Sinopec Engineering Group Co Ltd. — Capital/Financing Update 2019

Jul 30, 2019

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

==> picture [55 x 57] intentionally omitted <==

中石化煉化工程（集團）股份有限公司 SINOPEC Engineering (Group) Co., Ltd.*

(a joint stock limited liability company incorporated in the People’s Republic of China) (Stock Code: 2386)

VOLUNTARY ANNOUNCEMENT UNFULFILLMENT OF THE CONDITIONS TO THE FIRST EFFECTIVE PHASE OF THE INITIAL GRANT UNDER THE H SHARE APPRECIATION RIGHTS SCHEME

This announcement is made voluntarily by SINOPEC Engineering (Group) Co., Ltd. (the “ Company ”, together with its subsidiaries, the “ Group ”). References are made to the announcements of the Company entitled “The Proposed Initial Terms of H Share Appreciation Rights Scheme” dated 21 August 2017, the “Announcement in Relation to the Approval of the Proposed Initial Terms of H Share Appreciation Rights Scheme by the SASAC” dated 12 December 2017, the “Announcement of Resolutions Passed at the Second Extraordinary General Meeting for the year 2017 (the “ EGM ”)” dated 20 December 2017, the “Grant of H Share Appreciation Rights” dated 20 December 2017 and the circular of the EGM dated 3 November 2017 (the “ Circular ”). Unless otherwise defined, terms used in this announcement shall have the same meanings as those defined in the Circular.

1. Initial Grant Under the H Share Appreciation Rights Scheme

On 20 December 2017, the Company granted 13,143,000 units of H Share Appreciation Rights (representing 0.30% of the total issued Shares of the Company and 0.90% of the total issued H Shares of the Company as at 20 December 2017) to a total of 89 Incentive Recipients, accounting for approximately 0.5% of the total number of contracted employees as at 20 December 2017 (the “ Initial Grant ”), including the Directors (other than the independent non-executive Directors), the Company’s senior management members (including presidents, vice presidents and chief financial officer) and the core management, technical and highly skilled personnel of the Company’s subsidiaries.

* For identification purposes only

1

2. Unfulfilment of the Conditions to the First Effective Phase of the Initial Grant Under the H Share Appreciation Rights Scheme

According to Article 19 of “The H Share Appreciation Rights Scheme and the Initial Grant” in Appendix I to the Circular (the “ H Share Appreciation Rights Scheme ”), subject to the satisfaction of corresponding performance evaluation benchmarks as set out in Chapter 7 of the H Share Appreciation Rights Scheme, the H Share Appreciation Rights under various grants shall become effective in the following proportions:

		Effective
Period	Date	Proportion
Lock-up Period	Within two years following the Date of	0
	Grant of Share Appreciation Rights
The First Effective	From the second anniversary of the Date of	33%
Phase	Grant of Share Appreciation Rights
The Second Effective	From the third anniversary of the Date of	33%
Phase	Grant of Share Appreciation Rights
The Third Effective	From the fourth anniversary of the Date of	34%
Phase	Grant of Share Appreciation Rights

According to Article 23 of Chapter 7 of the H Share Appreciation Rights Scheme, the conditions upon which the granted H Share Appreciation Rights become effective include conditions based on the Group’s performance and conditions, and the performance of the relevant Incentive Recipients. The performance evaluation benchmarks on the Group for the First Effective Phase are as follows:

• (i) the ROE of the financial year immediately before the year of the effective date shall not be lower than 10.0% and shall not be lower than 75 percentile of such growth rate of revenue of benchmark companies

• (ii) the growth rate of revenue of the financial year immediately before the effective date as compared with that of the financial year immediately before the grant shall not be lower than 14.2% and shall not be lower than 75 percentile of such growth rate of revenue of benchmark companies

• (iii) the EVA of the financial year immediately before the year of the effective date shall not be less than RMB2.099 billion

2

The Company will use the financials prepared in accordance with the China Accounting Standards for Business Enterprises and the net profit after deduction of non-recurring profit or loss for the purposes of computing the ROE, the growth rate of revenue and the EVA stated above. The benchmark companies shall be those with similar business, in similar markets, with similar scale as the Group and with relatively stable historical operating performance.

The H Share Appreciation Rights initially granted by the Company on 20 December 2017 will enter into the First Effective Phase on 21 December 2019. According to the H Share Appreciation Rights Scheme, “the year before the First Effective Phase coming into effect” as specified in the conditions of the Initial Grant means the year of 2018. According to the audit report prepared by Grant Thornton China (Special General Partnership), the PRC auditor of the Company, the ROE of the Company for the year of 2018 was 10.08%, the growth rate of revenue for the year of 2018 compared with that for the year of 2016 was 19.41%, and the EVA for the year of 2018 was approximately RMB2.385 billion. However, both the ROE for the year of 2018 and the growth rate of revenue for the year of 2018 compared with that of the year of 2016 are lower than 75 percentile of the respective indicators of benchmark companies. Thus, the conditions to effect the H Share Appreciation Rights in the First Effective Phase of the Initial Grant were not fulfilled.

3. Nullification of 33% of the H Share Appreciation Rights under the Initial Grant

The EGM has authorised the Board to grant H Share Appreciation Rights to the Incentive Recipients upon the satisfaction of the conditions of grant in accordance with the various plans under the H Share Appreciation Rights Scheme, and to deal with all matters such as the effective arrangements and exercise of the H Share Appreciation Rights in accordance with the effective arrangements and performance conditions.

According to the authorisation granted to the Board under the EGM, the Board has considered and approved the “Proposal in Relation to the Unfulfillment of The Conditions to the First Effective Phase of the Initial Grant under the H Share Appreciation Rights Scheme” in the Forth Meeting of the Third Session of the Board convened on 30 July 2019. The Board approved that a total of 4,337,190 units (representing 33% of the H Share Appreciation Rights under the Initial Grant) of H Share Appreciation Rights in the First Effective Phase of the Initial Grant shall be nullified. This nullification will not affect the remaining number of H Share Appreciation Rights of 8,805,810 units to be effective upon the Second Effective Phase and the Third Effective Phase under the Initial Grant.

3

Yours faithfully, By order of the Board SINOPEC ENGINEERING (GROUP) CO., LTD. Jia Yiqun

Chief Financial Officer, Company Secretary

Beijing, the PRC 30 July 2019

As at the date of this announcement, the executive Directors are LU Dong, XIANG Wenwu, SUN Lili (employee representative Director) and ZHOU Yingguan (employee representative Director); the nonexecutive Directors are YU Baocai and WU Wenxin; and the independent non-executive Directors are HUI Chiu Chung, Stephen, JIN Yong and YE Zheng.

This announcement is available on the website of Hong Kong Exchanges and Clearing Limited (www. hkex.com.hk) and on the website of the Company (www.segroup.cn).

4