CStone Pharmaceuticals — Interim / Quarterly Report 2003

Aug 18, 2003

Yanzhou Coal Mining Company Limited

==> picture [47 x 49] intentionally omitted <==

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)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE, 2003

Yanzhou Coal Mining Company Limited (the “Company”) is pleased to announce the unaudited interim operating results of the Company for the six months ended 30th June, 2003:

• Net sales was RMB3,504.6 million (or approximately US$423.3 million, or HK$3,301.7 million), an increase of 17.0% as compared with the net sales of RMB2,996.6 million (or approximately US$361.9 million, or HK$2,822.8 million) for the same period last year.

• Net income was RMB738.0 million (or approximately US$89.13 million, or HK$695.2 million), an increase of 6.0% as compared with the net income of RMB696.4 million (or approximately US$84.1 million, or HK$656.2 million) for the same period last year.

In the first half of 2003, net sales of the Company were RMB3,504.6 million, representing an increase of RMB508 million or 17.0% over the same period last year. Net income was RMB738 million, representing an increase of RMB41.579 million or 6.0% as compared to the same period last year. Raw coal production was 21.84 million tonnes, an increase of 2.54 million tonnes or 13.2% as compared to the same period last year. Coal sales were 19.98 million tonnes, representing an increase of 3.8 million tonnes or 23.5% over the same period last year. Coal deliveries made by the special purpose coal transportation railway assets (the “Railway Assets”) were 13.86 million tonnes, representing an increase of 0.79 million tonnes or 6.0% over the same period last year.

Yanzhou Coal Mining Company Limited 18-08-2003 1

Yanzhou Coal Mining Company Limited

SUMMARY OF UNAUDITED FINANCIAL INFORMATION

(prepared in accordance with International Financial Reporting Standards (“IFRS”))

Net sales Coal net sales Domestic Export Railway transportation service income Total net sales Gross profit Operating income Interest expenses Income before income taxes Net income Net cash from operating activities Earnings per share (RMB/share) Current assets Current liabilities Total assets Shareholder’s equity Return on net assets (%) Net asset value per share (RMB/share)

Year ended For the six months ended 30th June 31st December % change as compared to 2003 2002 same period 2002 (RMB’000) (RMB’000) last year (RMB’000) (unaudited) (unaudited) (+/–) (audited) 3,428,625 2,928,609 17.1 6,213,901 2,181,385 1,583,981 37.7 3,413,955 1,247,240 1,344,628 -7.2 2,799,946 75,989 67,991 11.8 142,471 3,504,614 2,996,600 17.0 6,356,372 1,635,706 1,539,770 6.2 2,993,471 1,057,027 1,048,859 0.8 1,866,141 (37,971 ) (63,988 ) -40.7 (117,929 ) 1,019,056 984,871 3.5 1,748,212 737,966 696,387 6.0 1,221,999 831,369 1,028,784 -19.2 2,239,712 0.257 0.243 6.0 0.426 As at As at 30th June 31st December 2003 2002 2002 (RMB’000) (RMB’000) (RMB’000) (unaudited) (unaudited) (audited) 3,935,471 3,723,716 3,820,163 1,676,447 1,679,491 1,662,734 12,776,306 12,425,814 12,924,045 10,434,519 9,469,421 9,995,033 7.07 7.35 12.23 3.64 3.30 3.48

REVIEW OF OPERATIONS

The following discussion is based on the Company’s unaudited financial results for the first half of 2003 and 2002 respectively, which were prepared in accordance with IFRS.

Coal Production

The Company continued to carry out measures to increase its production capacity in the first half of 2003. This has led to a steady increase in coal output. Raw coal production increased 2.54 million tonnes, or 13.2%, to 21.84 million tonnes for the first six months of 2003 as compared to the same period in 2002. The increase in coal output was mainly due to: 1. an increase of 1.99 million tonnes or 31.8% in raw coal output of Jining III coal mine; and 2. an increase of 1.35 million tonnes or 8.7% in raw coal output of the Company’s five other coal mines . In the first half of 2003, salable coal production was 20.30 million tonnes, representing an increase of 2.17 million tonnes or 12.0% as compared to the same period last year.

Yanzhou Coal Mining Company Limited 18-08-2003 2

Yanzhou Coal Mining Company Limited

Coal Sales

The Company implemented the operating strategies of “increasing sales volume, stabilizing export volume” to increase sales volume of the high-priced and high quality clean coal in the first half of 2003. As a result, sales volume increased 3.80 million tonnes, or 23.5%, to 19.98 million tonnes as compared to the same period last year. Sales to the domestic market were 13.12 million tonnes, representing an increase of 3.68 million tonnes, or 39.0%, as compared to the same period of last year. The sales increase in the domestic market was attributable to the increase in sales of No.2 clean coal, No.3 clean coal, raw coal, blended coal and other types of coal by 0.23 million tonnes, 0.54 million tonnes, 1.52 million tonnes and 1.39 million tonnes respectively over the same period last year. Sales to the export market was 6.86 million tonnes, indicating an increase of 0.12 million tonnes, or 1.7%, as compared to the same period last year. Increase in export sales was mainly due to the increase in sales of No. 2 clean coal by 0.90 million tonnes despite a reduction in the sales of No.3 clean coal by 0.78 million tonnes.

Coal Sales Prices

The following table sets out the selling prices of the Company’s products for the six months ended 30th June 2003, 30th June 2002, and 31st December 2002 respectively; and in 2002:

(prepared in accordance with IFRS)

Clean Coal No.1 Clean Coal No.2 Clean Coal Domestic Exports No.3 Clean Coal Domestic Exports Subtotal for Clean Coal Domestic Exports Screened Raw Coal blended Coal and others Average Average: domestic

For the six For the year For the six months months ended ended 31st ended 30th June, 31st December, December, 2003 2002 2002 2002 Average price of coal products (RMB per tonne) 245.9 237.6 236.0 237.0 191.5 207.7 202.6 204.7 234.9 249.2 217.2 232.0 187.1 206.0 202.1 203.7 179.8 192.5 179.5 186.0 184.1 184.6 184.1 184.4 176.9 195.7 177.4 186.7 185.9 198.1 188.7 193.1 195.3 194.1 189.6 191.8 181.8 199.4 188.5 193.6 176.4 176.2 174.5 175.3 110.8 96.7 102.5 100.1 171.6 181.0 174.1 177.3 166.3 167.9 164.2 165.9

• Notes: 1. The average price of coal products is the invoice price minus sales taxes, transportation cost from the Company to the ports, port charges and various miscellaneous fees.

• The historic average price per tonne of the same type of products for the six months ended 31st December, 2002 was calculated based on the following formula:

(Net sales of the same type of products for the year ended 31st December, 2002) less (net sales of the same type of products for the six months ended 30th June, 2002)

(Sales volume of the same type of products for the year ended 31st December, 2002) less (sales volume of the same type of products for the six months ended 30th June, 2002)

Yanzhou Coal Mining Company Limited 18-08-2003 3

Yanzhou Coal Mining Company Limited

1. Information relating to the net sales and sales volume for the six months ended 30th June, 2002 and for the year ended 31st December, 2002 were set out in the Company’s 2002 interim report and 2002 annual report, respectively.

The Company’s average coal price for the first six months of 2003 was RMB171.60/tonne, representing a decrease of 5.2% or RMB9.40/tonne as compared to the same period last year. Average domestic coal price decreased 1.0% while average export coal price decreased 8.8%.

