Fairfax India Holdings Corporation Annual Report 2016

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HOLDINGS CORPORATION

2016 Annual Report

Contents

Fairfax India Corporate Performance . . . . . . . .

Corporate Profile . . . . . . . . . . . . . . . . . . . . . .

Letter to Shareholders . . . . . . . . . . . . . . . . . . .

Management’s Responsibility for the

Consolidated Financial Statements . . . . . . . .

Independent Auditor’s Report . . . . . . . . . . . . .

Fairfax India Consolidated Financial Statements .

Notes to Consolidated Financial Statements

. . .

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Corporate Information . . . . . . . . . . . . . . . . . .

HOLDINGS CORPORATION
8MAR201619315321

2016 Annual Report

Fairfax India Corporate Performance

(in US$ thousands, except as otherwise indicated)(1)

On January 30, 2015 Fairfax India Holdings Corporation subordinate voting shares began trading on the
Toronto Stock Exchange under the symbol FIH.U.

Book value per share
Closing share price(1)
Income
Net earnings
Total assets
Investments
Common shareholders’ equity
Shares outstanding(2)
Net earnings per share

December 31, 2016 December 31, 2015
9.50
10.10
65,251
40,939
1,025,451
978,569
1,013,329
106,678,879
0.42

10.25
11.55
128,604
107,825
1,303,497
1,095,569
1,075,446
104,881,031
1.01

(1) All share references are to common shares; Closing share price is in U.S. dollars; per share amounts are in U.S. dollars.

(2) At December 31, 2016 includes 74,881,031 subordinate voting shares and 30,000,000 multiple voting shares (2015 –

76,678,879 and 30,000,000, respectively).

FAIRFAX INDIA HOLDINGS CORPORATION

Corporate Profile

Fairfax India Holdings Corporation is an investment holding company whose objective is to achieve long term
capital appreciation, while preserving capital, by investing, either directly or through one of its wholly-owned
subsidiaries, in public and private equity securities and debt instruments in India and Indian businesses or other
businesses with customers, suppliers or business primarily conducted in, or dependent on, India (‘‘Indian
Investments’’).

Indian Investments

National Collateral Management Services Limited (‘‘NCML’’) is a private agricultural commodities storage
company headquartered in Gurgaon, India that operates in the agriculture value chain by offering end-to-end
solutions in grain procurement, testing, storage and collateral management. In 2016 NCML launched its wholly-
owned subsidiary, NCML Finance Pvt. Ltd (‘‘NFin’’). NFin focuses on rural and agri-business finance. Additional
information can also be accessed from NCML’s website www.ncml.com.

IIFL Holdings Limited (‘‘IIFL’’) was incorporated in 1995 and is a publicly traded, diversified financial services
holding company located in Mumbai, India with principal lines of business in a non-banking finance company,
wealth management, and capital markets and other activities (comprised of retail broking, institutional equities,
investment banking and financial products distribution). Additional information can also be accessed from IIFL’s
website www.iifl.com.

Fairchem Speciality Limited (‘‘Fairchem’’, formerly known as Adi Finechem Limited) is a publicly traded,
specialty chemical manufacturer located in Ahmedabad, India. Fairchem manufactures oleochemicals used in the
paints, inks and adhesives industries, as well as intermediate nutraceutical and health products. It has developed an
in-house technology that uses machinery designed and manufactured by leading European companies to separate
and convert waste generated during the production of soy, sunflower, corn and cotton oils into valuable
nutraceutical and fatty acids. Additional information can also be accessed from Fairchem’s website www.fairchem.in.

Privi Organics Limited (‘‘Privi’’), a private company located in Mumbai, India, is a supplier of aroma chemicals to
the fragrance industry. Privi’s world-class products are the result of its very strong research and development team
that has proven expertise in developing new products, customizing aromas per customer specifications, scaling up
products from basic research to commercial scale, and designing process improvements to drive quality and cost
optimization. A merger arrangement involving Fairchem and Privi is expected to occur by the end of the first quarter
of 2017. Additional information can also be accessed from Privi’s website www.privi.com.

National Stock Exchange of India Limited (‘‘NSE’’), a private company located in Mumbai, India, is India’s
largest stock exchange covering various cities and towns across the country. In addition to being a platform for all
exchange traded financial products in India, NSE’s flagship index, Nifty50, is used extensively by investors in India
and around the world as a barometer of the Indian capital markets. Additional information can also be accessed from
NSE’s website www.nseindia.com.

Saurashtra Freight Private Limited (‘‘Saurashtra’’), a private company located in Mumbai, India, owns the
largest container freight station at Mundra port (Gujarat), the second largest and fastest growing port in India. The
container freight station business provides services such as moving of containers to and from the port,
stuffing/destuffing of containers, cargo storage and transportation of cargo to the end customer as well as the storage,
maintenance and repair of empty containers. Additional information can also be assessed from Saurashtra’s website
www.saurashtracontainers.com.

To Our Shareholders:

Fairfax India had very good results in 2016, its second full year of operations.

Income
Net earnings
Total assets
Investments
Common shareholders’ equity
Book value per share

2016

2015
($ million, except per share amounts)(1)
65.3
40.9
1,025.5
978.6
1,013.3
9.50

128.6
107.8
1,303.5
1,095.6
1,075.4
$ 10.25

Fairfax India’s increase in common shareholders’ equity in 2016 was $62.1 million, which raised book value per
share, our key performance measure, by 7.9%, from $9.50 to $10.25. During the same period the USD BSE 30 Index
was relatively flat.

Fairfax India had excellent growth in net earnings in 2016, largely the result of net unrealized gains on investments
of $105 million versus $14 million in 2015, partially offset by lower interest income of $21 million versus $45 million
in 2015 (when a larger portion of its funds were in high yielding Indian bonds, awaiting deployment into Indian
investments) and a $7 million loss due to foreign exchange versus a $7 million foreign exchange gain in 2015.

Fairfax India has also made very good progress on investments in 2016. After completing two investments in 2015, it
announced its third investment in February 2016. With these three investments it had deployed about $370 million
of its investable funds. By the middle of 2016, Fairfax India made two more investment commitments and had
essentially fully committed the entire $1 billion that it had raised. Since it was continuing to see excellent new
investment opportunities, in September 2016 Fairfax India obtained a $225 million two-year secured term loan from
a syndicate of Canadian banks. By year end it made two more investments and committed to a third one. In two years
Fairfax India deployed or had commitments for its entire $1.2 billion of investable funds. Given these circumstances,
on January 13, 2017 Fairfax India issued 42.6 million shares at $11.75 per share in a public offering and a private
placement to OMERS and Fairfax Financial, raising gross proceeds of $500 million. When the term loan is repaid,
Fairfax India will be left with about $230 million for new investments, and ongoing expenses.

In all, Fairfax India has now completed or committed to investments in eight companies, working through
Fairbridge, its sub-advisor in India (wholly-owned by Fairfax Financial), and through its portfolio advisor Hamblin
Watsa in Toronto. Fairbridge operates under the strong leadership of CEO Harsha Raghavan and the excellent work of
Vice Presidents Sumit Maheshwari and Sarvjit Bedi. Fairfax India’s Mauritius subsidiary, FIH Mauritius Investments,
and its CEO Amy Tan are also an integral part of the investment process.

All of Fairfax India’s investments are in outstanding companies with a history of strong financial performance, led by
founders and management who are not only excellent but also adhere to the highest ethical standards. The details of
its investments are as follows:

National Collateral Management Services Limited
IIFL Holdings Limited

Adi Finechem Limited (renamed Fairchem Speciality Limited)
Sanmar Chemicals Group

National Stock Exchange of India Limited
Privi Organics Limited
Saurashtra Freight Private Limited
Bangalore International Airport Limited

Total

(1) All dollar amounts in this letter are in U.S. dollars.

Date of
Investment

Ownership
%

Aug. 2015
Dec. 2015
and
Feb. 2017
Feb. 2016
Apr. 2016
and
Sep. 2016
Jul. 2016
Aug. 2016
Feb. 2017
Committed

88%

27%
45%
Debentures
and
30%
1%
51%
51%
38%

Amount
Invested
($ million)
149

277
19

300
27
55
30
379

$ 1,236

FAIRFAX INDIA HOLDINGS CORPORATION

While the valuations of the private companies that Fairfax India has invested in remained relatively close to the
prices paid for them, the two listed companies in the portfolio, Fairchem and IIFL, have posted strong
mark-to-market gains. From the purchase price upon acquisition until the end of 2016, Fairchem’s share price
appreciated 135% from 212 rupees to 498 rupees, and IIFL’s share price appreciated 35% from 195 rupees to
262 rupees, resulting in mark-to-market gains of approximately $26 million and $64 million respectively.

While the book value per share of Fairfax India was $10.25 per share, we believe that the underlying intrinsic value is
much higher. For example, in spite of an average 15.4% return on equity and a 26% annual growth in book value per
share over the past ten years, IIFL, even at its current stock prices of around 364 rupees per share, is selling at a
price/earnings ratio of only 14.0 times expected earnings. And the founder, Nirmal Jain is an outstanding
entrepreneur. All of the companies listed above have similar characteristics. The potential for all of them is very
significant.

Now we are pleased to report to you on the investments Fairfax India has made.

National Collateral Management Services Limited (NCML)

You will recall that NCML was Fairfax India’s very first investment, completed in August 2015. NCML has operated
for over 12 years and is now preparing to expand to take advantage of the significant market potential in India’s
under-developed agricultural storage industry. NCML operates in the agriculture value chain by offering end-to-end
solutions in grain procurement, testing, storage and collateral management. As a result of fiscal and non-fiscal
changes in agriculture and food policy, private companies like NCML are enhancing their range of services provided
to Indian farmers, traders, food processors, banks, the government and other businesses connected to the agriculture
supply chain. This is expected to significantly improve efficiencies to help India achieve its stated national objective
of greater food security.

NCML has more than 1.5 million metric tons (MT) of storage capacity across 952 warehouses in 18 states. It has a
network of 6 regional offices, more than 176 touch points at agricultural produce markets and thousands of farmers
and traders to facilitate procurement of commodities. With assets under management at an all-time high of
$2.5 billion, NCML commands over a 45% share of the collateral management business in India, offering custodial
services to 74 banks and financial institutions for the management of collateralized commodities based on which
they advance post-harvest loans to farmers or dealers owning commodities.

Fairfax India invested a total of $149 million to acquire an 88% interest in NCML: $31 million was a capital infusion
into NCML to fund growth plans, while the remaining $118 million was used to buy out existing shareholders. Based
on discounted cash flow valuation techniques, we now value NCML at 9,948.8 million rupees, or $147 million,
reflecting a depreciation of the rupee from the time the transaction was completed. Based on Indian GAAP for the
twelve months ended December 31, 2016 NCML’s revenue grew by 109% to $118 million and shareholders’ equity
grew by 4% to $76 million but net earnings fell by 21% to $4 million. The increase in revenue was driven largely by a
new government procurement contract in the supply chain business. The reduction in net earnings was as a result of
a temporary higher tax expense and a small loss in the supply chain business caused by start up and higher interest
costs related to the above mentioned initiative. While the price to book value of 2.2 times and price/earnings ratio of
45 times seem high, we believe that the strong growth rate of NCML more than justifies the valuation.

Under the continued able leadership of its CEO Sanjay Kaul, now assisted by executive director Unupom Kausik,
NCML has made significant progress in 2016, achieving growth momentum across each of its business segments
with a focus on expanding and diversifying its client base.

NCML undertook four notable business initiatives during 2016. The first was the successful launch of NCML
Finance Pvt. Ltd. (NFin) as a Reserve Bank of India (RBI)-regulated non-banking finance company (NBFC). NFin
received good response from borrowers across the country and a large number of loans were approved for borrowers
serving the entire value chain. NFin obtained a credit rating of A+ in its first year of operation.

The second was the launch of a modern warehousing silo vertical by successfully bidding for 11 large concession
contracts from the Food Corporation of India (FCI). This represents an aggregate capacity of 550,000 MT at an
estimated total project cost of about $100 million. This will principally be financed by internal cash flow. The third
initiative was the unique and the first of its kind online bulk procurement, trading and sale portal –
MktYard.com – as an independent company. The fourth was the significant expansion of their Supply Chain
segment both in terms of revenue and number of clients. Seven very large clients who are market leaders in the agri
industry were added and the segment doubled its operations over the previous year with a wider range of

commodities and geographical coverage. The division launched structured trade facilities at port locations to
participate in international trade opportunities.

The warehousing business enhanced capacity by the addition of 100,000 MT during the year and work on its single
largest silo facility of 38,000 MT, for maize is nearing completion. In all, this was an excellent year for NCML.

IIFL Holdings Limited (IIFL)

In December 2015 Fairfax India successfully completed an open offer for IIFL and purchased 21.9% of its shares
outstanding at 195 rupees ($2.93) per share for a total consideration of $202 million. At 195 rupees per share, we
bought our position at a trailing price/earnings ratio of 12.9 times, price to book value of 2.0 times and dividend yield
of 1.5%.

At year end 2016 IIFL shares closed at a price of 262 rupees per share resulting in an unrealized gain of 35% in rupee
terms. It is trading at around 364 rupees per share and in spite of a 15.4% return on equity and a 26% annual growth
in book value per share over the past 10 years, IIFL is selling at a price/earnings ratio of 14.0 times expected earnings.

Fairfax Financial has known IIFL for over a decade and been a shareholder of IIFL since 2010, owning a direct interest
of 8.9% and an indirect interest through P Notes of 5.2%. One of us (Chandran) has been on the Board of IIFL
since 2012.

In February 2017 Fairfax India purchased 15,853,000 shares of IIFL while at the same time Fairfax Financial divested
its economic interest in an equivalent number of shares that it held as P Notes. This was done for several reasons:

(cid:127) Over time Fairfax Financial would prefer to have all of its Indian investments (as far as possible) in Fairfax
India with the exception of Thomas Cook and its subsidiaries, Quantum Advisors and ICICI Lombard General
Insurance Company Limited.

(cid:127) Even at 319 rupees per share, the price/earnings ratio is 12.3 times expected earnings and represents excellent

long term value for Fairfax India.

As a result, Fairfax India now owns 26.7% of IIFL.

Based on Indian GAAP, for the 12 months ended December 31, 2016, IIFL revenues grew 15% to $688 million, net
earnings after minority interest grew 26% to $95 million, and shareholders’ equity grew 47.6% to $650 million,
generating an ROE of 14.6%.

IIFL is a well-established national financial services company serving over 3.5 million customers from 2,250 service
locations and over 1,000 branches across India. It has an international presence with offices in New York, London,
Geneva, Singapore, Hong Kong, Dubai and Mauritius. In addition to the founding team, IIFL now has a highly
qualified and experienced management team driven by pride and reward of ownership. Again in 2016 under the
exceptional leadership of Nirmal Jain and R. Venkataraman, IIFL achieved outstanding results in each of its three
following major business divisions.

NBFC: This division successfully diversified its lending by adding a retail-focused loan portfolio. Loan assets under
management grew 15% over the previous year to approximately $3 billion. The portfolio continued to move towards
a superior loan mix by reducing its share of relatively higher risk loans to capital markets and construction finance
and increasing its share of lower risk retail mortgage loans. Retail mortgages now constitute 52% of the portfolio at
$1.6 billion. Asset quality was maintained with net nonperforming assets at 0.65%.

This division acquired management and control of Samasta Microfinance Limited, a Bangalore based NBFC, a micro
finance institution registered with the RBI. This acquisition is consistent with IIFL’s strategy of focusing on small
ticket retail credit to under-served geographies and segments.

IIFL has made very significant progress on its objective of achieving end-to-end digital interface with the increasing
adoption of mobile and tablet technology. All loan products are now live with tablet-based sourcing modules. IIFL is
the first mover to offer eSign facilities to customers for end-to-end paperless transactions in all their gold
loan branches.

In September 2016 CDC, the UK government-sponsored private equity fund, invested $150 million for
approximately a 15% stake in the NBFC, valuing just this division at about $1 billion while the entire company was
trading in the public markets at a valuation of $1.3 billion.

FAIRFAX INDIA HOLDINGS CORPORATION

Wealth Management:
IIFL Wealth has emerged as one of the leading wealth managers in India with assets under
management, advice and distribution of about $16 billion, having grown 22% this year. It offers advisory services,
wealth structuring solutions, asset management and distribution services to high net worth families. IIFL Wealth
NBFC, which commenced operations in February 2016, mostly offers loans against securities to a high net-worth
clientele and has a loan book of about $430 million.

Capital markets and other activities: This is a collection of several businesses, including retail and
institutional stock broking, financial products distribution, mutual fund management and investment banking. The
broking business is a leader in its field and provides broking and advisory services to retail and institutional clients. It
is well known for its high quality and innovative research and it covers over 500 Indian companies.

The highlight for the year in this division was the landmark performance of the investment banking division that for
the 9 months ended December 31, 2016 completed 16 investment banking transactions including 5 IPOs. IIFL is
among the top 5 investment banks in the country in terms of the number of equity IPOs completed.

The IIFL Markets App is highly rated and the most downloaded with over 800,000 downloads on Google Play Store.
The app is accessed by retail investors across 1,500 locations in India. With the growth of mobile networks in remote
locations, do it yourself (DIY) mobile trading forms over 30% of clients and has reduced the information asymmetry
of financial markets in Tier 2 locations in India.

Despite this stellar performance, the folks at IIFL are not resting on their laurels. They have formidable objectives:

(cid:127) To double IIFL’s consolidated revenues by fiscal year 2020 and, driven by margin improvement and scale
benefits, to grow net profit after minority interests by 2.5 times. They hope to reduce IIFL’s current borrowing
costs as a result of improving credit ratings.

(cid:127) To reduce cyclicality and volatility in IIFL’s earnings. IIFL has a healthy mix of steady businesses, namely
consumer finance and wealth, overlaid with fee income from the relatively volatile capital markets. On
consumer finance, the focus is to serve retail customers digitally as far as possible.

(cid:127) To de-risk the business model through multiple revenue streams from various businesses catering to various
sub-segments of customers. To achieve this, IIFL has diversified its loan book in terms of products and
geography, helping to provide insulation against concentration risk. IIFL will continue to work on improving
its best in class risk management framework and analytics to monitor risk.

The key challenges faced by IIFL in 2016 were:

(cid:127) Demonetization announced by the Government in November has affected revenues in the short term. Due to
its continued focus on and investments in digitization, IIFL was able to mitigate the impact of demonetization
because it had a ready platform to conveniently accept cashless payments from customers, the ability to make
collections through tablets and a self-help portal for quick query resolution.

(cid:127) IIFL faced increased competition, particularly in the housing finance sector which is witnessing the entry of a
large number of new entrants, most of them backed by private equity. This might lead to irrational pricing in
the short term. Given IIFL’s distribution reach and capital adequacy, it believes it can withstand such short
term pricing pressures. In any case, IIFL will not take undue risks to increase short term market share.

Overall, 2016 was an outstanding year for IIFL.

Fairchem Speciality Limited (formerly Adi Finechem Limited) (Fairchem)

On February 8, 2016 Fairfax India purchased 45% of Fairchem for 212 rupees ($3.13) per share for a total
consideration of $19 million. The price of 212 rupees per share represented a price/earnings ratio of 12.7 times
forward earnings for a company with a 20% annual growth in earnings per share over the last 10 years.

At the end of 2016 Fairchem shares closed at a price of 498 rupees per share, an increase of 135%. It is likely that the
share price increase is primarily the result of the pending merger between Fairchem and Privi Organics Limited, a
company in which Fairfax India invested, in August 2016, $55 million for a 51% interest. We describe the Privi
acquisition later in this letter.

Based on Indian GAAP, for the 12 months ended December 31, 2016, Fairchem revenues grew 17% to $26 million,
net earnings were flat at $2 million, and shareholders’ equity grew 11% to $10 million, generating an ROE of 18.2%.

Fairchem made significant plant upgrades and modifications in 2016 as described below, and is now entering a phase
where we expect very significant growth in revenue and profits.

Fairchem is an oleochemicals company. Oleochemicals are, broadly, chemicals that are derived from plant or animal
fat, which can be used for making both edible products and non-edible products. In recent years the production of
oleochemicals has been moving from the U.S. and Europe to Asian countries because of the local availability of key
raw materials.

Fairchem occupies a unique niche in this large global playing field. It has developed an in-house technology that uses
machinery manufactured by leading European companies to convert waste generated during the production of soy,
sunflower, corn and cotton oils into valuable chemicals. These chemicals include acids that go into non-edible
products like soaps, detergents, personal care products, paints, and other products that are used in the manufacture
of health foods and vitamin E. The company’s customers include major multinational companies including BASF,
Archer Daniels Midland, Cargill, Advanced Organic Materials, IFFCO Chemicals and Asian Paints. Fairchem operates
out of a single plant in Ahmedabad, the largest city in Gujarat, the home state of Prime Minister Modi. It has one of
the largest processing capacities for natural soft oil-based fatty acids in India. Over the last ten years, Fairchem’s sales
have grown at 23% per year to $26 million, and net earnings have grown at 24% per year to $2 million with a return
on equity over 20%.

In 2016, Fairchem developed a strong business relationship with a new U.S. based customer as the customer was
emerging as a dominant player in the natural tocopherols, natural vitamin E and sterols markets. To avoid any
product rejection, a joint detailed process and equipment audit was completed, which resulted in plant upgrades and
modifications. Fairchem successfully started supplying to the U.S. based customer in October 2016, but the plant
upgrades and modifications resulted in production losses and increased capital expenditures that negatively
impacted Fairchem’s net earnings during 2016.

The Indian vegetable oil market is growing at more than 10% per annum, resulting in increased availability of the
raw materials required for Fairchem. At the same time, the paints and printing ink industry is also expected to grow at
more than 10% per year, enabling it to absorb a higher volume of Fairchem’s products. In order to capitalize on this
opportunity and to improve plant efficiency and capacity utilization, Fairchem has embarked on a capital
expenditure (Capex) project that will achieve energy savings and full capacity utilization by March 2017. The Capex
project will also debottleneck the manufacturing facility and achieve a 33% increase in production within two years.
The Capex project should help improve both top and bottom lines.

Privi Organics Limited (Privi)

Founded in 1992 by two life-long friends, Mahesh Babani and D.B. Rao, Privi is one of India’s leading manufacturers
of aroma chemicals such as Amber Fleur, Dihydromyrcenol (citrus character) and Sandal Touch. Privi started
manufacturing aroma chemicals with only two products, which it gradually expanded to a range of over 50 products
today, with a capacity of over 22,000 tonnes per annum. Its products are used as fragrance additives in perfumes,
soaps, shampoos and packaged food. Privi enjoys a dominant position and economies of scale in its product
categories. Privi also develops and produces custom-made aroma chemicals to specific requirements of its customers.
Privi sources most of its raw materials, gum turpentine oil (GTO) and crude sulfate turpentine (CST) from pulp and
paper companies globally and competes primarily with pure play and niche suppliers such as IFF, DRT
and Renessenz.

One of Privi’s significant strengths is its established research and development (R&D) capabilities in aroma
chemicals, with a staff of 60 people, comprised of PhDs in chemistry, chemical engineers and instrumentation
engineers. The research specialists continuously strive to develop new products and processes. Importantly, one of
the R&D labs is completely focused on developing, through biotechnology, green products and green technologies in
technical collaboration with the University Institute of Chemical Technology, Mumbai.

Privi enjoys many advantages in its business:

(cid:127) It has a formidable presence in the aroma chemicals industry and is one of the leading producers of aroma
chemicals in the world, with a sizable global market share in most of the products it manufactures. It is on
track to be among the top 10 global players in aroma chemicals by 2018.

FAIRFAX INDIA HOLDINGS CORPORATION

(cid:127) Both Mahesh Babani and D.B. Rao have over two decades of hands-on experience, deep business relationships
and a strong vision for the business. They are supported by a talented and professional management team with
rich industry experience.

(cid:127) Privi achieved revenue and net profit CAGR of 18% and 12% respectively over the last 10 years and a return on

equity of 9% and expects to double its revenue by 2018 generating 16% EBITDA margins.

(cid:127) By being based in India, Privi has inherent cost advantages both in terms of cheaper manpower for

manufacturing and access to quality R&D talent at competitive costs.

(cid:127) Privi is less susceptible to competition because it is backward integrated for key raw materials, giving it an edge
on product pricing and the ability to enter into long term contracts. Process know-how, developed in-house
and continuously refined through R&D initiatives over the years, and cost-efficient manufacturing create a
strong competitive advantage over other international or domestic players.

Privi is a trusted supplier to all of the top 10 fragrance companies, which control about 80% of the global fragrance
market. Privi enjoys long term relationships with these fragrance companies with increasing customer engagement
over the years. Their major customers are Givaudan, Fermenich, Symrise, P&G, Henkel, Aromor, Lluch, SH Kelkar,
Ashapura and Drom. In order to strengthen its business model and to drive growth, Privi also has direct relationships
with global consumer goods giants that are the end-users of its products.

Privi operates out of two state-of-the-art manufacturing plants located at Mahad (about 175 km south of Mumbai).
Both the plants have dedicated facilities enabling continuous processing for all the key products, which ultimately
results in cost efficiency for the entire production system. Both the plants also enjoy significant cost and logistics
advantages because of consistent and on-time deliveries to customers, resulting from the plants’ proximity to the
Mumbai port (JNPT). One of the plants also enjoys certain tax benefits because of its ‘Export Oriented Unit’ status.

Privi overcame some significant issues in 2016 and stands poised for a bright future. Low crude oil prices and a
slowdown in China resulted in pricing pressures for the worldwide chemicals industry. Despite this, Privi was able to
maintain the previous year’s revenue with a nominal increase in EBIDTA and net earnings. The abnormal delay in
receiving permissions from the environment ministry restricted current year growth as the permission was received
after the yearly contracts for some customers for certain products were closed, but with better control of current
assets, particularly inventories, net operating cash flow has improved.

In August 2016 Fairfax India purchased 51% of Privi for $55 million. This was comprised of a 30% secondary stake
purchase from selling shareholders for $33 million and a capital injection of $22 million into Privi for a 21% stake.
Based on 2017 projections, we value Privi as follows: price/earnings ratio of 21.9 times and price to book value of
1.9 times. At the end of 2016, Fairfax India’s investment in Privi was valued at cost, since there were no changes to
Privi’s business and capital structure from the time of the transaction.

Additionally, the Boards of Directors of Fairchem and Privi approved a merger of the two companies to build an
Indian specialty chemicals enterprise, with both companies converting renewable waste feed-stocks into value-
added specialty chemicals. The merger will bring significant diversification and synergies to both partners, with
Fairchem gaining access to high quality R&D facilities, and Privi benefiting from Fairchem’s focus on cost
optimization and capital efficiency. Fairfax India had acquired a 45% equity ownership in Fairchem in the first
quarter of 2016. Under the terms of the merger, the Privi shareholders will receive 27 common equity shares and
27 compulsorily convertible preference shares of the merged entity for every 40 Privi shares exchanged (swap ratio of
1.35:1). The swap ratio was as recommended in a valuation report issued by M/s. Walker Chandiok & Co. LLP,
independent chartered accountants (a member firm of Grant Thornton in India). ICICI Securities Limited issued a
fairness opinion on the swap ratio. After the merger, Fairfax India will own approximately 49% in the merged
business. The merger has been approved by shareholders of Fairchem and Privi and the Mumbai High Court and will
be effective by March 31, 2017. After the merger, Fairchem and Privi will continue to operate as distinct and
independent business units, run by Nahoosh Jariwala and Mahesh Babani respectively.

We prepared a valuation for Privi based on the year-end closing price of Fairchem and the swap ratio. This indicated
that Privi’s value would be $94 million, resulting in an unrealized gain of $40 million or 73%. However, since the
merger was still pending at the end of 2016, the unrealized gain was not recognized in our financial statements.
Starting in the first quarter of 2017, our investment in the merged entity Fairchem (Fairchem and Privi) will be valued
based on the quarter end closing price of the public company, Fairchem.

Sanmar Chemicals Group (Sanmar)

Fifty years ago, when we arrived in Madras (now Chennai) to start our college education at IIT Madras, cricket, while
popular, was not the lucrative business it is today. Players were not paid to play and had to depend on the
benevolence of business houses and government companies for their livelihood. Sanmar and its owners were big
supporters of the sport and the players fifty years ago even as they are today. They are a highly ethical and exemplary
corporate citizen today as they were then.

In August 2015 when we met N. Sankar, the chairman, and his son Vijay, the deputy chairman, Sanmar had grown
into a large private conglomerate with sales of around $1 billion and an asset base of around $1.5 billion. Founded in
the early sixties, its business interests spanned chemicals, engineering technology and shipping, with operations in
India, the Middle East and the Americas. Fairfax India’s investment is in the chemicals business, which constitutes
more than 80% of the group’s operations and is housed within three operating companies, two in India, Chemplast
Sanmar (Chemplast) and Sanmar Specialty Chemicals (SSCL), and one in Egypt, TCI Sanmar (TCI).

Chemplast is Sanmar’s flagship Indian company and has been in the chemicals business for 40 years. N. Sankar is
considered a pioneer in the poly vinyl chloride (PVC) industry in India. With his visionary leadership, in 2009
Chemplast commissioned one of the largest greenfield PVC projects in India with an annual capacity of
200 thousand tons per annum (ktpa) which has been enhanced to 300 ktpa, mainly through process improvements
and minor debottlenecking, with an additional investment of only around $1 million. The aggregate PVC capacity of
Chemplast is 360 ktpa, making it the second largest PVC player in India. Chemplast is also the only specialty PVC
company in India.

Sanmar acquired TCI in 2007, with the intention of setting up a large greenfield PVC plant in Egypt to cater to the
high growth markets of North Africa, the Middle East and parts of Europe. TCI currently operates a 200 ktpa plant but
only produces about 130 ktpa. TCI plans to undertake a $200 million expansion as follows:

(cid:127) Phase 1 ($20 million): Debottlenecking of the existing PVC plant by replacing the PVC dryer which will
increase production from 130 ktpa to 200 ktpa. Replacement of the dryer has been completed and the capacity
is being ramped up gradually.

