Vice Chairman and President’s Message

Extracted from Annual Report 2007

Dear Shareholders,

Highlights of FY2007

COSCO posted a 64% hike in profit to a record S$336.6 million, as turnover surged 86% to S$2.26 billion. The strong performance for the year ended 31 December 2007 came as our shipyard group repaired and converted more ships and began building vessels and rigs for the strong offshore marine sector.

We started the year with the announcement of our maiden oil rig and new building & conversion contracts valued at US$200 million (S$310 million) and US$250 million (S$385 million) respectively. Two months later, we scored another first, by winning a US$170 million (S$243 million) drilling rig contract from Sevan Drilling, a subsidiary of Norwegian-listed Sevan Marine.

These are significant breakthroughs for our shipyard group. For instance, the Sevan contract, in addition to being our first drilling rig project, raised our order book 18% to US$1.1 billion (S$1.57 billion) and raised our new contract wins to US$1,272 million (S$1,820 million), in just the first quarter of 2007. More significantly, it shows the confidence customers have in our technical competence and project management capabilities.

Our contracts have been sealed with world-renowed global industry players. As we advance our shipyard competencies and enlarge our marine engineering base to include a broad range of high-value work, such as rig building, ship building and VLCC (Very Large Crude Carrier) conversions, we are heartened by the substantial progress made in diversifying our customer base of world-class corporations.

I am also pleased to highlight that in additional to proving our competency in the construction of 80,000 dwt and 92,500 dwt vessels, our focus on 57,000 dwt vessels also met with high demand from global customers. This not only solidifies our position and track record in the ship building arena, but also strengthens our resolve to forge ahead in building this part of our business.

Focusing on Strategic Direction

Putting into action our intent to grow our shipyard business and in preparation for our foray into the lucrative offshore rig market, our shipyard group has been building up offshore and new building expertise over the past two years. Initially, we undertook subcontract fabrication work to raise our standards, capability and capacity to take on more technically demanding projects.

Over the past year, the types of orders and the significance of our customers have become testament to the high precision engineering and technical skills of our shipyard group. We will continue to drive top line growth by charting our move into the higher value offshore marine engineering projects. Our shipyards are placing their priority on oil related businesses, followed by ship repair and conversions; therefore, presently we do not plan to extend into a fuller range of new building.

In ship repairs, bulk carrier repairs generally have a lower profit margin compared with other repairs. Corresponding to our focus to move into higher margin businesses, we might consider to divest other businesses to focus our energy and resources on the higher margin shipyard business.

Sustaining Future Growth

We have identified future growth drivers for COSCO. The aim for our China-based shipyard subsidiaries is to build up the areas of new building and offshore marine engineering, which includes offshore rig building, and for these two businesses to contribute 30% each, to total revenue by 2010. The traditional area of ship repair and conversion will eventually comprise 40% of the shipyard group’s revenue.

Driven by rising energy demand and new shipping regulations, we expect more high yielding orders for our shipyard group. Such contracts will give us greater confidence in executing technically complex and demanding projects. Furthermore, with new facilities and significant capacity increases coming on stream, we can make further inroads into the niche markets of offshore marine engineering work. Going forward, our shipyards will continue to build new special purpose vessels designed to meet the specific needs of our customers.

Achieving World-Class Excellence

It is my pleasure to share that during the year, the Company received the “Global Chinese Business 1000 – Best Business Performance Company” award in the Singapore region from Hong Kong-based Yazhou Zhoukan. COSCO was also ranked by the DP Information Group, Singapore’s leading credit and business information bureau, as the “Best Singapore-Listed China Company” at the Times Awards 2007.

More importantly, our commitment extends beyond operational and financial excellence to achieving high standards in corporate governance. In October 2007, we received another fillip when we won the award for most transparent company in the foreign listings category at the SIAS Investors Choice Awards, organised by the Securities Investors Association (Singapore). This is an encouragement and recognition for our efforts to always keep in mind the interests of our shareholders. As we continue to focus on growing our business and increasing shareholder value, we stay committed to communicating effectively, clearly, fairly and concisely in a timely manner, to facilitate well-informed investment decisions.

On this note, I would like to thank my fellow board members, colleagues and staff of COSCO, who have made it possible for us to accomplish so much over the past year. To our customers, business partners and shareholders, we appreciate your unstinting support and together, let us look forward to more good years.

Mr Ji Hai Sheng
Vice Chairman and President