Westshore Terminals Investment Corporation First …Westshore Terminals Investment Corporation First Quarter Report For the three months ended March 31, 2015 1 The Corporation was

Westshore Terminals Investment Corporation First Quarter Report For the three months ended March 31, 2015

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The Corporation was incorporated under the British Columbia Business Corporations Act on September 28, 2010 and is domiciled in Canada. The registered and head office of the Corporation is located at Suite 1800, 1067 West Cordova Street, Vancouver, British Columbia V6C 1C7. The Corporation owns all of the limited partnership units of Westshore Terminals Limited Partnership (“Westshore”), a limited partnership established under the laws of British Columbia.

The Corporation derives its cash inflows from its investment in Westshore by way of distributions on Westshore’s limited partnership units. Westshore operates a coal storage and loading terminal at Roberts Bank, British Columbia (the “Terminal”). Substantially all of Westshore’s operating revenues are derived from rates charged for loading coal onto seagoing vessels.

Westshore’s results are significantly affected by the volumes of coal shipped by different customers for sale in the export market, the rates per tonne charged by Westshore and Westshore’s costs. Contracts, which run to 2021 or later, provide customer volume commitments at fixed rates for substantially all of the Terminal’s estimated current capacity. Shipments under those contracts are expected to provide a stable base for revenues over the next several years, with the possibility of increased revenues from higher than committed shipments.

Caution Concerning Forward-Looking Statements This MD&A contains certain forward-looking statements, which reflect the current expectations of the Corporation and Westshore

with respect to future events and performance. Forward-looking statements are based on information available at the time they are made,

assumptions by management, and management’s good faith belief with respect to future events. They speak only as of the date of this

MD&A, and are subject to inherent risks and uncertainties, including those risk factors outlined in the annual information form of the

Corporation filed on www.sedar.com, that could cause actual performance or results to differ materially from those reflected in the forward-

looking statements, historical results or current expectations.

Forward-looking information included in this document includes statements with respect to future revenues, expected loading rates,

strength of markets for metallurgical and thermal coal, expected throughput volumes, future throughput capacity, the proportion of

throughput expected to be shipped at variable rates, the effect of Canadian/U.S. dollar exchange rate, the future cost of post-retirement

benefits, customer contract renegotiations, cost of and timing to complete capital projects and the anticipated level of dividends.

Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate

indications of whether, or the times at which, such performance or results will be achieved. There is significant risk that estimates,

predictions, forecasts, conclusions and projections will not prove to be accurate, that assumptions may not be correct and that actual results

may differ materially from such estimates, predictions, forecasts, conclusions or projections. Readers of this MD&A should not place undue

reliance on forward-looking statements as a number of risk factors could cause actual results, conditions, actions or events to differ

materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. Specific risk factors include

global demand and competition in the supply of seaborne coal, the ability of customers to maintain or increase sales or deliver coal to the

Terminal, fluctuations in exchange rates, and the Corporation’s ability to renegotiate key customer contracts on favourable terms or at all.

See the risk factors outlined in the annual information form referred to above.

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Westshore Terminals Investment Corporation Management’s Discussion & Analysis of Financial Condition and Results of Operations

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Management’s Discussion & Analysis of Financial Condition and Results of Operations

The unaudited financial results along with management’s discussion and analysis contained in this report should be read in conjunction with the management’s discussion and analysis included in the Corporation’s Annual Report for the year ended December 31, 2014. The date of this management’s discussion and analysis and results of operations is May 5, 2015.

The following table sets out selected consolidated financial information of the Corporation for the three months ended March 31, 2015. As at May 5, 2015, the Corporation has 74,248,016 (December 31, 2014 - 74,250,016) issued and outstanding shares. The Corporation renewed its normal course issuer bid (“NCIB”) on April 9, 2015 for another year which allows the Corporation to purchase up to 3,712,500 Common shares. 2,000 Common shares have been purchased from January 1, 2015 to May 5, 2015. No Common shares were repurchased in 2014.

(In thousands of Canadian dollars except per share amounts) Three Months Ended Three Months Ended March 31 2015 March 31 2014

$ $ Revenue 86,383 68,539 Profit before taxes and insurance proceeds 43,563 31,077 Profit before taxes 43,563 37,313 Profit for the period 32,174 27,601 Profit for the period per share(1) 0.43 0.37 Dividends declared 24,502 24,503 Dividends declared per share 0.33 0.33 (1) Weighted average shares outstanding for the period ended March 31, 2015 was 74,249,905 (March 31, 2014 - 74,250,016).

