CStone Pharmaceuticals — Interim / Quarterly Report 2006

Aug 21, 2006

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

兗州煤業股份有限公司 YANZHOU COAL MINING COMPANY LIMITED

(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 1171)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE, 2006

Yanzhou Coal Mining Company Limited is pleased to announce the unaudited interim operating results of the Company for the six months ended 30th June, 2006:

• Total net sales was RMB5,923.4 million (or approximately US$740.8 million, or HK$5,754.2 million), representing a decrease of 2.1% as compared with the total net sales of RMB6,050.2 million (or approximately US$731.0 million, or HK$5,681.3 million) for the same period last year.

• Net income attributable to the equity holders of the Company was RMB1,433.6 million (or approximately US$179.3 million, or HK$1,392.7 million), representing a decrease of 23.9% as compared with the net income attributable to the equity holders of the Company of RMB1,884.1 million (or approximately US$227.6 million, or HK$1,153.9 million) for the same period last year.

The board of directors (the “Board”) of Yanzhou Coal Mining Company Limited (the “Company”) is pleased to present the Company’s unaudited interim operating results for the six months ended 30th June, 2006, which have been reviewed by the audit committee of the Board.

In the first half of 2006, raw coal production was 17.85 million tonnes, representing a decrease of 0.59 million tonnes or 3.2% as compared to the same period last year; coal sales was 16.86 million tonnes, representing an increase of 0.22 million tonnes or 1.3% as compared to the same period last year. Total net sales were RMB5,923.4 million, representing a decrease of RMB126.8 million or 2.1 % as compared to the same period last year. Net income attributable to the equity holders of the Company was RMB1,433.6 million, representing a decrease of RMB450.5 million or 23.9% as compared to the same period last year.

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SUMMARY OF UNAUDITED FINANCIAL INFORMATION

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

Net sales Net sales of coal Domestic Exports Yancoal Australia Pty Net income of railway transportation service Total net sales Gross profit Interest expenses Income before income taxes Net income attributable to the equity holders of the Company Net cash from operating activities Earnings per share (RMB/share) Current assets Current liabilities Total assets Equity attributable to equity holders of the Company Return on net assets (%) Net asset value per share (RMB/share)

For the six months ended 30th June For the year change as ended compared to 31st December 2006 2005 the same period 2005 (RMB’000) (RMB’000) of last year (+/-) (RMB’000) (unaudited) (unaudited) % (audited) 5,851,598 5,958,168 -1.8 11,353,485 4,447,290 4,537,474 -2.0 8,421,462 1,342,907 1,420,694 -5.5 2,932,023 61,401 – – – 71,754 92,064 -22.1 163,437 5,923,352 6,050,232 -2.1 11,516,922 3,276,428 3,621,172 -9.5 6,228,334 (7,780) (14,250) -45.4 (24,611) 2,152,912 2,759,518 -22.0 4,419,973 1,433,612 1,884,054 -23.9 2,881,461 383,018 2,620,952 -85.4 3,939,274 0.291 0.383 -23.9 0.586 30th June 31st December 2006 2005 2005 (RMB’000) (RMB’000) (RMB’000) (unaudited) (unaudited) (audited) 11,187,124 10,851,724 10,951,151 3,777,113 3,620,216 3,429,030 21,989,295 20,575,746 21,254,444 17,971,378 16,634,419 17,618,577 7.98 11.33 16.35 3.65 3.38 3.58

REVIEW OF OPERATIONS

The following discussion is based on the Company’s unaudited financial results for the first half of 2006 and 2005 respectively, which were prepared in accordance with IFRS.

Coal Production

In the first half of 2006, the raw coal production of the Company was 17.85 million tonnes, representing a decrease of 0.59 million tonnes or 3.2% as compared to the same period last year. Among which, (1) the raw coal production of the Company’s six coal mines in the headquarters area were 17.74 million tonnes, representing a decrease of 0.70 million tonnes or 3.8%, as compared to the same period last year. The decrease in raw coal production was due to the delay in resettlement schedule of the villages above coal reserves; (2) raw coal production of the Yanzhou Coal Australia Pty Limited (“Yancoal Australia Pty”) was 0.11 million tonnes. Austar Coal Mine of Yancoal Australia Pty is currently in preparation to resume production and has not yet commenced commercial operation, the raw coal produced was development coal formed during the development of a roadway prior to the commencement of production of the relevant mine.

In the first half of 2006, salable coal production of the Company was 17.20 million tonnes, which was kept at the same level as the same period last year. Of this amount, salable coal production of Yancoal Australia Pty was 0.10 million tonnes.

Coal Sales

In the first half of 2006, coal sales of the Company were 16.86 million tonnes, representing an increase of 0.22 million tonnes or 1.3% as compared to the same period last year. Of this total amount, (1) domestic sales were 13.55 million tonnes, representing an increase of 0.61 million tonnes or 4.7% as compared to the same period last year; (2) export sales were 3.20 million tonnes, representing a decrease of 0.50 million tonnes or 13.4% as compared to the same period last year; and (3) sales of Yancoal Australia Pty were 0.11 million tonnes.

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In the first half of 2006, the Company implemented measures to optimize the sale product mix. The percentage of clean coal sales to total sales of the Company’s six coal mines in the headquarters area increased to 56.1% from 53.7% as compared to the same period last year.

Coal Sales Prices

The following table sets out the selling prices of the Company’s products for the six months ended 30th June, 2006, 30th June, 2005, 31st December, 2005 and for the year ended 31st December, 2005 respectively (prepared in accordance with IFRS) :

					For the six	For the year
		For the six months ended			months ended	ended 31st
		30th June			31st December	December,
		2006		2005	2005	2005
		Average price of	Average price of		Average price of	Average price of
		coal products		coal products	coal products	coal products
		(RMB per tonne)	(RMB per tonne)		(RMB per tonne)	(RMB per tonne)
1.	Headquarters
	Clean Coal
	No. 1 Clean Coal	506.55		500.99	528.61	514.20
	No. 2 Clean Coal	493.41		479.66	508.62	491.51
	Domestic	489.32		522.30	501.04	513.67
	Exports	500.55		418.39	519.16	460.09
	No. 3 Clean Coal	380.75		367.07	373.68	370.54
	Domestic	379.01		367.65	355.64	361.30
	Exports	383.66		366.39	395.27	381.51
	Lump Coal	422.29		446.34	418.43	432.26
	Domestic	422.29		454.14	418.43	434.66
	Exports	–		395.21	–	397.53
	Subtotal for Clean Coal	420.61		413.07	414.33	413.69
	Domestic	421.35		433.63	406.36	420.26
	Exports	419.19		383.97	425.63	404.37
	Screened Raw Coal	296.71		333.82	306.61	321.88
	Mixed Coal and others	156.94		147.35	152.47	150.45
	Average coal price	345.62		358.08	340.50	349.50
	Domestic	328.23		350.68	315.91	333.74
2.	Yancoal Australia Pty	558.34		–	–	–

Notes:

1. The Company’s 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.

2. The historic average price per tonne of each type of coal products for the six months ended 31st December, 2005, was calculated based on the following formula:

(Net sales of each type of coal products for the year ended 31st December, 2005) less (Net sales of each type of coal products for the six months ended 30th June 2005)

(Sales volume of each type of coal products for the year ended 31st December 2005) less (Sales volume of each type of coal products for the six months ended 30th June 2005)

The Company’s average coal price of products in the headquarters area for the first half of 2006 was RMB345.62/tonne, representing a decrease of RMB12.46/tonne or 3.5%, as compared to the same period last year. The average domestic coal price was RMB328.23/tonne, representing a decrease of RMB22.45/tonne or 6.4%, as compared to the same period last year; while the average export coal price was RMB419.19/tonne, representing an increase of RMB 35.23/tonne or 9.2%, as compared to the same period last year. Decrease in average coal price of the Company was mainly due to the decrease in domestic coal price.

