Yanzhou Coal Mining : MAJOR AND CONTINUING CONNECTED TRANSACTIONPROVISION OF FINANCIAL SERVICES TO YANKUANG GROUP

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

兗州 煤業 股 份 有 限公 司

YANZHOU COAL MINING COMPANY LIMITED

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

(Stock Code: 1171)

MAJOR AND CONTINUING CONNECTED TRANSACTION

PROVISION OF FINANCIAL SERVICES TO YANKUANG GROUP

PROVISION OF FINANCIAL SERVICES TO YANKUANG GROUP

References are made to the announcement of the Company dated 28 April 2017 and the circular of the Company dated 2 June 2017 in relation to the entering into of the 2017 Financial Services Agreement between Yankuang Finance Company and Yankuang Group.

As the 2017 Financial Services Agreement will expire on 31 December 2019, the twenty-seventh meeting of the seventh session of the Board held on 30 August 2019 considered and approved the "Proposal in relation to the Renewal of the Financial Services Agreement between Yankuang Group Finance Co., Ltd and Yankuang Group Company Limited", approving Yankuang Finance Company to enter into the 2020 Financial Services Agreement with Yankuang Group to provide deposit services, comprehensive credit facility services and miscellaneous financial services to Yankuang Group Members, and approving the annual caps of the respective services (if applicable) within the term of the 2020 Financial Services Agreement.

According to Chapter 14A of the Hong Kong Listing Rules, the entering into of the 2020 Financial Services Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company.

IMPLICATIONS UNDER THE HONG KONG LISTING RULES

Yankuang Group is a controlling Shareholder of the Company holding directly or indirectly approximately 53.79% of the issued share capital of the Company as at the date of this announcement, and thus Yankuang Group constitutes a connected person of the Company under the Hong Kong Listing Rules.

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1. Deposit services
   As the deposit services to be provided by Yankuang Finance Company to Yankuang Group Members under the 2020 Financial Services Agreement are on normal commercial terms, and no securities over the assets of the Group is or will be granted in respect of such services, the deposit services to be provided by Yankuang Finance Company to Yankuang Group Members are fully exempt from reporting, announcement, annual review and Independent Shareholders' approval requirements under Rule 14A.90 of the Hong Kong Listing Rules, and no annual cap is required to be set for the provision of such services.
2. Comprehensive credit facility services
   As the highest applicable percentage ratio as under Rule 14.07 of the Hong Kong Listing Rules with respect to the proposed annual caps in relation to the comprehensive credit facility services under the 2020 Financial Services Agreement is more than 25% but less than 75%, such transactions, together with the proposed annual caps are subject to reporting, announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Hong Kong Listing Rules. Such transactions also constitute a major transaction of the Company under Rule 14.06(3) of the Hong Kong Listing Rules and are subject to the relevant requirements for major transactions under Chapter 14 of the Hong Kong Listing Rules.
3. Miscellaneous financial services

As all of the relevant applicable percentage ratios under Rule 14.07 of the Hong Kong Listing Rules with respect to the total services fees in relation to the provision of miscellaneous financial services by Yankuang Finance Company to Yankuang Group Members under the 2020 Financial Services Agreement are less than 0.1%, such transactions are fully exempt from reporting, announcement, annual review and Independent Shareholders' approval requirements.

A circular containing, among other things, (i) particulars of the 2020 Financial Services Agreement and the transactions contemplated thereunder, (ii) a letter from the Independent Board Committee, and (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders of the Company, and other relevant matters as required by the Hong Kong Listing Rules, is expected to be despatched to the Shareholders on or before 11 October 2019, as additional time is required to prepare certain information to be contained in the circular by the Company.

1. PROVISION OF FINANCIAL SERVICES TO YANKUANG GROUP
   1. Introduction
   References are made to the announcement of the Company dated 28 April 2017 and the circular of the Company dated 2 June 2017 in relation to the entering into of the 2017 Financial Services Agreement between Yankuang Finance Company and Yankuang Group.