The following tables set out selected consolidated financial information for the Corporation on a quarterly basis for the last eight quarters. (In thousands of Canadian dollars except per share amounts) Three Months Ended

Mar 31, 2015 Dec 31, 2014 Sep 30, 2014 Jun 30, 2014 $ $ $ $ Revenue 86,383 69,976 88,474 85,085 Profit before taxes and insurance proceeds 43,563 31,724 51,216 48,280 Profit before taxes 43,563 31,738 59,216 48,311 Profit for the period 32,174 23,298 43,787 35,761 Profit for the period per share 0.43 0.31 0.59 0.48 Dividends declared 24,502 24,503 24,503 24,503 Dividends declared per share 0.33 0.33 0.33 0.33


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(In thousands of Canadian dollars except per share amounts) Three Months Ended Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 Jun 30, 2013

$ $ $ $ Revenue 68,539 78,135 81,347 78,805 Profit before taxes and insurance proceeds 31,077 36,253 39,778 47,924 Profit before taxes 37,313 42,253 39,778 54,249 Profit for the period 27,601 31,476 29,470 39,761 Profit for the period per share 0.37 0.42 0.40 0.54 Dividends declared 24,503 24,503 24,503 24,503 Dividends declared per share 0.33 0.33 0.33 0.33 Results of Operations

Tonnage shipped increased from 6.9 million tonnes in the first quarter of 2014 to 7.9 million tonnes in the first quarter of 2015. Of the tonnes shipped in the first quarter of 2015, 64% was metallurgical coal and 36% was thermal coal, compared to 57% and 43% respectively for the same period in the prior year. Based on information currently available, Westshore is anticipating coal volumes for 2015 to be approximately 31 million tonnes compared to 30.6 million tonnes shipped in 2014.

Coal loading revenue increased by 26.7% from $67.4 million in the first quarter of 2014 to $85.4 million in the first quarter of 2015 driven by higher tonnage and higher rates. The average loading rate in the first quarter of 2014 was $9.71 per tonne compared to $10.83 per tonne for the same period in 2015. More tonnage was shipped under contracts that provide for higher loading charges, partly as a result of the restructuring of contracts in 2014.

Other revenue, consisting primarily of wharfage income, decreased from $1.1 million in the first quarter of 2014 to $1.0 million in the first quarter of 2015.

Operating expenses increased by 21.6% from $33.4 million in the first quarter of 2014 to $40.6 million in the first quarter of 2015, primarily due to the higher costs associated with the higher volume and $3.3 million of past service cost adjustments related to the pension plans that arose from previously negotiated benefit improvements. Administration expenses decreased from $3.9 million in the first quarter of 2014 to $3.4 million in the first quarter of 2015.

In the first quarter of 2014, Westshore recognized $6.2 million in insurance proceeds arising from the Cape Apricot incident which occurred in December 2012. These amounts were recognized in profit and did not occur again in the current year.

Net finance costs increased from $0.9 million in the first quarter of 2014 to $1.1 million in the first quarter of 2015 primarily due to higher mark-to-market losses on interest rate swaps. The net interest cost components of the employee benefit plan expense are recorded in net finance costs. Net employee benefit interest of $0.7 million was recorded in the first quarter of 2014, consistent with $0.8 million net employee benefit interest in the first quarter of 2015.

Income tax expense increased from $9.7 million in the first quarter of 2014 to $11.4 million in the first quarter of 2015 due to the higher profits.

Profit increased from $27.6 million in the first quarter of 2014 to $32.2 million in the first quarter of 2015 (despite $6.2 million of insurance proceeds recognized in the first quarter of 2014), driven by higher coal loading rates and higher volumes.


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Other comprehensive loss increased from a $2.2 million loss in the first quarter of 2014 to a $7.7 million loss in the first quarter of 2015. Other comprehensive income or loss includes actuarial gains and losses on the defined benefit post-retirement obligations which are primarily impacted by the discount rate used and the plan asset value performance (relative to actuarial expectations). The discount rate used to calculate post-retirement liabilities decreased by a larger amount in the first quarter of 2015 compared to the decrease in the first quarter of 2014, resulting in a larger actuarial loss. This was slightly offset in the first quarter of both 2014 and 2015 as plan asset values exceeded actuarial expectations due to positive returns in the stock markets.

Cash Flows (In thousands of Canadian dollars) Three Months Ended Three Months Ended

March 31, 2015 March 31, 2014 $ $ Operating cash flows before working capital changes and income tax

49,814 40,348

Working capital changes (15,854) (15,017) Income tax paid (15,600) (26,250) Cash flow from operations 18,360 (919) Cash flows used in financing activities (24,616) (24,571) Cash flows used in investing activities (13,327) (739)

Cash flows from operations are available to the Corporation to fund capital and other expenditures and pay dividends to shareholders. Operating cash flows before changes in working capital and income tax payments increased from $40.3 million in the first quarter of 2014 to $49.8 million in the first quarter of 2015. Cash flows from coal loading operations were higher in the first quarter of 2015 due to higher average loading rates and higher volumes shipped. Insurance recoveries of $6.2 million in the first quarter of 2014 did not recur in the first quarter of 2015. Working capital changes in the first quarter of 2014 were consistent with the first quarter of 2015. Timing of income tax payments resulted in cash flow from operations increasing from a $0.9 million net outflow in the first quarter of 2014 to an inflow of $18.4 million in the first quarter of 2015.

