---

---

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

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 00386)

INTERIM RESULTS ANNOUNCEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2017

1	Important Notice

1.1

This announcement is a summary of the 2017 interim report of China Petroleum & Chemical Corporation (“Sinopec Corp.”). The full version of 2017 interim report is published on the website of Shanghai Stock Exchange (www.sse.com.cn), The Stock Exchange of Hong Kong Limited (“Hong Kong Stock Exchange”) (www.hkex.com.hk) and Sinopec Corp. (www.sinopec.com). Investors should read the 2017 interim report for more details.

1.2

The interim financial statements for the six-month period ended 30 June 2017 (the “reporting period”) of Sinopec Corp. and its subsidiaries (the “Company”), prepared in accordance with the Accounting Standards for Business Enterprises of the PRC (“ASBE”) and International Financial Reporting Standards (“IFRS”), have been audited by PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers Certified Public Accountants respectively, and both firms have issued standard unqualified opinions on the interim financial statements.

1.3	Basic Information of Sinopec Corp.

2	Principal Financial Data and Indicators

2.1	Principal Financial Data and Indicators Prepared in Accordance with ASBE

2.2	Principal Financial Data and Indicators Prepared in Accordance with IFRS

3	Number of Shareholders and Shareholdings of Principal Shareholders

As at 30 June 2017 there were a total of 547,058 shareholders of Sinopec Corp., of which 540,912 were holders of A shares and 6,146 were holders of H shares. The public float of Sinopec Corp. satisfied the minimum requirements under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong Kong Listing Rules”).

3.1	Top ten shareholders

Unit: share

Note:

1.

As compared with the number of shares as at 31 December 2016.

2.

Sinopec Century Bright Capital Investment Limited, a wholly-owned overseas subsidiary of China Petrochemical Corporation, holds 553,150,000 H shares,accounting for 0.46% of the total share capital of Sinopec Corp. Such shareholdings are included in the total number of shares held by HKSCC Nominees Limited.

Statement on the connected relationship or acting in concert among the aforementioned shareholders:

Apart from 交通銀行股份有限公司－滙豐晉信大盤股票型證券投資基金 and 交通銀行股份有限公司－滙豐晉信雙核策略混合型證券投資基金 which were administrated by 豐晉信基金管理公司, Sinopec Corp. is not aware of any connected relationship or acting in concert among or between the above-mentioned shareholders.

3.2	Information disclosed by H share shareholders in accordance with the Securities and Futures Ordinance (“SFO”) as at 30 June 2017

Notes:

(L) Long position, (S): Short position

3.3	Changes in the Controlling Shareholders and the de facto Controller

There was no change in the controlling shareholder or the de facto controller of Sinopec Corp. during the reporting period.

4	Equity Interests of Directors, Supervisors and Other Senior Management

As at 30 June 2017, apart from the 13,000 A shares of Sinopec Corp. held by vice president Mr. Ling Yiqun, none of the directors, supervisors and other senior management of Sinopec Corp. held any shares of Sinopec Corp.

Save as disclosed above, the directors, supervisors or other senior management of Sinopec Corp. confirmed that none of them had any interest or short positions in any shares, underlying shares or debentures of Sinopec Corp. or any of its associated corporations (within the meaning of Part XV of the SFO), as recorded in the registry pursuant to Section 352 of the SFO or as otherwise notified to Sinopec Corp. and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (“Model Code”) contained in Appendix 10 to the Hong Kong Listing Rules.

5	Business Review and Prospects and Management’s Discussion and Analysis

5.1	Business Review

In the first half of 2017, global economy recorded moderate recovery and Chinese economy maintained steady growth with gross domestic product (GDP) up by 6.9% year on year. With abundant supply, domestic refined oil products market witnessed strong competition. According to the statistics, domestic consumption of refined oil products increased by 5.5% compared with the first half of 2016, among which gasoline and kerosene consumption maintained strong growth momentum, and diesel consumption reversed its downward trend and realised growth year on year. Domestic demand for natural gas accelerated, up by 15.2% compared with the first half of 2016.Domestic consumption of major chemicals grow significantly with consumption of ethylene equivalent up by 10.5% year on year, and gross margin for chemical products remained strong.

