CStone Pharmaceuticals — Capital/Financing Update 2019

Mar 29, 2019

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

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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 "PRC with limited liability)

(Stock Code: 1171)

CONNECTED TRANSACTION

ACQUISITION OF 100% EQUITY INTERESTS OF DONGJIANG COMPANY

On 29 March 2019, Zhongyin Financial Leasing, asubsidiary of the Company, entered into the Share Transfer Agreement with Zhouhai Company, pursuant to which, Zhongyin Financial Leasing agreed to purchase and Zhouhai Company agreed to sell 100% equity interests of Dongjiang Company at a consideration of RMB185,370,900.

Yankuang Group is the controlling shareholder of the Company, holding directly and indirectly approximately 51.81% of the issued share capital of the Company as at the date of this announcement, and Zhouhai Company is a wholly-owned subsidiary of Yankuang Group. Therefore, Zhouhai Company is a connected person of the Company. Pursuant to Chapter 14A of the Hong Kong Listing Rules, the transaction contemplated under the Share Transfer Agreement constitutes a connected transaction of the Company.

As the highest applicable percentage ratio (as defined under the Hong Kong Listing Rules) of the transaction contemplated under the Share Transfer Agreement exceeds 0.1% but is less than 5%, the transaction is subject to the reporting and announcement requirements, but exempted from the independent shareholders' approval under Chapter 14A of the Hong Kong Listing Rules.

I. The Share Transfer Agreement

1. Background and main contents

On 29 March 2019, Zhongyin Financial Leasing, asubsidiary of the Company, entered into the Share Transfer Agreement with Zhouhai Company, pursuant to which, Zhongyin Financial Leasing agreed to purchase and Zhouhai Company agreed to sell 100% equity interests of Dongjiang Company at a consideration of RMB185,370,900.

2. Date

29 March2019

3. Parties

• (1) Zhongyin Financial Leasing; and

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(2) Zhouhai Company;

4. Pricing and payment

According to the Share Transfer Agreement, Zhongyin Financial Leasing shall pay RMB185,370,900 to Zhouhai Company as the consideration for the Share Transfer. The consideration is determined based on the Asset Evaluation Report issued by HuaxinZhonghe, according to which the total equity value of shareholders of Dongjiang Company as of 31 March 2018 is RMB185,370,900. Zhongyin Financial Leasing will pay the consideration within 5 business days upon the completion of the change of industrial and commercial registration for the Share Transfer.

The Asset Evaluation Report was issued by HuaxinZhonghe, an independent qualified evaluation institute in the PRC. As Dongjiang Company is a property development company, the asset-based approach cannot reflect its profitability in the future. In order to reflect the asset value of Dongjiang Company objectively, the Asset Evaluation Report was based on the income approach, which constituted a profit forecast under Rule 14.61 of the Hong Kong Listing Rules.

Pursuant toRule 14.62(1) of the Hong Kong Listing Rules, the following are the details of the principalassumptions, including commercial assumptions, on which the Asset Evaluation Reportwas based:

4.1 General assumptions

4.1.1 Transaction assumption: It is assumed that all assets to be evaluated are in the process of transaction and the valuerevaluates the assets based on the conditions of the transaction and others simulating the market.

4.1.2 Open market assumption: The open market assumption is an assumption about the conditions of the market in which the asset is intended to enter and the impact onthe asset under such market conditions. Open market refers to fully developed and perfect market conditions. It refers to a competitive market with voluntary buyers and sellers. In this market, buyers and sellers have equal status and have the opportunity and time to obtain sufficient market information. The transactions between the buyers and sellers are conducted on a voluntary, reasonable, non-mandatory or unrestricted basis.

4.1.3 Continuinguse assumption: The continuing use assumption is an assumption of the conditions under which the asset is intended to enter the market and the state of the asset under such market conditions. The assets are in use, and it is assumed that the assets that are in use will continue to be used. Under the continuing use assumption, the change in use of assets or the best use conditions are not considered, and the scope of use of the evaluation results is limited.

4.2 Special assumptions

4.2.1 There is no material change in current laws, regulations, polices and macroeconomic situations of the state. Nor is there any material change in political, economic and social environments in regions where parties to this transaction reside. There is no other material adverse influence due to other force majeure or unforeseeable factors.

4.2.2 It is assumed that the enterprise will continue to operate on the basis of the actual situation of the assets as at the EvaluationBenchmark Day.