Decrease in average coal price was caused by: 1) significant increase in domestic sales of lowerpriced raw coal, blended coal and other types of coal; and 2) the Company’s export coal price in the first quarter was based on the lower contract price of the preceding year. As a result, rate of decrease in export coal price in the first quarter of 2003 was fairy higher than the same period last year.

Net Sales of Coal

Net sales of coal increased RMB500 million, or 17.1%, to RMB3,428.6 million in the first half of 2003 as compared to the same period last year. Among which, net domestic sales increased RMB597.4 million, or 37.7%, to RMB2,181.4 million while net export sales decreased RMB97.388 million, or 7.2%, to RMB1,247.2 million, as compared to the same period in 2002.

The following table sets out the sales volume and net sales in coal by product category for the six months ended 30th June, 2003 and 2002 respectively:

(prepared in accordance with IFRS)

	For the	six months	ended	For the	six months	ended
	30th June, 2003			30th June, 2002
		(unaudited)			(unaudited)
	Sales		% of total	Sales		% of total
	volume	Net sales	net sales	volume	Net sales	net sales
	’000 tonnes	RMB’000	(%)	’000 tonnes	RMB’000	(%)
Clean Coal
No.1 Clean Coal	257.7	63,366	1.8	258.1	61,322	2.1
No.2 Clean Coal	3,634.8	695,996	20.3	2,504.1	520,186	17.7
Domestic	334.1	78,461	2.3	103.1	25,699	0.8
Exports	3,300.7	617,535	18.0	2,401.0	494,487	16.9
No.3 Clean Coal	5,891.2	1,058,955	30.9	6,129.5	1,179,900	40.3
Domestic	2,331.8	429,250	12.5	1,786.4	329,759	11.3
Exports	3,559.4	629,705	18.4	4,343.1	850,141	29.0
Subtotal of Clean Coal	9,783.7	1,818,317	53.0	8,891.7	1,761,408	60.1
Domestic	2,923.6	571,077	16.6	2,147.6	416,780	14.2
Exports	6,860.1	1,247,240	36.4	6,744.1	1,344,628	45.9
Screened Raw Coal	7,331.8	1,293,075	37.7	5,814.8	1,024,717	35.0
Blended Coal and others	2,864.2	317,233	9.3	1,473.6	142,484	4.9
Total	19,979.7	3,428,625	100.0	16,180.1	2,928,609	100.0
Total: domestic	13,119.6	2,181,385	63.6	9,436.0	1,583,981	54.1

Yanzhou Coal Mining Company Limited 18-08-2003 4

Yanzhou Coal Mining Company Limited

Railway Assets

Coal deliveries made by Railway Assets in the first half of 2003 were 13.86 million tonnes, representing an increase of 0.79 million, or 6.0%, as compared to the same period last year. Railway transportation service income for the first six months of 2003 was RMB75.989 million, representing an increase of RMB7.998 million , or 11.8%, over the same period last year.

Cost and Expenses

The following table sets out the Company’s principal operating expenses, which are also expressed as percentages of total net sales, for each of the six months ended 30th June, 2003 and 2002 respectively:

and 2002 respectively:
		Six months ended 30th June,
	2003	2002	2003	2002
	(RMB’000)		(% of total net	sales)
	(unaudited)		(unaudited)
Net sales
Net sales of coal	3,428,625	2,928,609	97.8	97.7
Railway transportation service income	75,989	67,991	2.2	2.3
Total net sales	3,504,614	2,996,600	100.0	100.0
Cost of goods sold and railway
transportation service
Materials	446,973	338,784	12.8	11.3
Wages and employee benefits	429,853	312,262	12.3	10.4
Electricity	141,058	115,125	4.0	3.9
Depreciation	434,622	380,646	12.4	12.7
Repairs and maintenance	154,926	131,892	4.4	4.4
Land subsidence	131,473	104,972	3.7	3.5
Mining rights expenses	9,802	9,802	0.3	0.3
Other transportation fees	26,037	17,864	0.7	0.6
Other manufacturing costs	94,164	45,483	2.7	1.5
Total cost of goods sold and railway
transportation service	1,868,908	1,456,830	53.3	48.6
Selling, general and administration expenses	636,167	533,334	18.2	17.8
Total operating expenses	2,505,075	1,990,164	71.5	66.4

Total operating expenses for the first six months of 2003 increased RMB514.9 million, or 25.9%, to RMB2,505.1 million as compared to the same period last year. Among which, cost of goods sold and railway transportation service increased 28.3% while selling, general and administration expenses increased 19.3%.

MANAGEMENT DISCUSSION AND ANALYSIS

The following discussion and analysis are based on the Company’s unaudited interim financial report of 2003 and 2002 respectively. These financial reports have been prepared in accordance with IFRS. In respect of the differences between IFRS and accounting principles generally accepted in the United States of America (the “US GAAP”), please refer to note 15 to the financial information prepared in accordance with IFRS.

Yanzhou Coal Mining Company Limited 18-08-2003 5

Yanzhou Coal Mining Company Limited

In the first half of 2003, net sales of the Company increased RMB508 million, or 17.0%, to RMB3,504.6 million from RMB2,996.6 million over the same period in 2002, among which, (1) net sales of coal were RMB3,428.6 million, representing an increase of RMB500 million, or 17.1%, as compared to RMB2,928.6 million of the same period in 2002. The increase was the result of an offset between an increase of RMB687.7 million attributable to increase in sales volume and a decrease of RMB187.7 million attributable to lower coal price; and (2) income generated from railway transportation service increased by RMB7.998 million or 11.8% to RMB75.989 million from RMB67.991 million of the same period last year due to the increase in the volume of coal deliveries made by the Railway Assets where transportation expenses were calculated on exmine basis and were borne by the customers.

Cost of goods sold and railway transportation service increased RMB412.1 million, or 28.3%, to RMB1,868.9 million for the first six months of 2003, as compared to RMB1,456.8 million for the same period of 2002. This was mainly due to the increase in coal production, wages and employee benefits. Cost of sales per tonne increased by RMB3.36 or 3.8% to RMB91.86 from RMB88.5 of the same period last year. The increase was attributable to the following: (1) Starting from 2002, the Company paid an additional housing allowance to the employees at a percentage of their wages. In the first half of 2003, housing allowance was recorded at RMB 57.04 million, resulting in an increase of RMB2.85 in cost of sales per tonne;(2) the Company invested additional RMB15 million on improving safety production facilities at coal mining sites, resulting in an increase of RMB0.75 in cost of sales per tonne; and (3) increased production efficiency and effective costs control under a strengthened management system partially offset the impact to the Company of the above-mentioned increases in cost of sales.

Selling, general and administration expenses (“SG&A”) were RMB636.2 million in the first half of 2003, representing an increase of RMB102.9 million, or 19.3%, from RMB533.3 million of the same period last year. The increase in SG&A was mainly due to: (1) an increase in labor insurance of RMB18.191 million; (2) an increase in coal resource compensation fees of RMB20.761 million; (3) an increase in R&D expenses of RMB36.037 million; (4) an increase in supplementary medical insurance of RMB14.234 million; and (5) an increase attributable to higher production output and increased sales volume.

The Company’s operating income increased RMB8.168 million, or 0.8%, to RMB1,057 million for the first six months of 2003 as compared to RMB1,048.9 million for the same period last year.

Interest expenses of the Company decreased RMB26.017 million, or 40.7%, to RMB37.971 million for the first six months of 2003 from RMB63.988 million for the same period last year. This was primarily due to the decrease in deemed interest expenses.