Average coal price of the coal of Yancoal Australia Pty was RMB558.34/tonne.

Net Sales of Coal

Net sales of coal of the Company were RMB5,851.6 million in the first half of 2006, representing a decrease of RMB106.6 million or 1.8%, as compared to the same period last year. Of the total net sales (1) net domestic sales were RMB4,447.3 million representing a decrease of RMB90.184 million or 2.0% as compared to the same period last year; (2) net export sales were RMB1,342.9 million, representing a decrease of RMB77.787 million or 5.5% as compared to the same period last year; and (3) net sales of Yancoal Australia Pty were RMB61.401 million.

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The following table sets out the sales volume and net sales in coal by product category for the six months ended 30th June, 2006 and 30th June, 2005 respectively (prepared in accordance with IFRS) :

		For	the six months ended	the six months ended	the six months ended	For	the six months ended	the six months ended
			30th June, 2006				30th June, 2005
				(unaudited)			(unaudited)
		Sales			% to total	Sales		% to total
		volume		Net sales	net sales	volume	Net sales	net sales
		’000 tonnes		RMB’000	(%)	’000 tonnes	RMB’000	(%)
1	Headquarters
	Clean Coal
	No. 1 Clean Coal	494.0		250,253	4.3	403.9	202,361	3.4
	No. 2 Clean Coal	2,671.7		1,318,267	22.5	3,004.4	1,441,087	24.2
	Domestic	1,697.8		830,759	14.2	1,771.5	925,247	15.5
	Exports	973.9		487,508	8.3	1,232.9	515,840	8.7
	No. 3 Clean Coal	5,955.3		2,267,452	38.7	5,293.0	1,942,915	32.6
	Domestic	3,725.7		1,412,053	24.1	2,857.3	1,050,494	17.6
	Exports	2,229.6		855,399	14.6	2,435.7	892,421	15.0
	Lump Coal	272.1		114,892	2.0	237.8	106,158	1.8
	Domestic	272.1		114,892	2.0	206.4	93,725	1.6
	Exports	0.0		0.0	0.0	31.4	12,433	0.2
	Subtotal for Clean Coal	9,393.1		3,950,865	67.5	8,939.1	3,692,521	62.0
	Domestic	6,189.6		2,607,957	44.6	5,239.1	2,271,827	38.1
	Exports	3,203.5		1,342,907	22.9	3,700.0	1,420,694	23.8
	Screened Raw Coal	4,895.6		1,452,611	24.8	6,065.6	2,024,798	34.0
	Mixed Coal and others	2,464.2		386,722	6.6	1,634.5	240,849	4.0
	Subtotal	16,752.9		5,790,197	99.0	16,639.2	5,958,168	100.0
	Domestic	13,549.4		4,447,290	76.0	12,939.2	4,537,474	76.2
2.	Yancoal Australia Pty	110.0		61,401	1.0	–	–	–
3.	Total	16,862.9		5,851,598	100.0	16,639.2	5,958,168	100.0

Railway Assets Specifically Used for Coal Transportation

In the first half of 2006, Coal delivered by the railway assets of the Company (“Railway Assets”) in the first half of 2006 were 9.42 million tonnes, representing a decrease of 1.58 million tonnes or 14.4% as compared to the same period last year. Net income from railway transportation service of the Company was RMB71.754 million, representing a decrease of RMB20.310 million or 22.1% as compared to the same period last year.

Costs and Expenses

The following table sets out the Company’s operating expenses, which are also expressed as percentages to total net sales, for each of the six months ended 30th June, 2006 and 2005 respectively:

	For	the six months	ended 30th June
	2006	2005	2006	2005
	(RMB’000)		(% to total net sales)
Net sales
Net sales of coal	5,851,598	5,958,168	98.8	98.5
Net income of railway transportation
service	71,754	92,064	1.2	1.5
Total net sales	5,923,352	6,050,232	100.0	100.0
Cost of sales and railway transportation
service
Materials	587,966	526,848	9.9	8.7
Wages and employee benefits	707,753	524,367	11.9	8.7
Electricity	163,435	140,938	2.8	2.3
Depreciation	469,837	431,605	7.9	7.1
Expenses for land subsidence, restoring,
recovery and environmental protection	209,264	359,694	3.5	5.9
Repairs and maintenance	157,698	171,166	2.7	2.8
Mining rights expenses	9,920	9,806	0.2	0.2
Transportation fees	50,729	53,530	0.9	0.9
Other expenses	290,322	211,106	4.9	3.5

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Total cost of sales and railway
transportation service	2,646,924	2,429,060	44.7	40.1
Selling, general and administration
expenses	1,202,070	905,663	20.3	15.0
Total operating expenses	3,848,994	3,334,723	65.0	55.1

Total operating expenses of the Company for the first half of 2006 were RMB3,849.0 million, representing an increase of RMB514.3 million or 15.4% as compared to the same period last year. Of these expenses, cost of sales and railway transportation service increased by 9.0%, while selling, general and administration expenses increased by 32.7%.

The percentage of total operating expenses to total net sales increased from 55.1% in the same period last year to 65.0% in this reporting period.

MANAGEMENT DISCUSSION AND ANALYSIS

The following discussion and analysis are based on the Company’s unaudited interim financial reports of 2006 and 2005 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 Supplemental Information II to the financial information prepared in accordance with IFRS contained herein.

In the first half of 2006, total net sales of the Company were RMB 5,923.4 million, representing a decrease of RMB126.8 million or 2.1%, from RMB6,050.2 million over the same period in 2005. Of these sales, (1) the Company’s net realized sales of coal were RMB5,790.2 million, representing a decrease of RMB168.0 million or 2.8%, as compared to RMB5,958.2 million over the same period in 2005. The decrease was the result of a decrease of RMB208.7 million attributable to the decrease in coal price, and an increase of RMB40.702 million attributable to the increase in coal sales volume; and (2) net income generated from railway transportation service was RMB71.754 million, representing a decrease of RMB20.310 million or 22.1%, from RMB92.064 million of the same period last year. The decrease was primarily due to the decrease in transportation fees, which are calculated on an ex-mine basis and paid exclusively by the customers, resulting from the decrease of 1.21 million tonnes in the coal transportation volume, as compared with the same period last year; and net sales of Yancoal Australia Pty were RMB61.401 million.

In the first half of 2006, cost of sales and railway transportation service were RMB2,646.9 million, representing an increase of RMB217.8 million or 9.0%, as compared to RMB2,429.1 million over the same period in 2005. Of these, the Company’s coal sales cost was RMB2,599.7 million representing an increase of RMB223.0 million or 9.4%, as compared to RMB2,376.7 million for the same period last year; while the unit cost of coal sales was RMB155.18, representing an increase of RMB12.34 or 8.6%, compared to RMB142.84 for the same period last year. This was mainly because 1 an increase in raw materials price and an increase in raw material consumption caused by more frequent relocation of longwall faces resulting in an increase in the unit cost of coal sales by RMB3.54; 2 an increase in the wages of employees resulting in the increase in unit cost of coal sales by RMB10.18; 3 reduction of the rate of export tax rebates increased the unit cost of coal sales by RMB1.97; and 4 effective cost control of the Company partially offset the impact of the abovementioned increased sales cost.

