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Ladies and gentlemen: good afternoon everyone! 

Today, our presentation will include 4 parts:

1. Results Highlights

2. Market and Business Review

3. Financial Review

4. Outlook

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First of all, let me briefly go through the interim results of 2016.

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In 1H2016, global political and economic landscape were unstable, while the economic and tradeenvironment did not support the recovery of shipping. Shipping market remain weak while themarket sentiment have become more cautious. Facing such complex and challenging businessenvironment, COSCO International adhered to the development, further refined its developmentstrategy, and actively responded to market changes, with focus on marketing services andstrengthening lean management, and constantly enhancing service awareness, as well as promotingthe transformation and upgrading of the Company, so as to reduce the impact on results caused bythe market downturn.

In 1H2016, the profit attributable to the equity holders of the Company reached HK$145 mn. Thebasic earnings per share was 9.45 HK cents.

As at the end of June 2016, the Group’s net cash on hand reached HK$6.1 bn. Such strong financialposition will support the future development of the Company.

To appreciate the long‐term support from our shareholders, the board of directors declared to payan interim dividend of 4 HK cents per share, representing a dividend payout ratio of 42%.

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Now let’s have a review on the shipping services markets and the performance of eachof our business segments in 1H2016.

In 1H2016, despite the continued weakness in shipping market, the global shippingcapacity continued steady growth, and reached 1.75 billion dead weight tonnages (DWT)in total. Such large shipping capacity laid the foundation for the development of shippingservices business which mainly serves operating vessels.

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During the period, the global total newbuilding delivery increased by 9% YOY, in whichChinese shipyards’ delivery reached 17.9 mn DWT, accounted for 35% globally. As forthe new contracting, the newbuilding contracting of Chinese shipyards increased YOY to13.2mn DWT. As at the end of June 2016, Chinese shipyards had newbuilding orderbookon hand of 122 mn DWT.

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In 1H2016, both output and price of new containers in China continued to drop. Thetotal output during the period was 718k TEU, down by 56% YOY, while the averageselling price kept falling, declined by 25% YOY.

The declines in output and price of new containers directly affected the demand andprice of container coatings.

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Ship Trading Agency Services: In 1H2015, the sluggish shipping market led to a continuedslowdown of fleet restructuing. Ship owners delayed the delivery of some newbuildvessels, and volume of ship scrapping retreated YOY, coupled with the continuing lowship price, commission income from secondhand vessels and others decreased ascompared to the same period of last year. During the period, revenue from ship tradingagency services fell by 29% YOY to HK$31.02 mn, and the operating profit declined by52% YOY to HK$12.94 mn.

As at the end of June 2016, COSCO Ship Trading’s orderbook on hand reached 97 vesselsor 13.86 mn DWT, which were scheduled for delivery over the coming 3 years.

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Marine Insurance Brokerage: during the period, COSCO Insurance Brokers continued topush forward the development of new customers outside COSCO Shipping Group andinnovate services for new non‐marine insurance products. As a result, it recorded stableresults in commission income from insurance brokerage amid weak businessenvironment.

Segment revenue from marine insurance brokerage services remained flat at HK$46 mn,and the operating profit slightly down by 3% YOY to HK$32.5mn in 1H2016.

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Supply of Marine Equipment and Spare Parts: In respond to the decreasing demand ofequipment resulted from ship owners’ cost control measures, COSCO Yuantongcontinued to step up marketing efforts and developed 40 new customers outside theparent group during the period. In 1H2016, revenue from supply of marine equipmentand spare parts slightly slid by 7% YOY to HK$501 mn, and the operating profit remainedstable at HK$32.63mn.

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Coatings: Our coatings segment recorded divergent results in 1H2016.

COSCO Kansai, a coating manufacturer specialised in the production and sale ofcontainer coatings and industrial coatings, recorded a revenue decline of 57% YOY toHK$287mn. Its operating profit decreased by 81% YOY to HK$6.68mn, mainly impactedby the year‐on‐year decline in the sales of container coatings.

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Coatings: In 1H2016, sales volume of Jotun COSCO, a coating manufacturer specialised inthe production of marine coatings, down by 10% YOY to 48,153 tonnes, impacted fromthe delay of certain shipbuilding projects. Share of profit slightly down by 2% YOY toHK$47.25 mn.

According to its orderbook on hand as at the end of June 2016, Jotun COSCO was goingto deliver newbuilding marine coatings to vessels of 39.6 mn DWT over the coming 2years, which would support Jotun COSCO’s sales volume of marine coatings in the future.

Combined the results from the two coatings JVs, profit before income tax from coatingssegment decreased by 35% YOY to HK$56.97 mn during the period.

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Marine Fuel Supply Business: The Company’s wholly‐owned subsidiary Sinfeng MarineServices continued to adopt prudent business strategy. Sales volume of marine fuel in1H2016 totaled 617k tonnes, up by 23% YOY; and segment revenue declined by 2% YOYto HK$1.39 bn, due to the lower price of marine fuel during the period.

The Group’s 18%‐owned associate Double Rich contributed HK$3.05 mn as share ofprofit during the period, down by 36% YOY, mainly caused by less investment income ascompared to the same period of last year .

Combined the above two, profit before income tax from marine fuel supply businessdropped by 34% YOY to HK$5.32 mn.

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General Trading (mainly asphalt): Sales volume of asphalt grew by 52% YOY to 80ktonnes in 1H2016. But its sales revenue declined by 5% YOY to HK$300 mn due to lowerasphalt price. The operating profit slid markedly to HK$6.02 mn, mainly because noreversal of provision for impairment of certain other receivables following the successfulcollection was recorded in 1H2016.

