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Second Quarter Financial Statement For The Period Ended 30/06/2004

HALF-YEAR AND FULL YEAR RESULTS

corresponding period of the immediately preceding financial year.

(i) Income Statement



	Group
	S$'000		%	S$'000		%
	Q2 2004	Q2 2003	Change	1H 2004	1H 2003	Change
Turnover	27,552	22,327	23	52,214	43,854	19
Cost of sales	(16,257)	(14,996)	8	(30,003)	(30,344)	(1)
Gross profit	11,295	7,331	54	22,211	13,510	64
Other operating income	1,274	230	454	1,553	728	113
Distribution costs	(288)	(293)	(2)	(554)	(573)	(3)
Administrative expenses	(3,095)	(2,687)	15	(5,965)	(5,108)	17
Exceptional items	0	0	0	0	15	NM
Operating profit	9,186	4,581	101	17,245	8,572	101
Net finance costs	(1,201)	(2,678)	(55)	(4,244)	(5,098)	(17)
Share of results of associated companies	13,786	4,114	235	21,668	6,714	223
Amortisation of goodwill of an associated company	(144)	(145)	(1)	(289)	(289)	0
Profit before tax	21,627	5,872	268	34,380	9,899	247
Tax	(1,992)	(489)	307	(3,200)	(1,373)	133
Profit from ordinary activities	19,635	5,383	265	31,180	8,526	266
Minority interest	(215)	(269)	(20)	(373)	(447)	(17)
Net profit	19,420	5,114	280	30,807	8,079	281


(ii) Breakdown and Explanatory Notes to Income Statement



	Group
	S$'000		%	S$'000		%
	Q2 2004	Q2 2003	Change	1H 2004	1H 2003	Change
Profit before tax is arrived at after (charging)/crediting:
Other income including interest income	1,365	278	391	1,748	875	100
Interest on borrowings	(2,772)	(2,808)	(1)	(4,755)	(5,701)	(17)
Depreciation and amortisation	(6,271)	(6,069)	3	(12,324)	(11,839)	4
Profit on disposal of property, plant and equipment	2	2	0	3	24	(88)
Foreign exchange (loss)/gain	1,480	83	1,683	316	457	(31)
The Group's exceptional item comprises:
Profit on disposal of a subsidiary	0	0	0	0	15	NM
Adjustment for over/(under) provision of tax in respect of prior years:
Income tax	6	0	NM	6	(281)	NM


NOTES:

NM denotes not meaningful.

as at the end of the immediately preceding financial year.

	Group		Company
	S$'000	S$'000	S$'000	S$'000
	30/06/2004	31/12/2003	30/06/2004	31/12/2003
Current assets
Cash and cash equivalents [1]	66,585	86,124	34,467	53,407
Trade and other receivables [2]	16,588	22,672	647	2,556
Trading property	615	615	0	0
	83,788	109,411	35,114	55,963
Non-current assets
Non-trade receivables	873	864	0	0
Other investments	559	558	200	200
Investments in associated companies	74,814	69,810	55,967	58,212
Investments in subsidiaries	0	0	169,779	171,054
Investment properties	30,200	30,275	0	0
Property, plant and equipment	353,893	352,774	413	473
Deferred tax assets	201	201	0	0
	460,540	454,482	226,359	229,939
Total assets	544,328	563,893	261,473	285,902
Current liabilities
Trade and other payables [1]	40,227	54,170	9,796	20,399
Borrowings [1]	40,341	43,317	1,192	5,068
Provision	2,698	2,288	0	0
Current tax	963	1,519	630	616
	84,229	101,294	11,618	26,083
Non-current liabilities
Other payables	4,438	4,493	102	107
Borrowings [1]	155,536	183,922	3,500	26,869
Deferred tax	252	252	0	0
	160,226	188,667	3,602	26,976
Total liabilities	244,455	289,961	15,220	53,059
Net assets	299,873	273,932	246,253	232,843
Shareholders' equity
Share capital	216,908	179,648	216,908	179,648
Reserves	1,383	25,780	527	27,499
Retained profits	80,384	65,866	28,818	25,696
Total shareholders' equity	298,675	271,294	246,253	232,843
Minority interest	1,198	2,638	0	0
	299,873	273,932	246,253	232,843

NOTES:

[1] The decrease in Cash and cash equivalents was due to the repayment of bank loans and the final instalment for the purchase consideration of Cosco (Dalian) Shipyard Co., Ltd. These had resulted in a decrease in Borrowings and Trade and other payables.

