Page 50 - Practical Design Ships and Floating Structures

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regional economy and improving shipping services. It has a wider coverage than ordinary bonded
warehouse, and is free of the custom supervision policy, which is quite common in the latter form.
With the opening up of shipping industry and the reform of shipping policies, more and more countries
will gradually phase in this free port policy.

3 COSCO GROUP IN THE TWENTY-FIRST CENTURY

COSCO Group was established in 1961. After 40 years of development, the group, who owns and
operates some 500 vessels in different sizes and types with total carrying capacity of more than
20mdwt, has successfully developed itself into a large-scaled shipping conglomerate, offering services
in over 1200 ports in more than 150 countries or regions. Here, I would like to express my sincere
gratitude to all of you in the field of shipbuilding and shipping industries. Thank you for your
consistent understanding and support for the development of our businesses in the past 40 years!

As a global ocean shipping operator, COSCO has already set the goals on how to develop itself in the
new century. Under the new strategic plans, the goup will continuously focus on ocean shipping as the
core business by upgrading its competitive presence in the industry, further expand modem logistics
business, embody itself to create outstanding capability against rivals through rationalizing,
reorganizing and making fill use of shipping resource as well as logistics resource. To split them into
details, we intend to fix on these aspects as follows:

(1) To strengthen our core ocean shipping businesses
COSCO will continue to focus on developing container liner business while strengthening dry bulk
sector and actively expanding tanker and specialized shipping businesses at the same time. What we
need to do right now is to update and optimize the chain of shipping and value industries in such areas
as fleet structure, voyage coverage, information technology, port service facilities, sales, marketing &
canvassing system and so on. While keeping owned vessels operating profitably, we will manage to
improve our financial performance by taking control of transportation demands, which are a bit more
than what we actually can handle. We will adopt flexible policies of vessel-chartering tactic in
accordance with the changes of market demand and supply, aiming at annually increasing the
proportion of chartered vessels. As to the adjustment of voyage structure, more efforts will be made to
the issues of network-planning and deployment of resources, sticking to the strategy of setting up
transshipment hub around the world. Furthermore, much attention will be paid to obtaining long-term
contracts and fundamental customs by providing with value-added and discrepancy of services in the
field of sales & marketing sector. In short, COSCO will enable itself to meet the challenge of
international merge and consolidation wave, gradually changing its position to a cooperative operator
from an independent one, gradually improving the quality of our services. We are confident that we
should have the capability of becoming one of the first-class shipping companies in the world.
(2) To expand modern logistics businesses

Being involved in logistics business has been identified as the inevitable choice to cater to the trend of
the times and market competition. It is also regarded as the critical step for the reaIization of
development strategy in the new century. COSCO's basic idea of dealing with modern logistics activity
is based on the powerful shipping business at its core, making full use of the global abundant logistics
resources, setting customer's satisfaction as our ultimate goals. The customer service portfolio begins
with transportation. Then it will be expanded to such areas as storage, products-processing, cargo
delivery before it finally goes through the most span of life of an product like production, circulation,
distribution and consumption. COSCO will put emphasis on improving its capability of profitability
and market competition by means of providing with value-added services, strengthening its presence