Income before tax increased RMB34.185 million, or 3.5%, to RMB1,019.1 million for the first six months of 2003 as compared to RMB984.9 million for the same period last year.

Net income increased RMB41.579 million, or 6.0%, to RMB738 million for the first six months of 2003 from RMB696.4 million for the same period last year.

Total assets as at 30th June 2003 decreased RMB147.7 million, or 1.1%, to RMB12,776.3 million as compared to RMB12,924.0 million as at 31st December, 2002. The decrease was a result of an offset between an increase attributable to the operation activities and a decrease after partial repayment of its long-term bank loans.

Total liabilities as at 30th June, 2003 decreased RMB586.3 million, or 20.1%, to RMB2,337.8 million as compared to RMB2,924.1 million as at 31st December, 2002. The decrease in the total liabilities was a result of partial repayment of its long-term bank loans during the reporting period.

Shareholders’ equity as at 30th June 2003 increased RMB439.5 million, or 4.4%, to RMB10,434.5 million from RMB9,995.0 million as at 31st December, 2002. This was principally attributable to the increase in the retained earnings of profits arising from the Company’s operation activities.

Yanzhou Coal Mining Company Limited 18-08-2003 6

Yanzhou Coal Mining Company Limited

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operations was the Company’s major source of capital during the first half of 2003. The Company’s cash received for the period have been used primarily on operating activities expenditure, purchase of property, plants and equipment, payment of shareholders’ dividends and partial repayment of long-term bank loans.

As at 30th June, 2003, the balance of bills and accounts receivable were RMB972.1 million, representing an increase of RMB169.2 million or 21.1% from RMB802.9 million as at 31st December, 2002. Out of the total receivables for the period, bills receivable accounted for RMB487.0 million, representing an increase of RMB247.0 million, or 102.9%, as compared to RMB240.0 million as at 31st December, 2002. Increase in bills receivable was primarily due to the increase in bank bills as a result of a substantial increase in coal sales volume. As at 30th June, 2003, accounts receivable decreased RMB77.908 million, or 13.8%, to RMB485.0 million from RMB563.0 million as at 31st December, 2002. The decrease was a result of the Company’s strengthened efforts to collect its outstanding accounts receivables.

As at 30th June, 2003, inventories decreased RMB28.812 million, or 5.0%, to RMB 547.8 million from RMB576.6 million as at 31st December, 2002. Strengthened management and strict cost control effectively reduced the Company’s inventories of auxiliary materials, spare parts and small tools.

Prepayment and other current assets as at 30th June 2003 decreased RMB18.621 million, or 2.5%, to RMB737.4 million as compared to RMB756.0 million as at 31st December, 2002.

Decrease in payables of materials and equipments has caused total bills and accounts payable as at 30th June 2003 to decrease RMB233.5 million, or 38.7%, to RMB369.2 million as compared to RMB602.7 million as at 31st December, 2002.

Other payables and accrued expenses increased RMB328.1 million, or 51.7%, to RMB962.9 million as at 30th June, 2003 from RMB634.8 million as at 31st December, 2002 as a result of an increase in accounts payable of dividends to shareholders and repairing expenses.

Long-term liabilities as at 30th June 2003 decreased RMB600.0 million, or 47.6%, to RMB661.3 million as compared to RMB1,261.3 million as at 31st December 2002 after an early partial repayment of some of its long-term bank loans.

In the first half of 2003, capital expenditure was RMB181.2 million. This was mainly used for the purchase of properties, machinery and equipment.

In the first half of 2003, the Company has paid RMB6.49 million to the Parent Company for the coal mining rights.

As at 30th June, 2003, the debt to equity ratio was 5.8%.

TAXATION

The Company is subject to an income tax rate of 33% on its taxable profits for the reporting period.

US GAAP RECONCILIATION

The Company’s unaudited interim financial statements are prepared in accordance with IFRS, which differs in certain aspects from the US GAAP. In respect of these differences, please refer to note 15 to the interim financial statements prepared in accordance with IFRS for the period ended 30th June 2003.

OUTLOOK FOR THE SECOND HALF OF 2003

In the first half of 2003, the Company overcame the negative impact of decrease in coal price and achieved stable growth in operating results through the implementation of policies such as increasing sales volume, adjusting product structure and cost control. The demand and supply in both domestic and overseas coal markets are expected to maintain overall stability in the next half year, which will be beneficial to the Company in achieving its annual operating targets.

Yanzhou Coal Mining Company Limited 18-08-2003 7

Yanzhou Coal Mining Company Limited

An increase in both supply and demand in the domestic coal market. China’s GDP is estimated to increase for more than 7% in 2003 in spite of the impact of SARS on China’s economic growth. The rapid and continuous growth in electricity power generation, construction and metallurgical industries will lead to a large increase in the demand for coal. It is estimated that the annual domestic coal demand will increase by 150 million tonnes, among which 95 million tonnes will be consumed by thermal power plants. The Chinese Government will continue to regulate production safety in coal mines by shutting down small coal mines which do not reach production safety standards and will further increase production safety level. Coal supply will keep pace with the increasing trend as in the first half year, which will assist in reaching an equilibrium in coal supply and demand, and to secure stable coal price. The demand and supply of thermal coal in the domestic coal market will be in equilibrium and at a stable price. The excess of coking coal demand over supply will be relieved and the coking coal price will fall slightly.

International thermal coal market is favorable to the Company in the increase of its coal export. Coking coal will be in short supply and its price will remain high. Oil price remains at a high level. Coal has an unique position in the world’s energy sources. Thermal coal is oversupplied in the global coal market. Several Australian coal producers are planning to reduce their production volume due to the appreciation of Australian Dollars, the increase of freight rate and the lower price in the spot market. This may cause the coal price to increase and place the Company in an advantageous position in Northeast Asia thermal coal market. Due to the recovery of thermal coal price in the European market, there was a slight increase in the Australian BJ spot price. There is excess of coking coal demand over supply. In addition, coking coal producers in countries such as U.S.A and Canada have lowered their production, the demand for coking coal from coking coal importing countries such as Brazil and India increased, and the coking coal price remains high. This will help to stabilize the semi-soft coking coal price.

The operating result of the Company will increase steadily. The Company has signed sales contracts with Japanese customers to export 10.68 million tonnes of coal in 2003, among which, the contract volume of No. 2 clean coal increased by 730,000 tonnes and the contract volume of No. 3 clean coal decreased by 1.22 million tonnes as compared with the same period in 2002. The contract prices of both No. 2 clean and No. 3 clean coal decreased by USD1.35/tonne as compared with that of last year. The average contract price of export coal in 2003 will decrease by USD1.14/tonne, or 3.6%, as compared with the average contract price in 2002. It is estimated that the average coal export price of the Company in the second half of 2003 will be lower than that of the first half of 2003. The Company estimates that the annual total coal export volume will reach 14 million tones. It is estimated that the domestic coal sale price will remain the average price level of 2002 and sales volume will continue to increase in the second half of 2003. The unit cost will be tightly controlled to ensure that it will not be higher than that of 2002. The operating result of the Company will thereby increase steadily.