Cash used in financing activities for the first quarter of both 2014 and 2015 was $24.6 million. In each period $24.5 million of that amount represented payment of dividends.

Cash used in investing activities increased from $0.7 million in the first quarter of 2014 to $13.3 million in the first quarter of 2015. The capital expenditures in the prior year were incurred as part of routine maintenance capital, whereas capital expenditures in the current year consisted primarily of costs capitalized for the Capital Project (defined below). Westshore expects that capital expenditures will be higher in the coming months as components of the Capital Project ramp up.


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Liquidity and Capital Resources Capital expenditures required to maintain the Terminal’s existing throughput capacity and refurbish equipment in

the ordinary course of business have increased over the past several years. Rather than continuing to incur increasing costs of this nature on an ongoing basis, the Corporation determined to undertake replacement of the three older stacker-reclaimers, a shiploader and related equipment. Together with the construction of new premises, these expenditures are expected to total approximately $270 million (all of which comprise the Capital Project) and are planned in phases, ending in early 2019. The Capital Project will be financed through a combination of retention of cash flow and borrowings. The Corporation expects that borrowings will not exceed $50 million. Once the Capital Project is complete, it is anticipated that the rated capacity of the terminal will increase by 2-3 million tonnes.

Meeting annual capital requirements, along with managing variations in working capital, are well within Westshore’s financial capacity based solely on revenues less expenses, without any need for financing except for material capital improvements. As a result, the Corporation does not anticipate any liquidity concerns with the ongoing operations of Westshore.

Westshore has a $15 million operating facility with a Canadian chartered bank which is primarily used for a letter of credit in the amount of $13.4 million related to pension funding. The term of the operating facility expires on August 28, 2015.

Westshore has a $50 million revolving credit facility to be utilized for capital expenditures and investments, which was not drawn at March 31, 2015. The credit facility has a term ending August 31, 2016, and is secured by a pledge of all of the assets of the Corporation. The revolving credit facility bears interest at the 1 month BA rate plus a margin and no repayments are required until maturity.

Westshore has post-retirement benefit obligations under its pension plans and other post-retirement benefit plans which it is required to fund each year. Westshore’s cash funding requirements are estimated to be $10.9 million in 2015 (2014 – $4.7 million), which is comprised of $9.5 million (2014 – $3.3 million) for contributions to the pension plans and $1.4 million (2014 - $1.4 million) for payments for other post-retirement benefits. Estimated pension funding in 2015 has increased over the prior year due to a drop in the solvency discount rates and plan improvements that are required to be pre-funded. The balance sheet reflects a $93.9 million net obligation for post-retirement pension benefits and other post-retirement benefit plans compared to $79.7 million for the prior quarter. This balance would decline in the future if interest rates increase, and increase if interest rates were to fall.

Future minimum payments under Westshore’s operating lease payments with Vancouver Fraser Port Authority (“VFPA”) (assuming minimum annual tonnes) are as follows:

(In thousands of Canadian dollars) March 31, 2015 Less than 1 year $ 11,848 Between 1 and 5 years 46,804 More than 5 years 78,981 $ 137,633

In addition to the above minimum operating lease payments, the Corporation also pays an annual participation rental fee to VFPA based on the volume of coal shipped in excess of 17.6 million tonnes.


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As at March 31, 2015, Westshore has a commitment of $197.9 million with respect to equipment purchases. Of that total commitment, $187.4 million relates to equipment to be delivered and paid for as part of the Capital Project.

The Corporation does not have any material capital lease obligations, or other long-term obligations.

Quarterly Distributions On April 15, 2015, shareholders of record as of March 31, 2015 received $0.33 per share representing an aggregate

amount of $24,501,845 (March 31, 2014 - $0.33 per share for an aggregate of $24,502,505).

Effective as of Q2 2013, the board of directors determined to declare and pay dividends to shareholders of $0.33 per share each quarter. Such dividend level is subject to change based on opportunities that may come before Westshore and based on the Terminal handling 30 million tonnes of coal or more annually under the existing customer agreements for the next several years. This approach is reviewed on a regular basis.

