Procurement Policy Monthly Report CONFIDENTIAL Procurement Policy Monthly Report HYUNDAI MERCHANT MARINE Co. Ltd. March 2012 Purchasing Team / Strategic Purchasing Part Feb. 2012 Based Data

Table of Contents Ⅰ. The Purpose of the Procurement Policy Ⅱ. The Summary of Key Indicator Ⅲ. The Summary of Monitoring A. Spend Ratio Summary (Feb. 2012) B. Spend Analysis C. Contract Management (Mar. 2012) Ⅳ. Procurement Policy Monitoring - Re-selection of CPO Target Suppliers for 2012 ※ Appendix - Supplier Evaluation Manual - Vendor information Manual - Contract Management Manual 1

Ⅰ. The Purpose of the Procurement Policy CPO CPO [Chief Procurement Office] An organization which carries out the monitoring and guiding on the company-wide cost management and procurement processes in relation to procurement of all goods and services at HMM Contract Service Provider Helper Watcher Carrying out entire procurement operation from establishing a procurement strategy to making decisions and concluding contracts Establishing a procurement strategy, Monitoring, managing and controlling the overall procurement procedure Monitoring, managing and controlling the overall procedure of procurement Acquiring visibility on all procurement activities carried out at HMM

Ⅰ. The Purpose of the Procurement Policy CPO Policy Monitoring * Acquiring visibility on all procurement activities carried out at HMM : Total 19 Services * Through diversification of the supplier base, should promote price competition among suppliers * Differentiating each supplier according to the supplier evaluation result and strategic importance * Minimizing the potential internal and external risk ☞ Sending Procurement Policy Monitoring Report every month Indicators Definition Unit Formula Remarks Supplier Evaluation Evaluating Major Suppliers on a Regular Basis (Target Suppliers: Upper 80% of Total Purchasing Amount) Evaluated Suppliers ∑(Evaluated Suppliers) ∑(CPO Target Suppliers) * Evaluate the target suppliers at least once a year * The supplier should be evaluated more than 3 people. Contract Management Acquiring Visibility on Procurement Operation New & Updated Contract Check the Contract Uploaded in ELMS system * Check the contract effective date * Check the contract amount of new & updated contract Spend Ratio Checking Spend Ratio of CPO Target Suppliers’ purchasing amount Total amount of CPO Target suppliers ∑(CPO Target Supplier’s Amount) ∑(Total Purchasing Amount) * Keep 80% Spend Ratio

Ⅱ. The Summary of Key Indicator Supplier Evaluation (Feb.) Contract Management (Mar.) Spend Ratio (Feb.) [No. of Suppliers] [Million U$] The number of the contract from Jan. to Feb. Spare parts (7) New van (5) Fuel & Lub. (8) 5 6 32 5.40 12 Feeder 4.29 Feeder (16) 13 1.11 장기임차 Target Supplier Incomplete Complete Total Amount Non-Target Amount Target Amount There are no target suppliers’ evaluation from February to March. 9 supplier’s evaluation will be done in April. (Depot: 6, Bulk Agent: 3) 36 contracts were made in 2012 (Feeder, Fuel & Lub. Spare parts, New van) Total purchasing amount is U$ 38,618,500 ( The purchasing amount above is only about New van and Feeder. “Spare parts”, “Fuel & Lub.” contracts don’t have fixed total amount when they make contract. It is because Fuel price is connected to international bunker price, and spare parts have only unit price.) CPO Target suppliers - Spend Ratio: 80% - USD 4.29billion (Total USD 5.40billion) HMM Minimum standard 80% is passed.

Ⅲ. The Summary of Monitoring A. Spend Ratio Summary (Feb. 2012) [Unit: USD] No. Service Total Purchase Amount CPO Target Amount Spend Ratio 1 Long term container 8,580,122 7,654,001 89% 2 Docking Repair 512,755 100% 3 Fuel&Lubricant 289,586,318 274,365,715 95% 4 New van&Reefer 13,338,500 5 Short term container 4,263,493 4,066,094 6 General Repair 772,339 49,204 3% 7 Spare parts 9,056,971 3,448,438 38% 8 Legal Insurance 3,076,463 1,903,639 62% 9 General Administration 1,745,668 874,591 50% 10 C. Feeder 21,808,380 11,222,456 51% 11 Trucking 30,813,690 16,611,666 54% No. Service Total Purchase Amount CPO Target Amount Spend Ratio 12 Bulk Agent 731,169 185,921 25% 13 Terminal 110,892,110 71,644,951 65% 14 Depot / CY 6,202,431 2,017,044 33% 15 M&R 6,399,048 3,647,297 57% 16 Barge 5,141,763 3,816,374 74% 17 Bulk Stevedore 7,279,646 3,297,272 45% 18 Container Agent 4,774,267 1,279,470 27% 19 CUT 10,759,244 6,418,550 60% 20 WUT 4,356,255 3,351,117 77% 21 KHT 744,557 523,285 70% * HMM Local brach cost will be excepted in Container agent service. Total Amount Total Target Amount Spend Ratio 540,451,005 429,961,413 80%

Procurement Policy 19 Services Total Purchasing Amount (Monthly) Ⅲ. The Summary of Monitoring B. Spend Analysis Procurement Policy 19 Services Total Purchasing Amount (Monthly) [Million U$] Total Purchasing Amount CPO Target Amount [Unit: million U$] Item　 2011. 02 2011. 03 2011. 04 2011. 05 2011. 06 2011. 07 2011. 08 2011. 09 2011. 10 2011. 11 2011. 12 2012. 01 2012. 02 Total Purchasing Amount 207 239 262 231 285 350 268 178 321 270 246 294 CPO Target Amount 176 222 219 200 206 185 133 272 225 237 195 234 Spend Ratio 85% 93% 84% 87% 72% 70% 75% 83% 80% The average of total purchasing amount per month is USD 264million, the average of CPO target amount per month is USD 212million. The average of spend ratio for 2012 is 80% (Jan.~Feb. 2012 Based Data)