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As the 2017 Financial Services Agreement will expire on 31 December 2019, the twenty-seventh meeting of the seventh session of the Board held on 30 August 2019 considered and approved the "Proposal in relation to the Renewal of the Financial Services Agreement between Yankuang Group Finance Co., Ltd and Yankuang Group Company Limited", approving Yankuang Finance Company to enter into the 2020 Financial Services Agreement with Yankuang Group to provide deposit services, comprehensive credit facility services and miscellaneous financial services to Yankuang Group Members, and approving the annual caps of the respective services (if applicable) within the term of the 2020 Financial Services Agreement.

According to Chapter 14A of the Hong Kong Listing Rules, the entering into of the 2020 Financial Services Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company.

2. 2020 Financial Services Agreement

Date

30 August 2019

Parties

1. Yankuang Finance Company; and
2. Yankuang Group

Effective Date and Term

The 2020 Financial Services Agreement shall become effective upon (1) execution by the legal representatives or authorized representatives of the parties with the official seals of the respective parties; (2) the approval from Independent Shareholders at the second extraordinary general meeting for the year 2019 of the Company, with effect from 1 January 2020 and will expire on 31 December 2022.

Major Terms and Pricing Policy

Pursuant to the 2020 Financial Services Agreement, Yankuang Finance Company shall provide the following financial services to Yankuang Group Members:

1. Deposit services
   Yankuang Finance Company shall provide deposit services to Yankuang Group Members in accordance with normal commercial terms. The Group will not provide any security over its assets or any guarantees for the deposit services.
   The interest rate for Yankuang Group Members' deposit with Yankuang Finance Company shall comply with relevant regulations of the PBOC and be determined on normal commercial terms with reference to the deposits benchmark interest rate promulgated by the PBOC periodically (if any), and the interest rate offered by the General Commercial Banks for the provision of same type of deposit services.

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1. Comprehensive credit facility services
   Yankuang Finance Company shall provide comprehensive credit facilities (including but not limited to loans, trade financing, bill acceptance and discounting, overdraft, factoring, guarantee, loan commitment, opening of letter of credit, etc.) to Yankuang Group Members with a maximum daily balance (including accrued interests) of loans of not exceeding RMB9.4 billion, RMB9.8 billion and RMB10.1 billion for each of the three years from 2020 to 2022 during the term of the 2020 Financial Services Agreement.
   The interest rate for the loan to be provided by Yankuang Finance Company to Yankuang Group Members shall comply with relevant regulations of the PBOC and be determined on normal commercial terms with reference to the loan benchmark interest rate promulgated by the PBOC periodically (if any), and the interest rate offered by General Commercial Banks for the provision of same type of loan services.
2. Miscellaneous financial services
   Yankuang Finance Company shall provide miscellaneous financial services to Yankuang Group Members which include but are not limited to, settlement services including payment and receipt, entrusted loan services, guarantee services and other auxiliary services in relation to settlement services. The total annual fees charged by Yankuang Finance Company for the provision of miscellaneous financial services to Yankuang Group Members shall not exceed RMB4 million for each of the three years from 2020 to 2022 during the term of the 2020 Financial Services Agreement.

The fees for the provision of miscellaneous financial services to Yankuang Group Members shall be charged by Yankuang Finance Company according to the prescribed rates determined by the PBOC or the CBIRC; if no such prescribed rates are available, the services fees shall be determined on normal commercial terms with reference to the fees charged by General Commercial Banks for the provision of the same type of financial services.

Yankuang Finance Company will (i) directly collect the information about the relevant rates set by the PBOC and/or the General Commercial Banks for relevant deposit and comprehensive credit facility services and the policy promulgated by the PBOC; (ii) directly collect the information about the standard fees and charges for relevant financial services as specified by the PBOC or the CBIRC (if applicable) and fees and charges provided by the General Commercial Banks so as to ensure that each transaction is conducted in accordance with the above pricing policy of the 2020 Financial Services Agreement.

