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.

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

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

(incorporated in Bermuda with limited liability)

(Stock Code: 934)

(1) Renewal of Existing Continuing Connected Transactions for the three financial year ending 31 December 2013;
(2) New Framework Master Agreement re Sinopec Finance Financial Services for the three financial years ending 31 December 2013;
(3) New Framework Master Agreement re Century Bright Financial Services for the three financial years ending 31 December 2013; and
(4) New Framework Master Agreement re Unipec Vessel Charter Services for the three financial years ending 31 December 2013

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

First Shanghai Capital Limited

A letter from the Board is set out on pages 6 to 25 of this Circular.

A letter from the Independent Board Committee containing its recommendation in respect of the Existing Continuing Connected Transactions, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement, the deposit services under the New Century Bright Financial Services Framework Master Agreement and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement is set out on pages 26 to 27 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 28 to 47 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 6 December 2010 at 10:00 a.m. is set out on pages 52 to 54 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 purpose only

18 November 2010

CONTENT

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28
Appendix – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48
Notice of Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	52

– i –

DEFINITIONS

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

“Board” the board of Directors “CBRC” China Banking Regulatory Commission（中國銀行業監督管理委員會）
“Century Bright” Sinopec Century Bright Capital Investment Limited （中石化盛駿國際投資有限公司） is a limited liability company incorporated in Hong Kong and a wholly owned subsidiary of Sinopec Group Company
“Circular” this circular
“Company” Sinopec Kantons Holdings Limited (and for identification only 中石化冠德控股有限公司）, an exempted company incorporated in Bermuda with limited liability
“connected person(s)” has the meaning ascribed to it in the Listing Rules
“Director(s)” the director(s) of the Company, including the independent non-executive directors of the Company
“EMIS”
Energy Market Information System
“Existing Century Bright Financial Services Framework Master Agreement”
the financial services agreement entered into between the Company and Century Bright on 20 March 2009
“Existing Continuing Connected Transactions”
collectively the non-exempted continuing connected transactions including, the services and facilities in relation to the Huizhou Jetty, the crude oil supply and sourcing and petroleum products trading and the third party processing of crude oil collectively in accordance with the New Framework Master Agreements, details of which are set out in paragraph I under heading “Letter from the Board” of this Circular
“First Previous SGM” the special general meeting held on 21 September 2007
“Group” the Company and its subsidiaries
“Hong Kong” the Hong Kong Special Administrative Region of the PRC

– 1 –

DEFINITIONS

“Huade”

Hua De Petrochemical Co., Ltd.（惠州市大亞灣華德石化有限公司）is established under the laws of the PRC with limited liability. Huade is a wholly owned subsidiary of Kantons International Investment Limited. Kantons International Investment Limited is a wholly owned subsidiary of the Company

“Huade Group” Huade and its subsidiaries
“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 （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

“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”

First Shanghai Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Existing Continuing Connected Transactions for the three financial years ending 31 December 2013 (together with their caps), the deposit services under the Sinopec Finance Financial Services Framework Master Agreement for the three financial years ending 31 December 2013, the deposit services under the New Century Bright Financial Services Framework Master Agreement for the three financial years ending 31 December 2013 and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement for the three financial years ending 31 December 2013

“Independent Shareholders”
holder of shares in the Company other than Sinopec Group Company, Sinopec Corp., Unipec, Century Bright and their respective associates
“Latest Practicable Date”
15 November 2010
“Listing Rules”

the Rules Governing the Listing of Securities on the Stock Exchange

– 2 –

DEFINITIONS

“New Century Bright Financial the financial services agreement entered into between Services Framework Master the Company and Century Bright on 15 November Agreement” 2010 in respect of continuing connected transactions as disclosed in paragraph III under the heading “Letter from the Board” of this Circular for the three financial years ending 31 December 2013
“New Framework Master collectively the New Sinopec Guangzhou Branch Agreements” Framework Master Agreement and the New Unipec Framework Master Agreement
“New Sinopec Guangzhou Branch the agreement dated 15 November 2010 entered into Framework Master Agreement” between the Company and Sinopec Guangzhou Branch in respect of the continuing connected transactions as disclosed in paragraph I under the heading “Letter from the Board” of this Circular for the three financial years ending 31 December 2013
“New Unipec Framework Master the agreement dated 15 November 2010 entered into Agreement” between the Company and Unipec in respect of continuing connected transactions as disclosed in paragraph I under the heading “Letter from the Board” of this Circular for the three financial years ending 31 December 2013
“Old Sinopec Guangzhou Branch the agreement dated 27 July 2007 entered into between Framework Master Agreement” the Company and Sinopec Guangzhou Branch in respect of continuing connected transactions between the Company and Sinopec Guangzhou for the three financial years ending 31 December 2010
“Old Unipec Framework Master the agreement dated 27 July 2007 entered into between Agreement” the Company and Unipec in respect of continuing connected transactions between the Company and Unipec Group for the three financial years ending 31 December 2010
“PBOC”

People’s Bank of China（中國人民銀行）

“Platts” Platts is a leading global provider of energy and metals information
“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 lawful currency of the PRC

– 3 –

DEFINITIONS

“Second Previous SGM”
“SGM”

the special general meeting held on 18 September 2008 the special general meeting to be convened and held at 10:00 a.m. on 6 December 2010 for the purpose of considering, and if thought fit, passing ordinary resolutions regarding the renewal of Existing Continuing Connected Transactions, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement, the deposit services under the New Century Bright Financial Services Framework Master Agreement and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement and all matters contemplated thereunder

“Share(s)”
the ordinary share(s) of the Company with a nominal value of HK$0.10 each
“Shareholder(s)” the holder(s) of the Share(s)
“Sinopec Corp.”
中國石油化工股份有限公司 (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, details of which are set out in paragraph VII under the heading “Letter from the Board” of this Circular
“Sinopec Finance”
Sinopec Finance Company Limited, a limited liability company organised in the PRC in July 1988
“Sinopec Finance Financial Services Framework Master Agreement”
the financial services agreement entered into between Sinopec Finance and Huade on 15 November 2010 in respect of the continuing connected transactions as disclosed in paragraph II under the heading “Letter from the Board” of this Circular for the three financial years ending 31 December 2013
“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

– 4 –

DEFINITIONS

“Sinopec Group Company”

中國石油化工集團公司 (China Petrochemical Corporation) (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 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)

“Sinopec Guangzhou Branch”

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

“State” the government of the PRC
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“subsidiary” has the meaning ascribed to it under the Listing Rules
“Unipec”
中國國際石油化工聯合有限公司 (China International United Petroleum and Chemicals Co. Ltd.), a company established under the laws of the PRC with limited liability, details of which are set out in paragraph VII under the heading “Letter from the Board” of this Circular
“Unipec Group” Unipec, its subsidiaries and its associated companies and affiliates
“Unipec Vessel Charter Framework Master Agreement”
the agreement dated 15 November 2010 entered into between the Company and Unipec in respect of the continuing connected transactions as disclosed in paragraph IV under the heading “Letter from the Board” of this Circular for the three financial years ending 31 December 2013

“%”

Percentage

– 5 –

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)

(Stock Code: 934)

Executive Directors:

Mr. Dai Zhaoming (Chairman) Mr. Zhu Zengqing (Vice-Chairman) Mr. Zhu Jianmin 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

18 November 2010

To the Shareholders

Dear Sir or Madam

(1) Renewal of Existing Continuing Connected Transactions for the three financial year ending 31 December 2013;
(2) New Framework Master Agreement re Sinopec Finance Financial Services for the three financial years ending 31 December 2013;

(3) New Framework Master Agreement re Century Bright Financial Services for the three financial years ending 31 December 2013; and

(4) New Framework Master Agreement re Unipec Vessel Charter Services for the three financial years ending 31 December 2013

Introduction

This letter refers to the matters mentioned above which have just been announced by the Company in a separate announcement dated 15 November 2010.

For identification purpose only

– 6 –

LETTER FROM THE BOARD

During the First Previous SGM back in September of 2007, Independent Shareholders had already approved the Existing Continuing Connected Transactions. Then, during the Second Previous SGM in September of 2008, Independent Shareholders also approved the revised caps. However, these approvals will expire at the end of this year on 31 December 2010.

As the Existing Continuing Connected Transactions regarding crude oil supply, crude oil sourcing and the provisions of crude oil jetty services will continue after 31 December 2010, the management of the Company would like to seek Shareholders’ approval on the Existing Continuing Connected Transactions to be conducted under the terms and conditions of the New Framework Master Agreements which will commence on 1 January 2011 and end on 31 December 2013.

In addition, the management of the Company would also like to seek Shareholders’ approval on the deposit services under the Sinopec Finance Financial Services Framework Master Agreement, the deposit services under the New Century Bright Financial Services Framework Master Agreement and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement, all of which will commence on 1 January 2011 and end on 31 December 2013.

Since the transactions contemplated under the above framework agreements fall under the requirements specified in Rule 14A.35 of the Listing Rules, the Company, in entering into these connected transactions, will have to comply with the reporting, announcement and Independent Shareholders’ approval requirements as stipulated by the Listing Rules.

In regards to the Existing Continuing Connected Transactions, certain transaction caps were proposed, approved, revised, and then reapproved during the First Previous SGM and Second Previous SGM. It should be noted that as at the date of this Circular, none of the caps in relation to the Existing Continuing Connected Transactions for the financial year ending 31 December 2010 have been exceeded and the Directors do not anticipate that any such caps will be exceeded.

(I) Non-exempted Existing Continuing Connected Transactions

(A) Crude Oil Jetty Services

On 27 July 2007, the Company entered into the Old Sinopec Guangzhou Branch Framework Master Agreement with Sinopec Guangzhou Branch, and entered into the Old Unipec Framework Master Agreement with Unipec, in order to regulate, among others, the provision of crude oil jetty services between the Group, Sinopec Guangzhou Branch and Unipec.

On 15 November 2010, the Company entered into the New Sinopec Guangzhou Branch Framework Master Agreement with Sinopec Guangzhou Branch, and entered into the New Unipec Framework Master Agreement with Unipec. Conditional upon the approval in the SGM, each of the New Sinopec Guangzhou Branch Framework Master Agreement and the New Unipec Framework Master Agreement will commence from 1 January 2011 for a term of 3 years up to 31 December 2013.

– 7 –

LETTER FROM THE BOARD

Nature of transaction and the connected parties

The Group has provided under each of the Old Sinopec Guangzhou Branch Framework Master Agreement and the Old Unipec Framework Master Agreement, and will continue to provide under each of the New Sinopec Guangzhou Branch Framework Master Agreement and the New Unipec Framework Master Agreement, the following services and facilities to relevant branches and subsidiaries of Sinopec Group, including Sinopec Guangzhou Branch, and Unipec Group, through the Huizhou Jetty:

(i) jetty and related services concerning the unloading of crude oil from oil tankers and dockage;
(ii) crude oil storage and related services concerning the storage of crude oil in oil tank and oil tank handling; and
(iii) the transmission of crude oil and related services concerning the transmission of crude oil from the Huizhou Jetty to, in case of Sinopec Group, Sinopec Guangzhou Branch’s refinery complex in Guangzhou; and in case of Unipec Group, to the crude oil bonded zone operated by the Group for Unipec Group’s crude oil trading businesses.

Historical amounts

The aggregate amounts received by the Group in respect of these connected transactions were approximately HK$533 million and HK$509 million for the two years ended 31 December 2009, and approximately HK$373 million for the six months ended 30 June 2010.

Pricing basis and caps

Pursuant to each of the New Sinopec Guangzhou Branch Framework Master Agreement and the New Unipec Framework Master Agreement, Huade will enter into separate crude oil jetty service agreements with Sinopec Guangzhou Branch and Unipec Group respectively, by which the parties will negotiate with reference to, among other factors, law and regulations, market conditions, normal commercial terms, trade customs and the principle of fairness and will conclude the detailed terms and provisions in the agreements.

