CONSOLIDATED FINANCIAL STATEMENTS



IMTT Holdings Inc. and Subsidiaries

Years Ended December 31, 2012 and December 31, 2011











Independent Auditors’ Report

The Board of Directors

IMTT Holdings Inc. and Subsidiaries:



Report on the Financial Statements



We have audited the accompanying consolidated
financial statements of IMTT Holdings Inc. and subsidiaries, which comprise the consolidated balance sheets as of December 31,
2012 and 2011, and the related consolidated statements of income, comprehensive income, shareholders’ (deficit) equity, and
cash flows for the years then ended, and the related notes to the consolidated financial statements.



Management’s Responsibility
for the Financial Statements



Management is responsible for the preparation
and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles;
this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.



Auditors’ Responsibility



Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.



An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend
on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.



We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinion.



2







Opinion



In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of IMTT Holdings Inc. and subsidiaries
as of December 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended, in accordance
with U.S. generally accepted accounting principles.





/s/ KPMG LLP

New Orleans, Louisiana

February 15, 2013





3









IMTT HOLDINGS INC. AND SUBSIDIARIES

Consolidated Balance Sheets

As of December 31, 2012 and 2011



|                                                                                                       |  | 2012 |               |   | 2011 |  
|------------------------------------------------------------------------------------------------------ |  | ---- | ------------- | - | ---- | -
|ASSETS                                                                                                 |  |      |               |   |      |  
|Current assets:                                                                                        |  |      |               |   |      |  
|Cash and cash equivalents (Note 2)                                                                     |  | $    | 7,704,000     |   |      | $
|Accounts and accrued interest receivable, net of allowance of $1,156,000 ($2,031,000 in 2011) (Note 6) |  |      | 45,084,000    |   |      |  
|Inventories (Note 2)                                                                                   |  |      | 6,936,000     |   |      |  
|Prepaid expenses and deposits (Notes 7 and 11)                                                         |  |      | 23,532,000    |   |      |  
|Total current assets                                                                                   |  |      | 83,256,000    |   |      |  
|Property, plant and equipment (Notes 2 and 6):                                                         |  |      |               |   |      |  
|Land                                                                                                   |  |      | 40,284,000    |   |      |  
|Terminal and other facilities                                                                          |  |      | 1,820,846,000 |   |      |  
|                                                                                                       |  |      | 1,861,130,000 |   |      |  
|Less: accumulated depreciation                                                                         |  |      | (644,931,000  | ) |      |  
|                                                                                                       |  |      | 1,216,199,000 |   |      |  
|                                                                                                       |  |      |               |   |      |  
|Debt issue costs, net (Notes 2 and 4)                                                                  |  |      | 5,053,000     |   |      |  
|Receivable from affiliates (Note 3)                                                                    |  |      | 54,000        |   |      |  
|Investment in NTL venture (Note 2)                                                                     |  |      | 11,144,000    |   |      |  
|Other (Notes 2, 5 and 11)                                                                              |  |      | 8,160,000     |   |      |  
|                                                                                                       |  |      | 24,411,000    |   |      |  
|                                                                                                       |  |      |               |   |      |  
|Total assets                                                                                           |  | $    | 1,323,866,000 |   |      | $
|                                                                                                       |  |      |               |   |      |  
|LIABILITIES and SHAREHOLDERS' EQUITY                                                                   |  |      |               |   |      |  
|Current liabilities:                                                                                   |  |      |               |   |      |  
|Accounts payable                                                                                       |  | $    | 52,012,000    |   |      | $
|Accrued liabilities (Notes 5 and 11)                                                                   |  |      | 37,432,000    |   |      |  
|Current portion of swap fair market value (Notes 2 and 4)                                              |  |      | 17,894,000    |   |      |  
|Current portion of long-term debt (Notes 3 and 4)                                                      |  |      | 7,042,000     |   |      |  
|Total current liabilities                                                                              |  |      | 114,380,000   |   |      |  
|Other long-term liabilities (Notes 2, 4, 5, 6 and 11)                                                  |  |      | 138,993,000   |   |      |  
|Long-term debt, excluding current maturities (Notes 3, 4 and 8)                                        |  |      | 923,524,000   |   |      |  
|Deferred income taxes (Notes 2 and 7)                                                                  |  |      | 229,096,000   |   |      |  
|Total liabilities                                                                                      |  |      | 1,405,993,000 |   |      |  
|                                                                                                       |  |      |               |   |      |  
|Commitments and contingencies (Note 6)                                                                 |  |      | —             |   |      |  
|                                                                                                       |  |      |               |   |      |  
|Shareholders' (deficit) equity (Note 9):                                                               |  |      |               |   |      |  
|IMTT Holdings Inc.                                                                                     |  |      | (85,080,000   | ) |      |  
|Non-controlling interest                                                                               |  |      | 2,953,000     |   |      |  
|Total shareholders' (deficit) equity                                                                   |  |      | (82,127,000   | ) |      |  
|                                                                                                       |  |      |               |   |      |  
|Total liabilities and shareholders' (deficit) equity                                                   |  | $    | 1,323,866,000 |   |      | $



The accompanying notes are an integral part of these statements.



4







IMTT HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Income

For the years ended December 31, 2012
and 2011



|                                                                          |  | 2012 |             |   | 2011 |  
|------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|REVENUES:                                                                 |  |      |             |   |      |  
|Tank storage and terminal charges (Notes 2 and 10)                        |  | $    | 443,276,000 |   |      | $
|Other rental income                                                       |  |      | 3,350,000   |   |      |  
|Railroad operations                                                       |  |      | 3,301,000   |   |      |  
|Other income (Note 2)                                                     |  |      | 1,890,000   |   |      |  
|Environmental response services                                           |  |      | 24,461,000  |   |      |  
|Total revenues                                                            |  |      | 476,278,000 |   |      |  
|                                                                          |  |      |             |   |      |  
|EXPENSES:                                                                 |  |      |             |   |      |  
|Terminals:                                                                |  |      |             |   |      |  
|Labor costs (Note 5)                                                      |  |      | 87,859,000  |   |      |  
|Repairs and maintenance (Note 6)                                          |  |      | 46,210,000  |   |      |  
|Real and personal property taxes                                          |  |      | 12,456,000  |   |      |  
|Other operating                                                           |  |      | 45,266,000  |   |      |  
|Total terminal operating expenses                                         |  |      | 191,791,000 |   |      |  
|Environmental response affiliate expenses                                 |  |      | 21,767,000  |   |      |  
|General and administrative (Notes 3 and 5)                                |  |      | 31,050,000  |   |      |  
|Interest expense (Notes 2, 3 and 4)                                       |  |      | 39,515,000  |   |      |  
|Depreciation and amortization (Note 2)                                    |  |      | 70,016,000  |   |      |  
|(Gain) loss of non-hedging derivatives (Notes 2 and 4)                    |  |      | (4,271,000  | ) |      |  
|                                                                          |  |      | 349,868,000 |   |      |  
|                                                                          |  |      |             |   |      |  
|Income before income taxes                                                |  |      | 126,410,000 |   |      |  
|                                                                          |  |      |             |   |      |  
|(Provision) for income taxes (Notes 2 and 7):                             |  |      |             |   |      |  
|Current                                                                   |  |      | (17,885,000 | ) |      |  
|Deferred                                                                  |  |      | (33,408,000 | ) |      |  
|                                                                          |  |      | (51,293,000 | ) |      |  
|                                                                          |  |      |             |   |      |  
|NET INCOME                                                                |  | $    | 75,117,000  |   |      | $
|                                                                          |  |      |             |   |      |  
|Less: Net (income) loss attributable to non-controlling interest (Note 1) |  |      | (839,000    | ) |      |  
|Net income attributable to IMTT Holdings Inc.                             |  | $    | 74,278,000  |   |      | $



The accompanying notes are an integral part of these statements.



5







IMTT HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive
Income

For the years ended December 31, 2012
and 2011



|                                                                                                           |  | 2012 |            |   | 2011 |  
|---------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|                                                                                                           |  |      |            |   |      |  
|Net Income                                                                                                 |  | $    | 75,117,000 |   |      | $
|                                                                                                           |  |      |            |   |      |  
|Less: net (income) loss attributable to non-controlling interest (Note 1)                                  |  |      | (839,000   | ) |      |  
|Net income attributable to IMTT Holdings Inc.                                                              |  |      | 74,278,000 |   |      |  
|                                                                                                           |  |      |            |   |      |  
|Other comprehensive income (loss):                                                                         |  |      |            |   |      |  
|                                                                                                           |  |      |            |   |      |  
|Derivatives (Notes 2 and 4):                                                                               |  |      |            |   |      |  
|Amortization of accumulated other comprehensive loss for swap agreements no longer accounted for as hedges |  |      | 1,174,000  |   |      |  
|                                                                                                           |  |      |            |   |      |  
|Pension and post-retirement benefit plans (Notes 5 and 9)                                                  |  |      | 166,000    |   |      |  
|                                                                                                           |  |      |            |   |      |  
|Foreign currency translation adjustment (Note 2)                                                           |  |      | 642,000    |   |      |  
|                                                                                                           |  |      |            |   |      |  
|Income tax effects of items included in other comprehensive income                                         |  |      | (764,000   | ) |      |  
|Other comprehensive income (loss) (Note 9)                                                                 |  |      | 1,218,000  |   |      |  
|                                                                                                           |  |      |            |   |      |  
|Less: other comprehensive (income) loss attributable to non-controlling interest (Note 1)                  |  |      | (139,000   | ) |      |  
|Other comprehensive income (loss) attributable to IMTT Holdings Inc.                                       |  |      | 1,079,000  |   |      |  
|                                                                                                           |  |      |            |   |      |  
|Comprehensive income                                                                                       |  |      | 76,335,000 |   |      |  
|                                                                                                           |  |      |            |   |      |  
|Less: Comprehensive (income) loss attributable to non-controlling interest (Note 1)                        |  |      | (978,000   | ) |      |  
|Comprehensive income attributable to IMTT Holdings Inc.                                                    |  | $    | 75,357,000 |   |      | $



The accompanying notes are an integral part of these statements.