4.2.3. It is assumed that the operators of the valued enterprise are responsible and that the management of the valued enterprise are capable of performing their duties.

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4.2.4 It is assumed that, unless otherwise stated, the valued enterprisefully complies with relevant laws and regulations.

4.2.5It is assumed that the accounting policies to be adopted by the valued enterprise in the future are generally consistent with the accounting policies adopted at the time when this Asset Evaluation Report was preparedin material aspects.

4.2.6 It is assumed that the scope and approaches of operation of the valued enterprise will remain in the same direction at present, on the basis of the current management approach and management level.

4.2.7There is no material change in interest rate, exchange rate, tax base, tax rate and other policies of the state.

4.2.8No force majeure event or unforeseeable factor will pose material adverse impact on the valued enterprise.

4.2.9 The calculation of income shall be based on accounting years. It is assumed that income and expenditure take place evenly.

4.2.10 This evaluation is based on the assumption that the valued enterprise are able to smoothly complete the development of the project concerned as planned and achieve completion and acceptance of the construction on time. In computing the asset value and the value of valued enterprise, this evaluation does not take into account of possible construction quality matters, increased costs arising from delay in construction and impacts on evaluation results due to contingent liabilities. It is assumed that development costs are under effective control within budget.

4.2.11 This evaluation is conducted on the basis of the stock assets of the valued enterprise and does not take into account of the future values generated from possible new development projects acquired by the valued enterprise. It is assumed that the income period is the anticipated period of projects under development.

4.2.12 In light of the current condition of real estate market in Shanghai, the evaluation has made appropriate and reasonable judgments concerning the expected sales price of foreseeable commercial apartments, but does not take into account of the impacts on the evaluation results in the event of significant changes in real estate market wherefuture projects are located.

4.2.13 The scope of evaluation is limited to the information disclosed in the evaluation disclosure forms submitted by the client and valued enterprise, and does not take into account of the possible contingent assets or contingent liabilities not covered in the list of information provided by the client and thevalued enterprise.

4.2.14 As at the EvaluationBenchmark Day, valued enterprise had not obtained the pre-sale permit license of the underground parking garage. This assessment assumes that the valued enterprise is able to obtain the pre-sale permit license of the underground parking garage in 2019.

SHINEWING, the auditor of the Company, has conducted its work inaccordance withthe Hong Kong Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" and has reviewed the accounting policies and arithmetical calculations of the profit forecast in accordance with the bases and assumptions adopted in preparing the Asset Evaluation Report.

The Board confirmed that the above-mentioned profit forecast was made after due and careful enquiry. In addition, the Company has engaged Donvex Capital as the financial adviser to confirm the abovementioned profit forecast was made by the Board after due and careful enquiry.

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An independent assurance report from SHINEWINGand a letter from the financial adviser are included in theappendixes to this announcement according to Rule 14.62 of the Hong Kong Listing Rules. the qualification of the experts providing conclusions or opinions in this announcement is as follows:

follows:
Name	Qualification	Date of the independent assurance report / letter from the financial adviser
SHINEWING	Certified Public Accountants	29March 2019
Donvex Capital	A corporation licensed to carry on type 6 (advising on corporate finance) regulated activities under the SFO	29 March 2019

As at the date of this announcement, neither SHINEWINGnor Donvex Capital has anyshareholding, directly or indirectly, in any member of the Group or any right (whether legallyenforceable or not) to subscribe for or to nominate a person to subscribe for securities in anymember of the Group. SHINEWINGand Donvex Capitalhavegiven and havenot withdrawn theirwritten consents to the publication of this announcement and the references to their names with the independent assurance reportand the letter from the financial adviser included in the form and context in which they are included respectively, and the independent assurance reportand the letter from the financial adviserare given as at the date of this announcement for incorporationherein.

5. Conditions precedent

The conditions precedent for the Share Transfer Agreement include:

(1) Zhongyin Financial Leasing and Zhouhai Company sign and affix seals on the Share Transfer Agreement respectively;

(2) Zhongyin Financial Leasing and Zhouhai Company complete the internal approval procedures for the Share Transfer Agreement respectively.