Pursuant to the New Sinopec Guangzhou Branch Framework Master Agreement and the New Unipec Framework Master Agreement, the service fees payable by Sinopec Group and Unipec Group to the Group, will be:

(i) in respect of jetty and related services concerning the unloading of crude oil from oil tankers and dockage, charged on the State-prescribed prices, being regulated and standardised by the Ministry of Transports of the PRC and on the basis of government-approved prices, being approved by the Guangdong Price Bureau;

– 8 –

LETTER FROM THE BOARD

(ii) in respect of crude oil storage and related services concerning the storage of crude oil in oil tank and oil tank handling, charged on the basis of government-approved prices, being approved by the Guangdong Price Bureau; and
(iii) in respect of the transmission of crude oil and related services concerning the transmission of crude oil from the Huizhou Jetty, charged based on the State-prescribed prices, being regulated by the PRC’s National Development and Reform Commission.

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 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. The consumer price index can be obtained from the Guangdong Bureau of Statistics of the PRC.

As approved in the First Previous SGM, the annual caps for these transactions are HK$700 million, HK$700 million and HK$700 million for each of the three financial years ending 31 December 2010 respectively. For the three financial years ending 31 December 2013, the Directors expect that these connected transactions will continue and the monetary amount will increase gradually. The aggregate transaction amounts will be within maximum annual caps of HK$750 million, HK$800 million and HK$850 million for each of the three financial years ending 31 December 2013 respectively.

In arriving at the caps, the following factors were taken into account: (i) the historical figures of the transactions; (ii) the State-prescribed prices and the government approved prices for these services; (iii) in the light of the demand for petroleum products in the PRC market, Sinopec Group is expected to import more crude oil, and Unipec Group is also expected to import more crude oil for Unipec Group’s crude oil trading business, and thus will consume more crude oil jetty services and its facilities; and (iv) given the nature of mutual dependence and reliance of the supply and consumption of the services and facilities by Sinopec Group and Unipec in relation to the Huizhou Jetty, it is in the interest of the Group to capture such demands in the volume and quantity of this business.

The payment terms of this transaction will be determined by the parties on a transaction-by-transaction basis, in accordance with market norms and on normal commercial terms, and with reference to prescriptions by and approvals of the PRC government. Currently, it is anticipated that payment will be made on a monthly basis.

Reasons for the transactions

The Group entered into these continuing connected transactions for the reasons that, (a) in the case of Sinopec Group, the availability and quality of the jetty and other services and the proximity of Huade crude oil jetty for transmission of crude oil to the

– 9 –

LETTER FROM THE BOARD

crude oil refinery facilities of Sinopec Guangzhou Branch; and (b) in the case of Unipec Group, the availability and quality of the jetty and other services and the proximity of Huade crude oil jetty for transmission of crude oil to the crude oil bonded zone operated by the Group for Unipec Group’s crude oil trading businesses. Sinopec Guangzhou Branch is the largest customer of Huizhou Jetty.

(B) Trading activities

On 27 July 2007, the Company and Unipec entered into the Old Unipec Framework Master Agreement to regulate the trading activities amongst them.

On 15 November 2010, the Company and Unipec entered into the New Unipec Framework Master Agreement. Conditional upon the approval in the SGM, the New Unipec Framework Master Agreement will cover all trading activities in respect of crude oil supply and sourcing with the Group and Unipec Group commencing on 1 January 2011 for a term of three years up to 31 December 2013.

1. Crude oil supply

Nature of the transactions and connected parties

The Group has supplied and will continue to supply crude oil to Unipec Group.

Historical amounts

The aggregate amounts received by the Group in respect of these connected transactions were approximately HK$20,300 million and HK$15,200 million for the two years ended 31 December 2009, and approximately HK$8,000 million for the six months ended 30 June 2010.

Pricing basis and caps

Under the New Unipec Framework Master Agreement, the Group will enter into separate written supply agreements within the term of the New Unipec Framework Master Agreement with members of the Unipec Group for the supply of crude oil on a transaction-by-transaction basis. The parties will negotiate with reference to, among other factors, market conditions, normal commercial terms, trade customs and the principle of fairness and will conclude the detailed terms and provisions in the contracts and the agreements. As in line with the Old Unipec Framework Master Agreement, under the New Unipec Framework Master Agreement, the prices payable are to be based on international market prices and are to be agreed between the parties on an arm’s length basis through negotiations. The parties can access such pricing information from various sources, including the EMIS energy market information resource operated by Platts.

As approved in the First Previous SGM and adjusted in the Second Previous SGM, the annual caps of these connected transactions for each of the three financial years ending 31 December 2010 are HK$50,000 million, HK$65,000 million and HK$85,000 million respectively.

– 10 –

LETTER FROM THE BOARD

For the three financial years ending 31 December 2013, the Directors expect that these connected transactions will continue. The aggregate amounts received by the Group in respect of these transactions in each financial year shall not exceed HK$19,000 million, HK$21,000 million and HK$23,400 million for each of the three financial years ending 31 December 2013 respectively. In arriving at the aforesaid annual caps, the Directors take into account the factors, including the high volatility in both the international and the PRC market price of crude oil, petroleum products, and the demand of petroleum products and crude oil by the crude oil refineries in the PRC.

The decrease in the annual caps is determined after considering (a) the historical amount of the 2008 and 2009 financial years (which were approximately HK$20,300 million and HK$15,200 million) and of the first six months of 2010 (which was approximately HK$8,000 million); (b) the spot price and the anticipated price of crude oil for the next three years; and (c) the anticipated oil supply business of the Group for the next three years.

The payment terms of these connected transactions will be determined by the parties on a transaction-by-transaction basis, in accordance with market norms and on normal commercial terms, and with reference to the specifications and requirements of different oil cargos being traded in different transactions, including type, quantity, transportation and shipping terms. Given the nature of these trading transactions, payment terms will have to be agreed upon by the parties on a transaction-bytransaction basis. Currently, it is anticipated that payment will be made within 30 days of the bill of lading of the oil cargos.

Reasons for the transactions

Due to foreign trade laws and regulations of the PRC, the Group cannot supply crude oil and petroleum products to, or enter into written agreements with its end users in the PRC directly. The Group has to supply to the users through and enter into written contracts with corporations that have crude oil and petroleum product import trading rights in the PRC, for example, Unipec.

2. Crude oil sourcing

Nature of the transaction and connected parties

The Group has sourced and will continue to source crude oil from members of the Sinopec Group.

Historical price

The aggregate amounts paid by the Group in respect of these connected transactions were approximately HK$28,700 million and HK$24,200 million for the two years ended 31 December 2009 and approximately HK$10,300 million for the six months ended 30 June 2010.

– 11 –

LETTER FROM THE BOARD

Pricing basis and caps

Under the New Unipec Framework Master Agreement, as in line with the Old Unipec Framework Master Agreement, the Group will enter into separate written sourcing agreements within the term of the New Unipec Framework Master Agreement with members of the Unipec Group, being members of the Sinopec Group, for the sourcing of crude oil on a transaction-by-transaction basis. The parties will negotiate with reference to, among other factors, market conditions, normal commercial terms, trade customs and the principle of fairness and will conclude the detailed terms and provisions in the contracts and the agreements.

The prices payable are to be based on international market prices and are to be agreed between the parties on an arm’s length basis through negotiations. The parties can access such pricing information from various sources, including the EMIS energy market information resource operated by Platts.

As approved in the First Previous SGM and adjusted in the Second Previous SGM, the annual caps of these connected transactions for each of the three financial years ending 31 December 2010 are HK$60,000 million, HK$80,000 million and HK$100,000 million respectively.

For the three financial years ending 31 December 2013, the Directors expect that these connected transactions will continue. The Group wishes to utilize the collective bargaining power of the Sinopec Group, which will be beneficial to the Group. The aggregate amounts paid by the Group in respect of these transactions shall not exceed HK$19,000 million, HK$21,000 million and HK$23,400 million for each of the three financial years ending 31 December 2013 respectively. In arriving at the aforesaid annual caps, the Directors take into account the factors, including the high volatility in both the international and the PRC market price of crude oil and petroleum products, and the demand of petroleum products and crude oil by the crude oil refineries in the PRC.

Reasons for the transactions

Sourcing crude oil from Sinopec Group will strengthen the collective bargaining power of Sinopec Group as and when Sinopec Group negotiates crude oil prices with international oil majors and other oil companies. In addition, the Group is not required to issue letters of credit to members of Sinopec Group in these transactions. Thus, the financial cost incurred by the Group is thereby reduced, as compared with sourcing crude oil from other third parties.

– 12 –

LETTER FROM THE BOARD

(II) Sinopec Finance Financial Services Framework Master Agreement

On 15 November 2010, the Company entered into the Sinopec Finance Financial Services Framework Master Agreement with Sinopec Finance for the provision of intra group financial services by Sinopec Finance to Huade Group. Conditional upon the approval in the SGM, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement will commence from 1 January 2011 for a term of 3 years up to 31 December 2013.

Major terms

(a) The intra group financial services to be provided by Sinopec Finance to the Huade Group include loan services, deposit services, conducting entrusted loans, conducting bill acceptance and discount services, and conducting transfer and relevant settlement services and planning of settlement scheme. Sinopec Finance has agreed to provide financial services other than those aforesaid services to the Huade Group at Huade’s request or instruction provided that Sinopec Finance has obtained the relevant approval from the CBRC.
(b) Sinopec Finance has undertaken to adhere to the principles below in providing the afore-mentioned financial services to the Huade Group:
(i) the interest rate for the Huade Group’s deposits with Sinopec Finance shall be fixed as the deposit interest rate as announced by the PBOC from time to time; and in compliance with the laws and regulations, shall be no lower than the interest rate for deposits offered by other independent commercial banks in the PRC;
(ii) the interest rate for loans granted to the Huade Group by Sinopec Finance shall be the base lending rate as announced by the PBOC from time to time; and in compliance with the laws and regulations, may lower the interest rate to a certain percentage and shall not be higher than the interest rate for loans offered by other independent commercial banks in the PRC;
(iii) the rate for discount services shall be the rate as announced by PBOC from time to time and with reference to the market situation and shall not be higher than the discount rate offered by other independent commercial banks in the PRC;
(iv) the service fees for entrusted loans shall not be higher than the fee offered by other independent commercial banks in the PRC; and
(v) the service charges for the transfer and relevant settlement services and planning of settlement scheme shall be free of charge. However, if any service charges relating to such transfer and relevant settlement services have been imposed by independent commercial banks on Sinopec Finance, Huade Group will then be charged the same by Sinopec Finance.

– 13 –

LETTER FROM THE BOARD

Capital risk control measures

(a) In accordance with the PRC laws and regulations, Sinopec Finance will ensure the safe and stable operation of fund management information system, which has undergone the security test in respect of connection to the online commercial banking and has reached the national security standards for commercial banks.
(b) Sinopec Finance will ensure its compliance with the risk monitoring indicators for financial institutions issued by the CBRC and in accordance with the PRC laws and regulations.
(c) In accordance with the PRC laws and regulations, Sinopec Finance will allow Huade to check the status of its deposits with Sinopec Finance each business day to enable Huade to monitor and ensure that the maximum outstanding balance at any time (including any interest accrued therefrom) for Huade Group’s deposits with Sinopec Finance does not exceed the relevant upper limit at any time.
(d) If there is a breach of laws or regulations, Sinopec Finance should inform immediately Huade and to ascertain the procedure and plan to ratify and mitigate the situation.
(e) The annual financial statements of Sinopec Finance will be provided to Huade upon request.

