Yanzhou Coal Mining : Circular

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about any of the contents of this circular or as to what action to take in relation to this circular, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Yanzhou Coal Mining Company Limited, you should at once hand this circular to the purchaser(s) or transferee(s) or to the bank, or a licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

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)

1. PROPOSAL IN RELATION TO THE 2019 INTERIM PROFIT DISTRIBUTION PLAN; AND
2. MAJOR AND CONTINUING CONNECTED TRANSACTION - PROVISION OF FINANCIAL SERVICES TO YANKUANG GROUP

Independent Financial Adviser to the Independent Board Committee and

the Independent Shareholders

The notice convening the EGM to be held at the headquarters of the Company at 298 South Fushan Road, Zoucheng, Shandong Province 273500, the PRC at 8:30 a.m. on Friday, 1 November 2019 was published on 16 September 2019.

Whether or not you are able to attend the meeting in person, you are strongly advised to complete and sign the form of proxy in accordance with the instructions printed thereon. The form of proxy shall be lodged with the Company's H Share Registrar, Hong Kong Registrars Limited at 17M/F, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong (for holders of H Shares) or the Office of the Secretary to the Board at 298 South Fushan Road, Zoucheng, Shandong Province 273500, the PRC (for holders of A Shares) as soon as possible but in any event not later than 24 hours before the time appointed for the holding of the meeting or any adjourned meeting (as the case may be).

Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjourned meeting should you so wish.

11 October 2019

	CONTENTS
		Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
I.	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
II. DETAILS OF THE 2019 INTERIM PROFIT DISTRIBUTION PLAN . . . . .	5
III. MAJOR AND CONTINUING CONNECTED TRANSACTION -
	PROVISION OF FINANCIAL SERVICES TO YANKUANG GROUP. . . .	5
IV.	EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
V.	RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
VI.	ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
IN RELATION TO CONNECTED TRANSACTION . . . . . . . . . . . . . . . . . . . . . .	17
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
IN RELATION TO CONNECTED TRANSACTION . . . . . . . . . . . . . . . . . . . . . .	19
APPENDIX I - FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . .	I-1
APPENDIX II - GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1

- i -

DEFINITIONS

In this circular, unless the context requires otherwise, the following expressions have the following meaning:

"2017 Financial Services	the financial services agreement entered into between
Agreement"	Yankuang Finance Company and Yankuang Group on
	28 April 2017;
"2019 Interim Profit Distribution	the proposed interim special cash dividend of
Plan"	RMB4,912.0 million (tax inclusive) for the first half of
	2019, being RMB1.00 per Share (tax inclusive)
	calculated on the basis of the 4,912.0 million total
	issued Shares;
"2020 Financial Services	the financial services agreement entered into between
Agreement"	Yankuang Finance 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 subscribed for and fully paid in RMB and
	are listed on the Shanghai Stock Exchange;
"associate(s)"	has the same 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 incorporated in
	the PRC 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;
"Director(s)"	the directors of the Company;
"EGM"	the 2019 second extraordinary general meeting of the
	Company to be held at the headquarters of the
	Company at 298 South Fushan Road, Zhoucheng,
	Shandong Province 273500, the PRC at 8:30 a.m. on
	Friday, 1 November 2019;

- 1 -

	DEFINITIONS
"General Commercial Banks"	general commercial banks which provide deposit
	services, comprehensive credit facility services and
	miscellaneous financial services;
"Group"	the Company and its subsidiaries;
"H Share(s)"	overseas-listedforeign-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;
"Hong Kong"	The Hong Kong Special Administrative Region of the
	PRC;
"Hong Kong Listing Rules"	the Rules Governing the Listing of Securities on the
	Stock Exchange of Hong Kong Limited, as revised
	from time to time;
"Hong Kong Stock Exchange"	The Stock Exchange of Hong Kong Limited;
"Independent Board Committee"	a committee of the Board established for the purpose of
	considering the provision of comprehensive credit
	facility services under the 2020 Financial Services
	Agreement and the proposed annual caps for the three
	financial 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 Adviser"	Donvex Capital Limited, a corporation licensed to carry
	on type 6 (advising on 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 services under the 2020
	Financial Services Agreement and the proposed annual
	caps for the three financial years ending 31 December
	2020, 31 December 2021 and 31 December 2022,
	respectively;
"Independent Shareholders"	Shareholders other than Yankuang Group and its
	associates, and who are not involved in, or interested in
	the provision of comprehensive credit facility services
	under the 2020 Financial Services Agreement;

- 2 -

	DEFINITIONS
"Latest Practicable Date"	3 October 2019, being the latest practicable date of
	ascertaining certain information contained in this
	circular before the issuing of this circular;
"PBOC"	People's Bank of China;
"PRC"	The People's Republic of China;
"RMB"	Renminbi, the lawful currency of the PRC;
"Share(s)"	A Share(s) and/or H Share(s);
"Shareholder(s)"	the shareholder(s) of the Company;
"subsidiary(ies)"	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* （兗礦集團有限公
	司）, 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
	Latest Practicable Date;
"Yankuang Finance Company"	Yankuang Group Finance Co., Ltd., a limited liability
	company incorporated in the PRC, which is owned as
	to 95% by the Company and 5% by Yankuang Group
	respectively as at the Latest Practicable Date. 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;
"Yankuang Group Members"	Yankuang Group, its subsidiaries and associates
	(excluding the Company and its subsidiaries);
"%"	per cent.

• For identification purposes only.

- 3 -

LETTER FROM THE BOARD

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)
Directors:	Registered office:
Li Xiyong	298 South Fushan Road
Li Wei	Zoucheng
Wu Xiangqian	Shandong Province
Liu Jian	PRC
Guo Dechun	Postal Code: 273500
Zhao Qingchun
Guo Jun	Principal place of business
	in Hong Kong:
Independent non-executive Directors:	40th Floor, Sunlight Tower
Kong Xiangguo	248 Queen's Road East
Cai Chang	Wanchai
Poon Chiu Kwok	Hong Kong
Qi Anbang
	11 October 2019
To the Shareholders
Dear Sir or Madam,

1. 1. PROPOSAL IN RELATION TO THE 2019 INTERIM PROFIT DISTRIBUTION PLAN; AND
   2. MAJOR AND CONTINUING CONNECTED TRANSACTION - PROVISION OF FINANCIAL SERVICES TO YANKUANG GROUP
2. INTRODUCTION
3. 
   References are made to the announcements of the Company dated 30 August 2019 in

relation to (1) the 2019 Interim Profit Distribution Plan, and (2) the entering into of the 2020 Financial Services Agreement between Yankuang Finance Company and Yankuang Group, the supplemental announcement of the Company dated 2 September 2019 in relation to the 2019 Interim Profit Distribution Plan and the notice of the EGM dated 16 September 2019.

The purpose of this circular is to provide you with the relevant information for making informed decisions in respect of the resolutions at the EGM.

- 4 -

LETTER FROM THE BOARD

1. DETAILS OF THE 2019 INTERIM PROFIT DISTRIBUTION PLAN

References are made to the announcement of the Company dated 30 August 2019 and the supplemental announcement of the Company dated 2 September 2019 in relation to the 2019 Interim Profit Distribution Plan.

