CStone Pharmaceuticals - Capital/Financing Update 2018

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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)

PROPOSED ADOPTION OF THE SHARE OPTION SCHEME AND THE GRANT THEREUNDER

The Company hereby announces that on 27 December 2018, the Board has approved the resolution to propose the Company to adopt the Share Option Scheme and, upon Shareholders’ approval at the General Meeting, to implement the Grant according to the Share Option Scheme , and also to propose a proposed plan of the Share Option Scheme and a proposed plan in respect of the Grant. The Share Option Scheme will become effective upon Shareholders’ approval at the General Meeting.

I. PROPOSED ADOPTION OF THE SHARE OPTION SCHEME

1. Purpose of the Share Option Scheme

The Share Option Scheme is for the purpose to further establish and improve the long-term incentive mechanism of the Company, attract and retain talents, fully mobilize the Directors, senior management, mid-level management and core employees of the Company, effectively align the interests of Shareholders, the Company and the management personally, and enable all parties to take interest in the long-term development of the Company.

2. Basis for determining the Participants and the scope of the Participants

(1) Basis for determining the Participants

Participants are determined in accordance with the Company Law, the Securities Law, the Incentive Measures and relevant laws, administrative regulations, departmental rules and regulatory documents as promulgated by the relevant regulatory departments such as the SASAC and the CSRC, and the relevant provisions of the Articles of Association with reference to the actual situations of the Company.

(2) Scope of Participants

The Participants include the Directors, senior management, mid-level management and core employees of the Company. In respect of the abovementioned Participants, any such Director

and senior management must have been elected at the General Meeting or appointed by the Board. A Participant must be employed by and have entered into a labor contract or an employment contract with the Company, the wholly-owned subsidiaries or controlled subsidiaries of the Company as at the Date of Grant and during the Assessment Years.

The Participants do not include the external Directors (including the Independent Directors), the supervisors and any Shareholder or actual controller individually or jointly holding more than 5% of the shares of the Company and their respective spouse, parents and children. The Participants shall not also be participants of share incentive schemes of any other listed companies, and persons who are already participants of such incentive schemes of any other listed companies shall not take part in the Share Option Scheme.

3. Source and number of shares under the Share Option Scheme

(1) Source of the underlying shares of the Scheme

The source of the underlying shares of the Scheme shall be ordinary A Shares to be directly issued to the Participants.

(2) Total number of the Share Options involved in the Scheme

The number of A Share Options to be granted under the Scheme is 46,680,000, representing approximately 0.95% of the total issued share capital of 4,912,016,000 shares of the Company as at the date of this announcement. Upon satisfaction of the conditions of exercise of the Share Options, each Share Option shall provide its holder with a right to purchase one A Share at the Exercise Price during the Validity Period. The Share Options shall not be transferred, mortgaged or used to set-off. Except as otherwise provided by the Scheme on lock-up requirements, upon exercise of the Share Options granted under the Scheme, the A Shares obtained by the Participants through the Grant in accordance with the law shall enjoy all rights and fulfil all obligations as ordinary Shareholders.

There is no Participant to whom the aggregate number of A Shares to be issued upon exercise of his or her Share Options may exceed 1% of the Company’s total share capital as at the date of consideration and approval of the Scheme at the General Meeting, and shall not exceed 1% of the Company’s total number of A Shares in issue on the same day. The total accumulated number of A Shares involved in the Scheme shall not exceed 10% of the total share capital of the Company as at the date of consideration and approval of the Scheme at the General Meeting, and shall not exceed 10% of the total number of the Company’s A Shares in issue on the same day.

During the Validity Period of the Share Options, any estimated income from Share Options of a Participant who is a Director or a member of the senior management shall be within 30% of his or her overall remunerations (including any expected income deriving from the Share Options) and any actual income upon exercise shall not exceed 40% of his or her overall remunerations (including any income deriving from the Share Options).

4. Validity Period, Validity Period of the Share Options, Date of Grant, vesting period, Exercise Date and the lock-up requirements

(1) Validity Period

The Scheme will take effect after it has been considered and approved by the General Meeting, and will expire on the date on which all the Share Options granted under the Scheme have been exercised or cancelled.

(2) Validity Period of the Share Options

The Validity Period of the Share Options granted under the Scheme commences from the Date of Grant, and such period must not exceed 60 months.

(3) Date of Grant

Please see the section headed “Proposed Grant Under the Share Option Scheme — Proposed Date of Grant” below for further information on the Date of Grant of the Share Option Scheme.

(4) Vesting period

The vesting period will be the period between the Date of Grant and the Exercise Date. The Share Options will have vesting periods of 24 months, 36 months and 48 months commencing from the Date of Grant respectively.

