultaneous with the interest payments on the term loan facilities. In addition, ICTSI pays periodicUS dollar principal amortization and receives Philippine peso principal amortization based on a givenswap rate, equal to and simultaneous with the principal payments on the term loan facilities.

Under the fixed-to-fixed cross-currency swaps, ICTSI pays and receives fixed interest rates on the USdollar and Philippine peso notional amounts on a semi-annual basis, respectively. ICTSI also paysperiodic US dollar principal payments and receives Philippine peso principal payments based on agiven swap rate, equal to and simultaneous with the principal payments on the term loan facilities. Asof June 30, 2012, the net market valuation gain on the outstanding cross-currency swaps amounting toUS$5 million (net of US$2.4 million tax) was taken directly to equity under other comprehensiveincome. Derivative assets as a result of the valuation amounted to US$7.9 million as ofJune 30, 2012. On January 4, 2012, ICTSI pre-terminated its fixed-to-fixed cross-currency swap witha notional amount of US$11.1 million (P=475.3 million) which was used to hedge its Philippine peso-denominated loan maturing in November 2015. Fair value of swap at settlement date amounted toUS$1.5 million. Proceeds arising from the settlement transaction of the cross-currency swapamounted to US$1.4 million. Loss on settlement of cross-currency swap amounting toUS$0.1 million was recognized in the unaudited consolidated statement of income for the six monthsended June 30, 2012.

In 2011, ICTSI designated its Mexican peso-denominated short-term investments as cash flow hedgesof the currency risk on Mexican peso-denominated payables that would arise from forecastedMexican peso-denominated monthly fixed port fees to API and port construction costs to acontractor. The hedging covers forecasted Mexican peso-denominated monthly fixed port fees fromNovember 2011 until October 2012 and approximately 24.0 percent of the total Mexican peso-denominated port construction costs. Foreign currency translation gains or losses deferred in equitywould form part of the cost of the port (including port fees during the construction period) and wouldbe recycled to profit and loss through depreciation.

ICTSI Form 17-Q Q2 2012 4747

As of June 30, 2012, an aggregate of US$4.7 million (MXN62.8 million) and US$12.9 million(MXN173.0 million) equivalent of Mexican peso- denominated short-term investments are hedgedagainst the Mexican peso-denominated payables that would arise from forecasted Mexican peso-denominated monthly fixed port fees and civil work payments to a contractor, respectively. Foreigncurrency translation loss on Mexican peso-denominated short-term investments designated as cashflow hedges aggregating to US$4.0 million (net of deferred income tax of US$1.7 million) have beenrecognized under equity as of June 30, 2012. No ineffectiveness was recognized in the consolidatedstatement of income for the first half of 2012. No amount has been recycled from equity to foreignexchange gain or loss in the consolidated statement of income as of June 30, 2012.

Except as discussed above, the Group has not entered into other material hedging transactions thatsignificantly affect its financial position and results of operations as at and for the six months endedJune 30, 2012.

2.8.2 Interest Rate Risk

The Group’s long-term liabilities have combined fixed and floating interest rates. A rise in short-terminterest rates in US dollar and Philippine peso will result in a corresponding increase in the interestrates due on the floating rate US dollar and Philippine peso-denominated liabilities. On a limitedbasis, the Group enters into interest rate swap agreements in order to manage its exposure tofluctuations in interest rates. As of June 30, 2012, the Group does not have any outstanding interestrate swap transactions.

2.8.3 Liquidity Risk

The Group 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 theliquidity risk management, the Group maintains strict control of its cash and makes sure that excesscash held by subsidiaries are up streamed timely to the Parent Company. The Group also monitorsthe 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 bankloans, project finance facilities and the debt capital markets.

ICTSI monitors and maintains a level of cash and cash equivalents and bank credit facilities deemedadequate to finance the Group’s operations, ensure continuity of funding and to mitigate the effects offluctuations in cash flows.

There are no other known trends, demands, commitments, events or uncertainties that will materiallyaffect the company’s liquidity.