Yanzhou Coal Mining Company Limited 18-08-2003 8

Yanzhou Coal Mining Company Limited

Operating strategies in the second half of 2003: (i) Increase production and enlarge sales volume. The Company will take advantage of the good reputation of its coal products in both domestic and overseas markets and continue to increase both the production and sales volume. (ii) The Company will continue to improve its product quality and implement the “Four optimizing” measures of coal sales. The Company will further improve its coal washing and selection system to upgrade the quality of its coal products. The market reputation and operating results of the Company will be further improved by optimizing the product structure, transportation method, market direction and port selection. (iii) Strengthen the management and control costs. The Company will continue to improve the mining technology and production efficiency, lower unit fixed costs, advance the bolting net supporting and auxiliary transportation reform, and lower the consumption of materials. The Company will improve the EPR management system and reinforce the management of costs and expenses. (iv) Seek opportunities for the acquisition and development of new coal mines. The Company will make good use of its advantages in technology, market share, management, etc. to seek opportunities in domestic and overseas markets and related businesses to acquire quality coal mines and develop new coal mines. In this way the Company will enhance its profitability level and expand the business scale for sustainable development.

DISCLOSURE OF SIGNIFICANT EVENTS

Final Dividends

At the 2002 annual general meeting of the Company held on 27th June, 2003, the shareholders of the Company approved a final dividend of RMB298.48 million (including tax), or RMB0.104 per share (including tax) to be declared and paid to the shareholders. Such final dividend had been paid to shareholders of the Company on 18th July, 2003.

Interim Dividends

There will be no payment of interim dividends to the shareholders of the Company. Conversion of surplus reserves into shares of capital will not take place.

Connected Transactions

The Company’s connected transactions during the first half of 2003 are set out in note 13 to the financial statements prepared in accordance with IFRS.

The second supplemental agreement to the materials and services supply agreement was entered into between the Company and the Parent Company on 29th May, 2003 (the “Second Supplemental Agreement”), contents of the agreement were disclosed in the circular to shareholders dated 30th May, 2003, and came into effect after the approval by independent shareholders at the annual general meeting for the year 2002 held on 27th June, 2003.

The Materials and Services Supply Agreement dated 17th October 1997, the Supplemental Agreement dated 30th October 2001 (both entered into between the Company and the Parent Company and contents of such agreements were disclosed in the combined offering prospectus dated 24th March, 1998 and the circular to shareholders dated 22nd November, 2001 respectively) and the Second Supplement Agreement defined the on-going supply of materials and services between the Company and the Parent Company.

Yanzhou Coal Mining Company Limited 18-08-2003 9

Yanzhou Coal Mining Company Limited

The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) has on 11th July, 2003 granted a conditional waiver (the “Waiver”) to the Company from strict compliance with the requirements of disclosure by way of press announcement and shareholders’ approval as stipulated in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) in respect of the connected transactions in accordance with the above agreements between the Company and the Parent Company for a period of three financial years ending 31st December, 2005. The upper limits of the Waiver were as follows: the value of connected transactions relating to the provision of materials and services by the Company to the Parent Company shall not exceed 13% of the Company’s audited consolidated net sales in the immediately preceding financial year, and the value of connected transactions relating to the provision of materials and services by the Parent Company to the Company shall not exceed 26% of the Company’s audited consolidated net sales in the immediate preceding financial year.

The on-going connected transactions in accordance with above agreements shall be: (1) entered into by the Company in the ordinary and usual course of its business; (2) conducted either on normal commercial terms, or where there is no available comparison, on terms that are fair and reasonable so far as the Company and its subsidiary, and the shareholders of the Company are concerned; and (3) entered into either in accordance with the terms of the above agreements, or where there are no such agreements, on terms no less favorable than those available to or from independent third parties. The Independent Non-executive Directors and auditors of the Company shall review the above-mentioned on-going connected transactions annually.

Investment for Establishment of Jining Sihe Port

The Company’s board of directors held a meeting on 11th April, 2003, at which a resolution has been passed to approve the opening of an inland river route connecting Jining III coal mine to the Jinghang Grand Canal by the construction of the Jining Sihe Coal Port which is adjacent to Jining III coal mine.

The handling capacity of the Jining Sihe Coal Port is expected to be 5 million tonnes per year. Its construction consists of two phases. The first phase of this project will mainly include a dock with loading capacity of 1,000 tonnes and a coal stockpile of 180 thousand tonnes. Its handling capacity is expected to be 3 million tonnes per year. Depending on the operation of the first phase of the Jining Sihe Coal Port, the Company may carry out feasibility study on, and the construction of, the second phase of the project.

Construction of the first phase of the Jining Sihe Coal Port has already commenced and is expected to be completed before the end of 2003. The estimated investment for the construction of the first phase of the Jining Sihe Coal Port is RMB250 million. The Company will use its internal capital resources to construct the Jining Sihe Coal Port.

Acquisition of equity interest in Zoucheng Nanmei Shipping Co., Ltd.

An Equity Transfer Agreement was entered into between the Company and Nantun Coal Mine Staff Labor and Service Company (the “Labor Company”) after its approval by a meeting of the Board of Directors held on 15th August, 2003. According to the Equity Transfer Agreement, the Company will acquire an 80% equity interest in Zoucheng Nanmei Shipping Co., Ltd. from the Labor Company. The consideration is approximately RMB10.164 million and will be satisfied by the Company’s internal capital resources. Details can be found in the announcement in domestic China Securities, Shanghai Securities , and Wen Wei Po and South China Morning Post of Hong Kong on 18th August, 2003.

Borrowing

The Company entered into a long term borrowing contract (the “Borrowing Contract”) with the Bank of China on 3rd December, 2001 and borrowed RMB1.2 billion from the Bank of China on 4th January, 2002. The loan was applied to finance the acquisition of Railway Assets from the Parent Company.

Yanzhou Coal Mining Company Limited 18-08-2003 10

Yanzhou Coal Mining Company Limited

The Borrowing Contract stipulates that the interest rate of the loan is 6.21% per annum, subject to adjustment in accordance with the adjustment of statutory interest rate or method of calculation of interest made by the State during the term of the Borrowing Contract. According to the newest statutory interest rate announced by the People’s Bank of China, the interest rate of the loan has been adjusted to 5.76% per annum from 1st January, 2003.

The loan period commenced on the date of the signing of the Borrowing Contract and will expire on the date on which the last instalment of principal and interest is repaid, which should be no more than 96 months. The Company has made an earlier repayment of RMB600 million to the Bank of China on 30th June, 2003.

Details for borrowings are set out in note 12 to the financial statements prepared in accordance with IFRS contained herein.

Material Contracts

The second supplemental agreement to the materials and services supply agreement was entered into between the Company and the Parent Company on 29th May, 2003. The details are set out in the “Connected Transactions” section above.

Save as disclosed above, the Company was not a party to any other material contract during the six months ended 30th June, 2003.

Purchase, Sale or Redemption of Shares

During the six months ended 30th June, 2003, the Company or any of its subsidiaries did not purchase, sell or redeem any of its shares.

Compliance with Code of Best Practice

None of the directors of the Company is aware of information that would reasonably indicate that the Company is not, or was not for any part of the six months ended 30th June, 2003, in compliance with the Code of Best Practice set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

Impact of the Exchange Rate Fluctuation on the Company

Coal exports of the Company are all settled in US dollars. China adopts a floating exchange rate which is under the State’s supervision. During the period under review, exchange rate from RMB to US dollars varied slightly and has no main influence on the Company.

Change of place of business in Hong Kong

The Company’s place of business in Hong Kong has been changed to Rooms 805-808, Alexandra House, 16-20 Chater Road, Central, Hong Kong on 28th July, 2003.

Employees

As at 30th June, 2003, the Company had 28,138 employees, of whom 1,795 were administrative personnel, 881 were technicians, 21,651 were directly involved in coal production and 3,811 were supporting staff.

Material Litigation and Arbitration

The Company was not involved in any material litigation and arbitration during the period of this report.