(5) Exercise Period and Exercise Date

Under the premise that conditions of exercise of the Share Options have been fulfilled, the Share Options are exercisable in three tranches upon expiry of 24 months from the Date of Grant. Details are as follows:

Arrangement for the exercise	Exercise Period	Proportion of exercisable Share Options to the total number of granted Share Options
First Exercise Period	Commencing from the first trading day after the expiry of the 24th month from the Date of Grant, and ending on the last trading day of the 36th month from the Date of Grant	33%
Second Exercise Period	Commencing from the first trading day after the expiry of the 36th month from the Date of Grant, and ending on the last trading day of the 48th month from the Date of Grant	33%
Third Exercise Period	Commencing from the first trading day after the expiry of the 48th month period from the Date of Grant, and ending on the last trading day of the 60th month period from the Date of Grant	34%

The Participants shall exercise their Share Options during the Validity Period of the Share Options. If the conditions of exercise of the Share Options are not fulfilled, the Share Options for that period shall not be exercised. If the conditions of exercise of the Share Options are

fulfilled but not all of the relevant Share Options for that period have been exercised, such portion of the unexercised Share Options shall be cancelled by the Company.

(6) Lock-up provisions on the underlying shares of the Share Option Scheme

The Company’s A Shares held by the Participants pursuant to the exercise of the Share Options under the Scheme are subject to the following lock-up provisions:

The lock-up provisions of the Scheme shall be implemented in accordance with the relevant laws and regulations including the Company Law, the Securities Law and the Articles of Association. Details are as follows:

(a) where a Participant is a Director or a member of the senior management of the Company, the number of shares that may be transferred each year during his or her term of office must not exceed 25% of the total number of shares held by him or her in the Company. No shares held may be transferred within half a year after his or her termination of office;
(b) where a Participant is a Director or a member of the senior management of the Company and he or she disposes of any shares within six months after any purchase of shares from the Company, or if he or she should purchases shares within six months after disposal thereof, all gains deriving therefrom should be vested with the Company and the Board will forfeit all such gains;
(c) where, during the Validity Period, there is any change to the requirements regarding the transfer of shares by Directors and senior management under applicable laws and regulations such as the Company Law and the Securities Law, and under the Articles of Association, the transfer by such Participants shall comply with the amended Company Law, Securities Law and other relevant laws and regulations and with the requirements under the Articles of Association;
(d) Share Options of not less than 20% of the total Share Options granted to a Director or senior management can only be exercised after such Participant has passed his or her performance assessment at the end of terms of office. If the terms of office of a Participant who is a Director or senior management has not ended upon expiry of the Validity Period, the conditions of exercise shall be determined with reference to his or her assessment results of the year during which the relevant Validity Period expires, and the Share Options shall be exercised within the Validity Period.

5. Exercise Price and basis of determination

Please see the section headed “Proposed Grant Under the Share Option Scheme — Exercise Price and basis of determination” below for further information on the Exercise Price and basis of determination.

6. Conditions of the Grant and exercise of the Share Options

(1) Conditions of the Grant

The following conditions must be simultaneously fulfilled before the Share Options can be granted to the Participants. On the contrary, no Share Option shall be granted to the Participants if any of the following conditions of Grant is not satisfied.

(a) There is no occurrence of any of the following in respect of the Company:
(i) issue of the auditors’ report with an adverse opinion or which indicates an inability to give opinion by a certified public account with respect to the financial report of the Company for its most recent accounting year;
(ii) issue of the auditors’ report with an adverse opinion or which indicates an inability to give opinion by a certified public account with respect to the internal control of the Company in its financial report for the most recent accounting year;
(iii)violation of laws and regulations, the Articles of Association or any undertaking publicly made in respect of distribution of profits within 36 months after listing of the securities on a stock exchange;
(iv)under applicable laws and regulations, no equity incentive is allowed; and
(v) such other circumstances as determined by the CSRC.
(b) There is no occurrence of any of the following in respect of a Participant:
(i) he or she has been held by the Shanghai Stock Exchange to be a person unsuitable for the relevant post(s) in the last 12 months;
(ii) he or she has been held by the CSRC or its derived agencies as a person unsuitable for the relevant post(s) in the last 12 months;
(iii)he or she has been imposed by the CSRC or any of its derived agencies with administrative penalties or measures prohibiting access into the market in the last 12 months by reason of material violation of laws and regulations;
(iv)he or she is under the Company Law prohibited from acting as a Director or a member of the senior management of the Company;
(v) he or she is under applicable laws and regulations not allowed to participate in an equity incentive scheme of a listed company; and
(vi)such other circumstance as determined by the CSRC.
(c) The Company has attained its performance targets as follows:

The growth rate on net profit for year 2017 (i) shall not be lower than 130%, as compared to the average net profit for years 2015 to 2017, and (ii) shall not be lower than the average net profit of industry peers. Earnings per share for year 2017 (i) shall not be lower than RMB1.17 per share, and (ii) shall not be lower than the average earnings per share of industry peers. For the avoidance of doubts, the Company has

attained these performance targets.