In the first half of 2006, selling, general and administration expenses of the Company were RMB1,202.1 million, representing an increase of RMB296.4 million or 32.7%, from RMB905.7 million over the same period in 2005. The increase was mainly due to: (1) an increase of RMB5.99 million in selling, general and administration expenses by the Company’s headquarters; (2) additional selling, general and administrative expenses of Yancoal Australian Pty of RMB236.5 million in this reporting period, which include � materials expenses of RMB30.655 million; � employees’ remuneration of RMB90.485 million; � depreciation expenses of RMB10.218 million; � repair and maintenance expenses of RMB32.618 million; � equipment rental expenses of RMB18.458 million; � other expenses of RMB43.318 million.

In the first half of 2006, interest expenses of the Company were RMB7.780 million, representing a decrease of RMB6.470 million or 45.4%, compared to RMB14.250 million over the same period in 2005. This was primarily due to the decrease in long-term bank loan balance as compared to the same period last year.

In the first half of 2006, income before tax of the Company was RMB2,152.9 million, representing a decrease of RMB606.6 million or 22.0%, compared to RMB2,759.5 million over the same period in 2005.

In the first half of 2006, net income attributable to the equity holders of the Company was RMB1,433.6 million, representing a decrease of RMB450.5 million or 23.9%, compared to RMB1,884.1 million for the same period in 2005.

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Total assets of the Company increased from RMB21,254.4 million as at 31st December, 2005 to RMB21,989.3 million as at 30th June, 2006, representing an increase of RMB734.9 million or 3.5%. The increase was primarily due to the increase in assets’ value resulting from the Company’s operating activities.

Total liabilities of the Company increased from RMB3,607.1 million as at 31st December, 2005 by RMB382.5 million or 10.6%, to RMB3,989.6 million as at 30th June, 2006. The increase in the Company’s total liabilities was primarily due to: (1) an increase in dividends payable of RMB510.0 million; (2) an increase in amounts due to Yankuang Group Corporation Limited (“Yankuang Group” or the “Controlling Shareholder”) and its other subsidiaries of RMB123.8 million ; (3) a decrease in account payables of RMB91,798 thousand; (4) a decrease in taxtation payable of RMB119.1 million; (5) a decrease in other account payables and payments in advance of RMB74,827 thousand.

Equity attributable to equity holders of the Company increased from RMB17,618.6 million as at 31st December to RMB17,971.4 million as at 30th June 2006, representing an increase of RMB352.8 million or 2.0%. The increase was principally attributable to the profits generated from the Company’s operating activities.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operations was the Company’s major source of capital during the first half of 2006. The Company’s principal use of the capital was expenditure for operating activities, and the purchase of property, plant and equipment.

As at 30th June, 2006, the balance of the Company’s bills and accounts receivable were RMB2,770.6 million, representing an increase of RMB545.8 million or 24.5% from RMB2,224.8 million as at 31st December, 2005. Of this amount, bills receivable accounted for RMB2,517.7 million, representing an increase of RMB424.8million or 20.3%, as compared to RMB2,092.9 million as at 31st December, 2005. Increase in bills receivable was primarily due to the increase in documentary acceptance bill from coal sales. Accounts receivable increased from RMB131.9 million as at 31st December, 2005 by RMB121.0 million or 91.7%, to RMB252.9 million as at 30th June, 2006. The increase was due to the increase in accounts receivables of the Company.

The Company verified and cancelled its provision for doubtful accounts debts of RMB70.180 million during the reporting period.

As at 30th June, 2006, inventories of the Company increased from RMB470.5 million as at 31st December, 2005 by RMB42.323 million or 9.0%, to RMB512.8 million. The increase was mainly due to the increase in the cost of coal inventory.

Prepayments and other current assets increased from RMB202.4 million as at 31st December, 2005 by RMB109.8 million or 54.2%, to RMB312.2 million as at 30th June, 2006. The increase was mainly due to the increase in the prepayments for equipments and materials.

Total account payables decreased from RMB497.7 million as at 31st December, 2005 by RMB91.798 million or 18.4%, to RMB405.9 million as at 30th June, 2006.

Other payables and accrued expenses decreased from RMB1,575.9 million as at 31st December, 2005 by RMB74.827 million or 4.7%, to RMB1,501.0 million as at 30th June, 2006.

In the first half of 2006, the Company’s capital expenditure was RMB1,044.8 million. This was mainly used for the purchase and refurbishment of properties, machinery and equipment.

As at 30th June, 2006, the Company’s debt to equity ratio was 1.3%, which was calculated based on equity attributable to equity holders of the Company and total liabilities amounting to RMB17,971.4 million and RMB231.8 million respectively.

Taking into account the cash in hand and the abundant capital sources, the Company believes that it will have sufficient operating capital to meet its current needs.

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 Supplemental Information II to the financial statements of this reporting period prepared in accordance with IFRS contained herein.

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OUTLOOK FOR THE SECOND HALF OF 2006

In the second half of 2006, the demand and supply in the domestic and overseas coal markets is expected to achieve an equilibrium.

The demand and supply in the domestic coal market is generally expected to achieve an equilibrium. High quality coal price is expected to hover at a high level whilst poor quality coal price is expected to face downward pressure. The steady growth of demand of certain coalconsuming industries, such as power, metallurgical industries, chemicals and construction materials, etc. which are driven by the growth of the PRC’s economy, slows down under macroeconomic control measures taken by the government. The commencement of production from new coal mines and the decreased net export volume of coal will increase the domestic supply of coal. The increase in coal transportation capacity will partially ease the tight domestic coal transportation capacity. The demand and supply in the domestic market is generally expected to maintain an equilibrium and coal price is generally expected to remain stable in the second half of 2006. The price of good quality coal is expected to maintain at a high level, while the prices of poor quality coal is expected to fall. Measures such as the PRC Government’s continuous effort in closing down sub-standard coal mines, strengthening the structure of the coal industry, implementing protective mining of coal resources, etc. are beneficial to the sustainable development of the coal industry and enhance the competitive capacities of the large-scale coal enterprises.

The demand for coal in the international market is expected to be strong, and coal price is expected to be at high level. The steady growth of world economy and growing hot issue relating to international energy drive the strong demand for coal in the international market, and the growth in demand for coal is the fastest among all energy resources. The coal demand in the Asia-Pacific region is expected to maintain a strong growth due to the increasing import of coal by U.S.A., China, India, South Korea and other countries. However, the increasing export of coal by Indonesia, tight supply of coal export by Australia and reduction of coal export by China, lead to a generally stable supply of coal in the Asia-Pacific region. It is expected that the international coal market will hover at a high price level in the second half of 2006. The continuous rise in coal price in the European coal market, the high prices of international oil and natural gas, and the continuous rebound in international shipping freight rate will be beneficial to sustain high prices in the East Asian coal market.

The volume of domestic sales and coal export of the Company for year 2006 is projected to be 34 million tonnes, representing an increase in sales volume of 1.52 million tonnes or 4.7% compared to the same period for year 2005. Of this amount, the domestic sales volume is projected to be 27 million tonnes, representing an increase of 1.77 million tonnes or 7.0% over the domestic sales volume for year 2005; and coal export volume is projected to be 7 million tonnes, which would be 0.25 million tonnes or 3.4% less than the export volume for year 2005.

The Company has entered into contracts and letters of intent for domestic sales and coal exports in 2006 for a total of 28.1 million tonnes, of which the volume of coal sold by signed contract amounted to 11.42 million tonnes, with an increase in contract price of 2.8% as compared with the average contract price of domestic coal sales for year 2005. The volume of coal sold by letter of intent for domestic sales amounted to 16.68 million tonnes, with the coal price fluctuating with market changes. The contracts the Company has already entered into for steam coal export in year 2006 amounted to 4.93 million tonnes, with a decrease in contract price of 7% as compared with the contract price of steam coal export in year 2005.

