Sinopec Kantons Holdings Limited — Proxy Solicitation & Information Statement 2002

Aug 27, 2002

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular, or as to the action to be taken, you should consult our stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Sinopec Kantons Holdings Limited , you should at once hand this circular together with the enclosed form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this document, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

SINOPEC KANTONS HOLDINGS LIMITED （中石化冠德控股有限公司） *

(incorporated in Bermuda with limited liability)

ONGOING CONNECTED TRANSACTIONS AND NEW WAIVER APPLICATION

Independent Financial Adviser to the Independent Board Committee of Sinopec Kantons Holdings Limited

==> picture [161 x 33] intentionally omitted <==

Industrial and Commercial Bank of China (Asia) Limited

A letter from the Independent Board Committee is set out on page 13 of this circular.

A letter from Industrial and Commercial Bank of China (Asia) Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee is set out on pages 14 to 21 of this circular.

A notice convening a SGM to be held at 1608 Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong on 26 September 2002 at 10:00 a.m. is set out on pages 26 to 27 of this circular. Whether or not you are able to attend the SGM in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible to Secretaries Limited, the Hong Kong Branch Share Registrar and Transfer Office of the Company, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong and in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or at any adjourned meeting (as the case may be) should you so wish.

27 August 2002

* For identification purposes only

CONTENT

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
The Ongoing Connected Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Application for Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Notice of Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:–

• “Board”

the board of Directors of the Company

• “COFTEC”

• 有關地方對外貿易經濟合作委員會 (the relevant local Commission of Foreign Trade and Economic Co-operation)

• “Company”

• Sinopec Kantons Holdings Limited (and for identification purposes only 中石化冠德控股有限公司 ), an exempted company incorporated in Bermuda with limited liability

• “CPIC”

• 中國石化國際事業有限公司 (China Petrochemical International Co. Ltd.) (formerly known as 中國石化國際 事業公司 (China Petrochemical International Company)), a company established under the laws of the PRC, which is a direct wholly-owned subsidiary of Sinopec Corp. and the sole shareholder of SKI

• “CPIGC”

• 中國石化國際事業廣州公司 (China Petrochemical International Guangzhou Company), a company established under the laws of the PRC, which is a wholly-owned subsidiary of GPC

• “Director(s)”

• the director(s) of the Company, including the independent non-executive directors of the Company

• “GPC”

• 中國石化集團廣州石油化工總廠 (formerly known as 中國石化廣州石油化工總廠 ) (Sinopec Guangzhou Petrochemical Complex), an enterprise established under the laws of the PRC and a wholly-owned subsidiary of Sinopec Group Company

• “Group” the Company and its subsidiaries

• “Guangdong Company”

• 中國石油化工股份有限公司廣東石油分公司 (Sinopec Guangdong Oil Products Company), a subsidiary of Sinopec Corp.

• “Guangdong Price Bureau”

• 中華人民共和國廣東省物價局 (the price bureau of Guangdong province, PRC)

– 1 –

DEFINITIONS

• “Guangzhou City”

• “Guangzhou Municipality”

• “HK$”

• “Hong Kong”

• “Huade”

• “Huade Petrol Stations”

• “Huizhou Jetty”

• “Independent Board Committee”

the administrative area which covers ten (10) districts in Guangzhou, namely, Baiyun District （白雲區）, Dongshan District （東山區）, Fangcun District （芳村區）, Haizhu District （海珠區）, Huangpu District （黃埔區）, Liwan District （荔灣區）, Tianhe District （天河區）, Yuexiu District （越秀區）, Huadu District （花都區） and Panyu District （番禺區）

• the administrative area which covers the Guangzhou City and its two (2) adjacent county-level cities, namely, Conghua

• （從化） and Zengcheng （增城）

• Hong Kong dollars, the lawful currency of Hong Kong

• the Hong Kong Special Administrative Region of the PRC

• 惠州市大亞灣華德石化有限公司 (Hua De Petrochemical Co. Ltd.), a sino-foreign equity joint venture company established under the laws of the PRC with limited liability in respect of which a seventy (70) per cent. equity interest is held by the Group through Kantons Investment

• the fifty-three (53) petrol stations located in the Guangzhou Municipality (and such other petrol stations from time to time) operated by the Group through Huade, either on a contractual operating basis or by virtue of its interest as a party to a joint venture or as an investor

• the Huizhou GPC Crude Oil Jetty Complex （惠州廣石化 碼頭）, including its oil tanker handling, crude oil unloading, storage and pipeline transmission facilities, which is located on Mabianzhou Island （馬鞭洲島） in the Daya Bay Economic and Technological Development Zone （大亞灣 經濟技術開發區） in Huizhou （惠州）, Guangdong Province, the PRC and which is owned and operated by the Group through Huade

• an independent committee of the Board comprising of Mr. Wong Po Yan and Ms. Tam Wai Chu, Maria, formed for the purposes of advising the Independent Shareholders in relation to the Ongoing Connected Transactions and the New Waiver Application

– 2 –

DEFINITIONS

• “Independent Financial Industrial and Commercial Bank of China (Asia) Limited, Adviser” appointed as the independent financial adviser for the purpose of advising the Independent Board Committee in relation to the Ongoing Connected Transactions and the New Waiver Application

• “Independent Shareholders” shareholders of the Company other than SKI, CPIC, CPIGC, Sinopec Corp. and Sinopec Group Company and their respective associates (as defined in the Listing Rules)

• “Kantons Investment”

• Kantons International Investment Limited (and for identification purposes only 冠德國際投資有限公司 ), a company incorporated under the laws of the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company

• “Latest Practicable Date”

• 26 August 2002, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular

• “Listing Rules”

• the Rules Governing the Listing of Securities on the Stock Exchange

• “New Waiver Application”

• the application for a waiver to the Stock Exchange in respect of the Ongoing Connected Transactions, details of which are set out in the section headed “Application for Waiver” on pages 8 to 11 of this circular