(2) Conditions of exercise of the Share Options

Share Options of the Participants may only be exercised upon the fulfilment of the following conditions by the Company and the Participants:

(a) There is no occurrence of any of the following circumstances in respect of the Company:
(i) issue of the auditors’ report with qualified opinion or which indicates an inability to give opinion by a certified public account with respect to the financial report of the Company for its most recent accounting year;
(ii) issue of the auditors’ report with qualified opinion or which indicates an inability to give opinion by a certified public account with respect to the internal control of the Company in its financial report for the most recent accounting year;
(iii) violation of laws and regulations, the Articles of Association or any undertaking publicly made in respect of distribution of profits within 36 months after listing of the securities on a stock exchange;
(iv) under applicable laws and regulations, no equity incentive is allowed; and
(v) such other circumstances as determined by the CSRC.
(b) There is no occurrence of any of the following circumstances in respect of a Participant:
(i) he or she has been held by the Shanghai Stock Exchange to be a person unsuitable for the relevant post(s) in the last 12 months;
(ii) he or she has been held by the CSRC or its derived agencies as a person unsuitable for the relevant post(s) in the last 12 months;
(iii) he or she has been imposed by the CSRC or any of its derived agencies with administrative penalties or measures prohibiting access into the market in the last 12 months by reason of material violation of laws and regulations;
(iv) he or she is under the Company Law prohibited from acting as a Director or a member of the senior management of the Company;
(v) he or she is under applicable laws and regulations not allowed to participate in an equity incentive scheme of a listed company; and
(vi) such other circumstance as determined by the CSRC.

In the event any of the circumstances specified in (a) occurs, the Share Options granted to all Participants under the Scheme but not exercised shall be cancelled by the Company. In the event any of the events specified in (b) occurs, the Share Options granted to the Participant under the Scheme but not exercised shall be cancelled by the Company.

(c) Performance targets of the Company

The exercise of the Share Options to be granted under the Scheme are subject to the performance targets in the Assessment Years from the financial year of 2019 through the financial year of 2021. Assessment will be made once a financial year. The conditions of performance assessment for each year are as follows:

Exercise Period	Conditions ofperformance assessment
First Exercise Period	1. The growth rate on net profit for year 2019 (i) shall not be lower than 139%, as compared to the average net profit for years 2015 to 2017, and (ii) shall not be lower than the average net profit of industry peers; 2. Earnings per share for year 2019 (i) shall not be lower than RMB1.20 per share, and (ii) shall not be lower than the average earningsper share of industry peers.
Second Exercise Period	1. The growth rate on net profit for year 2020 (i) shall not be lower than 149%, as compared to the average net profit for years 2015 to 2017, and (ii) shall not be lower than the average net profit of industry peers; 2. Earnings per share for year 2020 (i) shall not be lower than RMB1.25 per share, and (ii) shall not be lower than the average earningsper share of industry peers.
Third Exercise Period	1. The growth rate on net profit for year 2021 (i) shall not be lower than 159%, as compared to the average net profit for years 2015 to 2017, and (ii) shall not be lower than the average net profit of industry peers; 2. Earnings per share for year 2021 (i) shall not be lower than RMB1.30 per share, and (ii) shall not be lower than the average earningsper share of industry peers.

Notes:

① With reference to all A share listed companies under the classification of “mining industry - coal mining and dressing industry” according to the industry classification of the CSRC. If there are major changes in business structures of the peer sample companies or extreme values with excessive performance variation, the Board will remove or change such sample during the assessment.
② “The growth rate on net profits” indicator is calculated based on the net profits attributable to the Shareholders, net of non-recurring gains and losses.

③ Earnings per share refer to the ratio of the net profits attributable to the ordinary Shareholders to the total share capital of the Company after deducting non-recurring gains and losses. During the Validity Period, in cases of capitalization of capital reserves, bonus issue and stock issue which will affect the total number of issued shares of the Company, the Company’s total number of shares involved will be adjusted accordingly, and the target value of earnings per share will be adjusted in accordance with the adjustment of the Company’s total number of shares.

Participants may exercise the Share Options under the Scheme upon satisfaction of the conditions of exercise of the Share Options. On the contrary, the Share Options granted to and exercisable by the Participants shall be cancelled by the Company under the Scheme if the conditions of exercise of the Share Options are not satisfied.

(d) Participants’ performance assessment requirements

Assessment of Participants shall be conducted annually in accordance with the 2018 Performance Assessment Measures of Share Option Incentive Scheme ( 《 2018 年股票期权激励计划实施考核管理办法》) of the Company. The assessment results are determined based on the indicators of personal performance assessment. The performance assessment is conducted with reference to the following items:

Assessment Result	Excellent	Good	Passed	Failed （D）
	（A）	（B）	（C）
Standard Coefficient	1.0	1.0	0.8	0

Actual exercise quota of a Participant for a year = Standard coefficient × exercise quota of the Participant under the Scheme for the year.

If Participants fail in the assessment, the Share Options granted but not yet exercised in the corresponding exercise period will be cancelled by the Company pursuant to relevant requirements of the Scheme.