Operating Strategies in the Second Half of 2006

The Company will continue to improve its profitability and shareholders’ return through internal development and external expansion. In the second half of 2006, the Company will continue to implement the following operating strategies:

i) Improving operation and management and enhancing the profitability of the existing coal mines.

Firstly, the Company will stabilize the output and sales volume of its existing coal mines. The Company will optimize and adjust the production system of its coal mines so that the output of raw coal will start to increase again to achieve a sales target of 34.0 million tones for the year.

Secondly, the Company will continue to implement its “Three Nil Project” to improve product quality and reputation in the market, and to continuously implement its “Four Optimizations” to optimize the Company’s product mix, user mix, transportation structure and port flow structure so as to reduce the cost of sales and increase net sales price of products.

Thirdly, the Company will strengthen its management and implement cost control measures. The Company will improve its financial control system and control the capital risk. The Company will fully implement the policy of “increasing income, reducing cost, reducing material consumption and increasing efficiency”.

– 7 –

ii) Speeding up the development pace of existing projects and continuing to look for new acquisition opportunities.

The Company will accomplish revamping the production system, installation of mining equipment, and endeavors to put the Austar Coal Mine in Australia into full operation in the third quarter of 2006. The Company will complete the commercial negotiation for the new coal mine project in Shaanxi Province, and endeavors to complete construction of the coal mine by the end of 2006. The Company will speed up the construction pace of Zhaolou Coal Mine in Shandong Province and the methanol project in Shaanxi province, and endeavors to complete the construction of these two projects and commence their operations by the end of year 2007. The Company will continue to look for new acquisition opportunities in coal and other related industries both in China and overseas so as to expand the scale of its coal mine assets and develop coal further processing business.

In the year 2006, Yankuang Group will implement the transfer to the Company part of its coal and power operations and other new projects, which are in line with the Company’s development strategies and in accordance with the government’s relevant regulations. In addition, Yankuang Group will support the Company in its acquisition of the above-mentioned transfers to increase the business performance of the Company, reduce connected transactions and intra-industry competition between Yankuang Group and the Company. The Company would be invited to invest in the coal liquefaction project which is being developed by Yankuang Group.

The Company will acquire 98% of the equity interest in Yankuang Shanxi Neng Hua Company, Limited. (“Shanxi Neng Hua”) in the third quarter of year 2006. The acquisition is expected to offer a platform for the Company’s participation in coal resource exploitation and coal further processing business in Shanxi province. The Tianchi coal mine of Shanxi Neng Hua is expected to put into full operation by the end of year 2006.

iii) Regulating the operations of the Company and improving the management expertise of the Company.

Firstly, in accordance with the requirements of Sarbanes-Oxley Act, the Company will complete the establishment of its internal control systems before the end of year 2006. The Company has already completed the design, testings and rectifying works of its internal control system. The Company’s internal system will be formally implemented in October 2006, and issue the Internal Control Report by the end of the year 2006.

Secondly, pursuant to the requirements of domestic and foreign supervising and regulating authorities, the Company will arrange for its Directors, Supervisors, senior management and the other employees to attend regular training to strengthen their awareness of self-discipline and responsibility. The Company will also improve its corporate governance to promote the operational compliance of the Company.

Thirdly, The Company will strengthen the management of its external investments, control its investment risks and improve the quality and returns of its investments.

DISCLOSURE OF SIGNIFICANT EVENTS

Final Dividends Distribution for Year 2005

At the 2005 annual general meeting of the Company held on 28th June, 2006, the shareholders of the Company approved the final dividends of RMB1,082 million ( tax included), or RMB2.2 (tax included) per share to be declared and paid to the shareholders of the Company, which include (1) cash dividends of RMB737.7 million (tax included) or RMB0.150 (before tax) per share for the year ended 2005 in accordance with the Company’s consistent dividend policy; and (2) 2005 special cash dividends of RMB344.3 million (tax included) or RMB0.070 (tax included) per share.

Payment of the 2005 final cash dividends to the shareholders of the Company was completed on 20th July, 2006.

Interim Dividends Distribution

There will be no payment of interim dividends nor issue of bonus shares for the first half-year of 2006.

Acquisition of Mining Right of Zhaolou Coal Mine

The Company acquired 95.67% equity interest in Yanmei Heze Neng Hua Company Limited ( “ Heze Neng Hua”) from Yankuang Group in December 2005.

Yankuang Group has been granted the mining right certificate of Zhaolou Coal Mine by the Ministry of Land and Resources on 28th June, 2006. Pursuant to the related acquisition agreements, Heze Neng Hua has the right to purchase such mining rights from Yankuang Group at any time within 12 months from the grant of the mining rights of Zhaolou coal mine to Yankuang Group.

– 8 –

Construction works of Zhaolou coal mine are proceeding according to the plan, and are expected to be completed by the end of year 2007. The company will undertake acquisition of the mining rights of Zhaolou coal mine pursuant to the terms of the relevant agreements, as and when appropriate.

Acquisition of Equity Interest of Yankuang Shanxi Neng Hua Co., Ltd.

On 18th August, 2006, an agreement was entered into between the Company and Yankuang Group in relation to the acquisition of 98% equity interest of Yankuang Shanxi Nenghua Company Limited by the Company from Yankuang Group. Please refer to the “Announcement On Connected Transaction of Yanzhou Coal Mining Company Limited” published by the Company on 21st August, 2006 for details of the acquisition.

Material Litigation and Arbitration

On 13th December 2004, the Company made an entrusted loan of RMB640 million to Shandong Xin Jia Industrial Company Limited (“Shandong Xin Jia”) through the Bank of China Jining Branch (the “Entrusted Loan”). Since Shandong Xin Jia failed to duly repay the principal and interest of the Entrusted Loan, the Higher People’s Court of Shandong Province appointed Shandong Yinxing Auction Company Limited and auctioned the 289 million shares held by Lianda Group Limited, the guarantor, in Huaxia Bank Company Limited (“Huaxia Shares”) in accordance with the relevant laws on 6th September, 2005 to repay the company’s the principal, interest, penalty interest and relevant expenses of the Entrusted Loan. The final auction price was RMB3.5 per Huaxia Share and total final auction amount was RMB1,011.5 million.

The successful bidder of Huaxia Shares is going through qualification approval procedures of China Banking Regulatory Commission. Upon completing the qualification approval, the bidder will make payment of the auction amount and transferring procedures of Huaxia Shares, and the Company can call back the principal, interest, penalty interest and relevant expenses of the Entrusted Loan. As at this reporting date, the bidder is still undergoing the process of qualification approval. The Company and relevant parties are endeavoring to confirm the results of the qualification approval as soon as possible.

In view of the possibility that the bidder may not obtain the qualification approval by China Banking Regulatory Commission, the Company and the relevant parties have studied corresponding measures to call back the principal, interest, penalty interest and relevant expenses of the Entrusted Loan. Any significant progress concerning the entrusted loan will be promptly disclosed by the Company.

Save as disclosed above, the Company was not involved in any other significant litigation and arbitration during this reporting period.

Share Reform Plan

The share reform plan proposed by Yankuang Group was implemented (the “Share Reform Plan”) on 31st March, 2006. Yankuang Group has paid a consideration of 2.5 non-tradable shares for every 10 shares held by each holder of A shares whose name appeared on the register of members of A share on 30th March, 2006 in exchange for the right to list and trade the non-tradable shares of Yankuang Group on the Shanghai Stock Exchange. The non-tradable shares held by the Yankuang Group were granted the right to list and trade on the Shanghai Stock Exchange since 3rd April, 2006.