• “Ongoing Connected Transactions”

• the services and facilities in relation to the Huizhou Jetty, the supplies of petroleum products to the Huade Petrol Stations, the crude oil supply and sourcing, petroleum and petrochemical products trading and the third party processing of crude oil collectively, details of which are set out in the section headed “The Ongoing Connected Transactions” on pages 6 to 8 of this circular

• “PRC”

• the People’s Republic of China, but for the purposes of this circular and for geographical reference only (unless otherwise indicated) excludes Taiwan, Macau and Hong Kong

• “Previous Waiver”

• the waiver granted to the Company by the Stock Exchange on 23 July 1999 from strict compliance with the relevant requirements under Chapter 14 of the Listing Rules in respect of the Ongoing Connected Transactions

– 3 –

DEFINITIONS

• “SGM” a special general meeting of the Company to be held on 26 September 2002, the notice of which is set out on pages 26 to 27 of this circular

• “Sinochem” 中國化工進出口總公司 (China National Chemicals Import & Export Corporation), a State-owned enterprise established under the laws of the PRC

• “Sinopec Corp.” 中國石油化工股份有限公司 (China Petroleum & Chemical Corporation), a joint-stock limited liability company incorporated in the PRC, the shares of which are listed on the stock exchanges of Hong Kong, New York and London

• “Sinopec Group” Sinopec Group Company, its subsidiaries and and its associated companies and affiliates, including the Group, or where the context so requires, any two or more members of such group

• “Sinopec Group Company” 中國石油化工集團公司 (formerly known as 中國石油 化工總公司 ) (China Petrochemical Corporation), an enterprise established under the laws of the PRC, being the controlling shareholder of Sinopec Corp. (by virtue of its holding of approximately 55.06% in the issued share capital in Sinopec Corp.) and the ultimate controlling shareholder of the Company (by virtue of Sinopec Corp.’s holding of approximately 72.34% in the issued share capital of the Company)

• “Sinopec Guangzhou Branch” 中國石油化工股份有限公司廣州公司 (China Petroleum & Chemical Corporation Guangzhou Branch), a branch of Sinopec Corp.

• “SKI”

• Sinopec Kantons International Limited (and for identification purposes only 中石化冠德國際有限公司 ), a company established under the laws of the British Virgin Islands with limited liability and the immediate controlling shareholder of the Company

• “State” the government of the PRC

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Unipec”

中國國際石油化工聯合公司 (China International United Petroleum and Chemicals Co. Ltd.), a company established under the laws of the PRC with limited liability

– 4 –

LETTER FROM THE BOARD

SINOPEC KANTONS HOLDINGS LIMITED （中石化冠德控股有限公司） *

(incorporated in Bermuda with limited liability)

Executive Directors: Hong Zhi Ming Yang Shu Shan Dai Zhao Ming Ye Zhi Jun Lai Yong Fu

Non-executive Director: Guan Qing Jie Li Yue Ling

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal office: 1608 Citicorp Centre 18 Whitfield Road Causeway Bay Hong Kong

Independent Non-executive Directors: Wong Po Yan Tam Wai Chu, Maria

27 August 2002

To the shareholders

Dear Sir or Madam,

ONGOING CONNECTED TRANSACTIONS AND NEW WAIVER APPLICATION

BACKGROUND

Upon the listing of the Company’s shares on the Stock Exchange in June 1999, the Company applied for and was granted the Previous Waiver for the Ongoing Connected Transactions for a term of three (3) years commencing from the date of the listing.

By a press announcement of the Company dated 5 August 2002, it was announced that the Company has, upon the expiration of the Previous Waiver, made the New Waiver Application to the Stock Exchange for the granting of a new waiver for a period ending 31st December 2004 in connection with the Ongoing Connected Transactions from the strict compliance with the relevant requirements under Chapter 14 of the Listing Rules.

* For identification purposes only

– 5 –

LETTER FROM THE BOARD

An Independent Board Committee, comprising Mr. Wong Po Yan and Ms. Tam Wai Chu, Maria, has been formed to advise the Independent Shareholders in respect of the Ongoing Connected Transactions and the New Waiver Application. Industrial and Commercial Bank of China (Asia) Limited has also been appointed as the Independent Financial Adviser for the purpose of advising the Independent Board Committee in respect of the Ongoing Connected Transactions and the New Waiver Application.

The purposes of this circular are to set out: (a) the terms of the Ongoing Connected Transactions and the New Waiver Application; (b) the recommendation of the Independent Board Committee in respect of the Ongoing Connected Transactions and the New Waiver Application; (c) the advice of the Independent Financial Adviser to the Independent Board Committee in respect of the Ongoing Connected Transactions and the New Waiver Application; and (d) notice of the SGM to be convened at which ordinary resolution will be proposed to consider, and if thought fit, approving the Ongoing Connected Transactions and the New Waiver Application and all matters contemplated thereunder.

THE ONGOING CONNECTED TRANSACTIONS

1. Services and facilities in relation to the Huizhou Jetty

Huade has provided and will continue to provide the following services and facilities to Sinopec Guangzhou Branch through the Huizhou Jetty:

• (i) jetty and related services concerning unloading of crude oil from oil tankers and dockage;

• (ii) crude oil storage facilities and related services concerning storage of crude oil in oil tanker and oil tanker handling; and

• (iii) crude oil pipeline facilities and related services concerning transmission of crude oil from the Huizhou Jetty to Sinopec Guangzhou Branch’s refinery complex in Guangzhou City.

Huade and Sinopec Guangzhou Branch entered into an agreement in connection with the services and facilities of the Huizhou Jetty on 1 January 2001. The service fees payable in respect of (i) above are charged on the basis of the State-prescribed prices regulated and standardised by the PRC’s Ministry of Communication. The service fees payable in respect of (ii) and (iii) above are charged on the basis of government-approved prices approved by the Guangdong Price Bureau.