7. Methods of and procedures for adjustment of the Share Option Scheme

(1) Adjustment of the number of the Share Options

In the event of capitalization of capital reserves, bonus issue, share subdivision, rights issue or share consolidation of the Company prior to any exercise of the Share Options, the number of the Share Options shall be adjusted accordingly. The adjustment methods are as follows:

(a) capitalization of capital reserves, bonus issue, share subdivision

Q＝Q0×（1＋n）

Where: Q0 represents the number of the Share Options prior to adjustment; n represents the ratio of increase per share resulting from capitalization of capital reserves, bonus issue or share subdivision (i.e. the number of increased share(s) per share upon capitalization of capital reserves, bonus issue or share subdivision); and Q represents the number of the Share Options after adjustment.

(b) Rights issue

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Where: Q0 represents the number of the Share Options prior to adjustment; P1 represents the closing price of the Share Options on the record date; P2 represents the subscription price in respect of the rights issue; n represents the basis of the rights issue (i.e. the number of shares to be issued under the rights issue in proportion to the total share capital of the Company prior to the rights issue); and Q represents the number of Share Options after adjustment.

(c) Share consolidation

Q＝Q0×n

Where: Q0 represents the number of Share Options prior to the adjustment; n represents the ratio of consolidation of shares (i.e. one share of the Company be consolidated into n shares); and Q represents the number of Share Options after the adjustment.

(2) Adjustment methods of the Exercise Price

In the event of dividend distribution, capitalization of capital reserves, bonus issue, share subdivision, rights issue or share consolidation of the Company prior to any exercise of the Share Options, the Exercise Price should be adjusted accordingly. The adjustment methods are as follows:

(a) capitalization of capital reserves, bonus issue, share subdivision

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Where: P0 represents the Exercise Price of the Share Options prior to the adjustment; n represents the ratio of increase per share resulting from the capitalization of capital reserves, bonus issue or Share Option subdivision; and P represents the Exercise Price after the adjustment.

(b) Rights issue

P＝P0×（P1＋P2×n）/[P1×（1＋n）]

Where: P0 represents the Exercise Price prior to the adjustment; P1 represents the closing price of the Share Options as at the record date; P2 represents the subscription price in respect of the rights issue; n represents the ratio of the rights issue (i.e. the number of shares to be issued under the rights issue in proportion to the total share capital of the Company prior to the rights issue); and P represents the Exercise Price after the adjustment.

P＝P0÷n

Where: P0 represents the Exercise Price prior to the adjustment; n represents the ratio of share consolidation; and P represents the Exercise Price after the adjustment.

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Where: P0 represents the Exercise Price prior to the adjustment; V represents the dividend per share; and P represents the Exercise Price after the adjustment. After the adjustment of dividend distribution, P shall still be a positive number.

(3) In the event of issue of new shares by the Company, the number of the Share Options and the Exercise Price will not be adjusted.

(4) Procedures for adjustment of the Share Option Scheme

The General Meeting authorises the Board to make adjustments to the Exercise Price and number of the Share Options upon occurrence of any of the aforementioned circumstances. The Company shall engage legal advisers to give professional advice to the Board regarding whether such adjustments are in compliance with the requirements under the Incentive Measures, the Articles of Association and the requirements under the Scheme. If necessary adjustments need to be made to the number of the Share Options and the Exercise Price for matters other than the above circumstances, such adjustments shall be determined by the Board and be considered and approved at the General Meeting.

Any such adjustment shall give the Participants the same proportion of the share capital of the Company as to which that they were previously entitled. No such adjustment shall be made to the extent that a share will be issued at less than its nominal value (if any). Except for the adjustment made to capitalization of capital reserves, any other relevant adjustments shall be confirmed by the independent financial advisers to be engaged by the Company or the accountants of the Company in writing to the Directors that such adjustments comply with relevant requirements.

8. Amendments to or termination of the Share Option Scheme

(1) Procedures of amendments to the Share Option Scheme

(a) If the Company proposes to amend the Scheme prior to the consideration of the Scheme at the General Meeting, such amendments shall be considered and approved by the Board.
(b) If the Company proposes to amend the Scheme after the consideration and approval of the Scheme at the General Meeting, such amendments shall be considered and decided at the General Meeting, and must not be allowed in the following circumstances:

(i) circumstances that will result in accelerating the exercise of Share Options; and
(ii) circumstances that will lower the Exercise Price.
(c) Should there be any amendments to the Company Law, the Securities Law and the Incentive Measures, the Board shall make adjustments to the relevant contents of the Scheme according to the amendments with the authorization of the General Meeting.

(2) Termination procedures of the Share Option Scheme

(a) If the Company proposes to terminate the Scheme prior to the consideration of the Scheme at the General Meeting, such termination shall be considered and approved by the Board.
(b) If the Company proposes to terminate the Scheme after the consideration and approval of the Scheme at the General Meeting, such termination shall be considered and decided at the General Meeting. If the termination of the Scheme is considered and approved at the General Meeting or by the Board, no share option scheme shall be considered again in three months after the date of announcement of the resolutions.
(c) A law firm shall give professional opinions as to whether the termination of the Scheme by the Company is in compliance with the requirements under the Scheme and relevant laws and regulations or is significantly detrimental to the interests of the Company and the Shareholders as a whole.
(d) If the Scheme is terminated, the Company shall apply for the deregistration of the granted Share Options with the Shanghai Stock Exchange and the China Securities Depository and Clearing Corporation Limited in a timely manner after performing the relevant review and approval procedures.