6







IMTT HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders'
(Deficit) Equity

For the years ended December 31, 2012
and 2011



|                                           |  |       |              |   | IMTT
    Holdings Inc. |  |              | NON-CONTROLLING
    INTEREST | 
|------------------------------------------ |  | ----- | ------------ | - | ---------------------- |  | ------------ | ---------------------------- | 
|                                           |  |       |              |   |                        |  |              | Accumulated                  | 
|                                           |  |       |              |   | Other                  |  |              | Other                        | 
|                                           |  |       |              |   | Shareholders'          |  |              | Comprehensive                | 
|                                           |  | Total |              |   | Equity
    (deficit)   |  |              | Income
    (Loss)            | 
|Balance, January 1, 2011                   |  | $     | 178,174,000  |   |                        |  | 193,422,000  |                              | 
|                                           |  |       |              |   |                        |  |              |                              | 
|Comprehensive income:                      |  |       |              |   |                        |  |              |                              | 
|Net income (loss)                          |  |       | 54,820,000   |   |                        |  | 54,957,000   |                              | 
|Other comprehensive (loss),
    net of tax |  |       | (15,333,000  | ) |                        |  | —            |                              | 
|                                           |  |       | 39,487,000   |   |                        |  | 54,957,000   |                              | 
|                                           |  |       |              |   |                        |  |              |                              | 
|Distributions, net                         |  |       | —            |   |                        |  | —            |                              | 
|Balance, December 31, 2011                 |  |       | 217,661,000  |   |                        |  | 248,379,000  |                              | 
|                                           |  |       |              |   |                        |  |              |                              | 
|Comprehensive income:                      |  |       |              |   |                        |  |              |                              | 
|Net income                                 |  |       | 75,117,000   |   |                        |  | 74,278,000   |                              | 
|Other comprehensive income,
    net of tax |  |       | 1,218,000    |   |                        |  | —            |                              | 
|                                           |  |       | 76,335,000   |   |                        |  | 74,278,000   |                              | 
|                                           |  |       |              |   |                        |  |              |                              | 
|Distributions, net                         |  |       | (376,123,000 | ) |                        |  | (376,123,000 | )                            | 
|Balance, December 31, 2012                 |  | $     | (82,127,000  | ) |                        |  | (53,466,000  | )                            | 



The accompanying notes are an integral part of these statements.



7







IMTT HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2012
and 2011



|                                                                                 |  | 2012 |              |   | 2011 |  
|-------------------------------------------------------------------------------- |  | ---- | ------------ | - | ---- | -
|CASH FLOWS FROM OPERATING ACTIVITIES                                             |  |      |              |   |      |  
|Net income                                                                       |  | $    | 75,117,000   |   |      | $
|Adjustments to reconcile net cash provided by operating activities:              |  |      |              |   |      |  
|Depreciation                                                                     |  |      | 65,637,000   |   |      |  
|Amortization                                                                     |  |      | 4,379,000    |   |      |  
|Post retirement plans expense                                                    |  |      | 11,351,000   |   |      |  
|Deferred revenue recognized                                                      |  |      | (5,389,000   | ) |      |  
|Change in FMV of non-hedging derivatives                                         |  |      | (5,445,000   | ) |      |  
|Reclassification of swap loss from AOCI                                          |  |      | 1,174,000    |   |      |  
|Debt issue cost amortization                                                     |  |      | 3,221,000    |   |      |  
|Non-cash compensation expense                                                    |  |      | 70,000       |   |      |  
|Accretion of asset retirement obligation                                         |  |      | 91,000       |   |      |  
|Loss on sale/retirement of assets                                                |  |      | 16,000       |   |      |  
|Deferred income tax provision                                                    |  |      | 33,408,000   |   |      |  
|(Increase) decrease in accounts and accrued interest receivable                  |  |      | (8,078,000   | ) |      |  
|Decrease in inventories                                                          |  |      | 650,000      |   |      |  
|Decrease (increase) in prepaid expenses and deposits                             |  |      | 3,259,000    |   |      |  
|(Increase) decrease in other assets                                              |  |      | (361,000     | ) |      |  
|Increase (decrease) in accounts payable                                          |  |      | 5,089,000    |   |      |  
|Increase (decrease) in accrued liabilities                                       |  |      | 9,025,000    |   |      |  
|Increase in deferred revenue                                                     |  |      | 2,941,000    |   |      |  
|(Decrease) in other long-term liabilities                                        |  |      | (5,012,000   | ) |      |  
|Net operating cash flows                                                         |  |      | 191,143,000  |   |      |  
|                                                                                 |  |      |              |   |      |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                             |  |      |              |   |      |  
|Purchase of plant assets                                                         |  |      | (151,786,000 | ) |      |  
|Proceeds from sale of fixed assets                                               |  |      | 376,000      |   |      |  
|(Increase) in other assets                                                       |  |      | (4,631,000   | ) |      |  
|Decrease in tax-exempt bond escrow investments                                   |  |      | —            |   |      |  
|Net investing cash flows                                                         |  |      | (156,041,000 | ) |      |  
|                                                                                 |  |      |              |   |      |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                             |  |      |              |   |      |  
|Net borrowings (payments) under bank revolving credit facility                   |  |      | 297,273,000  |   |      |  
|Net (payments) under tax-exempt bond agreements                                  |  |      | (4,302,000   | ) |      |  
|Net other debt payments                                                          |  |      | —            |   |      |  
|Distributions to shareholders                                                    |  |      | (376,123,000 | ) |      |  
|Net (payments) to affiliates                                                     |  |      | (17,000      | ) |      |  
|Repayment of shareholder debt                                                    |  |      | (2,607,000   | ) |      |  
|Net financing cash flows                                                         |  |      | (85,776,000  | ) |      |  
|                                                                                 |  |      |              |   |      |  
|Net (decrease) increase in cash and cash equivalents                             |  |      | (50,674,000  | ) |      |  
|                                                                                 |  |      |              |   |      |  
|Net increase (decrease) in cash and cash equivalents due to currency translation |  |      | 15,000       |   |      |  
|                                                                                 |  |      |              |   |      |  
|Cash and cash equivalents at beginning of year                                   |  |      | 58,363,000   |   |      |  
|                                                                                 |  |      |              |   |      |  
|Cash and cash equivalents at end of year                                         |  | $    | 7,704,000    |   |      | $
|                                                                                 |  |      |              |   |      |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                 |  |      |              |   |      |  
|                                                                                 |  |      |              |   |      |  
|Cash paid during the period for:                                                 |  |      |              |   |      |  
|Interest (net of amount capitalized)                                             |  | $    | 37,709,000   |   |      | $
|Income taxes                                                                     |  |      | 5,441,000    |   |      |  



The accompanying notes are an integral part of these statements.





8







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



| | (1) | Nature of operations and organization
| | --- | -------------------------------------



IMTT Holdings Inc. (“IHI”),
formerly Loving Enterprises Inc., owns 100% of various corporations and limited liability companies (International Tank Terminals,
L.L.C. and Affiliates, “ITT and Affiliates”) who in turn own 100% of various operating entities, primarily partnerships
(“IMTT Combined”). The following chart summarizes the relationship of the various ITT and Affiliates and IMTT Combined
entities:



|Parent Entities (ITT and
Affiliates)       |  | Subsidiary/Operating Entities         
|------------------------------------------ |  | --------------------------------------
|99% Ownership *                            |  | 1% Ownership *                        
|                                           |  |                                       
|International Tank Terminals, L.L.C.       |  | ITT-Storage, Inc.                     
|                                           |  |                                       
|International Tank Bayonne, Inc. (100%)    |  | —                                     
|                                           |  |                                       
|International Tank Bayonne, Inc.           |  | ITT-Bayonne Storage, Inc.             
|                                           |  |                                       
|ITT-BX, Inc.                               |  | ITT-BX Storage, Inc.                  
|                                           |  |                                       
|ITT-Pipeline, Inc.                         |  | ITT-Pipeline Partner, Inc.            
|                                           |  |                                       
|ITT-BC, Inc. (50%)                         |  | ITT-Interterminal Pipeline, Inc. (50%)
|                                           |  |                                       
|ITT-Gretna, L.L.C.                         |  | ITT-Gretna Storage, Inc.              
|                                           |  |                                       
|ITT-Virginia, Inc.                         |  | ITT-Virginia Storage, Inc.            
|                                           |  |                                       
|ITT-Richmond-CA, Inc.                      |  | ITT-Richmond-CA Storage, Inc.         
|                                           |  |                                       
|ITT-Illinois, Inc.                         |  | ITT-Illinois Storage, Inc.            
|                                           |  |                                       
|ITT-Petroleum Management, Inc.             |  | ITT-SPR Partner, Inc.                 
|                                           |  |                                       
|ITT-Geismar, L.L.C.                        |  | ITT-Geismar Storage, Inc              
|                                           |  |                                       
|International Environmental Services, Inc. |  | ITT-IEP Partner, Inc.                 
|                                           |  |                                       
|ITT-NTL, Inc. (100%)                       |  | —                                     



* - Unless noted otherwise below



9







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



The IMTT Combined entities primarily
provide bulk liquid storage and handling services in North America through terminals located on the East, West and Gulf Coasts
as well as the Great Lakes region of the United States and in Quebec and Newfoundland, Canada, with the predominant terminals located
in New York harbor and on the Mississippi River near the Gulf of Mexico. Petroleum products, vegetable and tropical oils, renewable
fuels, and various chemicals are stored and handled.



International-Matex Tank Terminals
(“IMTT”) is a partnership formed in 1975 to own and operate bulk liquid storage terminal facilities in St. Rose and
Avondale, Louisiana. Bayonne Industries, Inc. (“BII”) is a New Jersey corporation, which owns terminal facilities in
Bayonne, New Jersey, and was purchased in 1983. IMTT-Bayonne is a partnership formed in 1983 to operate New Jersey terminal assets.
The IMTT-BX partnership was formed in 1993 to acquire the terminal facility adjacent to BII's tank terminal on April 1, 1993. IMTT-BC
is a partnership organized in 1996 to purchase certain terminal assets in 1997, 2003, and 2004 that are contiguous to the existing
Bayonne terminal. IMTT-Pipeline is a partnership formed in 1996 to own a pipeline utilized in the transfer of products by IMTT-Bayonne
and other third parties. IMTT-Bayonne leases and operates tank terminal and warehouse facilities owned by BII, IMTT-BX and IMTT-BC
in Bayonne, New Jersey/ New York Harbor. IMTT-Gretna is a partnership formed in 1990 to purchase and operate a bulk liquid storage
terminal in Gretna, Louisiana. IMTT-Virginia, formerly IMTT-Chesapeake and IMTT-Richmond, is a partnership formed in 1991 to purchase
and operate bulk liquid storage terminals in Chesapeake and Richmond, Virginia. IMTT-Petroleum Management is a partnership formed
in 1992 to own an interest in a joint venture operating the United States Strategic Petroleum Reserve. IMTT-Richmond-CA is a partnership
formed in 1995 to purchase and operate a bulk liquid storage terminal in Richmond, California. IMTT-Illinois (formerly IMTT-Lemont)
is a partnership formed in 1997 to purchase and operate terminal facilities in Lemont and Joliet, Illinois. IMTT-NTL, Ltd. (“IMTT-NTL”)
is a Canadian corporation formed in 1997 to own an interest in and manage a terminal in Newfoundland, Canada. IMTT-Quebec Inc.
(“IMTT-Quebec”), a 662/3% owned subsidiary of IMTT, operates a bulk liquid storage terminal located in Quebec,
Canada. IMTT-Geismar is a partnership formed in 2006 to construct and operate a chemical logistics facility in Geismar, Louisiana.
Oil Mop, LLC, (formally owned by International Environmental Partners, which was merged into Oil Mop, LLC in 2011) operating as
OMI Environmental Solutions, is a limited liability company formed in 1999 to provide environmental emergency response, industrial
services, waste transportation and disposal, and other oilfield related services to third parties as well as the IMTT terminals.
IMTT-FINCO, LLC (“IMTT-FINCO”) is a wholly-owned subsidiary of IMTT, which is a financing conduit to IMTT and other
terminal entities.