International crude oil prices went slightly upward at beginning of 2017 and then fluctuated downward. The average spot price of Platts Brent for the first half of 2017 was USD 51.8 per barrel, increased 30.4% year on year.

5.1.1

Operation Review

(1)	Exploration and production

In the first half of 2017, facing with low oil prices, the Company focused on reserve increase and development returns through our operation and production with superior results achieved. In exploration, our major direction maintained to focus on identification of high quality, large scale and low cost reserves. Number of new oil discoveries were made in Tahe Basin of Xinjiang, Junggar Basin, Shengli Oilfield and North Jiangsu Basin, and new natural gas discoveries were made in Sichuan Basin and Ordos Basin. In production, natural decline rate of matural fields was well controlled through refined development. Importance was attached to natural gas development, through expediting natural gas capacity construction in the Hangjinqi area of Erdos and fully promoting Phase II of Fuling Shale Gas development project. Production in the first half of 2017 was 211.38 million barrels of oil equivalent, up by 1.1% year on year, of which domestic crude production was 123.16 million barrels, overseas crude production was 22.82 million barrels, and total gas production was 452.12 billion cubic feet, increased by 16.3% compared to the same period of last year.

Exploration and Production: Summary of Operations

(2)

Refining

In the first half of 2017, our refined oil products mix has been optimised to address market demand changes, more high value-added products were produced and diesel-to-gasoline ratio further decreased to 1.15. We actively promoted refined oil products quality upgrading, and the GB VI quality upgrading plan for “2+26” cities in North China completed ahead of schedule. Crude oil sourcing optimisation continued to lower our feedstock cost, and export of refined oil products was increased moderately to help maintain high operational utilisation rates of refining facilities. The advantages of centralised marketing took full play, and profitability of asphalt, lubricant and LPG was maintained. In the first half of 2017, we processed 118 million tonnes of crude oil, increased by 1.6% compared to the same period of last year, and produced 74.11 million tonnes of refined oil products, with production of gasoline and kerosene up by 1.4% and 5.9% respectively, from levels in the first half of 2016.

Refining: Summary of Operations

Note:

Includes 100% of production of domestic joint ventures.

(3)	Marketing and distribution

In the first half of 2017, we took full advantages of our integrated business and distribution network to actively respond to over-supplied and competitive market conditions, and achieved good operational results. We optimised internal and external resources, put all efforts to expand market, and realised sustained growth in total sales volume of refined oil products. We flexiblely adjusted our marketing strategies, promoted branding gasoline and increased retail volume of premium gasoline. We innovated operational models and optimised layout of service stations, and expedited revamping of storage and transportation facilities of refined oil products to further improve our distribution network. We proactively promote vehicle natural gas business, expediting the construction and operation of CNG/LNG stations, vehicle natural gas sales volume increased by 28.2% year on year. The total sales volume of refined oil products in the first half of 2017 was up by 1.4% from the corresponding period last year to 98.55 million tonnes, of which domestic sales accounted for 87.22 million tonnes, up by 0.8% year on year. By means of “Internet+” and other marketing measures, we promoted rapid growth of new business, put more efforts on cultivation of major products and self-owned brand products. Transaction value of emerging business (non-fuel) was RMB 27.8 billion, up by 50% from the first half of 2016.

Marketing and Distribution: Summary of Operations

(4)

Chemicals

We continued the“basic and high-end” chemical business development concept to promote effective supply. In the first half of 2017, we optimised operations based on marginal contribution and gross margin of chemical facilities to promote profitability. Ethylene production for the first half of 2017 was 5.609 million tonnes, up by 2.4% from the corresponding period last year. We deepened adjustments of feedstock mix to reduce chemical feedstock cost, and pressed ahead optimisation of product slate, producing more market-oriented and high value-added products, strengthened the integration among production, sales, R&D and application, and intensified efforts on R&D, production and promotion of new products, with the ratio of performance compound reaching 62%, up by 4 percent points from the same period of last year, and the differential ratio of synthetic fiber reaching 88.2% up by 4.9 percent points year on year. At the same time, by implementing low-inventory marketing strategy, putting advantages of marketing network into full play, conducting differentiated and tailor-made measures, the Company provided whole-process solutions and value-added services to our customers. In the first half of 2017, total chemicals sales volume increased by 13.6% from the corresponding period last year to 37.30 million tonnes.