The Directors (including the independent non-executive Directors) consider that the above capital risk control measures are adequate to cover the risks involved in depositing funds with Sinopec Finance.

Reasons for / benefits of entering into the Sinopec Finance Financial Services Framework Master Agreement

The interest rates on loans and deposits to be offered by Sinopec Finance to the Huade Group will be equal to or not less favourable than those offered by other independent commercial banks in the PRC.
Sinopec Finance is regulated by the PBOC and the CBRC and provides its services in accordance with the rules and operational requirements of these regulatory authorities.
It is beneficial for the settlement operations for the members of the Sinopec Group, strengthening the Group’s capital management and control in order to mitigate and avert operating risks.
It will reduce the time of capital in transit for the Huade Group. It will also accelerate the turnover of cash flow and reduce transaction costs and expenses, thereby further enhancing the quality and efficiency of capital utilisation.

– 14 –

LETTER FROM THE BOARD

This also provides diversified financial services in broader areas for the Group, which is in line with the interests of the Company and the Shareholders. The financial services provided by Sinopec Finance are in line with market norms and on normal commercial terms, with reference to arrangements with other independent commercial banks in the PRC.
Pursuant to the relevant regulations of the PBOC and the CBRC, the customers of Sinopec Finance are limited to entities within Sinopec Group and its subsidiaries, thereby reducing the risks that Sinopec Finance may otherwise be exposed to if its customers include other entities unrelated to Sinopec Group.

Proposed caps for financial services and rationale

Deposit services

The Company estimates that the proposed caps for the maximum outstanding balance at any time (including any interest accrued therefrom) for the deposits placed by the Group with Sinopec Finance are RMB500 million (approximately HK$584 million), RMB500 million (approximately HK$584 million) and RMB500 million (approximately HK$584 million) for each of the three financial years ending 31 December 2013 respectively, after taking into account of:

(1) In order to strengthen the centralised management of funds and monitor the use of funds, the Sinopec Group will roll out a “funding pool” platform with the assistance of Sinopec Finance. Such platform amasses the funds of the Sinopec Group (including the Group) and enables loans to be granted within the Sinopec Group by capitalising on the leeway arising from the difference in the time for receipt and payment of funds of the members of the Sinopec Group, with an aim to support the development of the Sinopec Group and the Group. Huade Group will gradually transfer their deposit funds to Sinopec Finance without affecting the relationships with such banks. After taking into account the above issues, as well as the anticipated needs and future business development of Huade Group in the next three financial years ending 2013, Huade Group sets the maximum outstanding balance at any time (including any interest accrued therefrom) for its deposits placed with Sinopec Finance at RMB500 million (approximately HK$584 million) for each of the three years ending 31 December 2013 in the financial services agreement entered into with Sinopec Finance.
(2) Sinopec Finance is under the supervision of CBRC and it has been maintaining satisfactory operating results and financial position with good risks control and well-regulated management in the past three years. The safety standards of its settlement system reach the standards of domestic commercial banks. The collaboration between Huade Group and Sinopec Finance reduces finance costs, increase interest income of deposits, lower settlement costs and control risks.

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LETTER FROM THE BOARD

(3) There will be interest income from the deposits of the Huade Group with Sinopec Finance at a rate equal to or not less favourable than those offered by other independent commercial banks in the PRC.
(4) In respect of the Huade Group’s funds settlement business at Sinopec Finance, settlement expenses will be undertaken by Sinopec Finance while the Huade Group has no obligations to pay for the settlement expenses to Sinopec Finance, save if other independent commercial banks charge Sinopec Finance for such fees, Sinopec Finance will charge Huade Group the same accordingly.
(5) Sinopec Finance undertakes no appropriation of the Huade Group’s funds by major shareholder should occur.

The Directors (including the independent non-executive Directors) consider that the above proposed caps are fair and reasonable and in the interest of the Shareholders as a whole.

Loan services and conducting bill acceptance and discount services

In view of the loan facilities provided by Sinopec Finance to the Huade Group are on normal commercial terms which are similar to or even more favourable than those offered from independent third parties for comparable services in the PRC, and that no security over the assets of the Group will be granted in respect of the loan services, the loan services are exempt under Rule 14A.65(4) of the Listing Rules from all reporting, announcement and Independent Shareholders’ approval requirements. As such, no cap has been set for such services. The Directors (including the independent non-executive Directors) consider that the loan services provided under the Sinopec Finance Financial Services Framework Master Agreement are fair and reasonable and in the interest in the Shareholders as a whole.

Entrustment loans and other services

Apart from the deposit services and the loan services, the other services which may be provided by Sinopec Finance to the Huade Group are entrustment loans and other financial services which will be on normal commercial terms and on terms similar to or even more favourable than those offered by independent third parties for comparable services in the PRC.

The Company expects that each of the percentage ratios (as defined in Rule 14.07 of the Listing Rules) of the total fees payable by Huade to Sinopec Finance in respect of entrustment loans and other financial services will fall within the de minimis threshold as stipulated under Rule 14A.31(2) of the Listing Rules. The Company will comply with the reporting, announcement and Independent Shareholders’ approval requirements of the Listing Rules if the transaction amounts of the other financial services to be provided by Sinopec Finance to the Huade Group under the Sinopec Finance Financial Services Framework Master Agreement exceed the relevant threshold.

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LETTER FROM THE BOARD

(III) New Century Bright Financial Services Framework Master Agreement

Reference is made to the announcement of the Company dated 20 March 2009 with respect to the continuing connected transaction relating to the intra group financial services.

On 20 March 2009, the Company and Century Bright entered into the Existing Century Bright Financial Services Framework Master Agreement, by which Century Bright agreed to provide deposit services and settlement and similar services to the Group outside the PRC. The original cap for maximum outstanding balance at any time (including any interest accrued therefrom) for the deposits placed by the Group with Century Bright throughout the terms of the Existing Century Bright Financial Services Framework Master Agreement was HK$25 million for each financial year. The Existing Century Bright Financial Services Framework Master Agreement will expire on 31 March 2012.

Given the expansion of the business of the Group, the management of the Company would like to renew the Existing Century Bright Financial Services Framework Master Agreement and to revise the existing annual caps thereunder for the three financial year ending 31 December 2013.

On 15 November 2010, the Company and Century Bright entered into the New Century Bright Financial Services Framework Master Agreement, pursuant to which the term of the New Century Bright Financial Services Framework Master Agreement will expire on 31 December 2013 and the maximum outstanding balance at any time (including any interest accrued therefrom) for the deposits placed by the Group with Century Bright under the New Century Bright Financial Services Framework Master Agreement will be increased to HK$150 million, HK$150 million and HK$150 million for each of the three financial years ending 31 December 2013.

Nature of the transaction and the connected party

Century Bright will provide deposit services and settlement and similar services to the Company’s subsidiaries outside the PRC. Century Bright is a limited liability company incorporated in Hong Kong, which is a wholly-owned subsidiary of Sinopec Group.

Historical amounts

The historical amounts of the maximum outstanding balance (including any interest accrued therefrom) for the deposits placed by the Group with Century Bright for the year ended 31 December 2009 and for the six months ended 30 June 2010 were approximately HK$23.4 million and HK$23.4 million respectively. It should be noted that at the date of this Circular, the annual caps in relation to the Existing Century Bright Financial Services Framework Master Agreement for the financial year ending 31 December 2010 have not been exceeded and the Directors do not anticipate that such cap will be exceeded.

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LETTER FROM THE BOARD

Pricing basis and revised caps

In respect of deposit services, Century Bright will pay the Group interest accrued on the deposits calculated according to the depository interest rate as announced by other independent commercial banks in Hong Kong (such as The Hongkong and Shanghai Banking Corporation Limited or Bank of China (Hong Kong) Limited) from time to time. Such interest rate shall be (i) equal to or higher than the interest rate offered by Century Bright to Sinopec Group Company, Sinopec Corp. and other members of Sinopec Group in similar loan arrangements; and (ii) equal to or higher than the interest rate as announced by other independent commercial banks in Hong Kong (such as The Hongkong and Shanghai Banking Corporation Limited or Bank of China (Hong Kong) Limited) from time to time.

In respect of settlement and similar services, the Group will pay the settlement and similar charges as announced by other independent commercial banks in Hong Kong (such as The Hongkong and Shanghai Banking Corporation Limited or Bank of China (Hong Kong) Limited) from time to time. Such settlement and similar services charges shall be (i) equal to or lower than the settlement and similar services charges offered by Century Bright to Sinopec Group Company, Sinopec Corp. and other members of Sinopec Group in similar settlement services arrangements; and (ii) equal to or lower than the settlement and similar services charges as announced by other independent commercial banks in Hong Kong (such as The Hongkong and Shanghai Banking Corporation Limited or Bank of China (Hong Kong) Limited) from time to time for settlement and similar services provided by Century Bright.

The Company estimates that the proposed caps for the maximum outstanding balance at any time (including any interest accrued therefrom) for the deposits placed by the Group with Century Bright are HK$150 million, HK$150 million and HK$150 million for each of the three financial years ending 31 December 2013 respectively. In arriving at the aforesaid caps, the Directors take into account the factors, including the Group’s cash flow movements and level of deposits with other independent commercial banks in Hong Kong, the anticipated business volume of the Group, the financial control and treasure management of the Group, and the requirement to settle accounts receivables from the members units of Sinopec Group or any third party through the deposit accounts of the Group with Century Bright.

Reasons for the transactions

Century Bright has been providing loan, financial accommodation and deposit services to the Group, which are exempted connected transactions of the Group, and were disclosed in the announcements of the Company dated 27 July 2007 and 20 March 2009 respectively. As the business of the Group grows rapidly, the Group requires financial needs and operations and the management of the Company considers that it is necessary to increase the caps for the transactions under the New Century Bright Financial Services Framework Master Agreement.

In addition, the Directors are of the view that the Group would be benefited from entering to the New Century Bright Financial Services Framework Master Agreement for the reasons that: (i) the interest rates on loans and deposits to be offered by Century Bright to

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LETTER FROM THE BOARD

the Group will be equal to or not less favourable than those offered by other independent commercial banks in Hong Kong; (ii) it reduces the time of capital transit for the Group, and also accelerate the turnover of cash flow and reduce transaction costs and expenses, thereby further enhancing the quality and efficiency of capital utilization; and (iii) it provides diversified financial services in broader areas for the Group, which is in line with the interest of the Company and the Shareholders as a whole. The financial services provided by Century Bright are in line with market norms and on normal commercial terms, with reference to arrangements with other independent commercial banks in Hong Kong.

(IV) Unipec Vessel Charter Framework Master Agreement

On 15 November 2010, the Company entered into the Unipec Vessel Charter Framework Master Agreement with Unipec. Conditional upon the approval in the SGM, the Unipec Vessel Charter Framework Master Agreement will commence from 1 January 2011 for a term of 3 years up to 31 December 2013.

Major terms

(a) Although vessels chartering are to be done on a transaction-by-transaction basis, vessels will first be chartered by the Group from independent third party vessel owners under long term agreements. Then the vessels will be sub-chartered to the Unipec Group for the purpose of, among others, being used as crude oil transportation and/or as floating oil storage facilities. It should be noted that as of the date of this circular, the Company has not yet entered into any such long term vessel charter agreements with any independent third party vessel owners.
(b) The charter hire, related fees and payment will be determined by reference to the prevailing market charter hire, related fees and payment of vessel charter contracts on a transaction-by-transaction basis.
(c) The vessel charter agreement will be made on normal, fair and reasonable commercial terms.

