Sinopec Kantons Holdings Limited — Proxy Solicitation & Information Statement 2008

Nov 10, 2008

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 or transfer 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 circular, 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 ( )*

(incorporated in Bermuda with limited liability)

(Stock Code: 934)

DISCLOSEABLE AND CONNECTED TRANSACTION SALE OF LAND

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

Hantec Capital Limited

A letter from the Board is set out on pages 4 to 7 of this circular.

A letter from the Independent Board Committee containing its recommendation in respect of the Sale Agreement is set out on page 8 of this circular.

A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 9 to 15 of this circular.

A notice convening the SGM to be held at Boardroom 3-4, Mezzanine Floor, Renaissance Harbour View Hotel, 1 Harbour Road, Wan Chai, Hong Kong on 2 December 2008 at 10:15 a.m. is set out on pages 24 to 25 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 Tricor Secretaries Limited, the Hong Kong Branch Share Registrar and Transfer Office of the Company, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, 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. Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or at any adjourned meeting should you so wish.

• For identification purposes only

11 November 2008

CONTENT

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Appendix 1 – Property Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Appendix 2 – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24

– i –

DEFINITIONS

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

• “Company” Sinopec Kantons Holdings Limited (and for identification only ), an exempted company incorporated in Bermuda with limited liability and the shares of which are listed on the Stock Exchange.

• “Director(s)” the director(s) of the Company, including the independent non-executive directors of the Company.

• “Group” the Company and its subsidiaries.

• “Huade” (Hua De Petrochemical Co. Ltd.), a wholly owned foreign investment enterprise established in the PRC and an indirect wholly owned subsidiary of the Group.

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC.

• “HK$” the legal currency of Hong Kong.

• “Huizhou Jetty”

• the Huizhou Crude Oil Jetty Complex, including its oil tanker handling, crude oil unloading, storage and pipeline transmission facilities, which is located on Mabianzhou Island ( ) in the Daya Bay Economic and Technological Development zone ( ) in Huizhou ( ), Guangdong Province, the PRC and which is owned and operated by the Group through Huade.

• “Independent Board Committee”

• the independent board committee of the Company comprising of Mr. Wong Po Yan, Ms. Tam Wai Chu, Maria and Mr. Fong Chung, Mark, the independent non-executive Directors.

• “Independent Financial Adviser”

• Hantec Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Sale Agreement.

• “Independent Property Valuer”

• Grant Sherman Appraisal Limited, commissioned by the Group in respect of the Sale Agreement.

• “Independent Shareholders”

• holder of shares in the Company other than Sinopec Group Company, Sinopec Corp., Unipec, CPIC, SKI and their respective associates.

– 1 –

DEFINITIONS

• “Land” the land of an area of approximately 254,103 square meters owned by Huade located at north side of Yan Bei Village, Ao Tou, Huizhou City, Guangdong Province, PRC.

• “Latest Practicable Date” 7 November 2008, being the latest practicable date prior to the printing of the circular for certain information in the circular

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange.

• “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.

• “RMB” Renminbi, the legal currency of PRC. “Sale Agreement” the conditional agreement dated 22 October 2008 between Huade and SGCCS for the sale of the Land.

• “SGCCS” Sinopec Group Company Crude Oil Commercial Storage Company Limited ( ), a wholly owned subsidiary of Sinopec

• Group Company.

• “SGCCS Group” SGCCS, its subsidiaries and associated companies. “SGM” the special general meeting of the Company to be convened for the purpose of approving the Sale Agreement.

• “Sinopec Corp.” (China Petroleum & Chemical Corporation) (Stock Code: 386), a joint-stock limited liability company incorporated in the PRC, the shares of which are listed on the stock exchanges of Hong Kong, Shanghai, New York and London.

• “Sinopec Group” Sinopec Group Company, its subsidiaries and its associated companies and affiliates, including the Group, or where the context so requires, any two or more members of such group and the words “member of the Sinopec Group” shall mean any one of them.

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DEFINITIONS

“Sinopec Group Company” (China Petrochemical Corporation) (formerly known as (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 75.84% 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). “SKI” Sinopec Kantons International Limited (and for identification only ), a company established under the laws of the British Virgin Islands with limited liability and the immediate controlling shareholder of the Company. “sq.m.” square meter(s) “State” the government of the PRC. “Stock Exchange” The Stock Exchange of Hong Kong Limited. “Storage Facilities” the crude oil storage facilities to be owned, built and developed over the Land by SGCCS, estimated to be completed on 2010. “%” per cent.