[2] The decrease in Trade and other receivables was mainly due to the reclassification of the first instalment paid for the construction of two vessels by Nantong Cosco KHI Ship Engineering Co, Ltd from Deposits to Property, Plant and Equipment - Vessel under construction upon the approval obtained from the Shareholders at the Extraordinary General Meeting held on 20 April 2004.

Amount repayable in one year or less, or on demand



As at 30/06/2004

As at 31/12/2003

Secured	Unsecured	Secured	Unsecured
39,149,000	1,192,000	38,249,000	5,068,000



Amount repayable after one year



As at 30/06/2004

As at 31/12/2003

Secured	Unsecured	Secured	Unsecured
152,036,000	3,500,000	176,422,000	7,500,000



Details of any collateral

Secured borrowings are generally secured by the group's leasehold land and buildings, motor vessels, motor vehicles, investment properties and trading property with net book values totalling $371,622,000 (2003: $376,792,000).

the corresponding period of the immediately preceding financial year.

	Group
	S$'000
	Q2 2004	Q2 2003
Cash flow from operating activities
Profit before tax and share of results of associated companies	7,985	1,903
Adjustments for:
Depreciation of property, plant and equipment	6,146	5,886
Depreciation of investment properties	38	38
Profit on disposal of property, plant and equipment	(2)	(2)
Negative goodwill written off	(274)	0
Preference dividend (financing)	1	372
Interest expense (financing)	2,771	2,436
Interest income (investing)	(90)	(48)
Operating cash flow before working capital changes	16,575	10,585
Changes in operating assets and liabilities, net of effects from disposal of subsidiaries:
Receivables	1,628	88
Payables	1,659	2,455
Exchange differences	128	(28)
Cash generated from operations	19,990	13,100
Income tax paid	(203)	(593)
Net cash inflow from operating activities	19,787	12,507
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment	65	3
Payments for purchase of property, plant and equipment	(2,547)	(24,845)
Increase in deferred expenditure	0	(394)
Interest received	88	48
Dividend income received from associated companies	14,902	3,727
Payment to minority shareholder for acquisition of additional shares in a subsidiary	(800)	0
Net cash inflow/(outflow) from investing activities	11,708	(21,461)
Cash flows from financing activities
Repayment of bank loans and other term loans	(9,340)	(27,239)
Proceeds from bank loans and other term loans	0	24,340
Repayment of finance lease liabilities	(6)	(5)
Repayment of amount due to a related corporation	(13,957)	0
Dividends paid to shareholders of the Company	(7,230)	(3,411)
Dividends paid to minority shareholders of subsidiaries	(746)	0
Repayment of loan from immediate holding company	0	(501)
Repayment of loan by a related corporation	0	7,338
Proceeds from issue of ordinary shares	789	19,555
Interest paid	(1,360)	(2,372)
Net cash (outflow)/inflow from financing activities	(31,850)	17,705
Net (decrease)/increase in cash and cash equivalents held	(355)	8,751
Cash and cash equivalents at the beginning of the financial period	66,334	20,991
Cash and cash equivalents at the end of the financial period	65,979	29,742
Cash and cash equivalents represented by:
Bank and cash balances	20,707	24,375
Fixed deposits with financial institutions	45,877	15,720
Bank overdrafts	(605)	(10,353)
	65,979	29,742

(ii) changes in equity other than those arising from capitalisation issues and
distributions to shareholders, together with a comparative statement for the
corresponding period of the immediately preceding financial year.