(cid:127) Phase 2 ($180 million): Addition of a new 200 ktpa PVC plant and a 130 ktpa calcium chloride plant. In
addition, a 75 ktpa caustic soda by-product line will also be commissioned. This is expected to be completed in
2018 and the ramp-up to full production is expected to take two years thereafter. Thus, full capacity is expected
to be attained by 2020. This will take advantage of Sanmar’s significant investment and infrastructure
in Egypt.

Our analysis of the PVC industry going back about 25 years indicates that:

1. PVC sales are highly correlated with GDP growth. The auto, housing and construction sectors (key products:
pipes and windows) are key drivers of this demand. TCI Sanmar’s key market areas of India, Egypt and
Turkey are expected to see strong GDP growth and Sanmar has significant cost advantages supplying these
countries.

2. PVC margins are not correlated to the price of crude oil or most other commodities.

In 2016 Fairfax India agreed to lend to Sanmar the rupee equivalent of $300 million by way of non-convertible-
debentures (NCDs) for a period of 7 years. The NCDs pay a 3% payment-in-kind (PIK) interest and pay a redemption
premium such that the yield of the NCD is 13%. In addition, for $1 million Fairfax India received a 30% equity
interest in Sanmar’s chemicals business. Fairfax India funded the initial tranche of $250 million in April 2016 and the
second tranche of $50 million in September 2016.

FAIRFAX INDIA HOLDINGS CORPORATION

From the proceeds of the NCDs, Sanmar plans to utilize $80 million for capital expenditures at Chemplast (India),
$111 million to repay a loan from private equity firm, KKR and $109 million to repay other Indian bank loans. At the
same time, TCI is entering into an agreement with these Indian banks for a term loan for $280 million to fund
its expansion.

Based on conservative discounted cash flow and option pricing model valuation techniques, we believe that the
value of our loan to Sanmar is now $299 million and the value of our 30% equity in Sanmar’s chemical business is
$0.4 million. Based on Indian GAAP for the twelve months ended March 31, 2016 Sanmar’s revenues grew by 1% to
$545 million. Until Sanmar completes its capital projects in Egypt and sales ramp up to full capacity, it will lose
money. Net loss in 2016 was $90 million, the same as in 2015. However, earnings before income tax, depreciation
and amortization (EBITDA) for 2016 increased 98% to $65 million. We expect over time to make a compound annual
return on this investment in excess of 20%.

There have been some significant developments for Sanmar since our investment. For the first time in a decade,
optimism returned to the global PVC industry. This was due to reduced levels of production in China and Europe
necessitated by the closure of sub-optimally sized and environmentally unfriendly PVC plants. Limited capacity
addition and growing demand led by markets like India and Egypt resulted in very good prospects for the global
PVC industry.

Chemplast, driven by strong demand, had very good financial performance in 2016. Margins were very strong,
resulting in high cash generation. Chemplast is in the process of setting up a joint venture to manufacture
chlorinated PVC (CPVC). CPVC is a fast growing commodity and the joint venture will be only the second domestic
producer addressing a big opportunity in India. Chemplast is also in the process of acquiring a hydrogen peroxide
plant that gives them the ability to manufacture a value added product that utilizes hydrogen produced by
Chemplast, and provides entry into the market for a new valuable and allied product.

TCI has successfully restructured its balance sheet with a capital injection of $207 million from the parent with a
further injection of $78 million to come in March 2017. Further, as noted above, it has obtained a $280 million
project financing loan from a consortium of Indian banks for its expansion. The key activity for TCI in the next two
years will be implementation of the important Phase 2 project described above, on time and on budget. The project
implementation activity is on track, orders for long lead time items have been placed and all technology tie-ups are
in place.

National Stock Exchange of India Limited (NSE)

Founded in 1992, NSE is the largest stock exchange in India with a market share of over 86% in cash equity trading
and 99% in derivatives equity trading. With over 200,000 terminals in over 2,000 centres, NSE provides trading
facilities with national reach. The exchange uses the latest communications technology for automated screen-based
trading.

Fairfax India decided to invest in NSE for the following reasons:

(cid:127) It is the leading stock exchange in a fast-growing market.

(cid:127) Exchange volumes are strongly linked to economic activity and growth.

(cid:127) NSE has a long track record of developing innovative products and strong risk management protocols.

(cid:127) At a price/earnings ratio of 14.5 times forward earnings and price to book ratio of 2.6 times, valuations were
attractive for a near-monopoly business. Over the last 10 years they generated a return on equity of 19% and
grew book value per share annually by 21%.

Since Indian regulations mandated that no single shareholder (other than the two founding shareholders who each
own about 10%) could own more than 5%, Fairfax India decided to buy a 5% position in NSE. The position had to be
accumulated from several institutional shareholders who were interested in selling. After accumulating about 1% by
July 2016 and while in the process of negotiating the purchase of another 3% block, strong rumours broke again that
the much-anticipated public listing of NSE was about to be announced. As a result of the rumours, the potential
sellers walked away. Fairfax India therefore decided to suspend its efforts to purchase the remainder of the
5% position.

The rumours in fact turned out to be true and NSE has begun the process of launching its initial public offering.
Listing is expected to be completed by September 2017.

This was indeed a case of one that got away! However, Fairfax India does have a 1% position bought for $27 million,
and we expect it to make excellent returns on that small investment.

Saurashtra Freight Private Limited (Saurashtra)

Raghav Agarwalla’s is a wonderful story! He has transformed a struggling business into a real powerhouse since he
took over management eight years ago when he was barely 21. Upon his return from the University of Southern
California (USC) in Los Angeles he went straight to live in a dusty little port town called Mundra. You really need to
see Mundra town to understand its contrast from Los Angeles!

Saurashtra is part of the privately-held Saurashtra group of companies, which has been in operation for over 30 years
and was jointly founded by Surendra Kumar Sinha and Raghav’s father, Dipak Agarwalla. The group comprises four
companies – Saurashtra Infra and Power (which runs Saurashtra), Saurashtra Fuels, Saurashtra Ferrous and Magnum
Shipping Services. All group companies are held equally by the Agarwalla and Sinha families.

Since 2008, Saurashtra has been managed by newly minted USC graduate Raghav Agarwalla. The family asked him to
build the nascent container freight service (CFS) business which was struggling since nobody within the family was
paying attention to it. Raghav has done a great job in growing the business to its current level.

CFSs are an important link between transport operators and shipping lines and effectively work as an extension of a
port. It is in the port’s best interest to focus on maximizing container traffic and not get bogged down handling
containers that are waiting to be dispatched. Also, ports lack adequate storage facilities to hold containers for
extended periods of time. CFSs provide a facility outside of congested ports for temporary storage of goods pending
customs clearance and further distribution. Activities like stuffing and destuffing of containers, which might
otherwise have to be done in the port, are done at the CFS.

Launched in 2005, Saurashtra is located 5 km from Mundra port. With 24/7 operations, Saurashtra has the capacity
to handle 180,000 TEUs (twenty-foot equivalent units) per annum and handled about 88,000 TEUs in 2016,
implying capacity utilization of about 50%. It has a market share of about 20% at Mundra port, the highest among all
CFSs there. Saurashtra derives volume and revenue from both import and export of containers. While the ideal mix
between the two for maximum efficiency is 50:50, the mix is adjusted each year in order to maximize profitability.
On exports Saurashtra has relationships with more than 100 customs house agents (CHAs), who select the CFS to use.
CHAs, a very fragmented industry, act on behalf of importers and exporters and are licensed by the Indian customs
department to perform services related to documentation, packaging, insurance and customs clearance. On imports
Saurashtra has relationships with 48 of the approximately 60 shipping lines that call at Mundra port. CHAs and
importers utilizing any of the 48 shipping lines are obliged to use and pay for the services of CFSs. In return for
directing import traffic to it, Saurashtra pays the shipping line a commission. Shipping lines can have agreements
with multiple CFSs, but tend to use 4 to 5 at a port and normally split the cargo evenly among them.

We decided to invest in Saurashtra because:

(cid:127) We admired Raghav Agarwalla’s impressive leadership and track record.

(cid:127) The growth in the CFS and Inland Container Depots (ICD) industry is correlated to container traffic growth,
which during the last 15 years has grown at a rate of 1.3-1.4 times GDP growth, aided by increasing
containerization of cargo.

(cid:127) The CFS industry is highly fragmented: there are 15 in Mundra port and 34 in Mumbai port (JNPT). Since
many of these are inefficient and operating below capacity, Saurashtra could serve as a platform for
consolidation.

(cid:127) Saurashtra is located in Mundra port, the second largest and fastest growing container port in India. Also
Mundra port is modern and efficient and is in the process of expanding from 3.2 to 6.6 million TEUs.

(cid:127) Raghav has assembled a management team of experienced professionals, several of whom have come from
other large CFSs and shipping lines. Key senior executives have been in their roles for a minimum of four years.

(cid:127) Saurashtra has a paved container yard, which reduces damage to containers and large warehousing space, and

is investing in cold storage, a first for CFSs at Mundra.

FAIRFAX INDIA HOLDINGS CORPORATION

(cid:127) Saurashtra has leased a 30-acre container yard for storing empty containers for shipping lines and has the
largest inventory of empty containers which serve as a magnet for export business as empty containers are
available on demand.

(cid:127) Saurashtra plans to increase its geographical footprint by acquiring an existing CFS at JNPT, followed in due

course by the acquisition of an ICD in the national capital region.

On February 14, 2017 Fairfax India invested $30 million to acquire a 51% interest in Saurashtra. $18 million of the
$30 million will be used to purchase the founder’s stake: $10 million of this will be infused back in to Saurashtra by
the founders and used to unwind all previous transactions with Saurashtra group companies. The remaining
$12 million will be invested directly into Saurashtra. Based on projected Indian GAAP financials ending March 31,
2017, this implies a price/earnings ratio of 13.9 times, price/free cash flow ratio of 8.3 times and price to book value of
3.6 times for a business that has over the past eight years grown revenue and EBITDA at 30% and 41% per annum
respectively and generated a 20% average return on equity. After the completion of the transaction, Saurashtra will
be left with about $22 million of cash, which it plans to use to pursue its acquisition plans. The Agarwalla and Sinha
families own equally the remaining 49% of Saurashtra. It is our pleasure to welcome the Agarwalla and Sinha families
to the Fairfax India family.

Bangalore International Airport Limited (BIAL)

In 1991, a panel formed by the national airports authority of India (NAAI) selected the site for a new airport. It was
Devanahalli, a village about 40 km north of Bangalore. The impetus for the decision was that the existing airport
located 10 km from the city centre, was unable to cope with its fast growing air passenger traffic as Bangalore was
beginning to turn into the Silicon Valley of India. There was no room for expansion and the apron could only park
six aircraft! It then took another ten years of planning and delays until BIAL was formed as a public-private
partnership, with the central and state governments owning 26% and the rest owned by Unique Z ¨urich Airport,
Siemens Project Ventures and Larsen & Toubro, a large Indian conglomerate. The agreement between the state
government, the central government and BIAL, which was signed in July 2004, awarded a 30-year (extendable by
another 30 years at BIAL’s option) concession agreement to build a new large and modern airport in Devanahalli, the
site that was originally chosen. Under the concession agreement, for 25 years no other airport will be allowed to be
built or operate within a radius of 150 km of BIAL. After a 32-month construction period, the airport was inaugurated
on May 23, 2008.

The airport is located on 4,000 acres of land and the concession agreement provides for development of 1,000 acres
of this land for commercial purposes such as hotels, retail establishments, offices and industrial or entertainment
parks. This will permit BIAL to monetize approximately 460 acres after providing land to build roads, utilities,
landscaping and other services. This is very valuable real estate because Bangalore, given its congestion, is expanding
fast in the direction of the new airport.

From a sleepy and relatively small town in the sixties, Bangalore has truly flourished to become a vibrant and
growing metropolis that is now India’s third largest and fastest growing city with a population of approximately
12 million. Not only is it considered the Silicon Valley of India, but virtually every major international technology
company, social media company, software and software services company, investment bank, consulting company
and accounting firm has a major presence in the city. It is estimated that half of the Fortune 500 companies have
significant back office operations in Bangalore.

BIAL has tremendous growth potential. While its current capacity is about 20 million passengers per annum, it
handled over 22 million passengers in 2016! Plans are already in place to gradually expand the capacity of the airport
to 60 million passengers by 2030. This will include building a second runway, an additional terminal building and
related infrastructure. Land preparation for the second runway is already underway and about half completed.

Fairfax India’s team has done a great deal of work in evaluating the investment potential of all of the four private
airports in India (Mumbai, Delhi, Hyderabad and Bangalore). Having considered all of the variables, including the
concession agreement, revenue sharing formula with the government and the method for calculating the 16%
regulated return, it was Fairfax India’s firm conclusion that BIAL was the most profitable and offered the best
investment opportunity.

BIAL has three potential sources of revenues:

(cid:127) Aero revenue: Aero revenue, which has grown at 25% per year over the last 8 years, is the revenue earned
from airlines for providing services such as navigation, landing, take-off, parking, ground handling and
ground safety. Rates for these individual services are fixed in a manner to get the airport operator a fixed 16%
per annum regulated return on invested equity. Under the hybrid till approach, applicable to BIAL, 40% of
non-aero revenue is considered as a part of aero revenue to compute the regulated return.

(cid:127) Non-aero revenue: All the revenue sources other than from aero revenue are accounted for as non-aero
revenue. This includes income from activities such as cargo handling, fuel sales, food and beverage sales and
duty free shops. BIAL takes an interest free deposit from all the concessionaires and earns annual revenue on a
minimum guarantee, revenue share or fixed rental basis. Non-aero revenue has grown at a CAGR of 16% from
2009 to 2016 and is expected to grow substantially due to an increase in passenger growth rates, the
availability of additional space and the increasing propensity of passengers to spend money.

(cid:127) Real estate monetization: BIAL also comes with 460 acres of excess land that can be monetized by the
operator. So far, aside from building a hotel next to the airport and leasing it to the Taj Hotels Resorts and
Palaces on a management contract, all other land is undeveloped. Bangalore’s historical population areas are
getting congested, hence, the city is expanding in BIAL’s direction. There will be significant upside, over time,
from monetization of this real estate, a view strongly validated by Ashwin Ramesh, Fairfax’s real estate expert
in India.

Prior to Fairfax India’s anticipated investment, the ownership of BIAL was:

GVK Group
Siemens Germany
Zurich Airports
Airports Authorities of India
Government of Karnataka

Total

% Ownership
43%
26%
5%
13%
13%

100%

The GVK Group (GVK) is an Indian conglomerate with interests in energy, resources, airports, transportation,
hospitality and life sciences. As part of an effort to reduce its debt, GVK offered to sell a 33% interest in BIAL.

Fairfax India agreed to purchase 33% of BIAL from GVK for $330 million, implying an equity value for 100% of
approximately $1 billion for the whole company. Concurrently, Fairfax India will also purchase Zurich Airports’ 5%
interest in BIAL for $49 million. Based on Indian GAAP 2017 projections, the purchase price values BIAL at a
price/earnings ratio of 14.4 times and price to book value of 3.5 times and price/free cash flow ratio of 9.8 times. The
value of the real estate that can be monetized is not included in these projections.

We are very excited about this investment.

Financial Position

Fairfax India came into being on January 30, 2015, when it issued 106.7 million shares raising gross proceeds of
$1.1 billion by completing a public offering, a placement to cornerstone investors and an issue to Fairfax Financial.
In September 2016 it completed a $225 million 2-year secured term loan from a syndicate of Canadian banks, led
by Scotiabank.

At December 2016, the financial position of Fairfax India was as follows:

Undeployed cash and investments
Term loan
Common shareholders’ equity
Total debt to equity

$ million
430.7
223.8
1,075.4

20.8%

FAIRFAX INDIA HOLDINGS CORPORATION

On January 13, 2017 Fairfax India issued 42.6 million shares at $11.75 per share in a public offering and a private
placement to OMERS and Fairfax Financial, raising gross proceeds of $500 million. When the announced
investments are completed and the term loan is repaid, Fairfax India will be left with about $230 million for new
investments, and ongoing expenses.

Developments in India

On November 8, 2016, Prime Minister Modi stunned India and the rest of the world by announcing his most radical
frontal assault on corruption and the scourge of the undeclared and hence non-tax paying ‘‘black’’ economy of the
country, which by some accounts represents about half of India’s economic activity. He announced the historic
decision to immediately withdraw all of the high denomination currency notes in circulation, the 500 and
1,000 rupee notes (worth about $7.50 and $15), and replace them with new 500 and 2,000 rupee notes. Remarkably,
the plan was kept secret except to a handful of his closest confidantes even though the printing of the replacement
notes had been well underway. People that had the withdrawn notes had until the end of the year to deposit them
into banks, but they could immediately withdraw, in new notes, only a fraction of what was deposited. The
objectives of what now has been universally referred to as ‘‘demonetization’’ was to tackle the menace of counterfeit
currency, terror financing, illicit political funding, bribery, tax avoidance and the black market where cash serves as
the medium for undisclosed transactions. This, coupled with the many measures taken to encourage use of electronic
payments should over time result in more formalization of the economy, increased tax collections and a reduced
hoarding of illicit cash.

In order to understand the gravity and boldness of this decision, you need to understand that it is reliably estimated
that about 80% of all transactions in India, both legitimate and black are conducted in cash and that the withdrawn
notes represented 85% in value of all currency in circulation.

The reaction was immediate and severe:

(cid:127) The people attempted to use loop holes to legitimize their undeclared cash. The government moved fast to

block the loop holes, resulting in confusion for those just trying to comply with the new regime.

(cid:127) There were huge line-ups at banks and ATMs as the supply of usable new cash ran low and many ATMs became

non-operational.

(cid:127) People used to doing legitimate business in cash were severely constrained.

The expressed reactions to the move were highly partisan. Those in opposition and generally predisposed to oppose
the Prime Minister characterized the move as one of the dumbest of all time, while Mr. Modi’s supporters cheered and
said they would take the short term hardships as long as the move helped take away the fruits of illegal activity and
bribery from the powerful and rich and resulted, in the future, in more transparent transactions within the official
framework.

While the controversy rages on, we believe that Mr. Modi’s motive was focused on reducing corruption, terrorist
financing, counterfeiting and tax avoidance that is endemic in India. We believe that there are more actions like this
to come!

Based on the latest economic numbers, it appears as though the negative impact of demonetization on the economy
was not as severe as those predicted by the nay-sayers. Also, results from some state and municipal elections indicate
that the majority of the electorate, despite some hardships, is firmly behind Mr. Modi’s demonetization decision.

Prime Minister Modi continues to aggressively pursue the implementation of all the reform measures that we wrote
about in last year’s letter. Many of these reforms required legislative changes. The government successfully passed the
following bills by building a consensus:

(cid:127) The constitutional amendment bill to enable the introduction of a single goods and services tax in place of the

current myriad number of indirect taxes.

(cid:127) The Aadhaar (targeted delivery of financial and other subsidies, benefits and services) act to enable targeted

delivery of government subsidies and services using the biometric Aadhaar identity.

(cid:127) An insolvency and bankruptcy code to help resolve business stress in a timely manner so that the value of
underlying assets can be maximized. This is important given the backdrop of large non-performing assets in
the banking system.

(cid:127) The real estate regulation and development act to establish a real estate regulator in every state so that the
interests of consumers, and in some cases developers too, can be protected. Bargaining power in the sector
which hitherto was overwhelmingly in the hands of the developer should now be more balanced.

(cid:127) An amendment of the RBI act, introducing a new monetary policy framework. Monetary policy setting has
now been entrusted to an independent monetary policy committee (MPC) which has an explicit inflation
targeting mandate. The RBI will have a majority on the MPC, ensuring its independence.

India continued to build on the macro-economic stability achieved over the last couple of years with the fiscal
deficit, inflation and the current account deficit all projected to fall in fiscal 2017 (FY17).

(cid:127) The government continued on its path to fiscal consolidation by committing to reduce the fiscal deficit to
3.5% of GDP in FY17. Data for the first 9 months of the financial year suggests the government is on track to
achieve this.

(cid:127) Inflation continued to moderate and in FY17 should average less than 5% for the second consecutive year.
While this is partly due to the fall in global commodity prices, the government should be given credit for
continuing its tight fiscal policy and allowing only modest increases in support prices for farm products.

(cid:127) India’s current account deficit has continued its declining trend with the deficit likely to fall below 1% in
FY17, the lowest in over a decade. Further, the RBI successfully managed the redemption of high cost foreign
currency deposits raised from non-resident Indians during the ‘taper-tantrum’ of late 2013 without creating
any volatility in either the currency market or money market.

(cid:127) As a consequence of continued macro stability, the Indian rupee, compared to other emerging market
currencies, remained relatively stable through the course of 2016 despite bouts of global volatility after the
Brexit vote and the U.S. elections. In the last three years, the Indian rupee has outperformed a basket of
emerging market currencies by a wide margin.

(cid:127) Continued moderation in inflation, which is now well within the target band of 2-6%, allowed the RBI/MPC
to cut interest rates by 50 basis points in 2016. Consequently, interest rates across the spectrum fell. The yield
on the benchmark 10-year government security fell by 125 basis points through the year while those on the
benchmark 3-month treasury bill fell by about 100 basis points.

The government continues to focus on increasing the enrolment in Aadhaar and using it for efficient targeting of
government subsidies and programs. As of January 2017, over 1.1 billion people had been issued the biometric
Aadhaar identification number, covering over 90% of the adult population. The government’s effort to open bank
accounts for those under served by the formal financial system has also continued to yield good results. By the end of
January 2017, a total of 270 million bank accounts had been opened. Of these, more than half are linked to the
unique Aadhaar number and are thus ready for direct transfer of government subsidies. The government has already
shifted the cooking gas subsidy to direct benefit transfer (DBT), whereby the subsidy is directly credited to the
intended recipient’s bank account. The government is currently doing a pilot study to shift other subsidies such as
those for kerosene, food grains and fertilizers to the DBT mechanism. Aggregate subsidies have already fallen due to
the decline in oil prices and deregulation of petrol and diesel prices. After the shift to DBT, subsidies are likely to
fall further.

India continued to be the fastest growing large economy in the world. GDP growth improved by 40 bps to 7.3%
during the first three quarters of 2016, largely due to improvement in agriculture growth to 2.4% from 0.7% last year.
Both industry and services growth was broadly stable at 6.4% and 9.1% respectively. Given the normal monsoon
rainfall after two consecutive droughts and salary revisions for government employees, consumption demand
showed signs of revival in the second half of the year.

On the not so positive side of the ledger, the government has projected GDP growth of 7.1% for FY17, which is lower
than the growth of 7.5% in FY16. Further, this estimate may not have fully accounted for the impact of
demonetization, so growth could slip below 7%.

Capex activity continues to remain weak due to low capacity utilization levels in many sectors. On the one hand,
new capex project announcements grew about 17% in 2016 to $120 billion, and execution also picked up sharply.
On the other hand, stalled projects continue to rise, now totaling about $180 billion of projects that are stalled due to
policy or commercial reasons.

FAIRFAX INDIA HOLDINGS CORPORATION

Indian equity markets were relatively flat for a second consecutive year in 2016 as the benchmark rupee Sensex index
rose by just about 2%. While total initial public offerings more than doubled in value terms to about $4 billion,
equity capital raised declined 40% to $10 billion. Inflow from foreign portfolio investors (FPI) was one of the lowest
in recent years, with net inflow of $2.9 billion in equities and net outflow of $6.5 billion from debt markets. However,
domestic flows held up well as domestic equity mutual funds collected more than $10 billion in net inflows.

Despite these minor negatives, you can see that the government is focused on economic development and inclusive
growth. In this environment, the companies that Fairfax India has invested in continue to make significant progress.

Fairfax India has now completed over two years of operations. We would like to acknowledge the leadership provided
by John Varnell, who took on the role of founding CFO and shepherded the company through its formation. John
has now handed over CFO duties to Jennifer Allen, who has done an outstanding job during the transition and is
now fully in charge. We also welcome Keir Hunt, who has taken over as General Counsel and has performed
admirably in this role. John will continue as Vice President of Corporate Affairs.

We would like to thank our independent director, Dr. Punita Kumar-Sinha, who has decided not to stand for
re-election, for her excellent contribution and wish her well in her future endeavours. We also thank our
independent directors, Deepak Parekh, Tony Griffiths, Chris Hodgson and Alan Horn for their wise advice, support
and encouragement.

So Fairfax India has ended a very exciting and productive year. We are looking forward to seeing you at the annual
meeting to be held on April 20, 2017 at 2:00 p.m., Toronto time at Roy Thomson Hall, 60 Simcoe Street, Toronto,
Canada, where you will have the opportunity to meet with Sanjay Kaul, Nirmal Jain, Nahoosh Jariwala, Vijay Sankar,
Mahesh Babani and Raghav Agarwalla, the excellent leaders of NCML, IIFL, Fairchem, Sanmar, Privi and Saurashtra.
Again, we are truly appreciative of your support as shareholders, and we hope to see you on April 20.

March 10, 2017

8MAR201612231920

Chandran Ratnaswami
Chief Executive Officer

10MAR201607580995

V. Prem Watsa
Chairman

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FAIRFAX INDIA HOLDINGS CORPORATION

Management’s Responsibility for the Consolidated Financial Statements

The preparation and presentation of the accompanying consolidated financial statements, Management’s
Discussion and Analysis (‘‘MD&A’’) and all financial information are the responsibility of management and have
been approved by the Board of Directors.

The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board. Financial statements, by nature, are not precise
since they include certain amounts based upon estimates and judgments. When alternative methods exist,
management has chosen those it deems to be the most appropriate in the circumstances.

Management maintains appropriate systems of internal controls. Policies and procedures are designed to give
reasonable assurance that transactions are properly authorized, assets are safeguarded and financial records properly
maintained to provide reliable information for the preparation of the consolidated financial statements.

We, as Fairfax India’s Chief Executive Officer and Chief Financial Officer, have certified Fairfax India’s annual
disclosure documents filed with the Canadian Securities Administrators in accordance with Canadian securities
legislation.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting
and is ultimately responsible for reviewing and approving the consolidated financial statements and MD&A. The
Board carries out this responsibility principally through its Audit Committee which is independent from
management.

The Audit Committee is appointed by the Board of Directors and reviews the consolidated financial statements and
MD&A; considers the report of the external auditors; assesses the adequacy of the internal controls of the company;
examines the fees and expenses for audit services; and recommends to the Board the independent auditors for
appointment by the shareholders. The independent auditors have full and free access to the Audit Committee and
meet with it to discuss their audit work, Fairfax India’s internal control over financial reporting and financial
reporting matters. The Audit Committee reports its findings to the Board for consideration when approving the
consolidated financial statements and MD&A for issuance to the shareholders.

March 10, 2017

Chandran Ratnaswami
Chief Executive Officer

8MAR201612231920

28FEB201713300060
Jennifer Allen
Chief Financial Officer

Independent Auditor’s Report

To the Shareholders of Fairfax India Holdings Corporation

We have audited the accompanying consolidated financial statements of Fairfax India Holdings Corporation and its
subsidiaries, which comprise the consolidated balance sheets as at December 31, 2016 and 2015 and the consolidated
statements of earnings, comprehensive income, changes in equity and cash flows for the years then ended, and the
related notes, which comprise a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards (IFRS), and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.

Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and 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 auditor’s 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
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 in our audits is sufficient and appropriate to provide a basis for
our audit opinion.

Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Fairfax India Holdings Corporation and its subsidiaries as at December 31, 2016 and 2015 and their financial
performance and their cash flows for the years then ended in accordance with IFRS.

Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario

10MAR201709452707

March 10, 2017

FAIRFAX INDIA HOLDINGS CORPORATION

Consolidated Financial Statements

Consolidated Balance Sheets
as at December 31, 2016 and December 31, 2015
(US$ thousands)

Assets
Cash and cash equivalents
Restricted cash
Short term investments
Bonds
Common stocks

Total cash and investments

Interest receivable
Income taxes refundable
Other assets

Total assets

Liabilities
Accounts payable and accrued liabilities
Payable to related parties
Income taxes payable
Term loan

Total liabilities

Equity
Total common shareholders’ equity

See accompanying notes.

Notes

December 31, December 31,
2015

2016

10
6

12
10
7

146,960
18,810
27,428
528,857
539,284

1,261,339

7,493
7,326
27,339

12,464
6,457
50,143
512,789
415,637

997,490

27,680
–
281

1,303,497

1,025,451

606
3,673
–
223,772

228,051

743
1,993
9,386
–

12,122

1,075,446

1,013,329

1,303,497

1,025,451

Signed on behalf of the Board

10MAR201607580995
Director

10MAR201607580340
Director

Consolidated Statements of Earnings
for the years ended December 31, 2016 and 2015
(US$ thousands except per share amounts)

Income

Interest
Dividends
Net realized gains (losses) on investments
Net unrealized gains on investments
Net foreign exchange gains (losses)

Expenses

Investment and advisory fees
General and administration expenses
Interest expense

Earnings before income taxes
Provision for (recovery of) income taxes

Net earnings

Net earnings per share (basic and diluted)
Shares outstanding (weighted average – basic and diluted)

See accompanying notes.

Notes

2016

2015

6
6
6
6
6

12
14
7

9
9

21,343
5,611
3,392
104,995
(6,737)

128,604

12,552
4,937
4,171

21,660

106,944
(881)

107,825

44,699
–
(209)
14,190
6,571

65,251

5,393
5,515
–

10,908

54,343
13,404

40,939

1.01
106,517,213

0.42
98,019,189

FAIRFAX INDIA HOLDINGS CORPORATION

Consolidated Statements of Comprehensive Income
for the years ended December 31, 2016 and 2015
(US$ thousands)

Net earnings

Other comprehensive loss, net of income taxes

Items that may be subsequently reclassified to net earnings

2016

2015

107,825

40,939

Unrealized foreign currency translation losses, net of income taxes of nil (2015 – nil)

(26,736)

(55,263)

Other comprehensive loss, net of income taxes

Comprehensive income (loss)

(26,736)

(55,263)

81,089

(14,324)

See accompanying notes.