9. Supplemental provisions

(1) In case of any conflicts between the relevant provisions under the Scheme and relevant PRC laws and regulations, such provisions shall be implemented or adjusted in accordance with relevant PRC laws and regulations. Any issues not specified in the Scheme shall be implemented or adjusted in accordance with relevant PRC laws and regulations.
(2) In case of any violation of the Scheme, the Articles of Association or relevant PRC laws and regulations by the Participants, their shares gained from the Scheme will be disposed and the gains from the disposal shall be vested with the Company and executed by the Board.
(3) The Scheme is subject to approval by Yankuang Group, filing with the SASAC of Shandong Province, and the consideration and approval at the General Meeting.
(4) The Scheme shall be interpreted by the Board.

II. PROPOSED GRANT UNDER THE SHARE OPTION SCHEME

Key terms of the proposed Grant are set out in details in this section. The proposed Grant set out herein complies with the terms and provisions of the proposed Share Option Scheme.

1. Number of the underlying shares in respect of the Share Options under the Grant

The total number of the underlying shares in respect of the Share Options proposed to be granted pursuant to the Share Option Scheme is 46,680,000 A Shares, representing approximately 0.95% of the Company’s total issued share capital as at the date of this announcement.

2. Distribution of the Share Options proposed to be granted under the Share Option Scheme

The total number of proposed Participants to whom the Share Options are proposed to be granted is 502, comprising Directors, senior management, mid-level management and core employees of the Company. The distribution details are set out as follows:

Number	Position(s)	Name	Number of the Share Options proposed to be granted (,000 A Shares)	Percentage to total number of the Share Options proposed to be granted (%)	Percentage to total issued share capital of the Company as at the date of this announcement (%)
1	Director, General Manager	Wu Xiangqian	320	0.69	0.01
2	Deputy General Manager	Liu Jian	260	0.56	0.01
3	Deputy General Manager	Zhao Honggang	260	0.56	0.01
4	Director, Chief Financial Officer	Zhao Qingchun	260	0.56	0.01
5	Deputy General Manager	He Jing	260	0.56	0.01
6	Deputy General Manager	Gong Zhijie	260	0.56	0.01
7	Secretary to the Board	Jin Qingbin	260	0.56	0.01
Otherpersonnel（495）			44,800	95.97	0.91
Total			46,680	100.00	0.95

Note: Some figures shown as totals herein may not be an arithmetic aggregation of the figures preceding them due to rounding adjustments.

The proposed plan of the Share Option Scheme, including but not limited to the proposed distribution of the Grant as set out above, has been approved by the Remuneration Committee and has been made available for review and opinion of the Independent Directors and the Supervisory Committee. Proposed Grant to each of the above-mentioned Directors has been approved by the Independent Directors in compliance with Rule 17.04(1) of the Listing Rules.

Mr. Wu Xiangqian and Mr. Zhao Qingchun have irrevocably and unconditionally undertaken to the Company in writing respectively, that after the Scheme is approved by the General Meeting and the Grant is confirmed by the Board, they will accept the Grant of relevant Share Options (" Grantee Directors' Undertaking ").

3. Proposed Date of Grant

The Date of Grant is subject to approval by Yankuang Group, filing with the SASAC of Shandong Province, and the consideration and approval at the General Meeting. The Company shall grant the Share Options and complete the announcement and registration procedures within 60 days after the approval of the Share Option Scheme. If the Company fails to complete the above procedures within 60 days (including the acceptance of the Share Options by the Participants), the Scheme will be terminated and the Share Options to be granted will lapse. The Date of Grant must be a trading day.

4. Exercise Price and basis of determination

The Exercise Price pursuant to the proposed Share Option Scheme is RMB9.64 per A Share. The Exercise Price shall not be less than the nominal value of the Company’s A Shares or the higher of:

(1) the average trading price of the A Shares quoted on the Shanghai Stock Exchange on the trading day immediately preceding the date of this announcement, being RMB8.92 per A Share;
(2) the average trading price of the A Shares quoted on the Shanghai Stock Exchange for the 20 trading days immediately preceding the date of this announcement, being RMB9.58 per A Share;
(3) the closing price of the A Shares quoted on the Shanghai Stock Exchange on the trading day immediately preceding the date of this announcement, being RMB8.75 per A Share; and
(4) the average closing price of the A Shares quoted on the Shanghai Stock Exchange for the 30 trading days immediately preceding the date of this announcement, being RMB9.64 per A Share;

“Trading day” under this paragraph has the same meaning as under the Listing Rules of the Shanghai Stock Exchange.