– 6 –

LETTER FROM THE BOARD

If the State-prescribed prices or the government-approved prices (as the case may be) of any of the above services are abolished, the service fees payable by Sinopec Guangzhou Branch shall be (a) the fair market price for the relevant service (to be determined by the parties after consultation); or (b) if no market price is available or agreed between the parties, the previous State-prescribed prices or government-approved prices (as the case may be) plus a margin not exceeding the rate of increase of the consumer price index for Guangdong Province during the immediately preceding calendar year.

2. Supplies of petroleum products to the Huade Petrol Stations

The Group has purchased and will continue to purchase gasoline and other petroleum products from Guangdong Company and its subsidiaries for re-sale through the Huade Petrol Stations. Guangdong Company is a subsidiary of Sinopec Corp.. The Group also intends to purchase petroleum products from other members of the Sinopec Group in the future.

The Group has not entered into any long term purchase agreement with Guangdong Company for the supply of petroleum products. However, in view of the availability and quality of such products from Guangdong Company and the relative proximity of Guangdong Company to the Huade Petrol Stations, the Group intends to continue the purchase of petroleum products from Guangdong Company and its subsidiaries in the future.

The purchase prices payable for the petroleum products supplied by Guangdong Company to the Group are to be agreed between the parties on an arm’s length basis through negotiations. Guangdong Company has also indicated in writing to the Company that the prices are fair and reasonable and that the qualities of the products are in compliance with the State’s prescribed standard.

3. Crude oil supply

The Group has supplied and will continue to supply crude oil to certain members of the Sinopec Group, such as Unipec and its subsidiaries (the “ Unipec Group ”), and intends to supply crude oil to other members of the Sinopec Group in the future. Unipec is one of the State authorised import agents of crude oil in the PRC and is a State-owned enterprise established under PRC laws. Its registered capital is owned as to 70 per cent. by Sinopec Corp. and 30 per cent. by Sinochem.

The Group has not entered into any long term supply agreement with the relevant connected parties in respect of the supply of crude oil. The prices payable for the supply are determined on the basis of international market price.

– 7 –

LETTER FROM THE BOARD

4. Crude oil sourcing

The Group has sourced and will continue to source crude oil from certain members of the Sinopec Group, such as the Unipec Group, and intends to source crude oil from other members of the Sinopec Group.

The Group has not entered into any long term sourcing agreement with the relevant connected parties in respect of the sourcing of crude oil. The prices payable are determined on the basis of international market prices.

5. Petroleum and petrochemical products trading

The Group has traded and will continue to trade with certain members of the Sinopec Group, such as Sinopec (Hong Kong) / CAOSC Co. Ltd. (whose share capital is owned as to 70% by CPIC) and CPIGC and intends to trade with other members of the Sinopec Group in the future in certain petroleum and petrochemical products.

The Group has not entered into any long term trading agreement with the relevant connected parties in respect of the trading of petroleum and petrochemical products. The prices payable are determined on the basis of international market prices.

6. Third party processing

The Group has engaged and will continue to engage Sinopec Guangzhou Branch, and intends to engage other members of the Sinopec Group in the future, to refine and process crude oil into various types of petroleum products on behalf of the Group. Under the current PRC regulations, Sinopec Guangzhou Branch must in turn engage CPIGC, which has importexport trading rights, to obtain clearance from PRC customs to import crude oil into and to export refined petroleum products from the PRC.

The Group has not entered into any long term processing agreement with the relevant connected parties in respect of the third party processing of crude oil. The prices payable are agreed between the parties on an arm’s length basis through negotiations.

APPLICATION FOR WAIVER

The Directors, including the independent non-executive Directors, are of the opinion that the Ongoing Connected Transactions (and where relevant, any written agreements pertaining to such Ongoing Connected Transactions) have been entered into and carried out in the ordinary course of business of the Group, on an arm’s length basis, and either (1) where there are comparable transactions, on normal commercial terms; or (2) in accordance with State-

– 8 –

LETTER FROM THE BOARD

prescribed prices or government-approved prices (as the case may be) prescribed or approved by relevant governmental or regulatory authorities; or (3) in accordance with the terms of the agreements governing the Ongoing Connected Transactions in question; or (4) if there are no such agreements, on terms no less favourable than terms available to or from independent third parties. The Directors are of the view that the Ongoing Connected Transactions have been entered into in the ordinary course of business of the Group on normal commercial terms that are fair and reasonable so far as the Company and its shareholders are concerned.

Under the Listing Rules, for so long as Sinopec Group Company remains a substantial shareholder of the Company for the purposes of the Listing Rules, and Sinopec Guangzhou Branch, Guangdong Company, Unipec, CPIC, CPIGC and GPC and other relevant members of the Sinopec Group remain not less than 30 per cent. held by Sinopec Group Company, all of the Ongoing Connected Transactions would constitute “connected transactions”. Since the value of each of these Ongoing Connected Transactions had exceeded and will likely exceed the higher of HK$10,000,000 or 3% of the net tangible assets of the Group, pursuant to Rule14.26 of the Listing Rules, these Ongoing Connected Transactions would require disclosure by way of press notice, preparation and despatch of circulars to shareholders and prior approval by the independent shareholders of the Company on each occasion as they are entered into.

As the Ongoing Connected Transactions are entered into in the normal and ordinary course of business of the Group and occur on a regular basis, and as all the Ongoing Connected Transactions are conducted on an arm’s length basis (and where there are comparable transactions, on normal commercial terms) which are fair and reasonable, and are essential for the efficient and continued operations and growth of the business of the Group, the Directors consider that strict compliance with the disclosure and approval requirements under the Listing Rules would be impracticable.