The financial indicators of the Company including assets, liabilities, ownership interest, total share capital and net profit remain unchanged upon implementation of the revised Share Reform Plan of Yankuang Group.

MATERIAL CONTRACTS

Besides the relevant agreements disclosed in the sections headed “Acquisition of Equity Interest of Yankuang Shanxi Neng Hua Co., Ltd.” and “On-going Connected Transactions”, the Company was not a party to any material contract during this reporting period.

ON-GOING CONNECTED TRANSACTIONS

Pursuant to the regulations of Hong Kong Stock Exchange and Shanghai Stock Exchange on on-going connected transactions and the operation developments of the Company and Yankuang Group, the Company completed the review of its on-going connected transactions as required by law and reentered into six on-going connected transaction agreements (“New On-going Connected Transaction Agreements”) with Yankuang Group in the first quarter 2006. It also determined the annual caps on the connected transactions for each New On-going Connected Transaction Agreements in each year (“the Annual Caps”) from 2006 to 2008.

The New On-going Connected Transaction Agreements and the Annual Caps were approved by the independent shareholders on 24th March, 2006. The term for each of the New On-going Connected Transaction Agreements is from 1st January, 2006 till 31st December, 2008. The Company and Yankuang Group terminated the original contracts on the Materials and Services Supply Agreement and its supplementary agreement, and the Agreement of Endowment Insurance Fund.

– 9 –

Details of the connected transactions for the first half year of 2006 are set out in note 13 to the financial statements prepared in accordance with the IFRS contained herein.

BORROWINGS

Details of the borrowings are set out in note 14 to the financial statements prepared in accordance with the IFRS contained herein.

PURCHASE, SALE OR REDEMPTION OF SHARES OF THE COMPANY

During this reporting period, the Company and its subsidiaries did not purchase, sell or redeem any of the shares of the Company.

COMPLIANCE WITH MODEL CODE

Having made specific enquiry of all directors of the Company, during this reporting period, the directors of the Company have strictly complied with the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) set out in Appendix 10 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“the Listing Rules”). The Company has not adopted a code of conduct regarding the securities transactions of the directors of the Company on terms no less exacting than the required standard set out in the Model Code.

COMPLIANCE WITH CODE ON CORPORATE GOVERNANCE PRACTICES

During this reporting period, the Company has complied with the code provisions in the Code On Corporate Governance Practices set out in Appendix 14 of the Listing Rules (the “Code Provision”).

Save as disclosed below, there is no significant difference between the compliance with the Code Provision by the company during this reporting period and that disclosed in the Company’s 2005 Annual Report.

“Code for Securities Transactions by the Management of Yanzhou Coal Mining Company Limited” was established by the board of the Company on 21st April, 2006, which stipulates written guidelines for transactions in the securities of the Company for the directors, supervisors and senior management of the Company and any other person who may be aware of non-published price sensitive information. The code has combined the requirements of the relevant domestic laws and regulations and those of Hong Kong.

IMPACT OF FLUCTUATIONS IN EXCHANGE RATES ON THE COMPANY

Starting from 21st July, 2005, China reformed the exchange rate regime by moving into a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. RMB is no longer pegged to the US dollar.

The impact of floating exchange rate to the Company is mainly reflected in (a) (coal exports of the Company are calculated in US dollar) impact on income through coal export after conversion into RMB; (b) impact of conversion loss of foreign currency deposit; and (c) impact on the Company’s import costs of equipment and fittings.

The Company has no plans to make hedging arrangements for the exchange rates of RMB to foreign currencies.

EMPLOYEES

As at 30th June, 2006, the Company had 31,716 employees in total, of whom 2,026 were administrative personnel, 1,082 were technicians, 24,459 were directly involved in coal production and 4,149 were supporting staff.

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 Wang Xin Chairman

18th August, 2006 Zoucheng, People’s Republic of China

Directors: As at the date of this announcement, the Directors of the Company are Mr. Wang Xin, Mr. Geng Jiahuai, Mr. Yang Deyu, Mr. Shi Xuerang, Mr. Chen Changchun, Mr. Wu Yuxiang, Mr. Wang Xinkun, Mr. Chen Guangshui and Mr. Dong Yunqing, and the independent non-executive Directors of the Company are Mr. Pu Hongjiu, Mr. Cui Jianmin, Mr. Wang Xiaojun, Mr. Wang Quanxi.

The interim report of the Company for the six-month period ended 30th June, 2006 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 (http//www.hkex.com.hk) in due course.

– 10 –

INTERIM RESULTS

The unaudited interim operating results of the Company for the six months ended 30th June, 2006 prepared in conformity 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, 2006 TO JUNE 30, 2006

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 Non-operating income Less: Non-operating expenses Total profits Less: Income taxes Minority interest Net profit Add: Unappropriated profits at the beginning of the period Profits available for appropriation Less: Appropriations to statutory common reserve fund Profits available for appropriation to shareholders Less: Cash dividend proposed after the balance sheet date Unappropriated profits at the end of the period	The Group Six months ended June 30, 2006 2005 RMB RMB (unaudited) (unaudited) 6,486,152,242 6,676,644,921 2,940,473,641 2,758,267,900 138,120,360 125,034,009 3,407,558,241 3,793,343,012 41,283,862 23,891,613 519,847,693 538,394,458 919,559,240 805,420,279 (22,588,101) (4,424,385) 2,032,023,271 2,477,844,273 (1,058,461) 2,818,654 4,625,033 277,296 2,584,664 2,076,971 2,033,005,179 2,478,863,252 685,060,906 821,951,620 241,305 288,539 1,347,702,968 1,656,623,093 4,761,923,924 3,722,812,692 6,109,626,892 5,379,435,785 – – 6,109,626,892 5,379,435,785 – – 6,109,626,892 5,379,435,785	The Company Six months ended June 30, 2006 2005 RMB RMB (unaudited) (unaudited) 6,486,152,242 6,676,644,921 2,941,998,508 2,759,543,817 138,120,360 125,034,009 3,406,033,374 3,792,067,095 36,415,895 23,530,900 521,726,223 540,467,066 906,498,163 794,341,205 (16,540,560) (7,015,528) 2,030,765,443 2,487,805,252 (253,614) (7,775,735) 4,622,533 257,296 2,584,664 1,904,251 2,032,549,698 2,478,382,562 684,846,730 821,759,469 – – 1,347,702,968 1,656,623,093 4,762,240,508 3,723,129,276 6,109,943,476 5,379,752,369 – – 6,109,943,476 5,379,752,369 – – 6,109,943,476 5,379,752,369	The Company Six months ended June 30, 2006 2005 RMB RMB (unaudited) (unaudited) 6,486,152,242 6,676,644,921 2,941,998,508 2,759,543,817 138,120,360 125,034,009 3,406,033,374 3,792,067,095 36,415,895 23,530,900 521,726,223 540,467,066 906,498,163 794,341,205 (16,540,560) (7,015,528) 2,030,765,443 2,487,805,252 (253,614) (7,775,735) 4,622,533 257,296 2,584,664 1,904,251 2,032,549,698 2,478,382,562 684,846,730 821,759,469 – – 1,347,702,968 1,656,623,093 4,762,240,508 3,723,129,276 6,109,943,476 5,379,752,369 – – 6,109,943,476 5,379,752,369 – – 6,109,943,476 5,379,752,369
			3,792,067,095 23,530,900 540,467,066 794,341,205 (7,015,528)
			2,487,805,252 (7,775,735) 257,296 1,904,251
			2,478,382,562 821,759,469 –
			1,656,623,093 3,723,129,276
			5,379,752,369 –
			5,379,752,369 –
			5,379,752,369