Outlook The cash inflows of the Corporation are entirely dependent on Westshore’s operating results. They are affected by

the volume and mix of coal shipped through the Terminal, the rates charged to customers for the handling of that coal, and Westshore’s operating and administrative costs. Contracts entered into and revised since 2011 provide significant customer volume commitments through to 2021 or later at fixed rates. Shipments under those contracts are expected to provide a stable base for revenues over the next several years.

The variance in revenues from 2014 will ultimately be impacted by numerous factors, including total volumes shipped through the Terminal, the distribution of throughput by customer, and foreign exchange rates. Based on the information currently available to it, Westshore is anticipating volume levels in 2015 to be higher than in 2014 and at higher rates than in 2014. If Westshore’s profit for 2015 exceeds $42 million, incentive fees will be payable by Westshore to Westar Management Ltd. (the “Manager”) under the Management Agreement, to a maximum of $5.5 million.

Related Party Transactions The Manager provides management services to Westshore pursuant to a management agreement (the

“Management Agreement”). Westshore pays an annual management fee to the Manager and an incentive fee based on a percentage of profit above $42 million. The annual base management fee is paid in monthly installments, and $313,000 was paid in this regard by Westshore for the three month period ended March 31, 2015.

The Management Agreement provides for rolling five-year renewals. In anticipation of the next renewal, Westshore and the Manager agreed in 2014 to extend the term of the Management Agreement to 2024 (subject to further renewals) and amended the Agreement in certain respects, in view of the significant growth in Westshore’s business in recent years, and the Manager’s contribution and role in ongoing additional initiatives. Under the revised Management Agreement, Westshore will pay the Manager a base fee of $1,250,000 for 2015, $1,500,000 for 2016 and for each year thereafter the previous year’s fee escalated at 3% annually. . The incentive fee remains subject to an annual cap which will rise by increments to $7.5 million in 2017 and remain constant for the balance of the term of the Management Agreement. The cap for 2015 is $5.5 million.


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The Governance Agreement between the Corporation and the Manager governs the composition of the board of directors of the General Partner. Since January 1, 2011, the board of directors of the General Partner consists of seven directors, three of whom are nominated by the Manager. The seven current directors are the same people as the directors of the Corporation.

The Manager also provides administration services to the Corporation pursuant to an administration agreement. The Corporation pays an annual administration fee in monthly installments. The Corporation paid $100,000 to the Manager for the three month period ended March 31, 2015. The administration agreement was amended in December 2014. The fees payable to the Manager will be $400,000 for 2015, $500,000 for 2016, and will increase annually thereafter by 3% per annum.

Changes in Accounting Policies The Corporation’s financial statements have been prepared using the significant accounting policies and methods

of computation consistent with those applied in the Corporation’s Annual Report for the year ended December 31, 2014. No new accounting policies were adopted in the first quarter.

Critical Accounting Estimates The preparation of financial statements and related disclosures in accordance with IFRS requires the Corporation

to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and contingencies. These estimates are based on historical experience and on assumptions that are considered at the time to be reasonable under the circumstances. Under different assumptions or conditions, the actual results may differ, potentially materially, from those previously estimated.

The following is a discussion of the accounting estimates that are significant in determining the Corporation’s financial results.

Plant and equipment: Depreciation

Plant and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight line method over the estimated useful production life of the assets. The estimated useful lives of plant and equipment range from 3 to 35 years and are reviewed annually. A change in the estimated useful lives of plant and equipment could result in either a higher or lower depreciation charge to profit for the period.

Asset Retirement Obligations

Westshore is required to recognize the fair value of an estimated asset retirement obligation when a legal or constructive obligation is present, a reliable estimate of the obligation can be made and it is probable that the Corporation will be required to settle the obligation. At the expiry of the Terminal’s lease, the VFP A has the option to acquire the assets of the Terminal at fair value or require Westshore to return the site to its original condition. Westshore believes that the probability that the VFPA will elect to enforce site restoration is negligible. Any change in the estimate of the probability of incurring such costs could have a material impact on the asset retirement obligation.


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Goodwill

Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired, by comparing the fair value of Westshore to its carrying value, including goodwill. If the fair value of Westshore is less than its carrying value, a goodwill impairment loss is recognized as the excess of the carrying value of the goodwill over the fair value of the goodwill. The determination of fair value requires management to make assumptions and estimates about future coal loading rates, customer shipments, operating costs, foreign exchange rates and discount rates. Changes in any of these assumptions, such as lower coal loading rates, a decline in customer shipments, an increase in operating costs or an increase in discount rates could result in an impairment of all or a portion of the goodwill carrying value in future periods.

Employee Future Benefits

Westshore has post-retirement benefit obligations under its pension plans and other post-retirement benefit plans, the costs of which are based on estimates. Actuarial calculations of benefit costs and obligations depend on Westshore’s assumptions about future events. Major estimates and assumptions relate to expected plan investment performance, salary escalation, retirement ages of employees and expected health care costs, as well as discount rates, withdrawal rates and mortality rates.