Consolidated Statements of Changes in Equity
for the years ended December 31, 2016 and 2015
(US$ thousands)

Subordinate
voting shares

Multiple
voting shares

Share-based
payments,
net

Balance as of January 1, 2016
Net earnings for the year
Other comprehensive loss:

Unrealized foreign currency translation losses

Repurchases (note 8)
Amortization
Tax benefit on IPO issuance costs

727,972
–

–
(17,018)
–
2,073

300,000
–

–
–
–
–

(319)
–

–
–
133
–

Accumulated
other
comprehensive
loss

Total
common
shareholders’
equity

(55,263)
–

(26,736)
–
–
–

1,013,329
107,825

(26,736)
(21,178)
133
2,073

Retained
earnings

40,939
107,825

–
(4,160)
–
–

Balance as of December 31, 2016

713,027

300,000

(186)

144,604

(81,999)

1,075,446

Balance as of January 1, 2015
Net earnings for the year
Other comprehensive loss:

Unrealized foreign currency translation losses

Purchases and amortization
Issuance of shares, net of issuance costs (note 8)
Tax benefit on IPO issuance costs

–
–

–
–
725,825
2,147

–
–

–
–
300,000
–

–
–

–
40,939

–
–

–
40,939

–
(319)
–
–

–
–
–
–

(55,263)
–
–
–

(55,263)
(319)
1,025,825
2,147

Balance as of December 31, 2015

727,972

300,000

(319)

40,939

(55,263)

1,013,329

See accompanying notes.

FAIRFAX INDIA HOLDINGS CORPORATION

Consolidated Statements of Cash Flows
for the years ended December 31, 2016 and 2015
(US$ thousands)

Operating activities

Net earnings
Items not affecting cash and cash equivalents:

Net bond discount amortization
Deferred income taxes
Amortization of share-based payment awards
Net realized (gains) losses on investments
Net unrealized gains on investments
Net foreign exchange (gains) losses

Net sales (purchases) of short term investments classified as FVTPL
Purchases of bonds and common stocks classified as FVTPL
Sales of bonds and common stocks classified as FVTPL
Decrease (increase) in restricted cash in support of investments
Changes in operating assets and liabilities:

Interest receivable
Income taxes (refundable) payable
Payable to related parties
Other

Cash used in operating activities

Investing activities

Purchases of premises and equipment

Cash used in investing activities

Financing activities

Term loan:
Issuance
Issuance costs
Increase in restricted cash in support of term loan

Subordinate voting shares:

Issuances
Issuance costs
Repurchases
Purchases for share-based payment awards

Multiple voting shares:

Issuances

Cash provided by financing activities

Increase in cash and cash equivalents

Cash and cash equivalents – beginning of year
Foreign currency translation

Cash and cash equivalents – end of year

See accompanying notes.

Notes

2016

2015

6
6
6

15
15
6

107,825

40,939

(100)
2,071
133
(3,392)
(104,995)
6,737
22,590
(423,639)
333,591
6,457

19,306
(16,902)
1,760
5,065

(302)
2,147
132
209
(14,190)
(6,571)
(49,660)
(1,228,072)
264,361
(6,457)

(36,637)
9,255
1,610
5,868

(43,493)

(1,017,368)

(128)

225,000
(2,752)
(18,810)

–
–
(21,178)
–

–

–
–
–

766,788
(38,816)
–
(451)

–

300,000

182,260

1,027,521

138,639
12,464
(4,143)

146,960

10,153
235
2,076

12,464

Index to Notes to Consolidated Financial Statements

1. Business Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Basis of Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Critical Accounting Estimates and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Indian Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6. Cash and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8. Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.

Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11. Financial Risk Management

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12. Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13. Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14. General and Administration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15. Supplementary Cash Flow Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FAIRFAX INDIA HOLDINGS CORPORATION

Notes to Consolidated Financial Statements
for the years ended December 31, 2016 and 2015
(in US$ and thousands except per share amounts and as otherwise indicated)

1. Business Operations

Fairfax India Holdings Corporation (‘‘the company’’ or ‘‘Fairfax India’’) is an investment holding company whose
objective is to achieve long term capital appreciation, while preserving capital, by investing, either directly or
through one of its wholly-owned subsidiaries, in public and private equity securities and debt instruments in India
and Indian businesses or other businesses with customers, suppliers or business primarily conducted in, or
dependent on, India (‘‘Indian Investments’’). The company makes all or substantially all of its investments either
directly or through one of its wholly-owned subsidiaries, which currently include FIH Mauritius Investments Ltd
(‘‘FIH Mauritius’’) and FIH Private Investments Ltd (‘‘FIH Private’’).

In the first quarter of 2015 Fairfax India completed its initial public offering (‘‘IPO’’) concurrent with two private
placements followed by the exercise of an over-allotment option by the underwriters (collectively ‘‘the IPO
Offerings’’) and raised gross proceeds of approximately $1.06 billion (net proceeds of $1.02 billion) by issuance of
subordinate voting shares and multiple voting shares. The company’s subordinate voting shares commenced trading
on January 30, 2015 on the Toronto Stock Exchange (‘‘TSX’’) under the symbol FIH.U. The multiple voting shares are
not listed.

Fairfax Financial Holdings Limited (‘‘Fairfax’’) has taken the initiative in creating the company and is Fairfax India’s
ultimate parent and acts as its administrator. Fairfax is a holding company which, through its subsidiaries, is
principally engaged in property and casualty insurance and reinsurance and the associated investment management.
Fairfax is a Canadian reporting issuer with securities listed on the TSX and trading in Canadian dollars under the
symbol FFH for over 30 years and in U.S. dollars under the symbol FFH.U. Fairfax, through its subsidiaries, owns
30,000,000 multiple voting shares. During 2016, certain Fairfax subsidiaries purchased 796,864 subordinate voting
shares through open market transactions. At December 31, 2016 Fairfax’s multiple and subordinate voting share
holdings represented 95.3% of the voting rights and 29.4% of the equity interest in Fairfax India (December 31,
2015 – 95.1% and 28.1% respectively). Subsequent to December 31, 2016, Fairfax acquired an additional
13,717,873 subordinate voting shares from the company by way of a private placement (see note 8) and open market
transactions. After giving effect to those transactions Fairfax’s holdings represented 93.6% of the voting rights and
30.2% of the equity interest in Fairfax India.

Hamblin Watsa Investment Counsel Ltd. (the ‘‘Portfolio Advisor’’), a wholly-owned subsidiary of Fairfax and
registered portfolio manager in the province of Ontario, is the portfolio advisor of the company and its consolidated
subsidiaries, responsible to source and advise with respect to all investments.

The company was federally incorporated on November 25, 2014 and is domiciled in Ontario, Canada. The principal
office of the company, Fairfax and the Portfolio Advisor is located at 95 Wellington Street West, Suite 800, Toronto,
Ontario M5J 2N7.

2. Basis of Presentation

The company’s consolidated financial statements for the year ended December 31, 2016 have been prepared in
accordance with International Financial Reporting Standards (‘‘IFRS’’) as issued by the International Accounting
Standards Board (‘‘IASB’’).

The consolidated balance sheets of the company are presented on a non-classified basis. Assets expected to be
realized and liabilities expected to be settled within the company’s normal operating cycle of one year would
typically be considered as current, including the following balances: cash and cash equivalents, restricted cash, short
term investments, interest receivable, income taxes refundable (payable), other assets, accounts payable and accrued
liabilities, and payable to related parties. All other balances are generally considered as non-current.

The preparation of the company’s consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial
statements, the reported amounts of income and expenses during the reporting periods covered by the consolidated
financial statements and the related note disclosures. Critical accounting estimates and judgments are described in
note 4.

These consolidated financial statements were approved for issue by the company’s Board of Directors on
March 10, 2017.

3. Summary of Significant Accounting Policies

The principal accounting policies applied to the preparation of these consolidated financial statements and the
methods of computation have been consistently applied to all periods presented unless otherwise stated, and are set
out as follows.

Consolidation
Subsidiaries – A subsidiary is an entity over which the company has control. The company controls an entity when
the company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity. The company has determined that it meets the definition of
an investment entity (see note 4) and as such, is required to apply the exception to consolidation and instead
account for its investments in subsidiaries (National Collateral Management Services Limited (‘‘NCML’’) and Privi
Organics Limited (‘‘Privi’’)) at fair value through profit or loss (‘‘FVTPL’’).

The company has determined that FIH Mauritius and FIH Private should be consolidated as these entities provide
services relating to the company’s investment activities. All intercompany balances, profits and transactions are
eliminated in full.

Investments in associates – An associate is an entity over which the company has significant influence, but not
control, over the financial and operating policies. As discussed above, the company has determined that it meets the
definition of an investment entity and as such, investments in associates (IIFL Holdings Limited (‘‘IIFL’’), Fairchem
Speciality Limited (‘‘Fairchem’’, formerly known as Adi Finechem Limited) and Sanmar Chemicals Group
(‘‘Sanmar’’)) are accounted for at FVTPL.

Foreign currency translation
Functional and presentation currency – The consolidated financial statements are presented in U.S. dollars
while the Indian rupee is the functional currency of the company and its consolidated subsidiaries.

Although the company invests in Indian Investments, which are denominated in Indian rupees, its primary financial
reporting objective is to measure long term capital appreciation in U.S. dollars. Accordingly, the company presents
its consolidated financial statements in U.S. dollars to provide comparability with other North American investment
entities.

Foreign currency transactions – Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in net foreign exchange gains (losses) in the consolidated
statements of earnings. Income and expenses are translated at the average rate of exchange for the period.

Translation to the presentation currency – The consolidated balance sheets and consolidated statements of
earnings of Fairfax India and its consolidated subsidiaries are translated to the presentation currency as follows:

(cid:127) assets and liabilities are translated at the rates of exchange prevailing at the balance sheet dates;

(cid:127) income and expenses are translated at the average rates of exchange for the periods presented (unless this is
not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the transactions); and

(cid:127) the net unrealized gains or losses resulting from this translation are recognized in accumulated other

comprehensive income (loss).

Upon disposal or partial disposal of FIH Mauritius or FIH Private, a proportionate share of the cumulative amount of
exchange differences recognized in accumulated other comprehensive income (loss) and accumulated in a separate
component in equity would be recycled to the consolidated statements of earnings as part of the determination of
the gain or loss on disposal of these consolidated subsidiaries.

FAIRFAX INDIA HOLDINGS CORPORATION

Comprehensive income (loss)
Comprehensive income (loss) consists of net earnings (loss) and other comprehensive income (loss) and includes all
changes in total equity during a period, except for those resulting from investments by owners and distributions to
owners. Unrealized foreign currency translation gains (losses), net of income tax arising from the translation of the
company’s Indian rupee functional currency consolidated financial statements to the U.S. dollar presentation
currency are recognized in other comprehensive income (loss) and included in accumulated other comprehensive
income (loss) until recycled to the consolidated statements of earnings in the future. Accumulated other
comprehensive income (loss) (net of income taxes) is included on the consolidated balance sheets as a component of
total common shareholders’ equity and is comprised of unrealized foreign currency translation gains (losses), net of
income taxes.

Consolidated statements of cash flows
The company’s consolidated statements of cash flows are prepared in accordance with the indirect method,
classifying cash flows by operating, investing and financing activities.

Cash and cash equivalents – Cash and cash equivalents consists of cash on hand, demand deposits with banks
and other short term highly liquid investments with maturities of three months or less when purchased, and exclude
cash and short term highly liquid investments that are restricted. The carrying value of cash and cash equivalents
approximates fair value.

Restricted cash – Restricted cash primarily consists of amounts required to be maintained on deposit with a
syndicate of Canadian banks to support the term loan (see note 7) and for regulatory requirements related to the
acquisition of certain Indian Investments.

Cash and Investments
Cash and investments include cash and cash equivalents, restricted cash, short term investments, bonds and
common stocks. Management determines the appropriate classifications of investments at their acquisition date.

Classification – Short term investments, equity instruments and debt instruments are classified as FVTPL.

Recognition and measurement – The company recognizes cash and investments at fair value upon initial
recognition. Purchases and sales are recognized on the trade date, which is the date on which the company commits
to purchase or sell the investments.

Investments classified as FVTPL are carried at fair value on the consolidated balance sheets with realized gains and
losses and unrealized gains and losses recorded in net realized gains (losses) on investments and net unrealized gains
(losses) on investments, respectively, in the consolidated statements of earnings and as operating activities in the
consolidated statements of cash flows. Interest and dividends earned on investments are included in
the consolidated statements of earnings in interest and dividends, respectively, and as operating activities in the
consolidated statements of cash flows.

Transactions pending settlement are reflected on the consolidated balance sheets in other assets or in accounts
payable and accrued liabilities. Transaction costs related to investments classified as FVTPL are expensed as incurred.
An investment is derecognized when the rights to receive cash flows from the investment have expired or have been
transferred and when the company has transferred substantially all the risks and rewards of ownership.

Short term investments – Short term investments are investments with maturity dates between three months
and twelve months when purchased.

Determination of fair value – Fair values for substantially all of the company’s investments are measured using
market or income approaches. Considerable judgment may be required in interpreting market data used to develop
estimates of fair value. Accordingly, actual values realized in future market transactions may differ from the estimates
presented in these consolidated financial statements. The use of different market assumptions and/or valuation
methodologies may have a material effect on the estimated fair values. The fair values of investments are based on
bid prices for financial assets and ask prices for financial liabilities.

The company categorizes its fair value measurements according to a three level hierarchy described below:

Level 1 – Inputs represent unadjusted quoted prices for identical instruments exchanged in active markets.

Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices
for similar financial instruments exchanged in active markets, quoted prices for identical or similar financial
instruments exchanged in inactive markets and other market observable inputs.

Level 3 – Inputs include unobservable inputs used in the measurement of financial instruments. Management is
required to use its own assumptions regarding unobservable inputs as there is little, if any, market activity in
these instruments or related observable inputs that can be corroborated at the measurement date.

Transfers between fair value hierarchy categories are considered effective from the beginning of the reporting period
in which the transfer is identified.

Valuation techniques used by the company’s independent pricing service providers and third party broker-dealers
include use of prices from similar instruments where observable market prices exist, discounted cash flow analysis,
option pricing models, and other valuation techniques commonly used by market participants. The company
assesses the reasonableness of pricing received from these third party sources by comparing the fair values received to
recent transaction prices for similar assets where available, to industry accepted discounted cash flow models (that
incorporate estimates of the amount and timing of future cash flows and market observable inputs such as credit
spreads and discount rates) and to option pricing models (that incorporate market observable inputs including the
quoted price, volatility and dividend yield of the underlying security and the risk free rate).

All other financial assets and liabilities, primarily comprised of interest receivable, income taxes refundable
(payable), other assets, accounts payable and accrued liabilities, payable to related parties, and term loan, are
measured at amortized cost which approximates fair value. Under the amortized cost method, financial assets and
liabilities reflect the amount required to be received or paid and discounted when appropriate, at the contract’s
effective interest rate.

Net realized and unrealized gains (losses) on investments
Net realized gains (losses) arising on the disposition of investments and net unrealized gains (losses) arising on the
re-measurement of investments at fair value are included in net realized gains (losses) on investments and net
unrealized gains (losses) on investments in the consolidated statements of earnings, respectively.

Interest and dividend income
Interest income is recognized on an accrual basis using the effective interest method and includes bank interest and
interest from investments in debt instruments, with the exception of the Sanmar bonds where interest income is
included in its fair value measurement (see note 5). Interest receivable is shown separately on the consolidated
balance sheets based on the debt instruments’ stated rates of interest. Dividends from equity investments are
recognized when the company’s right to receive payment is established.

Income taxes
The provision for (recovery of) income taxes for the period comprises current and deferred income tax. Income taxes
are recognized in the consolidated statements of earnings, except to the extent that they relate to items recognized in
other comprehensive income or directly in equity. In those cases, the related taxes are also recognized in other
comprehensive income or directly in equity, respectively.

Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the company and its subsidiaries and its associates operate and generate
taxable income.

Deferred income tax is calculated under the liability method whereby deferred income tax assets and liabilities are
recognized for temporary differences between the financial statement carrying amounts of assets and liabilities and
their respective income tax bases at the current substantively enacted tax rates. Changes in deferred income tax
associated with components of other comprehensive income are recognized directly in other comprehensive income
while all other changes in deferred income tax are included in the provision for (recovery of) income taxes in the
consolidated statements of earnings.

FAIRFAX INDIA HOLDINGS CORPORATION

Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilized. Carry forwards of unused losses or unused tax credits are tax
effected and recognized as deferred tax assets when it is probable that future taxable profits will be available against
which these losses or tax credits can be utilized.

Deferred income tax is not recognized for withholding tax and other taxes that may be payable on unremitted
earnings for those Indian Investments that would otherwise be considered a subsidiary or an investment in associate
(‘‘certain Indian Investments’’) if not for the application of investment entity accounting, where the company has
determined it is not probable those earnings will be repatriated in the foreseeable future.

Current and deferred income tax assets and liabilities are offset when the income taxes are levied by the same
taxation authority and there is a legally enforceable right of offset.

Other assets
Other assets primarily consist of pending settlement of sales of investments and prepaid expenses.

Term loan
Borrowings are recognized initially at fair value, net of transaction costs incurred, and subsequently carried at
amortized cost. Interest expense on borrowings is recognized in the consolidated statements of earnings using the
effective interest method.

Contingencies and commitments
A provision is recognized for a contingent liability, commitment or financial guarantee when the company has a
present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. Provisions are discounted when the effect of the time value of money is considered
significant.

Equity
Common stock issued by the company is classified as equity when there is no contractual obligation to transfer cash
or other financial assets to the holder of the shares. Incremental costs directly attributable to the issue or repurchase
for cancellation of equity instruments are recognized in equity, net of tax.

Treasury shares are equity instruments reacquired by the company which have not been canceled and are deducted
from equity on the consolidated balance sheets, regardless of the objective of the transaction. The company acquires
its own subordinate voting shares on the open market for share-based payment awards. No gain or loss is recognized
in the consolidated statements of earnings on the purchase, sale, issue or cancellation of treasury shares.
Consideration paid or received is recognized directly in equity.

Dividends and other distributions to holders of the company’s equity instruments are recognized directly in equity.

Share-based payments
The company has restricted share plans or equivalent for its directors with vesting periods of up to ten years from the
date of grant. The fair value of restricted share awards on the grant date is amortized to compensation expense over
the vesting period, with a corresponding increase in share-based payments, net in the consolidated statements of
changes in equity. At each balance sheet date, the company reviews its estimates of the number of restricted share
awards expected to vest.

Net earnings (loss) per share
Basic net earnings (loss) per share is calculated by dividing the net earnings (loss) by the weighted average number of
subordinate and multiple voting shares issued and outstanding during the period, excluding subordinate voting
shares purchased by the company and held as treasury shares. Diluted net earnings (loss) per share is calculated using
the weighted average number of subordinate and multiple voting shares that would have been outstanding during
the period had all potential subordinate and multiple voting shares been issued at the beginning of the period, or
when other potential dilutive instruments were granted or issued, if later.

Comparative figures
Certain prior year comparative figures have been reclassified to be consistent with current year’s presentation.

New accounting pronouncements adopted in 2016
The company adopted the following amendments, effective January 1, 2016. These changes were adopted in
accordance with the applicable transitional provisions of each amendment, and did not have a significant impact on
the consolidated financial statements.

IFRS Annual Improvements 2012-2014
In September 2014 the IASB issued a limited number of amendments to clarify the requirements of four
IFRS standards.

Disclosure Initiative (Amendments to IAS 1)
In December 2014 the IASB issued certain narrow-focus amendments to IAS 1 Presentation of Financial Statements to
clarify existing presentation and disclosure requirements.

New accounting pronouncements issued but not yet effective
The following new standards have been issued by the IASB and were not yet effective for the fiscal year beginning
January 1, 2016. The company is currently evaluating their impact on its consolidated financial statements and does
not expect to adopt any of them in advance of their respective effective dates.

Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
In January 2016 the IASB issued amendments to IAS 12 Income Taxes to clarify the requirements on recognition of
deferred tax assets for unrealized losses. The amendments are effective for annual periods beginning on or after
January 1, 2017, with retrospective application.

Disclosure Initiative (Amendments to IAS 7)
In January 2016 the IASB issued amendments to IAS 7 Statement of Cash Flows that require additional disclosures
around changes in liabilities arising from financing activities, including both changes arising from cash flow and
non-cash changes. These amendments are effective for annual periods beginning on or after January 1, 2017, with
prospective application.

Foreign Currency Transactions and Advance Consideration (‘‘IFRIC 22’’)
In December 2016 the IASB issued an interpretation by the IFRS Interpretations Committee to clarify the accounting
for transactions that include the receipt or payment of advance consideration in a foreign currency. IFRIC 22 is
effective for annual periods beginning on or after January 1, 2018, with a choice of prospective or retrospective
application.

IFRS 9 Financial Instruments (‘‘IFRS 9’’)
In July 2014 the IASB issued the complete version of IFRS 9 which supersedes the 2010 version of IFRS 9 currently
applied by the company. This complete version is effective for annual periods beginning on or after January 1, 2018,
with retrospective application, and includes: requirements for the classification and measurement of financial assets
and liabilities; an expected credit loss model that replaces the existing incurred loss impairment model; and new
hedge accounting guidance.

4. Critical Accounting Estimates and Judgments

In the preparation of the company’s consolidated financial statements, management has made a number of critical
accounting estimates and judgments which are discussed below. Estimates and judgments are continually evaluated
and are based on historical experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances.

Where estimates were made, the reported amounts of assets, liabilities, income and expenses may differ from the
amounts that would otherwise be reflected if the ultimate outcome of all uncertainties and future earnings were
known at the time the consolidated financial statements were prepared.

Determination of investment entity status
An entity that meets the IFRS 10 Consolidated Financial Statements (‘‘IFRS 10’’) definition of an investment entity is
required to measure its investments in subsidiaries at FVTPL rather than consolidate them (other than those
subsidiaries that provide services to the company).

FAIRFAX INDIA HOLDINGS CORPORATION

An investment entity is an entity that obtains funds from one or more investors for the purpose of providing them
with investment management services, commits to its investors that its business purpose is to invest funds solely for
returns from capital appreciation, investment income, or both, and measures and evaluates the performance of
substantially all of its investments on a fair value basis. The company has concluded that it continues to meet the
definition of an investment entity, as its strategic objective of investing in Indian Investments and providing
investment management services to investors for the purpose of generating returns in the form of long term capital
appreciation, remains unchanged. The company has also determined that FIH Mauritius and FIH Private continue to
provide investment related services to the company and should continue to be consolidated.

The company may from time to time seek to realize on any of its Indian Investments. The circumstances under which
the company may sell some or all of its investments include: (i) where the company believes that the Indian
Investments are fully valued or that the original investment thesis has played out; or (ii) where the company has
identified other investment opportunities which it believes present more attractive risk-adjusted return
opportunities and additional capital is needed to make such alternative investments.

The company would exit its private investments either through initial public offerings or private sales. For publicly
traded investments, exit strategies may include selling the investments through private placements or in
public markets.

Valuation of Private Investments
The valuation of the company’s private investments are assessed at the end of each reporting period.

For each private investment completed during the reporting period, the transaction price is generally considered to
be representative of fair value, subject to the background of the investment, changes in market conditions and
factors specific to the investee. The company monitors various factors impacting the businesses of its investees and
believes the transaction price of a private investment may no longer be an appropriate estimate of fair value upon
occurrence of events such as significant under or over achievement of budgeted earnings; changes to the market
sector; regulatory revisions; movements in interest rates, foreign exchange rates and other market variables; and the
passage of time.

Estimates and judgments for private investments are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The company utilizes Fairfax’s valuation personnel to assist with the valuation of its investment portfolio. Detailed
valuations are performed for those financial instruments that are priced internally, while external pricing received
from independent pricing service providers and third party broker-dealers are evaluated by the company for
reasonableness. The company does not use independent valuation experts to determine the fair value of its
investments. The company’s Chief Financial Officer oversees the valuation function and regularly reviews valuation
processes and results, including at each quarterly reporting period. Significant valuation matters, particularly those
requiring extensive judgment, are communicated to the company’s Audit Committee.

Notwithstanding the rigour of the company’s valuation processes, the valuation of private investments inherently
has estimation uncertainty and different assumptions could lead to significantly different fair values. Refer to note 5
for disclosure on the valuation of the company’s private investments.

Income taxes
The company is subject to income taxes in Canada, Mauritius and India, and the company’s determination of its tax
liability or receivable is subject to review by those applicable tax authorities. The company has made a critical
judgment that it is able to control the timing of the repatriation of certain Indian Investments’ unremitted earnings
disclosed in note 10 and has no plans to repatriate these earnings in the foreseeable future; as a consequence no tax
has been recorded in these consolidated financial statements on these unremitted earnings. While the company
believes its tax positions to be reasonable, where the company’s interpretations differ from those of tax authorities or
the timing of realization is not as expected, the provision for income taxes may increase or decrease in future periods
to reflect actual experience. The company has tax specialist personnel responsible for assessing the income tax
consequences of planned transactions and events, and undertaking the appropriate tax planning.

Realization of deferred income tax assets is dependent upon the generation of taxable income in those jurisdictions
where the relevant tax losses and temporary differences exist. Tax legislation of each jurisdiction in which the
company operates is interpreted to determine the provision for (recovery of) income taxes and expected timing of
the reversal of deferred income tax assets and liabilities. The company has made a critical judgment that certain

deferred taxes disclosed in note 10 should not be recorded as an asset because it is not presently likely that they will
be realized.

Functional currency
At the time of its incorporation on November 25, 2014 the company had determined the currency of its primary
economic environment was the U.S. dollar as the proceeds from the IPO Offerings were denominated in U.S. dollars.
The deployment of the IPO proceeds into Indian Investments, denominated in Indian rupees, were subject to market
conditions and the availability of attractive investment opportunities.

During the third quarter of 2015 a substantial portion of the proceeds raised through the IPO Offerings (initially
invested in U.S. dollar denominated treasury bills) were reinvested into Indian Investments. Accordingly, the
company reassessed its functional currency and adopted the Indian rupee as its functional currency on a prospective
basis effective October 1, 2015. All balances in the consolidated financial statements were translated into Indian
rupees using the exchange rate prevailing at the date of the change.

There was no change to the functional currency of the two consolidated subsidiaries, FIH Mauritius and FIH Private,
which is the Indian rupee.

Indian Investments

Public Indian Investments

Investment in Fairchem Speciality Limited

On February 8, 2016 Fairfax India, through its wholly-owned subsidiary, acquired 44.7% of the common shares of
Fairchem Speciality Limited (‘‘Fairchem’’, formerly known as Adi Finechem Limited) at a price per share of $3.13
(212 Indian rupees) for total consideration of $19,409 (approximately 1.3 billion Indian rupees). See ‘Private Indian
Investments’ under the heading of ‘Investment in Privi Organics Limited’ within this note for details on a merger
arrangement involving Fairchem and Privi Organics Limited.

At December 31, 2016 the company held 44.9% of the outstanding common shares of Fairchem.

Fairchem’s shares are listed on both the Bombay Stock Exchange and the National Stock Exchange of India.

Fairchem is a specialty chemical manufacturer located in Ahmedabad, India. Fairchem manufactures oleochemicals
used in the paints, inks and adhesives industries, as well as intermediate nutraceutical and health products. It has
developed an in-house technology that uses machinery designed and manufactured by leading European companies
to separate and convert waste generated during the production of soy, sunflower, corn and cotton oils into valuable
nutraceutical and fatty acids.

Investment in IIFL Holdings Limited

On December 1, 2015 Fairfax India acquired 68,788,445 common shares of IIFL Holdings Limited (‘‘IIFL’’)
representing a 21.9% ownership interest at a price of $2.93 per share (195 Indian rupees) for total consideration of
$201,559 (approximately 13.4 billion Indian rupees). In accordance with regulations of the Securities and Exchange
Board of India (‘‘SEBI’’), the company placed $3,600 (237.1 million Indian rupees) in escrow to fund any
contingencies. The full amount of the funds in escrow were released in the first quarter of 2016.

Prior to the company’s investment in IIFL, Fairfax, through its subsidiaries, owned 8.9% of the issued and
outstanding IIFL common shares, and had an economic interest in another 5.2% of IIFL common shares through
derivative instruments (all acquired prior to the establishment of Fairfax India).

FIH Mauritius and certain Fairfax affiliates provided undertakings to SEBI pursuant to which they agreed not to
undertake certain activities so as to avoid acquiring control of IIFL subsequent to purchases made by the company. In
particular, FIH Mauritius and the Fairfax affiliates have undertaken not to exercise voting rights on IIFL shareholder
resolutions for any IIFL shares exceeding 25% of the issued and outstanding IIFL common shares at the time of
voting, effectively limiting voting to 25% even in cases where FIH Mauritius and the Fairfax affiliates own more than
25% of the IIFL shares. FIH Mauritius and the Fairfax affiliates have also undertaken not to purchase additional IIFL
shares if the total IIFL shares owned by FIH Mauritius and the Fairfax affiliates would exceed approximately 36% of
the issued and outstanding IIFL common shares unless FIH Mauritius and the Fairfax affiliates make an open offer or
obtain the prior consent of SEBI for such an acquisition.

FAIRFAX INDIA HOLDINGS CORPORATION

At December 31, 2016 the company held 21.7% of the outstanding common shares of IIFL. On February 8, 2017 the
company acquired a 4.99% common share equity interest in IIFL, see ‘Subsequent to December 31, 2016’ under the
heading of ‘Investment in IIFL Holdings Limited’ within this note for further details.

IIFL’s shares are listed on both the Bombay Stock Exchange and the National Stock Exchange of India.

IIFL is a publicly traded, diversified financial services holding company located in Mumbai, India with principal lines
of business in a non-banking finance company, wealth management, and capital markets and other activities
(comprised of retail broking, institutional equities, investment banking and financial products distribution).