Major Chemical Products: Summary of Operations

Unit of production: 1,000 tonnes

Note:

Includes 100% of production of domestic joint ventures.

5.1.2

Safety Management and Environmental Protection

The Company valued safe production and intensified safety supervision. In the first half of this year, we strengthened identification and prevention of risks, further tightened hazard management of tank farms, reinforced on-site safety supervision and management, advanced contractor health and safety control and tightened safety management of key areas including offshore operations, well control, coal mines and hydrogen sulfide. Above all, we achieved safe production and operations.

By active implementation of our green and low-carbon strategy, we promoted the integrated management of energy and environmental protection, pushed forward pollution prevention and treatment, deeply implemented “Energy Efficiency Doubling” plan and continued to advance carbon asset management. Energy conservation, pollution reduction and carbon reduction all recorded remarkable results. In the first half of 2017, energy intensity was down by 1.8%, industrial water consumption was down by 1.2%, chemical oxygen demand in discharged water was down by 2.3%, sulfur dioxide emissions were down by 4.3% from levels in the corresponding period last year, and all hazardous chemicals, discharged water, gas, and solid waste were properly treated.

5.1.3

Capital Expenditures

Focusing on quality and returns of investment, the Company continuously optimised its investment projects. In the first half of 2017, total capital expenditures were RMB 15.953 billion. Capital expenditures for the exploration and production segment were RMB 6.870 billion, mainly for oil and gas capacity building, Tianjin LNG Terminal Project, Wen 23 Gas Storage Project, boosting project of Sichuan-to-East China Pipeline as well as overseas projects. Capital expenditures for the refining segment were RMB 3.672 billion, mainly for the Zhongke integrated refining and chemical project, product mix adjustments of ZRCC and Maoming, and GB VI gasoline and diesel quality upgrading projects. Capital expenditures for the marketing and distribution segment were RMB 2.500 billion, mainly for constructing refined oil products depots, pipelines and service stations. Capital expenditures for the chemicals segment were RMB 2.594 billion, mainly for integrated refining and chemical projects of Zhongke and Gulei and the high-efficiency and environmental friendly aromatics project in Hainan refinery. Capital expenditures for corporate and others were RMB 317 million, mainly for R&D facilities and information technology application projects.

5.2	Business Prospects

Looking into the second half of 2017, we expect more reform measures to be announced by the Chinese government to revitalise real economy, the “Belt and Road” Initiative, synergetic development of Beijing-Tianjin-Hebei and the Yangtze River Economic Belt development will be further implemented. The China’s economy will maintain steady growth and drive the demand of refined oil products and petrochemical products as well as create new growth opportunities for petroleum and petrochemical industry. Along with the adjustments of China’s energy structure, demand of natural gas as cleaner energy resources will maintain robust growth rate. For the second half of 2017, the international crude oil prices are expected to fluctuate at a low level.

In the second half of 2017, in accordance with our objective of progressing at a steady pace to continually focus on growth stabilisation, market expansion, cost reduction, structural adjustments, reform, and consolidating the basis for the Company’s further development. Our focuses are on the following aspects:

For Exploration and Production, we will continue to advance high-efficiency exploration activities, enlarge economical reserve and raise reserve production ratio. In crude oil development, we will accelerate profitable development of new oilfields and profitable re-opening of suspended wells, optimise development structure of oilfields, control natural decline rate and solidify basis for stable production. In natural gas development, we will advance key projects for capacity construction, strengthen the efficiency of developed gas fields, optimise natural gas production and marketing plans and advance facilities construction. In the second half of 2017, we plan to produce 148 million barrels of crude oil, of which domestic production will account for 125 million barrels and overseas production will account for 23 million barrels. We plan to produce 427.5 billion cubic feet of natural gas during the period.

For Refining, we will center on the structural reform on the supply side and accelerate the construction of four regional refining centers. Based on market demand and industrial trend, we will optimise product mix and produce more gasoline, jet fuel, light oil and other high value-added products. We will complete GB V standard of regular diesel upgrading project, and accelerate upgrading progress of GB VI standard gasoline. We will fine-tune crude oil procurement and resource allocation to reduce procurement cost, fully optimise operations and ensure safe and stable production, take full play of integrated advantages of production and marketing to further optimise processing scheduling. We plan to process 118 million tonnes of crude in the second half of the year.

