China Petroleum & Chemical Corporation (SHA:600028, HKG:0386) (Sinopec Corp.) announced that in 2011, the National Audit Office of the People’s Republic of China (CNAO) conducted an audit review of the 2010 incomes and expenses of China Petrochemical Corporation, the controlling shareholder of Sinopec Corp. Amongst other things, the main issue involving the 2010 incomes and expenses of Sinopec Corp. was that the CNAO considered that Sinopec Tianjin Company failed to make a timely recognition of the net profits generated from the construction of 1 million-ton-per-annum ethylene and auxiliary projects, which caused a total of RMB1.44 billion not being recorded as profits into the accounts for the year of 2010. The issues revealed in this audit review had no material impact on the overall operating results and financial conditions of the company.

Sinopec Corp. stated that the 1 million-ton-per-annum ethylene and auxiliary projects of the Tianjin Company which commenced construction in 2006 were transferred to a newly-incorporated joint venture of Sinopec Corp., SINOPEC SABIC Tianjin Petrochemical Company Limited, in 2010 according to certain contractual terms. At the end of 2010, as the completion settlement of the projects was yet to be completed, in order to be prudent, Sinopec Tianjin Company did not record any profits related to the transfer of the projects. In 2011, with the procession of the completion settlement of the projects, Sinopec Tianjin Company recognized and recorded the construction costs of the projects based on the completion settlement and the earnings from the transfer of the projects.

Sinopec Corp. said the audit findings indicated that China Petrochemical Corporation managed to achieve a relatively sound implementation of the national macroeconomic policies along with a rapid development of its principal businesses, and its financial statements fairly reflected, in all material respects, a true view of the financial conditions and operating results of China Petrochemical Corporation. However, certain issues existed in terms of such aspects as accounting and management of project constructions.