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Next, I invite Mr. Ricky Chan, CFO of COSCO International, to go through the financialreview.

In 1H2016, the Group’s gross profit reached HK$250 mn, down by 33% YOY. The overall grossprofit margin dropped by 2.5 percentage points to 9.7%, as a result of lessened gross profitfrom container coatings amid the lower selling price and sales volume, as well as the year‐on‐year decline in commission income from ship trading agency which has high gross profit margin.

Other income and gains decreased significantly to HK$14.63 mn, mainly because two specialitems are excluded during the period, i.e. a reversal of provision for impairment of otherreceivables of HK$18.98 mn in general trading segment, and the government subsidy income ofHK$23.33 mn granted to COSCO Kansai by the Governments of Shanghai city and BaoshanDistrict.

Finance income decreased by 34% YOY to HK$44.59 mn, mainly due to lessened interestincome generated from the cash on hand. During the period, the return on cash reached 1.44%,which was 81 basis points higher than the 3‐month USD LIBOR rate as at the end of June 2016.

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Profit Breakdown: In 1H2016, profit before income tax from coatings business accountedfor 34% of the Group’s total; the profit contribution from the three traditional shippingservices businesses which mainly serve ship owners, including ship trading agency, marineinsurance brokerage, and supply of marine equipment and spare parts, contributed 49% intotal; marine fuel supply business contributed 3%; general trading contributed 2%; and theothers (mainly finance income) contributed 12%. The composition of the Company’s overallprofit is fairly diversified.

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Balance Sheet: As at the end of June 2016, COSCO International had total asset ofHK$9.38 bn, total liability was HK$1.29 bn, and total equity excluding non‐controllinginterests was HK$7.72 bn.

After deducting bank borrowings from total deposits and cash, the Group had net cashof HK$6.14 bn.

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Cash Flow: During the period, net cash inflow from operating activities was HK$19.14mn, mainly because of the decreased operating profit as compared to the same periodlast year.

Net cash generated from investing activities was HK$44.83 mn, declined as compared to1H2015, because of lessened dividends and interest income received from a jointventure as compared to the corresponding period last year.

Net cash outflow from financing activities of HK$157 mn, slightly dropped year‐on‐year,mainly attributable to the less dividend expense and repayment of bank loans ascompared to 1H2015.

Exchange loss on cash and cash equivalents amounted to HK$4.1mn, mainly due to thedepreciation of RMB currency during the period.

My financial review comes to an end. Thank you!

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Thank you Ricky. Now let me brief you the outlook.

As Vice Chairman Zhu just made a detailed briefing on the macro situation and the development vision of COSCO International, I won’t repeat it. I would like to report the key initiatives to be taken by the senior management in 2H2016.

Firstly, to maintain steady development by improving service ability and strengthening existingbusinesses.

As for ship trading agency, we will help ship owners and shipyards negotiate well, so as to ensuresmooth delivery of newbuildings and scrapping of obsolete vessels;

As for insurance brokerage, we will keep up the good work of hull & machinery insurance and war riskinsurance, and at the same time step up efforts to further expand sales channels and service coverage;

As for marine equipment and spare parts supply, we will provide better customized services toimprove service quality, and reduce procurement cost while strengthening global purchasing byleveraging cooperation with other sizable peer SOEs;

As for coatings business, we will try to increase sales of container coatings and solidify the marketleadership, and with great marketing efforts for marine coatings, to win over more orders ofnewbuildings marine coatings with better profitability and increase the sales contribution frommaintenance and repair marine coatings;

As for marine fuel supply, we will continue with prudent operations and carefully develop newcustomers while preserving the existing quality customers.

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Secondly, COSCO International will achieve the intensive development by strengthening internal management,rigid cost control and improving efficiency. The Company will introduce flat management which lessens thehierarchies of management and legal entities. The Company will strengthen risk management on potentialproject to reduce risk exposure, and monitor foreign currency risk and customer credit risk. Besides, theCompany will reinforce the production management by optimizing and consolidating the operation flow toensure the reliability of the product quality. It will analyze the cost drivers in great details in terms of theprocurement, manufacture and logistic, so as to control the production cost and to improve the productivity.

Thirdly, to encourage innovation by nurturing the creative mindset of service and marketing so as to furtherimprove service quality: as for ship trading agency and marine equipment and spare parts supply business, wewill accelerate the transformation and upgrade of existing business with the focus on expanding sales outsidethe Group; as for marine insurance brokerage, we will accelerate the growth of non‐marine insurance businessby actively developing new service products; as for coatings, we will uphold the eco‐friendly attitude andpromote the application and upgrade of eco‐friendly coating products.

The last but not least, to seek for leap development upon the most direct and major opportunity from theestablishment of China COSCO Shipping Corporation, which has become the largest shipping conglomerate inthe world controlling a total capacity of 85.32 mn DWT or 1,114 vessels, ranking the world’s No.1. Therefore,COSCO International now has the potential to transform from serving certain companies to serving the entiresector.

According to the request of the board of directors, COSCO International will go for the road of specialisationand economy of scale by seeking the opportunity of merging business of similar nature within the Group aswell as other businesses along the value chain outside the Group, so as to gradually enlarge its shippingservices business coverage and enhance its service and support ability, which will improve the overallcompetitiveness of vessel fleet. We management team will spare no effort to fulfill our duties and missions,diligently striving for the leaping development of COSCO International, and create greater returns forshareholders.

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This is the end of the presentation of COSCO International’s 2016 interim results. Thank you.

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