Deferred Income Taxes

Deferred income tax assets and liabilities have been recognized for temporary differences between the tax basis of an asset or liability and its carrying amount on the balance sheet. The deferred income tax balances can be affected by a change in the estimate of when temporary differences reverse, the likelihood of realization of deferred tax assets, and the classification of assets for tax purposes.

Future Accounting Standards: IFRS 15 – Revenue from Contracts with Customers

In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers, which will supersede IAS 18 – Revenue and related interpretations. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The Corporation intends to adopt IFRS 15 in its financial statements for the annual period beginning on January 1, 2017.

IFRS 9 – Financial Instruments

IFRS 9, as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities, as defined in IAS 39. The Corporation intends to adopt IFRS 9 in its financial statements for the annual period beginning on January 1, 2018.

The extent of the impact of adoption of these standards has not yet been determined.


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Disclosure Controls and Procedures and Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting and

disclosure controls and procedures. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. There have been no changes in Westshore’s internal control over financial reporting or disclosure controls and procedures during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to affect, the Corporation’s financial and other reporting.

Additional Information Additional information relating to the Corporation, including the Corporation’s latest Annual Report and Annual

Information Form, are available on SEDAR at www.sedar.com and on Westshore’s website at www.westshore.com.

On behalf of the Directors,

(Signed) “William W. Stinson” William W. Stinson Chairman, President and Chief Executive Officer May 5, 2015


http://www.westshore.com/

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WESTSHORE TERMINALS INVESTMENT CORPORATION Unaudited Condensed Consolidated Statements of Financial Position (Expressed in thousands of Canadian dollars) March 31, December 31, Note 2015 2014 Assets Current assets: Cash and cash equivalents $ 66,056 $ 85,639 Accounts receivable 11,826 8,863 Inventories 12,196 12,041 Prepaid expenses 3,880 1,089 93,958 107,632 Property, plant, and equipment: At cost 5 668,798 653,021 Accumulated depreciation (464,928) (462,362) 203,870 190,659 Goodwill 365,541 365,541 Other assets 12 375 - $ 663,744 $ 663,832 Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 33,496 $ 42,389 Income tax payable 883 4,084 Deferred revenue 1,401 - Other liabilities 12 281 48 Dividends payable to shareholders 24,502 24,503 60,563 71,024 Deferred income taxes 8 11,662 15,392 Employee future benefits 10 93,906 79,678 166,131 166,094 Shareholders' equity (deficit): Share capital 1,706,219 1,706,265 Deficit (1,208,606) (1,208,527) 497,613 497,738 $ 663,744 $ 663,832 Commitments (note 13) See accompanying notes to consolidated financial statements. Approved on behalf of the Board: (Signed) “William W. Stinson”

("Signed) “M. Dallas H. Ross” William W. Stinson M. Dallas H. Ross Director Director

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WESTSHORE TERMINALS INVESTMENT CORPORATION Unaudited Condensed Consolidated Statements of Comprehensive Income (Expressed in thousands of Canadian dollars) Three months ended March 31, 2015 and 2014 Note 2015 2014

Revenue: Coal loading $ 85,406 $ 67,416 Other 977 1,123 86,383 68,539 Expenses: Operating 40,607 33,398 Administrative 3,447 3,875 44,054 37,273 Other: Foreign exchange gain 2,343 665 Insurance proceeds 4 - 6,236 Net finance costs 6 (1,109) (854) Profit before income tax 43,563 37,313 Income tax expense 7 11,389 9,712 Profit for the period 32,174 27,601 Other comprehensive loss:

Items that will never be reclassified to profit or loss: Defined benefit plan actuarial losses 10 (10,455) (3,018) Income tax recovery on other comprehensive loss 2,718 785 Other comprehensive loss for the period, net of income tax (7,737) (2,233) Total comprehensive income for the period $ 24,437 $ 25,368 Profit per share: Basic and diluted earnings per share 9 $ 0.43 $ 0.37 Weighted average number of shares outstanding 74,249,905 74,250,016 See accompanying notes to unaudited condensed consolidated financial statements.