10







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



| | (2) | Summary of significant accounting policies
| | --- | ------------------------------------------



Combination/consolidation



The accompanying consolidated
financial statements consist of the accounts of IHI, which have been consolidated with those of ITT and Affiliates as well as those
of IMTT Combined after eliminating all intercompany account balances and transactions (“IHI Consolidated”). IMTT Combined
consists of the consolidated financial statements of IMTT, IMTT-Quebec and IMTT-FINCO combined with the other entities, primarily
partnerships, described previously.



Cash and cash equivalents



Cash and cash equivalents consists
of cash and temporary investments with original maturities of three months or less.



Revenue recognition



Contracts for the use of storage
capacity at the various terminals predominantly have non-cancelable terms of one to five years. These contracts generally provide
for payments for providing storage capacity throughout their term based on a fixed rate per barrel of capacity leased, as adjusted
annually for inflation indices. Contracts are classified and accounted for as operating leases in accordance with generally accepted
accounting principles and revenue is recognized over their term based on the rate specified in the contract. Revenue from the rendering
of ancillary services (e.g., product movement (thruput), heating, mixing, etc.) is recognized as the related services are performed
based on contract rates. Thruput revenues are not recognized until the thruput quantity specified in the contract for the applicable
period is exceeded. Payments received prior to the related services being performed or as a reimbursement for specific fixed asset
additions or improvements related to a customer’s contract are recorded as deferred revenue and ratably recognized as storage
revenues over the contract term; the non-current portion is included in other long-term liabilities in the accompanying balance
sheet. Environmental response services revenues are recognized as services are rendered.



Accounts receivable
and allowance for doubtful accounts



Accounts receivable are stated
at the historical carrying amount net of an allowance for doubtful accounts. An allowance for doubtful accounts receivable is established
based on specific customer collection issues that have been identified. Accounts receivable are charged against the allowance for
doubtful accounts when it has been determined the balance will not be collected.



11







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



Inventories



Inventories, which consist primarily
of back-up fuel supplies, chemicals and supplies used in packaging anti-freeze for customers, spare parts used in maintenance activities,
and spill response materials, are carried at cost, which is equal to or less than their fair market value.



Property, plant and
equipment



Property, plant and equipment
are carried at cost including applicable construction period interest. Construction period interest (including related letter of
credit fees) of $1,398,000 and $947,000 was capitalized in 2012 and 2011, respectively. Depreciation is provided using the straight-line
method over lives, which range from 15 to 30 years for the terminal facility and 3 to 8 years for furniture, fixtures and equipment.
Costs that are associated with capital additions and improvements or that extend the useful lives or increase service capacity
of assets are capitalized; costs of maintenance and repairs are expensed. Terminal fixed assets with a net book value of $1,209,575,000
at December 31, 2012 are utilized to provide storage capacity and related services to customers. The balance of assets not placed
in service and recorded in construction in progress was $45,811,000 and $46,771,000 at December 31, 2012 and 2011, respectively.



Debt issue costs



Costs incurred related to issuing
and reissuing and extending the term of tax-exempt bonds as well as entering into extended and expanded bank lines of credit (See
Note 4) are capitalized as debt issue costs in the accompanying balance sheets and amortized over the term of the related debt
as additional interest expense.



Tax-exempt bond escrow
investment



Proceeds from tax-exempt bond
issues were held by the trustee and invested in a highly liquid bank deposit pending reimbursement of IMTT Combined for expenditure
of qualified project costs.



Other assets



Costs incurred to deepen vessel
draft at the docks as well as those incurred periodically to maintain draft depths for more than one year are capitalized and amortized
over their estimated useful lives (3 to 20 years) as a planned major maintenance activity. $4,044,000 and $3,843,000 of such costs
were capitalized in 2012 and 2011, respectively. Amortization of such costs was $4,255,000 and $2,390,000 in 2012 and 2011, respectively.





12









IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



Investment in NTL venture



On July 21, 1997 IMTT-NTL acquired
a 20% interest in Newfoundland Transshipment Limited (“NTL”), a Canadian corporation, which owns and operates a storage
and transshipment terminal located in Newfoundland. The investment is shown in the accompanying balance sheet at cost of $11,144,000
at December 31, 2012. NTL guarantees its shareholders a minimum 12% return on investment. This return on investment was $1,672,000
for both 2012 and 2011 and is recorded as other income in the accompanying statements of income as its ultimate realization is
reasonably assured based on the nature of its operations and the involvement of major oil companies as customers and shareholders.



Income taxes



Income taxes are accounted for
in accordance with the asset and liability method. Income tax expense includes federal and state taxes currently payable as well
as deferred taxes arising from temporary differences between income for financial reporting and income tax reporting purposes.
Operating loss and tax credit carryforwards are recognized as reductions to net deferred income tax liabilities if it is likely
that their benefit will be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. IHI
Consolidated recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.
Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in
recognition or measurement are reflected in the period in which the change in judgment occurs.



Fair value measurements



IHI Consolidated has adopted
the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, for
fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that
are recognized or disclosed at fair value in the financial statements on a recurring basis. ASC 820 defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date and also establishes a framework for measuring fair value and expands disclosures about fair value measurements.



13







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011

Derivatives



IHI Consolidated has entered
into interest rate-related derivative instruments to manage its interest rate exposure on certain debt instruments. See Note 4.
IHI Consolidated does not enter into derivative instruments for any purpose other than economic interest rate hedging. That is,
IHI Consolidated does not speculate using derivative instruments.



By using derivative financial
instruments to hedge exposures to changing interest rates, IHI Consolidated exposes itself to credit risk and market risk. Credit
risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative
contract is positive, the counterparty owes IHI Consolidated, which creates credit risk for IHI Consolidated. When the fair value
of a derivative contract is negative, IHI Consolidated owes the counterparty and, therefore, it does not possess credit risk, as
was the case at December 31, 2012 and 2011. IHI Consolidated minimizes the credit risk in the derivative instruments by entering
into transactions with high quality counterparties. Market risk is the adverse effect on the value of a financial instrument that
results from a change in interest rates.



IHI Consolidated has in place
variable-rate debt. These debt obligations expose IHI Consolidated to variability in interest payments due to changes in interest
rates. IHI Consolidated believes that it is prudent to limit the variability of a large portion of its interest payments. To meet
this objective, IHI Consolidated enters into interest rate swap agreements to manage fluctuations in cash flows resulting from
interest rate risk on a significant amount of its variable-rate debt. These swaps change the variable-rate cash flow exposure on
the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, IHI Consolidated receives variable interest
rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the portion of the
debt that is swapped.



In accordance with ASC 815-10-05-4,
Derivatives and Hedging, IHI Consolidated had concluded that all of its interest rate swaps qualified as cash flow hedges
and IHI Consolidated applied hedge accounting for these instruments until March 31, 2009. Changes in the fair value of interest
rate derivatives designated as hedging instruments that effectively offset the variability of cash flows associated with variable-rate
debt obligations up to that time were reported in other comprehensive income or loss. Any ineffective portion of the change in
valuation of derivatives was recorded through earnings, and reported in the (gain) loss of non-hedging derivatives line in the
consolidated statements of income. Effective April 1, 2009, IHI Consolidated elected to discontinue the application of hedge accounting
to its interest rate swap agreements. The amount recorded in accumulated other comprehensive income at that time ($6,984,000 loss)
will be amortized to (gain) loss of non-hedging derivatives in the statements of income over the remaining term of the swap agreements.
$1,174,000 and $1,602,000 was amortized to (gain) loss of non-hedging derivatives in the statements of income for the years ended
December 31, 2012 and 2011, respectively. Subsequent to March 31, 2009, all changes in the fair value of interest rate swap agreements
are recorded through earnings. The long-term portion of these fair market values is recorded in other long-term liabilities in
the accompanying balance sheets. The term over which IHI Consolidated is currently partially hedging exposures relating to debt
is through June 2017. (See Note 4)



14







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



At December 31, 2012, IHI Consolidated
had $930,566,000 of outstanding debt, $415,000,000 of which was hedged with interest rate swaps. At December 31, 2011, IHI Consolidated
had $639,757,000 of outstanding debt, $443,300,000 of which was hedged with interest rate swaps.



For the years ended December
31, 2012 and 2011, IHI Consolidated recorded the following changes in the current and non-current portions of the value of its
derivative instruments:



|                                                                                                                                                               |  | 2012 |             |   | 2011 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Opening balance (liability)                                                                                                                                    |  | $    | (76,465,000 | ) |      | $
|                                                                                                                                                               |  |      |             |   |      |  
|Change in fair value of derivative instruments after March 31, 2009 included in gain (loss) on derivative instruments in the accompanying statements of income |  |      | (13,436,000 | ) |      |  
|                                                                                                                                                               |  |      |             |   |      |  
|Reclassification of realized losses on derivative instruments into interest expense for the year                                                               |  |      | 18,885,000  |   |      |  
|                                                                                                                                                               |  |      |             |   |      |  
|Closing balance (liability)                                                                                                                                    |  | $    | (71,016,000 | ) |      | $



IHI Consolidated will amortize
losses of approximately $201,000 (pretax) from accumulated other comprehensive (loss) into (gain) loss of non-hedging derivatives
in the statement of income over the next twelve months.



15







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



In accordance with ASC 815-10-10-1,
IHI Consolidated derivative instruments are recorded on the balance sheet at fair value. IHI Consolidated measures derivative instruments
at fair value using the income approach, which converts future amounts (being the future net cash settlements expected under the
derivative contracts) to a discounted present value. These valuations primarily utilize observable (“Level 2”) inputs
including contractual terms, interest rates and yield curves observable at commonly quoted intervals.



IHI Consolidated’s fair
value measurements of its derivative instruments at December 31, 2012 and 2011 were as follows:



|                        |  |            |             |   | Fair Value Measurements at Reporting Date Using                  |  
|----------------------- |  | ---------- | ----------- | - | ---------------------------------------------------------------- | -
|Description             |  | 2012 Total |             |   | Quoted Prices
 in Active
 Markets for Identical Assets (Level 1) |  
|Derivative Instruments: |  |            |             |   |                                                                  |  
|Current liabilities     |  | $          | (17,894,000 | ) |                                                                  | $
|Non-current liabilities |  |            | (53,122,000 | ) |                                                                  |  
|Total                   |  | $          | (71,016,000 | ) |                                                                  | $





|                        |  |            |             |   | Fair Value Measurements at Reporting Date Using                |  
|----------------------- |  | ---------- | ----------- | - | -------------------------------------------------------------- | -
|Description             |  | 2011 Total |             |   | Quoted Prices in Active Markets for Identical Assets (Level 1) |  
|Derivative Instruments: |  |            |             |   |                                                                |  
|Current liabilities     |  | $          | (17,883,000 | ) |                                                                | $
|Non-current liabilities |  |            | (58,582,000 | ) |                                                                |  
|Total                   |  | $          | (76,465,000 | ) |                                                                | $



There have been no transfers
of assets or liabilities between levels for the years ended December 31, 2012 and 2011.