In return for the long-term support of the Shareholders, after fully considering the current general operating results, the capital structure and the sustainable development of the Company, the Board proposed to declare an interim special cash dividend of RMB4,912.0 million (tax inclusive) for the first half of 2019, being RMB1.00 per Share (tax inclusive) calculated on the basis of the 4,912.0 million total issued Shares of the Company as at 3 October 2019. After distributing the interim special cash dividend, the Company will not increase its share capital by conversion of its capital reserve.

As at 30 June 2019, the undistributed profit as calculated by the Company under the Chinese Accounting Standards and the International Financial Reporting Standards was RMB45,808.5 million (unaudited) and RMB47,792.9 million (unaudited) respectively. After deducting the proposed dividend of RMB4,912.0 million, the remaining undistributed profit as at 30 June 2019 was RMB40,896.5 million under the Chinese Accounting Standards and RMB42,880.9 million under the International Financial Reporting Standards.

In accordance with the relevant regulations of the places where the Shares are listed and market practice, the 2019 interim special cash dividend is estimated to be distributed within two months after the consideration and approval of the 2019 Interim Profit Distribution Plan at the EGM (if approved). After the EGM, the Company will issue an announcement in relation to the implementation of the cash dividend distribution, determining the date of rights registration, the exdividend date and the date of distribution.

1. MAJOR AND CONTINUING CONNECTED TRANSACTION - 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, Yankuang Finance Company entered 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 in accordance with the terms of the 2020 Financial Services Agreement on 30 August 2019.

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.

- 5 -

LETTER FROM THE BOARD

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 (i) execution by the legal representatives or authorized representatives of the parties with the official seals of the respective parties; (ii) the approval from Independent Shareholders at the EGM 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.

(ii) 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 financial years from 2020 to 2022 during the term of the 2020 Financial Services Agreement.

- 6 -

LETTER FROM THE BOARD

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), the interest rate offered by General Commercial Banks for the provision of same type of loan services, and the relevant Yankuang Group Member's credit rating (as part of the Group's internal control measures as detailed in the section headed "Internal Control Measures" in the "Letter from the Board" in this circular). If the credit rating is high, the interest rate will be set at a rate lower than the loan benchmark interest rate promulgated by the PBOC but not lower than the interest rate offered by General Commercial Banks for the provision of same type of loan services. However, if the credit rating is not high, the interest rate will be set at a rate not lower than both the loan benchmark interest rate promulgated by the PBOC and the interest rate offered by the General Commercial Banks for the provision of same type of deposit services.

(iii) 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 financial 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

- 7 -

LETTER FROM THE BOARD

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 provided by Yankuang Finance Company or its interest, Yankuang Group shall assume the joint liability for repayment of the principal of such loan together with interest. Yankuang Finance Company monitors the financial position of Yankuang Group Members closely, including but not limited to conducting post-loan review on a monthly basis and refreshing loan risk classification on a quarterly basis. In addition to the provision of financial information by Yankuang Group Members as stated in the section headed "Internal Control Measures" in the "Letter from the Board" in this circular, as all Yankuang Group Members are required to provide all their settlement information to Yankuang Finance Company in compliance with the internal guidance of Yankuang Group, Yankuang Finance Company has first-hand information if there are any red-flags indicating a possibility in their respective ability to repay the loan (whether in their capacity as borrower or in Yankuang Group's capacity as guarantor).

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.

- 8 -

LETTER FROM THE BOARD

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

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; (ii) the increasing funding needs of Yankuang Group Members for investment in new projects (including, among others, the enhancement of research and development and sales and marketing capabilities and the construction of facilities for its projects) and business expansion plans (including, among others, the expansion of its logistics services trade business) in 2020; and (iii) a reasonable annual growth expectation of the funding needs of Yankuang Group Members from 2020 to 2022, 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 financial years ending 31 December 2020, 31 December 2021 and 31 December 2022, respectively.

Having considered Yankuang Group Members' increasing demand for the miscellaneous financial services due to their growing business needs in relation to new project investment plans and business expansion plans, 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 financial years ending 31 December 2020, 31 December 2021 and 31 December 2022.

- 9 -

LETTER FROM THE BOARD

Internal Control Measures

The following procedures have been adopted by the Group to 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:

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 each time before granting credit facilities to Yankuang Group Members, regardless of the size of the loan. 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.

- 10 -

LETTER FROM THE BOARD

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;
3. 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;
4. 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.

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.

- 11 -

LETTER FROM THE BOARD

Due to the long history and close working relationship between the Group and Yankuang Group, Yankuang Finance Company has a clear understanding of the financial conditions of Yankuang Group Members, thus the risk of Yankuang Finance Company in providing loans to Yankuang Group Members is low. There is also a low possibility of any dispute or litigation between Yankuang Finance Company and Yankuang Group Members regarding repayment terms of the loans as all the companies within Yankuang Group are familiar with terms and practice of loans provided by Yankuang Finance Company.

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 is formed 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.

Mr. Li Xiyong and Mr. Li Wei, Directors, also directors or senior management of Yankuang Group, are regarded as having material interests in the 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.

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 Latest Practicable Date, and thus Yankuang Group constitutes a connected person of the Company under the Hong Kong Listing Rules.

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

- 12 -

LETTER FROM THE BOARD

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.

(ii) 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.

(iii) 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.

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 Latest Practicable Date, 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.

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LETTER FROM THE BOARD

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 Latest Practicable Date, Yankuang Finance Company is held as to 95% by the Company and 5% by Yankang Group. The principal business of Yankuang Finance Company includes absorption of deposits from member companies, 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.

IV. EGM

The notice convening the EGM was published on 16 September 2019.

The following resolutions will be proposed to the Shareholders at the EGM:

As ordinary resolution:

1. To consider and approve the proposed 2019 Interim Profit Distribution Plan of the Company and to authorize the Board to distribute an aggregate special cash dividend of RMB4,912.0 million (tax inclusive), equivalent to RMB1.00 (tax inclusive) per share to the Shareholders,
2. To consider and approve the entering into of the Financial Services Agreement between Yankuang Group Finance Co., Ltd. and Yankuang Group Company Limited and to approve the major and continuing connected transactions contemplated thereunder and their annual caps (if applicable).

Whether or not you are able to attend the meeting in person, you are strongly advised to complete and sign the form of proxy dated 16 September 2019 in accordance with the instructions printed thereon. For holders of H Shares of the Company, the proxy form shall be lodged with the Company's H Share Registrar, Hong Kong Registrars Limited at 17M/F, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong. For holders of A Shares of the Company, the proxy form shall be lodged at the Office of the Secretary to the Board at 298 South Fushan Road, Zoucheng, Shandong Province 273500, the PRC as soon as possible but in any event not later than 24 hours before the time appointed for the holding of the meeting or any adjourned meeting (as the case may be). Completion and return of the proxy form will not preclude you from attending and voting in person at the meeting or any adjourned meeting should you so wish.

Yankuang Group is the controlling Shareholder, and therefore Yankuang Group and its associates are connected persons (as defined under the Hong Kong Listing Rules) of the Company. Pursuant to Rule 14A.36 of the Hong Kong Listing Rules, where independent shareholders' approval is required with regard to a connected

- 14 -

LETTER FROM THE BOARD

transaction, any connected person with a material interest in such transaction and any shareholder with a material interest in such transaction and its associates shall not vote on such transaction. Accordingly, Yankuang Group and its associates shall abstain from voting at the EGM on the resolution in relation to major and continuing connected transaction - provision of the comprehensive credit facility services to Yankuang Group, which must be taken by way of poll as required under the Hong Kong Listing Rules except where the chairman of the EGM, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands.