Pricing basis and caps

Under the Unipec Vessel Charter Framework Master Agreement, the Group will enter into separate vessel charter contracts within the terms of the Unipec Vessel Charter Framework Master Agreement with members of the Unipec Group for the provision of vessel chartering services on a transaction-by-transaction basis. The parties will negotiate with reference to, among other factors, market conditions, normal commercial terms, trade customs and the principle of fairness and will conclude the detailed terms and provisions in the contracts and the agreements. Under the Unipec Vessel Charter Framework Master Agreement, the fees payable will be based on the prevailing market charter hire, related fees and payment of vessel charter contracts on a transaction-by-transaction basis and are to be agreed between the parties on an arm’s length basis through negotiations.

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LETTER FROM THE BOARD

The aggregate amounts to be received by the Group in respect of these transactions in each financial year shall not exceed US$610 million (approximately HK$4,734 million), US$770 million (approximately HK$5,975 million) and US$940 million (approximately HK$7,294 million) for each of the three financial years ending 31 December 2013 respectively.

In arriving at the caps, the following factors have been taken into account: (i) the continuous global demand for vessel chartering services; (ii) the expected annual demand of Unipec Group in terms of crude oil shipping services in the next three years; and (iii) the average expected crude oil shipping charter hire, related fees and payment in the next few years by reference to the prevailing global shipping market, it is in the interest of the Group to capture such demands in the volume and quantity of this business.

Reasons for / benefits of entering into the Unipec Vessel Charter Framework Master Agreement

Firstly, the Group aims to become a first-class international oil, petroleum and petrochemical storage and logistics company. Providing vessel chartering services gives the Group an opportunity to capture and achieve this aim.

Secondly, it is expected that the vessel chartering services can diversify and extend the scope of services of the Group into the global crude oil shipping industry by providing (i) vessels chartering and (ii) vessels as floating oil storage facilities to Unipec Group, which is one of the global crude oil traders with substantial demand for crude oil shipping services.

The payment terms of these connected transactions will be determined by the parties on a transaction-by-transaction basis, in accordance with market norms and on normal commercial terms, and with reference to the details of the shipping arrangement and terms to be agreed between the Group and the counterparty. Currently, it is anticipated that payment will be made as soon as practicable upon completion of the shipment and discharge of the oil cargos at the respective ports of destination.

Proposed Caps for Vessel Chartering Services and Rationale

It is expected that the annual amount of charter hire, related fees and payment to be charged by the Group in relation to chartering services to Unipec Group will not exceed US$610 million (approximately HK$4,734 million), US$770 million (approximately HK$5,975 million), and US$940 million (approximately HK$7,294 million) in each of the three years ending 31 December 2013 respectively.

The proposed annual caps for the three years ending 31 December 2013 were determined with reference to the expected demand of the vessel chartering services from Unipec Group over the three years ending 31 December 2013.

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LETTER FROM THE BOARD

(V) The Directors’ view

The Directors are of the opinion that the Existing Continuing Connected Transactions for the three financial years ending 31 December 2013 (together with their caps), the deposit services under the Sinopec Finance Financial Services Framework Master Agreement, the deposit services under the New Century Bright Financial Services Framework Master Agreement and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement are entered into and carried out in the ordinary and usual course of business of the Group on an arm’s length basis, are fair and reasonable and in the interests of the Shareholders of the Company as a whole (including the basis thereof), and either (1) where there are comparable transactions, on normal commercial terms; or (2) in accordance with State-prescribed prices or government-approved prices (as the case may be) prescribed or approved by relevant governmental or regulatory authorities; or (3) will be in accordance with the terms of each of the agreements governing the Existing Continuing Connected Transactions, the Sinopec Finance Financial Services Framework Master Agreement, the New Century Bright Financial Services Framework Master Agreement and the Unipec Vessel Charter Framework Master Agreement in question; or (4) if applicable, on terms no less favourable than terms available to or from independent third parties.

(VI) Listing Rules implications

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% of Sinopec Corp., Unipec, Sinopec Finance, Century Bright and other relevant branches and members of the Sinopec Group Company, the transactions contemplated under each of the Existing Continuing Connected Transactions, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement, the deposit services under the New Century Bright Financial Services Framework Master Agreement and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement will constitute connected transactions of the Company under the Listing Rules.

With respect to the Existing Continuing Connected Transactions and the Sinopec Finance Financial Services Framework Master Agreement, since the value of each of the caps of these Existing Continuing Connected Transactions as disclosed in paragraph I above, the aggregate annual amounts of provision of the deposit services under the Sinopec Finance Financial Services Framework Master Agreement as disclosed in paragraph II above and the deposit services under the New Century Bright Financial Services Framework Master Agreement in paragraph III above and the caps for the transactions contemplated under the Unipec Vessel Charter Framework Master Agreement disclosed in paragraph IV above are more than 5% of the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules, pursuant to Rule 14A.35 of the Listing Rules, these transactions and agreements are subject to the reporting, announcement and Independent Shareholders’ approval requirements as set out in Rules 14A.45 to 14A.48 of the Listing Rules. Sinopec Group Company and its associates shall abstain from voting at the SGM. The Company will also disclose the relevant details in the next published annual report and accounts of the Company in accordance with the relevant requirements as set out in Rule 14A.45 of the Listing Rules.

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LETTER FROM THE BOARD

In addition, under the Sinopec Finance Financial Services Framework Master Agreement, the loan services and entrusted loan services and other services (apart from the deposit services) to be provided by Sinopec Finance to the Huade Group will constitute financial assistance to be provided by a connected person for the benefit of the Group. As such services are on normal commercial terms which are similar to or even more favourable than those offered by independent third parties for comparable services in the PRC, and no security over the assets of the Group will be granted in respect of such services, such services are exempt under Rule 14A.65(4) of the Listing Rules from all reporting, announcement and Independent Shareholders’ approval requirements.

With respect to the deposit services under the New Century Bright Financial Services Framework Master Agreement, as the annual amounts of the transactions will be aggregated with those under the Sinopec Finance Financial Services Framework Master Agreement, the applicable percentage ratios for such aggregated annual amounts are more than 5% and therefore are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Rules 14A.45 to 14A.48 of the Listing Rules. Regarding the settlement services thereunder, the aggregate fees and charges payable by the Group to Century Bright will not be, on an annual basis, more than the de minimis threshold of 0.1% calculated under Rule 14A.31(2) of the Listing Rules during the term of the New Century Bright Financial Services Framework Master Agreement. As such, the settlement services thereunder are exempt under Rule 14A.33 of the Listing Rules from all reporting, announcement and Independent Shareholders’ approval requirements.

(VII) Information on 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 and petroleum products, the operation of crude oil jetties and its ancillary facilities.

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 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.

Unipec is a company established under the laws of the PRC with limited liability, which is one of the State-authorised import agents of crude oil in the PRC and is a State-owned enterprise established under PRC laws and a wholly owned subsidiary of Sinopec Corp.

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LETTER FROM THE BOARD

Sinopec Finance is duly established in the PRC as a non-banking financial institution in 1988. Sinopec Finance is regulated by the PBOC and the CBRC and provides its services in accordance with the rules and operational requirements of these regulatory authorities. The registered capital of Sinopec Finance is RMB8,000 million (approximately HK$9,344 million). As at the date of this Circular, Sinopec Corp. is interested in 49% of the equity interest of Sinopec Finance and Sinopec Group Company is interested in 51% of the equity interest of Sinopec Finance. The principal business of Sinopec Finance includes the provision of, among others, deposit services, loan services, entrusted loan services and entrusted investment services.

Century Bright is a limited liability company incorporated in Hong Kong. It is a wholly-owned subsidiary of Sinopec Group Company. The principal activities of Century Bright include providing settlement and similar services and taking deposits from members of the Sinopec Group outside PRC, and conducting intra group loan transactions. Century Bright is a money lender registered under the Money Lender Ordinance (Cap. 162) in Hong Kong.

(VIII) General

Sinopec Group Company is holding approximately 75.84% of the entire issued share capital of Sinopec Corp.. Sinopec Corp. is holding the entire issued share capital of Unipec and the immediate controlling shareholder which is holding approximately 72.34% of the entire issued share capital of the Company. Pursuant to the Listing Rules, the Existing Continuing Connected Transactions, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement, the deposit services under the New Century Bright Financial Services Framework Master Agreement and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement constitute connected transactions to the Company. Sinopec Group Company, Sinopec Corp., Unipec, Century Bright, and their associates will abstain from voting in the SGM to approve the renewal of the Existing Continuing Connected Transactions under the New Framework Master Agreements, the Sinopec Finance Financial Services Framework Master Agreement, the New Century Bright Financial Services Framework Master Agreement and the Unipec Vessel Charter Framework Master Agreement.

The executive Directors, including Mr. Dai Zhaoming, Mr. Zhu Zhenqing, Mr. Zhu Jianmin, Mr. Tan Ke Fei and Mr. Zhou Feng, abstained from voting because of their other executive posts within the Sinopec Group.

The Company has established an Independent Board Committee comprising of the three independent non-executive Directors of the Company, namely Mr. Wong Po Yan, Ms. Tam Wai Chu, Maria and Mr. Fong Chung, Mark, to consider the renewal of the Existing Continuing Connected Transactions, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement, the deposit services under the New Century Bright Financial Services Framework Master Agreement and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement, all of which for the three financial years ending 31 December 2013, to recommend to the Shareholders how to

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LETTER FROM THE BOARD

vote in the SGM, and to advise the Independent Shareholders on these transactions and agreements. A letter from the Independent Board Committee is set out on pages 26 to 27 of this Circular.

First Shanghai Capital Limited, the Independent Financial Adviser, has been appointed as the independent financial adviser for the purpose of advising the Independent Board Committee and the Independent Shareholders in relation to the Existing Continuing Connected Transactions for the three financial years ending 31 December 2013, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement for the three financial years ending 31 December 2013, the deposit services under the New Century Bright Financial Services Framework Master Agreement for the three financial years ending 31 December 2013 and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement for the three financial years ending 31 December 2013 and all matters contemplated therein. A letter from the Independent Financial Adviser is set out on pages 28 to 47 of this Circular.

(IX) Special General Meeting

An SGM is to be convened and then held on 6 December 2010 at 10:00 a.m. at Boardroom 3-4, Mezzanine Floor, Renaissance Harbour View Hotel, 1 Harbour Road, Wan Chai, Hong Kong for the purpose of considering, and if thought fit, passing ordinary resolutions to approve by poll the Existing Continuing Connected Transactions, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement, the deposit services under the New Century Bright Financial Services Framework Master Agreement and the vessel chartering services under Unipec Vessel Charter Framework Master Agreement and all matters contemplated thereunder. The notice of the SGM is set out on pages 52 to 54 of this Circular.

Sinopec Group Company, Sinopec Corp., Unipec, Century Bright 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 SGM, 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 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 (or any adjourned meeting thereof) should you so wish.

(X) Recommendation

The Board (including the Independent Board Committee) is of the opinion that the Existing Continuing Connected Transactions (together with their caps) , the deposit services under the Sinopec Finance Financial Services Framework Master Agreement, the deposit services under the New Century Bright Financial Services Framework Master Agreement and the vessel chartering services under the Unipec Vessel Charter Framework Master

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LETTER FROM THE BOARD

Agreement, all of which for the three financial years ending 31 December 2013 and all matters contemplated therein 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 resolutions set out in the notice of the SGM for the approval of the Existing Continuing Connected Transactions for the three financial years ending 31 December 2013, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement for the three financial years ending 31 December 2013, the deposit services under the New Century Bright Financial Services Framework Master Agreement for the three financial years ending 31 December 2013 and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement for the three financial years ending 31 December 2013.

(XI) Additional information

Your attention is drawn to the additional information set out in the Appendix to this Circular.