In addition, according to requirements of the 2020 Financial Services Agreement, if Yankuang Group Members have not repaid a loan upon the expiry of term of such loan and in 10 working days from receiving the written repayment notice from Yankuang Finance Company, Yankuang Finance Company can convert the corresponding amounts of deposits of such Yankuang Group Members which is placed with Yankuang Finance Company as repayment of principal of such loan together with interest. If Yankuang Group Members have funding difficulty and cannot repay the principal of the loan from Yankuang Finance Company or its interest, Yankuang Group shall assume the joint liability for repayment of the principal of such loan together with interest.

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Internal Control Measures

The following internal control measures are adopted:

In terms of credit risks management, the credit approval committee of Yankuang Finance Company will conduct prior review over the proposed total credit amount and terms of the credit agreement before granting credit facilities to Yankuang Group Members. The senior management of Yankuang Finance Company will re-examine the decision making and approval procedure of the credit approval committee before providing comprehensive credit facility services to Yankuang Group Members. The audit committee of the Company will conduct quarterly review over the approval procedure and provision of the comprehensive credit facility services between Yankuang Finance Company and Yankuang Group Members. To evaluate the financial position and credit records of Yankuang Group Members, the financing planning department of Yankuang Finance Company will require Yankuang Group Members to provide financial statements on a quarterly basis and to provide monthly management accounts immediately before granting any loan to Yankuang Group Members.

In terms of information transparency, according to the requirements of China National Association of Finance Companies, Yankuang Finance Company will report data of key operating indicators and the financial statements to the association on monthly, quarterly and annual basis. China National Association of Finance Companies publishes periodically the basic operating data for finance companies sector on its official website, announces periodically the operating data and indicator ranking of finance companies with member units. Furthermore, under regulatory requirements of the CBIRC and the PBOC, Yankuang Finance Company reports and sends its financial statements to the regulators on a monthly basis. The Company will disclose the quarterly balance sheet and income statement of Yankuang Finance Company separately and disclose the operating information of Yankuang Finance Company and the provision of continuing connected transactions under the 2020 Financial Services Agreement in its interim and annual reports.

As such, the Directors consider that the above methodologies and procedures could ensure that the relevant continuing connected transactions will proceed according to the terms (including the pricing policy) required by the 2020 Financial Services Agreement, and such transactions will proceed on normal commercial terms and are in the interests of the Company and the Shareholders as a whole.

Capital Risk Control Measures

To protect the interests of the Shareholders, Yankuang Finance Company has implemented the following capital risk control measures in relation to the control of the Group's capital risk exposure:

1. Yankuang Finance Company has formulated its business management system and internal risk control system based on its needs in business operation and risk management;
2. Yankuang Finance Company has implemented capital budget control and planning management. It has tightened its centralized control over payments to monitor capital flow;

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1. Yankuang Finance Company has set up the risk indicators monitoring mechanism. The mechanism will raise monthly alert based on calculations of twenty indicators in seven aspects, such as capital adequacy, liquidity, credit risks and market risks, and will also conduct daily calculations on key indicators to ensure the risks are measurable and manageable. Yankuang Finance Company will track and manage the entire process of credit facilities to ensure that the risks before, amidst and after credit grant are measurable, and that the credit assets are financially secure.
2. Yankuang Finance Company has upgraded its capital management system to ensure the safe operation of its capital management network. Since its inception in 2010, Yankuang Finance Company has maintained a zero-mistake record in its capital settlement.

The Directors consider that the above capital risk control measures adopted by the Group in respect of the continuing connected transactions contemplated under the 2020 Financial Services Agreement are appropriate and that such procedures and measures will give sufficient assurance to the Shareholders that such continuing connected transactions will be appropriately monitored by the Company.

Payment

The payment of the relevant interests, expenses and service fees for the above services can be settled by the parties on a one-off basis or by installment in accordance with specific circumstances. Yankuang Finance Company will use internal resources to pay the relevant interests to Yankuang Group Members for the provision of deposit services.