As at the Latest Practicable Date, Yankuang Group controlled or was entitled to exercise control over the voting rights in respect of 2,267,169,423 A Shares and 374,989,000 H Shares in the Company, representing, in aggregate, approximately 53.79% of the entire issued share capital of the Company.

To the extent that the Company is aware, having made all reasonable enquiries, as at the Latest Practicable Date:

1. 1. there was no voting trust or other agreement or arrangement or understanding entered into by or binding upon Yankuang Group, whereby they had or might have temporarily or permanently passed control over the exercise of the voting rights in respect of their Shares in the Company to a third party, whether generally or on a case-by-case basis;
   2. Yankuang Group was not subject to any obligation or entitlement whereby they had or might have temporarily or permanently passed control over the exercise of the voting right in respect of their Shares in the Company to a third party, whether generally or on a case-by-case basis; and
   3. it was not expected that there would be any discrepancy between Yankuang Group's beneficial shareholding interest in the Company and the number of Shares in the Company in respect of which they would control or would be entitled to exercise control over the voting right at the EGM.
2. RECOMMENDATION

As disclosed in the section headed "Reasons for and Benefits of Entering Into the 2020 Financial Services Agreement" in the "Letter from the Board" and the "Letter from the Independent Board Committee" in this circular, the Directors consider that the transactions under the 2020 Financial Services Agreement are entered into based on normal commercial terms, and 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.

The independent non-executive Directors have issued their independent opinion on 30 August 2019, and confirmed that the 2019 Interim Profit Distribution Plan is in the best interest of the Company and its Shareholders as a whole and beneficial to the sustainable development of the Company.

- 15 -

LETTER FROM THE BOARD

The Directors consider that the proposals relating to (1) the 2019 Interim Profit Distribution Plan; and (2) the major and connected transaction - provision of financial services to Yankuang Group are fair and reasonable and in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that all Shareholders vote in favour of the aforesaid resolutions at the EGM.

VI. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the other sections in and Appendix I and II to this circular.

By order of the Board

Yanzhou Coal Mining Company Limited

Li Xiyong

Chairman of the Board

- 16 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

IN RELATION TO CONNECTED TRANSACTION

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)

Registered office:

298 South Fushan Road

Zoucheng

Shandong Province PRC

Postal Code: 273500

Principal place of business in Hong Kong:

40th Floor, Sunlight Tower

248 Queen's Road East

Wanchai

Hong Kong

11 October 2019

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTION

PROVISION OF FINANCIAL SERVICES TO YANKUANG GROUP

We refer to the circular of the Company dated 11 October 2019 ("Circular") to the Shareholders, of which this letter forms part. Terms defined therein shall have the same meanings when used in this letter unless the context otherwise requires. We have been appointed by the Board as the Independent Board Committee to advise you as to whether, in our opinion, the provision of comprehensive credit facility services under the 2020 Financial Services Agreement and the proposed annual caps for the three financial years ending 31 December 2020, 2021 and 2022 are fair and reasonable in so far as the Independent Shareholders are concerned.

Donvex Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee in respect of the provision of comprehensive credit facility services under the 2020 Financial Services Agreement and the proposed annual caps for the three financial years ending 31 December 2020, 2021 and 2022. The letter from the Independent Financial Adviser, which contains its advice, together with the principal factors taken into consideration in arriving at such advice, are set out on pages 19 to 30 of this Circular.

- 17 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

IN RELATION TO CONNECTED TRANSACTION

Your attention is also drawn to the "Letter from the Board" set out on pages 4 to 16 of this Circular and the additional information set out in Appendix I to this Circular. Having taken into account the terms of the 2020 Financial Services Agreement in relation to provision of comprehensive credit facility services and having considered the interests of the Independent Shareholders and the advice from the Independent Financial Adviser, we consider that the provision of comprehensive credit facility services under the 2020 Financial Services Agreement and the proposed annual caps for the three financial years ending 31 December 2020, 2021 and 2022 are (i) fair and reasonable; (ii) on normal commercial terms or better and (iii) in the interests of the Company and the Shareholders as a whole. We also consider that the provision of comprehensive credit facility services under the 2020 Financial Services Agreement is in the ordinary and usual course of business of the Group.

Accordingly, we recommend that the Independent Shareholders vote in favour of the resolution to approve the provision of comprehensive credit facility services under the 2020 Financial Services Agreement and the proposed annual caps for the three financial years ending 31 December 2020, 2021 and 2022.

Yours faithfully,

Yanzhou Coal Mining Company Limited

Kong Xiangguo, Cai Chang

Poon Chiu Kwok, Qi Anbang

Independent Board Committee

- 18 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

The following is the full text of the letter from Donvex Capital Limited setting out their advice to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

Unit 1305, 13th Floor

Carpo Commercial Building

18-20 Lyndhurst Terrace

Central

Hong Kong

11 October 2019

The Independent Board Committee and the Independent Shareholders of Yanzhou Coal Mining Company Limited

Dear Sir/Madam,

MAJOR AND CONTINUING CONNECTED TRANSACTION PROVISION OF COMPREHENSIVE CREDIT FACILITY SERVICES TO YANKUANG GROUP

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the provision of comprehensive credit facility services under the 2020 Financial Services Agreement, details of which are set out in the letter from the Board (the "Letter from the Board") contained in the circular of the Company dated 11 October 2019 to the Shareholders (the "Circular"), of which this letter forms part. Terms used herein have the same meanings as those defined in the Circular unless otherwise stated.

Reference is made to the announcement of the Company dated 30 August 2019 in relation to the 2020 Financial Services Agreement.

As the 2017 Financial Services Agreement will expire on 31 December 2019, on 30 August 2019, Yankuang Finance Company and Yankuang Group entered into the 2020 Financial Services Agreement, pursuant to which the Yankuang Finance Company will provide a range of financial service, including deposit services, comprehensive credit facility services and miscellaneous financial services, to Yankuang Group Member for the three years ending 31 December 2022.

As stated in the section headed "Implication under the Hong Kong Listing Rules" in the Letter from the Board, the provision of deposit services and miscellaneous financial services by Yankuang Finance Company to Yankuang Group Members are fully exempt from reporting, announcement, annual review and Independent Shareholders' approval requirements pursuant to the Hong Kong Listing Rules. In this regard, we have been appointed as the Independent Financial Adviser to give our advice to the Independent Board

- 19 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

Committee and the Independent Shareholders on the provision of comprehensive credit facility services under the 2020 Financial Services Agreement, including the proposed annual caps for the three years ending 31 December 2022.

As at the Latest Practicable Date, 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 Yankuang Finance Company is a non-wholly owned subsidiary of the Company. Accordingly, Yankuang Group is a connected person of the Company under Rule 14A of the Listing Rules and the entering into of the 2020 Financial Services Agreement and the transactions contemplated thereunder constitute continuing connected transactions for the Company under Chapter 14A of the Hong Kong Listing Rules.

As the highest applicable percentage ratio for the provision of comprehensive credit facility services under the 2020 Financial Services Agreement is more than 25% but less than 75% on an annual basis for the three years ending 31 December 2022, the provision of comprehensive credit facility services constitutes a major transaction under Rule 14.06(3), and are subject to the reporting, annual review, announcement and Independent Shareholders' approval requirements under the Chapter 14 of the Listing Rules.