In this circular, unless otherwise stated, certain amounts denominated in RMB have been converted (for information only) into HK$ using an exchange rate of RMB1.00 : HK$1.14. Such conversion shall not be construed as a representation that amounts in RMB were or may have been converted into HK$ (as the case may be) using such exchange rate or any other exchange rate or at all.

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LETTER FROM THE BOARD

SINOPEC KANTONS HOLDINGS LIMITED ( )*

(incorporated in Bermuda with limited liability)

(Stock Code: 934)

Executive Directors: Mr. Dai Zhao Ming Mr. Zhu Zeng Qing Mr. Zhu Jian Min Mr. Tan Ke Fei Mr. Zhou Feng Mr. Ye Zhi Jun (Managing Director)

Independent Non-executive Directors:

Mr. Wong Po Yan Ms. Tam Wai Chu, Maria Mr. Fong Chung, Mark

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal office: 20th Floor, Office Tower Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong

11 November 2008

To the shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION SALE OF LAND

(A) Introduction

The Board announced on 22 October 2008, Huade, a wholly owned subsidiary of the Company, had conditionally entered into the Sale Agreement with SGCCS.

(B) The Sale Agreement

Under the Sale Agreement, Huade will transfer the land use rights in relation to the Land which is owned by Huade in the PRC to SGCCS at the consideration of RMB151,953,600 (equivalent to approximately HK$173,227,104). The Sale Agreement is conditional upon (1) approval by the Independent Shareholders in the SGM of the Sale Agreement; and (2) approval by the relevant local PRC governmental authorities of the transfer of Land.

* For identification purposes only

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LETTER FROM THE BOARD

Rights of the Properties involved in the sale

The PRC land use right certificate in relation to the Land covering and including an approximately 254,103 square meters located at north side of Yan Bei Village, Ao Tou, Huizhou City, Guangdong Province, PRC was granted to Huade in the year of 17 April 2002 for the terms until 17 April 2052 respectively. Pursuant to the Sale Agreement between Huade and SGCCS, Huade agreed to transfer to SGCCS the land use rights of the Land for the remaining term.

Consideration and its basis

The transaction contemplated under the Sale Agreement was negotiated on an arm’s length basis between Huade and SGCCS and the consideration is approximately equivalent to the value of the Land being RMB151,950,000 (equivalent to approximately HK$173,223,000) as stated in the property valuation report as at 31 August 2008 prepared by the Independent Property Valuer. The Company will benefit from the transaction by way of a financial gain of approximately RMB94,133,600 (equivalent to approximately HK$107,312,304) before taxes (consideration received under the Sale Agreement less costs including the land acquisition cost and the cost of initial development to provide public utilities to the Land amounted to approximately RMB57,820,000 (equivalent to approximately HK$65,914,800)) and a net financial gain of approximately RMB50,209,400 (equivalent to approximately HK$57,238,716 after taxes including PRC business tax, land value appreciation tax, stamp duty and income tax which are approximately RMB43,924,200 (equivalent to approximately HK$50,073,600)). Under the Sale Agreement, the consideration will be paid in cash in full upon issue of the land use right certificate of the Land to SGCCS. The Board expects that the transaction contemplated under the Sale Agreement will not have material impact on the assets and liabilities of the Group. Subject to completion, the transaction contemplated under the Sale Agreement is expected to increase the Group’s net earnings by approximately RMB50,209,400 (equivalent to approximately HK$57,238,716).

Use of proceeds

The net proceeds after taxes to be derived from the sale amount to approximately RMB108,029,400 (equivalent to approximately HK$123,153,516). The proceeds from the sale will be used for general working capital and operational requirements for the Group’s business.

(C) Reasons for the Sale Agreement

The Land was acquired by Huade as land reserve and is currently vacant. As mentioned above from the sale of the Land, the Company will make net gain of approximately RMB50,209,400 (equivalent to approximately HK$57,238,716). Such monies will strengthen the cashflow of the Group. According to SGCCS, the Storage Facilities will be built on the Land.

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LETTER FROM THE BOARD

One of the Company’s strategies is to focus on operation of crude oil storage facilities. The Company is currently operating its own crude oil storage facilities at Huizhou Jetty. The management believes the transaction contemplated in the Sale Agreement would optimize the Group’s asset utilization and operations. Moreover, in the future, given the availability and quality of the crude oil unloading services and the proximity of Huade Huizhou Jetty to the Storage Facilities, Huade may provide crude oil unloading services in connection with the Storage Facilities. The management believes the Sale Agreement and the transaction contemplated therein will enhance shareholder’s investment value and return. The Company will comply with the relevant requirements under Chapter 14A of the Listing Rules, should there are any other connected transaction between the Group and Sinopec Group in connection with the Storage Facilities in the future.