3. Historical Amount, Proposed Annual Caps and Reasons

The historical transaction amounts of the 2017 Financial Services Agreement for the year 2017 and 2018 and for the six months ended 30 June 2019 are set out as follows:

				For the
				six months
				ended
Item	Unit	2017	2018	30 June 2019
		Actual amount	Actual amount	Actual amount
Maximum daily balance	RMB billion	8.808	9.986	10.488
of deposit
Maximum daily balance of	RMB billion	5.295	7.453	7.255
comprehensive credit facility
Aggregate miscellaneous	RMB million	0.110	1.670	0.455
financial services fees

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Having considered (i) the historical balances of loans provided by Yankuang Finance Company to Yankuang Group Members for the year 2017 and 2018 and for the six months ended 30 June 2019; and (ii) the increasing funding needs of Yankuang Group Members for investment in new projects and business expansion, the Board proposed that the maximum daily balance (including accrued interests) of loans to be provided by Yankuang Finance Company to Yankuang Group Members under the comprehensive credit facility services under the 2020 Financial Services Agreement shall not exceed RMB9.4 billion, RMB9.8 billion and RMB10.1 billion for each of the three years ending 31 December 2020, 31 December 2021 and 31 December 2022, respectivly.

Having considered Yankuang Group Members' demand for the miscellaneous financial services, the Board proposed that the maximum annual fees payable for such miscellaneous financial services under the 2020 Financial Services Agreement shall not exceed RMB4 million for each of the three years ending 31 December 2020, 31 December 2021 and 31 December 2022.

1. 4. Reasons for and Benefits of Entering Into the 2020 Financial Services Agreement

   The reasons for Yankuang Finance Company to enter into the 2020 Financial Services Agreement with Yankuang Group are as follows:

   Through the provision of financial services to Yankuang Group, Yankuang Finance Company can expand its source of capital through absorbing capitals from Yankuang Group Members, improve its profitability through providing loan and settlement services to Yankuang Group Members by means of charging loan interests and other service fees and increase its efficiency of capital utilization. At the same time, the Company can also lower its financing costs and improve its competitive edge.

   The Directors (including the independent non-executive Directors) consider that the transactions under the 2020 Financial Services Agreement (excluding the provision of comprehensive credit facility services) are entered into after arm's length negotiations and based on normal commercial terms, and therefore the terms of such transactions and the proposed caps of the annual service fees for the provision miscellaneous financial services are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

   The Directors (excluding the independent non-executive Directors, whose opinion on the matter will be given in the circular after taking into account the advice of the Independent Financial Adviser in this regard) consider that the provision of comprehensive credit facility services under the 2020 Financial Services Agreement are entered into after arm's length negotiations and based on normal commercial terms, and therefore the terms of such transactions and the proposed annual caps are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

2. GENERAL INFORMATION
   The twenty-seventh meeting of the seventh session of the Board held on 30 August 2019 considered and approved the entering into of the 2020 Financial Services Agreement by Yankuang Finance Company and the transactions contemplated thereunder.

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At the above meeting of the Board, Mr. Li Xiyong and Mr. Li Wei, also directors or senior management of Yankuang Group, are regarded as having material interests in the aforesaid 2020 Financial Services Agreement and the transactions contemplated thereunder. Therefore, Mr. Li Xiyong and Mr. Li Wei have abstained from voting at the meeting of the Board convened for the purpose of approving such transactions. Save as disclosed above, none of the other Directors has a material interest in such transactions.

The opinion of the independent non-executive Directors will be contained in the circular which will be despatched to the Shareholders after taking into account the advice of the Independent Financial Adviser.

The Company has appointed the Independent Financial Adviser to give advice to the Independent Board Committee and the Independent Shareholders and has formed the Independent Board Committee for giving advice to the Independent Shareholders on the transactions under the comprehensive credit facility services under the 2020 Financial Services Agreement and the proposed annual caps for the three years ending 31 December 2020, 31 December 2021 and 31 December 2022.

A circular containing, among other things, (i) particulars of the 2020 Financial Services Agreement and the transactions contemplated thereunder, (ii) a letter from the Independent Board Committee, and (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders of the Company, and other relevant matters as required by the Hong Kong Listing Rules, is expected to be despatched to the Shareholders on or before 11 October 2019, as additional time is required to prepare certain information to be contained in the circular by the Company.