ICTSI Form 17-Q Q2 2012 4848

PART II – OTHER INFORMATION

There are no other information not previously reported in SEC Form 17-C that need to be reported inthis section.

ICTSI Form 17-Q Q2 2012 4949

ANNEX 1

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESSCHEDULE OF AGING OF RECEIVABLESAs of June 30, 2012(Unaudited, in Thousands)

Trade Advances Total

Under six months US$52,231 US$10,525 US$62,756

Six months to one year 359 112 471

Over one year 504 29 533

US$53,094 U$10,666 US$63,760

ICTSI Form 17-Q Q2 2012 5050

ANNEX 2

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESFINANCIAL SOUNDNESS INDICATORS

As of and for the Six Months Ended June 30

2012 2011Liquidity ratios

Current ratio(a) 2.06 2.61Interest rate coverage ratio(b) 11.01 7.26

Solvency ratiosDebt to equity ratio(c) 0.54 0.69Asset to equity ratio(d) 1.84 2.07

Profitability ratioEBITDA margin(e) 43.2% 44.9%

(a) Current assets over current liabilities(b) EBITDA over interest expense and financing charges on borowings(c) Interest-bearing debts over total equity(d) Total assets over total equity(e) EBITDA over gross revenues from port operations

ICTSI Form 17-Q Q2 2012 5151

ANNEX 3

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESLIST OF EFFECTIVE PFRS STANDARDS AND INTERPRETATIONS*June 30, 2012

PFRSs and PIC Q&As Adopted/Not adopted/Not applicablePFRS 1, First-time Adoption of Philippine Financial ReportingStandards Adopted

PFRS 2, Share-based Payment AdoptedPFRS 3, Business Combinations AdoptedPFRS 4, Insurance Contracts Not applicablePFRS 5, Non-current Assets Held for Sale and DiscontinuedOperations Adopted

PFRS 6, Exploration for and Evaluation of Mineral Resources Not applicablePFRS 7, Financial Instruments: Disclosures AdoptedPFRS 8, Operating Segments AdoptedPAS 1, Presentation of Financial Statements AdoptedPAS 2, Inventories AdoptedPAS 7, Statement of Cash Flows AdoptedPAS 8, Accounting Policies, Changes in Accounting Estimates andErrors Adopted

PAS 10, Events after the Reporting Period AdoptedPAS 11, Construction Contracts AdoptedPAS 12, Income Taxes AdoptedPAS 16, Property, Plant and Equipment AdoptedPAS 17, Leases AdoptedPAS 18, Revenue AdoptedPAS 19, Employee Benefits AdoptedPAS 20, Accounting for Government Grants and Disclosure ofGovernment Assistance Adopted

PAS 21, The Effects of Changes in Foreign Exchange Rates AdoptedPAS 23, Borrowing Costs AdoptedPAS 24, Related Party Disclosures AdoptedPAS 26, Accounting and Reporting by Retirement Benefit Plans Not applicablePAS 27, Consolidated and Separate Financial Statements AdoptedPAS 28, Investments in Associates AdoptedPAS 29, Financial Reporting in Hyperinflationary Economies AdoptedPAS 31, Interests in Joint Ventures AdoptedPAS 32, Financial Instruments: Presentation AdoptedPAS 33, Earnings per Share AdoptedPAS 34, Interim Financial Reporting AdoptedPAS 36, Impairment of Assets AdoptedPAS 37, Provisions, Contingent Liabilities and Contingent Assets AdoptedPAS 38, Intangible Assets AdoptedPAS 39, Financial Instruments: Recognition and Measurement AdoptedPAS 40, Investment Property AdoptedPAS 41, Agriculture Not applicableIFRIC 1, Changes in Existing Decommissioning, Restoration andSimilar Liabilities Adopted

IFRIC 2, Members' Shares in Co-operative Entities and SimilarInstruments Not applicable