Yanzhou Coal Mining Company Limited 18-08-2003 11

Yanzhou Coal Mining Company Limited

Auditors

The Company retained Deloitte Touche Tohmatsu Certified Public Accountants Ltd. (certified public accountants in the PRC (excluding Hong Kong)) and Deloitte Touche Tohmatsu (certified public accountants in Hong Kong) as its domestic and international auditors, respectively.

On behalf of the Board Chairman Mo Liqi

15th August, 2003 Zoucheng, People’s Republic of China

The interim report of the Company for the six-month period ended 30th June, 2003 containing all the information required by paragraghs 46(1) to 46(6) of Appendix 16 to the Listing Rules will be published on the website of The Stock Exchange of Hong Kong Limited within 14 days from the date of this announcement.

Yanzhou Coal Mining Company Limited 18-08-2003 12

Yanzhou Coal Mining Company Limited

INTERIM RESULTS

The unaudited interim operating results of the Company for the six months ended 30th June, 2003 prepared in comformity with (i) the relevant accounting principles and regulations applicable to PRC enterprises (“PRC GAAP”) and (ii) the International Financial Reporting Standards (“IFRS”).

(i) Unaudited financial information prepared under PRC GAAP.

STATEMENT OF INCOME AND PROFITS APPROPRIATION FOR THE PERIOD FROM JANUARY 1, 2003 TO JUNE 30, 2003

Revenue from principal operations Less: Cost of principal operations Sales taxes and surcharges Profit from principal operations Add: Profits from other operations Less: Operating expenses General and administrative expenses Financial expenses Operating profit Add: Investment income Subsidy income Non-operating income Less: Non-operating expenses Total profits Less: Income taxes Minority interest Net profit Add: Retained earnings at the beginning of the year Profits available for appropriation Less: Appropriations to statutory common reserve fund Appropriations to statutory common welfare fund Profits available for appropriation to shareholders Less: Ordinary share dividend Retained earnings at the end of the period	The Group Six months ended June 30, 2003 2002 RMB RMB (Unaudited) (Unaudited) 4,427,879,818 3,780,370,046 1,999,944,009 1,572,614,620 53,654,994 50,489,605 2,374,280,815 2,157,265,821 33,280,264 19,257,160 903,853,042 781,281,891 599,243,171 485,864,557 28,122,556 30,995,763 876,342,310 878,380,770 1,478,333 – 4,495,207 – 3,771,816 1,750,353 8,858,613 4,496,573 877,229,053 875,634,550 299,630,188 288,114,506 828,354 2,574,132 576,770,511 584,945,912 1,751,708,336 1,197,704,033 2,328,478,847 1,782,649,945 – – – – 2,328,478,847 1,782,649,945 – – 2,328,478,847 1,782,649,945	The Company Six months ended June 30, 2003 2002 RMB RMB (Unaudited) (Unaudited) 4,427,879,818 3,780,370,046 2,000,043,993 1,578,679,680 53,654,994 50,367,046 2,374,180,831 2,151,323,320 29,154,080 14,852,699 902,550,577 777,461,546 598,685,387 485,349,056 28,129,884 31,006,049 873,969,063 872,359,368 2,389,488 2,831,482 4,495,207 – 3,673,897 1,750,353 8,855,669 4,490,260 875,671,986 872,450,943 298,901,475 287,505,031 – – 576,770,511 584,945,912 1,751,872,206 1,197,704,033 2,328,642,717 1,782,649,945 – – – – 2,328,642,717 1,782,649,945 – – 2,328,642,717 1,782,649,945	The Company Six months ended June 30, 2003 2002 RMB RMB (Unaudited) (Unaudited) 4,427,879,818 3,780,370,046 2,000,043,993 1,578,679,680 53,654,994 50,367,046 2,374,180,831 2,151,323,320 29,154,080 14,852,699 902,550,577 777,461,546 598,685,387 485,349,056 28,129,884 31,006,049 873,969,063 872,359,368 2,389,488 2,831,482 4,495,207 – 3,673,897 1,750,353 8,855,669 4,490,260 875,671,986 872,450,943 298,901,475 287,505,031 – – 576,770,511 584,945,912 1,751,872,206 1,197,704,033 2,328,642,717 1,782,649,945 – – – – 2,328,642,717 1,782,649,945 – – 2,328,642,717 1,782,649,945
			2,151,323,320 14,852,699 777,461,546 485,349,056 31,006,049
			872,359,368 2,831,482 – 1,750,353 4,490,260
			872,450,943 287,505,031 –
			584,945,912 1,197,704,033
			1,782,649,945 – –
			1,782,649,945 –
			1,782,649,945

Yanzhou Coal Mining Company Limited 18-08-2003 13

Yanzhou Coal Mining Company Limited

(ii) Unaudited Financial Information prepared under IFRS

CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2003

Notes Gross sales of coal 3 Transportation costs of coal 3 Net sales of coal 3 Railway transportation service income Cost of sales and service provided 4 Gross profit Selling, general and administrative expenses 5 Other operating income 6 Operating income Interest expenses 7 Income before income taxes Income taxes 8 Income before minority interest Minority interest Net income Appropriations to reserves Dividend Earnings per share 9 Earnings per ADS 9

Six months ended June 30, 2003 2002 RMB’000 RMB’000 (unaudited) (unaudited) 4,298,236 3,662,013 (869,611) (733,404 ) 3,428,625 2,928,609 75,989 67,991 (1,868,908) (1,456,830 ) 1,635,706 1,539,770 (636,167) (533,334 ) 57,488 42,423 1,057,027 1,048,859 (37,971) (63,988 ) 1,019,056 984,871 (280,262) (285,910 ) 738,794 698,961 828 2,574 737,966 696,387 131,036 551,732 298,480 287,000 RMB0.26 RMB0.24 RMB12.86 RMB12.13

Yanzhou Coal Mining Company Limited 18-08-2003 14

Yanzhou Coal Mining Company Limited

CONDENSED CONSOLIDATED BALANCE SHEET AS AT JUNE 30, 2003

Notes ASSETS CURRENT ASSETS Bank balances and cash Restricted cash Bills and accounts receivable 10 Investments in securities Inventories 11 Other loan receivable Prepayments and other current assets TOTAL CURRENT ASSETS MINING RIGHTS LAND USE RIGHTS PROPERTY, PLANT AND EQUIPMENT, NET GOODWILL NEGATIVE GOODWILL INVESTMENTS IN SECURITIES DEPOSIT MADE ON ACQUISITION OF INVESTMENTS IN SECURITIES DEFERRED TAX ASSET TOTAL ASSETS LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Bills and accounts payable Other payables and accrued expenses Provision for land subsidence, restoration, rehabilitation and environmental costs Amounts due to Parent Company and its subsidiary companies 13 Taxes payable TOTAL CURRENT LIABILITIES AMOUNTS DUE TO PARENT COMPANY AND ITS SUBSIDIARY COMPANIES – DUE AFTER ONE YEAR 13 LONG-TERM BANK BORROWING 12 TOTAL LIABILITIES COMMITMENTS SHAREHOLDERS’ EQUITY MINORITY INTEREST TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

At At June 30, December 31, 2003 2002 RMB’000 RMB’000 (unaudited) (audited) 1,452,113 1,544,173 37,406 51,761 972,085 802,929 88,702 88,702 547,767 576,579 100,000 – 737,398 756,019 3,935,471 3,820,163 115,919 119,231 611,526 618,206 7,955,542 8,276,941 86,826 51,660 (69,051) (82,861 ) 1,760 1,760 30,138 30,138 108,175 88,807 12,776,306 12,924,045 369,174 602,725 962,946 634,790 141,735 83,044 66,576 285,308 136,016 56,867 1,676,447 1,662,734 61,341 61,341 600,000 1,200,000 2,337,788 2,924,075 10,434,519 9,995,033 3,999 4,937 12,776,306 12,924,045

Yanzhou Coal Mining Company Limited 18-08-2003 15

Yanzhou Coal Mining Company Limited

NOTES TO THE CONDENSED FINANCIAL STATEMENT PREPARED UNDER IAS

1. BASIS OF PRESENTATION

The condensed financial statements have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” and with the applicable disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The Company also prepares a set of financial statements in accordance with the relevant accounting principles and regulations applicable to PRC enterprises (“PRC GAAP”). Differences between International Financial Reporting Standard (“IFRS”) and PRC GAAP are stated in note 14.

