In July 2002, the US Congress worked out the "Sarbanes-Oxley Act", setting down regulations on internal control and information disclosure for listed companies in the US. Ministry of Finance of the P.R.C., China Securities Regulatory Commission, Shanghai and Hong Kong Stock Exchanges also set up rules on strengthening internal control of listed companies accordingly. Sinopec, a company listed on 4 domestic and overseas stock exchanges, has established a team for internal control led by the Chairman, President and CFO. Special organizations have been set up within headquarters and all subsidiaries, respectively responsible for implementation and management of internal control.

In accordance with laws and regulations and considering the current operation and management status of the Company, Sinopec prepared the "Internal Control Instruction", according to the internal control framework put forward by COSO, a committee under the US National Commission on Fraudulent Financial Reporting. The internal control system is classified to standardize management at important phrase and milestones in different business sectors. Currently, the "Internal Control Instruction" consists of 15 different categories, namely investment, procurement, marketing, consolidated financial statement, etc. It also contains 55 business procedures, covering all aspects about company management. Subsequently, all subsidiaries have worked out detailed rules on implementation of the instruction.

Since the implementation of the internal control system started from January 1st 2005, the Company gradually extends the controlling range, fully makes use of controlling system including ERP, attaches importance to the combination of company internal control with daily management and sets down assessment methods and standards for internal control. In order to enhance internal control efficiency, subsidiaries regularly check their own internal control system, test the procedures, develop a long-term internal control mechanism and continuously strengthen internal control implementation. In 2007, the Company self-checked internal control performance within all subsidiaries (including IT control system) and solved the existing problems. In December 2007, the Company's 18th Meeting of the Third Board of Directors agreed on the "Internal Control Instruction" (2008 edition).

In line with supervision requirements home and abroad, the Company made a self-evaluation on internal control effectiveness. It proved that the internal control performed function within reporting period and an effective anti-malpractice mechanism has been established. The financial reports met the local accounting standards and information was disclosed according to the regulatory requirements. Assessment report of the Company's "Self-Evaluation Report on Internal Control" has been worked out by external auditors.

In 2007, implementing the 2008-year Internal Control Instruction, the Company will further improve the internal control system according to real situation and supervision requirements.