(D) The Directors’ view

The Company has established the Independent Board Committee to consider the Sale Agreement and to recommend to the shareholders how to vote in the SGM. The Independent Financial Adviser has been appointed for the purpose of advising the Independent Board Committee and the Independent Shareholders in relation to the Sale Agreement.

The Directors are of the opinion that the Sale Agreement and the transaction contemplated therein is fair and reasonable and in the interests of the shareholders of the Company as a whole and the terms of the Sale Agreement are on normal commercial terms. Accordingly, the Directors (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 Sale Agreement and the transaction contemplated therein.

(E) Listing Rules implications for the Sale Agreement

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 Group Company holds not less than 30 per cent. of Sinopec Corp., and other relevant branches and members of the Sinopec Group, the transaction contemplated under the Sale Agreement will constitute a “connected transaction”. Since the value of the Sale Agreement as disclosed will exceed 2.5% of the percentage ratios of the Group, pursuant to rule 14A.35 of the Listing Rules, the transaction contemplated therein will require disclosure by way of press notice, preparation and dispatch of circulars to shareholders and approval by poll by the Independent Shareholders. As the relevant percentage ratios (as defined in Chapter 14 of the Listing Rules) in relation to the Sale Agreement exceed 5%, the Sale Agreement also constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

(F) Information on Huade, the Company and the Sinopec Group

The Company was incorporated in Bermuda with limited liability and its shares are listed on the Stock Exchange. The principal activities of the Group are the trade of crude oil, petroleum and petrochemical products, the operation of crude oil jetties and its ancillary facilities.

– 6 –

LETTER FROM THE BOARD

Huade is a wholly owned foreign investment enterprise established in the PRC and an indirect wholly owned subsidiary of the Group. The principal business of Huade is operation of crude oil jetty and its ancillary facilities in Huizhou, the PRC.

Sinopec Group Company, the controlling shareholder of Sinopec Corp. and the ultimate controlling shareholder of the Company, is a State-authorised investment vehicle in oil and petrochemical business which integrates the upstream and downstream assets.

Sinopec Group Company Crude Oil Commercial Storage Company Limited ( ) is a wholly owned subsidiary of Sinopec Group Company which invests and owns crude oil storage facilities and assets.

Sinopec Corp. is an integrated energy and chemical company with upstream, midstream and downstream operations and is publicly listed on the stock exchanges of Hong Kong, Shanghai, New York and London. The principal operations of Sinopec Corp. and its subsidiaries include:

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

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

• (3) producing, distributing and trading chemical products.

SKI (Sinopec Kantons International Limited) is a limited liability company incorporated in the British Virgin Islands, and is the immediate controlling shareholder of the Company and a wholly owned subsidiary of Sinopec Corp..

(G) General

Sinopec Group Company is the ultimate controlling shareholder of the Company and indirectly holds approximately 72.34 per cent. (750 million shares) of the entire issued share capital of the Company. Pursuant to the Listing Rules, the Sale Agreement constitute a connected transaction to the Company. Since Sinopec Group Company has material interest in the transaction contemplated under the Sale Agreement. Sinopec Group Company and its associates including Sinopec Corp., and SKI will abstain from voting in the SGM to approve the Sale Agreement. There is no other shareholder that is materially interested in the transaction contemplated under the Sale Agreement who will be required to abstain from voting in the SGM to approve the Sale Agreement.

(H) Additional Information

Your attention is drawn to the addition information set out in the appendices 1 and 2 to this circular.

Yours faithfully, For and on behalf of the Board Dai Zhao Ming Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

SINOPEC KANTONS HOLDINGS LIMITED ( )*

(incorporated in Bermuda with limited liability)

(Stock Code: 934)

11 November 2008

To the Independent Shareholders

Dear Sir or Madam,

We have been appointed as the Independent Board Committee to advise you in connection with the Sale Agreement details of which are set out in the Letter from the Board contained in the circular to the shareholders of the Company dated 11 November 2008 (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 Sale Agreement, the advice and opinion of the Independent Financial Adviser in relation thereto as set out on pages 9 to 15 of the Circular, we are of the opinion that the terms of the Sale Agreement and the transaction contemplated therein are fair and reasonable so far as the Company and the Independent Shareholders are concerned. We are of the view that the Sale Agreement and the transaction contemplated therein are in the best interest of the Company and the Shareholders as a whole.

We therefore recommend that you vote in favour of the ordinary resolution to be proposed at the SGM to approve the Sale Agreement and the transaction contemplated therein.

