Year 2008 is a year of development for COSCO International. We will strive to achieve our strategy of “One Change”, i.e. change from the status of pursuing development and divesting non-core businesses together to the status of focusing on the new development of core business, so as to attain a rapid and positive growth of the Company. To achieve this, we will carry out five major tasks. Firstly, we will continue to pursue a continued growth of our businesses to ensure a solid growth in profit. We will endeavor to expand our core business so as to build up a distinguished image of shipping services provider. We will strengthen our internal management and enhance our corporate governance. In addition, we will continue to participate into the restructuring and consolidation of all shipping services related to COSCO Group and non-COSCO Group, so as to complement mutual competencies and drive synergy in related businesses. We will try to extend both internal and external servicing network of our core business to achieve horizontal integration through acquiring new business assets. We will strive to make great strides in 2008 and our aim is become a specialised, unique and leading shipping services provider.

To fulfill its commitment to providing maximum returns to our shareholders, the Board is pleased to share our fruitful results with them. Our usual practice is to distribute not less than 25% of the recurrent operating profits as dividend. The payment of future dividend will be subject to the market changes and capital requirement of the development projects of the Company in the future.

The reporting currencies adopted for financial statements of the Company and its major subsidiaries are Hong Kong dollars and Renminbi. The continuous appreciation of Renminbi has been inflating the net asset base of the Company and its subsidiaries as a whole and has therefore strengthened their asset base. Sales of coatings by COSCO Kansai Companies are indirect exports and settled by United States dollars, the continuous appreciation of Renminbi therefore imposes pressure on the profitability of COSCO Kansai Companies. Nevertheless, it is anticipated that upon the execution of the PRC Government’s new policy on regulating the indirect industrial exports at the end of 2008, those indirect industrial exports settled by United States dollars will gradually be transformed to domestic sales settled by Renminbi. It is believed that the appreciation pressure of Renminbi on container coatings and marine coatings businesses will soon be relieved.

In addition, due to the substantial earnings contributed from the associated company of SOLHL during the year, the Company has been able to deliver impressive results and benefited from the appreciation of Renminbi during the year. In a nutshell, the appreciation of Renminbi in the year had no material impact on COSCO International. However, the Company has formed a task force to closely monitor the market situation and take any precautionary measures if necessary.

The Company has been well prepared for the capital requirement of the future development and investment opportunities. As of the end of December 2007, the cash and cash equivalents of the Company was about HK$1,031,344,000. If all the potential investment projects including the construction plan for new coatings plants of Jotun COSCO HK are realised, it is anticipated the Company may not have enough cash in hand to pay the consideration of the investment project with the current net cash in hand. With a view to expanding its core business, the Company will raise funds according to the cash demand of the projects and the prevailing market conditions.

COSCO Group is a diversified and multinational conglomerate which focuses mainly on shipping and modern logistics businesses. Apart from these two major businesses, COSCO Group has a number of quality assets relating to shipping services. Currently, COSCO Group has regional operations of provision of marine equipments and spare parts in the United States, Germany, Japan and Singapore. In addition, COSCO Group owns other shipping services such as oil bunkering services. COSCO International has been interested in all kinds of shipping services businesses under its parent company. By ways of expansion of new businesses and consolidation of existing businesses, COSCO International will achieve the sustainable development and further enhance its overall core competencies.

In 2007, turnover from COSCO Group customers accounted for about 19% (2006: 21%) of the total turnover from shipping services, of which the proportions of the revenue from ship trading agency marine insurance brokerage and sales of marine equipment and spare parts businesses derived from COSCO Group customers were relatively high, i.e. 92%, 76% and 75% respectively. The coatings business, which has comparatively more customers from non COSCO Group, representing a larger share of the total revenue and its proportion of revenue from non COSCO Group customers accounted for about 99%. The Company expects to expand its businesses, consolidate and develop its clientele to further maintain the proportion from COSCO Group customers at an existing level and gradually reduce it.

The cyclical changes of the shipping industry mainly involve the fluctuations on transportation fees which have no direct impact on the income of shipping services. In addition, during the depression of the industry, some ship owners will order additional new vessels and replace equipment at lower prices. So that, when the market restores, they will be well positioned to cope with the higher demand and expand market shares. Therefore, in principle, the demand for shipping services is relatively stable and less volatile than the shipping industry, its cycle is not in phase with the shipping industry.

The marine insurance businesses for vessels registered in China Mainland are currently operating under traditional practice, i.e. insurance issues are being negotiated directly by the insurance companies with the shipowners, rather than through a more professional, independent insurance broker with stronger bargaining power as usually practicing internationally. With the liberation of the insurance market in China, the demand for insurance services has been on the rise and the need to seek advice in relation to vessels registered in China from professional insurance brokers has been increasing. Currently, over two-third of the vessels of COSCO Group’s fleets are registered in China. Therefore, the Company will take proactive strategies in 2008 to expand insurance brokerage businesses to the vessels registered in China within COSCO Group in order to expand the room for profit growth.