Accordingly, the Company has applied to the Stock Exchange for, and requested the Stock Exchange to grant a waiver, subject to and conditional upon the approval by the Independent Shareholders of the Ongoing Connected Transactions and the New Waiver Application at the SGM, from strict compliance with the disclosure and approval requirements under the Listing Rules for a period ending 31st December 2004 on the basis that:

1. The Ongoing Connected Transactions:

2. (1) have been entered into in the ordinary and usual course of business of the Group;

3. (2) have been entered into on an arm’s length basis and, where there are comparable transactions, on normal commercial terms; or where there is no available comparison, on terms no less favourable than those available to independent third parties;

– 9 –

LETTER FROM THE BOARD

• (3) are on terms that are fair and reasonable so far as the Company and its shareholders are concerned;

• (4) where relevant, have been entered into in accordance with the terms of the agreements governing such transactions; and

• (5) are within the applicable upper limits set out in paragraph 3 below;

• the Company’s independent non-executive Directors will review the Ongoing Connected Transactions annually and confirm in the Company’s annual report for the year in question that the Ongoing Connected Transactions have been entered into in the manner as stated in paragraphs 1 and 3;

• the Ongoing Connected Transactions shall not exceed the upper limits set out below in the relevant financial year of the Group:

• (1) service fees in relation to the Huizhou Jetty: the aggregate service fees (including liquidated damages, if any) that may be payable by Sinopec Guangzhou Branch to Huade shall not exceed ten (10) per cent. of the turnover of the Group for the same financial year;

• (2) supply of petroleum products to the Huade Petrol Stations: the aggregate consideration of these transactions between the Group, Guangdong Company and its subsidiaries, or other connected persons of the Group for the supply of petroleum products to the Huade Petrol Stations shall not exceed eighteen (18) per cent. of the turnover of the Group for the same financial year;

• (3) crude oil supply: the aggregate consideration of these transactions between the Group, the Unipec Group and other connected persons of the Group in each financial year shall not exceed forty (40) per cent. of the turnover of the Group for the same financial year;

• (4) crude oil sourcing: the aggregate consideration of these transactions between the Group, the Unipec Group and other connected persons of the Group shall not exceed eighteen (18) per cent. of the turnover of the Group for the same financial year;

• (5) petroleum and petrochemical products trading: the aggregate consideration of these transactions between the Group, Sinopec (Hong Kong) /CAOSA Co. Ltd., CPIGC and other connected persons of the Group shall not exceed ten (10) per cent. of the turnover of the Group for the same financial year; and

– 10 –

LETTER FROM THE BOARD

• (6) third party processing: the aggregate consideration of these transactions between the Group and Sinopec Guangzhou Branch and other connected persons of the Group shall not exceed three (3) per cent. of the turnover of the Group for the same financial year;

• details of the Ongoing Connected Transactions will be disclosed in the Company’s annual report in accordance with Rule 14.25(1)(A) to (D) of the Listing Rules;

• the auditors of the Company shall review the Ongoing Connected Transactions annually and provide the Directors with a letter (a copy of which shall be provided to the Listing Division of the Stock Exchange) stating that the Ongoing Connected Transactions:

• (1) have received the approval of the Directors;

• (2) are in accordance with the pricing policies as stated in the Company’s financial statements;

• (3) have been entered into (1) in accordance with the terms of the agreements governing such Ongoing Connected Transactions; or (2) where there are no such agreements, in accordance with the applicable State-prescribed prices or government-approved prices (as the case may be); or (3) where there are no such agreements, nor State-prescribed prices or government-approved prices (as the case may be), on terms no less favourable than terms available to or from independent third parties; and

• (4) have not exceeded the relevant upper limits referred to in paragraph 3 above;

and for the purpose of the above review by the auditors of the Company, Sinopec Guangzhou Branch undertakes to the Company that it will provide the auditors of the Company with access to its accounting records;

1. if any of the terms of the agreements or arrangements referred to above are altered or if the Group enters into any new agreements or arrangements with any connected persons (within the meaning of the Listing Rules) in the future or if the limits stated in paragraph 3 above are exceeded, the Company will have to comply with the provisions of Chapter 14 of the Listing Rules dealing with connected transactions unless it applies for and obtains a separate waiver from the Stock Exchange.

– 11 –

LETTER FROM THE BOARD

SPECIAL GENERAL MEETING

A SGM is to be convened and will be held on 26 September 2002 at 10:00 a.m. at 1608 Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong for the purpose of considering, and if thought fit, passing ordinary resolution to approve the Ongoing Connected Transactions and the New Waiver Application and all matters contemplated thereunder. The notice of the SGM is set out on pages 26 to 27 of this circular.

SKI,CPIC, CPIGC, Sinopec Corp. and Sinopec Group Company, and their respective associates will abstain from voting at the SGM.

A form of proxy for use in connection with the SGM is enclosed herewith. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible to Secretaries Limited, the Hong Kong Branch Share Registrar and Transfer Office of the Company, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong and in any event by no later than 48 hours before the time appointed for the holding of the SGM (or any adjourned meeting thereof). Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM should you so wish.

RECOMMENDATION

The Board (including the Independent Board Committee) is of the opinion that (a) the terms of the Ongoing Connected Transactions and (b) the New Waiver Application are fair and reasonable so far as the Company and the Independent Shareholders are concerned. Accordingly, the Board (including the Independent Board Committee) recommends that the Independent Shareholders vote in favour of the ordinary resolution set out in the notice of the SGM for the approval of the Ongoing Connected Transactions and the New Waiver Application.

ADDITIONAL INFORMATION

Your attention is drawn to the addition information set out in the Appendix to this circular.