Mr. Kong Xiangguo, Mr. Cai Chang, Mr. Poon Chiu Kwok and Mr. Qi Anbang, the independent non-executive Directors, have been appointed as members of the Independent Board Committee to advise the Independent Shareholders on whether the provision of comprehensive credit facility service, including the proposed annual caps, is in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole, and how the Independent Shareholders should vote in respect thereof. In our capacity as the Independent Financial Adviser, our role is to advise the Independent Board Committee and the Independent Shareholders in such regard.

OUR INDEPENDENCE

As at the Latest Practicable Date, we did not have any relationship with or interest in the Company or any other parties that could reasonably be regarded as relevant to our independence. In addition to our engagement as the Independent Financial Adviser, Donvex Capital Limited has also acted as a financial adviser to the then Board in relation to the consent letter of profit forecast adopted in the valuation of 100% equity interest in Shanghai Dongjiang Properties Development Company Limited* （上海東江房地產開發有限公司）over the last two years.

We are independent from and not connected with the Group pursuant to Rule 13.84 of the Listing Rules and, accordingly, are qualified to advise the Independent Board Committee and the Independent Shareholders in respect of the 2022 Financial Services Agreement and transactions contemplated thereunder. Apart from the normal advisory fee payable to us in connection with our appointment as the Independent Financial Adviser, no arrangement exists whereby we shall receive any other fees or benefits from the Company.

- 20 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

BASIS OF OUR OPINION

In formulating our opinion, we consider that we have reviewed sufficient and relevant information and documents and have taken reasonable steps as required under Rule 13.80 of the Listing Rules to reach an informed view and to provide a reasonable basis for our recommendation. We have relied on the information, statements, opinion and representations contained or referred to in the Circular and all information and representations which have been provided by the Company, the Directors and the management of the Company, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so at the date hereof. We have also assumed that all statements of belief, opinion and intention of the Directors as set out in the Letter from the Board contained in the Circular were reasonably made after due and careful inquiry. We have also sought and obtained confirmation from the Company that no material facts have been omitted from the information provided and referred to in the Circular.

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, that the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no material facts and representations the omission of which would make any statement in the Circular or the Circular misleading.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, or its subsidiaries or associates, nor have we carried out independent verification on the information supplied.

Our opinion is based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

This letter is issued for the information of the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the 2022 Financial Services Agreement and transactions contemplated thereunder and, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

- 21 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. BACKGROUND OF THE PARTIES
   1. Information on the Group

The Group is principally engaged in the business of mining, preparation, processing and sales of coal and coal chemicals. The main products of the Group include steam coals for use in large-scale power plants, coking coals for metallurgical production and prime quality low Sulphur coals for use in pulverized coal injection.

2. Information on Yankuang Group

Yankuang Group is a state-owned corporation and principally engaged in 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.

3. Information on Yankuang Group Finance

As stated in the Letter from the Board, Yankuang Finance Company is a non-banking financial institution legally established with the approval of the China Banking Regulatory Commission (the "CBRC"), principally engaged in the provision of deposit services to member companies; 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. As at the date of this announcement, Yankuang Finance Company is held as to 95% by the Company and 5% by Yankang Group respectively.

1. THE PROVISION OF COMPREHENSIVE CREDIT FACILITY SERVICES UNDER THE 2020 FINANCIAL SERVICE AGREEMENT
   1. Background

As the 2017 Financial Services Agreement will expire on 31 December 2019, on 30 August 2019, Yankuang Finance Company and Yankuang Group entered into the 2020 Financial Services Agreement, pursuant to which Yankuang Finance Company will provide a range of financial services, including but not limited to the provision of comprehensive credit facility services, to Yankuang Group Members for the three years ending 31 December 2022.

- 22 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

2. Major terms

The section below sets forth the principal terms of the provision of comprehensive credit facility services under the 2020 Financial Services Agreement.

Date

30 August 2019

Parties

1. Yankuang Finance Company; and
2. the Yankuang Group

Term

Three years commencing from 1 January 2020 to 31 December 2022

Provision of comprehensive credit facility services

Pursuant to the 2020 Financial Services Agreement, Yankuang Finance Company shall provide Yankuang Group Members with comprehensive credit facilities, including but not limited to loan services, bill acceptance and discounting services and guarantee services.

Payment terms

The payment of the relevant interests, expenses and service fees for the provision of comprehensive credit facility services shall be settled on a one-off basis or by installment in accordance with specific circumstances.

Pricing terms

Pursuant to the 2020 Finance Service Agreement, the interest rates charged by Yankuang Finance Company for the provision of comprehensive credit facility services is determined with reference to (i) the benchmark loan interest rates published from time to time by the People's Bank of China (the "PBOC"); and

1. the interest rates offered by the General Commercial Banks for the provision of same type of loan services. In addition, the interest rate to Yankuang Group Members is offered by Yankuang Finance Company after taking into account the credit rating of the Yankuang Group Members who seek for loan services from Yankuang Finance Company. Based on the credit rating, a reasonable adjustment on the benchmark loan interest may be made by Yankuang Finance Company with reference to the interest rate offered by the General Commercial Banks.

- 23 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

Assessment on internal control procedures of pricing and payment terms

In order to assess the fairness and reasonableness of the pricing and payment terms of the provision of comprehensive credit facility services, we have obtained and reviewed (i) the relevant invoices of three historical transactions in respect of the provision of comprehensive credit facility services by Yankuang Finance Company to Yankuang Group Members (the "Transaction Comparables"); (ii) the relevant benchmark interest rates in relation to the comprehensive credit facility services stipulated by the PBOC in the same period of the Transaction Comparables; and (iii) the relevant records of the interest rates in relation to comprehensive credit facility services offered by the General Commercial Banks in the same period of the Transaction Comparables collected by Yankuang Finance Company (the "Banks Comparables"). As the Transaction Comparables include all three categories of credit rating with different interest rates determined by Yankuang Finance Company, we are of the view that the Transaction Comparables were selected on a sufficient and representative basis to conduct our assessment on the internal control procedures.

Pricing

In respect of the pricing terms, we note that the interest rates charged by Yankuang Finance Company to those Transaction Comparables under the 2017 Financial Service Agreement were 4.35%, 3.915% and 3.48% respectively, which are (i) with reference to the benchmark interest rate of 4.35% stipulated by the PBOC; and (ii) in line with or no less favorable than the interest rates of 3.48% offered by the Banks Comparables for the same type of loan services.

Payment

In respect of the payment terms, we note that the payment terms offered by Yankuang Finance Company to those Transaction Comparables under the 2017 Financial Service Agreement were on a monthly basis, which are (i) with reference to the relevant regulations published by the PBOC and/or CBRC stating the payment terms for the same type of loan services shall be settled on a monthly basis; and (ii) in line with the major payment terms (i.e. on a monthly basis) offered by the Banks Comparables for the same type of loan services.

Views

Based on the above assessment on the internal control procedures of pricing and payment under the 2017 Finance Service Agreement and having considered that the Group will continue to implement such internal control procedures as stated under the section in this letter headed "Internal Control Procedures", we are of the view that the pricing and payment terms for the provision of comprehensive credit facility services under the 2020 Finance Service Agreement

- 24 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

are (i) on normal commercial terms after arm's length negotiation; and (ii) fair and reasonable as far as the Company and Independent Shareholders are concerned.