	Share capital	Reserves	Retained profits	Total
	S$'000	S$'000	S$'000	S$'000
The Group
Balance at 1 April 2004	179,877	23,556	77,253	280,686
Net gain not recognised in income statement
- Foreign currency translation differences	0	4,873	0	4,873
Net profit for the financial period	0	0	19,420	19,420
Total recognised gains for the financial period	0	4,873	19,420	24,293
Dividend for 2003	0	0	(7,230)	(7,230)
Issue of share capital	789	0	0	789
Conversion of RCCPS	91	46	0	137
Bonus issue of 1 ordinary share for every 5 existing ordinary shares of $0.20 each	36,151	(27,092)	(9,059)	0
Balance at 30 June 2004	216,908	1,383	80,384	298,675
Balance at 1 April 2003	124,945	14,361	50,490	189,796
Net loss not recognised in income statement
- Foreign currency translation differences	0	(183)	0	(183)
Net profit for the financial period	0	0	5,114	5,114
Total recognised losses and gains for the financial period	0	(183)	5,114	4,931
Dividend for 2002			(3,411)	(3,411)
Issue of share capital	20,039	(484)	0	19,555
Balance at 30 June 2003	144,984	13,694	52,193	210,871
The Company
Balance at 1 April 2004	179,877	27,573	34,682	242,132
Net profit for the financial period	0	0	10,425	10,425
Dividend for 2003	0	0	(7,230)	(7,230)
Issue of share capital	789	0	0	789
Conversion of RCCPS	91	46	0	137
Bonus issue of 1 ordinary share for every 5 existing ordinary shares of $0.20 each	36,151	(27,092)	(9,059)	0
Balance at 30 June 2004	216,908	527	28,818	246,253
Balance at 1 April 2003	124,945	11,711	34,323	170,979
Net profit for the financial period	0	0	3,655	3,655
Dividend for 2002	0	0	(3,411)	(3,411)
Issue of share capital	20,039	(484)	0	19,555
Balance at 30 June 2003	144,984	11,227	34,567	190,778

bonus issue, share buy-backs, exercise of share options or warrants, conversion of
other issues of equity securities, issue of shares for cash or as consideration for
acquisition or for any other purpose since the end of the previous period reported
on. State also the number of shares that may be issued on conversion of all the
outstanding convertibles as at the end of the current financial period reported on
and as at the end of the corresponding period of the immediately preceding
financial year.

During Q2 2004, the issued and paid-up capital of the Company was increased from $179,876,884 to $216,908,497. This was due to:

• the allotment and issue of 455,990 ordinary shares of $0.20 each as a result of the conversion of RCCPS;
• the allotment and issue of 3,945,000 ordinary shares of $0.20 each from the exercise of option under the Cosco Group Emplyees' Share Option Scheme; and
• the bonus issue of 180,757,078 ordinary shares of $0.20 each on the basis of 1 bonus share for every 5 existing ordinary shares held at the book closure date, 30 April 2004.

During Q2 2004, share options totalling 15,340,000 were granted to eligible employees and non-executive directors of the Group at the exercise price of $0.735 per share persuant to the Cosco Group Employees' Share Option Scheme 2002.

The outstanding share options under the Cosco Group Employees' Share Option Scheme as at 30 June 2004 was 17,560,000.

which auditing standard or practice.

The figures have not been audited or reviewed.

any qualifications or emphasis of a matter).

Not Applicable

issuer's most recently audited annual financial statements have been applied.

The Group has adopted the same accounting policies and method of computation in the financial statements for the current period compared with the audited financial statements for the financial year ended 31 December 2003.

including any required by an accounting standard, what has changed, as well as
the reasons for, and the effect of, the change.

Not Applicable

on and the corresponding period of the immediately preceding financial year,
after deducting any provision for preference dividends.

	Group		Group
	Q2 2004	Q2 2003	1H 2004	1H 2003
(i) Based on the weighted average number of ordinary shares on issue	1.79 cents	0.62 cents	2.85 cents	1.02 cents
(ii) On a fully diluted basis	1.79 cents	0.55 cents	2.84 cents	0.92 cents

NOTES:

The earnings per ordinary share is calculated by dividing the consolidated profit after taxation, minority interests and preference dividend by the weighted average number of ordinary shares in issue during the period.