– 11 –

(ii) Unaudited financial information prepared under IFRS CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2006

Notes Gross sales of coal 4 Railway transportation service income Total revenue Transportation costs of coal 4 Cost of sales and service provided 5 Gross profit Selling, general and administrative expenses 6 Other income 7 Interest expenses 8 Profit before income taxes Income taxes 9 Profit for the period Attributable to: Equity holders of the Company Minority interest Appropriations to reserve Dividends declared 10 Earnings per share 11 Earnings per ADS 11 CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 2006 Notes ASSETS CURRENT ASSETS Bank balances and cash Term deposits Restricted cash Bills and accounts receivable 12 Inventories Other loan receivable Prepayments and other current assets Prepaid lease payments Prepayment for land subsidence, restoration, rehabilitation and environmental costs TOTAL CURRENT ASSETS MINING RIGHTS PREPAID LEASE PAYMENTS PROPERTY, PLANT AND EQUIPMENT GOODWILL INVESTMENTS IN SECURITIES RESTRICTED CASH TOTAL ASSETS

Six months ended June 30, 2006 2005 RMB’000 RMB’000 (unaudited) (unaudited) 6,337,679 6,459,547 71,754 92,064 6,409,433 6,551,611 (486,081) (501,379 ) (2,646,924) (2,429,060 ) 3,276,428 3,621,172 (1,202,070) (905,663 ) 86,334 58,259 (7,780) (14,250 ) 2,152,912 2,759,518 (719,407) (875,175 ) 1,433,505 1,884,343 1,433,612 1,884,054 (107) 289 1,433,505 1,884,343 195,184 202,864 1,082,048 799,240 RMB0.29 RMB0.38 RMB14.57 RMB19.15 At At June 30, December 31, 2006 2005 RMB’000 RMB’000 (unaudited) (audited) 3,335,179 5,885,581 3,158,164 1,326,335 38,716 30,505 2,770,599 2,224,836 512,824 470,501 640,000 640,000 312,235 202,417 13,465 13,465 405,942 157,511 11,187,124 10,951,151 150,023 153,265 573,178 579,773 9,814,115 9,318,486 153,037 153,037 62,181 62,181 49,637 36,551 21,989,295 21,254,444

– 12 –

LIABILITIES AND EQUITY CURRENT LIABILITIES Bills and accounts payable Other payables and accrued expenses Dividend payable Amounts due to Parent Company and its subsidiary companies 13 Unsecured bank loan 14 Taxes payable TOTAL CURRENT LIABILITIES AMOUNTS DUE TO PARENT COMPANY AND ITS SUBSIDIARY COMPANIES – DUE AFTER ONE YEAR 13 DEFERRED TAX LIABILITY TOTAL LIABILITIES EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY MINORITY INTEREST TOTAL EQUITY TOTAL LIABILITIES AND EQUITY	405,862 1,501,042 510,048 632,023 200,000 528,138 3,777,113 31,827 180,624 3,989,564 17,971,378 28,353 17,999,731 21,989,295	497,660 1,575,869 – 508,254 200,000 647,247
		3,429,030 31,827 146,279
		3,607,136
		17,618,577 28,731
		17,647,308
		21,254,444

NOTES TO THE CONDENSED FINANCIAL STATEMENTS PREPARED UNDER IFRS

1. BASIS OF PRESENTATION

The interim financial report has been prepared in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting” and with the applicable disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on the SEHK.

2. SIGNIFICANT ACCOUNTING POLICIES

The interim financial report has been prepared on the historical cost basis.

The accounting policies adopted are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended December 31, 2005.

In the current period, the Group has adopted, for its first time, all of the new standards, amendment and interpretations issued by the International Accounting Standards Board (the “IASB”) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for accounting periods beginning on January 1, 2006.

effective for accounting	periods beginning on January 1, 2006.
IAS 19 (Amendment)	Employee Benefits: Actuarial Gains and Losses, Group Plans and Disclosures
IAS 39 (Amendment)	Financial Instruments: Recognition and Measurement:
	Amendment for hedges of forecast intragroup transactions
IAS 39 (Amendment)	Financial Instruments: Recognition and Measurement
	Amendment for fair value option
IAS 39 (Amendment) &	Financial Instruments: Recognition and Measurement
IFRS 4	Amendment for financial guarantee contracts
IFRS 6	Exploration for and Evaluation of Mineral Resources
IFRIC 4	Determining whether an Arrangement Contains a Lease
IFRIC 5	Rights to Interests Arising from Decommissing, Restoration
	and Environmental Rehabilitation Funds

The directors of the Company consider that the adoption of the new and revised standards has had no material effect on how the results for the current or prior accounting periods are prepared and presented. Accordingly, no prior period adjustment is required.

3. SEGMENT INFORMATION

The Group is engaged primarily in the coal mining business and the coal railway transportation business. The Company does not currently have direct export rights in the PRC and all of its export sales must be made through China National Coal Industry Import and Export Corporation (“National Coal Corporation”), Minmetals Trading Co., Ltd. (“Minmetals Trading”) 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, Minmetals Trading or Shanxi Coal Corporation. Certain of the Company’s subsidiaries are engaged in trading and processing of mining machinery and the transportation business via rivers and lakes in the PRC. No separate segment information about these businesses is presented in these financial statements as the underlying gross sales, results and assets of these businesses, which are currently included in the coal mining business segment, are insignificant to the Group.

– 13 –

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

Coal mining RMB’000 GROSS REVENUE External 6,337,679 Inter-segment – Total 6,337,679 Inter-segment revenue is charged at prices pre-determined RESULT Segment results 2,309,592 Unallocated corporate expenses Unallocated corporate income Interest expenses Profit before income taxes Coal mining RMB’000 GROSS REVENUE External 6,459,547 Inter-segment – Total 6,459,547 Inter-segment revenue is charged at prices pre-determined RESULT Segment results 2,892,250 Unallocated corporate expenses Unallocated corporate income Interest expenses Profit before income taxes

For the six months ended June 30, 2006 Coal railway transportation Eliminations Consolidated RMB’000 RMB’000 RMB’000 71,754 – 6,409,433 110,554 (110,554 ) – 182,308 (110,554 ) 6,409,433 by the relevant governmental authority. 13,300 – 2,322,892 (223,600 ) 61,400 (7,780 ) 2,152,912 For the six months ended June 30, 2005 Coal railway transportation Eliminations Consolidated RMB’000 RMB’000 RMB’000 92,064 – 6,551,611 116,740 (116,740 ) – 208,804 (116,740 ) 6,551,611 by the relevant governmental authority. 59,721 – 2,951,971 (214,978 ) 36,775 (14,250 ) 2,759,518

4. SALES OF COAL AND TRANSPORTATION COSTS OF COAL

SALES OF COAL AND TRANSPORTATION COSTS OF COAL
Domestic sales of coal, gross Less: Transportation costs Domestic sales of coal, net Export sales of coal, gross Less: Transportation costs Export sales of coal, net Net sales of coal	Six months ended June 30, 2006 2005 RMB’000 RMB’000 4,629,995 4,690,741 182,705 153,267 4,447,290 4,537,474 1,707,684 1,768,806 303,376 348,112 1,404,308 1,420,694 5,851,598 5,958,168
		4,537,474
		1,768,806 348,112
		1,420,694
		5,958,168

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.