6. Reasons and benefits for theShare Transfer

As a coal mining company with a high level of internationalization in the PRC, the Company has been striving to look for potential locations for expanding business operationwhich are more conducive to the Company's development.After the completion of the Share Transfer, the properties developed by Dongjiang Company (with a gross floor area of 34,400 sq.m.) can be leased or sold externally after meeting the internal needs of the Company, which is beneficial to give full play to the synergistic advantage of the subsidiaries in Shanghai, accelerate the integrated operation of regional industry, optimize the industry structure of Shanghai region and further enhance the economic benefit of the Company.

II. Implication of the Hong Kong Listing Rules

Yankuang Group is the controlling shareholder of the Company, holding directly and indirectly approximately 51.81% of the issued share capital of the Company as at the date of this announcement, and Zhouhai Company is a wholly-owned subsidiary of Yankuang Group. Therefore, Zhouhai Company is a connected person of the Company. Pursuant to Chapter 14A of the Hong Kong Listing Rules, the transaction contemplated under the Share Transfer Agreement constitutes a connected transaction of the Company.

As the highest applicable percentage ratio (as defined under the Hong Kong Listing Rules) of the transaction contemplated under the Share Transfer Agreement exceeds 0.1% but is less than 5%, the

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transaction is subject to the reporting and announcement requirements, but exempted from the independent shareholders' approval under Chapter 14A of the Hong Kong Listing Rules.

The Directors (including the independent non-executive Directors) consider that the terms andconditions of the Share Transfer Agreement are fair and reasonable, on normal commercial termsand in the interests of the Company and the Shareholders as a whole.

III. General Information

The Share Transfer Agreement has been approved by the Board meeting held on 29 March 2019.

At the aforesaid Board meeting, three connected Directors (i.e. Mr. Li Xiyong, Mr. Li Wei and Mr. Wu Yuxiang) were regarded as having a material interest in the Share Transfer Agreement and abstained from voting on the relevant resolution. The other 8 Directors considered and approved the transaction. Save as disclosed in above, none of the Directors abstained from voting on the relevant resolution at the aforesaid Board meeting convened for the purpose of approving such transaction.

IV. Information of the Parties

Yanzhou Coal

Yanzhou Coal is principally engaged in the business of mining, preparation, processing and sales of coal and coal chemicals. Yanzhou Coal’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.

Dongjiang Company

Dongjiang Company is mainly engaged in property development, operation and management. As of the Evaluation Benchmark Date, the book value of the net assets of Dongjiang Company was RMB94,684,900. The original cost of acquiring Dongjiang Company by Zhouhai Company was RMB11,710,000.

The financial information of Dongjiang Company in the past two years is shown in the following table (prepared according to Chinese accounting standards):

	Unit: RMB	Unit: RMB
	As at 31 December of
	2017	2018
Net Profit (before tax and extraordinary items) (loss is shown by"-")	-34,174,530.43	12,744.51 (unaudited)
Net Profit (after tax and extraordinary items) (loss is shown by"-")	-34,174,530.43	12,744.51 (unaudited)

After Zhongyin Financial Leasing completes the acquisition of 100% equity interest in Dongjiang Company, Dongjiang Company will become a wholly-owned subsidiary of the Company and its accounts will be consolidated into the accounts of the Group.

Zhongyin Financial Leasing

Zhongyin Financial Leasing is mainly engaged in the financial leasing, leasing, leasing tradeconsultation and guarantees, commercial factoring related to main business, etc.

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Zhouhai Company

Zhouhai Company is mainly engaged in property development and operation, upholstery and consultation services in relation to the businesses mentioned above, property management, parking charges, etc.

V. Definitions

In this announcement, unless the context requires otherwise, the following terms have themeanings set out below:

out below:
"Asset Evaluation Report"	"The Asset Evaluation Report of the Total Equity Value of Shareholders of ShanghaiDongjiang Properties Development Company Limited in Relation to the Proposed Acquisition of Total Equity Interests of ShanghaiDongjiang Properties Development Company Limited by Yanzhou Coal Mining Company Limited" (HuaxinZhonghe Bao [2018] No. SD1003) issued by HuaxinZhonghe based on income approach
"Board"	the board of Directors of the Company
"Company" or "Yanzhou Coal"	兗州煤業股份有限公司, Yanzhou Coal Mining Company Limited, a joint stock limited company incorporatedunder the laws of the PRC in 1997, and the H shares and A shares of which are listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange, respectively
"connected person"	has the meaning ascribed to it under the Hong Kong Listing Rules
"Director(s)"	the director(s) of the Company
"Dongjiang Company"	Shanghai Dongjiang Properties Development Company Limited* (上海東江房地產開發有限公司), a limited liability company incorporated under the laws of the PRC in 2002, a wholly-owned subsidiary of Zhouhai Company as at the date of this announcement
"Donvex Capital"	Donvex Capital Limited, a corporation licensed to carryon type 6 (advisingon corporate finance) regulatedactivities under the Securities and FuturesOrdinance (Cap. 571 of the Laws of Hong Kong)
"EvaluationBenchmark Day"	31 March 2018, being the evaluation benchmark day adopted by the Asset Evaluation Report
"Group"	the Company and its subsidiaries
"Hong Kong Listing Rules"	the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
"Hong Kong Stock Exchange"	The Stock Exchange of Hong Kong Limited