The fully diluted earnings per share is arrived at after taking into consideration the potential ordinary shares arising from the exercise of outstanding share options and Redeemable Cumulative Convertible Preference Shares (RCCPS) which would dilute the basic earnings per share. Share options had been excluded for Q2 2003 and 1H 2003 computation as the effect was anti-dilutive.

The comparative figures for earnings per ordinary share had been adjusted to account for the effect of bonus issue in Q2 2004.

capital of the issuer at the end of the:-

(a) current financial period reported on; and
(b) immediately preceding financial year.

	Group		Company
	30/06/2004	31/12/2003	30/06/2004	31/12/2003
Net asset value per ordinary share	27.54 cents	25.17 cents	22.71 cents	21.60 cents

The comparative figures for Net asset value per ordinary share had been adjusted to account for the effect of bonus issue.

understanding of the group's business. It must include a discussion of the
following:-

(a) any significant factors that affected the turnover, costs, and earnings of the
group for the current financial period reported on, including (where applicable)
seasonal or cyclical factors; and

(b) any material factors that affected the cash flow, working capital, assets or
liabilities of the group during the current financial period reported on.

Overview

In Q2 2004, the Group continued to achieve record net profit, margin expansion and strong turnover growth on robust performances by core businesses of dry bulk shipping, shipping agency and ship repair.

Turnover

In Q2 2004, Group turnover grew 23% to $27.6 million from $22.3 million in Q2 2003. Dry bulk shipping operations led turnover growth with charter income rising 30% from $16.86 million in Q2 2003 to $21.95 million in Q2 2004. Growth was due mainly to buoyant demand and improved bulk freight rates secured on charter renewals by the Group's dry bulk carriers. During Q2 2004, charter agreements for 8 of the Group's bulk carriers were renewed at higher rates. Dry bulk shipping remained the largest turnover contributor, constituting 79.7% of Group turnover in Q2 2004.

Against the 1H 2003, Group turnover grew 19% to a record $52.2 million in 1H 2004 mainly on strong contribution by the Group's dry bulk shipping operations.

Profitability

Gross profit rose 54% in Q2 2004 on higher turnover and expanding gross margin due to improved profitability from higher charter rates.

Successful restructuring in prior years enabled the Group to enjoy better operating efficiencies and greater economies of scale from profitable core business expansion, as well as effective control over expenses. As a result, distribution costs dropped 2% while administrative expenses rose just 15% albeit a bigger increase in business activities. Consequently, operating profit doubled to $9.2 million as operating margin improved from 20.5% in Q2 2003 to 33.3% in Q2 2004.

During Q2 2004, the Group's net finance costs halved to $1.2 million due mainly to foreign exchange gain of $1.5 million arising from the strengthening of the United States dollar against the Singapore dollar.

The Group continued to benefit from strong performances by its investments in two of the largest shipyards in China - 50%-held Cosco (Nantong) Shipyard Co., Ltd ("Cosco Nantong") acquired in February 2002 and 40%-held Cosco (Dalian) Shipyard Co., Ltd ("Cosco Dalian") acquired in August 2003.

Share of profits from associates rose significantly by 235% in Q2 2004 on strong Q2 contribution by Cosco Dalian of $6.03 million and improved productivity in Cosco Nantong. Cosco Nantong contributed $7.75 million to Group profit in Q2 2004, up 89% from the $4.1 million in Q2 2003.

Tax expenses rose 307% to $2.0 million on increased profits. The effective tax rate of 9.2% in Q2 2004 is considerably lower than the statutory tax rate of 20% due to higher tax exempt shipping profits and concessionary tax rates enjoyed by Cosco Nantong and Cosco Dalian.

Overall, the Group net profit rose 280% to $19.2 million in Q2 2004 on the back of strong contributions from both China shipyards and the Group's bulk shipping business. Net profit margin more than tripled to 70.5% in Q2 2004 from 22.9% in Q2 2003.

shareholders, any variance between it and the actual results.