The condensed financial statements reflect additional disclosures to conform with the disclosure requirements of the Hong Kong Companies Ordinance and with presentations customary in the United States of America.

Differences between IFRS and accounting principles generally accepted in the United States of America (“US GAAP”) are stated in note 15.

2. SEGMENT INFORMATION

The Group is engaged primarily in the coal mining business and, commencing from January 1, 2002, the Group is also engaged in coal railway transportation business. The Group operates only in the PRC. All the identifiable assets of the Group are located in the PRC. The Company does not currently have direct export rights and all of its export sales must be made through China National Coal Industry Import and Export Corporation (“National Coal Corporation”), China National Minerals Import and Export Co., Ltd. (“National Minerals Company”) or Shanxi Coal Imp. & Exp. Group Corp. (“Shanxi Coal Corporation”). The final customer destination of the Company’s export sales is determined by the Company, National Coal Corporation, National Minerals Company or Shanxi Coal Corporation. The Company’s subsidiary is engaged in trading and processing of mining machinery in the PRC. No separate segment information about the subsidiary’s business is presented in these financial statements as the underlying gross sales, results and assets of the subsidiary’s business are insignificant to the Group.

Business segments

For management purposes, the Group is currently organised into two operating divisions – coal mining and coal railway transportation. These divisions are the basis on which the Group reports its primary segment information.

Principal activities are as follows:

Coal mining – Underground mining, preparation and sales of coal Coal railway transportation – Provision for railway transportation services

Segment information about these businesses is presented below:

INCOME STATEMENT

INCOME STATEMENT
GROSS REVENUE External Inter-segment Total	Coal mining RMB’000 4,298,236 – 4,298,236	For the six months ended June 30, 2003 Coal railway transportation Eliminations Consolidated RMB’000 RMB’000 RMB’000 75,989 – 4,374,225 194,767 (194,767 ) – 270,756 (194,767 ) 4,374,225
			4,374,225

Yanzhou Coal Mining Company Limited 18-08-2003 16

Yanzhou Coal Mining Company Limited

	Inter-segment revenue is charged at
	prices pre-determined by the relevant
	governmental authority.
	RESULT
	Segment results	1,114,822	115,111		–	1,229,933
	Unallocated corporate expenses					(181,395 )
						1,048,538
	Unallocated corporate income					8,489
	Operating income					1,057,027
			For the six months ended June		30,	2002
			Coal railway
		Coal mining	transportation	Eliminations		Consolidated
		RMB’000	RMB’000	RMB’000		RMB’000
	GROSS REVENUE
	External	3,662,013	67,991		–	3,730,004
	Inter-segment	–	188,707	(188,707 )		–
	Total	3,662,013	256,698	(188,707 )		3,730,004
	Inter-segment revenue is charged at
	prices pre-determined by the
	relevant governmental authority.
	RESULT
	Segment results	997,228	135,518		–	1,132,746
	Unallocated corporate expenses					(97,165 )
						1,035,581
	Unallocated corporate income					13,278
	Operating income					1,048,859
3.	SALES OF COAL AND TRANSPORTATION COSTS OF COAL
				Six months	ended June 30,
				2003		2002
				RMB’000		RMB’000
	Domestic sales of coal, gross			2,507,618		1,795,523
	Less: Transportation costs			326,233		211,542
	Domestic sales of coal, net			2,181,385		1,583,981
	Export sales of coal, gross			1,790,618		1,866,490
	Less: Transportation costs			543,378		521,862
	Export sales of coal, net			1,247,240		1,344,628
	Net sales of coal			3,428,625		2,928,609

Yanzhou Coal Mining Company Limited 18-08-2003 17

Yanzhou Coal Mining Company Limited

Net sales of coal represents the invoiced value of coal sold and is net of returns, discounts, sales taxes and transportation costs if the invoiced value includes transportation costs to the customers.

Sales taxes consist primarily of a resource tax calculated at the rate of RMB1.20 per metric tonne (“tonne”) of the imputed quantity of raw coal sold and are paid to the local tax bureau. The resource tax for each of six months ended June 30, 2003 and 2002 amounted to RMB24,966,000 and RMB21,681,000, respectively.

4. COST OF SALES AND SERVICE PROVIDED

COST OF SALES AND SERVICE PROVIDED
Materials Wages and employee benefits Electricity Depreciation Land subsidence, restoration, rehabilitation and environmental costs Repairs and maintenance Annual fee and amortization of mining rights Transportation costs Others SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Retirement benefits scheme contributions Wages and employee benefits Additional medical insurance Depreciation Amortization of goodwill Distribution charges Allowance for doubtful debts Resource compensation fees Repairs and maintenance Research and development Staff training costs Freight charges Others	Six months ended June 30, 2003 2002 RMB’000 RMB’000 446,973 338,784 429,853 312,262 141,058 115,125 434,622 380,646 131,473 104,972 154,926 131,892 9,802 9,802 26,037 17,864 94,164 45,483 1,868,908 1,456,830 Six months ended June 30, 2003 2002 RMB’000 RMB’000 174,279 156,088 52,369 82,581 14,234 – 20,387 12,501 4,834 389 20,687 44,057 30,235 35,023 42,204 21,443 4,760 3,744 49,286 13,249 13,377 5,146 6,389 1,361 203,126 157,752 636,167 533,334
		533,334

5. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Yanzhou Coal Mining Company Limited 18-08-2003 18

Yanzhou Coal Mining Company Limited

6. OTHER OPERATING INCOME Gain on sales of auxiliary materials Interest income from bank deposits Release of negative goodwill to income Government grants Others 7. INTEREST EXPENSES Interest expenses on: – bank borrowing wholly repayable within 5 years – bank borrowing not wholly repayable within 5 years – bills receivable discounted without recourse Deemed interest expenses No interest was capitalized during the relevant periods. 8. INCOME TAXES Income taxes Deferred tax credit	Six months ended June 30, 2003 2002 RMB’000 RMB’000 26,124 13,079 7,356 13,278 13,810 13,810 4,495 – 5,703 2,256 57,488 42,423 Six months ended June 30, 2003 2002 RMB’000 RMB’000 35,154 3,666 – 39,639 186 705 2,631 19,978 37,971 63,988 Six months ended June 30, 2003 2002 RMB’000 RMB’000 299,630 288,114 (19,368) (2,204) 280,262 285,910	Six months ended June 30, 2003 2002 RMB’000 RMB’000 26,124 13,079 7,356 13,278 13,810 13,810 4,495 – 5,703 2,256 57,488 42,423 Six months ended June 30, 2003 2002 RMB’000 RMB’000 35,154 3,666 – 39,639 186 705 2,631 19,978 37,971 63,988 Six months ended June 30, 2003 2002 RMB’000 RMB’000 299,630 288,114 (19,368) (2,204) 280,262 285,910
		285,910

The Group is subject to a standard income tax rate of 33%. However, the effective income tax rate of the Group for the current period is 28% (six months ended June 30, 2002: 29%). The major reconciling item is the amount claimed on the appropriation to future development fund which is eligible for tax deduction but is not charged to income under IFRS.

9. EARNINGS PER SHARE AND PER ADS

The calculation of the earnings per share for the six months ended June 30, 2003 and 2002 is based on the net income for the period of RMB737,966,000 and RMB696,387,000, respectively, and on the weighted average number of 2,870,000,000 shares in issue during the relevant periods.

The earnings per ADS have been calculated based on the net income for the relevant periods and on one ADS representing 50 H shares.

Yanzhou Coal Mining Company Limited 18-08-2003 19

Yanzhou Coal Mining Company Limited

10. BILLS AND ACCOUNTS RECEIVABLE

Total bills receivable Total accounts receivable Less: Allowance for doubtful debts Total bills and accounts receivable, net	At At June 30, December 31, 2003 2002 RMB’000 RMB’000 487,038 239,974 582,218 639,038 (97,171) (76,083) 972,085 802,929	At At June 30, December 31, 2003 2002 RMB’000 RMB’000 487,038 239,974 582,218 639,038 (97,171) (76,083) 972,085 802,929
		802,929

Bills receivable represent unconditional orders in writing issued by or negotiated from customers of the Group for completed sale orders which entitle the Group to collect a sum of money from banks or other parties.

The Group made allowance for doubtful debts of RMB21,088,000 and RMB35,023,000 for the six months ended June 30, 2003 and 2002, respectively.

According to the credit rating of different customers, the Group allows a range of credit periods to its trade customers not exceeding 180 days.

The following is an aged analysis of bills and accounts receivable at the reporting date:

1– 180 days 181– 365 days 1– 2 years 2– 3 years Over 3 years INVENTORIES COST Auxiliary materials, spare parts and small tools Coal products	At At June 30, December 31, 2003 2002 RMB’000 RMB’000 705,154 551,795 178,458 182,371 107,614 99,633 58,011 38,388 20,019 6,825 1,069,256 879,012 At At June 30, December 31, 2003 2002 RMB’000 RMB’000 239,728 309,246 308,039 267,333 547,767 576,579	At At June 30, December 31, 2003 2002 RMB’000 RMB’000 705,154 551,795 178,458 182,371 107,614 99,633 58,011 38,388 20,019 6,825 1,069,256 879,012 At At June 30, December 31, 2003 2002 RMB’000 RMB’000 239,728 309,246 308,039 267,333 547,767 576,579
		576,579

11. INVENTORIES

Yanzhou Coal Mining Company Limited 18-08-2003 20

Yanzhou Coal Mining Company Limited

12. LONG-TERM BANK BORROWING

During the year ended December 31, 2002, the Group obtained a new bank loan in the amount of RMB1,200,000,000. The loan bears interest at 6.21% per annum and is repayable in instalments over a period of 7 years, the first repayment instalment of which is due in August 2004. The proceeds were used to finance the acquisition of Railway Assets.

During the six months ended June 30, 2003, the interest rate of the bank loan has been adjusted to 5.76%, pursuant to the terms of the loan agreement. Following an early partial repayment of the bank loan of RMB600,000,000 during the period, the remainder of the loan is repayable in instalments over a period of 3 years, the first repayment instalment of which is due in August 2004.

The above loan is repayable as follows:

Within one year More than one year, but not exceeding two years More than two years, but not exceeding five years Exceeding five years	At At June 30, December 31, 2003 2002 RMB’000 RMB’000 – – 200,000 200,000 400,000 600,000 – 400,000 600,000 1,200,000	At At June 30, December 31, 2003 2002 RMB’000 RMB’000 – – 200,000 200,000 400,000 600,000 – 400,000 600,000 1,200,000
		1,200,000

13. RELATED PARTY TRANSACTIONS

The amounts due to the Parent Company and its subsidiary companies are non-interest bearing and unsecured.

The amounts due to the Parent Company and its subsidiary companies as at June 30, 2003 included the present value of outstanding balance that arose from the funding of the acquisition of the mining rights of Jining III as of January 1, 2001 discounted using the market rate of bank borrowings.

Amounts due to Parent Company and its subsidiary companies Within one year More than one year, but not exceeding two years More than two years, but not exceeding five years Exceeding five years Total due Less: amount due within one year Amount due after one year	At At June 30, December 31, 2003 2002 RMB’000 RMB’000 66,576 285,308 10,483 10,483 27,721 27,721 23,137 23,137 127,917 346,649 66,576 285,308 61,341 61,341	At At June 30, December 31, 2003 2002 RMB’000 RMB’000 66,576 285,308 10,483 10,483 27,721 27,721 23,137 23,137 127,917 346,649 66,576 285,308 61,341 61,341
		346,649 285,308
		61,341

Except for the amounts disclosed above, the amounts due to the Parent Company and/or its subsidiary companies have no specific terms of repayment.

Yanzhou Coal Mining Company Limited 18-08-2003 21

Yanzhou Coal Mining Company Limited

During the periods, the Group had the following significant transactions with the Parent Company and/or its subsidiary companies:

Company and/or its subsidiary companies:
	Six months ended June 30,
	2003		2002
	RMB’000	RMB’000
Income
Sales of coal	79,009		55,788
Sales of auxiliary materials	180,480		–
Gain on sales of auxiliary materials	–		8,399
Utilities and facilities	14,500		2,500
Railway transportation services	26		266
Expenditure
Utilities and facilities	300		870
Electricity	154,119		–
Annual fee for mining rights	6,490		6,490
Purchases of supply materials	181,342		68,831
Repairs and maintenance services	92,217	108,437
Social welfare and support services	95,670		88,674
Technical support and training	7,565		7,565
Road transportation services	13,417		16,921
During the periods, the Group had the following	significant transactions with a related party,
certain management members of which are also management members of the Group:
	Six months ended June 30,
	2003		2002
	RMB’000	RMB’000
Sales of coal	21,501		20,243

Certain expenditure for social welfare and support services (excluding medical and child care expenses) of RMB33,973,000 and RMB31,375,000 for each of the six months ended June 30, 2003 and 2002, respectively, and for technical support and training of RMB7,565,000 for each of the six months ended June 30, 2003 and 2002, have been charged by the Parent Company at a negotiated amount per annum, subject to changes every year.

The above transactions were charged either at markets prices or based on terms agreed by both parties.

On January 1, 2002, the Company acquired the Railway Assets from the Parent Company. In addition to the above, the Company participates in a multi-employer plan of the Parent Company in respect of retirement benefits.

14. SUMMARY OF DIFFERENCES BETWEEN IFRS AND PRC GAAP

The condensed financial statements prepared under IFRS and those prepared under PRC GAAP have the following major differences:

• (i) adjustment of future development fund, which is charged to income before income taxes under PRC GAAP, to shareholders’ equity;

• (ii) recognition of a deferred tax asset under IFRS for the tax consequence of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities;

• (iii) negative goodwill arising under IFRS for the acquisition of Jining III is recognized as income in the statement of income on a systematic basis over the remaining weighted average useful life of the identifiable acquired depreciable/amortizable assets. No negative goodwill is recongized under PRC GAAP;

Yanzhou Coal Mining Company Limited 18-08-2003 22

Yanzhou Coal Mining Company Limited

• (iv) the installments payable to the Parent Company for the acquisition of Jining III have been stated at present value discounted using market rates under IFRS while under PRC GAAP, the installments payable are stated at gross amount. Accordingly, deemed interest expense arises on the installments payable to the Parent Company under IFRS and no such interest expenses are recognized under PRC GAAP; and

• (v) dividends proposed by the directors after the balance sheet date and subject to approval in the annual general meeting are adjusted in the financial statements under PRC GAAP as at the balance sheet date.

