CStone Pharmaceuticals — Interim / Quarterly Report 2008

Aug 29, 2008

YANZHOU COAL MINING COMPANY LIMITED

DEFINITIONS

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

“Yanzhou Coal”, “Company” or	means	Yanzhou Coal Mining Company Limited, a joint stock limited
“the Company”		company incorporated under the laws of PRC in 1997 in the PRC and
		the H Shares, the ADSs and A Shares of which are listed on the Hong
		Kong Stock Exchange, New York Stock Exchange Inc. and the Shanghai
		Stock Exchange, respectively;
“Group” or “the Group”	means	the Company and its subsidiaries;
“Yankuang Group”,	means	Yankuang Corporation Group Limited, a company with limited liability
“the Controlling Shareholder”,		established in 1996, being the controlling shareholder of the Company
or “Parent Company”		holding 52.86% of the total share capital of the Company;
“Yulin Neng Hua”	means	Yanzhou Coal Yulin Neng Hua Company Limited, a company with limited
		liability incorporated under the laws of the PRC in 2004 and a wholly
		owned subsidiary of the Company, mainly undertakes the construction
		and operation of a 0.6 million tonnes methanol project in Shaanxi
		Province;
“Yushuwan Coal Mine Company”	means	Shaanxi Yulin Yushuwan Coal Mine Company Limited, a joint venture to
		be invested by the Company, Zhengda Energy & Chemicals Company
		Limited and Yushen Coal Company Limited of Yushen City and mainly
		undertakes the construction and operation of Yushuwan coal mine, of
		which 41% equity interest is held by the Company;
“Heze Neng Hua”	means	Yanmei Heze Neng Hua Company Limited, a company with limited
		liability incorporated under the laws of the PRC in 2004 and a 96.67%
		non-wholly owned subsidiary of the Company, mainly undertakes the
		development of Juye coal f eld in the Shandong province;
“Shanxi Neng Hua”	means	Yanzhou Coal Shanxi Neng Hua Company Limited, a company with
		limited liability incorporated under the laws of the PRC in 2002 and
		a wholly-owned subsidiary of the Company, mainly undertakes the
		management of the projects invested by the Company in the Shanxi
		province;

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

“Tianhao Chemicals”	means	Shanxi Tianhao Chemicals Company Limited, a joint stock company
		incorporated under the laws of the PRC in 2002 and a 99.85% non-
		wholly owned subsidiary of Shanxi Neng Hua, mainly undertakes the
		construction and operation of a 0.1 million tonnes methanol project in
		Shanxi Province;
“Yancoal Australia Pty”	means	Yancoal Australia Pty Limited, a company with limited liability
		incorporated under the laws of Australia in 2004 and a wholly-owned
		subsidiary of the Company, mainly undertakes the management of the
		projects invested by the Company in Australia;
“Railway Assets”	means	the railway asset specif cally used for transportation of coal for the
		Company;
“CSRC”	means	China Securities Regulatory Commission;
“Hong Kong Stock Exchange”	means	The Stock Exchange of Hong Kong Limited;
“H Shares”	means	overseas listed foreign invested shares in the ordinary share capital of
		the Company, with a nominal value of RMB1.00 each, which are listed
		on the Hong Kong Stock Exchange;
“ A Shares”	means	domestic shares in the ordinary share capital of the Company, with
		a nominal value of RMB1.00 each, which are listed on the Shanghai
		Stock Exchange.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

YANZHOU COAL MINING COMPANY LIMITED INTERIM RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2008

Dear Shareholders,

The board of directors (the “Board”) of Yanzhou Coal Mining Company Limited is pleased to present the unaudited interim results of the Group for the six months ended June 30, 2008, which had been reviewed by the Audit Committee of the Board.

In the fi rst half of 2008, the raw coal production of the Group was 18.07 million tonnes, representing a decrease of 0.08 million tonnes or 0.4% as compared to the same period last year; coal sales volume was 18.51 million tonnes, representing an increase of 1.54 million tonnes or 9.1% as compared to the same period last year. Total net sales were RMB11,957.9 million, representing an increase of RMB5,261.9 million or 78.6% as compared to the same period last year. Net income attributable to the equity holders of the Company for this reporting period was RMB3,912.6 million, representing an increase of RMB2,410.2 million or 160.4%, as compared to the same period last year.