III. MECHANISM FOR SPECIFIC OCCURRENCES TO THE COMPANY OR THE PARTICIPANTS UNDER THE SHARE OPTION SCHEME

1. Occurrences in relation to the Company

(1) On occurrence of any of the following circumstances in respect of the Company, the Scheme shall be terminated and the outstanding Options granted and not exercised by the Participants shall be cancelled by the Company:
- (i) issue of the auditors’ report with an adverse opinion or which indicates an inability to give opinion by a certified public account with respect to the financial report of the Company for its most recent accounting year;
- (ii) issue of the auditors’ report with an adverse opinion or which indicates an inability to give opinion by a certified public account with respect to the internal control of the Company in its financial report for the most recent accounting year;
- (iii) violation of laws and regulations, the Articles of Association or any undertaking publicly made in respect of distribution of profits within 36 months after listing of its securities on a stock exchange;
- (iv) under applicable laws and regulations, no equity incentive is allowed; and
- (v) such other circumstances as determined by the CSRC.
(2) On occurrence of any of the following circumstances in respect of the Company, the Scheme shall not be amended:
- (i) change in control of the Company; and
- (ii) merger and spin-off of the Company.
(3) Where false statements or misleading statements in or material omissions from the information disclosure documents of the Company result in non-compliance with conditions of the Grant or arrangements for exercise of the Share Options, all outstanding Share Options shall be cancelled by the Company. In respect of the Share Options already exercised by relevant Participants, the Participants concerned shall return to the Company all interests granted. The Participants who bear no responsibility for the aforesaid matters and who incur losses as a result of the return of the Share Options granted may seek compensation from the Company or responsible parties in accordance with relevant arrangements under the Scheme. The Board shall withdraw the gains by the Participants in accordance with the aforesaid requirements and the relevant arrangements under the Scheme.

2. Occurrences in relation to the Participants

(1) Change of position

Where the position of a Participant changes as arranged by the Company for the requirements of the Company's work, as long as he or she still works at the Company

(including its subsidiaries, holding subsidiaries or dispatched by the Company to work elsewhere), the Share Options granted to him or her shall be exercised in accordance with the requirements under the Scheme prior to the change of his or her position, individual performance assessment shall be executed in accordance with the performance assessment scheme of the new position; however, in the event of any of the following circumstances in respect of the Participants, the Share Options granted to him or her but not yet exercised shall lapse. For the exercised Share Options, the Company may request the Participants to return the gains arose from the Share Option Scheme.

(a) violation of the PRC laws and regulations, the Articles of Association or the Company’s code of internal control, or negligence or misconduct provided in the labor contracts, which may result in material damage to the interests or reputation of the Company, or causing direct or indirect economic losses to the Company;
(b) be dismissed due to severe violations of the Company’s rules and regulations, and in accordance with the requirements under the Company’s reward and punishment management regulations for employees;
(c) where the Company has sufficient evidence to prove that the Participant, during his or her tenure, is involved in bribery, solicitation of bribes, corruption, theft, divulging operational and technological secrets of the Company and other illegal or unethical activities which damage the interests and reputation of the Company, thereby causing loss to the Company directly or indirectly;
(d) where the Participant shall take criminal responsibilities due to criminal behaviours; and
(e) violation of relevant laws and regulations or the provisions of the Articles of Association, causing undue damage to the Company.

(2) Cessation of service

For cessation of service due to retirement, the Share Options which are exercisable but not exercised shall retain the right to exercise and shall be exercised within six months by the relevant Participant at the date of the occurrence, and his or her Share Options which are not exercisable shall lapse. For cessation of service due to resignation, layoff or termination of engagement due to personal reasons, all of the outstanding Share Options granted and not exercised by the relevant Participants shall not be exercised and will be cancelled by the Company on the date of occurrence of the aforesaid circumstances.

(3) Occurrences of restricted implications

On occurrence of any of the following circumstances in respect of a Participant, all of the outstanding Share Options granted and not exercised by the Participant from the date of occurrence shall be recovered and cancelled by the Company without compensation:

(a) he or she becomes an Independent Director or supervisor, etc. who cannot hold the Share Option of the Company;
(b) he or she has been held by the Shanghai Stock Exchange as an unsuitable person in the last 12 months;
(c) he or she has been held by the CSRC or its derived agencies as an unsuitable person in the last 12 months;
(d) he or she has been imposed by the CSRC or any of its derived agencies with administrative penalties or measures prohibiting access into the market in the last 12 months by reason of material violation of laws and regulations;
(e) he or she is under the Company Law prohibited from acting as a Director or a member of the senior management of the Company;
(f) he or she is under applicable laws and regulations not allowed to participate in an equity incentive scheme of a listed company; and
(g) such other circumstances as determined by the CSRC.

(4) Incapability

The resignation of Participants due to incapacity shall be treated depending on the following two circumstances:

(a) If a Participant resigns due to incapacity resulting from performance of duties, at the date of the occurrence, the outstanding Share Options shall be fully subject to the procedures under the Scheme in accordance with the case prior to the incapacity. The Board may decide that the individual performance assessment results no longer form a condition of exercise of the Participant; and
(b) If a Participant resigns not due to incapacity resulting from performance of duties, the outstanding Share Options shall lapse at the date of the occurrence.

