A major earthquake measuring 8.0 Richter Scale jolted Wenchuan County of Southwest China's Sichuan province on 12th May, 2008. The devastation made by the earthquake brought huge pain to the victims. CSCL made a donation of 2 million RMB to Wen Chuan Earthquake Disaster Area via Red Cross Society of China.

Mr. Li Shaode, Chairman of CSCL, said, “CSCL thrived in 2007. We expanded our fleet and adjusted shipping capacity in good time, which allowed us to maintain a more than 40% share of the domestic market and our standing as a leading container transportation enterprise in China. The Company was also listed on the A-share market in China on 12 December 2007, giving it stronger assurance for sustainable growth in the future.”

During the period under review, all international and domestic trade lanes of CSCL achieved outstanding performance. For international trade lanes, freight rates of the Europe/Mediterranean Sea, the Middle East and Australia trade lanes continued to be strong. International container transportation business accounted for approximately 89% of the Company’s overall revenue. Affected by the sub-prime mortgage issue in the US, performance of the US trade lane was relatively weak. In response, CSCL began to adjust its shipping capacity last year and lowered the proportion of revenue from the US trade lane to its total revenue to only 36.2%. At the same time, the Company was able to increase notably the backhaul cargo volume, raising filled capacity on return from the US and Europe by 50% and 85% respectively. As for domestic trade lanes, the Company, armed with a premium brand reputation, maintained over 40% share of the market and boasted encouraging profit, with revenue per TEU up by 11% to RMB1,568 year-on-year.

In 2007, the Company continued to optimize the fleet structure and expand the scale of its fleet, boosting its annual shipping capacity by 47,000 TEUs. As at the end of 2007, the Company had a total shipping capacity of 446,000 TEUs, of which 82% are large container vessels of capacity over 4,000 TEUs. In addition, the Company has ordered 8 large container vessels of total capacity 13,300 TEUs from the Samsung Shipbuilding Factory in South Korea. The vessels will be delivered between 2010 and 2012 and are expected to markedly strengthen the Company’s competitiveness.

During the year under review, with the European Union expanding in the East and economies in the Black Sea area and the Middle East flourishing, the Company seized the first mover spot to launch with corresponding partners a Black Sea trade lane and two Middle East trade lanes. It also forged strategic partnership with China Railway Container Transport Co., Ltd. to expand its sea-rail service coverage, with the aim of achieving a seamless sea-rail service network that can accommodate larger transportation volume and offer extended services.

Apart from expanding its market to boost revenue, CSCL also implemented stringent control on expenses so as to trim costs. Positive results had been achieved through cost control measures over container management, transshipment and fuel oil. In 2007, the sales cost increased only 20%, which was lower than the 27.3% increase in revenue.

In addition, the Group captured the golden opportunity in the domestic capital market and successfully listed its A shares in the PRC. The Company issued 2.34 billion shares A Shares, of which the net proceeds raised was approximately RMB15.4 billion. The proceeds will be used to purchase container vessels and acquire from the parent company the assets related to container shipping businesses, which include ports, container manufacturing and logistics businesses, etc.

Looking forward, the Company will continue to uphold its service philosophy of offering supreme services, consolidate the “CSCL” brand image and improve customer satisfaction. Regarding international trade lanes, in addition to expanding the trade lane coverage, the Company will devote greater effort into raising capacity consumption on return trade lanes, aiming for a better balance in carriage volume back and forth and higher profitability. As for the domestic trade lanes, the Company will strive to enhance its competitive advantages and to consolidate its market leadership with new vessels to join its fleet in 2008 bringing additional capacity.

Mr. Li concluded, “2008 will see China as the star and smooth sailing for CSCL. The Company will continue to increase its container transportation volume and expand its fleet. With the plans to acquire container business related assets including ports, container manufacturing and logistics from our parent company progressing smoothly, we expect to reap synergies when the acquisitions are completed and ultimately boost our overall advantages. Facing the changing global economy, the Company will continue to explore ways to save costs, step up efforts to nurture talents and uphold its dedication to offering high quality global transportation service. Our aim is to become a world leading container transportation company and deliver maximum returns to shareholders.”

Ship Operators are encouraged to consider use of the system in order to secure a transit on a guaranteed date, especially during times of lock's overhaul or high traffic. At optimum approximately 50% of the traffic can participate during three periods:

• First Period: 365 to 22 days before transit date;
• Second Period: 21 to 4 days before transit date;
• Third Period: 3 to 2 days before transit date.

It must be cautioned that the third period is designed for short haul operators, i.e. vessel arriving from Caribbean or Colombian Ports.

Those operators who choose to leave their decision to attempt to book until the third period, because the demand for booking (during Canal congestion) generally far exceeds the slots available, can expect a less than a 10% probability of obtaining a booking.

Request for bookings will be received at 9:00 a.m. daily. Between 9:00 a.m. and 9:15 a.m. request will be treated as having received at the same time. Thereafter, requests for booking will be processed in order that they are received.

Transit Slot Allocations

From October 1 to May 31, three of the seven reserved transit slots allocated to the first booking period are available exclusively for commercial passenger vessels on a first come, first served basis.

If between 9:00 a.m. to 9:15 a.m. booking request exceed the number of slots available, allocations of booking will be made according the following criteria:

A) To customers with the highest ranking of Panama Canal business. This ranking will be determined as the result of the weighted average of the ranking of total transits (40%) and the ranking of tolls paid (60%) during the preceding 12-month period ending the last day of the month preceding the month of transit request. This customer ranking will be calculated and published each month by the ACP Marketing Department. The vessel's SIQD form will be used to apply proper credit to customers for the transit of each of their booked vessels.

B) To vessels in the order of frequency they transit booked during the preceding 12-month period ending the last day of the month preceding the month of the transit request.

NOTE: The crediting of points for transiting the Canal while booked; whenever there is a vessel with several customers involved, such as different owners, charterers, operators, cargo owners, etc., the customer paying the transit tolls will be credited for such transit.

Fees (in addition to normal Canal expenses) are US$ 0.39 per PC/UMS net ton. There is a premium fee of US$0.69 per PC/UMS net ton for booking during Condition 3 (total booking slots reduced from 21 to 12).

Cancellation Fee

• 31 to 364 days: 10% of booking fee or US$ 600
• 22 to 30 days: 50% of booking fee or US$ 900
• 4 to 21 days: 60% of booking fee or US$ 1,200
• 3 days to 36 hours: 80% of booking fee or US$ 1,500
• Less than 36 hours: 100% of booking fee

Vessels which are booked must arrive by a deadline of 0200 hours (91 ft beam and over) and 1400 hours (under 91 ft beam). Failure to do so will result in forfeit of booking fee and non preference scheduling.

Vessels booked for transit that fail to arrive on schedule, will be given the option of transiting on the same day as arrival, if and when re-scheduling is possible without adversely affecting other vessels. Should these vessels choose to exercise this option, they will be subject to a penalty equal to 200% of their prescribed booking fee.