Yours faithfully,

Mr. Wong Po Yan Ms. Tam Wai Chu, Maria Independent Independent Non-executive Director Non-executive Director

Mr. Fong Chung, Mark Independent Non-executive Director

* For identification purposes only

– 8 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Sale Agreement, which has been prepared for the purpose of inclusion in this circular:

==> picture [43 x 47] intentionally omitted <==

Hantec Capital Limited

45th Floor, COSCO Tower 183 Queen’s Road Central Hong Kong

11 November 2008

To the Independent Board Committee and the Independent Shareholders of Sinopec Kantons Holdings Limited

Dear Sirs and Madams,

DISCLOSEABLE AND CONNECTED TRANSACTION – SALE OF LAND

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the Sale Agreement, details of which are set out in the letter from the board (“ Letter from the Board ”) contained in the circular (the “ Circular ”) of the Company dated 11 November 2008 of which this letter forms part. Terms used in this letter have the same meanings as defined in the Circular unless the context otherwise requires.

On 22 October 2008, Huade, a wholly owned subsidiary of the Company, had conditionally entered into the Sale Agreement with SGCCS, pursuant to which Huade will transfer the land use rights in relation to the Land which is owned by Huade in the PRC to SGCCS.

Sinopec Group Company is the ultimate controlling shareholder of the Company and indirectly holds approximately 72.34% of the entire issued share capital of the Company. Pursuant to the Listing Rules, the Sale Agreement constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Since the value of the Sale Agreement will exceed 2.5% of the percentage ratios (as defined in Chapter 14 of the Listing Rules) of the Group, the transaction contemplated therein will be subject to the approval of the Independent Shareholders by way of poll in the SGM. As the relevant percentage ratios (as defined in Chapter 14 of the Listing Rules) in relation to the Sale Agreement exceed 5%, the Sale Agreement also constitutes a discloseable transaction for the Company under Chapter

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

14 of the Listing Rules. Sinopec Group Company and its associates including Sinopec Corp., and SKI will abstain from voting in the SGM to approve the Sale Agreement and the transaction contemplated thereunder.

The Independent Board Committee, comprising of three independent non-executive Directors, namely Mr. Wong Po Yan, Ms. Tam Wai Chu, Maria and Mr. Fong Chung, Mark, has been established to advise the Independent Shareholders as to whether the terms of the Sale Agreement are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

BASIS OF OUR ADVICE

In formulating our recommendation, we have relied on the statements, information, opinions and representations contained in the Circular, and the information and representations provided to us by the Directors and the management of the Company. We have assumed that all information, representations and opinions contained or referred to in the Circular and all information, representations and opinions which have been provided by the Directors and the management of the Company for which they are solely responsible, are true and accurate at the time they were made and will continue to be accurate at the date of the despatch of the Circular.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular the omission of which would make any such statement contained in the Circular misleading. We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion. However, we have not carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Sinopec Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

In arriving at our opinion with regard to the terms of the Sale Agreement, we have considered the following principal factors and reasons:

1. Background

• (a) Information on the Company and Huade

The principal activities of the Group are the trade of crude oil, petroleum and petrochemical products, the operation of crude oil jetties and its ancillary facilities.

Huade is a wholly owned foreign investment enterprise established in the PRC and an indirect wholly owned subsidiary of the Group. The principal business of Huade is operation of crude oil jetty and its ancillary facilities in Huizhou, the PRC.

• (b) Information on Sinopec Group

Sinopec Group Company, the controlling shareholder of Sinopec Corp. and the ultimate controlling shareholder of the Company, is a State-authorised investment vehicle in oil and petrochemical business which integrates the upstream and downstream assets.

SGCCS is a wholly owned subsidiary of Sinopec Group Company which invest and own crude oil storage facilities and assets.

Sinopec Corp. is an integrated energy and chemical company with upstream, midstream and downstream operations and is publicly listed on the stock exchanges of Hong Kong, Shanghai, New York and London. The principal operations of Sinopec Corp. and its subsidiaries include (i) exploring for and developing, producing and trading crude oil and natural gas; (ii) processing crude oil into refined oil products, producing refined oil products and trading, transporting, distributing and marketing refined oil products; and (iii) producing, distributing and trading chemical products.

SKI is a limited liability company incorporated in the British Virgin Islands, and is the immediate controlling shareholder of the Company and a wholly owned subsidiary of Sinopec Corp..