IFRIC 4, Determining whether an Arrangement contains a Lease Adopted

ICTSI Form 17-Q Q2 2012 5252

PFRSs and PIC Q&As Adopted/Not adopted/Not applicableIFRIC 5, Rights to Interests arising from Decommissioning,Restoration and Environmental Rehabilitation Funds Not applicable

IFRIC 6, Liabilities arising from Participating in a Specific Market- Waste Electrical and Electronic Equipment Not applicable

IFRIC 7, Applying the Restatement Approach under PAS 29Financial Reporting in Hyperinflationary Economies Not applicable

IFRIC 9, Reassessment of Embedded Derivatives AdoptedIFRIC 10, Interim Financial Reporting and Impairment AdoptedIFRIC 12, Service Concession Arrangements AdoptedIFRIC 13, Customer Loyalty Programmes Not applicableIFRIC 14, PAS 19 - The Limit on a Defined Benefit Asset, MinimumFunding Requirements and their Interaction Adopted

IFRIC 16, Hedges of a Net Investment in a Foreign Operation AdoptedIFRIC 17, Distributions of Non-cash Assets to Owners AdoptedIFRIC 18, Transfers of Assets from Customers Not applicableIFRIC 19, Extinguishing Financial Liabilities with EquityInstruments Adopted

SIC 7, Introduction of the Euro Not applicableSIC 10, Government Assistance - No Specific Relation to OperatingActivities Adopted

SIC 12, Consolidation - Special Purpose Entities AdoptedSIC 13, Jointly Controlled Entities - Non-Monetary Contributionsby Venturers Adopted

SIC 15, Operating Leases – Incentives AdoptedSIC 21, Income Taxes - Recovery of Revalued Non-DepreciableAssets Adopted

SIC 25, Income Taxes - Changes in the Tax Status of an Entity orits Shareholders Adopted

SIC 27, Evaluating the Substance of Transactions Involving theLegal Form of a Lease Adopted

SIC 29, Service Concession Arrangements: Disclosures AdoptedSIC 31, Revenue - Barter Transactions Involving AdvertisingServices Not applicable

SIC 32, Intangible Assets - Web Site Costs AdoptedPIC Q&A No. 2006-01: PAS 18, Appendix, paragraph 9 – Revenuerecognition for sales of property units under pre-completioncontracts

Not applicable

PIC Q&A No. 2006-02: PAS 27.10(d) – Clarification of criteria forexemption from presenting consolidated financial statements Adopted

PIC Q&A No. 2007-03: PAS 40.27 – Valuation of bank real andother properties acquired (ROPA) Not applicable

PIC Q&A No. 2008-01 (Revised): PAS 19.78 – Rate used indiscounting post-employment benefit obligations Adopted

PIC Q&A No. 2008-02: PAS 20.43 – Accounting for governmentloans with low interest rates under the amendments to PAS 20 Not applicable

PIC Q&A No. 2009-01: Framework.23 and PAS 1.23 – Financialstatements prepared on a basis other than going concern Not applicable

PIC Q&A No. 2010-01: PAS 39.AG71-72 – Rate used indetermining the fair value of government securities in thePhilippines

Not applicable

PIC Q&A No. 2010-02: PAS 1R.16 – Basis of preparation offinancial statements Adopted

PIC Q&A No. 2011-01: PAS 1.10(f) – Requirements for a ThirdStatement of Financial Position Adopted

* List of Philippine Financial Reporting Standards (PFRSs) [which consist of PFRS, Philippine Accounting Standards(PASs) and Philippine Interpretations] and Philippine Interpretations Committee (PIC) Q&As effective as ofJune 30, 2012.

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. (ICTSI)

MICTSIMindanao Int’l

ContainerTerminal Services,

Inc. (Phils.)

AHIAbbotsford

Holdings, Inc.(Phils.)

SBITHISubic Bay Int’l

Terminal Holdings,Inc. (Phils.)

IWIICTSI Warehousing,

Inc. (Phils.)

CICTICebu Int’l Container

Terminal, Inc.(Phils.)