16







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



Pension and other postretirement
plans



IHI Consolidated records annual
amounts relating to its pension and postretirement plans based on calculations that incorporate various actuarial and other assumptions,
including discount rates, mortality, assumed rates of return, compensation increases, turnover rates and healthcare cost trend
rates. IHI Consolidated reviews its assumptions on an annual basis and makes modifications to the assumptions based on current
rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in other comprehensive
income and amortized to net periodic cost over future periods using the corridor method. IHI Consolidated believes that the assumptions
utilized in recording its obligations under its plans are reasonable based on its experience and market conditions. Net periodic
costs are recognized as employees render the services necessary to earn the postretirement benefits.



Estimates



The preparation of financial
statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect reported amounts and disclosures. Some of the more important estimates and assumptions concern depreciation methods and
lives, future environmental remediation costs and pension plan discount rates and rates of return on plan assets. Actual results
may differ from those estimates and assumptions.



Impairment of long-lived
assets



Long-lived assets, such as property,
plant, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets is assessed by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds
the fair value of the asset.



17







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



Foreign currency translation



The assets and liabilities of
IMTT-NTL and IMTT-Quebec are translated from their foreign currency (Canadian dollars) to U.S. dollars at exchange rates in effect
at the end of the year and statement of income accounts are translated at average exchange rates for the year. Translation gains
or losses as a result of changes in the exchange rate are recorded as a component of other comprehensive income.



Commitments and contingencies



Liabilities for loss contingencies
arising from claims, assessments, litigation, fines, penalties and other sources, are recorded when it is probable that a liability
has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed
as incurred.



| | (3) | Related party transactions
| | --- | --------------------------



During 2012 and 2011, IHI Consolidated
paid or accrued $2,367,000 and $2,302,000, respectively, to entities related to a group of shareholders for legal services and
office rent, which are recorded as general and administrative expense in the accompanying statements of income. Receivables from
affiliates of $54,000 and $37,000 at December 31, 2012 and 2011, respectively, consist of receivables from entities affiliated
with a group of shareholders. In accordance with the terms of the shareholders’ agreement, IHI has loans outstanding to a
group of shareholders at December 31, 2012 and 2011 of $26,068,000 and $28,675,000, respectively. Principal payments of $2,607,000
are due annually through December 2022. Interest accrued on these loans for 2012 and 2011 was $1,548,000 and $1,689,000, respectively.



18







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



| | (4) | Long-term debt and related derivatives
| | --- | --------------------------------------



Long-term debt consists of the
following:



|                                                                                                                                      |  | 2012 |             |   | 2011 |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Tax-exempt N.J.E.D.A. bonds, 0.12 % at December 31, 2012 (.05% at December 31, 2011)                                                  |  | $    | 30,000,000  |   |      | $
|Tax-exempt N.J.E.D.A. bonds of terminated El Dorado joint venture, 0.12 % at December 31, 2012 (.05% at December 31, 2011)            |  |      | 6,300,000   |   |      |  
|Tax-exempt Ascension Parish bonds, 0.12% at December 31, 2012 (.08% at December 31, 2011)                                             |  |      | 165,000,000 |   |      |  
|Tax-exempt L.P.F.A. bonds, 0.12% at December 31, 2012 (.08% at December 31, 2011)                                                     |  |      | 50,000,000  |   |      |  
|Tax-exempt L.P.F.A. bonds, 0.12% at December 31, 2012 (.08% at December 31, 2011)                                                     |  |      | 85,000,000  |   |      |  
|Bank-owned tax-exempt L.P.F.A. bonds, 1.61% at December 31, 2012 (1.49% at December 31, 2011)                                         |  |      | 96,654,000  |   |      |  
|Bank-owned tax-exempt L.P.F.A. bonds, 1.61% at December 31, 2012 (1.49% at December 31, 2011)                                         |  |      | 86,966,000  |   |      |  
|Unsecured notes payable under U.S. revolving bank credit facility averaging 2.47% at December 31, 2012 (1.30% at December 31, 2011)   |  |      | 366,000,000 |   |      |  
|Notes payable under revolving credit facility with a Canadian bank, averaging 3.51% at December 31, 2012 (3.25% at December 31, 2011) |  |      | 18,542,000  |   |      |  
|Loans from shareholders, 5.50%, due in quarterly installments over a 15 year period beginning March 31, 2008                          |  |      | 26,068,000  |   |      |  
|Other                                                                                                                                 |  |      | 36,000      |   |      |  
|                                                                                                                                      |  | $    | 930,566,000 |   |      | $
|Less – Current maturities                                                                                                             |  |      | (7,042,000  | ) |      |  
|                                                                                                                                      |  | $    | 923,524,000 |   |      | $



19







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



In 1993, BII and IMTT-Bayonne
received the proceeds of and became obligated for $30,000,000 of tax-exempt New Jersey Economic Development Authority (“N.J.E.D.A.”)
Dock Facility Revenue Refunding Bonds (the “Bonds”) to refinance and retire previously issued tax-exempt industrial
development revenue bonds.



In accordance with the terms
of the Bond indenture, BII and IMTT-Bayonne select from four interest rate-setting frequency modes; daily, weekly, commercial paper
(“CP”) (from 30 to 269 days) and adjustable rate mode (at least six months). The interest rates for these various alternatives
are determined by the remarketing agent as the lowest rate that will allow the Bonds to be sold at par based on the current market
conditions. For all of 2012 and 2011, the Bond interest rate was set under the daily rate mode.



The Bonds are secured by $30,473,000
of irrevocable letters of credit, which expire June, 2014 (if not extended), issued by the banks under the credit facility discussed
below.



The Bonds mature on December
1, 2027, but are subject to optional and mandatory tender, as well as various redemption provisions, at 100% of principal and accrued
interest (plus applicable premium if the Bonds are in the adjustable rate mode). When in the daily or weekly rate mode, bond owners
may, at their option, tender the Bonds to the remarketing agent for payment of principal and accrued interest.



The Bonds are also subject to
mandatory tender provisions in the following cases: 1) each time the interest rate mode is converted, 2) if the related letters
of credit are released or allowed to terminate or expire without replacement or extension, 3) substitution of an alternate credit
facility for an existing letter of credit, if certain conditions are not met and 4) on each CP rate reset date. After tender, if
sufficient funds are not available from remarketing the Bonds, the bond owners could be paid from the proceeds of a draw on the
related letters of credit, or, should sufficient funds not be available from letters of credit, the Bonds could be purchased by
BII and IMTT-Bayonne. The Bonds may be redeemed at various times at the direction of BII and IMTT-Bayonne while in any rate mode
and are also subject to mandatory redemption if the Bonds are determined to be taxable.



IMTT-BC is responsible for the
payment of principal (due December 1, 2021) and related interest of a $6,300,000 N.J.E.D.A. tax-exempt bond issue of a terminated
joint venture. Interest terms on these bonds are similar to those issued by BII and IMTT-Bayonne discussed previously. These bonds
are secured by a $6,404,000 irrevocable letter of credit issued by the banks under the credit facility discussed below.



20







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



In July, 2007, IMTT-Geismar
received the proceeds of and became obligated for $165,000,000 of tax-exempt Industrial Development Board of the Parish of Ascension,
Louisiana, Inc. revenue bonds to finance construction of a chemical liquid logistics facility in Geismar, Louisiana. At the same
time, IMTT received the proceeds of and became obligated for $50,000,000 of tax-exempt Louisiana Public Facilities Authority (“L.P.F.A.”)
revenue bonds to finance the expansion of liquid terminal facilities at its St. Rose, Louisiana terminal. Both of these tax-exempt
financings mature on June 1, 2043 and are secured by irrevocable letters of credit expiring May, 2014 ($167,170,000 and $50,658,000,
respectively) issued by the banks under the credit facility discussed below as well as confirming irrevocable letters of credit
($167,333,000 and $50,707,000, respectively) issued by the Federal Home Loan Bank (“FHLB”) of Atlanta, which expire
August, 2013. These two tax-exempt financings have interest rate setting modes, optional and mandatory tender and redemption provisions
similar to the NJEDA tax-exempt bonds. For all of 2012 and 2011 the rate on these bonds was set under the weekly rate mode.



In August, 2010, IMTT-FINCO
received the proceeds of and became obligated for $85,000,000 of tax-exempt L.P.F.A. revenue bonds to finance expansion and improvements
at the St. Rose facility in Louisiana. This tax-exempt financing matures on August 1, 2046 and is secured by an irrevocable letter
of credit ($86,118,000) expiring May, 2014 issued by the banks under the credit facility discussed below as well as a confirming
irrevocable letter of credit ($86,202,000) issued by the FHLB of Atlanta, which expires August, 2013. This tax-exempt financing
has interest rate setting modes, optional and mandatory tender and redemption provisions similar to the NJEDA tax-exempt bonds.
For 2012 and 2011, the rate on these bonds was set under the weekly rate mode. Costs of $871,000 associated with the issuance of
these bonds are being deferred and amortized to interest expense ratably over the term of the bonds.



In November and December 2010,
IMTT-FINCO received the proceeds of and became obligated for an additional $100,000,000 and $90,000,000, respectively, of tax-exempt
L.P.F.A. revenue bonds to finance expansion and improvements at the St. Rose, Geismar and Gretna facilities in Louisiana. Concurrent
with the issuance of these bonds, IMTT-FINCO entered into agreements with a syndicate of banks to purchase the bonds, some of which
also participate in the revolving credit facility discussed below. These bonds do not require a letter of credit as security and
provide for monthly principal payments beginning in July, 2011, as follows, with final maturity in December, 2040, subject to mandatory
tender for purchase in December, 2015 at 100% of the outstanding principal balance plus accrued interest. The bonds can be resold
at that time and are subject to annual tender thereafter.





21













IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011





|Year       |  | Total Principal
Payments |            
|---------- |  | ------------------------ | -----------
|2013       |  | $                        | 4,435,000  
|2014       |  |                          | 4,557,000  
|2015       |  |                          | 4,683,000  
|2016       |  |                          | 4,799,000  
|2017       |  |                          | 4,944,000  
|Thereafter |  |                          | 160,202,000



* - subject to mandatory tender



IMTT-FINCO’s obligations
under these agreements are guaranteed by the remainder of the entities comprising IMTT Combined, excluding the Canadian entities.
These agreements also contain covenants and restrictions similar to the revolving credit facility as described below. The interest
rate on these bonds is determined monthly based on 68% of one-month LIBOR plus 65% of the LIBOR margin under the revolving credit
facility as described below.



Costs of $2,761,000 associated
with the issuance of these bonds is being deferred and amortized to interest expense ratably over the period to mandatory tender.