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WESTSHORE TERMINALS INVESTMENT CORPORATION Unaudited Condensed Consolidated Statements of Changes in Equity (Expressed in thousands of Canadian dollars) Three months ended March 31, 2015 and March 31, 2014 Share capital Deficit Total Balance at January 1, 2014 $ 1,706,265 $ (1,230,998) $ 475,267 Profit for the period - 27,601 27,601 Other comprehensive loss: Defined benefit plan actuarial losses, net of tax - (2,233) (2,233) Total comprehensive income for the period - 25,368 25,368 Distributions to shareholders of the Corporation: Dividends declared to shareholders - (24,503) (24,503) Balance at March 31, 2014 $ 1,706,265 $ (1,230,133) $ 476,132 Share capital Deficit Total Balance as at January 1, 2015 $ 1,706,265 $ (1,208,527) $ 497,738 Profit for the period - 32,174 32,174 Other comprehensive loss: Defined benefit plan actuarial losses, net of tax - (7,737) (7,737) Total comprehensive income for the period - 24,437 24,437 Distributions to shareholders of the Corporation: Dividends declared to shareholders - (24,502) (24,502) Adjustments due to share repurchases (46) (14) (60) Balance at March 31, 2015 $ 1,706,219 $ (1,208,606) $ 497,613 See accompanying notes to unaudited condensed consolidated financial statements.

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WESTSHORE TERMINALS INVESTMENT CORPORATION Unaudited Condensed Consolidated Statements of Cash Flows (Expressed in thousands of Canadian dollars) Three months ended March 31, 2015 and 2014 2015 2014 Cash provided by (used in): Operations: Profit for the period $ 32,174 $ 27,601 Adjustments for: Foreign exchange contracts (375) - Depreciation 2,567 2,603 Employee future benefits liability 2,950 (422) Net finance costs 1,109 854 Income tax expense 11,389 9,712 49,814 40,348 Changes in non-cash operating working capital and other: Accounts receivable (2,963) 64 Inventories (155) (683) Prepaid expenses (2,791) 957 Accounts payable and accrued liabilities (11,346) (15,355) Deferred revenue 1,401 - (15,854) (15,017) Income taxes paid (15,600) (26,250) 18,360 (919) Financing: Interest paid (53) (68) Dividends paid to shareholders (24,503) (24,503) Share repurchases (60) - (24,616) (24,571) Investments: Property, plant and equipment, net (13,327) (739) (13,327) (739) Decrease in cash and cash equivalents (19,583) (26,229) Cash and cash equivalents, beginning of the period 85,639 61,408 Cash and cash equivalents, end of the period $ 66,056 $ 35,179 See accompanying notes to unaudited condensed consolidated financial statements.

WESTSHORE TERMINALS INVESTMENT CORPORATION Notes to the Unaudited Condensed Consolidated Financial Statements (Tabular amounts expressed in thousands of Canadian dollars, except unit amounts) Three months ended March 31, 2015 and 2014

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1. Reporting entity:

Westshore Terminals Investment Corporation is domiciled in Canada and its registered and head office is located at Suite 1800, 1067 West Cordova Street, Vancouver, British Columbia, V6C 1C7. These unaudited condensed consolidated interim financial statements as at and for the three months ended March 31, 2015 comprise Westshore Terminals Investment Corporation and its subsidiaries (together referred to as the “Corporation”). The Corporation owns all of the limited partnership units of Westshore Terminals Limited Partnership (“Westshore”), a partnership established under the laws of British Columbia. Westshore operates a coal storage and loading terminal at Roberts Bank, British Columbia.

2. Basis of preparation:

(a) Statement of compliance:

These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) IAS 34, Interim Financial Reporting (IAS 34). Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Corporation since the last annual consolidated financial statements as at and for the year ended December 31, 2014. These unaudited condensed consolidated interim financial statements do not include all of the information required for full annual financial statements prepared in accordance with IFRSs.

The consolidated annual financial statements of the Corporation as at and for the year ended December 31, 2014 which were prepared under IFRS are available upon request from the Corporation’s registered office, at www.westshore.com or on SEDAR at www.sedar.com.

These unaudited condensed consolidated interim financial statements were approved by the Board of Directors on May 5, 2015.

(b) Basis of measurement:

These unaudited condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

• Non derivative financial instruments classified as fair value through profit or loss are measured at fair value;

• derivative financial instruments are measured at fair value; and

• the defined benefit obligation is recognized as the present value of the defined benefit obligation, measured at fair value, less plan assets at fair value.

(c) Functional and presentation currency:

These unaudited condensed consolidated interim financial statements are presented in Canadian dollars, which is the Corporation’s functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand.

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(d) Use of estimates and judgments:

The preparation of the unaudited condensed consolidated interim financial statements in conformity with IAS 34 requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment relate to the determination of net recoverable value of assets, useful lives of plant and equipment, asset retirement obligations, measurement of defined benefit obligations, derivative instruments and deferred income tax amounts.

3. Significant accounting policies:

(a) The Corporation’s financial statements have been prepared using the significant accounting policies and methods of computation consistent with those applied in the Corporation’s Annual Report for the year ended December 31, 2014.