3. Reasons for and benefits of the provision of comprehensive credit facility services under the 2020 Financial Service Agreement

To justify the reasonableness and fairness of the provision of comprehensive credit facility services under the 2020 Financial Service Agreement, we have considered the following facts and circumstances:

1. Pursuant to the 2020 Financial Service Agreement, Yankuang Finance Company will continue to provide deposit services to Yankuang Group for the three years ending 31 December 2022. These deposits received from the Yankuang Group Members represent a substantial amount of capitals for Yankuang Finance Company. As at 31 December 2018, Yankuang Finance Company had the deposits received from customers amounted to approximately RMB21,622.9 million.
   By leveraging on the provision of comprehensive credit facility services, e.g. loans and bill acceptance and discounting services, Yankuang Finance Company may utilise the idle cash in the most efficient manner to generate interest and service fee income and ultimately improve the revenue base for the Group; and
2. Due to the long history and close working relationship between the Group and Yankuang Group, Yankuang Finance Company has been familiar with the business operation of Yankuang Group and is able to obtain sufficient information, in particular the financial performance and position, of Yankuang Group Members in order to conduct a credit assessment before granting loan services to applicants. Besides, the interest rate of loans may vary for different Yankuang Group Members as a result of the credit assessment to mitigate the default risk.
   In addition, based on the information available in the website of China Foreign Exchange Trade System & National Interbank Funding Centre, the latest corporate credit rating of Yankuang Group is "AAA" indicating a strong capacity to meet financial commitments with a minimal risk of default.

Views

Based on the above, we concur with the Directors that the 2020 Financial Service Agreement and the transactions contemplated under are conducted in the ordinary and usual course of the business of the Group, and in the interest of the Shareholders and the Company as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

4. Historical transaction amounts and proposed annual caps

In determining the proposed annual caps for the provision of comprehensive credit facility services for the three years ending 31 December 2020, the management of the Company has taken into account (i) the historical amounts of comprehensive credit facility services provided by Yankuang Finance Company to Yankuang Group; and (ii) the expected business growth and financing demand of Yankuang Group Members in the forthcoming years.

The table below sets out (i) the actual amounts for the transactions completed for the provision of comprehensive credit facility services for the two years ended 31 December 2018 and the six months ended June 2019; and (ii) the proposed annual caps for the three years ending 31 December 2022.

Historical Annual Caps and

Actual Transaction Amount

Proposed Annual Caps

For the year ended

For the year ending

31 December

31 December

2017

2018

2019

2020

2021

2022

RMB

RMB

RMB

RMB

RMB

RMB

million

million

million

million

million

million

Provision of

comprehensive credit

facility services:

Annual cap

7,100

7,500

8,000

9,400

9,800

10,100

Actual Transaction

Amount

5,295

7,453

7,255

(Note)

Utilisation Rate

74.6%

99.4%

90.7%

(Note)

Note: The actual transaction amount of RMB7,255 million for the provision of comprehensive credit facility services, representing a utilisation rate of 90.7% of the annual cap for the year ending 31 December 2019, was recorded by the Group for the six months ended 30 June 2019.

Actual transaction amounts

As shown in the table above, the actual transaction amounts for the two years ended 31 December 2018 were approximately RMB5,295 million, RMB7,453 million, representing a utilization rate of 74.6% and 99.4% of the respective annual cap. The Group recorded a transaction amount of approximately RMB7,255 million for the six months ended 30 June 2019, representing a utilisation rate of 90.7% of the annual cap for the year ending 31 December 2019. After discussion, we understand that the management of Yankuang Finance

- 26 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

Company has been fully aware of latest utilisation rate and confirmed that the actual transaction amount for the year ending 31 December 2019 would not exceed the annual cap.

Assessment on the proposed annual caps

To assess the propose annual caps for the provision of comprehensive credit facility service of RMB9,400 million, RMB9,800 million and RMB10,100 million for the years ending 31 December 2020, 2021 and 2022 respectively, we have considered the following factors:

1. The annual cap is expected to increase from RMB8,000 million for the year ending 31 December 2019 to RMB9,400 million for the year ending 31 December 2020 mainly due to the increase in funding demand of Yankuang Group Members.
   Yankuang Finance Company has been working closely with Yankuang Group Members in order to better estimate the transaction amounts for provision of comprehensive credit facility services. We have reviewed the breakdown of the forecast for comprehensive credit facility services in 2020 provided by Yankuang Finance Company demonstrating that a total of 14 Yankuang Group Members has confirmed to further expand the business with Yankuang Finance Company with a total expected increase in transaction amount of approximately RMB1,400 million for the year ending 31 December 2020 as a result of their growing funding demand for certain projects in the PRC, such as coal-to-liquids,high-end aluminum materials and BeiDou satellite communication system. As such, it is reasonable for the Group to estimate the annual cap to be RMB9,400 million for the year ending 31 December 2020; and
2. In respect of the annual cap for the years ending 31 December 2022, we understand that Yankuang Group intends to further develop the coal-to-liquids ("CTL") technologies to meet the demand for clean energy in the PRC by increasing the investment in CTL-related projects located in Yulin, Shanxi of the PRC for the next five years. In addition, Yankuang Group will continue to develop (i) the high-end aluminum materials project located in Jining of the PRC to cater for the raw material demand for manufacturing of high speed railways in the PRC; and (ii) the BeiDou satellite communication project located in Xi'an of the PRC for the construction of "5G" mobile network technology applied in mining. As a result, Yankuang Group plans to demand for more loan financing, bill acceptance and discounting services from Yankuang Finance Company to facilitate its business development during 2020 to 2022.

- 27 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

Having considered the expected business development of Yankuang Group for the following years, we are of the view that the annual caps of RMB9,800 million and RMB10,100 million, representing a respective growth rate of 4% and 3%, for the years ending 31 December 2021 and 2022 have been determined on a fair and justifiable basis.

As stated above, since the basis of estimation in the annual caps for the three years ended 31 December 2022 is fair and justifiable, we concur with the Directors that the proposed annul caps for provision of comprehensive credit facility services under the 2020 Finance Service Agreement is fair and reasonable, on normal commercial terms or better, in ordinary and usual course of business and in the interest of the Company and its Shareholders as a whole.

5. Internal control procedures

As stated in Letter from the Board, Yankaung Finance Company has a set of internal control measures in place to ensure the continuing connected transactions will be conducted in accordance with the terms provided under the 2020 Financial Services Agreement including but not limited to the followings:

1. The Yankuang Finance Company will (a) directly collect the relevant interest rates stipulated by the PBOC and/or the General Commercial Banks for provision of loans service; and (b) directly collect the relevant standard fees stipulated by the PBOC and/or the General Commercial Banks for provision bill acceptance and other financial services so as to ensure each transaction of comprehensive credit facility services is conducted in accordance with the pricing policy under the 2020 Financial Service Agreement;
2. Prior to each financial service provided to Yankuang Group Members, the price management committee of Yankuang Finance Company will review and compare the interest rates and service fees collected by the financing plan department. As such, the price management committee will (a) make sure the pricing policy as described above are properly complied with; and (b) approve the final interest rates and services fees to Yankuang Group Members;
3. The audit committee of the Company will quarterly review the continuing connected transactions between Yankuang Finance Company and the Yankuang Group;
4. According to the 2020 Financial Services Agreement, in the event that Yankuang Group Members have not repaid a loan within 10 working days from receiving the written repayment notice from Yankuang Finance Company, Yankuang Finance Company could directly convert the full amount of funds that such Yankuang Group Members have deposited in Yankuang Finance Company as the repayment of principal of the loan together with its interest as Yankuang Finance Company closely monitors

- 28 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

and is well-informed about the financial position of Yankuang Group and Yankuang Group Members. In addition, if the Yankuang Group Members have difficulty in repaying the loans and/or the relevant interests, the Yankuang Group shall undertake the joint liability for repayment of the principal of such loan and interest; and

1. To improve the information transparency, Yankuang Finance Company will report the key operating indicators and financial statements to China National Association of Finance Companies （中國財務公司協會, the "CNAFC") on monthly, quarterly and annual basis. Meanwhile, CNAFC publishes from time to time the basic operating data for the finance companies sector on its official website, and announces the operating indicators and rankings of finance companies to its members. Furthermore, pursuant to the regulatory requirements of the CBRC and the PBOC, Yankuang Finance Company is required to submit its financial statements to the regulators on a monthly basis;

Besides, the financial results of Yankuang Finance Company and the continuing connected transactions under the 2020 Financial Service Agreement will be separately disclosed in the interim and annual reports of the Company.