On June 18, 2010 IMTT Combined
amended and restated its revolving credit facility. The unsecured revolving credit facility was originally with a twenty-two bank
syndicate with commitments totaling $1,100,000,000. This amended and restated credit facility now consists of seventeen banks with
commitments totaling $995,000,000 through June 7, 2014 and one Canadian bank with a commitment of $30,000,000 through June 7, 2014
($1,025,000,000 total). Commitments with four banks totaling $75,000,000 expired June 7, 2012. The proceeds from the amended and
restated revolving credit facility were used to pay off the existing revolving credit facilities, an existing $30,000,000 term
loan and, through distributions, the remaining $65,000,000 on an ITT and Affiliates term loan.



IMTT and IMTT-Bayonne are the
borrowers under this agreement, which is guaranteed by all the remaining entities comprising IMTT Combined, except IMTT-NTL and
IMTT-Quebec; however, a majority of the equity interest in IMTT-NTL and IMTT-Quebec is pledged in repayment of the debt. IMTT-NTL
and IMTT-Quebec are the borrowers under the Canadian portion of the facility.



22







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



Except for a $65,000,000 portion
of the facility through December 31, 2012, as described below, IMTT and IMTT-Bayonne can borrow, at their option, for various periods
under the agreement at LIBOR plus 1.50% to 2.75% or at the banks’ base rate, as defined, plus .50% to 1.75%, dependent upon
the leverage ratio, as defined. The Canadian borrowers can borrow from the Canadian lender at the bankers’ acceptance rates
plus 1.50% to 2.75%, or the Canadian prime rate plus .50% to 1.75%, dependent upon the leverage ratio, as defined. Borrowings provided
by the four banks not extending their commitments through June, 2014 are at LIBOR plus .55% to 1.50% or the banks’ base rate,
as defined, dependent upon the leverage ratio, as defined.



The bank that previously held
the ITT and Affiliates $65,000,000 term loan is part of the bank syndication and held the $65,000,000 under the amended and restated
revolving credit facility through December 31, 2012. The rate on this portion of the outstanding debt was LIBOR plus 1.00% and
matured on December 31, 2012, at which time this portion of the facility was paid from and converted to extended commitments through
June, 2014 with pricing the same as other commitments.



Costs of $9,275,000 associated
with the amendment, extension and increase of the revolving credit facility are being deferred and amortized to interest expense
ratably over the remaining extended loan term.



The U.S. portion of the revolving
credit facility includes the availability for the issuance of letters of credit. Letters of credit outstanding under this facility
at December 31, 2012 of $343,757,000 primarily secure obligations under certain tax-exempt bonds referred to previously. Loans
of $366,000,000 were outstanding under the U.S. portion of this facility and $18,542,000 of loans were outstanding with the Canadian
bank at December 31, 2012, thus leaving $296,701,000 total available under this credit facility at December 31, 2012.



IMTT Combined is subject to
various covenants under this credit facility. The primary covenants require the maintenance of certain ratios, as defined, of combined
1) debt to earnings before interest, income taxes and depreciation and amortization, and 2) earnings before interest, income taxes
and depreciation and amortization to interest expense. The loan agreement also restricts liens on assets, additional investments
and loans, sales or dispositions of assets and change of control, as defined, among other requirements.



The interest rate on the borrowings
under the tax-exempt bonds and the revolving bank credit facility discussed previously adjusts periodically depending on their
individual terms as previously described. In an effort to achieve a more stable interest cost and reduce the risk of rising interest
rates and expense, four interest rate swap agreements with three large banks were entered into whereby floating rates were swapped
for fixed rates.



23







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



The primary terms and the accounting
treatment of these financial instruments are described below:





|                                                 |  | Swap 1               |         |  | Swap 2               |   |           | Swap 3          |  |   | Swap 4        |   |  |       |            
|------------------------------------------------ |  | -------------------- | ------- |  | -------------------- | - | --------- | --------------- |  | - | ------------- | - |  | ----- | -----------
|Related debt                                     |  | N.J.E.D.A. Bonds     |         |  | Tax-Exempt Bonds     |   |           | Bank Line       |  |   | Bank Line     |   |  |       |            
|Notional amount                                  |  | $36,300,000          |         |  | $215,000,000         |   |           | $200,000,000*   |  |   | $52,000,000   |   |  |       |            
|Term                                             |  | 10/07-10/12          |         |  | 7/07-6/17            |   |           | 10/07-3/17      |  |   | 5/06-12/12    |   |  |       |            
|Fixed rate paid                                  |  | 3.410%               |         |  | 3.662%               |   |           | 5.507%          |  |   | 6.290%        |   |  |       |            
|Floating rate received                           |  | 67% of monthly Libor |         |  | 67% of monthly Libor |   |           | Quarterly Libor |  |   | Monthly Libor |   |  | Total |            
|                                                 |  | 2012                 |         |  | 2011                 |   |           | 2012            |  |   | 2011          |   |  | 2012  |            
|Floating rate at year end                        |  |                      | ***     |  |                      |   | 0.189     | %               |  |   | 0.141         | % |  |       | 0.189      
|Net interest expense for year                    |  | $                    | 982,000 |  |                      | $ | 1,181,000 |                 |  | $ | 7,530,000     |   |  | $     | 7,539,000  
|Fair market value at year end (liability)**      |  | $                    | -       |  |                      | $ | (948,000  | )               |  | $ | (29,890,000   | ) |  | $     | (31,587,000
|Change in fair market value for year gain (loss) |  | $                    | 948,000 |  |                      | $ | 1,022,000 |                 |  | $ | 1,697,000     |   |  | $     | (6,875,000 
|Change in fmv value recorded in –                |  |                      |         |  |                      |   |           |                 |  |   |               |   |  |       |            
|Other comprehensive income
    (loss)            |  | $                    | -       |  |                      | $ | -         |                 |  | $ | -             |   |  | $     | -          
|Net income (loss)                                |  | $                    | 948,000 |  |                      | $ | 1,022,000 |                 |  | $ | 1,697,000     |   |  | $     | (6,875,000 
|Total gain (loss)                                |  | $                    | 948,000 |  |                      | $ | 1,022,000 |                 |  | $ | 1,697,000     |   |  | $     | (6,875,000 











|*   |  | – At 1/1/12 was $140 million.                                                            
|--- |  | -----------------------------------------------------------------------------------------
|**  |  | – Included in current and other long-term liabilities in the accompanying balance sheets.
|*** |  | – Swap matured during 2012.                                                              









| | (5) | Employee benefits
| | --- | -----------------



Except for a plan covering certain
employees covered by a collective-bargaining agreement at the Lemont and Joliet, Illinois terminals, substantially all employees
of IMTT Combined are eligible to participate in a defined benefit pension plan (the “Plan”). Benefits under the Plan
are based on years of service and the employees' highest average compensation for a consecutive five year period. Coincident with
the acquisition of terminal facilities in 1997 and 2007 by IMTT-Illinois, it became the sponsor of a defined benefit plan covering
union employees at these terminals (“Union Plan”). Monthly benefits under this plan are computed based on a benefit
rate in effect at the date of the participant's termination ($52.50 at November 1, 2012) multiplied by the number of years of service.
IMTT Combined’s contributions to both plans are based on the recommendations of its consulting actuary.



24







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



The following table sets forth
the obligations and assets (as well as changes therein) of both plans, the resulting funded status and amounts recognized in the
accompanying financial statements:





|                                                                                               |  | 2012     |             |   | 2011       |  
|---------------------------------------------------------------------------------------------- |  | -------- | ----------- | - | ---------- | -
|                                                                                               |  | The Plan |             |   | Union Plan |  
|Changes in benefit obligation:                                                                 |  |          |             |   |            |  
|Benefit obligation at beginning of year                                                        |  | $        | 104,063,000 |   |            | $
|Service cost                                                                                   |  |          | 5,786,000   |   |            |  
|Interest cost                                                                                  |  |          | 4,749,000   |   |            |  
|Plan amendments                                                                                |  |          | —           |   |            |  
|Actuarial loss                                                                                 |  |          | 4,760,000   |   |            |  
|Benefits paid                                                                                  |  |          | (1,709,000  | ) |            |  
|Benefit obligation at end of year                                                              |  | $        | 117,649,000 |   |            | $
|                                                                                               |  |          |             |   |            |  
|Changes in plan assets:                                                                        |  |          |             |   |            |  
|Fair value of plan assets at beginning of year                                                 |  | $        | 61,696,000  |   |            | $
|Actual return on plan assets                                                                   |  |          | 8,102,000   |   |            |  
|Employer contribution                                                                          |  |          | 5,000,000   |   |            |  
|Benefits paid                                                                                  |  |          | (1,709,000  | ) |            |  
|Fair value of plan assets at end of year                                                       |  | $        | 73,089,000  |   |            | $
|                                                                                               |  |          |             |   |            |  
|Funded status – Pension (liability) recognized in balance sheet in other long-term liabilities |  | $        | (44,560,000 | ) |            | $
|                                                                                               |  |          |             |   |            |  
|Amounts recognized in accumulated other comprehensive income consist of:                       |  |          |             |   |            |  
|Net actuarial loss                                                                             |  | $        | 42,281,000  |   |            | $
|Prior service cost                                                                             |  |          | 405,000     |   |            |  
|Total                                                                                          |  | $        | 42,686,000  |   |            | $
|Accumulated benefit obligation at December 31:                                                 |  | $        | 85,913,000  |   |            | $



25







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



|                                                                                              |  | 2012     |            |   | 2011       |  
|--------------------------------------------------------------------------------------------- |  | -------- | ---------- | - | ---------- | -
|                                                                                              |  | The Plan |            |   | Union Plan |  
|Components of net periodic benefit cost:                                                      |  |          |            |   |            |  
|Service cost                                                                                  |  | $        | 5,786,000  |   |            | $
|Interest cost                                                                                 |  |          | 4,749,000  |   |            |  
|Expected return on plan assets                                                                |  |          | (4,296,000 | ) |            |  
|Amortization of prior service cost                                                            |  |          | 170,000    |   |            |  
|Recognized net actuarial loss                                                                 |  |          | 2,824,000  |   |            |  
|Net periodic benefit cost recognized in statement of income                                   |  | $        | 9,233,000  |   |            | $
|                                                                                              |  |          |            |   |            |  
|Other changes in plan assets and benefit obligation recognized in other comprehensive income: |  |          |            |   |            |  
|Net actuarial loss                                                                            |  | $        | 954,000    |   |            | $
|Prior service cost                                                                            |  |          | —          |   |            |  
|Amortization of prior service (cost)                                                          |  |          | (170,000   | ) |            |  
|Amortization of actuarial (loss)                                                              |  |          | (2,824,000 | ) |            |  
|Total recognized in other comprehensive income                                                |  | $        | (2,040,000 | ) |            | $
|Total recognized in net periodic benefit cost and other comprehensive income                  |  | $        | 7,193,000  |   |            | $
|                                                                                              |  |          |            |   |            |  
|Weighted average assumptions used to determine benefit obligations as of December 31:         |  |          |            |   |            |  
|Discount rate                                                                                 |  |          | 4.20       | % |            |  
|Expected return on plan assets                                                                |  |          | 7.00       | % |            |  
|Rate of compensation increase                                                                 |  |          | 4.57       | % |            |  
|                                                                                              |  |          |            |   |            |  
|Weighted average assumptions used to determine net benefit cost:                              |  |          |            |   |            |  
|Discount rate                                                                                 |  |          | 4.70       | % |            |  
|Expected return on plan assets                                                                |  |          | 7.00       | % |            |  
|Rate of compensation increase                                                                 |  |          | 5.47       | % |            |  



26







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



As of December 31, 2012, the
discount rate assumption used in the computation of benefit obligations for the Plan and the Union Plan was changed to 4.20% and
4.15%, respectively, to better approximate returns available on high quality fixed income investments.