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

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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)

(Stock Code: 934)

18 November 2010

To the Independent Shareholders

Dear Sir or Madam,

We have been appointed as the Independent Board Committee to advise you in connection with the Existing Continuing Connected Transactions for the three financial years ending 31 December 2013, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement for the three financial years ending 31 December 2013, and the deposit services under the New Century Bright Financial Services Framework Master Agreement for the three financial years ending 31 December 2013 and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement for the three financial years ending 31 December 2013, details of which are set out in the Letter from the Board contained in the circular to the shareholders of the Company dated 18 November 2010 (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 Existing Continuing Connected Transactions for the three financial years ending 31 December 2013, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement for the three financial years ending 31 December 2013, and the deposit services under the New Century Bright Financial Services Framework Master Agreement for the three financial years ending 31 December 2013 and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement for the three financial years ending 31 December 2013, and the advice and opinion of the Independent Financial Adviser in relation thereto as set out on pages 28 to 47 of the Circular, we are of the opinion that the Existing Continuing Connected Transactions (together with their caps) for the three financial years ending 31 December 2013, the deposit services (together with their caps) under both the Sinopec Finance Financial Services Framework Master Agreement and the New Century Bright Financial Services Framework Master Agreement for the three financial years ending 31 December 2013 and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement for the three financial years ending 31 December 2013 are in the interests of the Company and the Shareholders as a whole and are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

For identification purpose only

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We therefore recommend that you vote in favour of the ordinary resolution to be proposed at the SGM to approve the Existing Continuing Connected Transactions for the three financial years ending 31 December 2013, the deposit services under both the Sinopec Finance Financial Services Framework Master Agreement and the New Century Bright Financial Services Framework Master Agreement for the three financial years ending 31 December 2013 and the vessel chartering services under the Unipec Vessel Charter Framework Master Agreement for the three financial years ending 31 December 2013.

Yours faithfully,

Mr. Wong Po Yan Independent Non-executive Director

Ms. Tam Wai Chu, Maria Independent Non-executive Director

Mr. Fong Chung, Mark Independent Non-executive Director

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter received from the Independent Financial Adviser setting out its advice to the Independent Board Committee and the Independent Shareholders in relation to the Existing Continuing Connected Transactions, the deposit services under the Sinopec Finance Financial Services Framework Master Agreement, the deposit services under the New Century Bright Financial Services Framework Master Agreement and the vessel chartering services under Unipec Vessel Charter Framework Master Agreement and their respective annual caps for inclusion in this circular.

FIRST SHANGHAI CAPITAL LIMITED

19th Floor, Wing On House 71 Des Voeux Road Central Hong Kong

18 November 2010

To the Independent Board Committee and the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement to advise the Independent Board Committee and the Independent Shareholders in relation to the terms of the New Framework Master Agreements, the Sinopec Finance Financial Services Framework Master Agreement, the New Century Bright Financial Services Framework Master Agreement and the Unipec Vessel Charter Framework Master Agreement (collectively, the “Agreements”) and their respective annual caps (the “Annual Caps”), details of which are set out in the circular of the Company dated 18 November 2010 (the “Circular”) to the Shareholders of which this letter forms a part. Unless the context otherwise requires, terms used in this letter shall have the same meanings as those defined in the Circular.

Sinopec Group Company is the ultimate controlling shareholder of the Company and therefore Sinopec Corp., Unipec, Sinopec Finance, Century Bright and other relevant branches and members of the Sinopec Group Company which are held not less than 30% by Sinopec Group Company, are connected persons of the Company under the Listing Rules. Accordingly, the transactions contemplated under the Agreements (the “Continuing Connected Transactions”) constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

The Independent Board Committee, comprising the 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 in relation to the terms of the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Agreements and the Annual Caps. We, First Shanghai Capital Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the above.

In putting forth our opinion and recommendation, we have relied on the accuracy of the information and representations included in the Circular and provided to us by the management of the Company, and have assumed that all such information and representations made or referred to in the Circular and provided to us by the management of the Company were true at the time they were made and continued to be true up to the time of the holding of the SGM. We have also assumed that all statements of belief, opinion and intention made in the Circular were reasonably made after due enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the management of the Company and have been advised that no material facts have been withheld or omitted from the information provided and referred to in the Circular. We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have not, however, conducted any independent verification of the information included in the Circular and provided to us by the management of the Company nor have we conducted any form of investigation into the business, affairs or future prospects of the Company, the Sinopec Group (including Sinopec Finance and Century Bright) or the Unipec Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion on the terms of the Agreements and the Annual Caps, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons for the entering into of the Agreements

(i) The New Framework Master Agreements

The New Framework Master Agreements can be broadly divided into two categories:

(a) Crude Oil Jetty Services

The Company is principally engaged in the trade of crude oil and petroleum products, the operation of crude oil jetties and its ancillary facilities; and its shares have been listed on the Main Board of the Stock Exchange since 25 June 1999.

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

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Sinopec Corp. is an integrated energy and chemical company with upstream, midstream and downstream operations which is principally engaged in (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.

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 and a wholly owned subsidiary of Sinopec Corp. According to the website of Sinopec Corp., Unipec is the largest oil trading company in the PRC. In addition, based on information published by the Statistical Society for Foreign Economic Relations and Trade of China, which is under the leadership and management of the Ministry of Commerce of the PRC, we noticed that Sinopec Corp. is the largest foreign trade enterprise in the PRC with total import and export value of over US$55 billion in 2009, of which approximately US$51 billion was attributable to Unipec.

Huade, a wholly-owned subsidiary of the Company, is principally engaged in operation of crude oil jetty and ancillary facilities. As a result of (i) the availability and quality of the services provided; and (ii) the proximity of Huade crude oil jetty to Sinopec Guangzhou Branch for transmission of crude oil to the crude oil refinery facilities of Sinopec Guangzhou Branch; and in the case of Unipec Group, the proximity of Huade crude oil jetty for transmission of crude oil to the crude oil bonded zone operated by the Group for Unipec Group’s crude oil trading businesses, the Huade Group has been providing jetty, crude oil storage, crude oil transmission and related services to Sinopec Guangzhou Branch and Unipec Group since the listing of the Shares on the Stock Exchange. As set out in the annual report of the Company for the year ended 31 December 2009 (the “2009 Annual Report”), Sinopec Guangzhou Branch is the major customer of Huade.

(b) Trading activities – Crude oil supply and sourcing

In order to strengthen the collective bargaining power of Sinopec Group when Sinopec Group negotiates crude oil prices with international oil majors and other oil companies and to reduce the financial cost of the Group given no letters of credit is required to be issued for sourcing crude oil from members of Sinopec Group, the Group has been sourcing crude oil from Sinopec Group since the listing of the Shares on the Stock Exchange.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered (i) the Existing Continuing Connected Transactions under the New Framework Master Agreements are in the ordinary and usual course of business of the Group; (ii) the provision of the crude oil jetty services to the Sinopec Group and the Unipec Group is in revenue nature; and (iii) the crude oil trading activities with the Unipec Group is required for the operation of the Group and can reduce the finance cost of the Group, we concur with the Directors that the entering into of the New Framework Master Agreements is in the interests of the Company and the Shareholders as a whole.

(ii) The Sinopec Finance Financial Services Framework Master Agreement

Sinopec Finance is a non-banking financial institution established in the PRC in 1988 which is regulated by the PBOC and the CBRC and is owned as to 49% and 51% by Sinopec Corp. and Sinopec Group Company respectively. The principal business of Sinopec Finance includes the provision of, among others, deposit services, loan services, entrusted loan services and entrusted investment services.

Pursuant to the terms of the Sinopec Finance Financial Services Framework Master Agreement, the services to be provided by Sinopec Finance to the Huade Group include loan services, deposit services, conducting entrusted loans, conducting bill acceptance and discount services, and conducting transfer and relevant settlement services and planning of settlement scheme. Sinopec Finance has also agreed to provide financial services other than those aforesaid services to the Huade Group at Huade’s request or instruction provided that Sinopec Finance has obtained the relevant approval from the CBRC.

We noted that Sinopec Finance has registered capital of RMB8 billion. Based on the audited consolidated accounts of Sinopec Finance, we noted that Sinopec Finance had net assets of approximately RMB10.5 billion and RMB13.3 billion and capital adequacy ratio of approximately 16.9% and 22.2% as at 31 December 2008 and 2009, respectively, which is above the capital adequacy ratio requirement of 10%. We have also reviewed the articles of association of Sinopec Finance and an undertaking given by Sinopec Group Company and noted that Sinopec Group Company has to inject capital to Sinopec Finance under situations where Sinopec Finance has difficulties in meeting its payment obligation. In addition, pursuant to the relevant regulations of the PBOC, the China Securities Regulatory Commission and CBRC, the customers of Sinopec Finance are limited to entities within Sinopec Group and its subsidiaries, which can reduce the risks exposed to Sinopec Finance if its customers include other unrelated entities. We are also advised that as Sinopec Finance is more familiar with the business and transaction pattern of the Huade Group than independent commercial banks, it will reduce the time of capital in transit for the Group and accelerate the turnover of cash flow and reduce transaction costs and expenses of the Group, which in turn enhances the quality and efficiency of capital utilisation of the Group.

As disclosed in the letter from the Board, Sinopec Group will roll out a “funding pool” platform with the assistance of Sinopec Finance to strengthen the centralized management of funds and monitor the use of funds. Having taken into account, in particular, (i) the undertaking given by Sinopec Group Company to inject capital to

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Sinopec Finance under situations where Sinopec Finance has difficulties in meeting its payment obligation; (ii) the creditworthiness of Sinopec Finance as discussed above; (iii) the customers of Sinopec Finance are limited to entities within Sinopec Group and its subsidiaries, which can reduce the risks exposed to Sinopec Finance if its customers include other unrelated entities; (iv) the series of capital risk control measures as set out in the letter from the Board, we concur with the view of the Directors that there are adequate measures to cover the risks involved in depositing funds with Sinopec Finance.

Having considered the aforesaid, we concur with the view of the Directors that the entering into of the Sinopec Finance Financial Services Framework Master Agreement is in the interests of the Company and the Shareholders as a whole.

(iii) The New Century Bright Financial Services Framework Master Agreement

Century Bright is a limited liability company incorporated in Hong Kong which is a wholly-owned subsidiary of Sinopec Group Company. Century Bright is a money lender registered under the Money Lender Ordinance (Cap. 162) in Hong Kong and its principal activities include the provision of settlement and similar services and taking deposits from members of the Sinopec Group outside PRC, and conducting intra group loan transactions. Century Bright has been providing loan, financial accommodation and deposit services to the Group. Pursuant to the terms of the New Century Bright Financial Services Framework Master Agreement, Century Bright agreed to provide deposit services and settlement and similar services to the Group outside the PRC. As set out in the letter from the Board, the entering into of the New Century Bright Financial Services Framework Master Agreement can (i) reduce the time of capital transit for the Group, and also accelerate the turnover of cash flow and reduce transaction costs and expenses, thereby further enhancing the quality and efficiency of capital utilization; and (ii) provide diversified financial services in broader areas for the Group.

Having taken into account, in particular, (i) Century Bright is a registered money lender wholly-owned by Sinopec Group Company, which is a sizeable corporate in the PRC and thus providing confidence regarding the creditworthiness of Century Bright; (ii) the diversity of financial services offered by Century Bright can facilitate the financial management of the Group; (iii) the established business relationship between Century Bright and the Group enhances the efficiency of the transactions, thus improving the capital utilization of the Group; and (iv) the terms of the New Century Bright Financial Services Framework Master Agreement are fair and reasonable as discussed below, we concur with the view of the Directors that the entering into of the New Century Bright Financial Services Framework Master Agreement is in the interests of the Company and the Shareholders as a whole.