The following table summarizes the differences between IFRS and PRC GAAP:

Net income for six months ended June 30, 2003 2002 RMB’000 RMB’000 As per condensed financial statements prepared under IFRS 737,966 696,387 Impact of IFRS adjustment in respect of: – transfer to future development fund which is charged to income before income taxes under PRC GAAP (131,034 ) (115,784 ) – deferred tax effect on temporary differences not recognized under PRC GAAP (19,368 ) (2,204 ) – release of negative goodwill to income (13,810 ) (13,810 ) – deemed interest expenses 2,631 19,978 – proposed final dividend – – – others 386 379 As per financial statements prepared under PRC GAAP 576,771 584,946	Net assets as at June 30, December 31, 2003 2002 RMB’000 RMB’000 10,434,519 9,995,033 – – (108,175 ) (88,807 ) (69,050 ) (55,240 ) 102,182 99,551 – (298,480 ) 6,903 6,517 10,366,379 9,658,574	Net assets as at June 30, December 31, 2003 2002 RMB’000 RMB’000 10,434,519 9,995,033 – – (108,175 ) (88,807 ) (69,050 ) (55,240 ) 102,182 99,551 – (298,480 ) 6,903 6,517 10,366,379 9,658,574
		9,658,574

Note:

There are also differences in other items in the condensed financial statements due to differences in classification between IFRS and PRC GAAP.

15. SUMMARY OF DIFFERENCES BETWEEN IFRS AND US GAAP

The condensed financial statements are prepared in accordance with IFRS, which differ in certain significant respects from US GAAP. The significant differences relate principally to the accounting for the acquisitions of Jining II, Jining III and Railway Assets, the cost bases of property, plant and equipment and land use rights and related adjustments to deferred taxation.

Under IFRS, the acquisitions of Jining II, Jining III and Railway Assets have been accounted for using the purchase method which accounts for the assets and liabilities of Jining II, Jining III and Railway Assets at their fair value at the date of acquisition. Any excess of the purchase consideration over the fair value of the net assets acquired is capitalized as goodwill and amortized over a period of ten to twenty years. Any excess of the fair value of the net assets acquired over the purchase consideration is recorded as negative goodwill, which is presented as a deduction from the assets of the Group in the condensed consolidated balance sheet. The Group releases the negative goodwill to the statement of income on a systematic basis over the remaining weighted average useful life of the identifiable acquired depreciable/amortizable assets.

Yanzhou Coal Mining Company Limited 18-08-2003 23

Yanzhou Coal Mining Company Limited

Under US GAAP, as the Group, Jining II, Jining III and Railway Assets are entities under the common control of the Parent Company, the assets and liabilities of Jining II, Jining III and Railway Assets are required to be included in the condensed consolidated balance sheet of the Group at historical cost. The difference between the historical cost of the assets and liabilities of Jining II, Jining III and Railway Assets acquired and the purchase price paid is recorded as an adjustment to shareholders’ equity.

Under IFRS, the mining rights of Jining III are stated at purchase consideration less amortization. Mining rights are amortized on a straight line basis over twenty years, being the useful life estimated based on the total proven and probable reserves of the coal mine. Under US GAAP, as both the Group and Jining III are entities under the common control of the Parent Company, the mining rights have to be restated at nil cost and no amortization on mining rights will be recognized. However, a deferred tax asset relating to the capitalization of mining rights is required to be recognized under US GAAP as a higher tax base resulting from the capitalization is utilized for PRC tax purposes.

Under IFRS, property, plant and equipment and land use rights are stated at their respective fair values at the date of acquisition even including transactions between entities under common control. The fair value amount becomes the new cost basis of the assets of the Company formed from the reorganization and depreciation is based on such new basis. Under US GAAP, when accounting for a transfer of assets or exchange of shares between entities under common control, the entity that receives the net assets or equity interests shall initially recognize the assets and liabilities transferred at their carrying amounts in the accounts of the transferring entity at the date of transfer. Accordingly, property, plant and equipment and land use rights are restated at the historical cost and no additional depreciation on the fair value amounts will be recognized under US GAAP. However, a deferred tax asset relating to the difference in cost bases between the fair value at the date of acquisition and historical cost is required to be recognized under US GAAP as the tax basis of the assets is the fair value amount at the date of acquisition.

The adjustments necessary to restate net income and shareholders’ equity in accordance with US GAAP are shown in the tables set out below.

with US GAAP are shown in the tables set out below.
Net income as reported under IFRS US GAAP adjustments: Additional depreciation charged on property, plant and equipment and land use rights Additional deferred tax charges attributable to differences in cost bases of property, plant and equipment and land use rights Additional deferred tax charges attributable to capitalization of mining rights Amortization of negative goodwill on acquisition of Jining III Amortization of mining rights of Jining III Amortization of goodwill arising on acquisition of Jining II Amortization of goodwill arising on acquisition of Railway Assets Net income under US GAAP Earnings per share under US GAAP Earnings per ADS under US GAAP	Six months ended June 30, 2003 2002 RMB’000 RMB’000 737,966 696,387 94,084 91,755 (31,047) (30,279) (1,093) (1,093) (13,810) (13,810) 3,312 3,312 390 389 4,444 – 794,246 746,661 RMB0.28 RMB0.26 RMB13.84 RMB13.01
		746,661
		RMB0.26
		RMB13.01

Yanzhou Coal Mining Company Limited 18-08-2003 24

Yanzhou Coal Mining Company Limited

Shareholders’ equity as reported under IFRS US GAAP adjustments: Difference in cost bases of property, plant and equipment and land use rights Additional depreciation charged on property, plant and equipment and land use rights Additional deferred tax assets attributable to differences in cost bases of property, plant and equipment and land use rights Goodwill arising on acquisition of Jining II Negative goodwill arising on acquisition of Jining III, net Mining rights of Jining III Additional deferred tax asset attributable to capitalization of mining rights Goodwill arising on contingent consideration for acquisition of Railway Assets Shareholders’ equity under US GAAP	At At June 30, December 31, 2003 2002 RMB’000 RMB’000 10,434,519 9,995,033 (2,561,032) (2,561,032) 1,031,413 937,329 504,775 535,822 (11,270) (11,660) 69,051 82,861 (115,919) (119,231) 38,253 39,346 (75,556) (40,000) 9,314,234 8,858,468	At At June 30, December 31, 2003 2002 RMB’000 RMB’000 10,434,519 9,995,033 (2,561,032) (2,561,032) 1,031,413 937,329 504,775 535,822 (11,270) (11,660) 69,051 82,861 (115,919) (119,231) 38,253 39,346 (75,556) (40,000) 9,314,234 8,858,468
		8,858,468

Under US GAAP, the Group’s total assets would have been RMB11,656,021,000 and RMB11,787,480,000 at June 30, 2003 and December 31, 2002, respectively.

Please also refer to the published version of this announcement in South China Morning Post dated on 18-08-2003.

Yanzhou Coal Mining Company Limited 18-08-2003 25