The allocation of pension plan
assets as of December 31, 2012 and 2011 is shown below based on quoted prices in active markets for identical assets (Level 1 fair
value measurements).



|                                   |  | 2012     |       |   | 2011       | 
|---------------------------------- |  | -------- | ----- | - | ---------- | 
|                                   |  | The Plan |       |   | Union Plan | 
|Weighted average asset allocation: |  |          |       |   |            | 
|Domestic equity funds              |  |          | 30.0  | % |            | 
|International equity fund          |  |          | 10.5  | % |            | 
|Domestic fixed income fund         |  |          | 58.1  | % |            | 
|Other                              |  |          | 1.4   | % |            | 
|Total                              |  |          | 100.0 | % |            | 



Pension asset investment decisions
are made with assistance of an outside paid advisor to achieve the multiple goals of high rate of return, diversification and safety.



Expected benefit payments as
of December 31, 2012 are as follows:



|                                   |  | The Plan |            |  | Union Plan |  
|---------------------------------- |  | -------- | ---------- |  | ---------- | -
|                                   |  |          |            |  |            |  
|Year 2013                          |  | $        | 4,151,000  |  |            | $
|Year 2014                          |  |          | 4,300,000  |  |            |  
|Year 2015                          |  |          | 4,431,000  |  |            |  
|Year 2016                          |  |          | 4,864,000  |  |            |  
|Year 2017                          |  |          | 5,381,000  |  |            |  
|Years 2018-2022                    |  |          | 32,527,000 |  |            |  
|Anticipated contributions for 2013 |  | $        | 5,000,000  |  |            | $



27







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



IMTT Combined provides post-retirement
life insurance (coverage equal to 25% of final year compensation not to exceed $25,000) and health benefits (coverage for early
retirees at least 62 years old on early retirement to age 65, reimbursement of Medicare premiums for the Bayonne terminal employees
and some smaller health benefits no longer offered) to retired employees. IMTT Combined adopted the accounting treatment for post-retirement
benefits other than pensions as prescribed by ASC 715-60-05 in 2006. As allowed by that accounting standard, IMTT Combined elected
to defer and amortize the January 1, 2006 transition obligation over ten years.



The following table sets forth
the obligation and assets (as well as changes therein) of these plans, the resulting funded status and amounts recognized in the
accompanying financial statements:



|                                               |  | 2012 |             |   | 2011 |  
|---------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Changes in benefit obligation:                 |  |      |             |   |      |  
|Benefit obligation at beginning of year        |  | $    | 11,069,000  |   |      | $
|Service cost                                   |  |      | 725,000     |   |      |  
|Interest cost                                  |  |      | 503,000     |   |      |  
|Plan amendments                                |  |      | —           |   |      |  
|Actuarial loss                                 |  |      | 2,012,000   |   |      |  
|Benefits paid                                  |  |      | (445,000    | ) |      |  
|Early Retiree Reinsurance Program receipts     |  |      | —           |   |      |  
|Benefit obligation at end of year              |  | $    | 13,864,000  |   |      | $
|                                               |  |      |             |   |      |  
|Changes in plan assets:                        |  |      |             |   |      |  
|Fair value of plan assets at beginning of year |  | $    | —           |   |      | $
|Employer contribution                          |  |      | 445,000     |   |      |  
|Benefits paid                                  |  |      | (445,000    | ) |      |  
|Fair value of plan assets at end of year       |  | $    | —           |   |      | $
|                                               |  |      |             |   |      |  
|Funded status – plan (liability)               |  | $    | (13,864,000 | ) |      | $



28







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



|                                                                                              |  | 2012 |             |   | 2011 |  
|--------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Amounts recognized in combined balance sheets consist of:                                     |  |      |             |   |      |  
|Current (liabilities)                                                                         |  | $    | (743,000    | ) |      | $
|Other long-term (liabilities)                                                                 |  |      | (13,121,000 | ) |      |  
|Total (liabilities)                                                                           |  | $    | (13,864,000 | ) |      | $
|                                                                                              |  |      |             |   |      |  
|Amounts recognized in accumulated other comprehensive income consist of:                      |  |      |             |   |      |  
|Transition obligation (eliminated by 2011 Plan amendment)                                     |  | $    | —           |   |      | $
|Prior service (credit)                                                                        |  |      | (573,000    | ) |      |  
|Net actuarial loss                                                                            |  |      | 10,037,000  |   |      |  
|Total                                                                                         |  | $    | 9,464,000   |   |      | $
|                                                                                              |  |      |             |   |      |  
|Components of net periodic benefit cost:                                                      |  |      |             |   |      |  
|Service cost                                                                                  |  | $    | 725,000     |   |      | $
|Interest cost                                                                                 |  |      | 503,000     |   |      |  
|Amortization of transition obligation                                                         |  |      | —           |   |      |  
|Amortization of prior service cost                                                            |  |      | (48,000     | ) |      |  
|Amortization of actuarial loss                                                                |  |      | 574,000     |   |      |  
|Net periodic benefit cost of the plan                                                         |  | $    | 1,754,000   |   |      | $
|                                                                                              |  |      |             |   |      |  
|Other changes in plan assets and benefit obligation recognized in other comprehensive income: |  |      |             |   |      |  
|Net actuarial loss                                                                            |  | $    | 2,012,000   |   |      | $
|Prior service (credit)                                                                        |  |      | —           |   |      |  
|Amortization of transition obligation                                                         |  |      | —           |   |      |  
|Amortization of prior service cost                                                            |  |      | 48,000      |   |      |  
|Amortization of actuarial (loss)                                                              |  |      | (574,000    | ) |      |  
|Total recognized in other comprehensive income                                                |  | $    | 1,486,000   |   |      | $
|                                                                                              |  |      |             |   |      |  
|Total recognized in net periodic benefit cost and other comprehensive income                  |  | $    | 3,240,000   |   |      | $



29







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011





|                                                                                      |  | 2012 |             |    | 2011 | 
|------------------------------------------------------------------------------------- |  | ---- | ----------- | -- | ---- | 
|Weighted average assumptions used to determine benefit obligations as of December 31: |  |      |             |    |      | 
|Discount rate                                                                         |  |      | 3.90        | %  |      | 
|Rate of compensation increase                                                         |  |      | 4.57        | %  |      | 
|                                                                                      |  |      |             |    |      | 
|Weighted average assumptions used to determine net benefit cost:                      |  |      |             |    |      | 
|Discount rate                                                                         |  |      | 4.50        | %  |      | 
|Rate of compensation increase                                                         |  |      | 5.47        | %  |      | 
|                                                                                      |  |      |             |    |      | 
|Health Care Trend Rates - Pre-65 (Post-65)                                            |  |      |             |    |      | 
|Healthcare trend rate                                                                 |  |      | 8.00% (8.00 | )% |      | 
|Ultimate trend                                                                        |  |      | 5.00        | %  |      | 
|Year ultimate trend reached                                                           |  |      | 2025        |    |      | 
|                                                                                      |  |      |             |    |      | 
|Health Care Trend Rates – Medicare Part B                                             |  |      |             |    |      | 
|Healthcare trend rate                                                                 |  |      | 8.00        | %  |      | 
|Ultimate trend                                                                        |  |      | 5.00        | %  |      | 
|Year ultimate trend reached                                                           |  |      | 2025        |    |      | 





The plan amendments, effective
July 1, 2011, for the IMTT-Bayonne and IMTT-Pipeline locations resulted in a portion of the cost of coverage being shared, deductibles
and copays being increased, and Medicare Part B reimbursements being capped.



Expected benefit payments and
contributions as of December 31, 2012 are as follows:



|Year 2013                          |  | $ | 743,000   | 
|---------------------------------- |  | - | --------- | 
|Year 2014                          |  |   | 743,000   | 
|Year 2015                          |  |   | 730,000   | 
|Year 2016                          |  |   | 877,000   | 
|Year 2017                          |  |   | 1,033,000 | 
|Years 2018 – 2022                  |  |   | 5,833,000 | 
|Anticipated contributions for 2013 |  | $ | 743,000   | 





30











IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



Assumptions concerning health
care cost trend rates can have a significant impact on plan costs and liabilities, as shown below as of year-end and for the year
2012:



|                               |  | Using stated |            |  | One percentage point |  
|------------------------------ |  | ------------ | ---------- |  | -------------------- | -
|                               |  | assumptions  |            |  | Decrease             |  
|End of year benefit obligation |  | $            | 13,864,000 |  |                      | $
|Service and interest cost      |  |              | 1,228,000  |  |                      |  



Accumulated other comprehensive
income at December 31, 2012 contains $3,387,000 of net actuarial losses and $180,000 of prior service credits for the foregoing
defined benefit pension and post-retirement health/life plans expected to be recognized as components of net periodic benefit
cost in 2013.



IMTT Combined has established
a supplementary, non-qualified benefit plan for certain management employees whose compensation exceeds the maximum eligible for
inclusion in the qualified defined benefit plan. Under this plan, IMTT Combined funds additional compensation to the affected
employees on a pre-tax basis that will allow them to make a contribution to a separate investment account, which the employees
own, that will provide the actuarial equivalent of the benefits available as if all of the employees’ compensation had been
included in the qualified defined benefit plan. Expense related to this plan is recorded as additional compensation and primarily
included in general and administrative expense in the accompanying financial statements ($1,721,000 in 2012 and $993,000 in 2011).



IMTT Combined has established
defined contribution Section 401 (k) employee benefit plans. Under the primary plan, employees who are eighteen years old and
have six months of service are eligible to participate. Employees may contribute up to the maximum allowable for Federal income
tax purposes and IMTT Combined’s matching contribution is determined each year by management. In both 2012 and 2011, IMTT
Combined elected to match 5% of employee contributions. Total expense for the 401 (k) plans recognized for both 2012 and 2011
was $297,000.



31







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



IMTT Combined purchases life
insurance for certain management employees and provides for the repayment of premiums paid through deferred compensation arrangements.
Under this program, various amounts of life insurance are purchased in the name of the employee and paid for by IMTT Combined
and receivables are recorded from each management employee, along with accrued interest. The policies are pledged to IMTT Combined
as collateral. At retirement or termination of service, funds are provided to the plan participants under deferred compensation
agreements to provide for the repayment of premiums paid and the pledge of the policies is terminated. Expense related to the
deferred compensation arrangements is recorded annually as employee service is rendered. Expense associated with providing this
benefit of $70,000 and $68,000 for 2012 and 2011, respectively, is recorded in general and administrative expense in the accompanying
financial statements.



| | (6) | Commitments and contingencies
| | --- | -----------------------------



IHI Consolidated is involved
in various lawsuits, claims and inquiries (including environmental matters), which are routine to the nature of its business.
Management believes that resolution of these matters will not result in any material adverse effect on the financial statements.