Private Indian Investments

Investment in National Stock Exchange of India Limited

In the third quarter of 2016 the company, through its wholly-owned subsidiaries, acquired a 1.0% common share
equity interest in the National Stock Exchange of India Limited (‘‘NSE’’) for total consideration of $26,783
(approximately 1.8 billion Indian rupees). The initial transaction price was considered to approximate fair value at
year end due to the proximity of the transaction closing date to December 31, 2016 and the absence of changes in
factors impacting fair value since the closing date.

NSE, a private company located in Mumbai, India, is India’s largest stock exchange covering various cities and towns
across the country. In addition to being a platform for all exchange-traded financial products in India, NSE’s flagship
index, Nifty50, is used extensively by investors in India and around the world as a barometer of the Indian capital
markets.

Investment in Privi Organics Limited

On August 26, 2016 the company, through its wholly-owned subsidiaries, acquired a 50.8% common share equity
interest in Privi Organics Limited (‘‘Privi’’) for total consideration of $54,975 (approximately 3.7 billion
Indian rupees).

Privi, a private company located in Mumbai, India, is a supplier of aroma chemicals to the fragrance industry. Privi’s
world-class products are the result of its very strong research and development team that has proven expertise in
developing new products, customizing aromas per customer specifications, scaling up products from basic research
to commercial scale, and designing process improvements to drive quality and cost optimization.

On July 12, 2016 the boards of directors of Fairchem and Privi approved a merger arrangement (the ‘‘Merger’’)
involving the two companies, which is expected to bring significant diversification and synergies to both. In
December 2016 and February 2017 shareholder and regulatory approvals were received, respectively, for the Merger.
Under the terms of the Merger, Privi shareholders will receive 27 common equity shares and 27 compulsorily
convertible preference shares (‘‘CCPS’’) of the merged entity for every 40 Privi shares exchanged (‘‘swap ratio’’). Final
closing of the Merger is subject to customary closing conditions, which involve the share exchange, and is expected
to occur by the end of the first quarter of 2017. Fairfax India will own approximately 49% of the merged entity, after
factoring in the conversion of the CCPS. The swap ratio was recommended in a valuation report dated July 12, 2016
issued by M/s. Walker Chandiok & Co. LLP, Independent Chartered Accountants (a member firm of Grant Thornton
in India). ICICI Securities Limited issued a fairness opinion on the swap ratio. Fairchem and Privi Board of Director
approval was received on the swap ratio.

At December 31, 2016 the company prepared a valuation model to determine the value of its 9,517,042 Privi
common shares using the quoted bid price of Fairchem and the swap ratio. The company’s internal valuation model
indicated a value of $94,292 and an unrealized gain of $40,392, which was not recorded in the consolidated
statements of earnings as the Merger still required regulatory approval at December 31, 2016. The initial transaction
price was considered to approximate fair value as there had been no significant changes to Privi’s business, capital
structure and operating environment and the key assumptions in the company’s acquisition valuation model
continued to be valid due to the proximity of the transaction closing date to December 31, 2016.

Investment in Sanmar Chemicals Group

On April 8, 2016 the company announced that, through its wholly-owned subsidiaries, it had agreed to invest
$300 million into Sanmar through a combination of equity and debt securities resulting in a 30% common share
equity interest in Sanmar. On April 28, 2016 the company acquired the first tranche of $250 million, comprised of

$1 million in equity and $249 million in bonds. On September 26, 2016 the company acquired the second tranche of
$50 million in bonds.

Sanmar is one of the largest suspension Poly Vinyl Chloride (‘‘PVC’’) manufacturers in India and is in the process of
expanding its PVC capacity in Egypt. Sanmar also manufactures caustic soda, chloromethanes, refrigerant gases,
industrial salt and specialty chemical intermediates.

During 2016 management undertook a valuation study to formalize valuation models and determine the
appropriate separate fair values for its bond and common share investments in Sanmar. The fair value of the Sanmar
investments cannot be derived from an active market and accordingly, are determined using industry accepted
valuation techniques and models. Market observable inputs are used where possible, with unobservable inputs used
where necessary. Use of unobservable inputs can involve significant judgment and may materially affect the reported
fair value of the Sanmar investments.

Sanmar Common Stock

At December 31, 2016 the company estimated fair value using a discounted cash flow analysis based on multi-year
free cash flow projections with assumed after-tax discount rates ranging from 15.5% to 22.5% and long term growth
rates ranging from 2.0% to 3.6%. Free cash flow projections were based on EBITDA projections from financial
information for Sanmar’s three main business operations that had been prepared in the fourth quarter of 2016 by
Sanmar’s management. Discount rates were based on the company’s assessment of risk premiums to the appropriate
risk-free rate of the economic environment in which Sanmar operates. At December 31, 2016 the company’s internal
valuation model indicated that the fair value of the common shares was $440, resulting in an unrealized loss of $545
which was recorded in net unrealized gains on investments in the consolidated statements of earnings.

Sanmar Bonds

Investment in National Collateral Management Services Limited

On August 19, 2015 the company, through its wholly-owned subsidiary, acquired a 73.6% ownership interest in
National Collateral Management Services Limited (‘‘NCML’’) by acquiring 23,326,335 newly issued common shares
and 71,050,691 common shares from certain existing shareholders for an aggregate investment of $124,244
(approximately 8.1 billion Indian rupees).

Subsequently, the company acquired an additional 14.5% ownership interest in NCML by acquiring
18,618,420 common shares from minority shareholders for $24,472 (approximately 1.6 billion Indian rupees). At
December 31, 2016 the company held 88.1% of the outstanding common shares of NCML.

At December 31, 2015 the initial transaction price was considered to approximate fair value as there had been no
significant changes to NCML’s business, capital structure and operating environment and the key assumptions in the
company’s acquisition valuation model continued to be valid due to the proximity of the transaction closing date to
the year end. During 2016 the company refined its internal valuation model used in the determination of NCML’s
fair value. The fair value of NCML cannot be derived from an active market and accordingly, is determined using
industry accepted valuation techniques and models. Market observable inputs are used where possible, with
unobservable inputs used where necessary. Use of unobservable inputs can involve significant judgment and may
materially affect the reported fair value of NCML.

FAIRFAX INDIA HOLDINGS CORPORATION

that the fair value of the common shares was $146,586, resulting in an unrealized gain of $3,879 which was recorded
in net unrealized gains on investments in the consolidated statements of earnings.

NCML is a private agricultural commodities storage company headquartered in Gurgaon, India that operates in the
agriculture value chain by offering end-to-end solutions in grain procurement, testing, storage and collateral
management. In 2016 NCML launched its wholly-owned subsidiary, NCML Finance Pvt. Ltd, which focuses on rural
and agri-business finance.

Subsequent to December 31, 2016

Public Indian Investments

Investment in IIFL Holdings Limited

On February 8, 2017 the company, through its wholly-owned subsidiaries, acquired 15,853,000 common shares
representing a 4.99% equity interest in IIFL for total consideration of $75,175 (5.1 billion Indian rupees). In
connection with the transaction, Fairfax, through its subsidiaries, disposed of derivative instruments representing an
economic interest of 4.99% in IIFL.

In accordance with regulations of the SEBI and the National Stock Exchange of India, the transaction was subject to
certain sale and purchase pricing guidelines and, as a result, the total consideration paid per share approximated the
fair market value of the common share equity interest acquired. After giving effect to the shares acquired, the
company held 26.7% of the outstanding common shares of IIFL.

Private Indian Investments

Investment in Saurashtra Freight Private Limited

On February 14, 2017 the company, through its wholly-owned subsidiaries, acquired a 51.0% common share equity
interest in Saurashtra Freight Private Limited (‘‘Saurashtra’’), a private company, for cash consideration of $30,018
(2.0 billion Indian rupees).

Saurashtra runs the largest container freight station at Mundra port (Gujarat), the second largest and fastest growing
port in India. Saurashtra’s container freight station business provides services such as moving of containers to and
from the port, stuffing/destuffing of containers, cargo storage and transportation of cargo to the end customer as well
as the storage, maintenance and repair of empty containers.

Investment in Bangalore International Airport Limited

On March 28, 2016 the company and Fairfax, through their wholly-owned subsidiaries, announced that they will
collectively acquire 33.0% of the common shares of Bangalore International Airport Limited (‘‘BIAL’’), a private
company, from Bangalore Airport & Infrastructure Developers Private Limited, a wholly-owned subsidiary of GVK
Power and Infrastructure Limited (‘‘GVK’’) for an aggregate investment of approximately $330 million at current
exchange rates (approximately 22 billion Indian rupees). Fairfax, through a wholly-owned subsidiary, entered into a
separate share purchase agreement to acquire an additional 5.0% common share equity interest from Flughafen
Zurich AG (‘‘Zurich’’) for approximately $49 million. The acquisition of the additional 5.0% common share equity
interest from Zurich in BIAL can be acquired by Fairfax or the company and is conditional upon the company
acquiring the 33.0% common share equity interest from GVK.

Fairfax India is permitted to complete up to two Indian Investments where such investment would be less than or
equal to 25% of the company’s total assets (see note 11 under the heading ‘Concentration Risk’). On January 13, 2017
the company received net proceeds of $493,504 from an underwritten public offering and private placements
(see note 8) that resulted in an increase in the company’s total assets and investment concentration restriction limit.
After giving effect to this transaction, the investment concentration restriction limit increased providing the
company with the ability to acquire the total 38.0% investment in BIAL. The anticipated cost for the 38.0% common
share equity interest in BIAL is approximately $379 million (approximately 25 billion Indian rupees).

As of March 10, 2017 certain conditions to closing remain outstanding and there is no certainty as to if or when such
conditions, consents and approvals will be satisfied or waived. Such conditions, consents and approvals that remain
outstanding primarily include finalizing certain lending arrangements between GVK and its lenders, approval from
certain government authorities and receipt of a no-objection certificate from a relevant authorized dealer under the
Foreign Exchange Management Act, 1999, with respect to permitting a pledge of shares in connection with the BIAL
Transaction.

BIAL owns and operates the Kempegowda International Airport Bengaluru (‘‘KIAB’’), under a 30+30 year concession
agreement from the Government of India. KIAB has the distinction of being the first airport in India that was built to
the highest international standards by the private sector under a public-private partnership.

6. Cash and Investments

Fair Value Disclosures

The company’s use of quoted market prices (Level 1), valuation models using observable market information as
inputs (Level 2) and valuation models without observable market information as inputs (Level 3) in the valuation of
securities by type of issuer was as follows:

December 31, 2016

December 31, 2015

Significant
other

Significant

prices
(Level 1)

inputs
(Level 2)

inputs
(Level 3)

Total fair
value of
assets in
value of Indian rupees
assets (in thousands)

Significant
other

Significant

prices
(Level 1)

inputs
(Level 2)

inputs
(Level 3)

Quoted observable unobservable Total fair

Total fair
value of
assets in
value of Indian rupees
assets (in thousands)

Cash and cash
equivalents(1)
Restricted cash(2)

146,960

18,810

165,770

Short term investments –
U.S. treasury bills(3)

27,428

Bonds:

Government of India(4)
Indian corporate(4)
Sanmar

Common stocks:

IIFL

NCML
Privi(5)
Fairchem
NSE(5)
Sanmar
Investment funds(6)

Total cash and
investments

–

265,951

–

45,488

–

311,439

146,960

18,810

9,974,168

1,276,632

12,464

6,457

165,770

11,250,800

18,921

27,428

1,861,558

50,143

–

130,317

99,447

–

130,317

99,447

8,844,600

6,749,515

–

299,093

20,299,423

229,764

299,093

528,857

35,893,538

–

123,448

389,341

–

512,789

–

146,586

54,315

–

26,504

440

–

265,951

146,586

54,315

45,488

26,504

440

–

18,050,088

220,747

9,948,814

3,686,331

3,087,261

1,798,824

29,871

–

48,445

–

146,445

–

12,464

6,457

824,597

427,191

18,921

1,251,788

50,143

3,317,267

123,448

389,341

–

8,166,876

25,757,320

–

512,789

33,924,196

220,747

146,445

14,603,787

9,688,230

–

48,445

3,204,956

227,845

539,284

36,601,189

220,747

48,445

146,445

415,637

27,496,973

504,637

229,764

526,938 1,261,339

85,607,085

289,811

561,234

146,445

997,490

65,990,224

40.0%

18.2%

41.8%

100.0%

29.1%

56.2%

14.7%

100.0%

(1)

(2)

(3)

(4)

(5)

(6)

Included U.S. treasury bills with maturity dates of less than three months of $126,941 at December 31, 2016 (December 31, 2015 – nil and $4,501 of fixed deposits).

Comprised of a debt service reserve account used to fund term loan interest payments (December 31, 2015 – cash in escrow arising from investments in IIFL ($3,600) and Fairchem
($2,857)).

Short term U.S. treasury bills have a maturity date of June 22, 2017 (December 31, 2015 – maturity dates of June 23, 2016 and March 3, 2016).

Priced based on information provided by independent pricing service providers as at December 31, 2016 and December 31, 2015. There was no change in valuation techniques for these
securities during 2016.

Initial transaction price was considered to approximate fair value due to the proximity of the transaction closing date to December 31, 2016 and the absence of changes in factors
impacting fair value since the closing date.

These investment funds were primarily valued based on net asset value statements provided by third party fund managers that were compared to published quotes for the underlying
investments. The units of the funds are redeemable and priced daily. There was no change in the valuation technique for investment funds during 2016. At December 31, 2016 all
investment funds were sold and proceeds pending settlement of sales on investments of $26,525 were included on the consolidated balance sheets as a component of other assets.

FAIRFAX INDIA HOLDINGS CORPORATION

Transfers between fair value hierarchy levels are considered effective from the beginning of the reporting period in
which the transfer is identified. During 2016 and 2015 there were no transfers of financial instruments between
Level 1 and Level 2 and there were no transfers of financial instruments in or out of Level 3 as a result of changes in
the observability of valuation inputs.

A summary of changes in the fair value of Level 3 investments for the years ended December 31 was as follows:

Balance as of January 1

Purchases

Net unrealized gains (losses) included in the consolidated

statements of earnings

Net unrealized foreign currency translation losses included in

2016

Bonds

Common stocks

2015

Common
stocks

Sanmar

NCML Sanmar

Privi

–

146,445

–

NSE

–

299,000

–

1,000

54,975

26,783

Total

146,445

381,758

NCML

Total

–

148,716

6,907

3,879

(545)

–

10,241

–

the consolidated statements of comprehensive income

(6,814)

(3,738)

(15)

(660)

(279)

(11,506)

(2,271)

Balance – December 31

299,093

146,586

440

54,315

26,504

526,938

146,445

Indian rupees
(in thousands)

Balance as of January 1

Purchases

2016

Bonds

Common stocks

2015

Common
stocks

Sanmar

NCML Sanmar

Privi

NSE

Total

NCML

Total

–

9,688,230

–

9,688,230

–

19,835,450

–

66,496

3,686,331

1,798,824

25,387,101

9,688,230

Net unrealized gains (losses) included in the consolidated

statements of earnings

Balance – December 31

463,973

260,584

(36,625)

–

687,932

–

20,299,423

9,948,814

29,871

3,686,331

1,798,824

35,763,263

9,688,230

The table that follows illustrates the potential impact on net earnings of various combinations of changes in
unobservable inputs in the company’s internal valuation models for the level 3 investments at December 31, 2016.
The analysis assumes variations within a reasonably possible range determined by the company based on analysis of
the return on various equity indexes, management’s knowledge of the Indian equity markets and the potential
impact of changes in interest rates.

Indian
Investment

Fair
Value of
Investment

Valuation
Technique

Significant
unobservable
Inputs

Significant
unobservable
inputs used
in the
internal
valuation
models

Hypothetical
$ change
effect on
fair value
measurement(1)

Hypothetical
$ change
effect on
net earnings(1)

NCML common shares

$146,586

Discounted
cash flow

After-tax discount rate
Long term growth rate

11.9% to 15.8%
6.0%

24,035 / (20,425)
8,295 / (7,657)

20,850 / (17,719)
7,196 / (6,642)

Sanmar bonds(2)

$299,093

Discounted
cash flow

Credit spread

7.1%

18,311 / (17,182)

13,459 / (12,629)

Sanmar common shares

$440

Discounted
cash flow

After-tax discount rate
Long term growth rate

15.5% to 22.5%
2.0% to 3.6%

14,088 / (440)
3,894 / (440)

12,221 / (382)
3,378 / (382)

(1)

The impact on the internal valuation models from changes in significant unobservable inputs deemed to be subject to the most judgment and estimates
disclosed in the above table shows the hypothetical increase (decrease) on net earnings. Changes in the after-tax discount rates, long term growth rates, and
credit spreads, each in isolation, would hypothetically change the fair value of the company’s investments as noted in the table above. Generally, an increase
(decrease) in long term growth rates or decrease (increase) in after-tax discount rates or credit spreads would result in a higher (lower) fair value of the
company’s Indian Investments.

(2)

Based on parallel basis point shifts upward and downward in the term structure of interest rates.

Fixed Income Maturity Profile

Bonds are summarized by their earliest contractual maturity date in the table that follows. Actual maturities may
differ from maturities shown below due to the existence of put features. At December 31, 2016, there were no bonds
containing put features (December 31, 2015 – $137,400).

Due after 1 year through 5 years
Due after 5 years through 10 years
Due after 10 years

Effective interest rate

Investment Income

December 31, 2016

December 31, 2015

Amortized
cost
–
474,334
35,919

Fair value
–
490,706
38,151

Amortized
cost
190,458
237,348
87,553

Fair value
190,409
235,867
86,513

510,253

528,857

515,359

512,789

5.1%

8.2%

An analysis of investment income for the years ended December 31 is summarized in the following tables:

Interest and dividends

Interest income:

Cash and cash equivalents
Short term investments
Bonds

Dividends: common stocks

2016

2015

175
135
21,033

–
302
44,397

21,343

44,699

5,611

–

Net gains (losses) on investments and net foreign currency gains (losses)

Net gains (losses) on investments:

Short term investments

Bonds

Common stocks

Common stocks – Investment funds

Net foreign currency gains (losses) on:

Cash and cash equivalents

Investments

Term loan

2016

Net
change in
unrealized
gains
(losses)

Net
realized
gains
(losses)

Net gains
(losses) on
investments

Net
realized
gains
(losses)

2015

Net
change in
unrealized
gains
(losses)

Net gains
(losses) on
investments

(17)

(3,327)

4,688

2,048

3,392

(3,624)

3,005

–

(619)

–

22,318
81,038(1)
1,639

(17)

18,991

85,726

3,687

(257)

–

(2,651)

18,559

(1,718)

104,995

108,387

(209)

14,190

–

(3,155)

(2,963)

(6,118)

(3,624)

(150)

(2,963)

2,794

292

–

(6,737)

3,086

–

3,485

–

3,485

(2,908)

18,559

(1,718)

13,981

2,794

3,777

–

6,571

(1)

Principally comprised of net unrealized gains on the Indian Investments, IIFL ($51,305) and Fairchem ($26,399), in 2016.

FAIRFAX INDIA HOLDINGS CORPORATION

7. Term Loan

Secured Term Loan(3)

December 31, 2016

December 31, 2015

Principal
225,000

Carrying
value(1)
223,772

Fair
value(2)
223,772

Principal
–

Carrying
value
–

Fair
value
–

(1) Principal net of unamortized issue costs.

(2) Carrying value approximated fair value at December 31, 2016.

(3)

Interest bearing at LIBOR plus 350 bps for the first six months, increasing to LIBOR plus 500 bps thereafter.

On September 16, 2016 the company completed a 2-year secured term loan (the ‘‘term loan’’) bearing an interest rate
of LIBOR plus 350 to 500 basis points with a syndicate of Canadian banks for $225,000. At December 31, 2016 the
company used a portion of the net proceeds to complete the second tranche of Sanmar bonds ($50,000, see note 5).
The term loan contained a mandatory prepayment clause that became effective when the company received the net
proceeds from the Offerings (see note 8), requiring repayment of the $225,000 principal amount of the term loan by
March 31, 2017.

Under the terms of the term loan, the company is required to maintain a debt service reserve account to fund the
term loan interest payments. The cash held in the debt service reserve account was classified as restricted cash on the
consolidated balance sheets (December 31, 2016 – $18,810). The company is also required to use the term loan
proceeds solely for the purposes of funding: (i) investments in Specified Portfolio Companies (comprised of NCML,
IIFL, Fairchem, Sanmar, Privi or BIAL); (ii) investments in cash equivalents; (iii) transaction costs, fees and expenses
related to Specified Portfolio Companies; and (iv) the debt service reserve account. The term loan includes a financial
covenant that requires the company to maintain total common shareholders’ equity of not less than $750,000.

At December 31, 2016 the company was in compliance with the term loan covenants.

In 2016 term loan interest expense of $2,647 and amortization of issue costs of $1,524 (2015 – nil) were included in
interest expense in the consolidated statements of earnings. At December 31, 2016 prepaid interest expense of $543
(2015 – nil) was recorded in other assets on the consolidated balance sheets.

8. Total Equity

Total common shareholders’ equity

Authorized Capital

The company’s authorized share capital consists of (i) an unlimited number of multiple voting shares that may only
be issued to Fairfax or its affiliates; (ii) an unlimited number of subordinate voting shares; and, (iii) an unlimited
number of preference shares, issuable in series. Except as provided in any special rights or restrictions attaching to
any series of preference shares issued from time to time, the preference shares will not be entitled to vote at any
meeting of the shareholders of the company.

Issued Capital

Issued capital at December 31, 2016 included 30,000,000 (December 31, 2015 – 30,000,000) multiple voting shares
and 74,881,031 (December 31, 2015 – 76,678,879) subordinate voting shares without par value prior to deducting
52,728 (December 31, 2015 – 43,520) subordinate voting shares reserved in treasury for share-based payment awards.
Each subordinate voting share carries one vote per share at all meetings of shareholders except for separate meetings
of holders of another class of shares. Each multiple voting share carries fifty votes per share at all meetings of
shareholders except for separate meetings of holders of another class of shares. Fairfax, through its subsidiaries, owns
all the issued and outstanding multiple voting shares, which are not traded. At December 31, 2016 there were no
preference shares issued.

Common stock

The number of shares outstanding was as follows:

Subordinate voting shares – January 1
Issuances of shares
Purchases for cancellation

Subordinate voting shares – December 31

Multiple voting shares – January 1
Issuances of shares

Multiple voting shares – December 31

2016
76,678,879
–
(1,797,848)

2015
–
76,678,879
–

74,881,031

76,678,879

30,000,000
–

1
29,999,999

30,000,000

Common shares effectively outstanding – December 31

104,881,031

106,678,879

Capital transactions

Subsequent to December 31, 2016

On January 13, 2017 the company completed an underwritten public offering of 12,766,000 subordinate voting
shares at a price of $11.75 per share. Concurrent with the public offering, Fairfax and Ontario Municipal Employees
Retirement System (‘‘OMERS’’) acquired 12,766,000 and 17,021,500 subordinate voting shares, respectively, at a
price of $11.75 per subordinate voting share in a concurrent private placement (the ‘‘Concurrent Private Placement’’
and, together with the public offering, the ‘‘Offerings’’), resulting in net proceeds of $493,504, after commissions and
expenses of $6,500. Net proceeds from the Offerings will provide financing to acquire additional Indian Investments
and will be used for general corporate purposes. Receipt of the proceeds from the Offerings triggered a mandatory
prepayment clause in the term loan requiring repayment of the $225,000 principal amount of the term loan by
March 31, 2017 (see note 7).

Year ended December 31, 2016

Repurchase of Shares

During 2016, under the terms of the normal course issuer bid, the company repurchased for cancellation
1,797,848 subordinate voting shares for a net cost of $21,178, of which $4,160 was charged to retained earnings.
There were no repurchases for cancellation during 2015.

Dividends

The company did not pay any dividends on its total outstanding common shares during 2016 and 2015.

Year ended December 31, 2015

On January 30, 2015 the company completed its IPO of 50,000,000 subordinate voting shares at a price of $10.00 per
share for gross proceeds of $500,000. The company’s subordinate voting shares began trading on the TSX under the
symbol FIH.U. Concurrent with the IPO, the company issued to Fairfax and its affiliates 30,000,000 multiple voting
shares of the company on a private placement basis, for gross proceeds of $300,000. Also, concurrent with the closing
of the IPO, the company issued to certain cornerstone investors 20,578,947 subordinate voting shares, on a private
placement basis, for gross proceeds of $205,789. The combined gross proceeds of the IPO and private placements
were $1,005,789.

On February 10, 2015 a syndicate of underwriters exercised the IPO over-allotment option and the company issued
an additional 6,099,932 subordinate voting shares at a price of $10.00 per share for total gross proceeds of $60,999.
The exercise of the over-allotment option increased the combined total gross proceeds from the IPO and private
placements to $1,066,788 (net proceeds of $1,025,825 after commissions and expenses of $40,963).

FAIRFAX INDIA HOLDINGS CORPORATION

9. Earnings per Share

Net earnings per share is calculated in the following table based upon the weighted average shares outstanding:

Net earnings – basic and diluted

2016
107,825

2015
40,939

Weighted average shares outstanding – basic and diluted

106,517,213

98,019,189

Net earnings per share – basic and diluted

1.01

0.42

At December 31, 2016 and 2015 there were no instruments outstanding that could potentially dilute earnings
per share.

10. Income Taxes

The company’s provision for (recovery of) income taxes for the years ended December 31 are summarized in the
following table:

Current income tax:

Current year expense (recovery)
Adjustment to prior years’ income taxes

Deferred income tax:

Origination and reversal of temporary differences
Adjustments to prior years’ deferred income taxes

Provision for (recovery of) income taxes

2016

2015

(4,878)
1,926

11,257
–

(2,952)

11,257

2,070
1

2,147
–

2,071

2,147

(881)

13,404

A significant portion of the company’s earnings before income taxes is earned or incurred outside of Canada. The
statutory income tax rates for jurisdictions outside of Canada generally differ from the Canadian statutory income
tax rate (and may be significantly higher or lower).

During the second quarter of 2016, India and Mauritius amended their double income tax treaty. As a result,
investments acquired up to April 1, 2017 will not be assessed by India for tax on their future disposition. After April 1,
2017, India will levy capital gains tax at half the India domestic rate on equity investments purchased or sold
through Mauritius until March 31, 2019 and at the full rate from April 1, 2019 onward.

The company’s earnings (loss) before income taxes by jurisdiction and the associated provision for (recovery of)
income taxes for the years ended December 31 are summarized in the following table:

Earnings (loss) before income taxes
Provision for (recovery of) income taxes

2016

2015

Canada Mauritius
111,049
3,209

(4,105)
(4,090)

Total
106,944
(881)

Canada Mauritius
55,201
1,845

(858)
11,559

Total
54,343
13,404

Net earnings (loss)

(15)

107,840

107,825

(12,417)

53,356

40,939

The increase in pre-tax profitability in Mauritius during 2016 compared to 2015 primarily reflected increased net
unrealized gains on investments, partially offset by increased investment and advisory fees. The increase in pre-tax
losses in Canada during 2016 compared to 2015 principally related to interest expense on the term loan, partially
offset by net realized gains on short term investments and common stocks.

A reconciliation of the provision for (recovery of) income taxes calculated at the Canadian statutory income tax rate
to the provision of income taxes at the effective tax rate in the consolidated financial statements for the years ended
December 31 are summarized in the following table:

Canadian statutory income tax rate

Provision for income taxes at the Canadian statutory income tax rate
Tax rate differential on income earned and losses incurred outside of Canada
Provision relating to prior years
Change in unrecorded tax benefit of losses and temporary differences
Foreign exchange effect
Other including permanent differences

Provision for (recovery of) income taxes

2016

2015
26.5% 26.5%

28,340
(27,934)
1,926
1,685
(4,898)
–

14,401
313
–
206
(1,542)
26

(881) 13,404

The tax rate differential on income earned and losses incurred outside of Canada of $27,934 in 2016 principally
reflected the impact of net investment income taxed in India and Mauritius at lower rates. The tax rate differential on
income earned and losses incurred outside of Canada of $313 in 2015 principally reflected the impact of net
investment income taxed in India and Mauritius at higher rates.

The provision relating to prior years of $1,926 in 2016 (2015 – nil) primarily related to a refinement of the company’s
computation of the foreign exchange component of net realized gains and losses on investments.

The change in unrecorded tax benefit of losses and temporary differences of $1,685 in 2016 (2015 – $206) principally
reflected foreign accrual property losses incurred by FIH Mauritius. Deferred tax assets in Canada of $8,420 (2015 –
$8,807) were not recorded by the company because the related pre-tax losses did not meet the applicable recognition
criteria under IFRS.

Foreign exchange effect of $4,898 in 2016 (2015 – $1,542) principally reflected the impact of fluctuations in the
value of the Canadian dollar relative to the U.S. dollar and the Indian rupee as the company computes its corporate
tax liability in Canadian dollars pursuant to the requirements of Canadian tax authorities, whereas the functional
currency of the company and its Mauritius subsidiaries is the Indian rupee.

Changes in net income taxes refundable (payable) for the years ended December 31 was as follows:

Balance – January 1

Amounts recorded in the consolidated statements of earnings
Payments made during the year
Foreign currency translation

Balance – December 31

2016
(9,386)
2,952
13,500
260

2015
–
(11,257)
1,573
298

7,326

(9,386)

Management reviews the recoverability of potential deferred tax assets on an ongoing basis and adjusts, as necessary,
to reflect their anticipated realization. Deferred income tax balances at December 31, 2016 were nil (December 31,
2015 – nil) as the company has not recorded deferred tax assets of $6,529 (December 31, 2015 – $8,602) related to
costs of the IPO Offerings, and net operating losses and foreign accrual property losses of $1,891
(December 31, 2015 – $205).

