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

Mar 10, 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.

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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)

ANNOUNCEMENT 2019 ANNUAL BUSINESS PLAN FOR FINANCIAL DERIVATIVES

On 8 March 2019, the resolution in relation to the 2019 annual business plan for financial derivatives (the “ Annual Business Plan for Financial Derivatives ”) of SINOPEC Engineering (Group) Co., Ltd. (the “ Company ”) was considered and approved by the board of directors of the Company (the “ Board ”) at the second meeting of the Third Session of the Board. The details of the Annual Business Plan for Financial Derivatives of the Company are set out as follows:

I. BUSINESS OBJECTIVES

Since the Company has and may continue to have U.S. dollar-denominated assets, under the macro environment that Renminbi (“ RMB ”) is currently on its way of globalisation and marketisation, the Company seeks to effectively prevent the risk associated with the exchange rate for U.S. dollar-denominated assets arising from the fluctuations of the exchange rate of RMB. In view of this, the Company intends to trade in foreign exchange derivatives according to the actual needs at appropriate market opportunities based on its risk control principles and strategies.

In order to complete the relevant planning and preparation in advance to promptly respond to the favorable market conditions and complete transactions, the Company has formulated the Annual Business Plan for Financial Derivatives, which was considered and approved by the Board at the second meeting of the Third Session of the Board.

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II. BUSINESS SCOPE

The Company will trade in financial derivatives under the principle of capital preservation by way of hedging. The Company proposes to merely utilise financial derivative products such as forward, swap and option or suitable portfolios of the aforementioned products as business types of the financial derivative products.

III. BUSINESS SCALE

In consideration of the risk associated with U.S. dollar-denominated assets and the balance of U.S. dollar monetary funds as at the end of 2018, the trading scale in 2019 will not exceed US$1.5 billion.

The abovementioned limit is set based on the assessment of the risk exposure of U.S. dollar monetary funds. Any adjustment to such limit (if required) shall be separately submitted to the Board for consideration and approval.

The Company does not have any plan to expand the trading scale of the aforementioned business by means of any leveraged instruments.

IV. RISK ANALYSIS

1. Market risks: Whenever the trend of market exchange rate or interest rate substantially deviates from expectation, the exchange cost for U.S. dollar-denominated assets locked by the Company in advance by making use of financial derivatives to some extent might be higher than the cost that would have been incurred if no hedging transactions were made, which would increase the financial cost. In addition, a relatively large fluctuation in exchange rates could lead to a substantial change in the fair value of the relevant financial derivatives. In the event that the existing assets are not completely hedged, the book gain or loss of the Company could be affected to a certain extent.

2. Credit risks: In the event that credit default is made by the designated counterparty to the financial derivative trading and the settlement is not made according to the agreed price or amount, the Company might fail to cover the exchange loss incurred from the appreciation of the exchange rate of RMB by means of hedging transactions.

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1. Operating risks: In the course of financial derivative trading, transaction losses might be incurred due to any inaccuracy or untimely decision in respect of a deal arising from either subjective or objective factors such as manual operating fault or defect of the internal control system.

V. RISK CONTROL MEASURES

1. The Company will specify the objectives and principles of the use of financial derivatives and adhere to the purpose of capital preservation by way of hedging. The Company will fully utilise the advantages of financial derivatives in terms of hedging the risk associated with the exchange rate for U.S. dollar-denominated assets and prevent any speculative transactions involving high risks. In terms of the use of tools, the Company will strictly adhere to the principles of transactions, such as trading ratio, reverse hedge, gain/loss balances, simplified and systematic transactions.

2. In compliance with the relevant laws and regulations and provisions of the Articles of Association and the authorisation manual of the Company, the Company will strengthen its internal control system on exchange risks, clearly define the power and duties involved in the approval and operation of business transactions, and separate the personnel of internal control, trading, accounting and audit so as to ensure the compliance and effectiveness of every financial derivative transaction.

3. The Company will only conduct its trading in financial derivatives with prominent and large-scale banks with legitimate operational qualification and high credit ratings.

VI. PRINCIPLES OF ACCOUNTING AND AUDITING

The Company will strictly comply with the International Financial Reporting Standard 9 by the International Accounting Standards Board as well as the auditing requirements on financial instruments in the guidance thereof and conduct corresponding audits for the financial derivatives trading activities as contemplated.

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Shareholders of the Company and potential investors are advised that after the Annual Business Plan for Financial Derivatives is approved by the Board, the Company may trade in financial derivatives under the current development trend of the market exchange rates and interest rates as well as the expectation of volatility of such rates, but the Company is not obliged to trade in any financial derivatives in 2019.

By order of the Board SINOPEC ENGINEERING (GROUP) CO., LTD. SANG Jinghua Vice President, Secretary to the Board

Beijing, PRC 11 March 2019

As at the date of this announcement, the Company’s executive directors are LU Dong, XIANG Wenwu, SUN Lili (employee representative director) and ZHOU Yingguan (employee representative director); the non-executive 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).

• For identification purposes only.

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