1. IMPLICATIONS UNDER THE HONG KONG LISTING RULES
   Yankuang Group is a controlling Shareholder of the Company holding directly or indirectly approximately 53.79% of the issued share capital of the Company as at the date of this announcement, and thus Yankuang Group constitutes a connected person of the Company under the Hong Kong Listing Rules.
2. 1. Deposit services
      As the deposit services to be provided by Yankuang Finance Company to Yankuang Group Members under the 2020 Financial Agreement are on normal commercial terms, and no security over the assets of the Group is or will be granted in respect of such services, the deposit services to be provided by Yankuang Finance Company to Yankuang Group Members are fully exempt from reporting, announcement, annual review and Independent Shareholders' approval requirements under Rule 14A.90 of the Hong Kong Listing Rules, and no annual cap is required to be set for the provision of such services.
   2. Comprehensive credit facility services
      As the highest applicable percentage ratio under Rule 14.07 of the Hong Kong Listing Rules with respect to the proposed annual caps in relation to the comprehensive credit facility services under the 2020 Financial Services Agreement is more than 25% but less than 75%, such transactions, together with the proposed annual caps are subject to reporting, announcement, annual review and Independent Shareholders' approval requirements under Chapter 14A of the Hong Kong Listing Rules. Such transactions also constitute a major transaction of the Company under Rule 14.06(3) of the Hong Kong Listing Rules and are subject to the relevant requirements for major transactions under Chapter 14 of the Hong Kong Listing Rules.

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3. Miscellaneous financial services

As all of the relevant applicable percentage ratios under Rule 14.07 of the Hong Kong Listing Rules with respect to the total services fees in relation to the provision of miscellaneous financial services by Yankuang Finance Company to Yankuang Group Members under the 2020 Financial Services Agreement are less than 0.1%, such transactions are fully exempt from reporting, announcement, annual review and Independent Shareholders' approval requirements.

IV. INFORMATION OF THE PARTIES

The Company

The Company is principally engaged in the business of mining, preparation, processing and sales of coal and coal chemicals. The Company's main products are steam coal for use in large-scale power plants, coking coal for metallurgical production and prime quality low sulphur coal for use in pulverized coal injection.

Yankuang Group

Yankuang Group is a state-controlled limited liability company with a registered capital of RMB7,769.2 million and its legal representative is Mr. Li Xiyong. The principal business of Yankuang Group includes the exploration, processing, trade and provision of auxiliary services of mining (coal and nonferrous metal), high- end chemical industry, modern logistics, and engineering and technology services.

As at the date of this announcement, Yankuang Group is the controlling Shareholder of the Company, holding directly or indirectly approximately 53.79% of the issued share capital of the Company, and is hence a connected person of the Company.

Yankuang Finance Company

Yankuang Finance Company is a subsidiary of the Company registered and established in Shandong Province on 13 September 2010. As at the date of this announcement, Yankuang Finance Company is held as to 95% by the Company and 5% by Yankang Group. The principal business of Yankuang Finance Company includes provision of accounting and financing consultancy services, credit certification and related consultancy and agency services to member companies; provision of entrusted loan services among member companies, and provision of loans and finance leasing services to member companies. Yankuang Finance Company is a non- banking financial institution established with the approval of CBIRC. Yankuang Finance Company holds a finance license granted by the CBIRC.

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1. DEFINITIONS
   In this announcement, unless the context requires otherwise, the following expressions have the following meaning:

"2017 Financial Services	the financial services agreement entered into between Yankuang Finance
Agreement"	Company and Yankuang Group on 28 April 2017;
"2020 Financial Services	the financial services agreement entered into between Yankuang Finance
Agreement"	Company and Yankuang Group on 30 August 2019;
"A Share(s)"	domestic shares in the ordinary share capital of the Company, with a nominal
	value of RMB1.00 each, which are listed on the Shanghai Stock Exchange;
"associates"	has the meaning ascribed thereto under the Hong Kong Listing Rules;
"Board"	the board of Directors of the Company;
"Company"	（兗州煤業股份有限公司）
Yanzhou Coal Mining Company Limited	, a joint
	stock limited company established under the laws of PRC in 1997, and the H
	Shares and A Shares of which are listed on the Hong Kong Stock Exchange and
	the Shanghai Stock Exchange, respectively;
"CBIRC"	China Banking and Insurance Regulatory Commission;
"connected person(s)"	has the meaning ascribed thereto under the Hong Kong Listing Rules;
"Directors"	the directors of the Company;
"General Commercial	general commercial banks which provide deposit services, comprehensive
Banks"	credit facility services and miscellaneous financial services;
"Group"	the Company and its subsidiaries;
"Hong Kong Listing	the Rules Governing the Listing of Securities on the Hong Kong Stock
Rules"	Exchange;
"Hong Kong Stock	The Stock Exchange of Hong Kong Limited;
Exchange"
"H Share(s)"	overseas listed foreign invested shares in the ordinary share capital of the
	Company with a nominal value of RMB1.00 each, which are listed on the Hong
	Kong Stock Exchange;

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"Independent Board	a committee of the Board established for the purpose of considering the
Committee"	provision of comprehensive credit facility service transaction under the
	2020 Financial Services Agreement and proposed annual caps for the three
	years ending 31 December 2020, 31 December 2021 and 31 December 2022,
	comprised of independent non-executive Directors who are independent
	in respect of the 2020 Financial Services Agreement and the transactions
	contemplated thereunder;
"Independent Financial	Donvex Capital Limited, a corporation licensed to carry on type 6 (advising on
Adviser"	corporate finance) regulated activities under the SFO, being the independent
	financial adviser appointed by the Company to advise the Independent Board
	Committee and the Independent Shareholders in respect of the provision of
	comprehensive credit facility service transaction under the 2020 Financial
	Services Agreement and proposed annual caps for the three years ending 31
	December 2020, 31 December 2021 and 31 December 2022, respectively;
"Independent	Shareholders other than Yankuang Group and its associates, and who are not
Shareholders"	involved in, or interested in the provision of comprehensive credit facility
	service transaction under the 2020 Financial Services Agreement;
"PBOC"	People's Bank of China;
"PRC"	the People's Republic of China;
"RMB"	Renminbi, the lawful currency of the PRC;
"Shareholder(s)"	shareholder(s) of the Company;
"subsidiaries"	has the meaning ascribed thereto under the Hong Kong Listing Rules;
"SFO"	the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong),
	as amended, supplemented or otherwise modified from time to time;
"Yankuang Group"	Yankuang Group Company Limited, a state-controlled limited liability
	company and the controlling shareholder of the Company holding directly
	and indirectly approximately 53.79% of the total issued share capital of the
	Company as at the date of this announcement;
"Yankuang Finance	Yankuang Group Finance Co., Ltd., a limited liability company incorporated
Company"	in the PRC, which is owned as to 95% by the Company and 5% by Yankuang
	Group respectively as at the date of this announcement. Yankuang Finance
	Company is a non-banking financial institution legally established with the
	approval of the CBIRC and is a professional institution engaging in corporate
	financial services;

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"Yankuang Group	Yankuang Group, its subsidiaries and associates (excluding the Company and
Members"	its subsidiaries);
"%"	per cent.

By order of the Board

Yanzhou Coal Mining Company Limited

Li Xiyong

Chairman of the Board

Zoucheng City, Shandong Province, the PRC

30 August 2019

As at the date of this announcement, the Directors of the Company are Mr. Li Xiyong, Mr. Li Wei, Mr. Wu Xiangqian, Mr. Liu Jian, Mr. Guo Dechun, Mr. Zhao Qingchun and Mr. Guo Jun, and the independent non- executive Directors of the Company are Mr. Kong Xiangguo, Mr. Cai Chang, Mr. Poon Chiu Kwok and Mr. Qi Anbang.

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