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"HuaxinZhonghe"	Beijing HuaxinZhonghe Asset Evaluation Company Limited* (北京華 信眾和資產評估有限公司), an independent qualified evaluation institute in the PRC
"PRC"	the People's Republic of China
"RMB"	Renminbi, the lawful currency of the PRC
"SFO"	the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
"Share Transfer"	the acquisition of 100% equity interests in Dongjiang Company by Zhongyin Financial Leasing contemplated under the Share Transfer Agreement
"Share Transfer Agreement"	the agreement entered into between Zhongyin Financial Leasing and Zhouhai Company on 29 March 2019, pursuant to which Zhongyin Financial Leasing agreed to purchase and Zhouhai Company agreed to sell 100% equity interests in Dongjiang Company
"SHINEWING"	SHINEWING (HK) CPA Limited
"subsidiary"	has the meaning ascribed to it under the Hong Kong Listing Rules
"Yankuang Group"	Yankuang Group Company Limited* (兗礦集團有限公司), a limited liability company reformed and incorporated under the laws of the PRC in 1996, the controlling shareholder of the Company holding directly and indirectlyapproximately 51.81% of the total issued share capital of the Company as at the dateof this announcement
"Zhongyin Financial Leasing"	Zhongyin Financial Leasing Company Limited* (中垠融資租賃有限公 司), a limited liability company incorporated under the laws of the PRC in 2014 and a wholly-owned subsidiary ofthe Companyas at the dateof this announcement
"Zhouhai Company"	Shanghai Zhouhai Property Development Company Limited* (上海洲 海房地產開發有限公司), a limited liability company incorporated under the laws of the PRC in 1993 and a wholly-owned subsidiary of Yankuang Group as at the dateof this announcement
"%"	per cent

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

Zoucheng,Shandong Province,thePRC 29 March2019

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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.

* For identification purpose only

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In compliance with Rule 14.60A of the Hong Kong Listing Rules, the text of each of the independent assurance reportfrom SHINEWINGto the Directors confirming it has reviewed the accounting policies andarithmetical calculations of the profit forecast in the Asset Evaluation Report and the letter from the financial adviser confirming the evaluation in the Asset Evaluation Report hasbeen made by the Directors after due and careful enquiry both dated 29 March2019, for thepurpose of, among other things, inclusion in this announcement are reproduced below:

APPENDIX I –INDEPENDENT ASSURANCE REPORTFROM SHINEWING (HK) CPA LIMITED

29 March 2019

Board of Directors Yanzhou Coal Mining Company Limited 298 South Fushan Road Zoucheng Shandong Province PRC

Dear Sirs,

INDEPENDENT ASSURANCE REPORT

We have examined the accounting policies adopted and calculations of the underlying profit forecast (the “Underlying Forecast”) to the business valuation dated 10 June 2018 prepared by Beijing HuasinZhonghe Asset Evaluation Company Limited (北京華信眾合資產評估有限公司) (the “Valuer”) in respect of the valuation on Shanghai Dongjiang Properties Development Company Limited (上海東江房地產開發有限公司) (the “Target Company”) in connection with the proposed acquisition of entire equity interest in the Target Company by a subsidiary of Yanzhou Coal Mining Company Limited (the “Company”) as set out in the announcement of the Company dated 29 March 2019 (the “Announcement”).