SUMMARY OF KEY FINANCIAL INFORMATION (UNAUDITED)

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

Operating Results

Operating Results
	For the six months ended June 30 For the change as year ended compared to the December 31 2008 2007 same period 2007 (RMB’000) (RMB’000) of last year(+,-) (RMB’000) (unaudited) (unaudited) % (audited)
Net sales Net sales of coal Net income of railway transportation services Total net sales Gross prof t Interest expenses Income before income taxes Income attributable to equity holders of the Company for this reporting period Net cash income from operating activities Earnings per share	11,845,925 6,604,656 79.4 14,356,930 111,931 91,296 22.6 203,714 11,957,856 6,695,952 78.6 14,560,644 6,785,382 3,306,336 105.2 7,228,720 (15,827) (14,851) 6.6 (27,222) 5,494,255 2,240,187 145.3 4,543,313 3,912,641 1,502,360 160.4 3,230,450 3,861,370 2,030,035 90.2 4,558,649 RMB0.80 RMB0.31 160.4 RMB0.66

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

Assets and Liabilities

Assets and Liabilities
	June 30 December 31 2008 2007 2007 (RMB’000) (RMB’000) (RMB’000) (unaudited) (unaudited) (audited)
Current assets Current liabilities Total assets Equity attributable to equity holders of the Company Net asset value per share Return on net assets (%)	13,794,310 10,069,874 9,908,233 5,527,037 3,609,567 4,099,478 30,498,879 23,760,076 26,187,400 24,346,529 19,482,616 21,417,537 RMB4.95 RMB3.96 RMB4.35 16.07 7.71 15.07

REVIEW OF OPERATIONS

The following discussion is based on the Group’s unaudited fi nancial results for the fi rst half of 2008 and 2007 respectively, which were prepared in accordance with IFRS.

Coal Production

In the fi rst half of 2008, the raw coal production of the Group was 18.07 million tonnes, representing a decrease of 0.08 million tonnes or 0.4% as compared to the same period last year; salable coal production of the Group was 17.86 million tonnes, representing an increase of 0.19 million tonnes or 1.1% as compared to the same period last year.

The following table sets out the coal production of the Group for the six months ended June 30, 2008, and for the six months ended June 30, 2007:

	For the six months ended June 30 compared to the same 2008 2007 period last year(+,-) (‘000 tonnes) (‘000 tonnes) (‘000 tonnes) (%)
1. Raw coal production 1) the Company 2) Shanxi Neng Hua 3) Yancoal Australia Pty 2. Salable coal production 1) the Company 2) Shanxi Neng Hua 3) Yancoal Australia Pty	18,073.8 18,151.1 (77.3) –0.4 16,405.7 16,468.9 (63.2) –0.4 625.6 600.2 25.4 4.2 1,042.5 1,082.0 (39.5) (3.7) 17,856.0 17,667.0 189.0 1.1 16,309.3 16,152.0 157.3 1.0 625.6 600.2 25.4 4.2 921.1 914.8 6.3 0.7

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

Coal Sales and Price

The coal sale prices have risen substantially due to the rise in market price and the strategy of optimized sale structure adopted by the Company.

The following table sets out the sales prices of the Group’s products for the six months ended June 30, 2008, the six months ended June 30, 2007, the six months ended December 31, 2007 and the year ended December 31, 2007:

For the six For the months ended year ended For the six months ended June 30 December December 2008 2007 31, 2007 31,2007 (RMBper tonne) (RMBper tonne) (RMBper tonne) (RMBper tonne)

I. The Company Clean Coal No. 1 Clean Coal No. 2 Clean Coal Domestic Export No. 3 Clean Coal Domestic Export Lump Coal Average Price for Clean Coal Domestic Export Screened Raw Coal Mixed Coal and Others Average Coal Price of the Company Including: Domestic II. Shanxi Neng Hua III.Yancoal Australia Pty IV.traded coal (coal purchased from external sources) Domestic Export

961.50 573.04 617.83 593.88 988.51 544.24 613.48 585.60 992.92 555.89 618.55 593.87 394.45 343.07 349.08 345.10 809.41 431.37 490.03 456.29 837.81 459.87 496.32 476.75 398.43 335.18 432.92 358.90 859.93 535.96 579.08 563.85 929.14 479.53 560.40 520.60 940.95 505.22 568.03 538.88 397.59 336.15 417.54 356.98 449.34 330.55 345.93 338.85 174.67 136.70 175.09 157.42 651.02 390.10 435.88 414.02 653.67 395.00 436.37 417.24 236.36 195.41 212.15 204.13 672.82 498.52 409.78 465.10 670.18 — — — 666.86 — — — 926.92 — — —

Notes:

1. The sales price of coal products is the invoice price of coal sales of the Company minus sales taxes, transportation cost and various miscellaneous fees.