(5) Death

The death of Participants shall be treated depending on the following two

circumstances:

(a) If a Participant should decease due to the performance of duties, at the date of the occurrence, the outstanding Share Options shall be held by his or her designated heir or lawful heir on his or her behalf, and shall be subject to the procedures under the Scheme in accordance with the case prior to the death.

The Board may decide that the individual performance assessment results no longer form a condition of exercise of the Participant; and

(b) If a Participant should decease due to other reasons, the outstanding Share Options shall lapse at the date of the occurrence.

(6) Other circumstances not stated above and the handling method thereof shall be determined by the Remuneration Committee.

IV. IMPLICATIONS UNDER THE LISTING RULES

The Share Option Scheme constitutes a share option scheme under Chapter 17 of the Listing Rules. Pursuant to Rule 14A.92(3)(a), issue of new securities to Connected Persons of the Company is fully exempted from the requirements of approval by Shareholders, annual review, announcement and circular under Chapter 14A of the Listing Rules. Directors who are proposed Participants under the proposed Share Option Scheme have abstained from voting on any Board resolutions in relation to the proposed Share Option Scheme and/or the proposed Grant to themselves.

V. WAIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES

Since the Share Option Scheme involves the issue of new A Shares, Chapter 17 and certain provisions of the Listing Rules are therefore applicable to the Share Option Scheme. At the same time, PRC laws and regulations relating to establishment of share option scheme and grant of share options are also applicable. The Company has insofar as possible prepared the terms of the Scheme to be consistent with both the requirements of the relevant PRC laws and regulations as well as the Listing Rules and has applied to the Hong Kong Stock Exchange for waivers from strict compliance with (i) Note 1 of Rule 17.03(9) of the Listing Rules; and (ii) Rule A.3(a) of Appendix 10 to the Listing Rules.

(1) Waiver from strict compliance with Note 1 of Rule 17.03(9) of the Listing Rules regarding the basis of determination of the Exercise Price

Note 1 of Rule 17.03(9) of the Listing Rules requires that the exercise price must be at least the higher of: (i) the closing price of the securities on the date of granting the options; and (ii) the average closing price of the securities for the five business days immediately preceding the date of granting the options. However, the relevant PRC laws and regulations require that the exercise price of share options under share option schemes shall be the higher of: (i) the average trading price of the A shares on the trading day immediately preceding the date of announcement of the share option scheme; (ii) the average trading price of the A shares for the 20/60/120 trading days immediately preceding the date of announcement of the share option scheme; (iii) the closing price of the A shares on the trading day immediately preceding the date of announcement of the share option scheme; and (iv) the average closing price of the A shares for the 30 trading days immediately preceding the date of announcement of the share option scheme.

Since the Share Options to be granted under the Scheme involves A Shares only, and that the Exercise Price must be determined based on the relevant PRC laws and regulations, the Company has applied to the Hong Kong Stock Exchange and the Hong Kong Stock

Exchange has granted a waiver from strict compliance with Note 1 of Rule 17.03(9) of the Listing Rules.

For details of the Exercise Price and the basis of determination, please see the section headed “Proposed Grant Under the Share Option Scheme — Exercise Price and basis of determination” above.

(2) Waiver from strict compliance with Rule A.3(a) of Appendix 10 to the Listing Rules which prevents Directors from accepting options

Rule A.3(a) of Appendix 10 to the Listing Rules requires that directors of a listed issuer must not deal in any securities of the company on the day on which the company’s annual results are published and during the period of 60 days immediately preceding the publication date of the annual results or, if shorter, the period from the end of the relevant financial year up to the publication date of the annual results (the " Black-out Period ").

However, the relevant PRC laws and regulations require the Company to grant the Share Options within 60 days (including the acceptance of the Share Options by Participants) of Shareholders' approval of the Share Option Scheme. The relevant announcement and registration procedures shall also be completed within the said period, or the Share Option Scheme shall be terminated and the Share Options not granted shall lapse. Based on the current timetable of the Scheme, the General Meeting will be held on 12 February 2019. Therefore, if Shareholders' approval of the Scheme is obtained, the Date of Grant will fall within the Black-out Period. Therefore, two Directors, Mr. Wu Xiangqian and Mr. Zhao Qingchun, shall not accept the Grant pursuant to Rule A.3(a) of Appendix 10 to the Listing Rules.

Based on the following reasons, the Company has applied to the Hong Kong Stock Exchange and the Hong Kong Stock Exchange has granted a waiver from strict compliance with Rule A.3(a) of Appendix 10 to the Listing Rules:

(1) Details of the Grant (including but not limited to the identities of the Participants, the number of the Share Options, the Exercise Price, etc.) have been determined at the Board meeting held on the date of this announcement (which is prior to the Black-out Period), and put forward to the General Meeting for consideration;
(2) Once the Scheme and the details of the Grant are approved by the General Meeting, any amendments need to be approved by the Shareholders. The Grant by the Board is purely a procedural matter without any discretionary power;
(3) The two Directors, Mr. Wu Xiangqian and Mr. Zhao Qingchun, who are proposed to be granted the Share Options, have both given the Grantee Directors' Undertaking to the Company at the date of this announcement (which is prior to the Black-out Period).