Yours faithfully, For and on behalf of the Board

Hong Zhi Ming

Chairman

– 12 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

SINOPEC KANTONS HOLDINGS LIMITED （中石化冠德控股有限公司） *

(incorporated in Bermuda with limited liability)

27 August 2002

To the Independent Shareholders

Dear Sir or Madam,

We have been appointed as the Independent Board Committee to advise you in connection with (i) the Ongoing Connected Transactions; and (ii) the New Waiver Application, details of which are set out in the Letter from the Board contained in the circular to the shareholders of the Company dated 27 August 2002 (the “ Circular ”), of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

Having considered the Ongoing Connected Transactions and the New Waiver Application and the advice and opinion of the Independent Financial Adviser in relation thereto as set out on pages 14 to 21 of the Circular, we are of the opinion that the terms of the Ongoing Connected Transactions and the New Waiver Application are fair and reasonable so far as the Company and the Independent Shareholders are concerned. We therefore recommend that you vote in favour of the ordinary resolution to be proposed at the SGM to approve the Ongoing Connected Transactions and the New Waiver Application.

Yours faithfully,

Mr. Wong Po Yan

Independent Non-executive Director

Ms. Tam Wai Chu, Maria

Independent Non-executive Director

* For identification purposes only

– 13 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

==> picture [161 x 32] intentionally omitted <==

INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED 中國工商銀行（亞洲）有限公司

(Incorporated in Hong Kong with limited liability)

ICBC Tower 122-126 Queen’s Road Central Hong Kong

27 August 2002

The Independent Board Committee Sinopec Kantons Holdings Limited 1608 Citicorp Centre 18 Whitfield Road Causeway Bay Hong Kong

Dear Sir or Madam,

ONGOING CONNECTED TRANSACTIONS AND NEW WAIVER APPLICATION

INTRODUCTION

We have been appointed by the Company as the independent financial adviser (the “Independent Financial Adviser”) to the Independent Board Committee in relation to the Ongoing Connected Transactions and the New Waiver Application, details of which are contained in the letter from the Board set out on pages 5 to 12 of a circular to the shareholders of the Company dated 27 August 2002 (the “Circular”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

As the Independent Financial Adviser to the Independent Board Committee, our role is to give an independent opinion to and advise the Independent Board Committee whether (a) the terms of the Ongoing Connected Transactions and (b) the New Waiver Application are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

– 14 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

In arriving at our advice to the Independent Board Committee in respect of (a) the terms of the Ongoing Connected Transactions and (b) the New Waiver Application, we have relied on the statements, information, reports and representations contained in the Circular, the section headed “Business – Connected Transactions” in the prospectus of the Company dated 15 June 1999, annual reports of the Company for the three years ended 31 December 2001, press announcement of the Company dated 5 August 2002 and the information and representations provided to us by the Directors. We have assumed that all such statements, information, reports and representations contained or referred to in the aforesaid press announcement, the Circular, the aforesaid documents or otherwise provided by the Directors and for which they are solely responsible were true and accurate at the time they were made and given and continued to be so at the date of despatch of the Circular. We consider that we have been provided with sufficient information on which to form a reasonable basis for our advice. We have also been advised by the Directors that no material facts have been omitted from the Circular, the omission of which would make the Circular misleading. We have no reason to suspect that any relevant information or reports have been withheld, nor are we aware of any facts or circumstances which would render the information provided and the representations made to us to be untrue, inaccurate or misleading. We have not, however, carried out an independent verification of the information provided by the Directors, nor have we conducted an independent investigation into the business and affairs of the Company or any of its subsidiaries and associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our advice, we have considered the following principal factors and reasons:

1. Background of the Previous Waiver

The Company is a member of the Sinopec Group, which is engaged in a diversified range of energy and petrochemical related operations. The controlling shareholder of the Company is Sinopec Corp., a joint-stock company incorporated in the PRC, the shares of which are listed on the stock exchanges of Hong Kong, New York and London. The ultimate controlling shareholder of the Company is Sinopec Group Company, which is one of the largest Stateowned corporations in the PRC.

The principal operations of Sinopec Corp. and its subsidiaries, including the Company, comprise:

• (a) exploring for and developing, producing and trading crude oil and natural gas;

• (b) processing crude oil into refined oil products, producing refined oil products and trading, transporting, marketing and distributing refined oil products; and

– 15 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (c) producing, trading, marketing and distributing chemical products.

In the past, members of the Group had entered into dealings in the ordinary course of their business with other members of the Sinopec Group. Upon the listing of the Company in June 1999, the Company had applied for and was granted the Previous Waiver by the Stock Exchange for the Ongoing Connected Transactions, which is for a term of three years commencing from the date of listing.

2. Principal terms of the Ongoing Connected Transactions

Services and facilities in relation to the Huizhou Jetty

Huade has provided and will continue to provide the following services and facilities to Sinopec Guangzhou Branch through the Huizhou Jetty:

• (i) jetty and related services concerning unloading of crude oil from oil tankers and dockage;

• (ii) crude oil storage facilities and related services concerning storage of crude oil in oil tanker and handling of oil tankers; and

• (iii) crude oil pipeline facilities and related services concerning transmission of crude oil from the Huizhou Jetty to Sinopec Guangzhou Branch’s refinery complex in Guangzhou City.

Huade and Sinopec Guangzhou Branch entered into an agreement in connection with the services and facilities of the Huizhou Jetty on 1 January 2001. The terms and conditions of this agreement are the same in all material respects with the previous agreement dated 9 June 1998 entered into between Huade and GPC, which had expired on 31 December 2000.

Under the existing agreement, the service fees payable in respect of item (i) above are charged on the basis of the State-prescribed prices regulated and standardized by the Ministry of Communications in the PRC. The service fees payable in respect of items (ii) and (iii) above are charged on the basis of prices approved by the Guangzhou Price Bureau.

If the State-prescribed prices or the government-approved prices (as the case may be) of any of the above services are abolished, the service fees payable by Sinopec Guangzhou Branch shall be (a) the fair market price for the relevant service (to be determined by the parties after consultation); or (b) if no market price is available or agreed between the parties, the previous State-prescribed prices or government-approved prices (as the case may be) plus a margin not exceeding the rate of increase of the consumer price index for the Guangdong Province during the immediate preceding calendar year.