(iv) The Unipec Vessel Charter Framework Master Agreement

Pursuant to the Unipec Vessel Charter Framework Master Agreement, the Group will charter vessels from independent third party vessel owners under long term agreements and then sub-charter to Unipec Group for, among others, being used as

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crude oil transportation and/or as floating oil storage facilities. Unipec is one of the largest global crude oil traders, the entering into of the Unipec Vessel Charter Framework Master Agreement is the business support and opportunity provided by Sinopec Group to further develop the Group to become a first-class international oil, petroleum and petrochemical storage and logistics company.

As disclosed in the letter from the Board, it is expected that the vessel chartering services can (i) give the Group an opportunity to capture and achieve the aim of becoming a first-class international oil, petroleum and petrochemical storage and logistics company; and (ii) diversify and extend the scope of services of the Group into the global crude oil shipping industry by providing (a) vessels chartering; and (b) vessels as floating oil storage facilities to Unipec Group, which is one of the global crude oil traders with substantial demand for crude oil shipping services. We noted from both the 2009 Annual Report and the interim report of the Company for the six months ended 30 June 2010 (the “2010 Interim Report”) that the management of the Company has a view to develop the Group into an international oil and petrochemical storage and logistics company.

Having considered the above, in particular, (i) Unipec is one of the largest global crude oil traders, which to a certain extent can safeguard the continuation of this chartering business of the Group; (ii) the development of the vessel business is in line with the business development strategy of the Group to become a first class international oil and petrochemical storage and logistics company; and (iii) the terms of the Unipec Vessel Charter Framework Master Agreement are on normal commercial terms which are fair and reasonable as discussed below, we are of the view that the entering into of the Unipec Vessel Charter Framework Master Agreement is in the interests of the Company and the Shareholders as a whole.

2. Principal terms of the Agreements

I. Pricing bases of the Agreements

(i) The New Framework Master Agreements

(a) Crude Oil Jetty Services

Pursuant to the terms of the New Framework Master Agreements, the service fees payable by Sinopec Group and Unipec Group to the Group, will be:

in respect of jetty and related services concerning the unloading of crude oil from oil tankers and dockage, charged on the State-prescribed prices, being regulated and standardised by the Ministry of Transports of the PRC and on the basis of government-approved prices, being approved by the Guangdong Price Bureau;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

in respect of crude oil storage and related services concerning the storage of crude oil in oil tank and oil tank handling, charged on the basis of government-approved prices, being approved by the Guangdong Price Bureau; and
in respect of the transmission of crude oil and related services concerning the transmission of crude oil from the Huizhou Jetty, charged based on the State-prescribed prices, being regulated by the PRC’s National Development and Reform Commission.

If the State-prescribed prices or the government-approved prices are abolished, the service fees payable shall be (i) the fair market price for the relevant service (to be determined by the parties after consultation); or (ii) 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.

We are advised that the crude oil jetty services have been and are expected to continue to be charged at the State-prescribed prices or the government-approved prices (as the case may be) which are regulated by the relevant PRC authorities.

(b) Trading activities – Crude oil supply and sourcing

Pursuant to the terms of the New Framework Master Agreements, the prices payable for crude oil to be supplied or sourced should be based on international market prices and are to be agreed between the parties on an arm’s length basis through negotiations. The parties can access such pricing information from various sources, including the EMIS energy market information resource operated by Platts. We are advised that the Group has supplied and sourced crude oil to and from the Unipec Group based on the prices quote from the EMIS energy market information resource operated by Platts.

We noted that Platts is a leading global provider of energy and metals information based in the United States and is a division of The McGraw-Hill Companies, which is a leading global information provider, and sister to such market-leading brands as Standard & Poor’s. We also noted that Platts publishes news, research and market data, and more than 8,500 daily price assessments that are widely used as benchmarks in both physical and futures markets. As advised by the management of the Company, the price of crude oil as published by Platts serves to represent internationally recognized price.

Having considered that (i) the prices for provision of crude oil jetty services under the New Framework Master Agreements are charged based on State-prescribed prices or government-approved prices which are regulated by the relevant PRC authorities; and (ii) the prices for supply and source of crude oil under the New Framework Master Agreements are charged based on international

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

market price as quoted from independent third parties, we consider that the terms of the New Framework Master Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

(ii) The Sinopec Finance Financial Services Framework Master Agreement

The interest rates received from or fees charged by Sinopec Finance under the Sinopec Finance Financial Services Framework Master Agreement are as follows:

Services

Fees

Deposits with Sinopec Finance

the deposit interest rate as announced by the PBOC from time to time; and
shall be no lower than the interest rate for deposits offered by other independent commercial banks in the PRC;

Loans from Sinopec Finance

the base lending rate as announced by the PBOC from time to time; and
may lower the interest rate to a certain percentage and shall not be higher than the interest rate for loans offered by other independent commercial banks in the PRC;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Services

Fees

Discount services provided by Sinopec Finance

rate as announced by PBOC from time to time; and
shall not be higher than the discount rate offered by other independent commercial banks in the PRC;

Entrusted loans provided by Sinopec Finance

shall not be higher than the fee offered by other independent commercial banks in the PRC; and
Transfer and relevant settlement services and planning of settlement scheme provided by Sinopec Finance
free of charge. However, if any service charges relating to such transfer and relevant settlement services have been imposed by independent commercial banks on Sinopec Finance, Huade Group will then be charged the same by Sinopec Finance.

As shown in the table above, most of the pricing terms under the Sinopec Finance Financial Services Framework Master Agreement are based on rates announced by the PBOC and not less favourable to those offered by other independent commercial banks in the PRC and it is also free of charge (or at the same rate as charged by independent commercial banks on Sinopec Finance) for the transfer and settlement services provided by Sinopec Finance. Based on the above, we consider that the terms of the Sinopec Finance Financial Services Framework Master Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) The New Century Bright Financial Services Framework Master Agreement

The interest rates received from or fees charged by Century Bright under the New Century Bright Financial Services Framework Master Agreement are as follows:

Services

Fees

Deposits with Century Bright

the deposit interest rate as announced by other independent commercial banks in Hong Kong from time to time;
shall be equal to or higher than the interest rate offered by Century Bright to other members of Sinopec Group Company; and
shall be equal to or higher than the interest rate as announced by other independent commercial banks in Hong Kong;

Settlement and similar services provided by Century Bright

settlement and similar charges as announced by other independent commercial banks in Hong Kong from time to time;
shall be equal to or lower than the settlement and similar services charges offered by Century Bright to other members of Sinopec Group in similar settlement services arrangements; and
shall be equal to or lower than the settlement and similar services charges as announced by other independent commercial banks in Hong Kong;

As shown in the table above, the principal pricing terms under the New Century Bright Financial Services Framework Master Agreement are (i) based on rates announced by other independent commercial banks in Hong Kong; (ii) not less favourable to those provided by Century Bright to other members of Sinopec Group; and (iii) not less favourable to those provided by other independent commercial banks in Hong Kong. Based on the above, we consider that the terms of the New Century Bright Financial Services Framework Master Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) The Unipec Vessel Charter Framework Master Agreement

Pursuant to the Unipec Vessel Charter Framework Master Agreement, the detailed terms and provisions in the contracts and the agreements will conclude upon negotiation with reference to, among other factors, market conditions, normal commercial terms, trade customs and the principle of fairness. The fees payable by the Unipec Group will be based on the prevailing market charter hire, related fees and payment of vessel charter contracts on a transaction-by-transaction basis and are to be agreed on an arm’s length basis through negotiations. The vessel charter agreement will be made on normal, fair and reasonable commercial terms.

After taking into account the pricing terms of the Unipec Vessel Charter Framework Master Agreement will be based on prevailing market prices, we are of the view that the terms of the Unipec Vessel Charter Framework Master Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

II. Payment terms of the Agreements

Set out in the table below is a summary of the payment terms of the Continuing Connected Transactions as disclosed in the letter from the Board:

Transaction types under the Agreements Principal payment terms Crude oil jetty services � transaction-by-transaction basis; � in accordance with market norms and on normal commercial terms;
� with reference to prescriptions by and approvals of the PRC government; and
� payment is anticipated to be made on a monthly basis.
Crude oil supply and sourcing � transaction-by-transaction basis;
in accordance with market norms and on normal commercial terms;
with reference to the specifications and requirements of different oil cargos being traded in different transactions; and
payment is anticipated to be made within 30 days of the bill of lading of the oil cargos.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Transaction types under the Agreements Financial services provided by Sinopec Finance

Principal payment terms

in line with market norms and on normal commercial terms; and
with reference to arrangements with other independent commercial banks in PRC.

Financial services provided by Century Bright Vessel chartering services

in line with market norms and on normal commercial terms; and
with reference to arrangements with other independent commercial banks in Hong Kong.
transaction-by-transaction basis;
in accordance with market norms and on normal commercial terms;
with reference to the details of the shipping arrangement; and
payment is anticipated to be made as soon as practicable upon completion of the shipment and discharge of the oil cargos at the respective ports of destination.

Taking into account (i) the detailed payment terms will be determined on a transaction-by-transaction basis given the variation of the types of transactions; (ii) the payment terms will all be in accordance with market norms and on normal commercial terms; and (iii) as set out in the 2009 Annual Report, payments terms of the Group to its customers are usually due within 30 to 90 days from the date of billing, we are of the view that the payment terms of the Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Annual Caps in respect of the Agreements

The following is a summary of the historical transaction amounts and the Annual Caps for each of the Agreements:

	Historical figures	Historical figures	Historical figures		Annual Caps
			For the
			six
			months
	For the year ended		ended	For the year ending
	31 December		30 June		31 December
Name of agreement	2008	2009	2010	2011	2012	2013
New Framework Master
Agreements
– Crude oil jetty services
(in HK$ million)	533	509	373	750	800	850
– Crude oil supply
(in HK$ billion)	20.3	15.2	8.0	19.0	21.0	23.4
– Crude oil sourcing
(in HK$ billion)	28.7	24.2	10.3	19.0	21.0	23.4
Sinopec Finance Financial
Services Framework
Master Agreement
– Deposit services
(in RMB million)	–	–	–	500	500	500
New Century Bright
Financial Services
Framework Master
Agreement
– Deposit services
(in HK$ million)	N/A	23.4	23.4	150	150	150
Unipec Vessel Charter
Framework Master
Agreement
– Vessel chartering services
(in US$ million)	–	–	–	610	770	940

(i) Annual Caps in relation to the crude oil jetty services

During the year ended 31 December 2009, the oil refinery facilities of Sinopec Guangzhou Branch underwent a scheduled maintenance that affected its oil refining volume and resulted in the decrease of the actual transaction amount in relation to crude oil jetty services from approximately HK$533 million for the year ended 31 December 2008 to approximately HK$509 million for the year ended 31 December 2009. The refining volume picked up in the first half in 2010 and recorded an actual transaction amount of approximately HK$373 million for the six months ended 30 June 2010. With reference to data from the China Statistical Yearbook 2009 published by the National Bureau of Statistics of China, we noted that the consumption of crude oil in the PRC has been growing, where the annual consumption of crude oil in the PRC

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

grew from approximately 327.5 million tonnes of standard coal equivalent (“SCE”) in 2001 to approximately 532.4 million tonnes of SCE in 2008, representing a compound annual growth rate of approximately 7.2% for the period. Set out below is a graph illustrating the annual consumption of crude oil in the PRC from 2001 to 2008:–

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----- Start of picture text -----

600
500
400
300
200
100
0
2001 2002 2003 2004 2005 2006 2007 2008
Source: National Bureau of Statistics of China
(million tonnes of SCE)
----- End of picture text -----

As approved in the First Previous SGM, the annual caps in related to crude oil jetty services were HK$700 million for each of the years ended 31 December 2008 and 2009 and the year ending 31 December 2010. For the three years ending 31 December 2013, the Directors expect that these transactions will continue and the monetary amount will increase gradually. The aggregate transaction amounts will be within the Annual Caps of HK$750 million, HK$800 million and HK$850 million for each of the three years ending 31 December 2013 respectively. As set out in the letter from the Board, in arriving at the Annual Caps in relation to the crude oil jetty services, the following factors have been taken into account: (i) the historical figures of the transactions; (ii) the State-prescribed prices and the government approved prices for these services; (iii) in light of the demand for petroleum products in the PRC market, Sinopec Group is expected to import more crude oil, and Unipec Group is also expected to import more crude oil for Unipec Group’s crude oil trading business, and thus will consume more crude oil jetty services and its facilities; and (iv) given the nature of mutual dependence and reliance of the supply and consumption of the services and facilities by Sinopec Group and Unipec Group in relation to the Huizhou Jetty, it is in the interest of the Group to capture such demands in the volume and quantity of this business.