For Marketing and Distribution, we will coordinate scale and efficiency of the business, short-term and long-term goals, set up flexible operation strategies, optimise resources allocation, sparing no effort to expand markets and our business scale. We will further improve retail network layout, solidify and promote the advantages of e-commerce development. We will step up construction of natural gas stations to expand vehicle natural gas market. We will explore a new type of business model integrating “Internet-Marketing-Services” with IT technology and boost the growth of emerging business (non-fuel). In the second half, we plan to sell 87.78 million tonnes of refined oil products in the domestic market in the second half of 2017.

For Chemicals, we will continue to adjust our feedstock structure to lower costs, fine-tune our product slate, improve the coordinating mechanism between production, marketing, research and application, advance new product development, promotion and application, deliver more speciality and high-end products and speed up the upgrading of synthetic resin, synthetic rubber and synthetic fiber. We will deepen the structural adjustments of facilities and optimise production and operation based on contribution of the marginal benefit and gross margin so as to enhance efficiency and profitability. Meanwhile, we will better our marketing network, improve customer services and provide integrated solutions and value-added services. We plan to produce 6.05 million tonnes of ethylene in the second half of 2017.

In the second half of the year, the Company will continue to focus on supply-side structural reform, upgrade growth pattern to enhance efficiency and profitability, and fully implement value-oriented growth, innovation-driven development, integrated resource allocation, openness to cooperation, and green, low-carbon development strategies so as to deliver superior business results.

5.3	Management’s Discussion and Analysis

The following discussion and analysis should be read in conjunction with the Company’s audited interim financial statements and the accompanying notes in the interim report of Sinopec Corp. Parts of the following financial data, unless otherwise stated, were abstracted from the company’s audited interim financial statements that have been prepared according to IFRS.

5.3.1

Consolidated results of operations

In the first half of 2017, the Company’s turnover and other operating revenues were RMB 1,165.8 billion, representing an increase of 32.6% year on year, and profit attributable to owners of the company was RMB 27.9 billion, representing an increase of 40.1% year on year.

The following table sets forth the principal revenue and expenses items from the Company’s consolidated financial statements for the first half of 2017 and the corresponding period in 2016:

(1)	Turnover and other operating revenues

In the first half of 2017, the Company’s turnover was RMB 1,137.8 billion, representing an increase of 32.8% year on year. The change was mainly attributable to the raise of international crude oil prices and petrochemical product prices as compared with the same period of last year.

The following table sets forth the external sales volume, average realised prices and respective change rates of the Company’s major products in the first half of 2017 as compared with the first half of 2016.

Most of the crude oil and a small portion of natural gas produced by the Company were internally used for refining and chemical production with the remaining sold to other customers. In the first half of 2017, the turnover from crude oil, natural gas and other upstream products sold externally amounted to RMB 33.1 billion, increased by 44.0% year on year, accounting for 2.8% of the Company’s turnover and other operating revenues. The change was mainly attributable to significant recovery of crude oil prices as well as increased sales volume of natural gas.

Petroleum products (mainly consisting of oil products and other refined petroleum products) sold by the Refining Segment and the Marketing and Distribution Segment achieved external sales revenues of RMB 653.8 billion, representing an increase of 21.4% year on year and accounting for 56.1% of the Company’s turnover and other operating revenues. Those changes were mainly due to the rise of downstream product prices driven by crude oil price recovery.The sales revenue of gasoline, diesel and kerosene was RMB 553.4 billion, representing an increase of 18.5% year on year, accounting for 84.6% of the sales revenue of petroleum products. Sales revenue of other refined petroleum products was RMB 100.4 billion, representing an increase of 40.5% year on year, accounting for 15.4% of the sales revenue of petroleum products.

The Company’s external sales revenue of chemical products was RMB 178.7 billion, representing an increase of 41.5% year on year, accounting for 15.3% of its turnover and other operating revenues.The change was mainly due to the increases in chemical product sales volume and prices.