Deferred income tax has not been recognized for withholding tax and other taxes that may be payable on unremitted
earnings of certain Indian Investments. At December 31, 2016 deferred income tax of approximately $13.2 million
has not been recognized on unremitted earnings of approximately $49.8 million that are not likely to be repatriated
in the foreseeable future.

FAIRFAX INDIA HOLDINGS CORPORATION

11. Financial Risk Management

Overview

The company’s activities expose it to certain financial risks during or at the end of the reporting period. These risks,
and the company’s management thereof, are described below.

Market Risk

Market risk (comprised of foreign currency risk, interest rate risk and other price risk) is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes in market prices. The company is
exposed to market risk principally in its investing activities and to the extent that those activities expose the
company to foreign currency risk. The valuation of the company’s investment portfolio is largely dependent on the
underlying performance of the companies within the portfolio, but may also be affected, along with other financial
statement items, by fluctuations in interest rates, foreign currency exchange rates and market prices.

Foreign Currency Risk

Foreign currency risk is the risk that the fair value or cash flows of a financial instrument or another asset or liability
will fluctuate because of changes in exchange rates and as a result, could produce an adverse effect on net earnings
and equity when measured in Indian rupees, the company’s functional currency. The company’s equity and net
earnings may also be significantly affected by foreign currency translation movements as the majority of assets and
net earnings are denominated in a currency other than the company’s U.S. dollar presentation currency. The
company has not hedged its foreign currency risk.

The company’s net foreign currency exposure on balances denominated in currencies other than the Indian rupee
(expressed in U.S. dollars) are comprised as follows:

December 31, 2016

December 31, 2015

Cash and
cash
equivalents

Investments

Receivable
from sale of
investment
funds

Payable
Term to related
loan

Cash and
cash
Net
parties exposure equivalents

Investments

Payable
to
related
Net
parties exposure

U.S. dollars
All other currencies

Total

165,051(1)

716

165,767

27,428
–

27,428

26,525 (223,772)
–

–

(3,659)
(14)

(8,427)
702

12,367(1)

98,588
–

(1,984)
(9)

108,971
88

26,525 (223,772)

(3,673)

(7,725)

12,464

98,588

(1,993)

109,059

(1)

At December 31, 2016 cash and cash equivalents included restricted cash of $18,810 to fund term loan interest payments (December 31, 2015 – nil).

The table above shows the company’s net exposure to the U.S. dollar and all other currencies. If the Indian rupee
appreciated by 5% against the U.S. dollar and all other currencies, the effect on pre-tax earnings and net earnings
would be a hypothetical increase of $386 and $284 respectively (December 31, 2015 – a decrease of $5,453 and
$4,008). Certain shortcomings are inherent in the method of analysis presented, including the assumption that the
5% appreciation of the Indian rupee occurred with all other variables held constant.

The company’s net exposure to the U.S. dollar decreased at December 31, 2016 compared to December 31, 2015
primarily as a result of the term loan completed in the third quarter of 2016 for $225,000 and the sale of U.S. dollar
denominated investments (primarily U.S. treasury bills) to fund purchases of Indian Investments, partially offset by
increased holdings of cash and cash equivalents received from the term loan proceeds that were not invested into
Indian Investments. A portion of the net proceeds from the term loan were used to invest in the second tranche of
Sanmar bonds. The term loan contained a mandatory prepayment clause that became effective when the company
received the net proceeds from the Offerings (see note 8), requiring repayment of the $225,000 principal amount of
the term loan by March 31, 2017.

Interest Rate Risk

Interest rate risk is the risk that the fair values or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. Interest rate movements in India may affect the company’s equity and net earnings.
The Portfolio Advisor and Fairfax actively monitor interest rates in India and the potential impact changes in interest
rates may have on the company’s investment portfolio. There were no significant changes to the company’s
framework used to monitor, evaluate and manage interest rate risk at December 31, 2016 compared to
December 31, 2015.

The table that follows displays the potential impact of changes in interest rates on the company’s fixed income
portfolio based on parallel 200 basis point shifts up and down, in 100 basis point increments. This analysis was
performed on each individual security, with the hypothetical effect on net earnings calculated on an after-tax basis.
At December 31, 2015 the company was also exposed to indirect interest rate risk through investment funds with a
fair value of $48,445 to the extent the funds were invested in fixed income securities. The company’s exposure to
interest rate risk increased during 2016 due to the Sanmar bond investment (see note 5 for details on the valuation of
Sanmar bonds).

December 31, 2016

December 31, 2015

Fair value of
fixed income change effect on
net earnings

portfolio

Hypothetical $ Hypothetical % Fair value of

change in fair
value

fixed income change effect on
net earnings

Hypothetical $ Hypothetical %
change in
fair value

portfolio

Change in interest rates
200 basis point rise
100 basis point rise
No change
100 basis point decline
200 basis point decline

468,666
498,029
528,857
563,826
592,543

(44,238)
(22,656)
–
25,705
46,812

(11.4)%
(5.8)%
–
6.6 %
12.0 %

467,293
490,481
512,789
546,766
580,625

(33,439)
(16,396)
–
24,973
49,860

(8.9)%
(4.4)%
–
6.6 %
13.2 %

Certain shortcomings are inherent in the method of analysis presented above. Computations of the prospective
effects of hypothetical interest rate changes are based on numerous assumptions, including the maintenance of the
level and composition of fixed income securities at the indicated date, and should not be relied on as indicative of
future results. Actual values may differ from the projections presented should market conditions vary from
assumptions used in the calculation of the fair value of individual securities; such variations include non-parallel
shifts in the term structure of interest rates and a change in individual issuer credit spreads.

Market Price Fluctuations

Market price fluctuation is the risk that the fair value or future cash flows of an equity investment will fluctuate
because of changes in market prices (other than those arising from interest rate risk or foreign currency risk), whether
those changes are caused by factors specific to the individual investment or its issuer, or other factors affecting all
similar investments in the market. Changes to the company’s exposure to equity price risk through its equity
instruments at December 31, 2016 compared to December 31, 2015 are described below.

At December 31, 2015 the company was exposed to market price risk for its investments classified as Level 1 in the
fair value hierarchy solely through its investment in IIFL. The company’s exposure to market price risk for its Level 1
investments increased during 2016 as a result of its investment in Fairchem (see note 5). Refer to note 6 for the
potential impact on net earnings of various combinations of changes in significant unobservable inputs in the
company’s internal valuation models for the company’s investments classified as Level 3.

The following table illustrates the potential impact on pre-tax and after-tax net earnings of a 10% change in the fair
value of the company’s Level 1 equity investments at December 31, 2016 and 2015.

Change in fair value of the company’s Level 1 equity investments
Level 1 equity investments

Pre-tax impact on net earnings (loss)

After-tax impact on net earnings (loss)

Credit Risk

December 31,
2016

December 31,
2015

+10%

(cid:1)10%

+10%

(cid:1)10%

311,439

220,747

31,144

(31,144)

22,075

(22,075)

27,017

(27,017)

19,150

(19,150)

Credit risk is the risk of loss resulting from the failure of a counterparty to honour its financial obligations to the
company and arises predominantly with respect to cash and cash equivalents, short term investments and
investments in debt instruments. The company’s cash and cash equivalents, and short term investments are
primarily held at the holding company in major financial institutions (principally in high credit-quality Canadian
financial institutions). There were no significant changes to the company’s exposure to credit risk (except as set out
in the discussion which follows) or the framework used to monitor, evaluate and manage credit risk at December 31,
2016 compared to December 31, 2015.

FAIRFAX INDIA HOLDINGS CORPORATION

The company’s aggregate gross credit risk exposure was comprised as follows:

Cash and cash equivalents
Restricted cash
Short term investments – U.S. treasury bills
Bonds:

Government of India
Indian corporate
Sanmar

Common stocks – Investment funds(1)
Interest receivable
Other assets:

Receivable from sale of investment funds
Prepaid interest on term loan

Total gross credit risk exposure

December 31, December 31,
2015
12,464
6,457
50,143

2016
146,960
18,810
27,428

130,317
99,447
299,093
–
7,493

26,525
582

123,448
389,341
–
48,445
27,680

–
–

756,655

657,978

(1) The company was exposed to indirect credit risk through its holdings of investment funds, which were primarily invested in

Indian fixed income securities.

At December 31, 2016 the company had income taxes refundable of $7,326 (December 31, 2015 – income taxes
payable of $9,386).

The company’s short term investments in U.S. treasury bills are rated Aaa by Moody’s Investors Service, Inc.
(‘‘Moody’s’’) and AA+ by Standard & Poor’s Financial Services LLC (‘‘S&P’’). The composition of the company’s fixed
income portfolio is presented in the table below:

Government of India bonds(1)
Indian corporate bonds(2)
Sanmar bonds(3)

Total bonds

December 31, 2016

December 31, 2015

Fair value
130,317
99,447
299,093

528,857

Rating
Baa3/BBB(cid:1)
AAA
BBB(cid:1)

Fair value
123,448
389,341
–

512,789

Rating
Baa3/BBB(cid:1)
AAA
–

(1) Rated Baa3 by Moody’s and BBB(cid:1) by S&P.
(2) Rated AAA by subsidiaries of a Designated Rating Organization (‘‘DRO’’), being DBRS Limited, S&P, Fitch Inc. and

Moody’s, or subsidiaries or affiliates of a DRO.

(3) Rated BBB(cid:1) by Brickworks Ratings, an Indian rating agency.

The company’s exposure to credit risk from its investment in fixed income securities increased at December 31, 2016
compared to December 31, 2015 reflecting the company’s sale of Indian corporate bonds rated as AAA to fund the
purchase of Sanmar bonds ($299,093) which are rated BBB(cid:1).

Liquidity Risk

Liquidity risk is the risk that the company will encounter difficulty in meeting obligations associated with financial
liabilities that are settled by delivering cash or another financial asset. The company manages liquidity risk by
maintaining sufficient cash and cash equivalents to enable settlement of financial commitments on their respective
due dates. All accounts payable and accrued liabilities are due within three months, and income taxes payable must
be remitted to the respective tax jurisdictions within six months.

The company believes that cash and cash equivalents at December 31, 2016, excluding the undeployed net proceeds
received from the term loan, provides adequate liquidity to meet the company’s known significant expenses in 2017,
which are principally comprised of investment and advisory fees, corporate income taxes and general and
administration expenses. The company expects to continue to receive investment income on its holdings of fixed
income securities and dividends from its equity investments to supplement its cash and cash equivalents. The net
proceeds from the Offerings (see note 8), together with net proceeds from the sale of a portion of the company’s
U.S. treasury bills, Government of India bonds or Indian corporate bonds will be sufficient to fund the anticipated
investment in BIAL, the 4.99% investment in IIFL (February 8, 2017) and the investment in Saurashtra (February 14,
2017), and will provide the residual funding required to repay the term loan by March 31, 2017. The company has
adequate working capital to support its operations.

Concentration Risk

The company’s cash and investments are primarily concentrated in India and in Indian businesses or businesses with
customers, suppliers or business primarily conducted in, or dependent on, India. The market value of the company’s
investments, the income generated by the company and the company’s performance will be particularly sensitive to
changes in the economic condition, interest rates, and regulatory environment of India. Adverse changes to the
economic condition, interest rates or regulatory environment in India may have a material adverse effect on the
company’s business, cash flows, financial condition and net earnings.

The company’s cash and investments composition by the issuer’s country of domicile was as follows:

Cash and cash equivalents

India

U.S.

719(1) 165,051(2)

Short term investments – U.S. treasury bills

–

27,428

Total
165,770

27,428

U.S.
India
6,554(1) 12,367

Total
18,921

–

50,143

December 31, 2016

December 31, 2015

Bonds:

Government of India
Indian corporate
Sanmar

Common stocks:

IIFL
NCML
Privi
Fairchem
NSE
Sanmar
Investment funds

130,317
99,447
299,093

528,857

265,951
146,586
54,315
45,488
26,504
440
–

539,284

–
–
–

–

–
–
–
–
–
–
–

–

130,317
99,447
299,093

123,448
389,341
–

528,857

512,789

265,951
146,586
54,315
45,488
26,504
440
–

220,747
146,445
–
–
–
–
48,445

539,284

415,637

–
–
–

–

–
–
–
–
–
–
–

–

123,448
389,341
–

512,789

220,747
146,445
–
–
–
–
48,445

415,637

Total cash and investments

1,068,860

192,479

1,261,339

934,980

62,510

997,490

(1)

Included cash and cash equivalents invested in Mauritius and Canada of $716 at December 31, 2016 (December 31,
2015 – $97 and restricted cash of $6,457).

(2)

Included restricted cash of $18,810 at December 31, 2016 (December 31, 2015 – nil).

The company’s holdings of common stocks and Sanmar bonds at December 31, 2016 and December 31, 2015 are
summarized by the issuer’s primary sector in the table below.

Financial and investment funds
Commercial and industrial

December 31, 2016 December 31, 2015
269,192
146,445

292,455
545,922

838,377

415,637

FAIRFAX INDIA HOLDINGS CORPORATION

During 2016 the company’s concentration risk in the financial and investments funds sector increased primarily due
to the investment in NSE ($26,504) and the increase in fair value of IIFL, partially offset by the sale of investment
funds, while the company’s concentration risk in the commercial and industrial sector increased primarily due to the
investments in Sanmar (common stock – $440 and bonds – $299,093), Privi ($54,315) and Fairchem ($45,488).

The company will not make an Indian Investment if, after giving effect to such investment, the total invested
amount of such investment would exceed 20% of the company’s total assets at the time of the investment; provided,
however, that the company is permitted to complete up to two Indian Investments where, after giving effect to each
such investment, the total invested amount of each such investment would be less than or equal to 25% of the
company’s total assets (the ‘‘Investment Concentration Restriction’’). The company’s Investment Concentration
Restriction limit increased to approximately $325 million at December 31, 2016 from approximately $250 million at
December 31, 2015 principally as a result of the net proceeds received from the term loan and net unrealized gains on
the company’s Indian Investments. Indian Investments may be financed through equity or debt offerings as part of
the company’s objective to reduce its cost of capital and provide returns to common shareholders.

On January 13, 2017 the company completed the Offerings (see note 8) and received net proceeds of $493,504,
increasing the Investment Concentration Restriction limit which would enable the company to complete the
anticipated investment in BIAL (see note 5).

Capital Management

The company’s objectives when managing capital are to safeguard its ability to continue as a going concern in order
to provide returns for common shareholders and to maintain an optimal capital structure to reduce the cost of
capital. The company will seek attractive risk-adjusted returns, but will at all times seek downside protection and
attempt to minimize the loss of capital. Total capital at December 31, 2016, comprising the term loan and total
common shareholders’ equity, was $1,299,218 compared to $1,013,329 at December 31, 2015.

On September 16, 2016 the company completed a 2-year secured term loan (see note 7). The term loan includes a
financial covenant that requires the company to maintain total common shareholders’ equity of not less than
$750,000. At December 31, 2016 the company was in compliance with the term loan covenants.

On January 13, 2017 the company completed an underwritten public offering and concurrent with the public
offering, Fairfax and OMERS acquired additional subordinate voting shares resulting in net proceeds of $493,504.
Net proceeds from the Offerings will provide financing to acquire additional Indian Investments and will be used for
general corporate purposes. Receipt of the proceeds from the Offerings triggered a mandatory prepayment clause in
the term loan requiring repayment of the $225,000 principal amount of the term loan by March 31, 2017
(see note 7).

12. Related Party Transactions

Payables to Related Parties

The company’s payable to related parties was comprised as follows:

Investment and advisory fees
Other

Investment Advisory Agreement

December 31, 2016 December 31, 2015
1,803
190

3,611
62

3,673

1,993

The company and its subsidiaries have entered into an agreement with Fairfax and the Portfolio Advisor to provide
administration and investment advisory services to the company (the ‘‘Investment Advisory Agreement’’). As
compensation for the provision of these services, the company pays an investment and advisory fee, and if
applicable, a performance fee. Such fees are determined with reference to the company’s total common shareholders’
equity.

Investment and Advisory Fee

The per annum investment and advisory fee is calculated as 0.5% of the value of undeployed capital and 1.5% of the
company’s total common shareholders’ equity less the value of undeployed capital.

For 2016, the company determined that the majority of its assets were invested in Indian Investments, which are
considered deployed capital. In 2016 the investment and advisory fee recorded in the consolidated statements of
earnings was $12,552 (2015 – $5,393).

Performance Fee

Management Compensation

Pursuant to the Investment Advisory Agreement, Fairfax is required to provide a Chief Executive Officer, a Chief
Financial Officer and a Corporate Secretary to the company. For so long as the Investment Advisory Agreement
remains in effect, all compensation payable to the Chief Executive Officer, the Chief Financial Officer and Corporate
Secretary of the company will be borne by Fairfax.

Director Compensation

Compensation for the company’s Board of Directors for the years ended December 31 was as follows:

Retainers and fees
Share-based payments
Other

2016
150
133
50

2015
131
132
50

333

313

The compensation presented above is determined in accordance with the company’s IFRS accounting policies and
may differ from the compensation presented in the company’s Management Proxy Circular.

Other

On February 8, 2017 the company acquired 15,853,000 common shares representing a 4.99% equity interest in IIFL
(see note 5 for details).

13. Segment Reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to
risks and returns that are different from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that is subject to risks and returns, that are
different from those of segments operating in other economic environments.

The company has concluded that Fairfax India is engaged in a single geographic and business segment, that of
investing in India and Indian Investments.

FAIRFAX INDIA HOLDINGS CORPORATION

14. General and Administration Expenses

General and administration expenses for the years ended December 31 were comprised as follows:

Brokerage fees
Audit, legal and tax professional fees
Salaries and employee benefit expenses
Administrative expenses
Other

2016
153
2,646
737
811
590

4,937

2015
978
2,899
580
665
393

5,515

15. Supplementary Cash Flow Information

Details of certain cash flows included in the consolidated statements of cash flows for the years ended December 31
were as follows:

(a) Purchases of investments classified as FVTPL

Bonds
Common stocks

(b) Sales of investments classified as FVTPL

Bonds
Common stocks

Interest received
Dividends received
Interest paid on term loan

(d) Income taxes paid

2016

2015

(299,642)
(123,997)

(819,118)
(408,954)

(423,639)

(1,228,072)

280,960
52,631

264,361
–

333,591

264,361

31,803
5,611
(3,190)

34,224

11,794
–
–

11,794

(13,500)

(1,573)

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations

Notes to Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . .
Business Developments

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indian Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indian Investments

Public Indian Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private Indian Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Condition

Capital Resources and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book Value per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting and Disclosure Matters

. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Evaluation of Disclosure Controls and Procedures
Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Estimates and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Significant Accounting Policy Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Risk Management

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other

Quarterly Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Prices and Share Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compliance with Corporate Governance Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

52
53
54
54

57
61
70
71

72
73
73
75
75

75
75
76
76
76

76
77

82
83
83
84

FAIRFAX INDIA HOLDINGS CORPORATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations
(as of March 10, 2017)

(Figures and amounts are in US$ and $ thousands except per share amounts and as otherwise indicated. Figures may not add
due to rounding.)

Notes to Management’s Discussion and Analysis of Financial Condition and Results of Operations

(1) Readers of the Management’s Discussion and Analysis of Financial Condition and Results of Operations
(‘‘MD&A’’) should review the entire Annual Report for additional commentary and information. Additional
information relating to the company, including its annual information form, can be found on SEDAR at
www.sedar.com. Additional information can also be accessed from the company’s website www.fairfaxindia.ca.

(2) The MD&A contains references to book value per share. On any date, book value per share is calculated as
total common shareholders’ equity divided by the total number of common shares of the company
outstanding on that date. Book value per share is a key performance measure of the company and is closely
monitored as it is used to calculate the performance fee payable, if any, to Fairfax Financial Holdings Limited
(‘‘Fairfax’’). The performance fee is paid for the period from January 30, 2015 to December 31, 2017 and for
each consecutive three-year period thereafter, and is calculated, on a cumulative basis, as 20% of any
increase in total common shareholders’ equity (including distributions) above a 5% per annum increase.

(3) Unless otherwise noted, consolidated financial information of the company within this MD&A is derived
from the consolidated financial statements of the company prepared in accordance with International
Financial Reporting Standards (‘‘IFRS’’) as issued by the International Accounting Standards Board (‘‘IASB’’),
and is presented in U.S. dollars with the Indian rupee as the functional currency of the company and its
consolidated subsidiaries.

Business Developments

Overview

Fairfax has taken the initiative in creating the company and is Fairfax India’s ultimate parent and acts as its
administrator. Fairfax is a holding company which, through its subsidiaries, is principally engaged in property and
casualty insurance and reinsurance and the associated investment management. Fairfax is a Canadian reporting
issuer with securities listed on the Toronto Stock Exchange (‘‘TSX’’) and trading in Canadian dollars under the
symbol FFH for over 30 years and in U.S. dollars under the symbol FFH.U.

In the first quarter of 2015 Fairfax India completed its initial public offering (‘‘IPO’’) of 50,000,000 subordinate
voting shares at a price of $10.00 per share for gross proceeds of $500,000. The company’s subordinate voting shares
commenced trading on January 30, 2015 on the TSX under the symbol FIH.U.

Concurrent with the IPO, the company issued to Fairfax and its affiliates 30,000,000 multiple voting shares of the
company on a private placement basis, for gross proceeds of $300,000. The multiple voting shares are not listed. Also,
concurrent with the closing of the IPO, the company issued to certain cornerstone investors 20,578,947 subordinate
voting shares, on a private placement basis, for gross proceeds of $205,789. The combined gross proceeds of the IPO
and private placements were $1,005,789.

expenses of $6,500. Net proceeds from the Offerings will provide financing to acquire additional Indian Investments
and will be used for general corporate purposes. Receipt of the proceeds from the Offerings triggered a mandatory
prepayment clause in the term loan requiring repayment of the $225,000 principal amount of the term loan by
March 31, 2017 (see note 7 (Term Loan) to the consolidated financial statements for the year ended
December 31, 2016).

Indian Investments

Subsequent to December 31, 2016

Public Indian Investments

Investment in IIFL Holdings Limited

On February 8, 2017 the company, through its wholly-owned subsidiaries, acquired 15,853,000 common shares
representing a 4.99% equity interest in IIFL Holdings Limited (‘‘IIFL’’) for total consideration of $75,175 (5.1 billion
Indian rupees). In connection with the transaction, Fairfax, through its subsidiaries, disposed of derivative
instruments representing an economic interest of 4.99% in IIFL.

In accordance with regulations of the Securities and Exchange Board of India (‘‘SEBI’’) and the National Stock
Exchange of India, the transaction was subject to certain sale and purchase pricing guidelines and, as a result, the
total consideration paid per share approximated the fair market value of the common share equity interest acquired.
After giving effect to the shares acquired, the company held 26.7% of the outstanding common shares of IIFL.

Private Indian Investments

Investment in Saurashtra Freight Private Limited

Investment in Bangalore International Airport Limited

Fairfax India is permitted to complete up to two Indian Investments where such investment would be less than or
equal to 25% of the company’s total assets (see note 11 (Financial Risk Management) under the heading
‘Concentration Risk’ to the consolidated financial statements for the year ended December 31, 2016). On January 13,
2017 the company received net proceeds of $493,504 from an underwritten public offering and private placements
(see note 8 (Total Equity) to the consolidated financial statements for the year ended December 31, 2016) that
resulted in an increase in the company’s total assets and investment concentration restriction limit. After giving
effect to this transaction, the investment concentration restriction limit increased providing the company with the
ability to acquire the total 38.0% investment in BIAL. The anticipated cost for the 38.0% common share equity
interest in BIAL is approximately $379 million (approximately 25 billion Indian rupees).

FAIRFAX INDIA HOLDINGS CORPORATION

Operating Environment

Overview

India has emerged as the fastest growing major economy in the world according to the Central Statistics
Organization and the International Monetary Fund. According to the International Monetary Fund, the Indian
economy will continue to grow more than 7% in the financial year 2017-18. The improvement in India’s economic
fundamentals has accelerated in recent years with the combined impact of strong government reforms and the
Reserve Bank of India’s (‘‘RBI’’) inflation focus supported by favourable global commodity prices.

Government Initiatives

Numerous foreign companies are setting up their facilities in India on account of various government initiatives like
‘‘Make in India’’ and ‘‘Digital India’’. Mr. Narendra Modi, Prime Minister of India, has launched the Make in India
initiative with an aim to boost the manufacturing sector of the Indian economy. This initiative is expected to
increase the purchasing power of an average Indian consumer, which would further boost demand, and hence spur
development, in addition to benefiting investors. Currently, the manufacturing sector contributes over 15% of
India’s GDP. The Government of India, under the Make in India initiative, is providing incentives across various
sectors to achieve a higher percentage of GDP from the manufacturing sector. The Digital India initiative focuses on
three core components: creation of digital infrastructure, delivering services digitally and increasing digital literacy.

Demonetization

On November 8, 2016 the Government of India announced the demonetization of all Indian rupee 500
(approximately $7.50) and 1,000 (approximately $15) banknotes. The Government of India claimed that the action
would curtail the shadow economy and suppress on the use of illicit and counterfeit cash to fund illegal activity and
terrorism. The sudden nature of the announcement and the prolonged cash shortages in the weeks that followed,
created significant disruption throughout the economy, threatening economic output. The action was considered to
have reduced India’s GDP and industrial production over the short term but it is anticipated that these effects will
disappear in 2017 as the currency circulation normalizes.

Business Objectives

Investment Objective

Fairfax India is an investment holding company whose objective is to achieve long term capital appreciation, while
preserving capital, by investing, either directly or through one of its wholly-owned subsidiaries, in public and private
equity securities and debt instruments in India and Indian businesses or other businesses with customers, suppliers
or business primarily conducted in, or dependent on, India (‘‘Indian Investments’’).

Investment Strategy

The company invests in businesses that are expected to benefit from India’s pro-business political environment, its
growing middle class and its demographic trends that are expected to underpin strong growth for several years.
Sectors of the Indian economy that the company believes will benefit most from such trends include infrastructure,
financial institutions, consumer services, retail and exports. The company is not limited to investing solely in these
sectors and intends to invest in other sectors as and when opportunities arise.

The company utilizes, and expects to benefit significantly, from the experience and expertise of Fairfax and the
Portfolio Advisor.

The company employs a conservative, fundamental value-based approach to identifying and investing in high
quality public and private Indian businesses. This approach is designed to compound book value per share over the
long term. The company will seek attractive risk-adjusted returns, but will at all times seek downside protection and
attempt to minimize the loss of capital.

The company intends to make Indian Investments with a view to be a strategic partner to grow the business and as a
result optimize investment returns for the shareholders of Fairfax India. The level and nature of this strategic
relationship will vary by investment. It may include one or more of the following, as deemed appropriate by the
company: (i) board appointment or nomination rights; (ii) board observer rights; (iii) input on management
selection; (iv) the provision of managerial assistance; and (v) ongoing monitoring and cooperation with the board
and management of the portfolio business to ensure that its strategy is being implemented in a manner that is
consistent with the investment objectives of the company and with the company’s and Fairfax’s fundamental values
(as set forth in Fairfax’s guiding principles which are included in Fairfax’s publicly available annual reports).

Fairfax India’s involvement with the Indian Investments may include providing specialized guidance or expertise in
limited circumstances or on a temporary basis and does not extend to any involvement in the day-to-day operations
of those operations. Activities are expected to be ancillary and undertaken to maximize returns from investments.
Board representation is sought only to maintain protective rights and to maximize the value of the company’s
investment for its shareholders.

Investment Selection

To identify potential investments, the company principally relies on the expertise of the Portfolio Advisor and
its affiliates.

The following is an illustrative list of criteria that the company and the Portfolio Advisor believe to be paramount
when identifying and investing in Indian Investments:

Attractive valuation – The company’s conservative fundamental value approach leads it to focus on businesses that
have positive, stable cash flows that can be purchased at discounted multiples. The company does not invest in
start-up businesses or businesses that have speculative business plans.

Experienced and aligned management – The company focuses on businesses with experienced, entrepreneurial
management teams with strong, long term track records. The company generally requires the portfolio businesses to
have in place, either prior to or immediately following investment by the company, proper incentives to drive the
businesses’ profitability.

Strong competitive position in industry – The company seeks to invest in businesses that hold leading market positions,
possess strong brand power and are well-positioned to capitalize on the growth opportunities in the Indian economy.
The company also seeks to invest in businesses that demonstrate significant competitive advantages as compared to
their peers and that position them to protect their market position and profitability.

Alignment of the management team with the values of the company – The company, Fairfax and the Portfolio Advisor all
seek to adhere to the highest standards of business practices and ethics. The company requires that the management
teams at each of its portfolio businesses adhere to a similar standard of business practices and ethics and adhere to the
company’s fundamental values, as described above.

The Portfolio Advisor and its affiliates conduct thorough due diligence investigations when evaluating any Indian
Investment prior to a recommendation to the company and its subsidiaries to make the investment. This generally
includes consultations with Fairfax’s network of current and former management teams, consultants, competitors,
investment bankers and senior executives to assess, among other things, the industry dynamics, the character of the
management team and the viability of the business plan.

More specifically, due diligence in respect of a particular investment opportunity typically includes, among other
items as deemed necessary from time to time: (i) review of historical and projected financial information; (ii) on-site
visits; (iii) interviews with management, employees, customers and vendors; (iv) review of material agreements;
(v) background checks; and (vi) research relating to the businesses’ management, industry, markets, products and
services, and competitors.

FAIRFAX INDIA HOLDINGS CORPORATION

Investment Restrictions

On January 13, 2017 the company completed the Offerings and received net proceeds of $493,504, increasing the
Investment Concentration Restriction limit which would enable the company to complete the anticipated
investment in BIAL.

The company intends to make multiple different investments as part of its prudent investment strategy. The
company will invest the net proceeds from the Offerings that comply with the Investment Concentration
Restriction. At December 31, 2016 the company determined that it was in compliance with these investment
restrictions. With the completion of the investments in the National Stock Exchange of India Limited and Privi
Organics Limited in the third quarter of 2016, the company satisfied the voluntarily-adopted measure (set forth in
the IPO prospectus) that it would invest the net proceeds from the IPO in at least six different Indian Investments.

