In order to meet the market development and customer demands, our company reorganized the eastern and western lines in the way of innovation. Together with the CKYH Alliance, COSCO has further adjusted and optimized the major Europe-America Line to improve the service quality and line coverage rate and cut the risk and cost for new lines exploitation. And more direct calls such as ports of Pusan and Portland are offered for the Transpacific Ocean Line, which has widened the service coverage rate of the Northwestern Atlantic Line. The Europe Line was reorganized and a new line was added. In addition, the South China-Persian Gulf Line was launched as a result of cooperation of COSCON, HJS and KLINE.

In order to improve the market share and meet the need of the shipping capacity in the new markets, 9 new vessels with capacity of 39,240 TEUs have been put in use within the year. By Dec. 31, 2005, our company had totally owned 124 vessels with total shipping capacity of 322,414 TEUs, representing an increase of 8% compared with that of 2004. In addition, owing to the sufficient excavation of the useful resources in the market summit period, the company took back some temporarily chartered vessels to increase 14% of the actual practicable cabins in 2004. By Dec. 31, 2005, the company had placed orders of 23 vessels with actual capacity of about 180,000 TEUs (including 11 time charter vessels with capacity of about 79,733 TEUs), which are expected to run in the following several years. The development strategy for the fleet is to continuously increase the proportion of medium-sized and large-sized vessels to gradually optimize the structure of the fleet. In the first half of 2005, the company signed agreements with Hyundai Heavy Industries Limited and Nantong COSCO KHI Ship Engineering Co., Ltd. to buy 8 vessels (each has the capacity of 10,000 TEU), becoming the first company ordering container vessel with 10,000 TEUs in the industry.

The shipping era in the 21st Century is the era of shipping based on information. Our company has never abandoned the pursuit of adopting advanced information networking technologies for the corporation operation, service and management. Based on the establishment of the effective customer service system, the company further perfected the e-business functions in 2005 by successively launching the interactive service functions such as the on-line booking, on-line shipping orders consignation and check-up, on-line B/L printing, e-drawing, and on-line cargo arrival notice, etc. Moreover, it launched the a utomatic voice telephone service for China . The above measures offer great convenience to the customers around the world and also elevate the position of our brand image. The company also focused on popularizing the integrated business information systemIRIS -2 in the new markets and business expansion areas to coordinate with its business development. Besides, the functions of the management information system have been further perfected, playing an important role in improving yield management and cutting cost. And another 16 sales and service websites worldwide have been added to meet the needs of the expansion of the shipping capacity. The Networking of the southern China has also been reorganized to improve its service level and market share in the area.

Cost management is the key for enterprises to improve the service quality and also the core element for them to use the social resources effectively. So, as a MNC as COSCON, the strict control of cost is very important to its own management and the sustainable development of the society as well. COSCON has cut the proportion of the transfer goods through measures such as proper line design and expansion of the proportion for the direct calls, etc. and cut the transfer cost through active adjustment of supply structure. Meanwhile, our company carried out the dynamic cabin management to maintain the high use rate of the cabins and enhance the order control. The container cost has been effectively cut through reasonable distribution of empty containers to improve the use rate of the containers to cut the turnover time. And the service cost has been greatly saved by using IRIS-2 system for cost control. COSCON has redesigned the configuration of the shipping lines, the shipping schedule, and the shipping speed to cut the shipping cost as possible as it can. Furthermore, our company enhanced the cost control for the purchase of fuel. Through measures of centralized purchase and operation of futures, etc., our company's fuel cost is lower than the average level in the market. With the collaboration benefits caused by the business integration, our company has strengthened the port bargaining ability and limited the increase extent of the port charges.

Expecting the year 2006, the company will expand the current market share and greatly exploit the new markets. On one hand, it will actively adopt the new vessels to enlarge the freight capacity of the major shipping lines to expand the market share of Europe/America lines. On the other hand, it will actively focus on the development of the new markets, driving the formation of the global sub-line networking. At the same time, the company will further develop information system to innovate on the marketing mode with informationization. Finally, it will deepen the customer-oriented marketing strategy to make it personalized to improve the services for high-value customers based on customer segmentation.

The cost of the container shipment business amounted to RMB23.3 billion in 2005, an increase of 15% compared with RMB20.3 billion in 2004. The freight costs of goods and equipments added up to RMB12.8 billion in 2005, an increase of 3.7% compared with that in 2004. In 2005, the company took great efforts to control the costs. As a result, there was less increase in the freight costs of goods and equipments than that in freight capacity, thus greatly reducing the cost of each container and goods. The total voyage cost in 2005 was RMB6.4 billion, an increase of 48.1% compared with RMB4.3 billion in 2004, which resulted mainly from the rise in fuel charge and the THC charge. Because of the constant rise in petrol price in the global market, together with the increase in vessels and voyage numbers, the petrol consumption rose dramatically, which led to the tremendous increase in fuel cost in 2005, an increase of 61.6% compared with that in 2004. Furthermore, the company adopted new vessels, which resulted in the increase in shipping capacity and voyage numbers in the voyage routes of Transpacific Ocean and Asia-Europe, etc., thus leading to the increase of the THC charge, which increased by 21.6% compared with 2004. In short, the cost increase in fuel and THC charge accounted for the tremendous voyage cost in 2005. The vessel cost in 2005 was RMB4.1 billion, an increase of 14% (RMB500 million) compared with RMB3.6 billion in 2004. The increase of the vessel cost was caused mainly by the use of the new vessels. However, it was lower than the increase extent of the total shipping cost and capacity. In 2005, all the contracts are fulfilled according to their payment terms respectively.