In assessing the fairness and reasonableness of the Annual Caps for the three years ending 31 December 2013 in respect of the crude oil jetty services, we have discussed with the management of the Company and are given to understand that the Directors determined the Annual Caps on the basis detailed above and the Directors also consider that the Annual Caps can provide more opportunities to conduct its ordinary and usual course of business. Having considered (i) the historical transaction amounts, in particular, the actual transaction amount has already reached approximately HK$373 million for the six months ended 30 June 2010; (ii) the increase in the annual consumption of crude oil in the PRC, which may drive up the demand of crude oil refinery and hence the demand of crude oil jetty services in future; (iii) the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

improvement in the utilisation rate of the oil refining capacity of Sinopec Guangzhou Branch as expected by the management of the Company, which would drive up the demand of the crude oil jetty services; and (iv) the provision of crude oil jetty services to Unipec Group, which is the largest oil trading company in the PRC as mentioned in the section headed “Background of and reasons for the entering into of the Agreements” above, we are of the view that the expected volumes of the crude oil jetty services under the Annual Caps are reasonable. We also consider the expected prices used to determine the relevant Annual Caps are reasonable given that they are based on State-prescribed prices and government approved prices in relation to these services.

After taking into account the above factors, we are of the view that the Annual Caps in relation to the crude oil jetty services are fair and reasonable so far as the Independent Shareholders are concerned.

(ii) Annual Caps in relation to crude oil supply and sourcing

As advised by the management of the Company, despite the trading volumes with Unipec Group in relation to crude oil supply and sourcing for the year ended 31 December 2009 was higher than those for the year ended 31 December 2008, the historical transaction amounts in relation to crude oil supply and sourcing for the year ended 31 December 2009 were lower than those for the year ended 31 December 2008 due to the decrease in average international crude oil price.

As mentioned in the letter from the Board, the Directors expect that the connected transactions in relation to crude oil supply and sourcing will continue. In arriving at the Annual Caps in relation to crude oil supply and sourcing, the Directors have taken into account the factors, including the high volatility in both the international and the PRC market price of crude oil, petroleum products, and the demand of petroleum products and crude oil by the crude oil refineries in the PRC.

In order to assess the fairness and reasonableness of the bases of the Annual Caps in relation to crude oil supply and sourcing, we have reviewed and considered (i) the expected price and volume of crude oil to be supplied to or sourced from the Sinopec Group for the determination of the Annual Caps; (ii) the breakdown of the historical transaction amounts; and (iii) the historical trend of crude oil prices.

We have reviewed the expected volume of crude oil to be supplied to or sourced from the Sinopec Group. We have been advised by the management of the Company that the reduction of the expected transaction volumes as compared to the prior years were principally due to (i) the termination of the processed oil trading business during the first half of 2010 as disclosed in the 2010 Interim Report; and (ii) the relatively lower profit margin of the trading segment where the Company may reallocate resources to other areas. We also noted that the average volume of crude oil supplied and sourced for the six months ended 30 June 2010 was close to the expected volumes for the determination of the Annual Caps.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Regarding the expected crude oil prices in determining the Annual Caps for the three years ending 31 December 2013, we have reviewed and noted that they are in line with the information on expected crude oil price for the three years ending 31 December 2013 as obtained from Bloomberg. We have also noted that the historical price of crude oil has been highly volatile in the recent years. Based on data obtained from Bloomberg, crude oil spot price rocketed from approximately US$58.3 per barrel on 3 January 2007 to approximately US$146.3 per barrel on 11 July 2008 and plummeted to approximately US$30.5 per barrel on 23 December 2008. The crude oil spot price then gradually recovered and hovered around US$80 per barrel in 2010. Set out below is the historical spot price chart of crude oil since 3 January 2007:–

==> picture [329 x 177] intentionally omitted <==

----- Start of picture text -----

160
140
120
100
80
60
40
20
0
2007 2008 2009 2010
(US$ per barrel)
----- End of picture text -----

Source: Bloomberg

Based on the above, we are of the view that the basis of the Annual Caps in relation to crude oil supply and sourcing are fair and reasonable so far as the Independent Shareholders are concerned.

(iii) Annual Caps in relation to the Sinopec Finance Financial Services Framework Master Agreement

As stated in the letter from the Board, the Company estimates that the Annual Caps for the maximum outstanding balance at any time (including any interest accrued therefrom) with Sinopec Finance are RMB500 million, RMB500 million and RMB500 million for each of the three years ending 31 December 2013 respectively, after taking into account of (i) the expected funding platform of the Sinopec Group; (ii) the historical operating performance of Sinopec Finance; (iii) the reasonable terms of the Sinopec Finance Financial Services Framework Master Agreement; and (iv) the undertakings provided by Sinopec Finance.

In assessing the fairness and reasonableness of the Annual Caps for deposit services under the Sinopec Finance Financial Services Framework Master Agreement, we have taken into account the above mentioned factors and have reviewed the historical financial performance of Sinopec Finance, where we noted that Sinopec Finance (i) has been profitable for each of the three years ended 31 December 2009;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) has net assets of approximately RMB13.3 billion as at 31 December 2009; (iii) has capital adequacy ratio above the regulatory requirement of 10% for each of the three years ended 31 December 2009; and (iv) Sinopec Group Company has to inject capital to Sinopec Finance under situations where Sinopec Finance has difficulties in meeting its payment obligation, which convinced the creditworthiness of Sinopec Finance. We have also discussed with the management of the Company and understood that the Annual Caps in relation to deposit services under the Sinopec Finance Financial Services Framework Master Agreement has been determined principally after taking into account the expected enforcement of the collection of receivables of Huade with reference to the annual turnover of Huade. In addition, we have reviewed the 2009 Annual Report and have been advised by the management of the Company that the business segment of crude oil jetty services was solely attributable to Huade and that Huade recorded revenue of approximately HK$510 million and HK$520 million for each of the two years ended 31 December 2009, which are both close to the proposed Annual Caps.

After taking into account the above factors, in particular, (i) the deposit services under the Sinopec Finance Financial Services Framework Master Agreement are conducted on normal commercial terms; (ii) the creditworthiness of Sinopec Finance; (iii) the expected enforcement of the collection of receivables of Huade which will increase the cash level of Huade and the annual turnover of Huade has been made reference to in determining the Annual Caps such that sufficient flexibility can be provided to the Group to cater for possible increases in cash balance and therefore demand for deposit services; and (iv) the deposit services provided by Sinopec Finance provides a flexibility to Huade to manage its cashflow where Huade can generate interest at a rate no less favourable than the rate offered by other independent commercial banks in the PRC by depositing with Sinopec Finance, we are of the view that the bases of the determination of the Annual Caps in relation to the deposit services under the Sinopec Finance Financial Services Framework Master Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

(iv) Annual Caps in relation to the New Century Bright Financial Services Framework Master Agreement

As set out in the letter from the Board, the original cap for maximum outstanding balance at any time (including any interest accrued therefrom) with Century Bright throughout the terms of the Existing Century Bright Financial Services Agreement was HK$25 million. The Existing Century Bright Financial Services Agreement will expire on 31 March 2012. Given the expansion of the business of the Group, the management of the Company would like to renew the Existing Century Bright Financial Services Agreement and to revise the existing annual caps thereunder for each of the three financial years ending 31 December 2013 to HK$150 million.

In assessing the fairness and reasonableness of the Annual Caps for the New Century Bright Financial Services Framework Master Agreement, we have discussed with the management of the Company and understand that certain subsidiaries of the Group in the PRC have distributed dividends to the Group in Hong Kong during the second half of 2010 to facilitate the future development of the Group. Accordingly,

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given the dividends distributed by subsidiaries of the Group in the PRC to the Group in Hong Kong, the Company expects that the level of deposit in Hong Kong will increase and the Company is expecting to place part of the deposit with Century Bright. We noted that the expected amount of deposit to be placed with Century Bright only represent a portion of the dividend distributed from its subsidiaries while the remaining portion of the dividend would be placed with other commercial banks in Hong Kong which provide flexibility for the Group to cater for the increases in cash balance and demand for deposit services during the year ending 31 December 2010.

On the basis that the deposit services under the New Century Bright Financial Services Framework Master Agreement are conducted on normal commercial terms and having taken into consideration the above factors, in particular, the substantial cash inflow as a result of the distribution of dividends from certain subsidiaries of the Group to facilitate the future development of the Group and the possible increase in level of deposit in Hong Kong of the Group, we consider that the Annual Caps for the New Century Bright Financial Services Framework Master Agreement for each of the three years ending 31 December 2013 provide sufficient flexibility for the Group to cater for possible increases in cash balance and therefore demand for deposit services and are fair and reasonable.

(v) Annual Caps in relation to the Unipec Vessel Charter Framework Master Agreement

As mentioned in the letter from the Board, in arriving at the Annual Caps in relation to the Unipec Vessel Charter Framework Master Agreement, the Company has taken into account: (i) the continuous global demand for vessel chartering services; (ii) the expected annual demand of Unipec Group in terms of crude oil shipping services in the next three years; and (iii) the average expected crude oil shipping charter hire, related fees and payment in the next few years by reference to the prevailing global shipping market, which is in the interest of the Group to capture such demands in the volume and quantity of this business.

In assessing the fairness and reasonableness of the Annual Caps in relation to the Unipec Vessel Charter Framework Master Agreement, we have discussed with the management of the Company the bases in arriving at the Annual Caps and reviewed (i) the expected crude oil shipping services required by Unipec Group for the three years ending 31 December 2013; (ii) the expected percentage of shipping services of Unipec Group to be carried out by the Group for the three years ending 31 December 2013; and (iii) the expected freight rates for the three years ending 31 December 2013. We are advised that the expected volumes of shipping services to be carried out by the Group are expectations provided by Unipec, which we consider reasonable after reviewing the historical growth rates of the export and import volume of crude oil in the PRC based on data obtained from Bloomberg. We have also reviewed the price trends in relation to international oil shipping freight rates since 2007 based on data obtained from Bloomberg, which we noted to be volatile and that the expected freight rates for the determination of the Annual Caps are within the range of the historical fluctuation of freight rates.

– 45 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

After taking into account the above factors, we are of the view that the bases of the Annual Caps in relation to the Unipec Vessel Charter Framework Master Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

Based on the above, we are of the view that the Annual Caps in relation to the Agreements have been fairly and reasonably determined by the Board and are in the interests of the Company and the Shareholders as a whole. Shareholders should note that the Annual Caps should not be construed as an assurance or forecast by the Company of its future revenue.