2. The historic average price of each type of coal products for the six months ended December 31, 2007 was calculated based on the following formula:

(Net sales of each type of coal products for the year ended December 31, 2007) less (Net sales of each type of coal products for the six months ended June 30 2007)

• (Sales volume of each type of coal products for the year ended December 31 2007) less (Sales volume of each type of coal products for the six months ended June 30 2007)

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

The Company’s coal sales volume for the fi rst half of 2008 were 18.51 million tonnes, representing an increase of 1.54 million tonnes or 9.1% as compared to the same period last year. The net sales of coal were RMB11,845.9 million, representing an increase of RMB5,241.3 million or 79.4% as compared to the same period last year.

The following table sets out the Group’s sales volume and net sales in coal by product category for the six months ended June 30, 2008 and the six months ended June 30, 2007:

	For the six months ended June 30 2008 2007 % of total % of total Sales volume Net sales net sales Sales volume Net sales net sales of coal of coal of coal of coal of coal of coal ’000 tonnes RMB’000 % ’000 tonnes RMB’000 %
1. The Company Clean Coal No. 1 Clean Coal No. 2 Clean Coal Domestic Export No. 3 Clean Coal Domestic Export Lump Coal Subtotal of Clean Coal Domestic Export Screened Raw Coal Mixed coal and others Subtotal of the Company Including: Domestic 2. Shanxi Neng Hua 3. Yancoal Australia Pty 4. Traded coal (coal purchased from external sources) Domestic Export 5. Subtotal of the Group	198.5 190,891 1.6 381.2 218,422 3.3 4,677.7 4,623,915 39.0 2,923.8 1,591,246 24.2 4,643.2 4,610,318 38.9 2,763.8 1,536,371 23.3 34.5 13,597 0.1 160.0 54,875 0.9 1,996.2 1,615,739 13.6 4,956.2 2,137,972 32.3 1,867.2 1,564,326 13.2 3,823.5 1,758,305 26.6 129.0 51,413 0.4 1,132.7 379,667 5.7 651.5 560,226 4.7 244.8 131,225 2.0 7,523.9 6,990,771 59.0 8,506.0 4,078,865 61.8 7,360.4 6,925,761 58.5 7,213.3 3,644,323 55.2 163.5 65,010 0.5 1,292.7 434,542 6.6 6,676.7 3,000,109 25.3 5,232.6 1,729,668 26.2 1,566.2 273,572 2.3 1,772.5 242,299 3.7 15,766.8 10,264,452 86.6 15,511.1 6,050,832 91.6 15,603.3 10,199,442 86.1 14,218.4 5,616,290 85.0
	601.9 142,276 1.2 571.5 111,679 1.7
	1,001.7 673,937 5.7 886.9 442,145 6.7
	1,141.8 765,260 6.5 — — — 1,127.2 751,710 6.4 — — — 14.6 13,550 0.1 — — —
	18,512.2 11,845,925 100.0 16,969.5 6,604,656 100.0

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

The Group has enhanced its coal trade business since 2008 in order to make a good use of the marketing advantages and strengthen the profi tability. From January 1, 2008 onwards, the Group adjusted the accounting treatment of coal trade business, and the coal trade item is classifi ed as a principal business of the Company instead of other business.

In the fi rst half of 2008, sales volume of the coal purchased from external sources of the Group were 1.14 million tones, representing an increase of 0.84 million tonnes or 280.0%, as compared to the same period last year. The sales of the traded coal were RMB765.3 million representing an increase of RMB612.7 million or 401.5% as compared to the same period last year.

Railway Assets

In the fi rst half of 2008, coal delivered by the railway assets of the Company was 8.50 million tonnes, representing a decrease of 0.20 million tonnes or 2.3% as compared to the same period last year. Realized net income from railway transportation service of the Company was RMB111.9 million (realized income of transportation volume calculated on an exmine basis and on the basis that the transportation cost of the Railway Assets was borne by the customers), representing an increase of RMB20.635 million or 22.6% as compared to the same period last year. The increase was mainly due to the increase in transport volume with the transportation charges relating to 1.23 million tonnes being borne by the customers.

Operating Expenses and Cost Control

Total operating expenses of the Group in the fi rst half of 2008 were RMB6,594.7 million, representing an increase of RMB2,048.7 million or 45.1% as compared to the same period last year, among which, (1) the cost of sales and railway transportation service increased by RMB1,782.9 million or 52.6% as compared to the same period last year; (2) selling, general and administration expenses increased by RMB265.8 million or 23.0% as compared to the same period last year. The percentage of total operating expenses to total net sales decreased to 55.1% in this reporting period from 67.9% in the same period last year.