2. Reasons for the sale of the Land

As set out in the Letter from the Board, the Land was acquired by Huade as land reserve and is currently vacant. According to SGCCS, the Storage Facilities will be built on the Land after the acquisition of the Land by SGCCS. One of the Company’s strategies is to focus on operation of crude oil storage facilities. The Company is currently operating its own crude oil storage facilities at Huizhou Jetty. The

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

management believes the transactions contemplated in the Sale Agreement would optimize the Group’s asset utilization and operations. Moreover, in the future, given the availability and quality of the crude oil unloading services and the proximity of Huade Huizhou Jetty to the Storage Facilities, Huade may provide crude oil unloading services in connection with the Storage Facilities. The management believes the Sale Agreement and the transaction contemplated therein will enhance shareholder’s investment value and return. As set out in the Letter from the Board, the Company will make net gain of approximately RMB50,209,400 (equivalent to approximately HK$57,238,716) from the sale of the Land. Such monies will strengthen the cashflow of the Group.

Considering (i) property holding is not a core business of the Group and net gain from the sale of the Land will reinforce the Group’s financial position and provide additional funding for the Group’s operational requirements for the Group’s core business; and (ii) the transaction contemplated under the Sale Agreement may enhance shareholder’s investment value and return by providing crude oil unloading services in connection with the Storage Facilities for transmission of crude oil in the future, we concur with the view of the Directors that the entering into of the Sale Agreement is in the interests of the Company and its Shareholders as a whole.

3. Principal terms of the Sale Agreement

Under the Sale Agreement, Huade will transfer the land use rights in relation to the Land which is owned by Huade in the PRC to SGCCS at the consideration of RMB151,953,600 (equivalent to approximately HK$173,227,104).

The PRC land use right certificate in relation to the Land covering and including an approximately 254,103 sq.m. located at north side of Yan Bei Village, Ao Tou, Huizhou City, Guangdong Province, PRC was granted to Huade in the year of 17 April 2002 for the terms until 17 April 2052 respectively. Pursuant to the Sale Agreement, Huade agreed to transfer to SGCCS the land use rights of the Land for the remaining term.

(a) Basis of the consideration

As referred to in the Letter from the Board, the consideration for the sale of the Land of RMB151,953,600 (equivalent to approximately HK$173,227,104) was negotiated on an arm’s length basis between Huade and SGCCS and the consideration is approximately equivalent to the value of the Land being RMB151,950,000 (equivalent to approximately HK$173,223,000) as stated in the property valuation report as at 31 August 2008 prepared by the Independent Property Valuer. A copy of the valuation report is set out in Appendix 1 to the Circular. Under the Sale Agreement, the consideration will be paid in cash in full upon issue of the land use right certificate of the Land to SGCCS.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Valuation of the Land

Based on the valuation report made by the Independent Property Valuer as set out in Appendix 1 to the Circular, the market value (the “Valuation”) of the Land as at 31 August 2008 would be approximately RMB151,950,000 (equivalent to approximately HK$173,223,000).

To assess the fairness and reasonableness of the consideration for the sale of the Land, we have reviewed and enquired into the Independent Property Valuer regarding the methodology of, and basis and assumptions adopted for the Valuation. In the course of our enquiry, we noted that the Independent Property Valuer carried out a site visit on 8 September 2008 to the Land to research for the necessary information to determine the market value of the Land. The Independent Property Valuer further explained that, it had adopted the comparison approach assuming sale in their existing state by making reference to comparable sales evidences as available in the relevant market. As confirmed by the Independent Property Valuer, comparison approach is a commonly adopted approach for valuation of land or properties and it is also consistent with normal market practice.

Further details of the basis and assumptions of the Valuation are included in Appendix 1 to the Circular. During our discussion with the Independent Property Valuer, we have not identified any major factors which cause us to doubt the fairness and reasonableness of the principal basis and assumptions adopted for the Valuation. However, Shareholders should note that valuation of assets or companies usually involves assumptions and therefore the Valuation may or may not reflect the true market value of the Land accurately. We have no reason to doubt the fairness and appropriateness of the methodology adopted and assumptions used by the Independent Property Valuer in arriving at the Valuation which is in general, such methodology and assumptions usually used in the market for valuation of such property.

The Directors are of the opinion that the Sale Agreement is fair and reasonable and in the interests of the shareholders of the Company as a whole.

In light of that the Valuation was fairly and reasonably determined by the Independent Property Valuer and the consideration for the sale of the Land is approximately equivalent to the Valuation as at 31 August 2008 with a difference of RMB3,600 (equivalent to approximately HK$4,104) only, we concur with the Directors that the consideration for the sale of the Land is fair and reasonable and in the interests of the shareholders of the Company as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Possible financial impact of the Sale Agreement

(a) Earnings

As set out in the Letter from the Board, the Company will benefit from the sale of the Land by way of a financial gain of approximately RMB94,133,600 (equivalent to approximately HK$107,312,304) before taxes (consideration received under the Sale Agreement less costs including the land acquisition cost and the cost of initial development to provide public utilities to the Land amounted to approximately RMB57,820,000 (equivalent to approximately HK$65,914,800)) and a net financial gain of approximately RMB50,209,400 (equivalent to approximately HK$57,238,716) after taxes including PRC business tax, land value appreciation tax, stamp duty and income tax which are approximately RMB43,924,200 (equivalent to approximately HK$50,073,600).