In light of the above and based on our review on relevant documents provided by the Group, including:

1. the records collected by Yankuang Finance Company in relation to the interest rates and standard fees stipulated by PBOC and/or the General Commercial Banks;
2. the approval records of the price management committee of Yankuang Finance Company for the provision of comprehensive credit facility services to Yankuang Group Members;
3. the agreements in relation to provision of loan services entered into between Yankuang Finance Company and Yankuang Group Members which stipulated that Yankuang Group shall provide guarantee to Yankuang Group Members and undertake the joint liability for repayment of the principal of such loan and interest in the event that Yankuang Group Members have difficulty in the repayment; and
4. the records in relation to the monthly submission of the financial statements and key operating indicators to CNAFC,

we concur with the view of the Directors that the internal control measures for the provision of comprehensive credit facility services have been properly implemented, and are sufficient to safeguard the interest of the Company and Independent Shareholders.

- 29 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IN RELATION TO CONNECTED TRANSACTION

RECOMMENDATION

Having considered the abovementioned principal factors and reasons, we are of the view that the terms and conditions for the provision of comprehensive credit facility services under the 2020 Financial Services Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole and in the ordinary and usual course of business of the Group.

Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders, and we also recommend the Independent Shareholders, to vote in favour of the ordinary resolution(s) to be proposed at the EGM to approve the provision of comprehensive credit facility services under the 2020 Financial Services Agreement, including the proposed annual caps for the three years ending 31 December 2022.

Yours faithfully,

For and on behalf of

Donvex Capital Limited

Doris Sy

Director

Ms. Doris Sy is a person licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO and is a responsible officer of Donvex Capital Limited who has over 18 years of experience in corporate finance industry.

* For identification purpose only

- 30 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. THREE-YEAR FINANCIAL INFORMATION OF THE GROUP

The Company is required to set out in this circular the information for the last three financial years with respect to the profits and losses, financial record and position, set out as a comparative table and the latest published audited balance sheet together with the notes on the annual accounts for the last financial year for the Group.

The audited consolidated financial statements of the Group for the years ended 31 December 2016, 2017 and 2018 together with the accompanying notes to the financial statements, can be found on pages 147 to 281 of the annual report of the Company for the year ended 31 December 2016, pages 154 to 287 of the annual report of the Company for the year ended 31 December 2017 and 167 to 331 of the annual report of the Company for the year ended 31 December 2018. The links are as follows:

https://www1.hkexnews.hk/listedco/listconews/sehk/2017/0406/ltn20170406660.pdf

https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0403/ltn201804031358.pdf

https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0329/ltn201903292452.pdf

The unaudited consolidated financial statements of the Group for the six months ended 30 June 2019 together with the accompanying notes to the financial statements, can be found on pages 107 to 153 of the interim report of the Company for the six months ended 30 June

2019. The link is as follows:

https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0830/ltn20190830588.pdf

2. STATEMENT OF INDEBTEDNESS OF THE GROUP

At the close of business on 31 August 2019, being the latest practicable date for the purpose of this statement of indebtedness prior to the date of this circular, the bank and other borrowings of the Group comprise the following:

		RMB'000
Unsecured borrowing	18,114,496
Secured borrowing	20,807,260
Guaranteed notes	19,513,025
	58,434,781

The secured borrowings were secured by the Group's bank deposits and other assets.

Contingent liabilities

As at 31 August 2019, the Group has provided guarantees with respect to the performance and operation of the Group, joint operations and related parties amounting to RMB6,523 million.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

On 24 May 2019, the 2018 annual general meeting of the Company approved the Company to apply to the Shanghai Stock Exchange for issuance of various types of corporate bonds of not more than RMB20 billion, including but not limited to ordinary corporate bonds, renewable bonds and green corporate bonds (the "Authorised Corporate Bonds Issue"). As at 31 August 2019, the Company did not issue any corporate bond under the Authorised Corporate Bonds Issue.

Save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of business, as of 31 August 2019, the Group did not have any other debt securities issued and outstanding, or authorised or otherwise created but unissued, loans or term loans (secured, unsecured, guaranteed or otherwise), other borrowings or indebtedness in the nature of borrowings including bank overdrafts and liabilities under acceptances (other than normal trade bills), acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, guarantees or other material contingent liabilities.

The Directors confirmed there was no material adverse change in the indebtedness and contingent liabilities of the Group since 31 August 2019, being the date for determining the Group's indebtedness.

3. SUFFICIENCY OF WORKING CAPITAL

The Directors are of the view that after taking into account of the internal resources of and credit facilities available to the Group, the Group will have sufficient working capital to satisfy its present requirements, that is, for at least the next 12 months from the date of this circular in the absence of unforeseen circumstances.

4. BUSINESS TREND AND FINANCIAL AND TRADING PROSPECTS OF THE GROUP

In the second half of 2019, the macro economy environment is expected to be more complex and severe, the US-China trade frictions will exert continuous impact, and Chinese economy is facing increasing downward pressure. Chinese coal industry is confronted with even more stringent environmental protection inspections from relevant authorities, and regional coal market will become more competitive. The Group will proactively seize the opportunities brought by the replacement of the old growth drivers with new ones, adapt itself to the changes and meet the challenges, and continuously optimize operation strategy, to make the main coal business a premium and big one, expedite the release of the advanced production and implement in-depth lean management. The Group endeavors to realize the full-year business objectives in the process of economic structural adjustment and industry transformation and reorganization, and promote quality development.

Focus on coal business with clear strategic positioning. Seize the economic development opportunities, strengthen resources integration, optimize industry structure; unswervingly focus on the coal business, and continue to enhance the efficiency of resource

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

allocation and profitability of the coal business, so as to enhance the Group's core competitiveness and maintain long-term sustainable development capacities.

Strengthen intensive efficiency to ensure production increase and efficiency improvement. The Headquarter base will further implement "three reductions and three improvements" and the integration of automation, informationization and intelligentization, accelerate the construction of intelligent workface and transportation system, and thus to secure balanced and stable production by means of well-planned and precise mining; The Inner Mongolia base, centering on the strategic positioning of ten million tonnes of mine industry cluster, is expected to accelerate the project construction and the relevant license approvals so as to release the advantageous production capacity of its three coal mines with productivity of ten million tonnes per annum each. The Australia base will optimize the increments and fulfil reduction while maintain the good momentum of development, so as to improve the overall operation efficiency.