– 16 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Supplies of petroleum products to the Huade Petrol Stations

The Group has purchased and will continue to purchase gasoline and other petroleum products from Guangdong Company and its subsidiaries for re-sale through the Huade Petrol Stations. Guangdong Company is a subsidiary of Sinopec Corp.. The Group also intends to purchase petroleum products from other members of the Sinopec Group in the future.

The Group has not entered into any long term agreement with Guangdong Company for the supply of petroleum products. However, in view of the availability as well as the quality of products supplied by Guangdong Company and the relative proximity of Guangdong Company to the Huade Petrol Stations, the Group intends to continue to purchase petroleum products from Guangdong Company and its subsidiaries in the future.

The purchase prices payable for the petroleum products supplied by Guangdong Company to the Group will be agreed between both parties through negotiation on an arm’s length basis. Guangdong Company has also indicated in writing to the Company that the prices are fair and reasonable and that the quality of the products supplied is in compliance with the State’s prescribed standards.

Trading activities

The Group has conducted and will continue to conduct the following trading activities with the Sinopec Group. The Group has not entered into any long term agreements with the relevant connected parties in respect of these trading activities.

(i) Supply of crude oil

The Group has supplied and will continue to supply crude oil to certain members of the Sinopec Group and intends to supply crude oil to other members of the Sinopec Group in the future. Crude oil sold by the Group is priced by reference to prevailing oil prices at the international market at the time of sale.

(ii) Sourcing of crude oil

The Group has sourced and will continue to source crude oil from certain members of the Sinopec Group and intends to source crude oil from other members of the Sinopec Group in the future. Crude oil purchased by the Group is priced by reference to prevailing oil prices at the international market at the time of purchase.

(iii) Trading of petroleum and petrochemical products

The Group has traded and will continue to trade in petroleum and petrochemical products with certain members of the Sinopec Group and intends to trade with other members of the

– 17 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Sinopec Group in the future. Such transactions are priced by reference to prevailing prices at the open market at the time of trade.

Processing of crude oil

The Group has engaged and will continue to engage Sinopec Guangzhou Branch, and intends to engage other members of the Sinopec Group in the future, to refine and process crude oil into various types of petroleum products on behalf of the Group. Under the current regulations in the PRC, Sinopec Guangzhou Branch must in turn engage CPIGC, which has the import /export trading right, to obtain clearance from the local customs to import crude oil into or to export refined petroleum products from the PRC.

The Group has not entered into any long term processing agreements with the relevant connected parties in respect of the processing of crude oil. The prices payable are agreed between the parties through negotiation on an arm’s length basis.

3. Reasons for making the New Waiver Application

The Board is of the opinion that the Ongoing Connected Transactions have been entered into and carried out in the ordinary course of business of the Group and occur on a regular basis. These transactions are essential for the efficient and continuous operation and growth of the Group. The Board considers that full disclosure by way of press announcement and/or prior approval by the Independent Shareholders of the Ongoing Connected Transactions on each occasion it occurs in full compliance of the Listing Rules would be impracticable due to the frequency of happening of such transactions.

4. Basis of the New Wavier Application

The Company has applied to the Stock Exchange for, subject to the approval by the Independent Shareholders of the terms of the Ongoing Connected Transactions and the New Waiver Application at the SGM, a waiver from the strict compliance with the relevant requirements of the Listing Rules on each occasion it occurs for a period ending 31 December 2004 on the basis as described in the paragraph headed “Application for wavier” as contained in the letter from the Board set out on pages 8 to 11 of the Circular.

The approval of the New Waiver Application by the Stock Exchange will be subject to certain requirements being fulfilled, which will be materially the same as those granted under the Previous Waiver. In summary, these will include a review of the Ongoing Connected Transactions by the independent non-executive Directors and the auditors of the Company on an annual basis and the disclosure of the details of the Ongoing Connected Transactions in the annual reports of the Company as required by the Listing Rules. Moreover, there will be an

– 18 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

upper limit, expressed as a percentage to the total turnover of the Group (“Upper Limit”), to be imposed by the Stock Exchange on the total amount of each type of the Ongoing Connected Transactions for any particular financial year as follows:

		Upper	Limit
		Pursuant to	Pursuant to
		New Waiver	Previous
		Application	Waiver
1.	Services and facilities in relation to
	the Huizhou Jetty	10	12
2.	Supplies of petroleum products to
	the Huade Petrol Stations	18	30
3.	Supply of crude oil	40	65
4.	Sourcing of crude oil	18	35
5.	Trading of petroleum and petrochemical products	10	20
6.	Processing of crude oil	3	3

As evidenced from the above, there will be a reduction in the Upper Limit applicable to five out of the six types of the Ongoing Connected Transactions pursuant to the New Waiver Application as compared to the corresponding limit under the Previous Waiver.

5. Past history of compliance in respect of the Previous Waiver

The amount of each type of the Ongoing Connected Transactions and their approximate percentage to the total turnover of the Group for each of the three financial years ended 31 December 2001 are set out in the table below:

								Upper Limit
		Year	2001	Year	2000	Year	1999	pursuant to
			% to total		% to total		% to total	the Previous
		Amount	turnover	Amount	turnover	Amount	turnover	Waiver
		HK$’ 000		HK$’ 000			HK$’ 000
1.	Services and facilities
	in relation to the
	Huizhou Jetty	314,137	5.30	310,880	3.61	256,379	5.92	12
2.	Supplies of petroleum
	products to the Huade
	Petrol Stations	430,769	7.27	654,635	7.60	233,485	5.39	30
3.	Supply of crude oil	814,946	13.75	2,061,661	23.93	2,258,106	52.10	65
4.	Sourcing of crude oil	–	–	400,411	4.65	1,052,927	24.29	35
5.	Trading of petroleum and
	petrochemical products	210,195	3.55	109,713	1.27	38,381	0.89	20
6.	Processing of crude oil	58,112	0.98	34,766	0.40	64,356	1.48	3

– 19 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on our review of the annual reports of the Company for each of the three financial years ended 31 December 2001, the independent non-executive Directors, having relying on the confirmation from the previous auditors of the Company, have confirmed that the Ongoing Connected Transactions have been entered into in the manner as stipulated in paragraph (D)(1) “Conditions to waiver” in the section headed “Business – Connected Transactions” as contained in the prospectus of the Company dated 15 June 1999 (“Waiver Conditions”). Furthermore, the Directors are of the opinion that the Ongoing Connected Transactions have been entered into in the manner as stipulated in paragraphs (D)(1) and (D)(2) in the Waiver Conditions.