Indian Investments

Cautionary Statement Regarding Financial Information of Significant Indian Investments

Fairfax India has agreed to voluntarily provide within the MD&A, summary financial information prepared in
accordance with IFRS for all of its Indian Investments in which it had previously filed a business acquisition report in
accordance with section 8.2 of National Instrument 51-102 Continuous Disclosure Obligations (‘‘NI 51-102’’). National
Collateral Management Services Limited (‘‘NCML’’), IIFL and Sanmar Chemicals Group (‘‘Sanmar’’) (collectively,
‘‘Significant Indian Investments’’) prepare their financial statements in accordance with Indian Generally Accepted
Accounting Principles (‘‘Indian GAAP’’). Fairfax India is limited in respect to the amount of independent verification
it is able to perform with respect to the Significant Indian Investments financial statements. The unaudited
summarized financial information contained in this MD&A was prepared exclusively for Fairfax India. Such
unaudited financial information is the responsibility of the respective managements and has been prepared by them
using recognition, measurement and presentation principles consistent with IFRS as issued by the IASB, and
provided to the company in Indian rupees.

The company’s Significant Indian Investments fiscal years end on March 31. Summary financial information of the
company’s Significant Indian Investments has been provided primarily relating to the periods subsequent to the
company’s investment and to the extent that the latest interim financial information is available to the company’s
management.

Significant Indian Investments summarized financial information should be read in conjunction with Fairfax India’s
historical consolidated financial statements including the notes thereto and the related MD&A as well as Fairfax
India’s other public filings.

Fairfax India has no knowledge that would indicate that the Significant Indian Investments summarized financial
information contained herein requires material modifications. However, readers are cautioned that the Significant

Indian Investments summarized financial information contained in the MD&A may not be appropriate for
their purposes.

The table below provides a summary of the company’s Indian Investments completed at December 31, 2016, and the
additional Indian Investments completed and/or committed to subsequent to December 31, 2016:

Date Acquired

Ownership %

Initial
transaction
price

Fair value at
December 31,

2016 Net change

At December 31, 2016
Public Indian Investments:

IIFL
Fairchem

Private Indian Investments:

NCML
Sanmar
Sanmar Bonds
Privi
NSE

Total Indian Investments completed at

December 31, 2016

Subsequent to December 31, 2016
Public Indian Investments:

IIFL

Private Indian Investments:

Saurashtra
BIAL

Total additional Indian Investments
completed and/or committed to
subsequent to December 31, 2016

December 2015
February 2016

August 2015
April 2016
April and September 2016
August 2016
July 2016

21.7%
44.9%

88.1%
30.0%
–
50.8%
1.0%

201,559
19,409

220,968

148,716
1,000
299,000
54,975
26,783

530,474

265,951
45,488

311,439

146,586
440
299,093
54,315
26,504

526,938

64,392
26,079

90,471

(2,130)
(560)
93
(660)
(279)

(3,536)

751,442

838,377

86,935

February 2017

4.99%

75,175

February 2017
Committed

51.0%
38.0%

30,018
379,000

409,018

484,193

1,235,635

Public Indian Investments

Set out and discussed below are the public Indian Investments held by the company at December 31, 2016 whose
shares are listed on both the Bombay Stock Exchange (‘‘BSE’’) and the National Stock Exchange (‘‘NSE’’) of India.

IIFL Holdings Limited

Business Overview

IIFL Holdings Limited (‘‘IIFL’’) was incorporated in 1995 and is a publicly traded, diversified financial services
holding company located in Mumbai, India with principal lines of business in a non-banking finance company,
wealth management, and capital markets and other activities (comprised of retail broking, institutional equities,
investment banking and financial products distribution). IIFL serves over 3.5 million customers from 2,250 service
locations and over 1,000 branches across India. It also has an international presence, with offices in New York,
London, Geneva, Singapore, Hong Kong, Dubai and Mauritius.

IIFL’s principal lines of business are as follows:

Non-Banking Finance Company

IIFL’s non-banking finance company (‘‘NBFC’’) and housing finance company are diversified financing companies,
offering loans secured against collaterals of home, property, gold, commercial vehicles, shares and other securities as
well as offering loans to small and medium sized businesses. At December 31, 2016 IIFL’s NBFC managed assets worth
approximately $3 billion (211 billion Indian rupees) where retail mortgage and gold loans represented
approximately 52% and 14%, respectively, of the managed assets. The housing financing company offers home loans
in the affordable housing segment and focuses on mortgage loans to small and medium sized businesses.

FAIRFAX INDIA HOLDINGS CORPORATION

Wealth Management

Wealth management is the fastest growing business in IIFL and is one of the leading wealth managers in India. At
December 31, 2016 IIFL’s wealth management division was amongst the top six mutual fund distributors in India
and had approximately $16 billion (1,070 billion Indian rupees) of assets under advice, distribution and
management. This division was a pioneer in launching alternate investment funds across equity, real estate and high
yield debt. The division’s strong growth is driven by all of its varied business segments: distribution services, asset
management, credit, advisory and wealth structuring solutions. It has created a niche by providing unique solutions
for its clients in the areas of succession planning, asset protection and administration services. In February 2016 IIFL
launched Wealth NBFC that primarily offers loans to high net worth clientele, where investment securities are
received as loan collateral. At December 31, 2016 IIFL’s Wealth NBFC had a loan book of approximately $430 million
(29 billion Indian rupees).

Capital Markets and Other Activities

IIFL is a leading online and offline broking and financial advisory services provider to retail and institutional clients
and is well known for high quality research in India.

IIFL is one of the largest non-bank retail broking houses in India offering trading and advisory services to retail clients
via its website, mobile application and branch network. Over the past two decades, IIFL has created a brand, powered
by informed research and cutting-edge technology, extensive footprint, high service standards and competitive
brokerage. IIFL also offers currency and commodities broking and the distribution of financial service products such
as mutual funds and life insurance to retail clients.

IIFL’s shares are listed on both the BSE and the NSE of India.

Additional information can also be accessed from IIFL’s website www.iifl.com.

Transaction Description

On December 1, 2015 Fairfax India acquired 68,788,445 common shares of IIFL representing a 21.9% ownership
interest at a price of $2.93 per share (195 Indian rupees) for total consideration of $201,559 (approximately
13.4 billion Indian rupees). Prior to the company’s investment in IIFL, Fairfax, through its subsidiaries, owned 8.9%
of the issued and outstanding IIFL common shares, and had an economic interest in another 5.2% of IIFL common
shares through derivative instruments (all acquired prior to the establishment of Fairfax India).

At December 31, 2016 the company held 21.7% of the outstanding common shares of IIFL. FIH Mauritius and the
Fairfax affiliates have undertaken not to exercise voting rights on IIFL shareholder resolutions for any IIFL shares
exceeding 25% of the issued and outstanding IIFL common shares at the time of voting, effectively limiting voting to
25% even in cases where FIH Mauritius and the Fairfax affiliates own more than 25% of the IIFL shares.

Fairfax had invested in IIFL prior to the company’s December 1, 2015 investment and was able to recommend for
appointment one board representative, out of the eight board members, which Fairfax has maintained since 2012. At
December 31, 2016 the company did not have any additional board representation in IIFL, but is considered to have
board representation through the original Fairfax board representative.

On February 8, 2017, as noted in the ‘Business Developments’ section of this MD&A under the heading ‘Indian
Investments’, the company acquired 15,853,000 common shares representing a 4.99% equity interest in IIFL for total
consideration of $75,175 (5.1 billion Indian rupees). In connection with the transaction, Fairfax, through its
subsidiaries, disposed of derivative instruments representing an economic interest of 4.99% in IIFL. After giving
effect to the shares acquired, the company held 26.7% of the outstanding common shares of IIFL.

Key business drivers, events and risks

IIFL’s key business drivers will be the growth and penetration of their financial services products, particularly in the
areas of lending and wealth management.

Demonetization announced by the Government of India in November 2016 negatively impacted IIFL’s revenues in
the short term. IIFL’s continued focus on and investments in digitization enabled them to mitigate the impact of
demonetization as they had a ready platform to conveniently accept cashless payments from customers, the ability
to make collections through tablets and a self-help portal for quick query resolution.

During the quarter ended September 30, 2016 IIFL’s NBFC subsidiary issued 43,334,409 compulsorily convertible
preference shares (‘‘CCPS’’) and 100 equity shares to CDC Group PLC (‘‘CDC’’) for approximately a 15% ownership
on a fully diluted basis in IIFL’s wholly-owned NBFC subsidiary and received total consideration of approximately
$150 million (approximately 10.1 billion Indian rupees). The investment by CDC will help IIFL’s NBFC subsidiary in
expanding the lending business and address the capital needs of the under-served segments.

During the quarter ended September 30, 2016 CRISIL, India’s top rating agency (controlled by S&P), upgraded the
rating for India Infoline Finance Ltd, the non-banking finance arm of IIFL, and its subsidiary India Infoline Housing
Finance Ltd, to CRISIL AA/Stable from CRISIL AA-/Stable. The rating is applicable on the long term debt instruments
of the above noted IIFL subsidiaries. The upgrade in rating primarily reflected the improved capital position of IIFL’s
subsidiaries, a well diversified business risk profile, and a presence across the financial services space with an
increasing focus towards retail lending. The rating upgrade by CRISIL will decrease IIFL’s cost of funding in future
reporting periods.

Valuation and Consolidated Financial Statement Impact

IIFL’s shares are publicly traded in India. Accordingly, the company determined the fair value of its investment in
IIFL using the bid prices at December 31, 2016 and 2015, without adjustments or discounts.

In 2016 the consolidated statements of earnings included unrealized gains on investments of $51,305 (2015 –
$18,559) related to the company’s investment in IIFL. IIFL’s share price increased from 212.30 Indian rupees per
share at December 31, 2015 to 262.40 Indian rupees per share at December 31, 2016 which the company believes was
primarily related to the robust performance of the NBFC subsidiary and the Wealth Management division of
the company.

In 2016 the consolidated statements of earnings included dividend income earned from the investment in IIFL of
$4,352 (2015 – nil).

IIFL’s Summarized Financial Information

The company’s fiscal year ends on December 31 and IIFL’s fiscal year ends on March 31. Summarized below are IIFL’s
balance sheets at September 30, 2016 and March 31, 2016.

Balance Sheets
(unaudited – US$ thousands)

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity

September 30, 2016(1) March 31, 2016(1)
1,846,590
1,630,821
1,456,112
1,429,520
591,779

2,509,396
2,006,664
2,147,269
1,574,213
794,578

(1) The net assets of IIFL were translated at September 30, 2016 at $1 U.S. dollar = 66.58 Indian rupees and at March 31,
2016 at $1 U.S. dollar = 66.22 Indian rupees. The exchange rates used were the spot rates prevailing on those respective
dates.

Current assets increased by $662,806 to $2,509,396 at September 30, 2016 from $1,846,590 at March 31, 2016
primarily due to increased investments in fixed deposits, short term investments, mutual funds, and loans and
receivables as a result of the growth in IIFL’s NBFC segment. The growth within the NBFC segment primarily related

FAIRFAX INDIA HOLDINGS CORPORATION

to retail (low risk retail mortgage loans) and commercial vehicle financing, partially offset by declines in large
mortgages.

Non-current assets increased by $375,843 to $2,006,664 at September 30, 2016 from $1,630,821 at March 31, 2016
primarily due to increased holdings of long term investments and loans and advances (primarily growth in the NBFC
segment, as noted above). The increases in long term investments principally related to investing part of the short
term and long term loans entered into during the period into long term investments, and investing into long term
investments the proceeds received from CDC on the CCPS and equity issuance of approximately $150 million
(approximately 10.1 billion Indian rupees) for approximately a 15% ownership on a fully diluted basis in IIFL’s
wholly-owned NBFC subsidiary.

Current liabilities increased by $691,157 to $2,147,269 at September 30, 2016 from $1,456,112 at March 31, 2016
primarily due to an increase in short term interest bearing loans and borrowings to support the growth in the
NBFC segment.

Non-current liabilities increased by $144,693 to $1,574,213 at September 30, 2016 from $1,429,520 at March 31,
2016 primarily due to an increase in long term interest bearing loans and borrowings to support the growth in the
NBFC segment.

Summarized below is IIFL’s statement of earnings for six months ended September 30, 2016.

Statement of Earnings
(unaudited – US$ thousands)

Revenue
Net earnings before taxes
Net earnings

Six months ended
September 30, 2016(1)
333,009
77,587
52,260

(1) Amounts for the six months ended September 30, 2016 were translated into US$ using the average exchange rates of

$1 U.S. dollar = 66.93 Indian rupees prevailing during that period.

For the six months ended September 30, 2016, IIFL’s revenue and net earnings of $333,009 and $52,260 respectively,
were primarily driven by activities of the NBFC segment, primarily related to retail (low risk retail mortgage loans)
and commercial vehicle financing, partially offset by declines in large mortgages. IIFL’s management continues to
focus on reducing operating costs to achieve better economies of scale and leverage existing infrastructure to offer
complementary products across multiple segments. The rating upgrade by CRISIL will decrease IIFL’s cost of funding
in future reporting periods.

Fairchem Speciality Limited

Business Overview

Fairchem Speciality Limited (‘‘Fairchem’’, formerly known as Adi Finechem Limited) was incorporated in 1985 and
publicly listed its shares on the BSE in 1995 and NSE in 2015. Fairchem is a specialty chemical manufacturer located
in Ahmedabad, India. Fairchem manufactures oleochemicals used in the paints, inks and adhesives industries, as
well as intermediate nutraceutical and health products. It has developed an in-house technology that uses
machinery designed and manufactured by leading European companies to separate and convert waste generated
during the production of soy, sunflower, corn and cotton oils into valuable nutraceutical and fatty acids. Fatty acids
go into non-edible products like soaps, personal care products, paints, and nutraceutical products that are used in the
manufacturing of natural vitamin E and corticosteroids.

Fairchem has expanded its capacity from 8,000 tonnes per annum in 2010 to 45,000 tonnes per annum as at
December 31, 2016, making it one of the largest processing capacity companies of natural soft oil based fatty acids in
India. Fairchem’s business is a single business segment which is specialty chemicals and they have customers that
include major domestic inks and paint manufacturers, and multinational natural vitamin E and sterol
manufacturers.

Fairchem’s shares are listed on both the BSE and the NSE of India.

Additional information can also be accessed from Fairchem’s website www.fairchem.in.

Transaction Description

On February 8, 2016 Fairfax India, through its wholly-owned subsidiary, acquired 44.7% of the common shares of
Fairchem at a price per share of $3.13 (212 Indian rupees) for total consideration of $19,409 (approximately
1.3 billion Indian rupees). Refer to the Private Indian Investments heading under the sub-heading Privi Organics
Limited within this Indian Investments section of this MD&A for a discussion of a merger arrangement involving
Fairchem and Privi Organics Limited.

At December 31, 2016 the company held 44.9% of the outstanding common shares of Fairchem.

At December 31, 2016 the company had appointed two of the twelve Fairchem board members.

Key business drivers, events and risks

Fairchem’s key business drivers will be the growth of its oleochemicals business and forward integration into value
added products, such as fatty alcohols and natural vitamin streams. With rising environmental concerns, the use of
oleochemicals is growing in lubricants, paper printing, paints and coatings, and animals feed industries. As a result of
the increasing demands for sustainable and biodegradable chemicals, oleochemicals markets have been experiencing
strong growth in recent years.

India is the one of the largest consumers of soft oils, providing Fairchem with a competitive advantage of having
good access to raw materials used in their manufacturing processes. Given the close proximity to raw materials,
oleochemicals production has shifted from developed countries (U.S. and Europe) to Asia (India, Malaysia and
Indonesia). The lower cost of raw materials and their efficient manufacturing processes enable Fairchem to benefit
from its competitive advantages in comparison to its global peers. Fairchem has a strong market presence for some of
its products, with little or no competition, and is viewed to produce a superior quality product compared to its
competitors from China. Fairchem is exposed to limited availability of raw materials (primarily soya oils) which are
used in its manufacturing processes and as a result may impact its ability to meet higher demand.

Fairchem needed to develop a strong business relationship with a new U.S. based customer as the customer was
emerging as a dominant player in the natural tocopherols, natural vitamin E and sterols markets. To avoid any
product rejection, a joint detailed process and equipment audit was completed, which resulted in plant upgrades and
modifications. Fairchem successfully started supplying to the U.S. based customer in October 2016, but the plant
upgrades and modifications resulted in production losses and increased capital expenditures that negatively
impacted Fairchem’s net earnings during the period.

Valuation and Consolidated Financial Statement Impact

Fairchem’s shares are publicly traded in India. Accordingly, the company determined the fair value of its investment
in Fairchem using the bid price at December 31, 2016, without adjustments or discounts.

In 2016 the company’s consolidated statements of earnings included unrealized gains on investments of $26,399
(2015 – nil) related to its investment in Fairchem. The company believes the increase in Fairchem’s trading price
from 212.00 Indian rupees per share at the transaction date (February 8, 2016) to 498.10 Indian rupees per share at
December 31, 2016 was primarily a result of the announced merger of Fairchem and Privi and the growth of
Fairchem’s revenues.

Private Indian Investments

Cautionary Statement Regarding the Valuation of Private Indian Investments

In the absence of an active market for its private Indian Investments, fair values for these investments are determined
by management using industry acceptable valuation methodologies after considering the history and nature of the
business, operating results and financial conditions, outlook and prospects, general economic, industry and market
conditions, contractual rights relating to the investment, public market comparables (if available) and, where
applicable, other pertinent considerations. The process of valuing investments for which no active market exists is
inevitably based on inherent uncertainties and the resulting values may differ from values that would have been used
had an active market existed. The amounts at which the company’s private Indian Investments could be disposed of
may differ from the fair values assigned and those differences may be material.

FAIRFAX INDIA HOLDINGS CORPORATION

National Collateral Management Services Limited

Business Overview

National Collateral Management Services Limited (‘‘NCML’’) is a leading private agricultural commodities company
in India that has operated for over 12 years and is now preparing to expand to take advantage of the significant
market potential in India’s under-developed agricultural storage industry with the support of and investment from
Fairfax India. NCML has a network of over 6 regional offices and operates in the mid-stream post-harvest agriculture
value chain by offering end-to-end solutions in grain procurement, testing, storage and preservation, and collateral
management. NCML was promoted by a consortium of banks, cooperatives and the National Commodity and
Derivatives Exchange Limited (‘‘NCDEX’’) in 2004 as a warehousing and collateral management company to support
commodity trading on NCDEX and has since evolved into a significant player in India.

NCML’s principal lines of business are as follows:

Warehousing and Collateral Management

NCML’s warehousing segment is comprised of over 1.5 million metric tons of storage capacity across 952 warehouses
in 18 states in India and is a market leader with over a 45% market share within its collateral management segment.

Supply Chain Management

NCML’s supply chain management segment provides end-to-end procurement, testing and certification, logistics,
trading and disposal services, throughout the entire agriculture value chain. NCML’s clients include bulk consumers,
large end users and farmers.

Non-banking Finance Company (‘‘NBFC’’)

During 2016 NCML launched its wholly-owned subsidiary, NCML Finance Pvt. Ltd (‘‘NFin’’). NFin is an RBI
registered NBFC with a focus on rural and agri-business financing. With its extensive reach and over a decade of
experience, NCML has realized that despite the presence of numerous financial entities in the rural and agriculture
value chain, the small and marginal farmer segment remains underpenetrated. NFin provides a seamless facility for
NCML’s customers to receive post-harvest financing.

While NFin intends to offer a complete suite of financial products in the agriculture and rural domain going forward,
it initially started its operations by offering loans secured by warehouse receipts for commodities kept in the custody
of NCML to bulk consumers, farmer producers’ organizations and aggregators.

Additional information can also be accessed from NCML’s website www.ncml.com.

Transaction Description

On August 19, 2015 the company, through its wholly-owned subsidiary, acquired a 73.6% ownership interest in
NCML by acquiring 23,326,335 newly issued common shares and 71,050,691 common shares from certain existing
shareholders for an aggregate investment of $124,244 (approximately 8.1 billion Indian rupees).

At December 31, 2016 the company had appointed three of the seven NCML board members.

Key business drivers, events and risks

NCML’s key business drivers will be the long term modernization of its grain storage facilities, the development of its
new financing subsidiary, and the expansion of its supply chain management segment.

The Food Corporation of India (‘‘FCI’’) is a government agency responsible for distribution of food grains throughout
India. The majority of commodity storage in India is in facilities owned or leased directly by the government with
only about 5% stored in organized private warehouses owned by companies that provide warehousing, storage and
preservation services like NCML. The current storage capacity in India is approximately 125 million metric tons, of
which 75% is government owned. The Government of India is reviewing the process of acquiring, storing and

distributing food grains with the outcome expected to result in a new distribution model that is focused on a
public/private partnership. There are a few large national-level players (like NCML) which own and/or run high
quality infrastructure and provide diverse ancillary services to warehousing customers who stand to benefit from
potential changes in the industry.

As a result of recently announced fiscal and non-fiscal changes in agriculture and food policy, private companies like
NCML are enhancing their range of services provided to Indian farmers, traders, food processors, banks, the
government and other businesses connected to the agriculture supply chain. This is expected to significantly
improve efficiencies to help India achieve its stated national objective of greater food security.

During the fourth quarter of 2016 the Indian agriculture commodity landscape showed mixed results in the wake of
the demonetization decision taken by the Government of India on November 8, 2016. In the first eight weeks post
demonetization, arrivals of the summer crop harvest dropped considerably as farmers and aggregators transact
largely in cash due to the limited banking infrastructure and the increased operational ease of transacting in cash.
This negatively impacted the deposits into NCML’s warehouses. In addition, the collateral management segment of
NCML saw closures of a large number of accounts as clients used the old currency to repay and close their loan
accounts, and the banks faced a lower credit demand, partly on account of the demonetization decision as well as the
non-availability of cash withdrawal facilities from banks that constrained the purchase of fresh produce from
farmers. In view of the above developments, the warehousing and collateral management segments were negatively
impacted and the company’s revenue and profitability decreased during this period. The other divisions of the
company (Supply Chain, Testing and Certification and Weather Intelligence), however, performed reasonably well
and partially offset the lower profitability in the warehousing and collateral management segment. The impact of the
demonetization started to ease towards the end of December 2016 and NCML anticipates a strong performance in
the first quarter of 2017.

After receiving encouraging responses from private players for the construction of six silos with a 250,000 tonne
capacity, the FCI had called for bids for building 27 additional silos which will be located in the states of Punjab,
Haryana, Uttar Pradesh, West Bengal, Bihar and Gujarat, and will have an estimated combined grain storage capacity
of 1.35 million metric tons. NCML submitted bids for all 27 locations and was awarded a 30 year concession
agreement to build 11 of the locations with a 550,000 metric ton capacity which will require capital expenditure of
an estimated $100 million (approximately 7.0 billion Indian rupees). NCML anticipates that most of the capital
expenditure requirements will be able to be financed internally.

Valuation and Consolidated Financial Statement Impact

At December 31, 2016 the company estimated fair value using a discounted cash flow analysis based on multi-year
free cash flow projections with assumed after-tax discount rates ranging from 11.9% to 15.8% and a long term
growth rate of 6.0%. Free cash flow projections were based on EBITDA projections from financial information for
NCML’s business units that had been prepared in the fourth quarter of 2016 by NCML’s management. Discount rates
were based on the company’s assessment of risk premiums to the appropriate risk-free rate of the economic
environment in which NCML operates. At December 31, 2016 the company’s internal valuation model indicated
that the fair value of the common shares was $146,586 (2015 – $146,445), resulting in an unrealized gain of $3,879
(2015 – nil), largely offset by an unrealized foreign currency translation loss of $3,738 (2015 – loss of $2,271) which
were recorded in net unrealized gains on investments in the consolidated statements of earnings and in the
consolidated statements of comprehensive income, respectively, in 2016. The net unrealized gain of $3,879 was
primarily driven by the growth in NCML’s supply chain business and the success of the new NBFC segment.

FAIRFAX INDIA HOLDINGS CORPORATION

NCML’s Summarized Financial Information

The company’s fiscal year ends on December 31 and NCML’s fiscal year ends on March 31. Summarized below are
NCML’s balance sheets at December 31, 2016 and March 31, 2016.

Balance Sheets
(unaudited – US$ thousands)

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity

December 31, 2016(1) March 31, 2016(1)
80,531
54,582
36,599
21,342
77,172

84,825
58,915
45,281
22,614
75,845

(1) The net assets of NCML were translated at December 31, 2016 at $1 U.S. dollar = 67.87 Indian rupees and at March 31,
2016 at $1 U.S. dollar = 66.22 Indian rupees. The exchange rates used were the spot rates prevailing on those respective
dates.

Current assets increased by $4,294 to $84,825 at December 31, 2016 from $80,531 at March 31, 2016 primarily
reflecting an increase in inventory with the commencement of Kharif season (typically crops planted and harvested
June through October and relate primarily to rice and corn) resulting in increased grain procurement, partially offset
by a decrease in trade receivables.

Non-current assets increased by $4,333 to $58,915 at December 31, 2016 from $54,582 at March 31, 2016 primarily
driven by an increase in property, plant and equipment relating to the capitalization of the ongoing warehousing
projects.

Current liabilities increased by $8,682 to $45,281 at December 31, 2016 from $36,599 at March 31, 2016 primarily
due to increases in short term loans and borrowings and other payables relating to customer advances for grain
procurement during Kharif season.

Non-current liabilities increased by $1,272 to $22,614 at December 31, 2016 from $21,342 at March 31, 2016
primarily due to an increase in long term loans and borrowings relating to the financing obtained for the ongoing
warehousing projects.

Summarized below are NCML’s statements of earnings for the nine months ended December 31, 2016 and 2015.

Statements of Earnings
(unaudited – US$ thousands)

Revenue
Net earnings before taxes
Net earnings

Nine months ended
Nine months ended
December 31, 2016(1) December 31, 2015(1)
34,062
3,866
3,448

73,153
2,916
2,420

(1) Amounts for the nine months ended December 31, 2016 and 2015 were translated into US$ using the average exchange
rates of $1 U.S. dollar = 67.07 Indian rupees and $1 U.S. dollar = 64.74 Indian rupees prevailing during those periods,
respectively.

NCML’s revenue for the nine months ended December 31, 2016 and 2015 were primarily driven by supply chain
services, storage and preservation services and collateral management segments. Revenue of $73,153 for the nine
months ended December 31, 2016 increased from $34,062 for the nine months ended December 31, 2015
principally as a result of a significant increase in the supply chain services segment, partially offset by a reduction in
the storage and preservation services segment as a result of the impact of demonetization and two consecutive
drought years. NCML’s reported net earnings of $2,420 for the nine months ended December 31, 2016 compared to
net earnings of $3,448 for the nine months ended December 31, 2015 with a year-over-year decrease of $1,028
primarily resulting from lower margins in the storage and preservation services segment.

A normal cycle of commodities would be to receive deposits during the first quarter of a fiscal year (April to June) and
then experience a withdrawal of those commodities during the second quarter (July to September). For the nine
months ended December 31, 2016 NCML experienced lower deposits of commodities in the first quarter and
significantly higher withdrawals in the second quarter as a result of two consecutive droughts and the impact of
rainfall deficits resulting in depleted commodities. The drought conditions adversely affected the quality of the crops
(principally cotton, coriander, mustard and turmeric) resulting in higher commodity prices and lower storage
demand. By the end of December 2016 NCML started to experience new crop deposits primarily as a result of a
normal monsoon season throughout India that is improving the harvesting season.

Sanmar Chemicals Group

Business Overview

Sanmar Chemicals Group (‘‘Sanmar’’), a private company, is one of the largest suspension Poly Vinyl Chloride
(‘‘PVC’’) manufacturers in India, headquartered in Chennai, India with operational presence in India and Egypt.
Sanmar has an installed capacity of approximately 366,000 tonnes per annum in India and is in the process of
expanding its PVC capacity in Egypt from 200,000 tonnes per annum to 400,000 tonnes per annum. Once the
expansion is completed, Sanmar will have a total PVC capacity of over 766,000 tonnes per annum.

Sanmar’s principal lines of business are as follows:

Chemplast

Beginning as Chemicals and Plastics India Limited in 1962, Chemplast is currently the second largest suspension
PVC manufacturer and the largest specialty PVC manufacturer in India, with the top three players capturing
approximately 90% of India’s domestic manufacturing capacity. A significant portion of Chemplast’s revenues are
derived from integrated operations. Chemplast’s product range falls into four distinct groups: PVC resins, caustic
soda / chlorine, chlorinated solvents and refrigerant gases. Caustic soda is mainly used in the manufacture of paper
and pulp, alumina, petroleum products, soaps and detergents, and is also the basic feedstock for various chemicals.
The majority of its revenues are generated through sales to end customers (rather than through distributors).

TCI Sanmar Chemicals S.A.E. (‘‘Sanmar Egypt’’)

Sanmar Egypt is the largest Indian investor in Egypt’s chemical business and the largest caustic soda and PVC
manufacturer in Egypt. Sanmar has invested approximately $1.2 billion during Phase 1 of its Egypt project and has
created world-class manufacturing facilities for caustic soda and PVC in Port Said, Egypt. Phase 1 projects were
completed in April 2012 at which time PVC production commenced. Phase 2 is underway with an additional
investment of approximately $300 million, for an aggregate investment of approximately $1.5 billion. Phase 2
expansion is expected to be completed by April 2018. On completion of Phase 2, the PVC capacity will double to
400,000 metric tons per annum. A new plant to produce calcium chloride granules with a capacity of 130,000 metric
tons will also be established under Phase 2. Calcium chloride granules are used worldwide for dust control, de-icing,
drilling operations and in bakery products.

Sanmar Egypt sells directly to end-user customers and also through distributors. PVC is mainly sold in the key target
markets like Egypt, Turkey and parts of western Europe. PVC is primarily used in pipes and fittings, window and door
profiles, shoes, film, sheet, flooring and cable industries. Caustic soda is primarily used in textiles, alumina, pulp and
paper, and soaps.