(b) Cashflow

As the consideration will be paid by SGCCS in cash in full upon issue of the land use right certificate of the Land to SGCCS. Therefore, the sale of the Land shall give rise to a net cash inflow totaling approximately RMB108,029,400 (equivalent to approximately HK$123,153,516) for the Group, being the net proceeds from the sale of the Land.

(c) Working capital

As set out in the Letter from the Board, the net proceeds to be derived from the sale of the Land amount to RMB108,029,400 (equivalent to approximately HK$123,153,516) will be used for general working capital and operational requirements for the Group’s business. Therefore, the working capital of the Group would be further enhanced after completion of the Sale Agreement.

(d) Net asset value

It is expected that the sale of the Land shall not impose any material impact on the net asset value of the Group as the proceeds from the sale of the Land shall be settled in cash, thus the cash balance of the Group will be enhanced by the gross sale proceeds upon completion.

In light of the financial gain from the sale of the Land and the expected improvement in the Group’s cashflow and working capital, we consider that the Sale Agreement is in the interests of the Company and its Shareholders as a whole.

It should be noted that the aforementioned analyses are for illustrative purpose only and does not purport to represent how the financial position of the Group will be upon completion of the Sale Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having taken into account the principal factors and reasons, in particular:

• (i) property holding is not a core business of the Group and proceeds from the sale of the Land will provide additional funding for the Group’s core business;

• (ii) the consideration is approximately equivalent to the value of the Land as stated in the property valuation report set out in Appendix 1 of the Circular;

• (iii) we have not identified any major factors which cause us to doubt the fairness and reasonableness of the principal basis and assumptions adopted for the Valuation; and

• (iv) the net gain from the sale of the Land will reinforce the Group’s cashflow and working capital,

we consider that the terms of the Sale Agreement are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned. Although the sale of the Land is not entered into in the ordinary and usual course of business of the Company, in view of (i) the proceeds from the sale of the Land will reinforce the Group’s financial position and provide additional funding for the Group’s core business and (ii) the Sale Agreement may enhance shareholder’s investment value and return by providing crude oil unloading services in connection with the Storage Facilities for transmission of crude oil in the future, we are of the view that it is still in the interests of the Company and its Shareholders as a whole. We therefore advise the Independent Shareholders and advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Sale Agreement and the transactions contemplated therein.

Yours faithfully, For and on behalf of Hantec Capital Limited Kinson Li Director

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PROPERTY VALUATION

APPENDIX 1

The following is the text of a letter and valuation certificate prepared for the purpose of incorporation in this circular received from the Independent Property Valuer in connection with their valuation as at 31 August 2008 of the Land.

Room 1701 on 17th Floor Jubilee Centre, 18 Fenwick Street, Wanchai, Hong Kong

11 November 2008

The Board of Directors Sinopec Kantons Holdings Limited 20th Floor, Office Tower Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong

Dear Sirs,

In accordance with the instructions from Huade, a wholly-owned subsidiary of Sinopec Kantons Holdings Limited (“the Company”) to value the property interests held by Huade, located in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the property interests as at 31 August 2008.

Market value is defined as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.

We have valued the property by comparison approach assuming sale in their existing state by making reference to comparable sales evidences as available in the relevant market.

In valuing the property interests, we have complied with all the requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and The HKIS Valuation Standards on Properties (1st Edition 2005) published by The Hong Kong Institute of Surveyors.

The valuation has been made on the assumption that the owner sells the property interest on the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect their value.

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APPENDIX 1

PROPERTY VALUATION

No allowance has been made in our valuation for any charges, mortgages or amounts owing on any of the property valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that all the interests are free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

In valuing the property, we have assumed that the owner has free and uninterrupted rights to use the property for the whole of the unexpired term as granted and is entitled to transfer the properties with the residual term without payment of any further premium to the government authorities or any third parties.

We have assumed that all consents, approvals and licenses from relevant government authorities for the properties have been granted without any onerous conditions or undue time delay which might affect their values. It is assumed that all applicable zoning and use regulations and restrictions have been complied with unless nonconformity has been stated, defined, and considered in the appraisal report.

No environmental impact study has been ordered or made. Full compliance with applicable national, provincial and local environmental regulations and laws is assumed unless otherwise stated, defined, and considered in the report. It is also assumed that all required licenses, consents, or other legislative or administrative authority from any local, provincial, or national government or private entity or organization either have been or can be obtained or renewed for any use which the report covers.