OUR ADVICE

After taking into account the principal factors and reasons referred to above, we are of the opinion that (a) the terms of the Ongoing Connected Transactions and (b) the New Waiver Application are fair and reasonable so far as the Company and the Independent Shareholders are concerned. We have formulated our advice based on the following consideration:

• The Ongoing Connected Transactions have been entered into in the ordinary and usual course of business of the Group. The terms of these transactions have been negotiated on an arm’s length basis between the Group and the relevant third parties concerned.

• The Ongoing Connected Transactions have been entered into (1) where there are comparable transactions, on normal commercial terms; or (2) in accordance with the applicable State-prescribed prices or government-approved prices (as the case may be).

• The term of the Previous Waiver had expired on 25 June 2002. Other than the replacement of a counter party to certain Ongoing Connected Transactions as a result of the reorganization of the Sinopec Group in preparation of the listing of Sinopec Corp. on the stock exchanges of Hong Kong, New York and London, the approval of the New Waiver Application by the Stock Exchange will in substance represents an extension of the term of the Previous Waiver. Moreover, there will be a reduction in the Upper Limit applicable to almost all types of the Ongoing Connected Transactions pursuant to the New Waiver Application as compared to the corresponding limit under the Previous Waiver, which is determined having regard to the historical percentages of the various types of the Ongoing Connected Transactions over the respective total turnover of the Group for each of the three financial years ended 31 December 2001. In addition, the new Upper Limits have been set in order to allow sufficient room for the expansion of the Group’s business in the future while at the same time this ensures that the spirit of the Listing Rules governing connected

– 20 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

transactions is followed. In the event that the volume of such transactions exceeds the level as originally expected at the time when the New Waiver Application was made, then it will be necessary for the Company to take appropriate steps in order to comply with the then prevailing requirements of the Listing Rules.

– The making of the New Wavier Application is essential to the Company and unless such application is approved by the Stock Exchange, all of the Ongoing Connected Transactions would require disclosure by way of press announcement, preparation and dispatch of circulars to shareholders and likely prior approval by the Independent Shareholders on each occasion it occurs, thus creating unnecessary administrative burden and costs on the Company, unless applicable exceptions under the Listing Rules apply.

• The approval of the New Waiver Application will be conditional on, inter alia , the Ongoing Connected Transactions being reviewed by the independent non-executive Directors and the auditors of the Company on an annual basis. The Company has good history of compliance of the Waiver Conditions in the past and therefore, we consider that the Company will have the capability to ensure the continued compliance of similar conditions as prescribed under the New Waiver Application.

Yours faithfully,

For and on behalf of INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED Peter Leung

Head of Corporate Finance & Advisory

– 21 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTEREST

Directors’ Interest in Share Capital or Options over the Share Capital

As at the Latest Practicable Date, none of the Directors, nor their associates, had any interest in the share capital, or options over the share capital, of the Company or any of its associated corporations which were required to be notified to the Company and the Stock Exchange pursuant to section 28 of the Securities (Disclosure of Interests) Ordinance, Cap.396 (the “ SDI Ordinance ”) (including interests which they are deemed or taken to have under section 31 of or Part 1 of the Schedule of the SDI Ordinance) or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies as set out in appendix 10 of the Listing Rules to be notified to the Company and the Stock Exchange or which are required, pursuant to section 29 of the SDI Ordinance, to be entered in the register referred to therein.

Directors’ Interest in Any Asset Acquired, Disposed or Leased

None of the Directors has any material interest, direct or indirect, in any asset which, since 31st December 2001, being the date to which the latest audited consolidated financial statements of the Group have been made up, had been acquired or disposed of by or leased to any member of the Group or was proposed to be acquired or disposed of by or leased to any member of the Group.

Directors’ Service Contracts and Appointment Letters

Each of Mr. Hong Zhi Ming and Mr. Dai Zhao Ming, executive Director, has entered into a service contract with the Company for a period of three (3) years commencing from 23rd March, 1998 (which is automatically renewed upon expiry for successive terms of one (1) year), subject to termination by either party giving not less than six (6) months’ prior written notice to the other party.

Mr. Yang Shu Shan, executive Director, has entered into a service contract with the Company for a period of one (1) year commencing from 1st July, 2001 renewable automatically for successive terms of one (1) year each commencing from the day next after the expiry of the

– 22 –

GENERAL INFORMATION

APPENDIX

then current term of the appointment, unless terminated by not less than six (6) months’ notice in writing served by either party.

On 28th March, 2002, an executive Director, Mr, Ye Zhi Jun, has entered into a service contract with the Company for a term of one (1) year commencing from 28th March, 2002 renewable automatically for successive terms of one (1) year each commencing from the day next after the expiry of the then current term of the appointment unless terminated by not less than six (6) months’ notice in writing served by either party.

Mr. Lai Yong Fu, an executive Director, has entered into a service contract with the Company for a term of one (1) year commencing from 26 August 2002 renewable automatically for successive terms of one (1) year each commencing from the date next after the expiry of the then current term of the appointment unless terminated by not less than six (6) months’ notice in writing served by either party.

Mr. Guan Qing Jie, non-executive Director, has been appointed for a term of three (3) years commencing from 25th March, 1998 which is automatically renewed upon expiry for successive terms of one year.