(2)	Operating expenses

In the first half of 2017, the Company’s operating expenses were RMB 1,126.5 billion, representing an increase of 33.5% year on year. The operating expenses mainly consisted of the following:

Purchased crude oil, products and operating supplies and expenses were RMB 887.0 billion, representing an increase of 44.1% year on year, accounting for 78.7% of total operating expenses, of which:

‧

Crude oil purchasing expenses were RMB 242.0 billion, representing an increase of 48.3% year on year. Throughput of crude oil purchased externally in the first half of 2017 was 88.65 million tonnes (excluding the volume processed for third parties), increased by 3.2% year on year. The average cost of crude oil purchased externally was RMB 2,730 per tonne, increased by 43.7% year on year.

‧

Other purchasing expenses were RMB 645.0 billion, increased by 42.6% year on year.The change was mainly due to the higher purchase prices of crude oil trade and external refined oil products.

Selling, general and administrative expenses of the Company totaled RMB 30.1 billion, representing a decrease of 8.8% year on year. The change was mainly due to the adjustment of the cost and tax accounting and the Company’s continuing cost control effects.

Depreciation, depletion and amortisation expenses of the Company were RMB 55.2 billion, representing an increase of 12.4% year on year. This was mainly due to significant increase in depletion rate as a result of oil and gas reserves revision in the exploration and production segment following crude oil price drop.

Exploration expenses in the first half of 2017 were RMB 4.5 billion, representing a decrease of 4.0% year on year.This was mainly due to higher successful exploration rate and optimised deployment.

Personnel expenses were RMB 31.3 billion, representing an increase of 7.8 % year on year. The change was mainly attributable to the carryover effect of personnel expenses adjustment as a result of improvement of our recruitment system.

Taxes other than income tax were RMB 116.3 billion, representing an increase of 3.1% year on year. The change was mainly due to the adjustment of the cost and tax accounting and increased resources taxes as a result of crude oil price recovery.

Other operating income, net were RMB 2.0 billion, representing an increase of RMB 2.1 billion year on year. This was mainly due to the asset impairment of high cost oil fields.

(3)	Operating profit

In the first half of 2017, the Company’s operating profit was RMB 39.3 billion, representing an increase of 12.0% year on year. This was mainly due to the Company actively response volatile market situations, put our efforts on structure adjustment, quality upgrading and cost reduction, achieved good operation performance.

(4)	Net finance costs

In the first half of 2017, the Company’s net finance costs were RMB 1.3 billion, down by RMB 3.0 billion, representing a decrease of 69.9% year on year, which is mainly due to the increase in interest income by improving the management of cash and bills receivable, the decrease in interest expense by optimising of debt structure, and a foreign exchange gain.

(5)	Profit before taxation

In the first half of 2017, the Company’s profit before taxation amounted to RMB 46.0 billion, representing an increase of 29.4% year on year.

(6)	Tax expense

In the first half of 2017, the Company’s tax expense totaled RMB 8.9 billion, up by 6.4% year on year.

(7)	Profit attributable to non-controlling interests of the Company

In the first half of 2017, profit attributable to non-controlling shareholders was RMB 9.1 billion, up by RMB 1.9 billion, representing an increase of 26.4% year on year.

(8)	Profit attributable to owners of the Company

In the first half of 2017, profit attributable to owners of the Company was RMB 27.9 billion, representing an increase of 40.1% year on year.

5.3.2

Assets, liabilities, equity and cash flows

Unit: RMB million

(2)

Cash Flow

The following table sets forth the major items in the consolidated cash flow statements for the first half of 2017 and of 2016.

Unit: RMB million

5.4	The results of the principal operations by segments (under ASBE)

*

Gross profit margin = (Operating income – Operating cost, tax and surcharges)/Operating income

6

Dividend

6.1	Dividend distribution for the year ended 31 December 2016

Upon the approval at its 2016 Annual General Meeting, the final cash dividend of Sinopec Corp. for 2016 was RMB 0.17 per share (tax inclusive). The final dividend for 2016 has been distributed on or before 28 July 2017 to shareholders who were registered as existing shareholders as at 18 July 2017. Combined with the 2016 interim cash dividend of RMB 0.079 per share (tax inclusive), the total cash dividend for 2017 amounted to RMB 0.249 per share (tax inclusive).

6.2	Interim dividend distribution plan for the six-month ended 30 June 2017

As approved at the 14th meeting of the sixth session of the board of directors of Sinopec Corp. (the “Board”), the interim dividend for the six months ended 30 June 2017 of RMB 0.10 per share (tax inclusive) will be distributed based on the total number of shares as of 19 September 2017 (record date) in cash.