Specialty Chemicals

Sanmar’s Specialty Chemicals business is engaged in the manufacturing and marketing of phytochemicals and
organic chemicals. The phytochemicals division manufactures an active pharmaceutical ingredient called colchicine
(treatment of gout) from plant based raw material. The organic chemical division is involved in the manufacturing of
advanced organic intermediates for the pharmaceutical, agro chemical, flavours and fragrances, and other fine
chemical applications.

Additional information can also be accessed from Sanmar’s website www.sanmargroup.com.

FAIRFAX INDIA HOLDINGS CORPORATION

Transaction Description

At December 31, 2016 the company had appointed two of the six Sanmar board members.

Key business drivers, events and risks

India continues to be a PVC deficit market with approximately 50% of the demand being met through imports.
Egypt and Turkey, which are manufacturing hubs for exports to Europe, currently have a demand gap of
1,000 kilotons per annum which is being met by imports from the U.S. and Asia.

Sanmar’s key business drivers will be its planned increased PVC manufacturing capacity in Egypt and India to cater to
the growing demand of PVC in North Africa, Middle East and India, as well as an overall improvement in the capacity
utilization of all of its PVC production facilities.

Valuation and Consolidated Financial Statement Impact

Sanmar Common Stock

At December 31, 2016 the company estimated fair value using a discounted cash flow analysis based on multi-year
free cash flow projections with assumed after-tax discount rates ranging from 15.5% to 22.5% and long term growth
rates ranging from 2.0% to 3.6%. Free cash flow projections were based on EBITDA projections from financial
information for Sanmar’s three main business operations that had been prepared in the fourth quarter of 2016 by
Sanmar’s management. Discount rates were based on the company’s assessment of risk premiums to the appropriate
risk-free rate of the economic environment in which Sanmar operates. At December 31, 2016 the company’s internal
valuation model indicated that the fair value of the common shares was $440, resulting in an unrealized loss of $545
in 2016 which was recorded in net unrealized gains on investments in the consolidated statements of earnings.

Sanmar Bonds

The debt securities mature 7 years from the date of issuance of the first tranche, subject to earlier redemption by
Sanmar under certain circumstances. The company is entitled to a coupon payment payable in kind and capitalized
in lieu of payment of such amount in cash on an annual basis. A redemption premium may also be payable in kind to
the company. The Sanmar debt securities are currently rated BBB(cid:1) with a stable outlook by Brickworks Ratings, an
Indian rating agency.

At December 31, 2016 the company estimated fair value using an industry accepted discounted cash flow and option
pricing model that incorporated Sanmar’s assumed credit spread of 7.1% and certain redemption options embedded
in the bonds. The assumed credit spread was based on credit spreads of industry comparables with company specific
adjustments for credit risk premium. At December 31, 2016 the company’s internal valuation model indicated that
the fair value of the bonds was $299,093, resulting in an unrealized gain of $6,907 in 2016 which was recorded in net
unrealized gains on investments in the consolidated statements of earnings, largely offset by an unrealized foreign
currency translation loss of $6,814 which was recorded in the consolidated statements of comprehensive income in
2016. The net unrealized gain of $6,907 was primarily related to the accretion of the security to the company’s
redemption value after incorporating both the issue’s credit risk and the redemption option held by the issuer prior
to maturity.

Sanmar’s Summarized Financial Information

On April 18, 2016 Sanmar acquired 100% of SHL Securities Alpha Limited (‘‘SHL Alpha’’) and as a result of this
transaction SHL Alpha became a wholly-owned subsidiary of Sanmar. The historical audited and interim financial
statements of Sanmar do not include the consolidated financial information of SHL Alpha and its subsidiaries.
Accordingly, the balance sheets of Sanmar and SHL Alpha at March 31, 2016 were combined (‘‘Sanmar Combined’’)
to give effect to the acquisition.

The company’s fiscal year ends on December 31 and Sanmar’s fiscal year ends on March 31. Summarized below are
Sanmar’s balance sheets at September 30, 2016 and March 31, 2016.

Balance Sheets
(unaudited – US$ thousands)

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity

September 30, 2016(1) March 31, 2016(1)

Sanmar
283,674
1,254,160
383,133
1,308,636
(153,935)

Sanmar Combined
148,892
1,285,258
463,725
1,062,992
(92,567)

(1) The net assets of Sanmar were translated at September 30, 2016 at $1 U.S. dollar = 66.58 Indian rupees and at March 31,
2016 at $1 U.S. dollar = 66.22 Indian rupees. The exchange rates used were the spot rates prevailing on those respective
dates.

Current assets increased by $134,782 to $283,674 at September 30, 2016 from $148,892 at March 31, 2016 primarily
due to increases in cash and cash equivalents relating to the September 26, 2016 investment from Fairfax India and
bank loans received by Sanmar Egypt to finance the Phase 2 expansion project in Egypt.

Non-current assets decreased by $31,098 to $1,254,160 at September 30, 2016 from $1,285,258 at March 31, 2016
primarily due to a decrease in property, plant and equipment due to depreciation for the period.

Current liabilities decreased by $80,592 to $383,133 at September 30, 2016 from $463,725 at March 31, 2016
primarily due to a reduction in short term loans and borrowings relating to repayment of certain high interest
bearing loans. The high interest bearing loans were repaid and new long term loans and borrowings with lower
interest rates were entered into during the period, as noted below.

Non-current liabilities increased by $245,644 to $1,308,636 at September 30, 2016 from $1,062,992 at March 31,
2016 primarily due to an increase in long term loans and borrowings principally relating to the $299,000 bond
investment by Fairfax India and bank loans received by the Sanmar Egypt segment to finance the Phase 2 expansion
project in Egypt, partially offset by repayment of a portion of long term debt in Chemplast.

Summarized below is Sanmar’s statement of earnings for six months ended September 30, 2016.

Statement of Earnings
(unaudited – US$ thousands)

Revenue
Net loss before taxes
Net loss

Six months ended
September 30, 2016(1)

Sanmar
289,204
(35,394)
(57,775)

(1) Amounts for the six months ended September 30, 2016 were translated into US$ using the average exchange rates of

$1 U.S. dollar = 66.93 Indian rupees prevailing during that period.

FAIRFAX INDIA HOLDINGS CORPORATION

Sanmar’s revenue of $289,204 for the six months ended September 30, 2016 was principally comprised of revenues
from its Chemplast division with higher than budgeted volumes achieved in the PVC business, which was negatively
impacted by lower revenues from the Sanmar Egypt business as a result lower production volumes stemming from
short term plant shutdowns to address maintenance issues. Sanmar’s net loss of $57,775 for the six months ended
September 30, 2016 principally related to net losses in the Sanmar Egypt business as a result of lower production
volumes as described above. Sanmar Egypt’s maintenance issues at the plant were subsequently resolved.

Privi Organics Limited

Business Overview

Privi Organics Limited (‘‘Privi’’), a private company founded in 1992, is a supplier of aroma chemicals to the
fragrance industry and is located in Mumbai, India. Privi’s world-class products are the result of its very strong
research and development team that has proven expertise in developing new products, customizing aromas per
customer specifications, scaling up products from basic research to commercial scale, and designing process
improvements to drive quality and cost optimization. With an installed capacity of 22,000 tonnes per annum of
aroma chemicals, Privi enjoys a dominant position and economies of scale in its product categories.

Privi converts waste product from paper mills into specialty aromas used as fragrance additives. The research efforts
are facilitated with an advanced research infrastructure comprising two labs, both recognized by the Department of
Scientific and Industrial Research. Privi has also dedicated one of these labs to focus on the development of green
products and technology, in an effort to help preserve the environment.

Additional information can also be accessed from Privi’s website www.privi.com.

Transaction Description

On August 26, 2016 the company, through its wholly-owned subsidiaries, acquired a 50.8% common share equity
interest in Privi for total consideration of $54,975 (approximately 3.7 billion Indian rupees).

Additionally, on July 12, 2016 the boards of directors of Fairchem and Privi approved a merger arrangement
(the ‘‘Merger’’) involving the two companies, which is expected to bring significant diversification and synergies to
both. In December 2016 and February 2017 shareholder and regulatory approvals were received, respectively, for the
Merger. Under the terms of the Merger, Privi shareholders will receive 27 common equity shares and 27 compulsorily
convertible preference shares (‘‘CCPS’’) of the merged entity for every 40 Privi shares exchanged (‘‘swap ratio’’). Final
closing of the Merger is subject to customary closing conditions, which involve the share exchange, and is expected
to occur by the end of the first quarter of 2017. Fairfax India will own approximately 49% of the merged entity, after
factoring in the conversion of the CCPS. The swap ratio was recommended in a valuation report dated July 12, 2016
issued by M/s. Walker Chandiok & Co. LLP, Independent Chartered Accountants (a member firm of Grant Thornton
in India). ICICI Securities Limited issued a fairness opinion on the swap ratio. Fairchem and Privi Board of Director
approval was received on the swap ratio.

At December 31, 2016 the company had appointed one of the ten Privi board members.

Key business drivers, events and risks

Privi’s business drivers for growth are comprised of: (i) developing, manufacturing and supplying additional (newer)
aroma chemicals to existing customers; (ii) making value added products from by-products made in manufacturing
of aroma chemicals; and (iii) strengthening margins by increasing backward integration capacities.

Valuation and Consolidated Financial Statement Impact

The initial transaction price was considered to approximate fair value at December 31, 2016 as there had been no
significant changes to Privi’s business, capital structure and operating environment and the key assumptions in the
company’s acquisition valuation model continued to be valid due to the proximity of the transaction closing date to
December 31, 2016. As a result, in 2016 the consolidated statements of earnings included nil in net unrealized gains
on investments (2015 – nil) related to the investment in Privi.

At December 31, 2016 the company prepared a valuation model to determine the value of its 9,517,042 Privi
common shares using the quoted bid price of Fairchem (498.10 Indian rupees per share) and the swap ratio. The
company’s internal valuation model indicated a value of $94,292 and an unrealized gain of $40,392, which was not
recorded in the consolidated statements of earnings as the Merger still required regulatory approval at
December 31, 2016.

National Stock Exchange of India Limited

Business Overview

National Stock Exchange of India Limited (‘‘NSE’’), a private company located in Mumbai, India, is India’s largest
stock exchange covering various cities and towns across the country. In addition to being a platform for all exchange
traded financial products in India, NSE’s flagship index, Nifty50, is used extensively by investors in India and around
the world as a barometer of the Indian capital markets.

Additional information can also be accessed from NSE’s website www.nseindia.com.

Transaction Description

In the third quarter of 2016 the company, through its wholly-owned subsidiaries, acquired a 1.0% common share
equity interest in NSE for total consideration of $26,783 (approximately 1.8 billion Indian rupees).

At December 31, 2016 the company did not have any NSE board representation.

Key business drivers, events and risks

India has two main stock exchanges where most of its trading takes place, the BSE and the NSE. BSE has been in
existence since 1875, while the NSE is relatively new, with trading beginning in 1994. NSE has approximately
1,300 listed firms available for trading on the exchange, while the BSE has approximately 5,500 listed firms available
for trading. NSE’s major product categories are equities, derivatives and debentures. Almost all significant firms in
India are listed on both the BSE and the NSE exchange but NSE enjoys a dominant market share position that
represents a significant portion of the exchange market with the NSE representing an 86% market share in the equity
trading cash segment, a 99% market share in the equity derivatives trading segment and a 56% market share in the
foreign exchange derivatives market. With an annual GDP growth percentage between 5% and 10% per year since
2010, India can expect to have a large number of businesses added to the list of exchange traded securities during this
time of economic expansion.

On June 23, 2016 NSE announced that they will be filing for an IPO in early 2017 (anticipated to be completed by
September 2017) and will also look to file for an overseas listing in 2017. They have appointed Citibank, JM
Financial, Kotak Mahindra and Morgan Stanley as lead investment banks to manage the IPO. The IPO was is in
response to their dominance in the domestic equity market and will enable existing shareholders of the NSE to dilute
their ownership in the exchange through an open offer.

On February 3, 2017 the NSE appointed Vikram Limaye (formerly the CEO of infrastructure lender IDFC Limited
‘‘IDFC’’) as CEO. Mr. Limaye will be the first head of the NSE to come from outside the ranks of the NSE’s founding
team since it was set up in 1992. Mr. Limaye had been with IDFC since 2005 and has served more than 25 years with
financial institutions, global investment banks, international commercial banks, and global accounting firms.

Valuation and Consolidated Financial Statement Impact

The initial transaction price was considered to approximate fair value at year end due to the proximity of the
transaction closing date to December 31, 2016 and the absence of changes in factors impacting fair value since the
closing date. As a result, in 2016 the consolidated statements of earnings included nil in net unrealized gains on
investments (2015 – nil) related to the investment in NSE.

In 2016 the consolidated statements of earnings included dividend income earned from the investment in NSE of
$1,028 (2015 – nil).

FAIRFAX INDIA HOLDINGS CORPORATION

Results of Operations

Fairfax India’s consolidated statements of earnings for the years ended December 31, 2016 and 2015 are shown in the
following table:

Income

Interest
Dividends
Net realized gains (losses) on investments
Net unrealized gains on investments
Net foreign exchange gains (losses)

Expenses

Investment and advisory fees
General and administration expenses
Interest expense

Earnings before income taxes
Provision for (recovery of) income taxes

Net earnings

Net earnings per share (basic and diluted)

2016

2015

21,343
5,611
3,392
104,995
(6,737)

44,699
–
(209)
14,190
6,571

128,604

65,251

12,552
4,937
4,171

5,393
5,515
–

21,660

10,908

106,944
(881)

54,343
13,404

107,825

40,939

1.01

$ 0.42

Total income of $128,604 in 2016 increased from $65,251 in 2015 principally as a result of increased net unrealized
gains on investments (primarily related to net unrealized gains in 2016 on the Indian Investments IIFL ($51,305) and
Fairchem ($26,399) and net unrealized gains on Indian corporate bonds (inclusive of unrealized gains on Sanmar
bonds)) and increased dividend income, partially offset by decreased interest income (primarily due to decreased
holdings of Indian corporate bonds) and decreased net foreign exchange gains (principally as a result of the
weakening of the Indian rupee relative to the U.S. dollar during 2016). Dividend income in 2016 of $5,611 (2015 –
nil) was primarily comprised of dividends received from the company’s investments in IIFL and NSE. In addition
total income in 2016 increased as a result of increased net realized gains on investments of $3,392 in 2016
(principally related realized gains on the sale of common stocks and investment funds, partially offset by realized
losses on the sale of Indian corporate bonds) from net realized losses on investments of $209 in 2015.

Net gains (losses) on investments and net foreign currency gains (losses) in 2016 and 2015 were comprised as follows:

Net gains (losses) on investments:

Short term investments

Bonds

Common stocks

Common stocks – Investment funds

Net foreign currency gains (losses) on:

Cash and cash equivalents

Investments

Term loan

2016

Net
change in
unrealized
gains
(losses)

Net
realized
gains
(losses)

Net gains
(losses) on
investments

Net
realized
gains
(losses)

2015

Net
change in
unrealized
gains
(losses)

Net gains
(losses) on
investments

(17)

(3,327)

4,688

2,048

3,392

(3,624)

3,005

–

(619)

–

22,318
81,038(1)
1,639

(17)

18,991

85,726

3,687

(257)

–

(2,651)

18,559

(1,718)

104,995

108,387

(209)

14,190

–

(3,155)

(2,963)

(6,118)

(3,624)

(150)

(2,963)

2,794

292

–

(6,737)

3,086

–

3,485

–

3,485

(2,908)

18,559

(1,718)

13,981

2,794

3,777

–

6,571

(1)

Principally comprised of net unrealized gains on the Indian Investments, IIFL ($51,305) and Fairchem ($26,399), in 2016.

Total expenses increased from $10,908 in 2015 to $21,660 in 2016 primarily as a result of increased investment and
advisory fees (principally as a result of increased holdings of Indian Investments) and interest expense incurred on
the 2-year secured term loan. The per annum investment and advisory fee is calculated as 0.5% of the value of
undeployed capital and 1.5% of the company’s total common shareholders’ equity less the value of undeployed
capital. For 2016, the company determined that the majority of its assets were invested in Indian Investments, which
are considered deployed capital.

The recovery of income taxes of $881 in 2016 differed from the provision for income taxes that would be determined
by applying the company’s Canadian statutory income tax rate of 26.5% to the company’s earnings before income
taxes primarily as a result of the tax rate differential on income earned outside of Canada and foreign exchange
fluctuations, partially offset by unrecorded deferred taxes in Canada.

The provision for income taxes of $13,404 in 2015 differed from the provision for income taxes that would be
determined by applying the company’s Canadian statutory income tax rate of 26.5% to the company’s earnings
before income taxes primarily due to foreign exchange fluctuations and the unrecorded benefit of losses and
temporary differences.

The company reported net earnings of $107,825 ($1.01 net earnings per basic and diluted share) in 2016 compared to
net earnings of $40,939 ($0.42 net earnings per basic and diluted share) in 2015. The year-over-year increase in
profitability in 2016 reflected increased net unrealized gains on investments, partially offset by increased investment
and advisory fees (principally as a result of increased holdings of Indian Investments) and interest expense.

Consolidated Balance Sheet Summary

The assets and liabilities reflected on the company’s consolidated balance sheet at December 31, 2016 were impacted
by the acquisitions of the Indian Investments (Sanmar, Privi, Fairchem and NSE), the sale of Indian corporate bonds
and investment funds to finance those Indian Investments, and the 2-year secured $225,000 term loan.

Total Assets

Total assets at December 31, 2016 of $1,303,497 (December 31, 2015 – $1,025,451) were comprised as follows:

Total cash and investments increased to $1,261,339 at December 31, 2016 from $997,490 at December 31, 2015.
The company’s cash and investments composition by the issuer’s country of domicile was as follows:

Cash and cash equivalents

December 31, 2016

December 31, 2015

India

U.S.

719(1) 165,051(2)

Total
165,770

India
U.S.
6,554(1) 12,367

Total
18,921

Short term investments – U.S. treasury bills

–

27,428

–

50,143

Bonds:

Government of India
Indian corporate
Sanmar

Common stocks:

IIFL
NCML
Privi
Fairchem
NSE
Sanmar
Investment funds

130,317
99,447
299,093

528,857

265,951
146,586
54,315
45,488
26,504
440
–

539,284

–
–
–

–

–
–
–
–
–
–
–

–

130,317
99,447
299,093

123,448
389,341
–

528,857

512,789

265,951
146,586
54,315
45,488
26,504
440
–

220,747
146,445
–
–
–
–
48,445

539,284

415,637

–
–
–

–

–
–
–
–
–
–
–

–

123,448
389,341
–

512,789

220,747
146,445
–
–
–
–
48,445

415,637

Total cash and investments

1,068,860

192,479

1,261,339

934,980

62,510

997,490

(1)

Included cash and cash equivalents invested in Mauritius and Canada of $716 at December 31, 2016 (December 31,
2015 – $97 and restricted cash of $6,457).

(2)

Included restricted cash of $18,810 at December 31, 2016 (December 31, 2015 – nil).

FAIRFAX INDIA HOLDINGS CORPORATION

Cash and cash equivalents increased to $165,770 at December 31, 2016 from $18,921 at December 31, 2015
principally reflecting the net proceeds received from the term loan that had not yet been invested into Indian
Investments. Restricted cash of $18,810 at December 31, 2016 related to requirements under the term loan for the
company to establish a debt service reserve account to fund the term loan interest payments compared to restricted cash
of $6,457 at December 31, 2015 that related to cash in escrow arising from investments in IIFL ($3,600) and Fairchem
($2,857).

Short term investments – U.S. treasury bills decreased to $27,428 at December 31, 2016 from $50,143 at
December 31, 2015 principally reflecting the sale of short term investments to finance the investment in Privi.

Bonds and Common stocks – The company is actively seeking investment opportunities in India and will
continue to redirect capital from its cash and cash equivalents and bond portfolio into Indian Investments as and
when those opportunities are identified. For more information about recent Indian Investments, see the Business
Developments and Indian Investments sections of this MD&A. For more information on the company’s total cash
and investment holdings of $1,261,339 at December 31, 2016 (December 31, 2015 – $997,490) see note 6 (Cash and
Investments) to the consolidated financial statements for the year ended December 31, 2016.

Interest receivable decreased by $20,187 to $7,493 at December 31, 2016 from $27,680 at December 31, 2015
primarily reflecting decreased interest receivable from Indian corporate bonds as a result of sales of Indian corporate
bonds in 2016 where the proceeds were used to finance the Indian Investments (Sanmar, Fairchem and NSE).

Income taxes refundable was $7,326 at December 31, 2016 compared to income taxes payable of $9,386 at
December 31, 2015, primarily reflecting income tax payments made during 2016 relating to the company’s 2015
Canadian corporate tax return filing. The current income tax refundable in 2016 differed from the current income
tax liability in 2015 primarily due to the impact of foreign accrual property losses (‘‘FAPL’’) and grossed up foreign tax
deduction in Canada in 2016 whereas in 2015 the company generated significant foreign accrual property income
(‘‘FAPI’’) in Canada.

Other assets increased to $27,339 at December 31, 2016 from $281 at December 31, 2015 primarily relating to the
receivable of $26,525 on the sale of the company’s investment in investment funds where the sale proceeds were not
received until January 2017.

Total Liabilities

Total liabilities at December 31, 2016 of $228,051 (December 31, 2015 – $12,122) were comprised as follows:

Payable to related parties increased to $3,673 at December 31, 2016 from $1,993 at December 31, 2015
principally reflecting higher investment and advisory fees as a result of increased total common shareholders’ equity
(primarily as a result of net earnings in 2016 (principally from net unrealized gains on the Indian Investments IIFL
and Fairchem), partially offset by net unrealized foreign currency translation losses of $26,736).

Term loan – On September 16, 2016 the company completed a 2-year secured term loan (the ‘‘term loan’’) bearing
an interest rate of LIBOR plus 350 to 500 basis points with a syndicate of Canadian banks for $225,000. At
December 31, 2016 the company used a portion of the net proceeds to complete the second tranche of Sanmar bonds
($50,000) (see note 5 (Indian Investments) to the consolidated financial statements for the year ended December 31,
2016). The term loan contained a mandatory prepayment clause that became effective when the company received
the net proceeds from the Offerings (see note 8 (Total Equity) to the consolidated financial statements for the year
ended December 31, 2016), requiring repayment of the $225,000 principal amount of the term loan by
March 31, 2017.

Comparison of 2015 to 2014 – Fairfax India was federally incorporated on November 25, 2014 and completed its
IPO in the first quarter of 2015, as a result there were no significant balances on the consolidated balance sheet at
December 31, 2014 to which discussions of comparisons would apply.

Financial Condition

Capital Resources and Management

On September 16, 2016 the company completed a $225,000 term loan with a syndicate of Canadian banks. At
December 31, 2016 the company used a portion of the net proceeds to complete the second tranche of Sanmar bonds
($50,000) (see note 5 (Indian Investments) to the consolidated financial statements for the year ended December 31,
2016). As noted above, the term loan contained a mandatory prepayment clause requiring repayment by
March 31, 2017.

Total common shareholders’ equity at December 31, 2016 increased to $1,075,446 from $1,013,329 at December 31,
2015 primarily reflecting net earnings of $107,825, partially offset by unrealized foreign currency translation losses
of $26,736 in 2016.

Book Value per Share

Total common shareholders’ equity at December 31, 2016 was $1,075,446 (December 31, 2015 – $1,013,329). The
book value per share at December 31, 2016 was $10.25 compared to $9.50 at December 31, 2015 representing an
increase in 2016 of 7.9%, primarily reflecting net earnings of $107,825, partially offset by unrealized foreign currency
translation losses of $26,736.

Total common shareholders’ equity
Number of common shares effectively outstanding
Book value per share

December 31, 2016 December 31, 2015
1,013,329
106,678,879
9.50

1,075,446
104,881,031
10.25

The company has issued and repurchased common shares since it was federally incorporated on November 25, 2014
as follows:

Date
2014 – issuance of shares
2015 – issuance of shares
2016 – repurchase of shares

Number of
subordinate
voting
shares
–

Number
of
multiple
voting
shares(1)
1

1
76,678,879 29,999,999 106,678,878
(1,797,848)
(1,797,848)

–

number

Total Average issue/ Net proceeds/
(repurchase
cost)
–
1,025,825
(21,178)

repurchase
of shares price per share
10.00
9.62
11.78

(1) Multiple voting shares that may only be issued to Fairfax or its affiliates.

74,881,031 30,000,000 104,881,031

On October 4, 2016 the company announced that the TSX accepted a notice filed by Fairfax India of its intention to
commence a normal course issuer bid for its subordinate voting shares by which it is authorized, until expiry of the bid on
October 5, 2017, to acquire up to 3,500,000 subordinate voting shares representing approximately 6.4% of the public
float in respect of the subordinate voting shares. Decisions regarding any future repurchases will be based on market
conditions, share price and other factors including opportunities to invest capital for growth. The Notice of Intention to
Make a Normal Course Issuer Bid is available, without charge, by contacting the Corporate Secretary of the company.

All of the share issuances in 2015 were pursuant to the IPO. During 2016 the company repurchased 1,797,848 subordinate
voting shares for cancellation under the terms of its normal course issuer bid.

Liquidity

FAIRFAX INDIA HOLDINGS CORPORATION

The net proceeds from the Offerings (refer to note 8 (Total Equity) to the consolidated financial statements for the
year ended December 31, 2016), together with net proceeds from the sale of a portion of the company’s U.S. treasury
bills, Government of India bonds or Indian corporate bonds will be sufficient to fund the anticipated investment in
BIAL, the 4.99% investment in IIFL (February 8, 2017) and the investment in Saurashtra (February 14, 2017), and will
provide the residual funding required to repay the term loan by March 31, 2017. The company has adequate working
capital to support its operations.

Highlights in 2016 (with comparisons to 2015 except as otherwise noted) of major components of cash flow are
presented in the following table:

Operating activities

Cash provided by operating activities before the undernoted
Net sales (purchases) of short term investments classified as FVTPL
Purchases of bonds and common stocks classified as FVTPL
Sales of bonds and common stocks classified as FVTPL
Decrease (increase) in restricted cash in support of investments

Investing activities

Purchases of premises and equipment

Financing activities

Issuance of term loan, net of issuance costs
Increase in restricted cash in support of term loan
Issuance of subordinate voting shares, net of issuance costs
Issuance of multiple voting shares
Repurchases of subordinate voting shares
Purchases for share-based payment awards

2016

2015

17,508
22,590
(423,639)
333,591
6,457

2,460
(49,660)
(1,228,072)
264,361
(6,457)

(128)

–

222,248
(18,810)
–
–
(21,178)
–

–
–
727,972
300,000
–
(451)

Increase in cash and cash equivalents during the year

138,639

10,153

Cash provided by operating activities before the undernoted is comprised of net earnings adjusted for items not
affecting cash and cash equivalents and changes in operating assets and liabilities. Cash provided by operating
activities before the undernoted of $17,508 in 2016 increased from $2,460 in 2015, principally reflecting higher
interest and dividends received on securities, partially offset by higher income taxes paid and interest paid on the
term loan.

Net sales of short term investments classified as FVTPL of $22,590 in 2016 principally related to the sale of U.S. treasury
bills to finance the investment in Privi compared to net purchases of short term investments classified as FVTPL of
$49,660 in 2015 that primarily related to investing the undeployed capital received from the IPO into U.S. treasury bills.
Purchases of bonds and common stock classified as FVTPL decreased from $1,228,072 in 2015 to $423,639 in 2016
primarily reflecting lower purchases of both bonds and common stocks. In 2015 the company used the IPO net proceeds
to purchase Indian corporate bonds and Government of India bonds, and started to deploy the capital into Indian
Investments (IIFL and NCML). In 2016 purchases of bonds and common stocks classified as FVTPL related to purchases of
Indian Investments (Sanmar, Privi, Fairchem and NSE). Sales of bonds and common stocks classified as FVTPL of
$333,591 and $264,361 in 2016 and 2015, respectively, principally related to the sale of Indian corporate bonds to
partially finance the deployment of capital into Indian Investments. Decrease (increase) in restricted cash in support of
investments in 2016 and 2015 related to cash in escrow arising from investments in IIFL ($3,600) and Fairchem ($2,857).
Refer to note 15 (Supplementary Cash Flow Information) to the consolidated financial statements for the year ended
December 31, 2016 for details of purchases and sales of investments classified as FVTPL.

Issuance of term loan, net of issuance costs, of $222,248 and increase in restricted cash in support of term loan of
$18,810 in 2016 related to the 2-year secured term loan where the company used a portion of the net proceeds to
invest in the second tranche of Sanmar bonds ($50,000). Repurchases of subordinate voting shares of $21,178 in
2016 related to the company’s repurchases for cancellation of 1,797,848 subordinate voting shares. Issuance of
subordinate voting shares, net of issuance costs, of $727,972 and issuance of multiple voting shares of $300,000 in
2015 reflected net proceeds received from the IPO and private placement offerings. Issuance costs were primarily
comprised of fees paid to underwriters of the subordinate voting shares. Refer to note 8 (Total Equity) to the
consolidated financial statements for the year ended December 31, 2016 for details.

Contractual Obligations

Under the terms of the Investment Advisory Agreement, the company and its subsidiaries are contractually obligated
to pay Fairfax an investment and advisory fee and, if applicable, a performance fee. These fees will vary based on the
book value per share of the company.

In 2016 the investment and advisory fee recorded in the consolidated statements of earnings was $12,552 (2015 –
$5,393).

The performance fee is paid for the period from January 30, 2015 to December 31, 2017 and for each consecutive
three-year period thereafter, and is calculated, on a cumulative basis, as 20% of any increase in total common
shareholders’ equity (including distributions) above a 5% per annum increase. The amount of common
shareholders’ equity at any time which must be achieved before any performance fee would be payable is sometimes
referred to as the ‘‘hurdle per share’’. The company determined that no performance fee should be accrued for 2016
(2015 – nil) as the book value per share of $10.25 at that date was less than the hurdle per share at that date of $10.75.