Many of the entities comprising
IMTT Combined are subject to compliance with federal and state environmental regulations, some of which require environmental
remediation and ongoing monitoring activities. Depending upon the nature and circumstances of such activities, certain of the
expenditures related thereto have been recorded as operating expenses in the accompanying statements of income and others are
capitalized as such expenditures are incurred.



A summary of these environmental
remediation matters follows.



The Lemont terminal entered
into a consent order with the state of Illinois to remediate a contamination problem which existed at the time of the purchase
of this facility from its former owners. Remediation is also required as a result of the renewal of a lease with a government
agency for a portion of the terminal. This remediation effort, consisting of among other things, the implementation of extraction
and monitoring wells and soil treatment, is estimated to span a period of ten to twenty years or more at a cost of $4,500,000
to $6,000,000.



The Bayonne, New Jersey terminal,
which has been acquired and aggregated over a 29 year period, contains pervasive remediation requirements that were assumed at
the time of purchase from the various former owners. One former owner retained environmental remediation responsibilities for
a purchased site as well as sharing other remediation costs. These remediation requirements are documented in two memoranda of
agreement and an administrative consent order with the state of New Jersey. Remediation efforts entail removal of free product,
soil treatment, repair/replacement of sewer systems, and the implementation of containment and monitoring systems. These remediation
activities are estimated to span a period of ten to twenty or more years at a cost ranging from $32,150,000 to $53,600,000.



32







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



The remediation activities
described previously at the two terminals are estimated based on currently available information, in undiscounted U.S. dollars
and are inherently subject to relatively large fluctuation. Management believes that the cost of the foregoing remediation activities
($36,650,000 to $59,600,000 in total) is capitalizable in accordance with generally accepted accounting principles (ASC 410-30-25-18)
as such costs are recoverable and improve the property as compared with its condition when acquired and either 1) extend the life,
increase the capacity or improve the safety and/or efficiency of the property or 2) mitigate or prevent environmental contamination
that has yet to occur that may result from future operations or activities. During 2012 and 2011, approximately $4,065,000 and
$9,214,000, respectively, of such expenditures were incurred and capitalized within property, plant and equipment. For the years
ended December 31, 2012 and 2011 approximately $2,093,000 and $3,265,000, respectively, of environmental related cost that did
not meet the capitalization criteria was charged to operations.



Various studies are being conducted
to measure emissions from heavy fuel oil (“HFO”) storage and handling, which could be significantly greater than previous
U.S. Environmental Protection Agency (“U.S. EPA”) emission calculations indicate and the HFO industry has historically
utilized. Based on a study conducted in the Northeast, the Massachusetts EPA has required emission controls to be installed on
the HFO tanks at a terminal in that state. If additional studies find that HFO emissions exceed previous calculations, the U.S.
EPA could mandate controls on a nationwide basis, which is estimated to cost IMTT Combined as much as $75,000,000 to $100,000,000
in capital expenditures over some future period.



IMTT-Holdings Inc. (“IHI”)
is the ultimate parent entity of IMTT Combined. The IHI shareholders’ agreement contains various provisions concerning shareholder
distributions, which were the subject of an arbitration proceeding in 2012. The arbitration process resulted in a ruling that
$221,157,000 of distributions were required for the five quarter period ending December 31, 2011. IMTT Combined made distributions
in 2012 to fund the payment of these distributions by IHI to its shareholders. Additional distributions were required and made
by IMTT Combined in 2012 to fund 2012 quarterly IHI shareholder distributions ($154,966,000) as well as income taxes, debt service
on certain IHI shareholder loans and various general and administrative expenses. IMTT Combined made total net distributions of
$386,081,000 in 2012 to fund these cash requirements of its parent entities that have no sources of cash flow other than from
IMTT Combined.



IMTT Combined is in the process
of expanding storage capacity and other customer service capabilities at various terminals to satisfy new customer contract requirements.
Approximately $20,289,000 of additional capital expenditures will be necessary in 2013 to complete these projects.



33







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



Hurricane Sandy struck the
East Coast of the United States including the Bayonne terminal on October 29, 2012. With the exception of policy deductibles and
certain expenses disallowed under its insurance coverage ($2,500,000 in total, which were expensed as repair and maintenance in
2012), all expenditures incurred in the repair and clean-up of Hurricane Sandy related damages as of December 31, 2012 will be
reimbursed by insurance coverage and therefore no net gain or loss as a result of storm related damage was recognized in the accompanying
financial statements. The Bayonne terminal returned to operations (with some limitations) shortly after the storm with relatively
insignificant loss of revenue, some of which should be recovered from business interruption insurance, which will be recognized
after December 31, 2012 when settlement is made and funds are received. The Hurricane Sandy insurance receivable balance, net
of deductibles and non-covered costs, as well as partial insurance proceeds already received, totaled $9,228,000 at December 31,
2012.



With the exception of the following
two leases, all terminal assets are located on owned land.



In June 2011, IMTT-Illinois
entered into a 39 year lease with the Metropolitan Water Reclamation District of Greater Chicago for a portion of the property
comprising the Lemont terminal. The lease began July 1, 2011 and expires June 30, 2050. Annual rent is $316,000, payable in semi-annual
installments. The rent shall be adjusted every 10 years based on the then determined fair market value of the property.



IMTT-Quebec has operating lease
commitments primarily for the land on which the terminal is located and related terminal assets. Minimum lease payments required
in the future are as follows at December 31, 2012:



|Year       |  | Amounts |        
|---------- |  | ------- | -------
|           |  |         |        
|2013       |  | $       | 855,000
|2014       |  |         | 878,000
|2015       |  |         | 892,000
|2016       |  |         | 914,000
|2017       |  |         | 941,000
|Thereafter |  |         | 394,000



In connection with the leases
described above, IMTT-Quebec has the responsibility to remove any contaminants from the leased premises at the end of their term.
The total amount of undiscounted estimated future cash flows through lease termination required to satisfy this obligation is
$9,996,000. These cash flows were discounted using a credit-adjusted risk free interest rate of 4.5% and capitalized in property,
plant and equipment and are being depreciated over the term of the leases. A credit- adjusted risk free interest rate of 7.5%
was previously utilized.



34







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



The changes to the asset retirement
obligation recorded are as follows for 2012 and 2011:



|                                   |  | 2012 |           |  | 2011 |  
|---------------------------------- |  | ---- | --------- |  | ---- | -
|Balance, January 1,                |  | $    | 1,185,000 |  |      | $
|Accretion (interest) expense       |  |      | 91,000    |  |      |  
|Change in estimate                 |  |      | 3,643,000 |  |      |  
|Exchange rate effect on obligation |  |      | 23,000    |  |      |  
|Balance, December 31,              |  | $    | 4,942,000 |  |      | $



This obligation is recorded
in other long-term liabilities in the accompanying balance sheets.



| | (7) | Income taxes
| | --- | ------------



IHI Consolidated provides for
income taxes in accordance with the asset and liability method as prescribed by ASC 740-10-25-2, Income Taxes. The components
of the income tax expense shown in the accompanying statements are as follows:



|                         |  | 2012    |            |  | 2011     |  
|------------------------ |  | ------- | ---------- |  | -------- | -
|                         |  | Current |            |  | Deferred |  
|U.S. federal             |  | $       | 13,422,000 |  |          | $
|State and local          |  |         | 4,463,000  |  |          |  
|Foreign                  |  |         | —          |  |          |  
|                         |  |         |            |  |          |  
|Total income tax expense |  | $       | 17,885,000 |  |          | $



35







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



Income tax expense differs
from income tax computed at the U.S. federal statutory rate of 35% of income before income taxes as shown in the accompanying
financial statements, as follows:



|                                                                       |  | 2012 |            |   | 2011 |  
|---------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|Income tax expense based on U.S. federal statutory rate                |  | $    | 44,244,000 |   |      | $
|State income tax provisions, net of federal income tax benefit         |  |      | 6,843,000  |   |      |  
|Non-deductible expenses                                                |  |      | 187,000    |   |      |  
|Foreign income tax differences                                         |  |      | (269,000   | ) |      |  
|Others, net                                                            |  |      | 288,000    |   |      |  
|                                                                       |  |      |            |   |      |  
|Total income tax expense recorded in accompanying financial statements |  | $    | 51,293,000 |   |      | $



Deferred income taxes have
been recorded in the accompanying balance sheets for the tax effects of temporary differences that impact the financial statements
and income tax returns in different periods, offset partially by carryforwards for federal and state income tax purposes of unused
net operating losses and tax credits. These temporary differences consist primarily of fixed asset basis differences as well as
various expenses, which affect the financial statements and tax returns in different periods. Differences in the basis of the
fixed assets for accounting and income tax reporting purposes exist primarily as a result of different depreciation methods and
lives used for financial and income tax reporting purposes, involuntary conversion treatment, for income tax purposes, of proceeds
received from asset expropriations and settlement of insurance coverage for property damage.



36







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



The primary components of deferred
income tax liabilities (assets) are as follows:



|                                                           |  | 2012 |             |   | 2011 |  
|---------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|Deferred tax liabilities:                                  |  |      |             |   |      |  
|Fixed asset basis differences                              |  | $    | 279,851,000 |   |      | $
|Foreign terminal earnings and investment basis differences |  |      | 3,721,000   |   |      |  
|Currency translation gain                                  |  |      | 1,094,000   |   |      |  
|Others, net                                                |  |      | —           |   |      |  
|Total deferred tax liabilities                             |  | $    | 284,666,000 |   |      | $
|                                                           |  |      |             |   |      |  
|Deferred tax assets:                                       |  |      |             |   |      |  
|Interest rate swap agreement differences                   |  | $    | (28,762,000 | ) |      | $
|Pension expense in excess of contributions                 |  |      | (16,772,000 | ) |      |  
|Net operating loss and tax credit carryforwards            |  |      | (11,475,000 | ) |      |  
|Expense accruals                                           |  |      | (10,778,000 | ) |      |  
|Deferred revenue items                                     |  |      | (4,013,000  | ) |      |  
|Currency translation loss                                  |  |      | —           |   |      |  
|Others, net                                                |  |      | (333,000    | ) |      |  
|Total deferred tax assets prior to valuation allowance     |  |      | (72,133,000 | ) |      |  
|Valuation allowance                                        |  |      | 4,553,000   |   |      |  
|Net deferred tax assets                                    |  |      | (67,580,000 | ) |      |  
|Net deferred taxes as shown in accompanying balance sheets |  | $    | 217,086,000 |   |      | $



Management believes that it
is more likely than not that the net deferred tax assets will be realized through future operations and the reversal of other
temporary differences. The valuation allowance at December 31, 2012 and 2011 was primarily related to certain federal SRLY and
state net operating loss carryforwards that, in the judgment of management, are not more likely than not to be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary
differences become deductible and prior to the expiration of the net operating loss carryforwards.