The 2017 interim dividend distribution plan, with the consideration of interest of shareholders and development of the Company, is in compliance with the Articles of Association and relevant procedures. The independent non-executive directors have issued independent opinions on it.

The interim cash dividend will be distributed on or before 29 September 2017 (Friday) to all shareholders whose names appear on the register of members of Sinopec Corp. on 19 September 2017 (Tuesday). To be entitled to the interim dividend, holders of H shares shall lodge their share certificates and transfer documents for registration with Hong Kong Registrars Limited at 1712-1716, 17th floor, Hopewell Centre, No. 183 Queen’s Road East, Wanchai, Hong Kong, no later than 4:30 p.m. on 12 September 2017 (Tuesday). The register of members of the H shares of Sinopec Corp. will be closed from 13 September 2017 (Wednesday) to 19 September 2017 (Tuesday) (both days inclusive).

The dividend will be denominated and declared in RMB and distributed to domestic shareholders and Shanghai-Hong Kong Stock Connect shareholders in RMB and to foreign shareholders in Hong Kong Dollars. The exchange rate for dividend to be paid in Hong Kong dollars is based on the average benchmark exchange rate of RMB against Hong Kong Dollar as published by the People’s Bank of China one week ahead of the date of declaration of the interim dividend, i.e. 25 August 2017 (Friday).

In accordance with the Enterprise Income Tax Law of the People’s Republic of China and its implementation regulations which came into effect on 1 January 2008, Sinopec Corp. is required to withhold and pay enterprise income tax at the rate of 10% on behalf of the non-resident enterprise shareholders whose names appear on the register of members for H Shares of Sinopec Corp. when distributing the cash dividends to them. Any H Shares of the Sinopec Corp. registered not under the name of an individual shareholder, including HKSCC Nominees Limited, other nominees, agents or trustees, or other organisations or groups, shall be deemed as shares held by non-resident enterprise shareholders. Therefore, enterprise income tax shall be withheld from dividends payable to such shareholders. If holders of H Shares intend to change their shareholder status, they should enquire about the relevant procedures from their agents or trustees. Sinopec Corp. will withhold and pay enterprise income tax on behalf of the relevant shareholders based on the register of members for H shares of Sinopec Corp. as at the record date in accordance with the laws or the requirements of relevant government authorities.

Where the individual holders of the H shares are residents of Hong Kong, Macau or a country which had an agreed tax rate of 10% for cash dividends to them with China under relevant tax agreement, Sinopec Corp. should withhold and pay individual income tax on behalf of the relevant shareholders at a rate of 10%. Where the individual holders of the H Shares are residents of a country which had an agreed tax rate of less than 10% with China under relevant tax agreement, Sinopec Corp. shall withhold and pay individual income tax on behalf of the relevant shareholders at a rate of 10%. In that case, if the relevant individual holders of the H Shares wish to reclaim the extra amount withheld (Extra Amount) by the application of 10% tax rate, Sinopec Corp. can apply for the relevant agreed preferential tax treatment provided that the relevant shareholders submit the evidence required by the notice of the tax agreement to the share register for H shares of Sinopec Corp. Sinopec Corp. will assist with the tax refund after the approval of the competent tax authority. Where the individual holders of the H Shares are residents of a country which has an agreed tax rate of over 10% but less than 20% with China under the tax agreement, Sinopec Corp. shall withhold and pay the individual income tax at the agreed actual rate in accordance with relevant tax agreements. Where the individual holders of the H Shares are residents of a country which has an agreed tax rate of 20% with China, or has not entered into any tax agreement with China, or under any other circumstances, Sinopec Corp. shall withhold and pay the individual income tax at a rate of 20%.

Pursuant to the Notice on the Tax Policies Related to the Pilot Program of the Shanghai-Hong Kong Stock Connect (关於滬港股票市場交易互聯互通機制試點有關稅收政策的通知) (Caishui [2014] No. 81):

For domestic investors of H Shares of Sinopec Corp. through Shanghai-Hong Kong Stock Connect, Sinopec Corp. shall withhold and pay income tax at the rate of 20% on behalf of individual investors and securities investment funds. Sinopec Corp. will not withhold or pay the income tax of dividends for domestic enterprise investors and those domestic enterprise investors shall report and pay the relevant tax themselves.