TICTTartous Int’l Cont.

Terminal, JSC(Syria)

PRIME STAFFERSPrime Staffers &

Selection Bureau,Inc. (Phils.)

ICTHIInt’l Cont. Terminal

Holdings, Inc.(Cayman Islands)

NICTINaha Int’l Container

Terminal (Japan)

CGSAContecon Guayaquil

S.A. (Ecuador)

ICTSI (M.E.) JLTICTSI Middle EastJLT (Dubai, UAE)

SCIPSISouth CotabatoIntegrated Ports

Services, Inc. (Phils.)

CORDILLACordilla PropertiesHoldings (Phils.)

CMSAContecon Manzanillo

S.A. Mexico

ICTSI SUBIC INC.New Container

Terminal (NCT) 2,Subic Bay

ICTSI Ltd.ICTSI Ltd.(Bermuda)

DIPSSCORDavao Int’d Port &

StevedoringServices Corp.

(Phils.)

SBITCSubic Bay Int’lTerminal Corp.

(Phils.)

IW CARGOIW Cargo Handlers,

Inc. (Phils.)

BIPIBauan Int’l Ports,

Inc. (Phils.)

CTSSI Phils.Cont. Term. Sys.Sols., Phils., Inc.

(Phils.)

PIHLPentland Int’lHoldings Ltd.(British Virgin

Isles)

CTSSICont. Term. Sys.

Sols., Inc.(Mauritius)

ICTSI Ltd.RHQ

Manila

MICTSLMadagascar

Int’l Cont.Terminal

Servs, Ltd.(Madagascar)

TSSATecon SuapeS.A. (Brazil)

RCBVRoyal Capital

BV(Netherlands)

ICTSI Far EastICTSI Far East

PTE. Ltd.(Singapore)

ICTSIMauritius

ICTSIMauritius Ltd.

(Rep. ofMauritius)

ICTSI PolandICTSI Poland

Ltd.(Bermuda)

ICTSI BrazilICTSI Brazil

Ltd.(Bermuda)

ICBVICTSI Capital

B.V.(Netherlands)

CUSAC. Ultramar S.A

(Panama)

FWSAFuture Water

S.A.(Panama)

KEIKinston

Enterprises,Inc.

(Panama)

ICTSI Africa(Pty) Ltd.

Cape Town,South Africa

IHKLICTSI

(Hong Kong)Ltd.

(Hong Kong)

ICTSI GeorgiaICTSI GeorgiaCorp. (Cayman

Isles)

AICTLAustralian

Cont.Terminals, Ltd.

(Australis)

CTVCCContainer

Terminal deVenezuela

Conterven C.A.(Venezuela)

IPSALInt’l Ports of

South Americaand Logistics

S.A. (Uruguay)

IOIICTSI OregonInc.(Portland,

USA)

ICTS – IndiaInternational

Container TerminalServices PrivateLimited (India)

ICONLogistiek B.V.(Netherlands)

PT CTSSIPT ContainerTerm. Sys.Solns. Inc.(Indonesia)

NMCTSNew Muara

Container TerminalServices SDN BHD

(Brunei)

MTSPT Makassar

Term. Services

SPIASociedad PortuarioIndustrial Aguadulce

S.A. (Colombia)

YRDICTLYantai Rising

Dragon Int’l Cont.Term. Ltd.(China)

BICTBatumi Int’l

Cont. Term. LLC.(Georgia)

TECPLATATecplata S.A.(Argentina)

AGCTAdriatic Gate

Container Terminal(Croatia)

BCTBaltic Container

Terminal Ltd.(Poland)

MIPT MaharlikaIndonesia Tbk

(Indonesia)

ANNEX 4INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.AND SUBSIDIARIESMAP OF SUBSIDIARIESJune 30, 2012


Documents

Thursday · ictsi form 17-q q2 2012 securities and exchange commission sec form 17-q quarterly report pursuant to section 17 of the securities regulation code and src rule 17(2