4. Conditions of the Agreements

In compliance with the annual review requirements under Chapter 14A of the Listing Rules, the Company will comply with the following during the term of the Agreements:

(i) each year the independent non-executive Directors must review the Continuing Connected Transactions and confirm in the Company’s annual report and accounts that the Continuing Connected Transactions have been entered into (a) in the ordinary and usual course of business of the Company; (b) either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Group than terms available to or from (as appropriate) independent third parties; and (c) in accordance with the Agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole;
(ii) each year the auditors of the Company must provide a letter to the Board (with a copy provided to the Stock Exchange at least 10 business days prior to the bulk printing of the annual report of the Company) confirming that the Continuing Connected Transactions (a) have received the approval of the Board; (b) are in accordance with the pricing policies of the Company if the Continuing Connected Transactions involve provision of goods or services by the Company; (c) have been entered into in accordance with the relevant agreement governing the transactions; and (d) have not exceeded the Annual Caps;
(iii) the Company will allow, and will procure that the counterparty to the Continuing Connected Transactions will provide the auditors of the Company with sufficient access to the relevant records of the Continuing Connected Transactions. The Board must state in the annual report whether its auditors have confirmed the matters stated in paragraph (ii) above; and
(iv) the Company shall promptly notify the Stock Exchange and publish an announcement in accordance with the Listing Rules if it knows or has reason to believe that the independent non-executive Directors and/or auditors of the Company will not be able to confirm the matters set out in paragraphs (i) and/or (ii) above respectively.

– 46 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In light of the conditions attached to the Agreements, in particular, (i) the restriction of the value of the Agreements by way of the Annual Caps; and (ii) the ongoing review by the independent non-executive Directors and auditors of the Company on the terms of the Agreements and the Annual Caps not being exceeded, we are of the view that appropriate measures will be in place to govern the conduct of the Agreements and safeguard the interests of the Independent Shareholders.

RECOMMENDATION

Having considered the above, we are of the opinion that the Agreements are on normal commercial terms and that the terms of which and the bases of the respective Annual Caps are fair and reasonable so far as the Company and the Independent Shareholders are concerned. We also consider that the Continuing Connected Transactions are conducted in the ordinary and usual course of business of the Group and the entering into of the Agreements is in the interests of the Company and the Shareholders as a whole. Accordingly, we would advise the Independent Board Committee to recommend the Independent Shareholders, and we also recommend the Independent Shareholders, to vote in favour of the relevant resolutions to approve the aforesaid matters at the SGM.

Yours faithfully, For and on behalf of

First Shanghai Capital Limited

Helen Zee Fanny Lee

Managing Director

Deputy Managing Director

– 47 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this Circular is accurate and complete in all material respects and not misleading or deceptive and there are no other matters the omission of which would make any statement herein or this Circular misleading.

2. DISCLOSURE OF INTERESTS

Directors’ Interests and Short Positions

As at the Latest Practicable Date, none of the Directors and the chief executive of the Company has interest in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required to be entered in the register maintained by the Company pursuant to section 352 of the SFO; or (iii) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as contained in the Listing Rules.

It should be noted that Mr. Ye Zhi Jun, who is both the managing Director of the Group as well as an executive Director, does not have any material interest in the Group.

Directors’ Interest in Any Asset Acquired, Disposed or Leased

As at the Latest Practicable Date, none of the Directors has any material interest, direct or indirect, in any asset which, since 31 December 2009, 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

As at the Latest Practicable Date, 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.

– 48 –

GENERAL INFORMATION

APPENDIX

Directors’ Interest in Contracts or Arrangements

No contracts or arrangements 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.

Competing Interest

The executive directors, being Mr. Dai Zhaoming, Mr. Zhu Zengqing, Mr. Zhu Jianmin, Mr. Tan Ke Fei, and Mr. Zhou Feng, will abstain from voting because they have other executive posts within the Sinopec Group.

Mr. Dai Zhaoming, Mr. Zhu Zengqing, Mr. Zhu Jianmin, Mr. Tan Ke Fei, Mr. Zhou Feng and Mr. Ye Zhi Jun, being executive directors of the Company, are also directors of Sinopec Kantons International Limited.

Save as disclosed, as at the Latest Practicable Date, none of the Directors and his/ her associates had any interests which competed or was likely to compete, either directly or indirectly, with the Company’s business.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following persons (other than a Director or chief executive of the Company) had the following interests or short positions in Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:

	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 International United Petroleum and Chemicals Company Limited, a wholly owned subsidiary of 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

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial position or trading prospects of the Group since 31 December 2009, the date to which the latest audited financial statements of the Group were made up.

– 49 –

GENERAL INFORMATION

APPENDIX

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:

Qualification

Name Qualification First Shanghai Capital Limited A licensed corporation to carry out type 6 (advising on corporate finance) regulated activity under the SFO

First Shanghai Capital 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, First Shanghai Capital 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. MISCELLANEOUS

(a) The joint company secretaries of the Company are Mr. Li Wen Ping and Mr. Lai Yang Chau, Eugene (practicing solicitor).
(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.

– 50 –

GENERAL INFORMATION

APPENDIX

8. 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, 1 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 6 December 2010:

(a) the letter from First Shanghai Capital Limited as the Independent Financial Adviser as set out on pages 28 to 47 in this Circular;
(b) the written consent from First Shanghai Capital 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 pages 26 to 27 in this Circular;
(d) the New Sinopec Guangzhou Branch Framework Master Agreement;
(e) the New Unipec Framework Master Agreement;
(f) the Sinopec Finance Financial Services Framework Master Agreement;
(g) the New Century Bright Financial Services Framework Master Agreement;
(h) the Unipec Vessel Charter Framework Master Agreement; and
(i) this Circular.

– 51 –

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)

(Stock Code: 934)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) 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 6 December 2010 at 10:00 a.m. for the purposes of considering and, if thought fit, passing the following resolutions as ordinary resolutions:

ORDINARY RESOLUTIONS

“ THAT
(a) the Company’s entering into the New Framework Master Agreements (as defined in the circular of the Company dated 18 November 2010 (the “ Circular ”)) for the purpose of renewing the Existing Continuing Connected Transactions (as defined in the Circular) be and is hereby approved;
(b) the proposed annual caps in relation to the transactions contemplated under the New Framework Master Agreements (as set out in the Circular) for each of the three years ending 31 December 2013 be and are hereby approved; and
(c) any Director be and is hereby authorised to do further acts and things, entering all such transactions and arrangements, execute such other documents and/or deeds and/or take all such steps, which in their opinion may be necessary, desirable or expedient implement the New Framework Master Agreements with such changes as the Directors may consider necessary, desirable or expedient.”
“ THAT
(a) the Company’s entering into of the Sinopec Finance Financial Services Framework Master Agreement (as defined in the Circular) be and is hereby approved;

For identification purpose only

– 52 –

NOTICE OF SPECIAL GENERAL MEETING

(b) the proposed annual caps for the deposits services under Sinopec Finance Financial Services Framework Master Agreement (as set out in the Circular) for each of the three years ending 31 December 2013 be and are hereby approved; and
(c) any Director be and is hereby authorised to do further acts and things, entering all such transactions and arrangements, execute such other documents and/or deeds and/or take all such steps, which in their opinion may be necessary, desirable or expedient implement the Sinopec Finance Financial Services Framework Master Agreement with such changes as the Directors may consider necessary, desirable or expedient.”
“ THAT
(a) the Company’s entering into of the New Century Bright Financial Services Framework Master Agreement (as defined in the Circular) be and is hereby approved;
(b) the proposed annual caps for the deposits services under New Century Bright Financial Services Framework Master Agreement (as set out in the Circular) for each of the three years ending 31 December 2013 be and are hereby approved; and
(c) any Director be and is hereby authorised to do further acts and things, entering all such transactions and arrangements, execute such other documents and/or deeds and/or take all such steps, which in their opinion may be necessary, desirable or expedient implement the New Century Bright Financial Services Framework Master Agreement with such changes as the Directors may consider necessary, desirable or expedient.”
“ THAT
(a) the Company’s entering into of the Unipec Vessel Charter Framework Master Agreement (as defined in the Circular) be and is hereby approved;
(b) the proposed annual caps in relation to the transactions contemplated under the Unipec Vessel Charter Framework Master Agreement (as set out in the Circular) for each of the three years ending 31 December 2013 be and are hereby approved; and

– 53 –

NOTICE OF SPECIAL GENERAL MEETING

(c) any Director be and is hereby authorised to do further acts and things, entering all such transactions and arrangements, execute such other documents and/or deeds and/or take all such steps, which in their opinion may be necessary, desirable or expedient implement the Unipec Vessel Charter Framework Master Agreement with such changes as the Directors may consider necessary, desirable or expedient.”

By Order of the Board Dai Zhaoming Chairman

Hong Kong, 18 November 2010

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

Notes:

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.
The resolutions proposed at the SGM will be voted by way of poll.
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.

As at the date of the announcement, the Board of Directors comprises of the following:

Executive Directors:

Mr. Dai Zhaoming (Chairman)

Mr. Zhu Zengqing (Vice-Chairman)

Mr. Zhu Jianmin Mr. Tan Kefei
Mr. Zhou Feng

Mr. Ye Zhijun (Managing Director)

Independent non-executive Directors:

Mr. Wong Po Yan

Ms. Tam Wai Chu, Maria

Mr. Fong Chung, Mark

– 54 –

AI assistant

Sinopec Kantons Holdings Limited — Proxy Solicitation & Information Statement 2010

49576_rns_2010-11-17_6757361e-feb1-4f68-ab6e-ac16c1aded98.pdf

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

First Shanghai Capital Limited

CONTENT

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

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

Introduction

LETTER FROM THE BOARD

(I) Non-exempted Existing Continuing Connected Transactions

(A) Crude Oil Jetty Services

Nature of transaction and the connected parties

Historical amounts

Pricing basis and caps

Reasons for the transactions

(B) Trading activities

1. Crude oil supply

Nature of the transactions and connected parties

Historical amounts

Pricing basis and caps

LETTER FROM THE BOARD

Reasons for the transactions

2. Crude oil sourcing

Nature of the transaction and connected parties

Historical price

Pricing basis and caps

Reasons for the transactions

LETTER FROM THE BOARD

(II) Sinopec Finance Financial Services Framework Master Agreement

Major terms

Capital risk control measures

Reasons for / benefits of entering into the Sinopec Finance Financial Services Framework Master Agreement

LETTER FROM THE BOARD

Proposed caps for financial services and rationale

Deposit services

Loan services and conducting bill acceptance and discount services

(III) New Century Bright Financial Services Framework Master Agreement

Nature of the transaction and the connected party

Historical amounts

LETTER FROM THE BOARD

Pricing basis and revised caps

Reasons for the transactions

LETTER FROM THE BOARD

(IV) Unipec Vessel Charter Framework Master Agreement

Major terms

Pricing basis and caps

Reasons for / benefits of entering into the Unipec Vessel Charter Framework Master Agreement

Proposed Caps for Vessel Chartering Services and Rationale

LETTER FROM THE BOARD

(V) The Directors’ view

(VI) Listing Rules implications

LETTER FROM THE BOARD

(VII) Information on the Company and the Sinopec Group

LETTER FROM THE BOARD

(VIII) General

LETTER FROM THE BOARD

(IX) Special General Meeting

(X) Recommendation

LETTER FROM THE BOARD

(XI) Additional information

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

To the Independent Shareholders

Dear Sir or Madam,

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

FIRST SHANGHAI CAPITAL LIMITED

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the entering into of the Agreements

(i) The New Framework Master Agreements

(a) Crude Oil Jetty Services

(ii) The Sinopec Finance Financial Services Framework Master Agreement

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iii) The New Century Bright Financial Services Framework Master Agreement

(iv) The Unipec Vessel Charter Framework Master Agreement

Sinopec Kantons Holdings Limited Proxy Solicitation & Information Statement 2010