37







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



Deferred income taxes are classified
as follows in the accompanying balance sheets:



|                                  |  | 2012 |             |   | 2011 |  
|--------------------------------- |  | ---- | ----------- | - | ---- | -
|Current deferred tax (asset)      |  | $    | (12,010,000 | ) |      | $
|Noncurrent deferred tax liability |  |      | 229,096,000 |   |      |  
|Net deferred tax liability        |  | $    | 217,086,000 |   |      | $



Net operating loss (“N.O.L.”)
and tax credit carryforwards outstanding as of December 31, 2012 expire as follows:



|Year of Expiration |  | Federal N.O.L. |           |  | State N.O.L.’s |   |             | Foreign N.O.L.’s | 
|------------------ |  | -------------- | --------- |  | -------------- | - | ----------- | ---------------- | 
|2013               |  | $              | —         |  |                | $ | 3,609,000   |                  | 
|2014               |  |                | —         |  |                |   | 2,502,000   |                  | 
|2015               |  |                | —         |  |                |   | 1,895,000   |                  | 
|2016               |  |                | —         |  |                |   | 1,632,000   |                  | 
|2017               |  |                | —         |  |                |   | 1,001,000   |                  | 
|2018               |  |                | 463,000   |  |                |   | 1,066,000   |                  | 
|2019               |  |                | 350,000   |  |                |   | 843,000     |                  | 
|2020               |  |                | 561,000   |  |                |   | 236,000     |                  | 
|2021               |  |                | 545,000   |  |                |   | 5,087,000   |                  | 
|2022               |  |                | 787,000   |  |                |   | 6,642,000   |                  | 
|2023               |  |                | 855,000   |  |                |   | 19,705,000  |                  | 
|2024               |  |                | 600,000   |  |                |   | 27,416,000  |                  | 
|2025               |  |                | 158,000   |  |                |   | 15,390,000  |                  | 
|2026               |  |                | 1,365,000 |  |                |   | 14,897,000  |                  | 
|2027               |  |                | 1,000     |  |                |   | 18,422,000  |                  | 
|2028               |  |                | —         |  |                |   | 6,000       |                  | 
|2029               |  |                | —         |  |                |   | 153,000     |                  | 
|2030               |  |                | —         |  |                |   | 5,000       |                  | 
|2031               |  |                | —         |  |                |   | 6,000       |                  | 
|2032               |  |                | —         |  |                |   | —           |                  | 
|                   |  | $              | 5,685,000 |  |                | $ | 120,513,000 |                  | 



Federal alternative minimum
tax credits of $419,000 have unlimited carryforward periods.



38







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



IHI Consolidated has not recorded
any increase in income tax liabilities attributable to unrecognized income tax benefits in its consolidated statement of income
for the year 2012. Accordingly, no related expense or liability for interest or penalties has been accrued at December 31, 2012.
As of December 31, 2012, tax authorities have proposed no material adjustments to IHI Consolidated’s income tax positions.
There are no income tax positions for which it is reasonably possible that the amounts of unrecognized tax benefits will materially
increase or decrease in the next 12 months.



IHI Consolidated and its subsidiaries
file U.S. federal and state income tax returns. Two subsidiaries file Canadian federal and provincial income tax returns. U.S.
federal income tax returns for tax years ending after 2008 (after 1998 to the extent of federal net operating loss carryforward
deductions) are subject to examination by the Internal Revenue Service. The U.S. entities of IHI Consolidated are currently under
examination by the IRS for the 2010 tax year. No material adjustments have been proposed. State income tax returns for tax years
ending after 2007 (after 1998 to the extent of state net operating loss carryforward deductions) are subject to examination by
state tax authorities. Canadian tax returns for tax years after 2007 (after 2004 to the extent of Revenue Canada and provincial
net operating loss deductions) are subject to examination by Revenue Canada and provincial tax authorities.



| | (8) | Fair value of financial
                                                                   instruments
| | --- | ------------------------------------------------------------------------------------------------------



The fair value of financial
instruments (as defined by ASC 825-10-50) contained in the accompanying balance sheets, including cash and cash equivalents, accounts
receivable, accounts payable and long-term debt, approximates the carrying amount due to either the short-term maturity or variable
or competitive interest rates assigned to these financial instruments.



| | (9) | Accumulated other comprehensive
                                                                   income
| | --- | ---------------------------------------------------------------------------------------------------------



Shareholders’ (deficit)
equity includes accumulated other comprehensive income. Changes in the components of accumulated other comprehensive income for
2012 and 2011 are as follows:



|                                                               |  | Derivatives |            |   | Foreign
    Currency Translation |   |           | Pension and
    Post-
Retirement Plans |  |   | Accumulated
    Other Comprehensive Income (Loss) |  
|-------------------------------------------------------------- |  | ----------- | ---------- | - | -------------------------------- | - | --------- | -------------------------------------- |  | - | ------------------------------------------------- | -
|Balance, January 1, 2011                                       |  | $           | (2,106,000 | ) |                                  | $ | 2,282,000 |                                        |  | $ | (16,844,000                                       | )
|Other comprehensive income (loss) for
    the year, net of tax |  |             | 957,000    |   |                                  |   | (384,000  | )                                      |  |   | (15,906,000                                       | )
|Balance, December 31, 2011                                     |  |             | (1,149,000 | ) |                                  |   | 1,898,000 |                                        |  |   | (32,750,000                                       | )
|Other comprehensive income (loss) for
    the year, net of tax |  |             | 722,000    |   |                                  |   | 394,000   |                                        |  |   | 102,000                                           |  
|Balance, December 31, 2012                                     |  | $           | (427,000   | ) |                                  | $ | 2,292,000 |                                        |  | $ | (32,648,000                                       | )



*Net
of deferred income tax (provision) credit of ($764,000) in 2012 and $10,339,000 in 2011.



39







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



| | (10) | Future minimum rental
                                                                    revenue
| | ---- | -------------------------------------------------------------------------------------------------



Future minimum rental revenues
for terminal storage capacity for the remaining unexpired term of lease agreements in existence at December 31, 2012 are as follows:



|Year                |  | Amounts |              
|------------------- |  | ------- | -------------
|                    |  |         |              
|2013                |  | $       | 287,098,000  
|2014                |  |         | 213,165,000  
|2015                |  |         | 151,030,000  
|2016                |  |         | 77,727,000   
|2017                |  |         | 60,437,000   
|2018 and thereafter |  |         | 223,898,000  
|Total               |  | $       | 1,013,355,000



| | (11) | Additional balance sheet
                                                                    detail
| | ---- | ---------------------------------------------------------------------------------------------------



Additional detail of the components
of certain balance sheet captions follows:



|                                    |  | 2012 |            |  | 2011 |  
|----------------------------------- |  | ---- | ---------- |  | ---- | -
|Prepaid expenses and deposits:      |  |      |            |  |      |  
|Deferred income tax asset           |  | $    | 12,010,000 |  |      | $
|Prepaid insurance                   |  |      | 5,439,000  |  |      |  
|Deferred debt issuance costs        |  |      | 3,271,000  |  |      |  
|Prepaid income taxes                |  |      | 2,058,000  |  |      |  
|Other                               |  |      | 754,000    |  |      |  
|Total prepaid expenses and deposits |  | $    | 23,532,000 |  |      | $



|Other assets:           |  |   |           |  |  |   |           | 
|----------------------- |  | - | --------- |  |  | - | --------- | 
|Deferred dredging costs |  | $ | 4,315,000 |  |  | $ | 4,526,000 | 
|Deposits                |  |   | 1,691,000 |  |  |   | 1,854,000 | 
|Long-term receivables   |  |   | 1,599,000 |  |  |   | —         | 
|Other                   |  |   | 555,000   |  |  |   | 1,097,000 | 
|Total other assets      |  | $ | 8,160,000 |  |  | $ | 7,477,000 | 



40







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



|                                               |  | 2012 |            |  | 2011 |  
|---------------------------------------------- |  | ---- | ---------- |  | ---- | -
|Accrued liabilities:                           |  |      |            |  |      |  
|Accrued payables                               |  | $    | 12,179,000 |  |      | $
|Income taxes payable                           |  |      | 8,456,000  |  |      |  
|Damage claim settlement/ fine accruals         |  |      | 3,056,000  |  |      |  
|Vacation pay                                   |  |      | 2,790,000  |  |      |  
|Deferred revenue – current portion             |  |      | 2,507,000  |  |      |  
|Interest                                       |  |      | 1,384,000  |  |      |  
|Workmen’s compensation claims                  |  |      | 1,253,000  |  |      |  
|Utilities                                      |  |      | 1,178,000  |  |      |  
|Retiree health/life benefits – current portion |  |      | 743,000    |  |      |  
|Health claims                                  |  |      | 663,000    |  |      |  
|Accrued bonuses                                |  |      | —          |  |      |  
|Other                                          |  |      | 3,223,000  |  |      |  
|Total accrued liabilities                      |  | $    | 37,432,000 |  |      | $



|Other long-term liabilities:      |  |   |             |  |  |   |             | 
|--------------------------------- |  | - | ----------- |  |  | - | ----------- | 
|Swap mark-to-market liabilities   |  | $ | 53,122,000  |  |  | $ | 58,582,000  | 
|Pension benefits                  |  |   | 46,862,000  |  |  |   | 43,919,000  | 
|Deferred revenue                  |  |   | 19,969,000  |  |  |   | 18,051,000  | 
|Retiree health/life benefits      |  |   | 13,122,000  |  |  |   | 10,487,000  | 
|Asset retirement obligation       |  |   | 4,942,000   |  |  |   | 1,185,000   | 
|Deferred compensation             |  |   | 796,000     |  |  |   | 726,000     | 
|Other                             |  |   | 180,000     |  |  |   | 188,000     | 
|Total other long-term liabilities |  | $ | 138,993,000 |  |  | $ | 133,138,000 | 



| | (12) | Accounting pronouncements
| | ---- | -------------------------



IHI Consolidated is not aware
of any issued accounting standards whose implementation date is subsequent to December 31, 2012, that would have a material impact
on the reporting of its future results of operations or financial position.



| | (13) | Subsequent events
| | ---- | -----------------



Subsequent events were evaluated
through February 15, 2013 for their impact on the accompanying financial statements, which is the date the statements were
available to be issued. The following event was noted.



41







IMTT HOLDINGS INC. and SUBSIDIARIES



Notes to Consolidated Financial Statements

December 31, 2012 and 2011



On February 15, 2013 IMTT
Combined refinanced its revolving credit facility. The new facility consists of, among other changes, total commitments of $1,040,000,000,
similar covenants as previously existed except that the debt to earnings before interest, income taxes and depreciation and amortization
covenant increased (5.0 vs. 4.75 currently), the interest rate on borrowings was lowered to LIBOR plus 1.25% to 2.25% or base
rate plus .25% to 1.25% and the facility maturity was extended five years to February 2018. Similarly, the $100,000,000 and $90,000,000
bank-owned tax-exempt bonds were amended with covenants similar to the revolving credit facility and the mandatory tender for
purchase date was extended to match the revolving credit facility termination date.





42