We have been provided with copies of extracts of title documents relating to the properties. However, we have not inspected the original documents to verify ownership or to verify any amendments which may not appear on the copies handed to us. Due to the nature of the land registration system in the PRC, we are unable to search the original documents to verify the existing title of the property or any material encumbrances that might be attached to the property. In the preparation of our valuation report regarding the property in the PRC, we have relied to the considerable extent on the legal opinion provided by the Company’s legal adviser, Haiwen & Partners, ( ) on the PRC laws regarding the titles of the property in the PRC.

In the course of our valuation, we have relied on a considerable extent on the information provided by Huade on such matters as property title, statutory notices, easements, tenure, occupation, site and floor areas, identification of the properties and all other relevant matters. We have no reason to doubt the truth and accuracy of the information provided to us by Huade. We were also advised by Huade that no material facts have been omitted from the information supplied. All documents have been used as reference only. All dimensions, measurements and areas are approximations. No on-site measurement has been taken.

We have inspected the exterior of the property and, where possible, the interior of the properties in respect of which we have been provided with such information as we have required for the purpose of our valuation. However, no structural survey has been carried out and it was not possible to inspect the wood work and other parts of the structure which were

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PROPERTY VALUATION

APPENDIX 1

covered, unexposed or inaccessible. We are therefore, unable to report that the properties are free of rot, infestation or any structural defect. No tests have been carried out on any of the building services.

Unless otherwise stated, all monetary figures stated in this report are in Renminbi (RMB).

We enclose herewith our valuation certificate.

Respectfully submitted, For and on behalf of

GRANT SHERMAN APPRAISAL LIMITED Peggy Y. Y. Lai

MRICS MHKIS RPS (GP)

Associate Director Real Estate Group

• Note: Ms Peggy Y.Y. Lai is a member of the Royal Institution of Chartered Surveyors, a member of the Hong Kong Institute of Surveyors and Registered Professional Surveyors in the General Practice Section, who has over 5 years experience in the valuation of properties in Hong Kong, the PRC and the Asian Region.

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PROPERTY VALUATION

APPENDIX 1

VALUATION CERTIFICATE

Property interests held by Huade for disposal

			Capital value in
		Particulars of	existing state as at
Property	Description	Occupancy	31 August 2008
			(RMB)
Portion of a parcel of land	The property comprises	The property is	151,950,000
located at north side of	portion of land having a site	vacant.	see note (ii)
Yan Bei Village,	area of approximately 254,103
Ao Tou,	sq.m. to be carving out from a
Huizhou City,	site with an area of about
Guangdong Province	360,536 sq.m.
the PRC

Notes:

• (i) According to a State-owned Land Use Right Certificate No. Hui Wan Guo Yong (2002) Zi Di 13210300277 Hao dated 17 April 2002, the land use rights with an area of approximately 360,536 sq.m. have been granted to (“Huade”) for a term up to 17 April 2052 for storage use.

• (ii) According to a Sale Agreement dated 22 October 2008 entered between Huade, and SGCCS, Huade agrees to transfer portion of the land with an area of 254,103 sq.m. to SGCCS. Therefore, our valuation mentioned above reflects only the value of the land with an area of 254,103 sq.m..

• (iii) We have been provided with a PRC legal opinion on the title to the property issued by Haiwen & Partners, the PRC legal adviser of the Company, which contains, inter alia, the following information:

• a. Huade has legally possessed the land use right under the aforesaid State-owned Land Use Right Certificate mentioned in note (i) above.

• b. Huade has the right to transfer, let or mortgage the land use right under the aforesaid State-owned Land Use Right Certificate mentioned in note (i) above including the subject property within the land use right term.

• c. The Sale Agreement mentioned in note (ii) above does not violate the restrictive stipulations of the PRC laws and administrative regulations.

• d. The subject property is not subject to any charge or any other material encumbrances.

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GENERAL INFORMATION

APPENDIX 2

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 INTERESTS

Directors’ Interests and Short Positions

As at the Latest Practicable Date, none of the Directors, nor their associates, had any interest and short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance Cap.571 (the “SFO”)) which were required to be notified to the Company and the Stock Exchange which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 and the Stock Exchange under the provisions of Divisions 7 and 8 of Part XV of the SFO 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 352 of the SFO, 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 31 December 2007, 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

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.

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GENERAL INFORMATION

APPENDIX 2

Competing interest

As at the Latest Practicable Date, save as disclosed herein, none of the Directors and their respective associates had any interest, directly or indirectly, in a business which competes or may compete with the business of the Group.