The Group's results for Q2 2004 are in line with the commentary made in paragraph 10 of the Group's First Quarter Financial Statement released on 12 May 2004.

competitive conditions of the industry in which the group operates and any
known factors or events that may affect the group in the next reporting period
and the next 12 months.

To sustain long term growth, the Group will continue its strategy of expanding its core businesses of dry bulk shipping and ship repair. It had in the last quarter of 2003 signed an agreement to lease two 74,000 dwt panamax and placed an order for two new 55,500 dwt handymax bulk vessels to enlarge its current fleet. Deliveries of these vessels are expected in Q3 2005 and Q3 2006.

Restructuring efforts are continuing to add new profitable businesses to the Group's core shipping and shipping related activities. The Group has recently signed a Memorandum of Understanding ("MOU") with China Ocean Shipping (Group) Company, Guangzhou Ocean Shipping Company, Tianjin Ocean Shipping Company and Shanghai Ocean Shipping Company to acquire 51% of the registered interest of Cosco Shipyard Group Co., Ltd ("Cosco Shipyard"). Cosco Shipyard is the leading shipyard group in China for ship repair and conversion with 7 shipyards strategically located in Nantong, Dalian, Guangzhou, Shanghai, Xiamen, Zhoushan and Tianjin. The acquisition will enhance the Group's capability in ship repair.

The Group had benefited from rising charter freight rates since 2002. It is optimistic of the outlook for freight rates based on the firming trend of Baltic Dry Index in recent months. Charters for the remaining 6 ships are due for renewals in Q4 2004 and Q1 2005, and favourable freight rates will have positive impact on the Group's shipping income.

The first full year contribution from Cosco Dalian and capacity expansion in the Nantong shipyards will further add to Group earnings.

Barring unforeseen circumstances, the Group expects both turnover and net profit for FY2004 to exceed those of FY2003.

(a) Current Financial Period Reported On

Any dividend declared for the current financial period reported on? None
(b) Corresponding Period of the Immediately Preceding Financial Year

Any dividend declared for the corresponding period of the immediately preceding financial year? None

(c) Date payable

Not Applicable


(d) Books closure date

Not Applicable

The directors do not recommend the payment of interim dividend on the ordinary shares for the current financial period.

The dividend of 5.7 cents per RCCPS par value S$0.01 less 20% Singapore Income Tax will be paid on 16 November 2004 in accordance with the terms of the preference shares.

(This part is not applicable to Q1, Q2, Q3 or Half Year Results)

group) in the form presented in the issuer's most recently audited annual financial
statements, with comparative information for the immediately preceding year.

Not Applicable

contributions to turnover and earnings by the business or geographical segments.

Not Applicable

Not Applicable

full year and its previous full year.

Total Annual Dividend (Refer to Para 16 of Appendix 7.2 for the required details)



	Latest Full Year ()	Previous Full Year ()
Ordinary
Preference	0	0
Total:

Pursuant to Rule 907 of the Listing Manual, the following interested person transactions were entered into during the financial period:




Name of interested person	Aggregate value of all interested person transaction during the financial period under review (excluding transactions less than $100,000 and transactions conducted under shareholders' mandate pursuant to Rule 920)	Aggregate value of all interested person transactions conducted under shareholders' mandate pursuant to Rule 920 (excluding transactions less than $100,000)
	S$'000	S$'000
		Q2 2004	1H 2004
Between Subsidiaries and:
Cosco Container Lines		3,493	6,789
Cosco Bulk Carrier Co.		0	208
Cosco Chartering and Shipbroking (UK) Ltd		2,245	4,492
Guangzhou Ocean Crew Co.		441	882
Qingdao Ocean Crew Co.		331	662
Shanghai Ocean Crew Co.		550	1,102
Chimbusco (S) Pte Ltd		113	113
		7,173	14,248
Between Associated companies of the Group and:
Cosco Shipyard Group Co., Ltd		904	1,264
Cosco Nantong Steel Co., Ltd		0	472
Cosco Bulk Carrier Co.		812	812
Cosco Dalian		881	881
Cosco Hongkong		331	331
Cosco Container Lines		866	866
		3,794	4,626