(b) New standards and interpretations not yet adopted:

IFRS 15 – Revenue from Contracts with Customers

In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers, which will supersede IAS 18 – Revenue and related interpretations. The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The Corporation intends to adopt IFRS 15 in its financial statements for the annual period beginning on January 1, 2017.

IFRS 9 – Financial Instruments

IFRS 9, as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities, as defined in IAS 39. The Corporation intends to adopt IFRS 9 in its financial statements for the annual period beginning on January 1, 2018.

The extent of the impact of adoption of these standards has not yet been determined.

4. Insurance proceeds:

On December 7, 2012 the MV Cape Apricot, a large cape size coal vessel, ran through the trestle at Berth 1 rendering it unusable. Repairs to the trestle were completed to a point sufficient to bring Berth 1 back into operations in early February 2013, with final repairs to the road-way on the trestle completed in April 2013.


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In mid-September 2014, the Corporation and its insurers reached a collective settlement of their claims with the ship’s owners and insurers. The Corporation has recovered an aggregate of $46.6 million from its insurers, the ship’s owners and their insurers.

5. Plant and equipment:

During the quarter, $15,777,000 of construction-in-progress was added, of which $2,451,000 was yet to be paid for at quarter end. Depreciation was recorded in operating expenses on the consolidated statements of comprehensive income.

6. Finance costs: Three months ended March 31 2015 2014 Interest expense, net $ 53 $ 68 Pension interest expense, net 823 703 Unrealized loss on interest rate contracts 233 83

Net finance costs

$ 1,109 $ 854 7. Income tax expense: Three months ended March 31 2015 2014 Reconciliation of effective tax rate: Profit before income tax $ 43,563 $ 37,313 Statutory rate 26.00% 26.00% Expected income tax expense 11,326 9,701 Permanent differences 16 11 Other 47 - Actual income tax expense $ 11,389 $ 9,712


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8. Deferred tax assets and liabilities: March 31, December 31, 2015 2014 Deferred tax assets: Non-pension liability $ 19,981 $ 18,394 Post-retirement benefits 4,434 2,322 Hedging contracts - 12 Financing fees 1 1 Total assets 24,416 20,729 Deferred tax liabilities: Property, plant and equipment (36,054) (36,121) Hedging contracts (24) - Total liabilities (36,078) (36,121) Net deferred income tax liabilities $ (11,662) $ (15,392) 9. Profit per share:

Basic and diluted earnings per share: Three months ended March 31 2015 2014 Profit for the period $ 32,174 $ 27,601

Weighted average number of Common shares outstanding 74,249,905 74,250,016 Basic and diluted earnings per share 0.43 0.37


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10. Employee benefits: March 31, December 31, 2015 2014 Present value of unfunded obligations $ 76,851 $ 70,746 Present value of funded obligations 122,259 112,724 Total present value of obligations 199,110 183,470 Fair value of plan assets (105,204) (103,792) Recognized liability for defined benefit obligations $ 93,906 $ 79,678

The Corporation makes contributions to two non-contributory defined benefit plans that provide pension benefits for employees upon retirement. The Corporation also provides two non-contributory, other post retirement benefit plans that provide retiring allowances and other medical benefits after retirement.

Asset and Liability Movements:

Movement in the present value of the defined benefit obligations

Pension obligations Other post retirement

benefits 2015 2014 2015 2014 Defined benefit obligation at January 1 $ 112,724 $ 98,044 $ 70,746 $ 58,272 Benefits paid by the plan (1,711) (1,219) (374) (338) Current and past service costs and interest (see below) 4,980 1,550 1,406 1,220 Actuarial losses in other comprehensive income (see below) 6,266 2,737 5,073 2,230 Defined benefit obligations at March 31 $ 122,259 $ 101,112 $ 76,851 $ 61,384

The discount rate used to calculate the benefit obligations decreased from 4.00% as at December 31, 2014 to 3.50% as at March 31, 2015.


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Movement in the fair value of the defined benefit plan assets

Pension assets Other post retirement

benefits 2015 2014 2015 2014 Fair value of plan assets at January 1 $ 103,792 $ 94,111 $ - $ - Contributions paid into the plan 1,256 1,148 374 338 Benefits paid by the plan (1,711) (1,219) (374) (338) Expected return on plan assets (see below) 1,038 1,058 - - Non-investment expense (see below) (55) (55) - - Actuarial gains in other comprehensive income (see below) 884 1,949 - - Fair value of plan assets at March 31 $ 105,204 $ 96,992 $ - $ -

Profit and Loss:

Profit and loss includes the following amounts in respect of post-retirement obligations:

Pension obligations expense recognized in profit and loss

Three months ended March 31, 2015 2014 Service costs: Current service costs $ 547 $ 449 Past service costs 3,285 - Non-investment expenses 55 55 3,887 504 Net interest costs Interest cost 1,148 1,101 Expected return on plan assets (1,038) (1,058) 110 43 $ 3,997 $ 547


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Other post retirement benefits expense recognized in profit and loss Three months ended

March 31, 2015 2014 Current service costs $ 633 $ 506 Past service costs 60 54 Interest costs 713 660 $ 1,406 $ 1,220

The current and past service costs are recognized in operating expenses and net interest costs are included in net finance costs.