For details of the Grant, please see the section headed “Proposed Grant Under the Share Option Scheme” above.

VI. INFORMATION OF 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.

VII. GENERAL MEETING

Shareholders’ approval at the General Meeting will be sought in relation to the proposed Share Option Scheme. A circular containing, inter alia, the terms of the Share Option Scheme and details of the proposed Grant will be dispatched to the Shareholders in due course.

VIII. DEFINITIONS

In this announcement, the following expressions shall have the meanings set out below unless the context otherwise requires:

the context otherwise requires:
“A Shares”	domestic shares in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange;
“Articles of Associations”	the Articles of Association of Yanzhou Coal Mining Company Limited;
“Assessment Years”	a period of time (i.e. from years 2019 to 2021) when the Company will make assessments on an annual basis of the Participants and the Company, to decide if the conditions of the exercise of the Share Options have been satisfied;
“Black-out Period”	Please see the section headed “Proposed Grant Under the Share Option Scheme — Waiver from Strict Compliance with the Listing Rules” of this announcement;
“Board”	the board of directors of the Company;
“Company Law”	Company Law of the People's Republic of China, as revised from time to time;
“Company”	Yanzhou Coal Mining Company Limited, a joint stock limited company established under the laws of the PRC in 1997, and the H Shares and A Shares of which are listed on the Hong Kong Stock Exchange (1171.HK) and the Shanghai Stock Exchange (600188.SH), respectively;
“Connected Person(s)”	have the same meaning ascribed thereto under the Listing Rules;
“CSRC”	China Securities Regulatory Commission;


“Date of Grant”	the date on which the Company grants the Participants the Share Options, and the date of grant must be a trading day, which will be determined by the Board in accordance with relevant regulations;
"Director(s)"	director of the Company;
“Exercise Date”	the date on which the Participants are entitled to exercise the Share Options, which must be a trading day (with the meanings ascribed thereto under the Listing Rules);
“Exercise Period”	the exercise period as set out in the Scheme;
“Exercise Price”	the price as agreed in advance by the Participants for purchasing A Shares when the Company grants the Participants the Share Option;
“General Meeting”	the general meeting of the Company, and it also refers to the class meetings of the Company unless explicitly stated;
“Grant”	the Company grant a total of 46,680,000 Share Options to the Participants under the Scheme;
"Grantee Directors' Undertaking"	Please see the section headed “Proposed Grant Under the Share Option Scheme — Distribution of the Share Options proposed to be granted under the Share Option Scheme” of this announcement;
“H Shares”	overseas-listed foreign-invested shares in the ordinary share capital of the Company with a nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange;
“Hong Kong Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Incentive Measures”	the Administrative Measures on Share Incentives of Listed Companies issued by CSRC;
“Independent Director(s)”	the independent non-executive director(s) of the Company;
“Listing Rules of the Shanghai Stock Exchange”	the rules governing the listing of securities on the Shanghai Stock Exchange, as revised from time to time;
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as revised from time to time;


“Participant(s)”	the directors of the Company, senior management, mid- level management, core backbone staff and other employees who are eligible to participate in the Scheme in accordance with the provision of the Scheme;
“PRC”	the People's Republic of China, and for the purpose of this announcement, excluding Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan;
“Remuneration Committee”	the remuneration committee under the Board;
“RMB”	Renminbi, the lawful currency of the PRC;
“SASAC of Shandong Province”	the State-owned Assets Supervision and Administration Commission of Shandong Province (山東省人民政府國有資產監督管理委員會);
“SASAC”	the State-owned Assets Supervision and Administration Commission of the State Council of the People's Republic of China;
“Scheme” or “Share Option Scheme”	the share option scheme of A Shares of the Company;
“Securities Law”	Securities Law of the People's Republic of China, as revised from time to time;
“Share Option(s)”	in the case of satisfying the conditions of exercise, each share option (also known as share option per share) is entitled to purchase one A Share of the Company at a pre-set exercise price of the Share Option (also known as an “Option”) during the Validity Period;
“Shareholder(s)”	the shareholder(s) of the Company;
“Supervisory Committee”	the supervisory committee of the Company;
“Validity Period of the Share Options”	the validity period of the Share Options granted under the Scheme, commencing from the Date of Grant and should not exceed 60 months;
“Validity Period”	the validity period during which the Scheme is in effect, commencing from the date after the consideration and approval of the Scheme at the General Meeting and ending on the date of exercise or cancellation of the Share Options granted under the Scheme. Upon the expiry of the Scheme, the Company shall not grant any

Share Options under the Share Option Scheme; “Yankuang Group” Yankuang Group Co. Ltd., a state-controlled limited liability company and the controlling Shareholder of the Company holding directly or indirectly approximately 51.81% of the total issued share capital of the Company as at the date of this announcement; “%” percentage.

By order of the Board Yanzhou Coal Mining Company Limited Li Xiyong Chairman

Zoucheng, Shandong Province, the PRC 27 December 2018

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