For investors in the Hong Kong Stock Exchange (including enterprises and individuals) of A Shares of Sinopec Corp. through Shanghai-Hong Kong Stock Connect Program, the Company will withhold and pay income taxes at the rate of 10% on behalf of those investors and will report to the tax authorities for the withholding. For investors who are tax residents of other countries, whose country of domicile is a country having entered into a tax treaty with the PRC stipulating a dividend tax rate of lower than 10%, the enterprises and individuals may, or may entrust a withholding agent to, apply to the competent tax authorities for the entitlement of the rate under such tax treaty. Upon approval by the tax authorities, the amount paid in excess of the tax payable based on the tax rate under such tax treaty will be refunded.

7	Financial statements

7.1	Auditors’ opinion

7.2	Financial Statements

7.2.1

Interim financial statement prepared under ASBE

Consolidated and Parent Balance Sheets

Unit: RMB million

Unit: RMB million

Unit: RMB million

Consolidated and Parent Income Statement

Unit: RMB million

 

		Six-month periods ended 30 June
		2017		2016
		Consolidated	Parent	Consolidated	Parent
Operating income		1,165,837	411,410	879,220	346,149
Less:	Operating costs	942,602	306,503	665,193	237,835
	Taxes and surcharges	116,297	77,324	112,831	79,602
	Selling and distribution expenses	25,955	1,280	23,572	1,304
	General and administrative expenses	35,903	19,509	38,416	21,527
	Financial expenses	1,289	1,395	4,284	2,065
	Exploration expenses, including dry holes	4,542	4,143	4,730	4,730
	Impairment losses	4,076	3,681	1,423	1,124
Add:	Gain from changes in fair value	369	—	113	—
	Investment income	8,152	8,873	5,394	8,750
	Other income	1,321	358	—	—
Operating profit		45,015	6,806	34,278	6,712
Add:	Non-operating income	833	326	1,357	767
Less:	Non-operating expenses	816	481	875	469
Profit before taxation		45,032	6,651	34,760	7,010
Less:	Income tax expense	8,915	478	8,379	852
Net profit		36,117	6,173	26,381	6,158
Including: net profit of acquiree before the consolidation under common control		—	—	86	—
Attributable to:
Equity shareholders of the Company		27,092	6,173	19,250	6,158
Minority interests		9,025	—	7,131	—
Basic earnings per share (RMB)		0.224	N/A	0.159	N/A
Diluted earnings per share (RMB)		0.224	N/A	0.159	N/A
Net profit		36,117	6,173	26,381	6,158

Unit: RMB million

Consolidated and Parent Cash Flow Statement

Unit: RMB million

Unit: RMB million

Consolidated Statement of Changes in Equity

Statement of Changes in Equity

7.2.2

Interim financial statements prepared under IFRS

Consolidated Income Statement

Unit: RMB million

Unit: RMB million

Consolidated Statement of Comprehensive Income

Unit: RMB million

Consolidated Balance Sheet

Unit: RMB million

Consolidated Balance Sheet

Unit: RMB million

7.2.3

Differences between consolidated financial statements prepared in accordance with the accounting policies complying with ASBE and IFRS (UNAUDITED)

(1)	Effects of major differences between the net profit under ASBE and the profit for the period under IFRS are analysed as follows:

(2)	Effects of major differences between the shareholders’equity under ASBE and the total equity under IFRS are analysed as follows:

*

The figures are extracted from the consolidated financial statements prepared in accordance with the accounting policies complying with IFRS which have been audited by PricewaterhouseCoopers.

7.3	Changes in accounting polices

✓ Applicable  ☐ Not applicable

On 25 May 2017, Ministry of Finance issued Amendment to “Accounting Standards for Business Enterprises No. 16 – Government Grants”, effective from 12 June 2017. An entity shall apply the amendment to new government grants incurred from 1 January 2017 up to the effective date.

In accordance with the above amendment, an item “other income” is separately presented before the item “operating income” in the Consolidated Income Statement, which reflects the relevant government grants received during enterprise’s daily activities (such business was presented in “non-operating income” before the amendment takes effect).