Directors’ Responsibilities

The directors of the Company and the Target Company (the “Directors”) are solely responsible for the preparation of the Underlying Forecast including the bases and assumptions, for the purpose of business valuation of the Target Company based on discounted cash flow method. The Underlying Forecast has been prepared using a set of bases and assumptions (the “Assumptions”) that include hypothetical assumptions about future events and management's actions that are not necessarily expected to occur. Even if the events anticipated occur, actual results are still likely to be different from the Underlying Forecast and the variation may be material. The Directors are responsible for the reasonableness and validity of the Assumptions.

Our Independence and Quality Control

We have complied with the independence and other ethical requirement of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants, (“HKICPA”) which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

The firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” and accordingly maintains a comprehensive system of quality control including documented policies

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and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

*English name for identification purpose only

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, based on our work on the Underlying Forecast and to report our opinion solely to you, as a body, solely for the purpose of reporting under Rule 14.62 of Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and for no other purpose. We have not reviewed, considered or conducted any work on the reasonableness and the validity of the Assumptions and express no opinion on the reasonableness and validity of the Assumptions on which the Underlying Forecast is based. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

We conducted our engagement in accordance with the Hong Kong Standard on Assurance Engagements 3000 (Revised) (“HKSAE 3000 (Revised)”) “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” and with reference to the procedures specified in Hong Kong Standard on Investment Circular Reporting Engagements 500 “Reporting on Profit Forecast, Statements of Sufficiency of Working Capital and Statements of Indebtedness” issued by the HKICPA. We examined the consistency of accounting policies adopted and the arithmetical accuracy of the Underlying Forecast. We have planned and performed our work to obtain reasonable assurance for giving our opinion below.

We have planned and performed such procedures as we considered necessary to assist the Directors solely in evaluating whether the Underlying Forecast, so far as the accounting policies and calculations are concerned, has been properly compiled in accordance with the Assumptions made by the Directors. Our work does not constitute any valuation of the Target Company.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, so far as the accounting policies and calculations are concerned, the Underlying Forecast has been property compiled in accordance with the Assumptions adopted by the Directors as set out in the Announcement and is presented on a basis consistent in all material aspects with the accounting policies currently adopted by the Company.

Yours faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants Lau Kai Wong Practising Certificate Number: P06623

Hong Kong

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APPENDIX II – LETTER FROM THE FINANCIAL ADVISER

29 March 2019

The Board of Directors Yanzhou Coal Mining Company Limited 298 Fushan South Road, Zoucheng City, Shandong Province, PRC Postal Code: 273500

Dear Sirs,

Re: 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 ) (the "Target Company") in relation to the acquisition of 100% equity interest in the Target Company

We refer to the valuation (the " Valuation ") prepared by Beijing HuaxinZhonghe Asset Evaluation Company Limited (北京華信眾合資產評估有限公司) (the " Valuer ") dated 10 June 2018 in relation to the value of 100% equity interests in the Target Company as at 31 March 2018. As stated in the valuation report from the Valuer, the Valuation has been arrived at and based on the income approach, which takes into account the cash flow projection of the business related to the Target Company. As such, such projection is regarded as a profit forecast (the “ Profit Forecast* ”) under Rule 14.61 of the Listing Rules. Unless otherwise stated, capitalized terms used herein should have the same meanings as those defined in the announcement of the Company dated 29 March 2019.

We have reviewed the Profit Forecast upon which the Valuation has been made and have discussed with you and the Valuer the information and documents provided by you which formed part of the basis and assumptions upon which the Profit Forecast has been prepared. We have also considered the letter from SHINEWING (HK) CPA Limited dated 29 March 2019 addressed to you as set out in Appendix I to the Announcement regarding the calculations upon which the Profit Forecast has been made. As the relevant bases and assumptions are about future events which may or may not occur, the actual financial performance of the businesses of the Target Group may or may not achieve as expected and the variation may be material.

On the basis of the foregoing and the calculations reviewed by SHINEWING (HK) CPA Limited, without giving any opinion on the reasonableness of the valuation methods, bases and assumptions adopted by the Valuer on the Valuation, for which Valuer and the Company are responsible, we are of the opinion that the Profit Forecast underlying the Valuation, for which the Directors are solely responsible, have been made after due and careful enquiry. Our opinion has been given for the sole purpose of compliance with Rule 14.62(3) of the Listing Rules and for no other purpose.

* For identification purpose only

Yours faithfully, For and on behalf of Donvex Capital Limited

Doris Sy Director

Note: The translation into Chinese language of this letter is for reference only. In case of any inconsistency, the English version shall prevail.

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