09:41 SHANGHAI PECHEM<00338> - Announcement (3) storage and delivery of petrochemicals, chemical fibres and other chemical products; wholesale, retail, storage and delivery of refined oil products and other oil products and operation of convenient stores affiliated to the service stations; electricity generation, manufacturing and installation of machines; purchase, sale and supervision on the manufacturing of raw materials, coal, equipments and components; research, development and application of technology and information; and import and export, exportation of technology and labour related services. In accordance with the PRC Accounting Standards, the audited total assets value, net assets value and net profits of Sinopec Corp. as at 31 December 2003 were RMB390,213,000,000, RMB162,946,000,000 and RMB19,011,000,000 respectively. 3.2 Principal activities of the Company The Company is a highly integrated entity which processes crude oil into synthetic fibres, resins and plastics, intermediate petrochemicals and petroleum products. 4. Description of the Subject Matter of this Connected Transaction The subject matter of this connected transaction related to the Catalysts-Related Business which was based in Jinshan District, Shanghai. According to the management accounts of the Science and Technology Development Company, the revenue of the Catalysts-Related Business amounted to RMB113,671,400, and the net profit after tax and extraordinary items of the Catalysts-Related Business amounted to RMB1,415,000. The net profit before tax and extraordinary items of the Catalysts-Related Business amounted to RMB1,664,706. As at 31 May 2004, the book asset value and the book liabilities were RMB43,570,500 and RMB2,685,300 respectively. As such, the net book value of the Catalysts-Related Business was RMB40,885,200. In the Assets Valuation Report, Beijing Zhong Zheng Appraisal Co, an asset valuer which is not a connected person to the Company or Sinopec Corp. as defined in the Hong Kong Listing Rules, valued the net asset value of the Catalysts-Related Business as at 31 May 2004 at RMB49,916,200 with a gain on disposal of RMB9,030,900 or 22.09%. The gain was a result of the fact that the valuation took into account the potential value and importance of patent rights and proprietary technology that formed an integral part of the Catalysts-Related Business. The Catalyst-Related Business was free and clear of any guarantee, charge, pledge or other limitations on the Assets Transfer and was not subject to any litigation, arbitration, judicial enforcement or other material dispute. 5. Key Terms and Pricing Policy of the Connected Transaction The purchase price of the Catalysts-Related Business was determined by reference to the Assets Valuation Report (which valuation is set out in detail below) and upon arm's length negotiation between the parties. Pursuant to the Assets Valuation Report, employing 31 May 2004 as the base valuation date, the net asset value of the Catalysts-Related Business was RMB49,916,200 and the subsequent purchase price was fixed at RMB49,916,200. The Board of Directors was of the view that there was no material change in the value of the Catalysts-Related Business since the last valuation as of 31 May 2004. The Company intended to use the purchase monies from the Assets Transfer as part of the working capital of the Company. Pursuant to the Assets Transfer Agreement, the parties will complete the transfer of the Catalysts-Related Business on the Closing Date. Sinopec Corp. agreed to pay in cash in full the purchase price, i.e. RMB49,916,200, to the Company or such personnel as designated by Company on the Closing Date. To clearly set out the rights and obligations of the parties in connection with the transfer of the relevant building ownership and land use rights underlying the Catalysts-Related Business, the parties intend to enter into a separate agreement, in addition to the Assets Transfer Agreement. 6. Reasons for the Connected Transaction and its effect on the Company