Actuarial gains and losses recognized in other comprehensive income

Three months ended March 31, 2015 2014 Cumulative amount at beginning of period (24,999) (11,530) Actuarial loss - financial assumption changes (11,339) (4,967) Return on plan assets greater than discount

884 1,949

Cumulative amount at March 31 $ (35,454) $ (14,548) 11. Loans and borrowings:

This note provides information about the contractual terms of the Corporation's interest-bearing loans and borrowings, which are measured at amortized cost.

The Corporation has an operating facility of $15 million, which has a $13,444,000 letter of credit outstanding against it (see note 13). The term of this operating facility expires in August 2015.

The Corporation has a $50 million revolving credit facility to be utilized for capital expenditures and investments, none of which was drawn at March 31, 2015. The credit facility has a term ending August 31, 2016, and is secured by a pledge of all of the assets of the Corporation. The revolving credit facility bears interest at the 1 month BA rate plus a margin and no repayments are required until maturity.

Under its credit facilities, the Corporation is required to comply with certain financial covenants. At March 31, 2015, the Corporation was in compliance with these financial covenants.

12. Financial instruments:

The carrying amounts of financial assets and liabilities reported in the consolidated statement of financial position approximate their fair values.


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Financial instruments carried at fair value, by the levels in the fair value hierarchy, are as follows:

Fair value measurement at reporting date using:

Quoted prices in active markets identical assets

(Level 1)

Significant other observable inputs

(Level 2)

Significant unobservable

inputs (Level 3)

March 31, 2015 Financial assets (liabilities): Derivative instruments: Interest rate contracts $ (281) $ - $ (281) $ - Foreign exchange contracts 375 - 375 -

On May 7, 2013, the Corporation entered into two interest rate swaps, each with notional value of $15,000,000 and maturing on August 31, 2016. Under the terms of the swaps, the Corporation pays an amount based on a fixed annual interest rate of 1.56% and 1.46% respectively, and receives a 1 month BA CDOR which is recalculated at set interval dates. As these interest rate swaps have not been designated as hedges, the fair value of these interest rate swaps at March 31, 2015, being a liability of $281,000 (measured based on Level 2 of the fair value hierarchy), has been recorded in other liabilities and a loss of $233,000 has been recognized in net finance costs for the three month period ended March 31, 2015. In March 2015, the Corporation entered into put options with notional amounts totaling US$54.0 million to exchange US dollars for Canadian dollars with a strike price of $1.3302. The counterparty has call options with notional amounts totaling US$54.0 million to exchange US dollars for Canadian dollars with a strike price of $1.2475. As these foreign exchange contracts have not been designated as hedges, the fair value of these interest rate swaps at March 31, 2015 being an asset of $375,000 (measured based on Level 2 of the fair value hierarchy), has been recorded in other assets and a gain of $375,000 has been recognized in foreign exchange gain for the three month period ended March 31, 2015. The carrying amounts of these swaps are equal to fair value, which is based on valuations obtained from the counterparty. The mark-to-market value is determined by the counterparty by multiplying the notional amount of the trade with the difference between the forward rate and the contract rate and discounting the resultant asset or liability by an applicable discount factor.


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13. Commitments:

The Corporation has provided a letter of credit of $13,444,000 (December 31, 2014: $13,444,000) related to pension funding.

The Corporation has commitments of $197,904,000 with respect to equipment purchases. Of that total commitment, $187,400,000 relates to equipment to be delivered and paid for as part of the Capital Project.

The Corporation also pays an annual participation rental fee based on the volume of coal shipped in excess of 17.6 million tonnes.

14. Related party transactions: Three months ended March 31, 2015 2014 Administration agreement Westar Management Ltd. $ 100 $ 86 Management agreement: Westar Management Ltd. 313 252 Vehicle leases: Affiliate of Westar Management Ltd. 141 160 Director fees: Director fees 129 103

Corporate Office Westshore Terminals Investment Corporation

1800 – 1067 West Cordova Street Vancouver, British Columbia V6C 1C7

Telephone: 604.488.5295 Facsimile: 604.687.2601 www.westshore.com

Documents

Westshore Terminals Investment Corporation First …Westshore Terminals Investment Corporation First Quarter Report For the three months ended March 31, 2015 1 The Corporation was