On September 16, 2016, the company completed a $225,000 term loan with a syndicate of Canadian banks. At
December 31, 2016 the company used a portion of the net proceeds to complete the second tranche of Sanmar bonds
($50,000) (see note 5 (Indian Investments) to the consolidated financial statements for the year ended December 31,
2016). The term loan contained a mandatory prepayment clause that became effective when the company received
the net proceeds from the Offerings (see note 8 (Total Equity) to the consolidated financial statements for the year
ended December 31, 2016), requiring repayment of the $225,000 principal amount of the term loan by
March 31, 2017.

Related Party Transactions

For details on the company’s related party transactions, please see note 12 (Related Party Transactions) to the
consolidated financial statements for the year ended December 31, 2016.

Accounting and Disclosure Matters

Management’s Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the company’s management, including the company’s CEO and
CFO, the company conducted an evaluation of the effectiveness of its disclosure controls and procedures as of
December 31, 2016, as required by the Canadian securities legislation. Disclosure controls and procedures are
designed to ensure that the information required to be disclosed by the company in the reports it files or submits
under securities legislation is recorded, processed, summarized and reported on a timely basis and that such
information is accumulated and reported to management, including the company’s CEO and CFO, as appropriate, to
allow required disclosures to be made in a timely fashion. Based on their evaluation, the CEO and CFO have
concluded that as of December 31, 2016, the company’s disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

The company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined under National Instrument 52-109). The company’s internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the consolidated financial statements.

FAIRFAX INDIA HOLDINGS CORPORATION

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

The company’s management assessed the effectiveness of the company’s internal control over financial reporting as
of December 31, 2016. In making this assessment, the company’s management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’) in Internal Control – Integrated
Framework (2013). The company’s management, including the CEO and CFO, concluded that, as of December 31,
2016, the company’s internal control over financial reporting was effective based on the criteria in Internal Control –
Integrated Framework (2013) issued by COSO.

Critical Accounting Estimates and Judgments

Please refer to note 4 (Critical Accounting Estimates and Judgments) to the consolidated financial statements for the
year ended December 31, 2016.

Significant Accounting Policy Changes

The company completed its IPO on January 30, 2015 and commenced its investment activities shortly thereafter.
Please refer to note 3 (Summary of Significant Accounting Policies) to the consolidated financial statements for the
year ended December 31, 2016 for a detailed discussion of the company’s accounting policies. There were no
significant accounting policy changes during 2016.

Future Accounting Changes

Certain new IFRS may have a significant impact on the company’s consolidated financial reporting in the future.
Each of those standards will require a moderate degree of implementation effort within the next year as described
below. The company does not expect to adopt any of these new standards in advance of their respective effective
dates. New IFRS standards and amendments that have been issued but are not yet effective are also described in
note 3 (Summary of Significant Accounting Policies) to the consolidated financial statements for the year ended
December 31, 2016.

IFRS 9 Financial Instruments (2014) (‘‘IFRS 9’’)

In July 2014 the IASB issued a complete version of IFRS 9 which supersedes the 2010 version currently applied by the
company (‘‘IFRS 9 (2010)’’). IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with
retrospective application, and includes: requirements for the classification and measurement of financial assets and
liabilities; an expected credit loss model that replaces the existing incurred loss impairment model; and new hedge
accounting guidance.

The company has commenced evaluating the impact of IFRS 9 by assessing its business models and the cash flow
characteristics of its financial assets to determine their appropriate classifications under the new standard. The
company expects equity securities held within the company’s investment portfolio to continue to be classified as
FVTPL under IFRS 9, and the classification of financial liabilities to also remain largely unchanged from IFRS 9 (2010).
Upon adopting IFRS 9 on January 1, 2018 the company does not expect to restate comparative periods, and will
record any necessary adjustments to opening retained earnings as permitted by the standard.

Risk Management

Overview

The primary goals of the company’s financial risk management program are to ensure that the outcomes of activities
involving elements of risk are consistent with the company’s objectives and risk tolerance, while maintaining an
appropriate balance between risk and reward and protecting the company’s consolidated balance sheets from events
that have the potential to materially impair its financial strength. There were no significant changes in the types of
the company’s risk exposures or the processes used by the company for managing those risk exposures at
December 31, 2016 compared to those identified at December 31, 2015 and disclosed in the company’s 2015 Annual
Report, other than as outlined in note 11 (Financial Risk Management) to the consolidated financial statements for
the year ended December 31, 2016.

Risks

The following risks, among others, should be considered in evaluating the outlook for the company. Additional risks
not currently known to the company or that are currently deemed immaterial may also impair business operations.
The company, its consolidated subsidiaries, Fairfax and the Portfolio Advisor monitor these risks on an on-going
basis and take actions as needed to mitigate their impact.

Weather Risk

Certain Indian Investments (including NCML, Fairchem and Privi) are operating in industries exposed to weather
risk. The revenues of these portfolio companies may be adversely affected during a period of severe weather
conditions in India. Because weather events are unpredictable by nature, historical results of operations of certain
Indian Investments may not be indicative of their future results of operations. As a result of the occurrence of one or
more major weather catastrophes in any given period, the expected returns from Indian Investments impacted by
weather risk may fall short of the company’s expectations.

A significant increase in the price of crude oil could adversely affect the Indian economy which
could adversely affect Indian Investments

India imports a majority of its requirements of petroleum oil and petroleum products. The Government of India has
deregulated prices and has been reducing the subsidy in respect of certain oil products, resulting in international
crude prices having a greater effect on domestic oil prices. While global oil prices continue to be relatively subdued,
any increase or volatility in oil prices, as well as the impact of Indian rupee depreciation, which makes imports more
expensive, and the pass-through of such increases to Indian consumers could have a material adverse impact on the
Indian economy, including a rise in inflation and market interest rates resulting in a significant impact on the
profitability of certain Indian Investments.

Geographic Concentration of Investments

All of the company’s investments will be made in India and in Indian businesses or other businesses with customers,
suppliers or business primarily conducted in, or dependent on, India. As a result, the company’s performance will be
particularly sensitive to economic changes in India. The market value of the company’s investments, the income
generated by the company and the company’s performance will be particularly sensitive to changes in the economic
condition and regulatory environment in India. Adverse changes in the economic condition or regulatory
environment of India may have a material adverse effect on the company’s business, cash flows, financial condition
and net earnings.

Foreign Currency Fluctuation

All of the company’s investments will be made in India and Indian businesses or other businesses with customers,
suppliers or business primarily conducted in, or dependent on, India, and the financial position and results for these
investments are principally denominated in Indian rupees. The functional currency of the company and its
consolidated subsidiaries (FIH Mauritius and FIH Private) is the Indian rupee and the company’s presentation
currency is the U.S. dollar.

The company presents its consolidated financial statements in U.S. dollars to provide comparability with other
North American investment entities.

Accordingly, the income and expenses are translated at the average rates of exchange in effect during the applicable
reporting period. Assets and liabilities are translated at the exchange rates in effect at the balance sheet date. As a
result, the company’s consolidated financial position is subject to foreign currency fluctuation risk, which could
materially adversely impact its operating results and cash flows. Although the company may enter into currency
hedging arrangements in respect of its foreign currency cash flows, there can be no assurance that the company will
do so or, if it does, that the full amount of the foreign currency exposure will be hedged at any time.

Volatility of the Indian Securities Markets

Stock exchanges in India have, in the past, experienced substantial fluctuations in the prices of listed securities. The
stock exchanges in India have also experienced temporary exchange closures, broker defaults, settlement delays and
strikes by brokerage firm employees. In addition, the governing bodies of the stock exchanges in India have, from

FAIRFAX INDIA HOLDINGS CORPORATION

time to time, imposed restrictions on trading in certain securities, limitations on price movements and margin
requirements. Furthermore, from time to time, disputes have occurred between listed businesses and stock
exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment.

Investments May Be Made In Indian Private Businesses Where Information Is Unreliable or
Unavailable

In pursuing the company’s investment strategy, the company may seek to make investments in privately-held
businesses. As minimal public information exists about private businesses, the company could be required to make
investment decisions on whether to pursue a potential investment in a private business on the basis of limited
information, which may result in an investment in a business that is not as profitable as the company initially
believed, if at all. Investments in private businesses pose certain incremental risks as compared to investments in
public businesses, including that they:

(cid:127) have reduced access to the capital markets, resulting in diminished capital resources and ability to withstand

financial distress;

(cid:127) may have limited financial resources and may be unable to meet their obligations under their debt securities
that the company may hold, which may be accompanied by a deterioration in the value of any collateral and a
reduction in the likelihood of the company realizing any guarantees that it may have obtained in connection
with its investment;

(cid:127) may have shorter operating histories, narrower product lines and smaller market shares than larger businesses,
which tend to render them more vulnerable to competitors’ actions and changing market conditions, as well
as general economic downturns;

(cid:127) are more likely to depend on the management talents and efforts of a small group of persons; therefore, the
death, disability, resignation or termination of one or more of these persons could have a material adverse
impact on an investment and, as a result, the company; and

(cid:127) generally have less predictable operating results, may from time to time be parties to litigation, may be
engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may
require substantial additional capital to support their operations, finance expansion or maintain their
competitive position.

Valuation Methodologies Involve Subjective Judgments

For purposes of IFRS-compliant financial reporting, the company’s assets and liabilities are valued in accordance with
IFRS. Accordingly, the company is required to follow a specific framework for measuring the fair value of its
investments and, in its audited consolidated financial statements, to provide certain disclosures regarding the use of
fair value measurements.

The fair value measurement accounting guidance establishes a hierarchal disclosure framework that ranks the
observability of market inputs used in measuring financing instruments at fair value. The observability of inputs
depends on a number of factors, including the type of financial instrument, the characteristics specific to the
financial instrument and the state of the marketplace, including the existence and transparency of transactions
between market participants. Financial instruments with readily quoted prices, or for which fair value can be
measured from quoted prices in active markets, generally will have a high degree of market price observability and
less judgment applied in determining fair value.

A portion of the company’s portfolio investments may be in the form of securities that are not publicly traded. The
fair value of securities and other investments that are not publicly traded may not be readily determinable. The
company will value these securities quarterly at fair value as determined in good faith by the company and in
accordance with the valuation policies and procedures under IFRS. The company may utilize the services of an
independent valuation firm to aid it in determining the fair value of these securities. The types of factors that may be
considered in fair value pricing of the company’s investments include the nature and realizable value of any
collateral, the portfolio business’ ability to make payments and its earnings, the markets in which the portfolio
investment does business, comparisons to publicly traded companies, discounted cash flows and other relevant
factors. Because such valuations, and particularly valuations of private securities and private companies, are
inherently uncertain, such valuations may fluctuate over short periods of time and may be based on estimates, and

the company’s determinations of fair value may differ materially from the values that would have been used if a
ready market for these securities existed. The value of the company’s total assets could be materially adversely
affected if the company’s determinations regarding the fair value of its investments were materially higher than the
values that it ultimately realizes upon the disposition of such securities.

The value of the company’s portfolio may also be affected by changes in accounting standards, policies or practices.
From time to time, the company will be required to adopt new or revised accounting standards or guidance. It is
possible that future accounting standards that the company is required to adopt could change the valuation of the
company’s investments.

Due to a wide variety of market factors and the nature of certain securities to be held by the company, there is no
guarantee that the value determined by the company or any third-party valuation agents will represent the value
that will be realized by the company on the eventual disposition of the investment or that would, in fact, be realized
upon an immediate disposition of the investment. Moreover, the valuations to be performed by the company or any
third-party valuation agents are inherently different from the valuation of the company’s securities that would be
performed if the company were forced to liquidate all or a significant portion of its securities, as liquidation valuation
could be materially lower.

Pace of Completing Investments

The company’s business is to identify, with the assistance of the Portfolio Advisor, suitable investment opportunities,
pursuing such opportunities and consummating such investment opportunities. If the company is unable to source and
manage its investments effectively, it would adversely impact the company’s financial position and net earnings. There
can be no assurance as to the pace of finding and implementing investment opportunities. Conversely, there may only be
a limited number of suitable investment opportunities at any given time. This may cause the company, while it deploys
cash proceeds not yet invested, to hold significant levels of cash, cash equivalents, bonds or short term U.S. treasury bills.
A lengthy period prior to which capital is deployed may adversely affect the company’s overall performance.

Minority Investments

The company may make minority equity investments in businesses in which the company does not participate in
the management or otherwise influence the business or affairs of such businesses. The company will monitor the
performance of each investment and maintain an ongoing dialogue with each business’ management team.
However, it will be primarily the responsibility of the management of the business to operate the business on a
day-to-day basis and the company may not have the right to influence such business.

Reliance on Key Personnel and Risks Associated with the Investment Advisory Agreement

The management and governance of the company depends on the services of certain key personnel, including the
Portfolio Advisor, Fairfax, as administrator, and certain executive officers of the company. The loss of the services of
any key personnel, particularly V. Prem Watsa and Chandran Ratnaswami, could have a material adverse effect on
the company and materially adversely affect the company’s financial condition and net earnings.

The company will rely on the Portfolio Advisor and its affiliates, from time to time with respect to the sourcing of its
investments. Consequently, the company’s ability to achieve its investment objectives depends in large part on the
Portfolio Advisor and its ability to identify and advise the company on attractive investment opportunities. This
means that the company’s investments are dependent upon the Portfolio Advisor’s business contacts, its ability to
successfully hire, train, supervise and manage its personnel and its ability to maintain its operating systems. If the
company were to lose the services provided by the Portfolio Advisor or its key personnel or if the Portfolio Advisor
fails to satisfactorily perform its obligations under the Investment Advisory Agreement, the company’s investments
and growth prospects may decline.

The company may be unable to duplicate the quality and depth of management from the Portfolio Advisor if the
company were to source and manage its own investments or if it were to hire another investment advisor. If the
Portfolio Advisor should cease for whatever reason to be the investment advisor of the company or Fairfax should
cease to provide investment administration services to the company, the cost of obtaining substitute services may be
greater than the fees the company will pay the Portfolio Advisor and Fairfax under the Investment Advisory
Agreement, and this may adversely affect the company’s ability to meet its objectives and execute its strategy which
could materially and adversely affect the company’s cash flows, net earnings and financial condition.

FAIRFAX INDIA HOLDINGS CORPORATION

Lawsuits

The company operates in Canada, Mauritius and India and may, from time to time, become party to a variety of legal
claims and regulatory proceedings. The existence of such claims against the company and its consolidated
subsidiaries, directors or officers could have adverse effects, including the incurrence of significant legal expenses
defending claims, even those without merit.

The company and its consolidated subsidiaries manage day-to-day regulatory and legal risk primarily by
implementing appropriate policies, procedures and controls. Internal and external counsels also work closely with
the company and its consolidated subsidiaries to identify and mitigate areas of potential regulatory and legal risk.

Significant Shareholder

Fairfax, through its subsidiaries, owns 30,000,000 multiple voting shares. During 2016, certain Fairfax subsidiaries
purchased 796,864 subordinate voting shares through open market transactions. At December 31, 2016 Fairfax’s
multiple and subordinate voting share holdings represented 95.3% of the voting rights and 29.4% of the equity
interest in Fairfax India (December 31, 2015 – 95.1% and 28.1% respectively). Subsequent to December 31, 2016,
Fairfax acquired an additional 13,717,873 subordinate voting shares from the company by way of a private
placement (see note 8 (Total Equity) to the consolidated financial statements for the year ended December 31, 2016)
and open market transactions. After giving effect to those transactions, Fairfax’s holdings represented 93.6% of the
voting rights and 30.2% of the equity interest in Fairfax India. Fairfax has the ability to substantially influence
certain actions requiring shareholder approval, including approving an Indian Investment, liquidation or sale of
assets, electing members of the Board of Directors and adopting amendments to articles of incorporation
and by-laws.

Taxation Risks

The company structures its business according to prevailing taxation law and practice in Canada, Mauritius and
India. Any change in tax policy, tax legislation (including in relation to taxation rates), the interpretation of tax
policy or legislation or practice could adversely affect the company’s return earned on investments and on the capital
available to be invested. Further, taxes and other constraints that would apply to the company and its consolidated
subsidiaries in such jurisdictions may not apply to other parties, and such parties may therefore have a significantly
lower effective cost of capital and a corresponding competitive advantage in pursuing investments. A number of
other factors may increase the effective tax rates, which would have a negative impact on net earnings. These
include, but are not limited to, changes in the valuation of our deferred tax assets and liabilities, and any
reassessment of taxes by a taxation authority.

The company has tax specialist personnel for assessing the income tax consequences of planned transactions and
events and undertaking the appropriate tax planning. The company also consults with external tax professionals as
needed. Tax legislation of each jurisdiction in which the company operates is interpreted to determine income taxes
and expected timing of the reversal of deferred income tax assets and liabilities. Any amendments to the capital gains
and permanent establishment articles in the India-Mauritius Double Taxation Avoidance Agreement may result in
capital gains derived from the company or its investments in India becoming subject to tax in India, which could
have a material adverse effect on the company’s business, financial condition and net earnings. During the second
quarter of 2016, India and Mauritius amended their double income tax treaty. As a result, investments acquired up to
April 1, 2017 will not be assessed by India for tax on their future disposition. After April 1, 2017, India will levy capital
gains tax at half the India domestic rate on equity investments purchased or sold through Mauritius until March 31,
2019 and at the full rate from April 1, 2019 onward.

Emerging Markets

The company’s investment objective is to achieve long-term capital appreciation, while preserving capital, by
investing in Indian Investments. Foreign investment risk is particularly high given that the company invests in
securities of issuers based in or doing business in an emerging market country.

The economies of emerging market countries have been and may continue to be adversely affected by economic
conditions in the countries with which they trade. The economies of emerging market countries may also be
predominantly based on only a few industries or dependent on revenues from particular commodities.

Also, because publicly traded debt instruments of emerging market issuers represent a relatively recent innovation in
the world debt markets, there is little historical data or related market experience concerning the attributes of such
instruments under all economic, market and political conditions.

Other heightened risks associated with emerging markets investments include without limitation: (i) risks due to less
social, political and economic stability, including the risk of war, terrorism, nationalization, limitations on the
removal of funds or other assets, or diplomatic developments that affect investments in these countries; (ii) the
smaller size of the market for such securities and a lower volume of trading, resulting in a lack of liquidity and in price
volatility; (iii) certain national policies which may restrict the company’s investment opportunities, including
restrictions on investing in issuers or industries deemed sensitive to relevant national interests and requirements that
government approval be obtained prior to investment by foreign persons; (iv) certain national policies that may
restrict the company’s repatriation of investment income, capital or the proceeds of sales of securities, including
temporary restrictions on foreign capital remittances; (v) the lack of uniform accounting and auditing standards
and/or standards that may be significantly different from the standards required in Canada; (vi) less publicly
available financial and other information regarding issuers; (vii) potential difficulties in enforcing contractual
obligations; and (viii) higher rates of inflation, higher interest rates and other economic concerns. The company may
invest to a substantial extent in emerging market securities that are denominated in Indian rupees, subjecting the
company to a greater degree of foreign currency risk.

As reflected in the above discussion, investments in emerging market securities involve a greater degree of risk than,
and special risks in addition to the risks associated with, investments in domestic securities or in securities of foreign
developed countries.

Economic Risk

The Indian economy has grown rapidly during the past several years and there is no assurance that this growth rate
will be maintained. India may experience substantial (and, in some cases, extremely high) rates of inflation or
economic recessions causing a negative effect on the Indian economy. India may also impose restrictions on the
exchange or export of currency, institute adverse currency exchange rates or experience a lack of available currency
hedging instruments. Any of these events could have a material adverse effect on the Indian economy.

Trading Price of Common Shares Relative to Book Value per Share

The company is neither a mutual fund nor an investment fund, and due to the nature of its business and investment
strategy, and the composition of its investment portfolio, the market price of its common shares, at any time, may
vary significantly from its book value per share. This risk is separate and distinct from the risk that the market price of
the common shares may decrease.

FAIRFAX INDIA HOLDINGS CORPORATION

Other

Income
Expenses

Quarterly Data (unaudited)

December 31, September 30,
2016

2016

June 30, March 31, December 31, September 30,
2015

2016

2015

2016

June 30, March 31,
2015

2015

Provision for (recovery of) income taxes
Net earnings (loss)
Net earnings (loss) per share

(in Indian rupees and in thousands)(1)

Income
Expenses
Provision for (recovery of) income taxes
Net earnings
Net earnings per share

11,566
8,036

1,106
2,424
$ 0.02

75,346
5,760

33,917
3,967

3,186
66,400
$ 0.62

(8,309)
38,259
$ 0.36

7,775
3,897

3,136
742
$ 0.01

29,668
2,559

6,318
20,791
$ 0.19

30,114
4,418

1,267
2,487

4,202
1,444

7,378
18,318

964
(2,184)
$ 0.17 $ (0.02)

(1,256)
4,014
$ 0.06

December 31, September 30,
2016

2016

June 30, March 31, December 31,
2015
2016

2016

784,002
540,632
74,174
169,196
1.60

383,530
215,826

5,040,596 2,276,566
265,351
(559,268)
4,441,240 2,570,483
24.10

41.63

524,810
263,045
211,699
50,066
0.47

1,902,290
164,092
405,088
1,333,110
12.50

(1)

Presented for the quarters starting October 1, 2015, the date upon which the company’s functional currency changed from the U.S. dollar to the Indian rupee.

Total income of $11,566 in the fourth quarter of 2016 decreased from $29,668 in the fourth quarter of 2015 primarily
as a result of decreased net unrealized gains on investments. Net unrealized gains on investments of $4,765 in the
fourth quarter of 2016 included net unrealized gains on bonds of $5,702 (primarily unrealized gains on Sanmar and
Government of India bonds) and common stock of $199 (principally related to unrealized gains on Fairchem and
NCML, partially offset by unrealized losses on IIFL), while the net unrealized gains on investments of $15,776 in the
fourth quarter of 2015 included net unrealized gains on common stock of $18,559 (principally related to unrealized
gains on IIFL), partially offset by net unrealized losses on bonds of $2,268 (primarily related to unrealized losses on
Indian corporate bonds).

Total income also decreased in the fourth quarter of 2016 compared to the fourth quarter of 2015 as a result of
decreased net foreign exchange gains (principally as a result of the weakening of the Indian rupee relative to the U.S.
dollar during 2016), and decreased interest income (primarily due to decreased holdings of Indian corporate bonds)
consistent with the company investing its capital into public and private Indian Investments commencing in the
fourth quarter of 2015, partially offset by increased net realized gains on investments (principally related the
disposition of the remaining investment in investment funds in the fourth quarter of 2016).

Total expenses of $8,036 in the fourth quarter of 2016 increased from $2,559 in the fourth quarter of 2015, which is
consistent with the increased holdings of Indian Investments that resulted in higher investment and advisory fees.
Total expenses in the fourth quarter of 2016 also reflected the interest expense related to the 2-year secured term
loan.

The company reported net earnings of $2,424 (net earnings of $0.02 per share) in the fourth quarter of 2016
compared to net earnings of $20,791 (net earnings of $0.19 per share) in the fourth quarter of 2015. The decrease in
profitability in the fourth quarter of 2016 primarily reflected decreased net unrealized gains on investments and
interest income, increased investment and advisory fees and increased interest expense.

Stock Prices and Share Information

At March 10, 2017 the company had 117,434,531 subordinate voting shares and 30,000,000 multiple voting shares
outstanding (an aggregate of 147,434,531 shares effectively outstanding). Each subordinate voting share carries
one vote per share at all meetings of shareholders except for separate meetings of holders of another class of shares.
Each multiple voting share carries fifty votes per share at all meetings of shareholders except for separate meetings of
holders of another class of shares. The multiple voting shares are not publicly traded.

The table that follows presents the TSX high, low and closing U.S. dollar prices of the subordinate voting shares of
Fairfax India, trading under the symbol FIH.U, for each quarter of 2016 and 2015.

First

Second

Fourth
Quarter Quarter Quarter Quarter
(US$)

Third

2016

High
Low
Close

2015

High
Low
Close

10.89
9.30
10.85

11.59
9.80
11.50

11.95
10.25
10.50

12.74
11.05
11.35

11.25
10.06
11.00

12.10
10.60
11.10

12.00
10.90
11.55

11.15
10.02
10.10

Compliance with Corporate Governance Rules

Fairfax India is a Canadian reporting issuer with securities listed on the TSX and trading in U.S. dollars under the
symbol FIH.U. It has in place corporate governance practices that comply with all applicable rules and substantially
comply with all applicable guidelines and policies of the Canadian Securities Administrators and the practices set
out therein.

The company’s Board of Directors has adopted a set of Corporate Governance Guidelines (which include a written
mandate of the Board), established an Audit Committee and Governance, Compensation and Nominating
Committee, approved written charters for all of its committees, approved a Code of Business Conduct and Ethics
applicable to all directors, officers and employees of the company and established, in conjunction with the Audit
Committee, a Whistleblower Policy. The company continues to monitor developments in the area of corporate
governance as well as its own procedures.

FAIRFAX INDIA HOLDINGS CORPORATION

Forward-Looking Statements

This annual report may contain forward-looking information within the meaning of applicable securities legislation.
Forward-looking statements may relate to the company’s or an Indian Investment’s future outlook and anticipated
events or results and may include statements regarding the financial position, business strategy, growth strategy,
budgets, operations, financial results, taxes, dividends, plans and objectives of the company. Particularly, statements
regarding future results, performance, achievements, prospects or opportunities of the company, an Indian
Investment, or the Indian market are forward-looking statements. In some cases, forward-looking statements can be
identified by the use of forward-looking terminology such as ‘‘plans’’, ‘‘expects’’ or ‘‘does not expect’’, ‘‘is expected’’,
‘‘budget’’, ‘‘scheduled’’, ‘‘estimates’’, ‘‘forecasts’’, ‘‘intends’’, ‘‘anticipates’’ or ‘‘does not anticipate’’ or ‘‘believes’’, or
variations of such words and phrases or state that certain actions, events or results ‘‘may’’, ‘‘could’’, ‘‘would’’,
‘‘might’’, ‘‘will’’ or ‘‘will be taken’’, ‘‘occur’’ or ‘‘be achieved’’.

Forward-looking statements are based on the opinions and estimates of the company as of the date of this annual
report, and they are subject to known and unknown risks, uncertainties, assumptions and other factors that may
cause the actual results, level of activity, performance or achievements to be materially different from those
expressed or implied by such forward-looking statements, including but not limited to the following factors:
taxation of the company and its subsidiaries; substantial loss of capital; long-term nature of investment; limited
number of investments; geographic concentration of investments; potential lack of diversification; financial market
fluctuations; pace of completing investments; control or significant influence position risk; minority investments;
ranking of company investments and structural subordination; follow-on investments; prepayments of debt
investments; risks upon dispositions of investments; bridge financings; reliance on key personnel; effect of fees;
performance fee could induce Fairfax to make speculative investments; operating and financial risks of investments;
allocation of personnel; potential conflicts of interest; employee misconduct at the portfolio advisor could harm the
company; valuation methodologies involve subjective judgments; lawsuits; foreign currency fluctuation; derivative
risks; unknown merits and risks of future investments; resources could be wasted in researching investment
opportunities that are not ultimately completed; investments may be made in foreign private businesses where
information is unreliable or unavailable; illiquidity of investments; competitive market for investment
opportunities; use of leverage; investing in leveraged businesses; regulation; investment and repatriation restrictions;
aggregation restrictions; restrictions relating to debt securities; pricing guidelines; emerging markets; corporate
disclosure, governance and regulatory requirements; legal and regulatory risks; volatility of the Indian securities
markets; political, economic, social and other factors; governance issues risk; Indian tax law; changes in law;
exposure to permanent establishment; enforcement of rights; smaller company risk; due diligence and conduct of
potential investment entities; Asian economic risk; reliance on trading partners risk; natural disaster risks;
government debt risk; and economic risk. Additional risks and uncertainties are described in the company’s annual
information form which is available on SEDAR at www.sedar.com and on the company’s website at
www.fairfaxindia.ca. These factors and assumptions are not intended to represent a complete list of the factors and
assumptions that could affect the company. These factors and assumptions, however, should be considered carefully.

Although the company has attempted to identify important factors that could cause actual results to differ materially
from those contained in forward-looking statements, there may be other factors that cause results not to be as
anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as
actual results and future events could differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements. The company does not undertake to update
any forward-looking statements contained herein, except as required by applicable securities laws.

Directors of the Company

Officers of the Company

Anthony F. Griffiths
Corporate Director

Christopher D. Hodgson
President
Ontario Mining Association

Alan D. Horn
President and Chief Executive Officer
Rogers Telecommunications Limited

Deepak Parekh
Chairman
Housing Development Finance Corporation Limited

Harsha Raghavan
Managing Director
Fairbridge Capital Private Limited

Chandran Ratnaswami
Chief Executive Officer of the Company

V. Prem Watsa
Chairman of the Company

Operating Management

FIH Mauritius Investments Ltd.

Amy Tan
Chief Executive Officer

Jennifer Allen
Chief Financial Officer

Chandran Ratnaswami
Chief Executive Officer

John Varnell
Vice President, Corporate Affairs and Corporate Secretary

V. Prem Watsa
Chairman

Head Office

95 Wellington Street West
Suite 800
Toronto, Ontario, Canada M5J 2N7
Telephone: (416) 367-4755
Website: www.fairfaxindia.ca

Auditor

PricewaterhouseCoopers LLP

Transfer Agents and Registrars

Computershare Trust Company of Canada, Toronto

Share Listing

Toronto Stock Exchange
Stock Symbol: FIH.U

Annual Meeting

The annual meeting of the shareholders of
Fairfax India Holdings Corporation will be
held on Thursday, April 20, 2017 at 2:00 p.m.
(Toronto time) at Roy Thomson Hall,
60 Simcoe Street, Toronto, Canada