3. SUBSTANTIAL SHAREHOLDERS

So far as the Directors are aware, shareholders holding five (5) per cent. or more or a short position of 1% or more of the Company’s relevant share capital as recorded in the register of interests in shares and short position maintained by the Company and their reported interests pursuant to provisions of section 336 of the SFO 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 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 2007, 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 are the qualifications of the professional advisers who have given opinion or advice, which is contained in this circular:

Name Qualification

Hantec Capital Limited A licenced corporation to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO.

Grant Sherman Appraisal Limited Professional property surveyors and valuers

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GENERAL INFORMATION

APPENDIX 2

Each of Hantec Capital Limited and Grant Sherman Appraisal 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, each of Hantec Capital Limited and Grant Sherman Appraisal 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 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. PROCEDURES FOR DEMANDING A POLL

Set out below is the procedure by which shareholders and the chairman of any shareholders’ meeting may demand a poll pursuant to article 73 of the bye-laws of the Company:

“At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded:

• (i) by the Chairman of the meeting; or

• (ii) by at least three shareholders present in person (or, in the case of a shareholder being a corporation, by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or

• (iii) by any shareholder or shareholders present in person (or, in the case of a shareholder being a corporation, by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all the shareholders having the right to vote at the meeting; or

• (iv) by any shareholder or shareholders present in person (or, in the case of a shareholder being a corporation, by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.”

A poll will be demanded by the Chairman of the SGM meeting to pass the ordinary resolution in the notice of the SGM.

8. MISCELLANEOUS

• (a) The secretary of the Company is Mr. Lai Yang Chau, Eugene (practicing solicitor). The qualified accountant of the Company is Mr. Chan Kim Fai (a member of the Hong Kong Institute of Certified Public Accountants).

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GENERAL INFORMATION

APPENDIX 2

• (b) The principal place of business of the Company in Hong Kong is 20th Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong.

• (c) The Hong Kong Branch Share Registrar and Transfer Office of the Company is Tricor Secretaries Limited of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

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

9. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection at the office of the Company at 20th Floor, Office Tower, Convention Plaza, Harbour Road, Wanchai, Hong Kong during normal business hours on any weekday (except public holidays) from the date of this circular up to and including 2 December 2008:

• (a) the letter from Hantec Capital Limited as the Independent Financial Adviser as set out on pages 9 to 15 in this circular;

• (b) the written consents from Hantec Capital Limited and Grant Sherman Appraisal 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 8 in this circular;

• (d) the valuation certificate relating to the land prepared by Grant Sherman Appraisal Limited dated 11 November 2008, the text of which is set out in appendix 1 of this circular, and

• (e) the Sale Agreement.

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NOTICE OF SPECIAL GENERAL MEETING

SINOPEC KANTONS HOLDINGS LIMITED ( )* (incorporated in Bermuda with limited liability)

(Stock Code: 934)

NOTICE IS HEREBY GIVEN that a special general meeting of Sinopec Kantons Holdings Limited (the “ Company ”) will be held at Boardroom 3-4, Mezzanine Floor, Renaissance Harbour View Hotel, 1 Harbour Road, Wan Chai, Hong Kong on 2 December 2008 at 10:15 a.m. for the purposes of considering and, if thought fit, passing the following resolution as ordinary resolution:

ORDINARY RESOLUTION

“ THAT

the Sale Agreement (as defined in the circular of the Company dated 11 November 2008 (the “ Circular ”)) and the transaction contemplated therein be and are hereby approved, and that the Directors be and are hereby authorised to do all such acts and take all necessary actions in connection therewith”.

Note: This ordinary resolution will be put to a poll.

By Order of the Board Dai Zhao Ming Chairman

Hong Kong, 11 November 2008

As at the date of this notice, the Board of Directors comprises of the following:

Executive Directors:

Mr. Dai Zhao Ming (Chairman)

Mr. Zhu Zeng Qing (Vice-Chairman)

Mr. Zhu Jian Min

Mr. Tan Ke Fei Mr. Zhou Feng

Mr. Ye Zhi Jun (Managing Director)

Independent non-executive Directors:

Mr. Wong Po Yan Ms. Tam Wai Chu, Maria

Mr. Fong Chung, Mark

• For identification purposes only

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NOTICE OF SPECIAL GENERAL MEETING

Principal office: 20th Floor,

Office Tower Convention Plaza, 1 Harbour Road, Wanchai, 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 Bye-laws 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 Tricor Secretaries Limited, the Hong Kong Branch Share Registrar and Transfer Office of the Company, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time for holding the meeting or adjourned meeting.

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