Mr. Li Yue Ling was appointed as a non-executive Director for a term of three (3) years commencing from 18th May, 2001 under an appointment letter dated 5th September, 2001.

Mr. Wong Po Yan and Ms. Tam Wai Chu, Maria were appointed as independent nonexecutive Directors since 25th March, 1998 for a term of three (3) years. Their appointments have been extended from 25th March, 2001 for a further term of three (3) years.

Save as disclosed above, none of the Directors has or is proposed to have a service contract with the Company or any of its subsidiaries which is not determinable by the Group within one (1) year without the payment of compensation other than statutory compensation.

Directors’ Interest in Contracts

No contracts of significance to which the Company, any of its holding companies, fellow subsidiaries or subsidiaries was a party and in which a Director had a material interest and which is significant to the Group’s business, whether directly or indirectly, subsisted at the date of this circular.

3. SUBSTANTIAL SHAREHOLDERS

So far as the Directors are aware, shareholders holding ten (10) per cent. or more of the Company’s share capital in issue as recorded in the register of substantial shareholders’

– 23 –

GENERAL INFORMATION

APPENDIX

interests maintained by the Company and their reported interests pursuant to provisions of section 16 of SDI Ordinance are as follows:

	Number of	Percentage of
Name of interested party	Shares	shareholding
		(%)
Sinopec Kantons International Limited	750,000,000	72.34

• Note : The entire share capital of Sinopec Kantons International Limited is held by China Petrochemical International Co. Ltd.. The entire registered capital of China Petrochemical International Co. Ltd. is held by China Petroleum & Chemical Corporation. The controlling interest in the registered capital of China Petroleum & Chemical Corporation is held by China Petrochemical Corporation.

4. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial position or trading prospects of the Group since 31 December 2001, the date to which the latest audited financial statements of the Group were made up.

5. LITIGATION

Neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

6. CONSENT AND EXPERT

The following is the qualification of the professional adviser who has given opinion or advice, which is contained in this circular:

Name	Qualification
Industrial and Commercial	Exempt dealer under Securities Ordinance
Bank of China (Asia) Limited	(Cap. 333, Laws of Hong Kong)

Industrial and Commercial Bank of China (Asia) Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and the reference to its name in the form and context in which it appears.

As at the Latest Practicable Date, Industrial and Commercial Bank of China (Asia) Limited is not beneficially interested in the share capital of any member of the Group nor does it have any right, whether legally enforceable or not, to subscribe for or to nominate persons to

– 24 –

GENERAL INFORMATION

APPENDIX

subscribe for securities in any member of the Group nor does it have any interest, either direct or indirect, in any assets which have been, since the date to which the latest published audited financial statements of the Company were made up acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group.

7. MISCELLANEOUS

• (a) The secretary of the Company is Mr. Lai Yang Chau, Eugene (practicing solicitor).

• (b) The Hong Kong Branch Share Registrar and Transfer Office of the Company is Secretaries Limited of 5th Floor, Wing On Centre, 111 Connaught Road, Central, Hong Kong.

• (c) The English text of this circular and form of proxy shall prevail over the Chinese text.

8. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Boughton Peterson Yang Anderson at 4001, Gloucestor Tower, The Landmark, 11 Pedder Street, Central, Hong Kong during normal business hours on any weekday (except public holidays) from the date of this circular up to and including 26 September 2002:

• (a) the letter from Industrial and Commercial Bank of China (Asia) Limited as the Independent Financial Adviser as set out on pages 14 to 21 in this circular;

• (b) the written consent from Industrial and Commercial Bank of China (Asia) Limited referred to in paragraph 6 of this appendix;

• (c) the letter of recommendation from the Independent Board Committee to the Independent Shareholders as set out on page 13 in this circular;

• (d) the service agreements and appointment letters of the Directors referred to in paragraph 2 of this appendix; and

• (e) the agreement dated 1 January 2001 entered into between 惠州大亞灣華德石化有 限公司 (Hua De Petrochemcial Co. Ltd.) and 中國石油化工股份有限公司廣州 分公司 (China Petroleum & Chemcial Corporation Guangzhou Branch) in relation to the services and facilities in relation to the Huizhen GPC Crude Oil Jelly Complex

• （惠州廣石化碼頭）.

– 25 –

NOTICE OF SPECIAL GENERAL MEETING

SINOPEC KANTONS HOLDINGS LIMITED （中石化冠德控股有限公司） *

(incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of Sinopec Kantons Holdings Limited (the “Company”) will be held at 1608 Citicorp Centre, 18 Whitfield Road, Causeway Bay, Hong Kong on 26 September 2002 at 10:00 a.m. for the purposes of considering and, if thought fit, passing the following resolution as ordinary resolution:

ORDINARY RESOLUTION

“ THAT

• (a) the Ongoing Connected Transactions (as defined in the circular of the Company dated 27 August 2002 (the “ Circular ”), a copy of which was marked “A” and has been produced to the meeting and signed by the Chairman of the meeting for the purposes of identification) be and are hereby approved; and

• (b) the New Waiver Application (as defined in the Circular) be and is hereby approved; AND THAT the Directors be and are hereby authorised to do all such acts and take all necessary actions in connection with the Ongoing Connected Transactions and the New Waiver Application.”

By Order of the Board Hong Zhi Ming Chairman

Hong Kong, 27 August, 2002

• For identification purposes only

– 26 –

NOTICE OF SPECIAL GENERAL MEETING

Principal office:

1608 Citicorp Centre 18 Whitfield Road Causeway Bay Hong Kong

Notes:

1. A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more proxies to attend, and subject to the provisions of the Byelaws of the Company, vote in his stead. A proxy need not be a member of the Company.

2. In order to be valid, the form of proxy must be deposited together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority, at Secretaries Limited, the Hong Kong Branch Share Registrar and Transfer Office of the Company, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not less than 48 hours before the time for holding the meeting or adjourned meeting.

– 27 –