Annual Report 2012

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Financial Statements (International) NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) for the year ended 31 December 2012 29 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES (Continued) Notes: (Continued) (e) On 1 March 2011, the Company issued convertible bonds due 2017 with an aggregate principal amount of RMB 23 billion in the PRC (the “2011 Convertible Bonds”). The 2011 Convertible Bonds are issued at par value of RMB 100 and bear a fixed interest rate of 0.5% per annum for the first year, 0.7% for the second year, 1.0% for the third year, 1.3% for the fourth year, 1.8% for the fifth year and 2.0% for the sixth year, payable annually. The holders can convert the 2011 Convertible Bonds into shares of the Company from 24 August 2011 onwards at an initial conversion price of RMB 9.73 per share, subject to adjustment for, amongst other things, cash dividends, subdivision or consolidation of shares, bonus issues, issue of new shares, rights issues, capital distribution, change of control and other events which have an effect on the issued share capital of the Company (the “Conversion Option”). Unless previously redeemed, converted or purchased and cancelled, the 2011 Convertible Bonds will be redeemed within 5 trading days after maturity at 107% of the principal amount, including interest for the sixth year. The initial carrying amounts of the liability component and the derivative component, representing the Conversion Option of the 2011 Convertible Bonds, were RMB 19,279 million and RMB 3,610 million, respectively. During the term of the 2011 Convertible Bonds, the conversion price may be subject to downward adjustment that if the closing prices of the Company’s A Shares in any fifteen trading days out of any thirty consecutive trading days are lower than 80% of the prevailing conversion price, the board of directors may propose downward adjustment to the conversion price subject to the shareholders’ approval. The adjusted conversion price shall be not less than (a) the average trading price of the Company’s A Shares for the twenty trading days prior to the shareholders’ approval, (b) the average trading price of the Company’s A Shares on the day immediately before the shareholders’ approval, (c) the net asset value per share based on the latest audited financial statements prepared under ASBE, and (d) the nominal value per share. As at 31 December 2012, the carrying amounts of the liability component and the derivative component were RMB 20,104 million (2011: RMB 20,017 million) and RMB 2,462 million (2011: RMB 2,610 million), respectively. During the year ended 31 December 2012, the conversion price of the 2011 Convertible Bonds was adjusted to RMB 6.98 per share as a result of the final dividends for the year ended 31 December 2011 and the interim dividends for the year ended 31 December 2012 declared and paid during the year. During the year ended 31 December 2012, RMB 857,033 thousand of the 2011 Convertible Bonds were converted into 117,724,450 A shares of the Company. As at 31 December 2012 and 2011, the fair value of the derivative component of the 2011 Convertible Bonds was calculated using the Binomial Model. The followings are the major inputs used in the Binomial Model: 172 Annual Report 2012 CHINA PETROLEUM & CHEMICAL CORPORATION 2012 2011 Stock price of A shares RMB 6.92 RMB 7.18 Conversion price RMB 6.98 RMB 7.28 Credit spread 120 basis points 180 basis points RMB onshore swap rate 3.66% 2.81% Any change in the major inputs into the Binomial Model will result in changes in the fair value of the derivative component. The changes in the fair value of the derivative component from 31 December 2011 to 31 December 2012 resulted in an unrealised loss of RMB 19 million (2011: an unrealised gain of RMB 1,000 million), which has been recorded in the “finance costs” section of the consolidated income statement for year ended 31 December 2012. The initial carrying amount of the liability component of the 2011 Convertible Bonds is the residual amount, which is after deducting the allocated issuance cost of the 2011 Convertible Bonds relating to the liability component and the fair value of the derivative component as at 1 March 2011. Interest expense is calculated using the effective interest method by applying the effective interest rate of 5.10% to the adjusted liability component. Should the aforesaid derivative component not been separated out and the entire 2011 Convertible Bonds been considered as the liability component, the effective interest rate would have been 2.07%.
NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2012 30 TRADE ACCOUNTS AND BILLS PAYABLES The Group The Company 2012 2011 2012 2011 RMB millions RMB millions RMB millions RMB millions Amounts due to third parties 204,535 167,207 54,209 50,622 Amounts due to Sinopec Group Company and fellow subsidiaries 6,870 6,429 2,514 4,266 Amounts due to associates and jointly controlled entities 4,223 3,366 1,004 1,597 Amounts due to subsidiaries — — 63,457 71,653 215,628 177,002 121,184 128,138 Bills payable 6,656 5,933 4,000 3,052 Trade accounts and bills payables measured at amortised cost 222,284 182,935 125,184 131,190 The maturities of trade accounts and bills payables are as follows: The Group The Company 2012 2011 2012 2011 RMB millions RMB millions RMB millions RMB millions Due within 1 month or on demand 188,822 150,949 92,241 98,469 Due after 1 month but within 6 months 33,315 31,820 32,836 32,622 Due after 6 months 147 166 107 99 222,284 182,935 125,184 131,190 31 ACCRUED EXPENSES AND OTHER PAYABLES The Group The Company 2012 2011 2012 2011 RMB millions RMB millions RMB millions RMB millions Accrued expenditures 43,091 33,849 39,504 32,373 Advances from third parties 4,309 5,989 3,785 4,473 Amounts due to Sinopec Group Company and fellow subsidiaries 11,295 9,714 9,068 7,546 Amounts due to subsidiaries — — 65,130 26,210 Others 7,421 7,167 4,892 3,630 Financial liabilities carried at amortised costs 66,116 56,719 122,379 74,232 Taxes other than income tax 33,718 47,864 28,935 41,222 Receipts in advance 68,120 65,606 57,876 61,554 Provision for onerous contracts for purchases of crude oil (Note) — 5,800 — 5,800 Derivative financial instruments – hedging 1,032 684 — — – non-hedging 76 205 36 188 169,062 176,878 209,226 182,996 Note: As at 31 December 2011, the Group has entered into certain non-cancellable purchase contracts of crude oil for delivery in 2012. Due to the high purchase costs of crude oil of these contracts, the Group determined that the economic benefits to be derived from processing the crude oil under these purchase contracts would be lower than the unavoidable cost of meeting the Group’s obligations under these purchase contracts. Consequently, a provision for onerous contracts of RMB 5,800 million was recognised as at 31 December 2011. The amount of provision for onerous contracts as at 31 December 2011 approximated the actual losses incurred from these noncancellable purchase commitment contracts during the year ended 31 December 2012 and the provision has been utilised accordingly. Management expects the economic benefits to be derived from non-cancellable purchase commitment contracts entered into by the Group as at 31 December 2012 would be higher than the unavoidable cost of meeting the obligation under these contracts. Therefore, the Group did not recognise such a provision as at 31 December 2012. 173 CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2012 Financial Statements (International)
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CONTENTS 2 Company Profile 3 Princi
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PRINCIPAL FINANCIAL DATA AND INDICA
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2 FINANCIAL INFORMATION EXTRACTED F
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(2) Information disclosed by the sh
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Sinopec Corp.’s development accel
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Business Review and Prospects BUSIN
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MANAGEMENT’S DISCUSSION AND ANALY
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The following table shows the opera
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In 2012, refining margin was RMB 15
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As at 31 December 2012, the Company
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(2) Financial data prepared under A
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(2) THE PROPOSED ISSUANCE OF A SHAR
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Significant Events SIGNIFICANT EVEN
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CONNECTED TRANSACTIONS 1 AGREEMENTS
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Decision-making procedures: The maj
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Corporate Governance CORPORATE GOVE
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REPORT OF THE BOARD OF DIRECTORS Th
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6 DIVIDEND During this report perio
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16 RISK FACTORS In the course of it
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Firstly, the Board of Directors dil
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DIRECTORS, SUPERVISORS, SENIOR MANA
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Li Chunguang Dai Houliang Liu Yun L
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The Members of the Fourth Session o
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Zou Huiping Zou Huiping, aged 52, S
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The Members of the Fourth Session o
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Lei Dianwu Ling Yiqun Lei Dianwu, a
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THE BREAKDOWN ACCORDING TO THE MEMB
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REPORT OF THE PRC AUDITOR All Share
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BALANCE SHEET as at 31 December 201
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INCOME STATEMENT for the year ended
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CASH FLOW STATEMENT for the year en
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STATEMENT OF CHANGES IN EQUITY for
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NOTES TO THE FINANCIAL STATEMENTS (
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Page 123 and 124: NOTES TO THE FINANCIAL STATEMENTS (
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Page 139 and 140: CONSOLIDATED BALANCE SHEET as at 31
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Page 193 and 194: (C) DIFFERENCES BETWEEN FINANCIAL S
Page 195 and 196: (D) SUPPLEMENTAL INFORMATION ON OIL
Page 198 and 199: Corporate Information CORPORATE INF
Page 200: Confirmation from fhe Directors and
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Annual Report 2012

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