The following table sets out the Group’s major operating expenses, which are also expressed as percentages of total net sales, for the six months ended June 30, 2008 and the six months ended June 30, 2007, respectively:

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

For the six months ended June 30 2008 2007 2008 2007 (RMB’000) (% of total net sales)

Net sales Net sales of coal Net income of railway transportation service Total net sales Cost of sales and railway transportation service Materials Wages and employee benef ts Electricity supply Depreciation Repairs and maintenance Expenses for land subsidence, restoration, recovery and environmental protection Mining rights expenses and amortization Other transportation expenses Cost of traded coal Other expenses Total cost of sales and costs of railway transportation service Selling, general and administration expenses Total operating expenses

11,845,925 6,604,656 99.1 98.6 111,931 91,296 0.9 1.4 11,957,856 6,695,952 100.0 100.0 704,859 560,611 5.9 8.4 1,267,739 1,141,120 10.6 17.0 209,377 200,149 1.8 3.0 547,341 529,481 4.6 7.9 – 204,144 – 3.0 951,570 419,471 8.0 6.3 85,303 12,947 0.7 0.2 65,436 52,247 0.5 0.8 727,381 – 6.1 – 613,468 269,446 5.1 4.0 5,172,474 3,389,616 43.3 50.6 1,422,260 1,156,437 11.9 17.3 6,594,734 4,546,053 55.1 67.9

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS

The following discussion and analysis should be read in conjunction with the unaudited interim fi nancial report and the notes thereto for the six months ended June 30, 2008 and the unaudited interim fi nancial report and the notes thereto for the six months ended June 30, 2007. Those fi nancial reports have been prepared in accordance with IFRS.

RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2008 COMPARED WITH RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2007

In the fi rst half of 2008, realized net sales of the Group were RMB11,957.9 million, representing an increase of RMB5,261.9 million or 78.6%, from RMB6,696 million over the same period in 2007, which was mainly attributable to: (1) the rise in average sale price of coal resulted in an increase of RMB4,313.1 million in net sales of coal; and 2) sales of traded coal (purchased from external sources of the Group) resulted in an increase of RMB765.3 million in net sales of coal. The following table sets out the sales and changes in the sales of the Group for the six months ended June 30, 2008 and the six months ended June 30, 2007:

	For the six months ended June 30, 2008 2007 change (+,-) change (+,-) RMB million RMB million RMB million %
1. Net sales of coal The Company Shanxi Neng Hua Yancoal Australia Pty traded coal (purchased from external sources) 2. Net income of railway transportation service 3. Total	11,845.9 6,604.7 5,241.2 79.4 10,264.5 6,050.8 4,213.7 69.6 142.2 111.7 30.5 27.3 673.9 442.1 231.8 52.4 765.3 — — — 111.9 91.3 20.6 22.6 11,957.9 6,696.0 5,261.9 78.6

In the fi rst half of 2008, cost of sales and cost of railway transportation service of the Group was RMB5,172.5 million, representing an increase of RMB1,782.9 million or 52.6 %, as compared to RMB3,389.6 million over the same period in 2007. The following table sets out the cost and changes in the costs of the Group for the six months ended June 30, 2008 and the six months ended June 30, 2007:

Percentage Increase or increase For the six months ended June 30, decrease or decrease 2008 2007 (+,-) %

1. Sale cost of coal (RMB million) The Companytotal sale cost (RMB million) note sale cost per tonne (RMB) Shanxi Neng Huatotal sale cost (RMB million) sale cost per tonne (RMB) Yancoal Australia Ptytotal sale cost (RMB million) sale cost per tonne (RMB) Traded coal (purchased from external sources)total sale cost (RMB million) 2. Cost of railway transportation service (RMB million) 3. Total (RMB million)

5,054.4 3,299.6 1,754.8 53.2 3,864.7 2,908.7 956.0 32.9 245.11 187.52 57.59 30.7 98.0 84.7 13.3 15.7 162.89 148.23 14.66 9.9 364.3 307 57.3 18.7 363.69 346.15 17.54 5.1 727.4 — — — 118.1 90.0 28.1 31.2 5,172.5 3,389.6 1,782.9 52.6