Optimize product structure to achieve quality and efficiency improvement. Give priority to efficiency, fully tap the potentials of the added value of the products and comprehensively enhance our market competitiveness and marketing profitability. Adhere to clean coal strategy: strictly implement 100% raw coal washing and increase technical support for clean coal production and coal preparation so as to increase the productive rate of quality clean coal; develop and expand high-price clean coal market while maintaining traditional clean coal market share to improve the overall profitability of clean coal. Adhere to coal blending strategy. Coordinate self-produced and out-sourced coal resources and all types of coal products as a whole, fully strengthen coal blending work so as to maximize synergy efficiency. Adhere to coal slurry reduction strategy. Optimize the coal slurry drying technology, adopt measures to reduce coal slurry at the source and enhance internal allocation for utilization so as to "squeeze the last profit and tap every potential to improve efficiency".

Strengthen cost control to reduce cost and increase efficiency. Strengthen target cost management, decompose cost control objectives of the whole process, formulate and implement precise control measures, and strive to maintain the cost of main products at a stable level. Reduce cost by taping potentials: continue to implement the "three benchmarking" activities of unit consumption of materials, equipment energy consumption, equipment utilization rate and idle rate; intensify efforts to clear warehouses and improve the turnover rate of equipment, so as to realize the synergetic sharing and efficient utilization of the materials. Reduce cost by saving expenses: give full play to the rigid control function of financial sharing platform, and effectively reduce controllable expenses; further optimize the debt structure and minimize financial expenses to the largest extent. Reduce cost by streamlining: continue to optimize the allocation of human resources, reduce posts by automation, improve efficiency by informatization and replace labor by intelligentization, improve the efficiency of posts allocation and management, so as to release the new vitality of streamlining and fitness.

Focus on synergy and integration to promote inherent strength. Prudently carry out the "Double Hundred Initiatives" of state-owned enterprises reform, and stimulate the vitality of micro business bodies and the internal impetus of the Company; improve the corporate governance system of the subsidiaries of the Company in an orderly manner to improve the

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

level of standard operation; comprehensively promote the fully market-based development, sufficiently unleash the full potential of the market, and improve the economic efficiency and operation quality of the Company; continue to promote clean and efficient use of coal, build high-standard demonstration projects for ecological restoration in coal mine subsidence areas, and create a new name card of "safe, efficient, clean and green".

5. POSSIBLE RISKS OF THE GROUP

Risks arising from safety management

The three main business sectors of the Company, namely coal mining, coal chemicals and power generation, are all of high hazardous nature and of complex uncertainties, thus the risk of safety management can easily arise.

Solutions: The Company will proactively promote an integrated mechanism of safety risks management and control by levels and hidden dangers inspection and prevention, giving priority to dynamic management over major systematic risks and occasional accidental risks; adhere to develop the risk dual pre-control system platform, and realize risks identification modelized management, enclosed treatment of risks and hidden dangers as well as pre-alarming of risks and hidden dangers; proactively respond to the safety inspections by safety supervision and management authorities, and make analysis and implement countermeasures to rectify the problem raised by the authorities; strengthen assessment and accountability system construction, implementing stringent grid safety supervision, improving the effectiveness of safety inspection and enhancing safety accountability and safety performance assessment.

Risks arising from trade

As the Company's trade business is affected by national macro-policy adjustment, market price fluctuation, customer integrity and financial strength, internal control and management of the Company, etc. If internal control is not in place, and the partner breaches the contract, etc., it will cause great loss to the Company and have a negative impact on the Company's reputation.

Solutions: The Company will optimize mode of trade business, increase the proportion of modern logistics and trade, and further expand business modes of combination of futures trading and spot trading, supply chain financing and etc.; Given the premise of risks under control, gradually develop trade business focusing on coal, coking coal, steel and construction industries, and facilitate synergy with the main business of the Company; improve customer evaluation mechanism, promote tracking and maintaining relationship with creditable customers, know about the dynamic production and operation of the customers and establish customer filing and rating system for long-term customers; strengthen the supervision and inspection of key links such as contract signing, contract performance, strengthen the dynamic tracking of contract performance, enhance risks prevention and control during the trade process; improve the capability of the trade staff by proactively employing talented people and enhancing staff training.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Risks arising from exchange rate

The pace of cross-border development of the Company has been significantly accelerated in recent years, and the proportion of foreign exchange assets has significantly increased. The Company's overseas financing, overseas investment, international trade and other business are all affected by exchange rate fluctuations, which bring many uncertainties on the Company's economic benefits and strategic development.

Solutions: The Company will strengthen foreign exchange staff training, introduce external personnel proficient in foreign exchange management, improve the Company's foreign exchange management capabilities; will explore to establish cooperation mechanisms with professional institutions to strengthen the ability to predict and give early warning of exchange rate fluctuations; will use multiple financial platforms and derivative financial instruments to deal with the exchange rate fluctuations within the settlement time difference and reduce risks arising from exchange rate fluctuations.

Risks arising from environmental protection

In recent years, new laws, regulations and policies related to environmental protection have been continuously introduced, and the requirements for environmental protection have been more and more stringent, which in turn further increased the risks from environmental protection. In the event of an environmental incident, the Company may undergo production interruption and will also face severe penalties such as fines, suspension of production for rectification, and even criminal accountability, which will have a negative impact on the Company's reputation.

Solutions: The Company will formulate an environmental target responsibility system, that is, to clarify roles responsibilities, strictly implement various tasks, sign a letter of responsibility at each level, and strengthen supervision and evaluation. The Company will accurately understand environmental protection laws, regulations and policies, investigate in advance and collect relevant technical solutions, and actively promote facility upgrades to ensure compliance with legal and regulatory standards. The Company will strengthen the tracking, scheduling and summarization of environmental protection work, carefully analyse the causes of the problems and formulate solutions in a timely manner. The Company will strengthen the construction of existing environmental protection talents, and continuously optimize the personnel structure. The Company will pragmatically carry out environmental protection business training and improve the staff's business level.

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APPENDIX II

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTEREST

Shareholding of Directors, chief executive and supervisors of the Company

As at the Latest Practicable Date, save as disclosed below, none of the Directors, chief executive or supervisors of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (i) which are required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO); or (ii) which are required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or

1. which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Hong Kong Stock Exchange.

		Number of A
		Shares held as
		at the Latest
		Practicable
Name	Title	Date
		(Shares)
Li Xiyong	Director, Chairman of the Board	10,000
Li Wei	Director, Vice Chairman of the Board	10,000
Wu Xiangqian	Director, General Manager	10,000
Guo Jun	Employee Director	10,000
Gu Shisheng	Supervisor, Chairman of the	10,000
	Supervisory Committee
Jiang Qingquan	Employee Supervisor	10,000
Wang Fuqi	Chief Engineer	10,000
Zhao Honggang	Deputy General Manager	10,000

All the interests disclosed above represent long position in the A Shares.

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APPENDIX II

GENERAL INFORMATION

As at the Latest Practicable Date, Mr. Li Xiyong and Mr. Li Wei are directors or employees of Yankuang Group, the controlling shareholder of the Company having an interest in the Company's Shares required to be disclosed to the Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2018, being the date to which the latest published audited accounts of the Group were made up.

4. CONSENT AND QUALIFICATIONS OF EXPERT

The following is the qualification of the expert who has given opinion or advice which is contained in this circular:

Name	Qualification
Donvex Capital Limited	a corporation licensed to carry on type 6 (advising
	on corporate finance) regulated activities under
	the SFO

The expert referred to above has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter or statements and references to its name in the form and context in which it appear.