New & Updated Contract (Jan.~Mar.) Ⅲ. The Summary of Monitoring C. Contract Management New & Updated Contract (Jan.~Mar.) * Contract Amount & Number of Contract (Jan.~Mar.) * Contract Status for Each Month Service Contract Amount (U$) Contract Amount Ratio No. of Contract No. of Contract Ratio Feeder 25,280,000 66%　 16 44% Fuel & Lub. - -　 8 22% Spare parts 7 19% New van 13,338,500 34%　 5 14% Total 38,618,500 100% 36 28 8 ※ Feeder contract amount is estimated by purchasing amount of last year. ※ Fuel & Lub. cost will be changed everyday by international bunker price. ※ Spare parts cost will be calculated as it occurs. • 28 contracts was made in January among total 36 contracts. (78%)

General Administration Ⅳ. Procurement Policy Monitoring Re-selection of CPO Target Suppliers for 2012 CPO Target Suppliers for 2012 are updated based on 2011 data → Newly updated target suppliers will be evaluated by the group in charge at least once a year. → New evaluation plan in 2012 is like the attached file. Evaluation Plan No. Service The number of target suppliers 1 Long term container 11 8 Legal Insurance 6 15 M&R 37 2 Docking Repair 4 9 General Administration 7 16 Barge 31 3 Fuel&Lubricant 28 10 C. Feeder 25 17 Bulk Stevedore 26 New van&Reefer Trucking 98 18 Container Agent 55 5 Short term container 12 Bulk Agent 65 19 CUT General Repair 13 Terminal 41 20 WUT 24 Spare parts 35 14 Depot / CY 21 KHT Total 617

Ⅳ. Procurement Policy Monitoring Re-selection of CPO Target Suppliers for 2012 CPO Target Suppliers for 2012 are updated based on 2011 data Month The No. of suppliers Target Service 1 59 KHT, Depot, Mater lease, M&R 2 - 3 4 9 Depot, Bulk agent 5 24 WUT, CUT, New van (Box, RF), Bulk agent 6 36 CUT, Spare parts 7 8 55 Terminal, KHT, WUT, CUT, Depot 10 177 Terminal, KHT, WUT, Feeder, Trucking, Barge, Depot 11 154 WUT, KHT, Feeder, Fuel & Lubricant, Trucking, Barge, General repair Stevedoring, Bulk Agent, 12 103 Docking repair, Feeder, Long-term lease, Legal affairs & insurance, General Management, Trucking, Barge, Bulk agent, Container agent Total 617

Ⅳ. Procurement Policy Monitoring Spend Ratio  Collect the total purchasing amount of 19 services using CPO system The people who are in charge of CPO Evaluation can use ZMMR0840 in SAP program for checking evaluation marks. Manual for ZMMR0840 Supplier Evaluation  Evaluate the CPO Target Suppliers at least once a year ☞ Flash manual : P. Pak (http://ppak.hmm21.com/gm/folder-1.11.5521) Web page (Check the ※Appendix for simple Ver. Manual) ☞ Follow the link http://hmmcpo.hmm21.com→ Evaluation → Evaluation Plan → Vendor List ☞ Give a Total Feedback after complete every evaluation of service suppliers  Total score of every suppliers will be presented in the next month report Contract Management  Figure out the contents of the contract, and it will be used as evidence if the trouble is occurred with suppliers ☞ Acquiring visibility on procurement operation: Contents of the contract (Contract Amount, General Terms and Conditions, Contract Period, etc.) ☞ Portal log on → ELMS → Contract Review → Contract Management) Related Mail (KOR)

※ Appendix Supplier Evaluation Manual 1) Visit CPO home page, The URL is http://hmmcpo.hmm21.com/ 2) Click ‘Evaluation Plan’ under the ‘Evaluation’ menu. 3) Click the period and the service on the Drop-down list for searching the supplier. (Ex. October, Feeder)

※ Appendix Supplier Evaluation Manual Click the Checklist button for Evaluation. 2) Click the position and working period on the Drop-down list. 3) Start to answer about the question. 4) Click ‘Evaluation’ tab for next step after you complete the answer and save it. 5) After you complete the evaluation sheet, please move on to next supplier.

※ Appendix Vendor Information Manual 1) Click ‘Vendor Information’ under the ‘Evaluation’ menu. 2) Click the service name which you want to put the information on the Drop-down list. 3) You can also put the supplier name in the search bar. 4) Click the appropriate vendor name on the list.

※ Appendix Vendor Information Manual 1) Click ‘Edit’ for entering the information. 2) Click ‘Save’ after you complete the form. ( The items with red star should be entered necessarily.) * Vendor information should be completed during supplier’s evaluation period.

※ Appendix Contract Management Manual 1) Click ‘ELMS’ in system link for managing new and updated contract. (You can also access ‘ELMS’ using this URL) http://elms.hmm21.com/index_main.jsp 2) Click ‘Contract Management’ in ‘Contract Review’ category. 3) Click ‘New Entry’ for entering contract information.

※ Appendix Contract Management Manual Search the vendor code Fill the CPO Evaluation period out Summarize the contents of contract here. Click here and attach the contract.