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 Chairman's Address
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Dear Shareholders:

On behalf of the Board of Directors, I would first like to express my sincerest gratitude to all of our shareholders and the wider community for your interest and support.

In 2014, Sinopec Corp. made significant progress toward fulfilling the Board’s core commitment to improve development quality and returns through launching our initiatives to deepen reform, accelerate the transition to new sources of growth, as well as enhance internal management and maintained a favorable growth momentum. We are delighted to see that, with regard to reforms, Sinopec’s marketing business has established mixed-ownership operations by restructuring and introducing private capital. This move not only enhanced our enterprise value but also advanced the transition of the business from an oil products supplier to an integrated services provider. With regard to growth mode transformation, commercial operations at the Fuling shale gas field commenced ahead of plan with a production capacity of 2 billion cubic meters per year, making China the first country outside North America to develop shale gas for commercial use. We have also fully upgraded our refined oil products and raised the production volume of our premium gasoline, for which growth in demand has been strong. Revenues for our non-fuel business in the marketing segment increased 28%. With regard to internal management, Sinopec effectively controlled costs for each business segment and conducted its operations safely. Our chemical feedstock and product mix also continued to improve due to the scheme of the optimisation of resources. The continued efforts of Sinopec management and employees have helped us tackle the huge challenge presented by the tumbling price of international crude in the fourth quarter of 2014. Sinopec maintained stable production and improved its ability to withstand risks, further enhancing its level of sustainable development.
Despite the slow recovery of the global economy in 2013, China's economy and domestic demand for petroleum and petrochemical products grew steadily over the past year. Giving full play to our integrated business model, we focused on the quality and efficiency of growth and development. We made steady progress on multiple fronts by deepening reform, restructuring our business model, promoting innovation in our work streams, increasing revenue and controlling costs. Oil and gas production volume showed steady growth as we achieved breakthroughs of strategic significance in the exploration of shale gas in Fuling, which demonstrate how China can accelerate the pace of shale gas development. Overseas upstream assets increased, strengthening the Company's resource base. The refining segment seized the opportunity provided by the modified oil products pricing mechanism. The Company made major advances in this segment by optimising and adjusting the product mix, accelerating quality upgrading of refined oil products and supplying more clean products to the market, which have become new growth drivers for the Company. The marketing and distribution segment improved its operational quality and efficiency by optimising its existing network. In the chemicals segment, the Company focused on adjusting its feedstock and product mix and successfully mitigated the impact of difficult market conditions. We regard technological innovations to be the key driver of future restructuring and transformation of our business growth model.

In 2014, according to International Financial Reporting Standards, the Company had total revenues and other operating income of RMB 2.83 trillion, down by 1.9% from the previous year. Profits attributable to shareholders dropped by 29.7% to RMB 46.47 billion. Taking into account the Company’s profitability, shareholder returns and future development needs, the Board proposed a final dividend of RMB 0.11 per share, which, combined with the interim dividend of RMB 0.09 per share, brings our total annual dividend to RMB 0.2 per share.

During the Board’s three-year term, the global economy has seen a marginal recovery, while China has entered a period of adjustment after growing at a very high rate for more than 30 years. The country is now phasing into a New Normal of slower growth, an improved economic structure and a shift among the drivers of growth. The Board has addressed the quality of development and returns, and it has focused on top-down design to implement strategies for resources, markets, integration, internationalization, differentiation, and green and low-carbon development. The Board’s aim is to realize its vision of building a people-oriented, world-leading energy and chemical company.

In the past three years, the Company has further enhanced its corporate governance and has attached great importance to increase its enterprise value. We return our shareholders and protected investor interests through an improved dividend policy; we set up the Social Responsibility Management Committee to guide the Company on sustainable development, established regulations such as Policy for Composition and Diversity of Board Members, and emphasized the roles played by Board committees and independent Board members; we continued to improve internal control mechanisms and our ability to execute internal control; and we increased corporate transparency by improving information disclosure and investor relations. Sinopec was also keen to make use of the capital markets for corporate development. With support from investors and the public, the Company raised a total of RMB 150 billion in equity through an H share private placement, a conversion of domestic A share convertible bonds, equity financing of Sinopec Canton, and private capital raising in the marketing segment. At the same time, Sinopec financed its capital needs through the issuance of bonds based on market conditions, which effectively improved its capital and debt structure, enhanced enterprise value and supported the rapid development of the Company.

In the past three years, we have deepened reforms throughout the company. We led mixed-ownership reform in China with our marketing business, aiming to transform the segment into a market orientated business through joint efforts with private investors. The initiative laid the foundations for invigorating Sinopec, further increase our competitiveness, advancing the transition to a new model of business and ensuring sustainable growth. We have completed the capital restructuring of the Yizheng Chemical Fiber Company, which accelerated the listing plan for Sinopec Group’s oilfield service business, and we mitigated the negative impacts on Yizheng’s shareholders by preventing the company from being delisted potentially due to three years of consecutive losses. We have also successfully completed the A share reform of the Shanghai Petrochemical Company and Yizheng Chemical Fiber Company, and we have supported Shanghai Petrochemical’s stock option incentive plan. In addition, we have continuously improved our investment management mechanism with a focus on returns, establishing market-oriented operation mechanisms that will let each segment become more specialised and market-based, an initiative that has shown early progress.

Beijing, China
March 20, 2015


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