As at the Latest Practicable Date, the above expert was not beneficially interested in the share capital of any member of the Group nor did it has any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, the above expert did not have any direct or indirect interest in any assets which have been, since 31 December 2018 (being the date to which the latest published audited financial statements of the Group were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

5. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had any existing or proposed service contract with any member of the Group which will not expire or is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

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APPENDIX II

GENERAL INFORMATION

6. DIRECTORS' INTERESTS IN THE GROUP'S ASSETS OR CONTRACTS

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had any interest, direct or indirect, in any assets which have been, since 31 December 2018 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors or supervisors of the Company was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Group.

7. DIRECTORS' INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors or their respective associates (as defined under the Hong Kong Listing Rules) had any interests in the businesses, other than being a Director, which compete or are likely to compete, either directly or indirectly, with the businesses of the Group (as would be required to be disclosed under Rule 8.10 of the Hong Kong Listing Rules if they were controlling shareholders of the Company).

8. LITIGATION

As at the Latest Practicable Date, the Group was involved in 20 litigation cases and 2 arbitration cases, among which 20 were contractual disputes (9 cases as plaintiff, 10 cases as defendant and 1 case as jointly liable party) and 2 were in relation to commercial instruments (1 case as plaintiff and 1 case as defendant). Please refer to pages 37 to 53 of the 2019 Interim Report of the Company for further details.

As far as the Directors are aware, save as disclosed above (details of which can be found on pages 37 to 53 of the 2019 Interim Report of the Company), none of the members of the Group was at present engaged in any other litigation or claim or arbitration of material importance (including any litigation or claims that may have any material influence on rights to explore or mine) and there was no other litigation or claim of material importance (including any litigation or claims that may have any material influence on rights to explore or mine) known to the Directors to be pending or threatened against any member of the Group as at the Latest Practicable Date.

9. MATERIAL CONTRACTS

As at the Latest Practicable Date, the following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Group within the two years preceding the date of this circular which are or may be material:

1. On 27 November 2017, the Company entered into the share subscription agreement with Linshang Bank Co., Ltd ("Linshang Bank"), pursuant to which the Company agreed to subscribe for 400 million shares privately placed by Linshang Bank at the issue price of RMB3.00 per share. On the same date, the Company entered into the share transfer agreement with Shandong Yinfeng

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APPENDIX II			GENERAL INFORMATION
Investment	(Group)	Company	Limited* （山東銀豐投資集團有限公司）, Sunhover
Industrial	(Group)	Company	Limited* （翔宇實業集團有限公司）, LinyiXinghua

Trading Company Limited*（臨沂市興華商貿有限公司）, Linyi Yuandong Import & Export Company Limited*（臨沂遠東進出口有限公司）and Linyi Feida Investment Company Limited* （臨沂飛達投資有限公司）, pursuant to which the Company agreed to acquire 317,697,143 shares of Linshang Bank at the price of RMB3.00 per share. Upon completion of the abovementioned transactions, the Company held 717,697,143 shares of Linshang Bank, representing 19.75% of the total issued share capital of Linshang Bank. Please refer to the announcements of the Company dated 27 November 2017 and 6 December 2018 for further details.

1. On 1 December 2017, Yanzhou Coal Ordos Neng Hua Company Limited*（兗州煤 業鄂爾多斯能化有限公司）("Ordos Neng Hua"), a wholly-owned subsidiary of the Company, entered into the equity transfer agreement with Inner Mongolia Yitai Coal Co., Ltd.*（內蒙古伊泰煤炭股份有限公司）("Yitai Coal"), pursuant to which Ordos Neng Hua agreed to acquire and Yitai Coal agreed to sell 25% equity interests in Inner Mongolia Yitai Zhundong Railway Co., Ltd.*（內蒙古伊泰准東鐵 路有限責任公司）at a total consideration of RMB1,942,500,000. Please refer to the announcement of the Company dated 1 December 2017 for further details.
2. On 23 March 2018, Yancoal International (Holding) Company Limited ("Yancoal International"), a wholly-owned subsidiary of the Company, entered into the placing letter, pursuant to which Yancoal International agreed to subscribe for 420 million overseas listed foreign invested shares in China Zheshang Bank Co. Ltd. ("CZ Bank") ("CZ Bank H share"), which are listed on the Hong Kong Stock Exchange, at a total consideration of HKD2,016,000,000. Upon completion of the abovementioned subscription, Yancoal International's shareholding in CZ Bank increased to approximately 934 million CZ Bank H shares, representing approximately 20.51% of the total number of CZ Bank H shares and approximately 4.99% equity interest in the total share capital of CZ Bank. Please refer to the announcement of the Company dated 23 March 2018 for further details.
3. the 2020 Financial Services Agreement.

Save as disclosed above, no material contract (not being a contract entered into in the ordinary course of business) has been entered into by any member of the Group within the two years immediately preceding the issue of this circular.

10. MISCELLANEOUS

1. As at the Latest Practicable Date, the Directors of the Company are Mr. Li Xiyong, Mr. Li Wei, Mr. Wu Xiangqian, Mr. Liu Jian, Mr. Zhao Qingchun, Mr. Guo Dechun and Mr. Guojun, 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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APPENDIX II

GENERAL INFORMATION

1. As at the Latest Practicable Date, the registered office and principal place of business of the Company is at 298 Fushan South Road, Zoucheng, Shandong Province, the PRC.
2. The H Share registrar of the Company in Hong Kong is Hong Kong Registrars Limited at 17M/F, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong.
3. Mr. Jin Qingbin and Ms. Leung Wing Han Sharon are the joint company secretaries of the Company as at the Latest Practicable Date.
   Mr. Jin Qingbin is a senior accountant, a senior economist and MBA. He obtained the qualification for the board secretary of listed companies in Shanghai Stock Exchange in November 2008. Mr. Jin Qingbin graduated from Missouri State University.
   Ms. Leung Wing Han Sharon is a fellow member of The Hong Kong Institute of Chartered Secretaries, the Institute of Chartered Secretaries and Administrators in the United Kingdom, and the Association of Chartered Certified Accountants in the United Kingdom and a member of the Hong Kong Institute of Certified Public Accountants. She holds a bachelor's degree majoring in law and a bachelor's degree of business administration majoring in accounting as well as a master's degree of international corporate and finance law.
4. Unless the context otherwise requires, all references to times in this circular refer to Hong Kong times.
5. The English text of this circular shall prevail over the Chinese text, in case of any inconsistency.

11. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Baker & McKenzie at 14th Floor, One Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong during normal business hours on any weekday (except public holidays) from the date of this circular up to and including the date of the EGM:

1. the 2020 Financial Services Agreement;
2. the letter from the Board, the text of which is set out in the section headed "Letter from the Board" in this circular;
3. the letter from the Independent Board Committee of the Company to the Independent Shareholders as set out in this circular;
4. the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders as set out in this circular;

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APPENDIX II

GENERAL INFORMATION

1. the material contracts referred to in the section headed "Material contracts" in this appendix;
2. the written consent from the expert as set out in the section headed "Consent and Qualification of Expert" of this appendix;
3. the annual reports of the Company for each of the financial years ended 31 December 2017 and 31 December 2018;
4. the Articles of Association; and
5. this circular.

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