– 14 –

5. 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 of materials Others 6. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Retirement benefits scheme contributions Wages and employee benefits Additional medical insurance Depreciation Distribution charges Resource compensation fees Repairs and maintenance Research and development Staff training costs Freight charges Materials and consumables Property management Education Exchange loss Others 7. OTHER INCOME Gain on sales of auxiliary materials Interest income from bank deposits Interest income on loan receivable Others 8. INTEREST EXPENSES Interest expenses on bank borrowing wholly repayable within 5 years Deemed interest expenses in respect of acquisition of Jining III No interest was capitalized during the relevant periods.	Six months ended June 30, 2006 2005 RMB’000 RMB’000 587,966 526,848 707,753 524,367 163,435 140,938 469,837 431,605 209,264 359,694 157,698 171,166 9,920 9,806 50,729 53,530 290,322 211,106 2,646,924 2,429,060 Six months ended June 30, 2006 2005 RMB’000 RMB’000 305,845 228,395 254,353 130,837 26,922 20,212 48,202 30,749 25,797 20,179 51,866 62,925 37,549 70,100 19,960 25,155 20,185 15,153 9,772 10,746 37,476 9,754 43,135 18,603 20,402 8,302 20,301 14,174 280,305 240,379 1,202,070 905,663 Six months ended June 30, 2006 2005 RMB’000 RMB’000 23,406 20,759 61,400 33,841 – 3,377 1,528 282 86,334 58,259 Six months ended June 30, 2006 2005 RMB’000 RMB’000 6,196 12,320 1,584 1,930 7,780 14,250	Six months ended June 30, 2006 2005 RMB’000 RMB’000 587,966 526,848 707,753 524,367 163,435 140,938 469,837 431,605 209,264 359,694 157,698 171,166 9,920 9,806 50,729 53,530 290,322 211,106 2,646,924 2,429,060 Six months ended June 30, 2006 2005 RMB’000 RMB’000 305,845 228,395 254,353 130,837 26,922 20,212 48,202 30,749 25,797 20,179 51,866 62,925 37,549 70,100 19,960 25,155 20,185 15,153 9,772 10,746 37,476 9,754 43,135 18,603 20,402 8,302 20,301 14,174 280,305 240,379 1,202,070 905,663 Six months ended June 30, 2006 2005 RMB’000 RMB’000 23,406 20,759 61,400 33,841 – 3,377 1,528 282 86,334 58,259 Six months ended June 30, 2006 2005 RMB’000 RMB’000 6,196 12,320 1,584 1,930 7,780 14,250
		14,250

– 15 –

9. INCOME TAXES

Income taxes Deferred tax charge	Six months ended June 30, 2006 2005 RMB’000 RMB’000 685,062 821,951 34,345 53,224 719,407 875,175	Six months ended June 30, 2006 2005 RMB’000 RMB’000 685,062 821,951 34,345 53,224 719,407 875,175
		875,175

The Group is subject to a standard income tax rate of 33%. The effective income tax rate of the Group for the current period is 33% (six months ended June 30, 2005: 32%). The major reconciling items are the amount claimed on the appropriation to a future development fund for which a tax deduction is granted and expenses which are not deductible for tax purposes.

10. DIVIDENDS

2005 Final dividend approved, RMB0.150 per share (2005: 2004 final dividend approved RMB0.1625, adjusted for the bonus issue) 2005 Special dividend approved, RMB0.070 per share (2005: Nil)	Six months ended June 30, 2006 2005 RMB’000 RMB’000 737,760 799,240 344,288 – 1,082,048 799,240	Six months ended June 30, 2006 2005 RMB’000 RMB’000 737,760 799,240 344,288 – 1,082,048 799,240
		799,240

Pursuant to the annual general meeting held on June 28, 2006, a final dividend and special dividend in respect of the year ended December 31, 2005 were approved.

Pursuant to the annual general meeting held on June 28, 2005, a final dividend and a bonus issue on the basis of six bonus shares for every ten existing shares in respect of the year ended December 31, 2004 were approved.

11. EARNINGS PER SHARE AND PER ADS

The calculation of the earnings per share attributable to equity holders of the Company for the six months ended June 30, 2006 and 2005 is based on the profit for the period of RMB1,433,612,000 and RMB1,884,054,000 and on 4,918,400,000 shares in issue (adjusted for the bonus issue, as appropriate), during both periods.

The earnings per ADS have been calculated based on the net income for the relevant periods and on one ADS being, equivalent to 50 shares.

12. BILLS AND ACCOUNTS RECEIVABLE

Total bills receivable Total accounts receivable Less: Allowance for doubtful debts Total bills and accounts receivable, net	At June 30, 2006 RMB’000 2,517,655 309,464 2,827,119 (56,520 ) 2,770,599	At December 31, 2005 RMB’000 2,092,949 258,587 2,351,536 (126,700 ) 2,224,836

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

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	At June 30, 2006 RMB’000 2,785,729 5,447 5,919 18 30,006 2,827,119	At December 31, 2005 RMB’000 2,245,170 6,014 19 – 100,333
		2,351,536

– 16 –

13. RELATED PARTY TRANSACTIONS

The amounts due to 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, 2006 included the present value of an 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.

The consideration for the cost of the mining rights of approximately RMB132,479,000 is to be settled over ten years by equal annual instalments before December 31 of each year, commencing from 2001.

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 Total due Less: amount due within one year Amount due after one year	At June 30, 2006 RMB’000 632,023 8,689 23,138 663,850 (632,023 ) 31,827	At December 31, 2005 RMB’000 508,254 8,689 23,138 540,081 (508,254 ) 31,827

Except for the outstanding consideration as described above, the amounts due to Parent Company and/or its subsidiary companies have no specific terms of repayment but is expected to be repaid within one year. During the periods, the Group had the following significant transactions with the Parent Company and/or its subsidiary companies:

	Six months ended June 30,	Six months ended June 30,
	2006	2005
	RMB’000	RMB’000
Income
Sales of coal	448,702	390,037
Sales of auxiliary materials	232,521	226,496
Utilities and facilities	–	14,500
Expenditure
Utilities and facilities	162,594	174,721
Annual fee for mining rights	6,490	6,490
Purchases of supply materials and equipment	214,230	142,414
Repairs and maintenance services	81,847	55,635
Social welfare and support services	198,406	110,961
Technical support and training	10,000	7,565
Road transportation services	32,915	20,583
Construction services	80,642	–

Certain expenditures for social welfare and support services (excluding medical and child care expenses) of RMB31,875,000 for each of the six months ended June 30, 2006 and 2005, and for technical support and training of RMB7,565,000 for each of the six months ended June 30, 2006 and 2005, have been charged by the Parent Company at a negotiated amount per annum, subject to changes every year.

In addition to the above, the Company participates in a scheme of the Parent Company in respect of retirement benefits.

Transactions/balance with other state-controlled entities in the PRC

The Group operates in an economic environment currently predominated by entities directly or indirectly owned or controlled by the PRC government (“state-controlled entities”). In addition, the Group itself is part of a larger group of companies under the Parent Company which is controlled by the PRC government. Apart from the transactions with the Parent Company and fellow subsidiaries and other related parties disclosed above, the Group also conducts business with other state-controlled entities. The directors consider those state-controlled entities are independent third parties so far as the Group’s business transactions with them are concerned.

In establishing its pricing strategies and approval process for transactions with other state-controlled entities, the Group does not differentiate whether the counter-party is a state-controlled entity or not.

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Material transactions with other state-controlled entities are as follows:

Material transactions with other state-controlled entities are as follows:
	Six months	ended June 30,
	2006	2005
	RMB’000	RMB’000
Trade sales	681,224	631,033
Trade purchases	214,235	142,414
Material balances with other state-controlled entities are as follows:
	At	At
	June 30,	December 31,
	2006	2005
	RMB’000	RMB’000
Amounts due from other state-controlled entities	99,714	63,645
Amounts due to other state-controlled entities	771,314	613,082

In addition, the Group has entered into various transactions, including deposit placements, borrowings and other general banking facilities, with certain banks and financial institutions which are state-controlled entities in its ordinary course of business,. In view of the nature of those banking transactions, the directors are of the opinion that separate disclosure would not be meaningful.

Except as disclosed above, the directors are of the opinion that transactions with other state-controlled entities are not significant to the Group’s operations.

Compensation of key management personnel

The remuneration of directors and other members of key management was as follows:

Directors’ fee Salaries, allowance and other benefits in kind Retirement benefit scheme contribution	Six months ended June 30, 2006 2005 RMB’000 RMB’000 179 – 828 569 373 256 1,380 825	Six months ended June 30, 2006 2005 RMB’000 RMB’000 179 – 828 569 373 256 1,380 825
		825

The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

14. UNSECURED BANK LOAN

The loan is interest bearing at 5.76% per annum and is repayable in August 2006.

SUPPLEMENTAL INFORMATION I

SUMMARY OF DIFFERENCES BETWEEN IFRS AND PRC GAAP

The Interim 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, but recognized as an appropriation of shareholders’ equity under IFRS;

• (ii) reversal of the Work Safety Cost provided but not yet ultized for the enhancement of safety production environment and facilities under IFRS, which is charged as an expense immediately when set aside under PRC GAAP;

• (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 prior to January 1, 2005. No negative goodwill arose from the above transaction under PRC GAAP;

• (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;

• (v) pre-operating expenses written off in terms of IFRS are capitalized in subsidiaries of the Company as a long term asset under PRC GAAP;

• (vi) recognition of amortization of goodwill under PRC GAAP, which is not amortized but instead tested for impairment at least annually under IFRS from January 1, 2005 onwards; and

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• (vii) recognition of a deferred tax asset/liability under IFRS for the tax consequences 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, which are not recognized under PRC GAAP.

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

	Profit attributable	Profit attributable	Equity attributable	Equity attributable
	to equity holders		to equity	holders
	of the Company for		of the Company as at
	six months ended June 30,		June 30,	December 31,
	2006	2005	2006	2005
	RMB’000	RMB’000	RMB’000	RMB’000
As per interim financial report prepared under IFRS	1,433,612	1,884,054	17,971,378	17,618,577
Impact of IFRS adjustments in respect of:
– transfer to future development fund which
is charged to profit before income
taxes under PRC GAAP	(195,185 )	(202,864 )	(358,665 )	(269,945 )
– reversal of Work Safety Cost	(104,079 )	(127,619 )	(547,347 )	(443,268 )
– release of negative goodwill to income	–	–	(138,101 )	(138,101 )
– deemed interest expenses	1,587	1,930	114,807	113,220
– write-off of pre-operating expenses of subsidiaries	185,428	54,856	307,229	121,801
– recognition of goodwill amortization	(8,005 )	(6,958 )	(23,011 )	(15,006 )
– deferred tax effect on temporary differences
not recognized under PRC GAAP	34,345	53,224	180,624	146,279
– others	–	–	8,070	8,070
As per interim financial report prepared
under PRC GAAP	1,347,703	1,656,623	17,514,984	17,141,627

Note: There are also differences in other items in the interim financial report due to differences in classification between IFRS and PRC GAAP.

SUPPLEMENTAL INFORMATION II

SUMMARY OF DIFFERENCES BETWEEN IFRS AND US GAAP

The interim financial statement is prepared in accordance with IFRS (“IFRS Interim Financial Report”), which differs 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.

In the IFRS Interim Financial Report, the acquisitions of Jining II, Jining III, Railway Assets and Heze have been accounted for using the purchase method which accounts for the assets and liabilities of Jining II, Jining III, Railway Assets and Heze 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. Prior to January 1, 2005, such goodwill was amortized over a period of ten to twenty years. Subsequent to January 1, 2005, such goodwill is tested for impairment at least annually. Prior to January 1, 2005, any excess of the fair value of the net assets acquired over the purchase consideration is recorded as negative goodwill, which was presented as a deduction from the assets of the Group in the condensed consolidated balance sheet, and such negative goodwill was released to the statement of income on a systematic basis over the remaining weighted average useful life of the identifiable acquired depreciable/amortizable assets. The carrying amount of negative goodwill at January 1, 2005 has been derecognised. Therefore, an adjustment has been made to opening retained earnings and negative goodwill at January 1, 2005.

Under US GAAP, as the Group, Jining II, Jining III, Railway Assets and Heze are entities under the common control of the Parent Company, therefore the assets and liabilities of Jining II, Jining III, Railway Assets and Heze 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, Railway Assets and Hese acquired and the purchase price paid is recorded as an adjustment to shareholders’ equity.

In the IFRS Interim Financial Report, 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 estimated 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

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recognized under US GAAP as a higher tax base resulting from the capitalization is utilized for PRC tax purposes.

In the IFRS Interim Financial Report, property, plant and equipment and land use rights are stated at their respective fair values at the date of acquisition including those arising from 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 base of the assets is the fair value amount at the date of acquisition.

In the IFRS Interim Financial Report, the acquisition of Yanmei Shipping has been accounted for using purchase method which accounted for the assets and liabilities of Yanmei Shipping at their fair value at the date of acquisition. The excess of the purchase consideration over the value of the net assets acquired is capitalized as a goodwill and was, prior to January 1, 2005, amortized over a period of ten years. After January 1, 2005, such goodwill is tested for impairment at least annually. Under US GAAP, goodwill is not amortized but instead tested for impairment at least annually starting from the initial recognition of goodwill in 2003, when Yanmei Shipping was acquired by the Group.

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

Profit for the period attributable to equity holders of the Company as reported under IFRS US GAAP adjustments: Additional depreciation charged on fair valued property, plant and equipment and prepaid lease payments Additional deferred tax charge due to a higher tax base resulting from the difference in cost bases of property, plant and equipment and prepaid lease payments and capitalization of mining rights Amortization of mining rights of Jining III Loss of Heze included in the Group using the pooling of interest method Income under US GAAP Earnings per share under US GAAP Earnings per ADS under US GAAP

Six months ended June 30, 2006 2005 RMB’000 RMB’000 1,433,612 1,884,054 93,925 94,064 (32,088) (32,134 ) 3,312 3,312 – (681 ) 1,498,761 1,948,615 RMB0.30 RMB0.40 RMB15.24 RMB19.82

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Equity attributable to the equity holders of the Company as reported under IFRS US GAAP adjustments: Difference in cost bases of property, plant and equipment and prepaid lease payments Additional depreciation/amortization charged on fair valued property, plant and equipment and prepaid lease payments Additional deferred tax asset due to a higher tax base resulting from the difference in cost bases of property, plant and equipment and prepaid lease payments Goodwill arising on acquisition of Jining II Mining rights of Jining III Additional deferred tax asset due to a higher tax base resulting from capitalization of mining rights Goodwill arising on acquisition of Railway Assets Amortization of goodwill on acquisition of Yanmei Shipping Goodwill arising on acquisition of Heze Shareholders’ equity under US GAAP	At June 30, 2006 RMB’000 17,971,378 (2,561,032) 1,594,748 318,874 (10,106) (96,047) 31,696 (97,240) 1,116 (35,645) 17,117,742	At December 31, 2005 RMB’000 17,618,577 (2,561,032 ) 1,500,823 349,869 (10,106 ) (99,359 ) 32,788 (97,240 ) 1,116 (35,645 ) 16,699,791

Under US GAAP, the Group’s total assets would have been RMB20,955,035,000 and RMB20,189,379,000 at June 30, 2006 and December 31, 2005, respectively.

Please also refer to the published version of this announcement in South China Morning Post.

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