7.4	The Group has no material accounting errors during the reporting period.

7.5	Changes in the scope of consolidation as compared with those for last annual report

☐ Applicable  ✓ Not applicable

7.6	Notes on the financial statements prepared under IFRS

7.6.1

Turnover

Turnover primarily represents revenue from the sales of crude oil, natural gas, petroleum and chemical products.

7.6.2

Tax expense

Tax expense in the consolidated income statement represents:

Reconciliation between actual income tax expense and the expected income tax expense at applicable statutory tax rates is as follows:

Note:

(i)

The provision for PRC current income tax is based on a statutory income tax rate of 25% of the assessable income of the Group as determined in accordance with the relevant income tax rules and regulations of the PRC, except for certain entities of the Group in western regions in the PRC are taxed at preferential income tax rate of 15% through the year 2020.

(ii)

It is mainly due to the foreign operation in the Republic of Angola (“Angola”) that is taxed at 50% of the assessable income as determined in accordance with the relevant income tax rules and regulations of Angola.

7.6.3

Basic and Diluted Earnings per Share

The calculation of basic earnings per share for the six-month period ended 30 June 2017 is based on the profit attributable to ordinary shareholders of the Company of RMB 27,915 million (2016: RMB 19,919 million) and the weighted average number of shares of 121,071,209,646 (2016: 121,071,209,646) during the period.

The calculation of diluted earnings per share for the six-month period ended 30 June 2017 is based on the profit attributable to ordinary shareholders of the Company (diluted) of RMB 27,913 million (2016: RMB 19,917 million) and the weighted average number of shares of 121,071,209,646 (2016: 121,071,209,646) calculated as follows:

(i)	Profit attributable to ordinary owners of the Company (diluted)

	Six-month periods ended 30 June
	2017	2016
	RMB million	RMB million
Profit attributable to ordinary owners of the Company	27,915	19,919
After tax effect of employee share option scheme of Shanghai Petrochemical	(2)	(2)
Profit attributable to ordinary owners of the Company (diluted)	27,913	19,917

(ii)	Weighted average number of shares (diluted)

	Six-month periods ended 30 June
	2017	2016
	Number of shares	Number of shares
Weighted average number of shares at 30 June	121,071,209,646	121,071,209,646
Weighted average number of shares (diluted) at 30 June	121,071,209,646	121,071,209,646

7.6.4

Dividends

Dividends payable to owners of the Company attributable to the period represent:

Pursuant to the Company’s Articles of Association and a resolution passed at the Directors’ meeting on 25 August 2017, the directors authorised to declare the interim dividends for the year ending 31 December 2017 of RMB 0.10 (2016: RMB 0.079) per share totaling RMB 12,107 million (2016:RMB 9,565 million). Dividends declared after the balance sheet date are not recognised as a liability at the balance sheet date.

Dividends payable to owners of the Company attributable to the previous financial year, approved during the period represent:

Pursuant to the shareholders’ approval at the Annual General Meeting on 28 June 2017, a final dividend of RMB 0.17 per share totaling RMB 20,582 million according to total shares on 18 July 2017 was approved. All dividends have been paid in July 2017.

Pursuant to the shareholders’ approval at the Annual General Meeting on 18 May 2016, a final dividend of RMB 0.06 per share totaling RMB 7,264 million according to total shares on 23 June 2016 was approved. All dividends have been paid in the six-month period ended 30 June 2016.

7.6.5

Trade Accounts Receivable and Bills Receivable

The ageing analysis of trade accounts and bills receivables (net of impairment losses for bad and doubtful debts) is as follows:

Impairment losses for bad and doubtful debts are analysed as follows:

 

Sales are generally on a cash term. Credit is generally only available for major customers with well-established trading records. Amounts due from Sinopec Group Company and fellow subsidiaries are repayable under the same terms.

Trade accounts receivable and bills receivable (net of impairment losses for bad and doubtful debts) primarily represent receivables that are neither past due nor impaired. These receivables relate to a wide range of customers for whom there is no recent history of default.

7.6.6

Trade Accounts and Bills Payables

The ageing analysis of trade accounts and bills payables are as follows:

7.6.7

Segment Reporting

(1)	Information of reportable segmental revenues, profits or losses, assets and liabilities

Information of the Group’s reportable segments is as follows: