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

Table of Contents Ⅰ. The Purpose of the Procurement Policy Ⅱ. The Summary of Key Indicator Ⅲ. The Summary of Monitoring (June. 2012) A. Spend Analysis B. Supplier Evaluation C. Contract Management Ⅳ. Procurement Policy Monitoring ※ 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 (June) Contract Management (June) Spend Ratio (June) [No. of Suppliers] Long-term con. (2) [Million U$] New van (5) 5 6 1717 32 Feeder (16) Spare parts (7) 1374 12 Feeder 35 13 25 343 10 장기임차 Target Supplier Incomplete Complete Total Amount Non-Target Amount Target Amount The number of the contract from Jan. to June. There are 35 target suppliers in June. (Service: Spare part) 25 suppliers which are not complete will be evaluated by next month The average score of evaluated suppliers are 81. The supplier evaluation of WUT will be handled from July to August. 39 contracts were made in 2012 (Feeder, Fuel & Lub. Spare parts, New van Long-term container) Total purchasing amount is U$ 40,877,850 ( The purchasing amount above is only about New van, Long-term container and Feeder. The other contracts don’t have fixed total amount when they make contract.) CPO Target suppliers - Spend Ratio: 80% - USD 1,374million (Total USD 1,717million) HMM Minimum standard 80% is passed.

Ⅲ. The Summary of Monitoring A. Spend Analysis [Unit: USD] No. Service Total Purchase Amount CPO Target Amount Spend Ratio 1 Long term container 25,450,612 22,669,977 89% 2 Docking Repair 4,975,125 3,244,935 65% 3 Fuel&Lubricant 908,061,601 852,197,024 94% 4 New van&Reefer 43,415,000 39,942,500 92% 5 Short term container 14,529,211 13,680,784 6 General Repair 1,626,688 720,434 44% 7 Spare parts 25,156,221 20,792,175 83% 8 Legal Insurance 9,608,528 9,253,037 96% 9 General Administration 5,178,024 2,587,237 50% 10 C. Feeder 66,993,152 34,375,911 51% 11 Trucking 95,180,879 50,335,217 53% No. Service Total Purchase Amount CPO Target Amount Spend Ratio 12 Bulk Agent 3,013,878 726,116 24% 13 Terminal 365,972,854 236,859,617 65% 14 Depot / CY 20,292,477 5,914,259 29% 15 M&R 19,351,110 11,061,792 57% 16 Barge 17,773,510 12,316,729 69% 17 Bulk Stevedore 24,080,303 9,485,722 39% 18 Container Agent 16,066,199 4,162,059 26% 19 CUT 34,549,740 31,794,712 92% 20 WUT 14,121,349 11,063,296 78% 21 KHT 2,159,193 1,631,398 76% * HMM Local brach cost will be excepted in Container agent service. Total Amount Total Target Amount Spend Ratio 1,717,555,655 1,374,814,931 80%

Ⅲ. The Summary of Monitoring A. Spend Analysis Update Target Suppliers Newly updated target suppliers were notified in the beginning of 2012. For managing accuracy of visibility on all procurement activities, we purchasing team would like to update target suppliers of some services which have low spend ratio. (20%~50%) Target services for updating is like below. Updated vendor List will be noticed in the next monthly report. Service Spend Ratio (Until June) General Repair 44% General Administration 50% C. Feeder 51% Depot/CY 29% Container Agent 26% Evaluation Plan

Procurement Policy 19 Services Total Purchasing Amount (Monthly) Ⅲ. The Summary of Monitoring A. Spend Analysis Procurement Policy 19 Services Total Purchasing Amount (Monthly) [Million U$] Total Purchasing Amount CPO Target Amount [Unit: million U$] Item　 2011. 07 2011. 08 2011. 09 2011. 10 2011. 11 2011. 12 2012. 01 2012. 02 2012. 03 2012. 04 2012. 05 2012. 06 Total Purchasing Amount 350 268 178 321 270 285 246 294 352 291 273 260 CPO Target Amount 185 133 272 225 237 195 234 281 230 217 214 Spend Ratio 70% 75% 85% 83% 80% 79% The average of total purchasing amount per month is USD 282million, the average of CPO target amount per month is USD 222million. The average of spend ratio for 2012 is 80% (Jan.~June. 2012 Based Data)

Evaluation status of CPO Target in June Ⅲ. The Summary of Monitoring B. Supplier Evaluation Evaluation status of CPO Target in June * Spare parts Target supplier’s grade * Average grade is 81, and there are 8 suppliers whose grades are above average among 10 suppliers. It means that almost all of the evaluated suppliers show good performance in their service and goods. The gap between the lowest mark and the highest mark is 12 point. The gap between the suppliers which got good marks and low marks in performance assessment is 13point. The criteria in performance assessment is Delivery time, After service, Quality management , Cost reduction rate, Service quality (timely & accurate service). According to the assessment data, the suppliers which have lower marks should strengthen the deadline management and cost reduction in their performance. The cost reduction rate comparing with total order amount should be at least more than 3%. In addition, deadline management should be well established, and working process should be clear like as other good-performance-suppliers. Average: 81

New & Updated Contract (Jan. ~June) Ⅲ. The Summary of Monitoring C. Contract Management New & Updated Contract (Jan. ~June) * Contract Amount & Number of Contract (Jan. ~June) * Contract Status for Each Month Service Contract Amount (U$) Contract Amount Ratio No. of Contract No. of Contract Ratio Feeder 25,280,000 61.84% 16 41% Fuel & Lub. - 9 23% Spare parts 7 18% New van 13,338,500 32.63% 5 13% Long-term con. 2,259,350 5.53% 2 5% Total 40,877,850 100% 39 28 10 1 ※ 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 39 contracts. (72%)

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 9 General Administration 7 16 Barge 31 3 Fuel&Lubricant 23 10 C. Feeder 25 17 Bulk Stevedore 99 4 New van&Reefer Trucking 98 18 Container Agent 57 5 Short term container 12 Bulk Agent 46 19 CUT General Repair 13 Terminal 39 20 WUT 24 Spare parts 35 14 Depot / CY 65 21 KHT Total 667

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 39 KHT, Depot, Mater lease, M&R 2 - 3 4 9 Depot, Bulk agent 5 13 WUT, CUT, Bulk agent 6 36 CUT, Spare parts 7 8 New van (Box, RF) 55 Terminal, KHT, WUT, CUT, Depot 10 197 Terminal, KHT, WUT, Feeder, Trucking, Barge, Depot 11 194 WUT, KHT, Feeder, Fuel & Lubricant, Trucking, Barge, General repair Stevedoring, Bulk Agent, 12 117 Docking repair, Feeder, Long-term lease, Legal affairs & insurance, General Management, Trucking, Barge, Bulk agent, Container agent Total 667

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.