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

• Note: In the fi rst half of 2008, sale cost per tonne of coal was RMB245.11, representing an increase of RMB57.59 or 30.7 %, as compared to RMB187.52 over the same period in 2007; sale cost per tonne of coal was RMB210.67 after deducting the increase in unit cost of coal sales caused by government policies, representing an increase of RMB23.15 or 12.3 %, from RMB187.52 over the same period in 2007. The main reasons contributing to the change in the increase in unit cost of coal sales are set out as follows:

Unit: RMB

Relevant amount

Factors

(+,-)

1. Government Policies:

1. Government Policies:
(a) From August 1st, 2007 onwards, as required by the regulations issued by Jining Municipal Government, Shandong Province, the Company accrued Coal Price Regulation Fund provision of RMB8/ton ROM. (b) From January 1st, 2008 onwards, the Company has accrued Mining Right Resource Asset Compensation Fee provision of RMB5/ton ROM for the original-owned f ve coalmines (Nantun Coalmine, Xinglongzhuang Coalmine, Baodian Coalmine, Dongtan Coalmine, Jining II Coalmine). (c) The arable land use tax paid by the Company has increased by RMB67.470 million year on year due to the higher standard of the arable land use tax. (d) The mining area river banks harness fee paid by the Company has increased by RMB102.5 million. (e) Compensation fee for the structures and greens attached on the surface of the mining areas paid by the Company has increased by RMB174.1 million. Subtotal 2. Others (a) Increase of employees’ wages and various miscellaneous fees. (b) An increase of unit cost of coal sales as a result of the price increase of raw material. (c) The land subsidence fees paid by the Company increased by RMB180 million year on year. (d) The company re-classif ed the repairing expenses originally listed under cost of sales as selling, general and administration expenses. Subtotal Total	8.03 4.58 4.30 6.54 10.99
	34.44
	8.09 9.43 11.48 (6.32) 22.68
	57.12

In the fi rst half of 2008, selling, general and administration expenses of the Group were RMB1,422.3 million, representing an increase of RMB265.9 million or 23%, from RMB1,156.4 million over the same period in 2007,mainly due to: (1) labor insurance of the Company increased by RMB119.6 million over the same period in 2007; (2) the Company re-classifi ed the repairing fees originally under cost of sales as selling, general and administration expenses, resulting in an increase of RMB150.5 million in sales, general and administrative fees over the same period last year; (3) the loss in foreign exchange translation increased by RMB126.1 million over the same period in 2007;. (4) assets impairment provisions of RMB28.375 million were accrued during the reporting period; (5) selling, general and administration expenses of Shanxi Neng Hua decreased by RMB24.164 million; and (6) selling, general and administration expenses of Yancoal Australia Pty decreased by RMB189 million, mainly due to exchange gains of RMB106.8 million in the reporting period.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

In the fi rst half of 2008, other operating income of the Group was RMB194.2 million, representing an increase of RMB89.013 million or 84.7%, compared to RMB105.1 million over the same period in 2007, which was primarily due to receipt of interests income of RMB132.2 million on entrusted loans during the reporting period.

In the fi rst half of 2008, interest expenses of the Group were RMB15.827 million, representing an increase of RMB0.976 million or 6.6% compared to RMB14.851 million over the same period last year.

In the fi rst half of 2008, income before income taxes of the Group was RMB5,494.3 million, representing an increase of RMB3,254.1 million or 145.3%, compared to RMB2,240.2 million over the same period last year.

In the fi rst half of 2008, net income attributable to the equity holders of the Company for the period was RMB3,912.6 million, representing an increase of RMB2,410.2 million or 160.4%, compared to RMB1,502.4 million for the same period last year.

Total assets of the Group increased to RMB30,498.9 million as at June 30, 2008 from RMB26,187.4 million as at December 31, 2007, representing an increase of RMB4,311.5 million or 16.5%. The increase was primarily due to the increase in assets value resulting from the Group’s operating activities.

Total liabilities of the Company increased to RMB6,077.7 million as at June 30, 2008 from RMB4,698.8 million as at December 31, 2007 by RMB1,378.9 million or 29.3%, mainly due to (1) Yancoal Australia Pty borrowed a new bank US$ loan (converted to RMB464.9 million on June 30, 2008); and (2) dividend payable for the year 2007 was RMB836.1 million.

Equity attributable to equity holders of the Company increased from RMB21, 417.5 million as at December 31, 2007 to RMB24,346.5 million as at June 30, 2008, representing an increase of RMB2,929 million or 13.7%. Such increase was principally attributable to the profi ts realized from the Company’s operating activities.

LIQUIDITY AND FINANCIAL RESOURCES

In the fi rst half of 2008, the Group’s principal source of fund was the cash fl ow from operations and the collection of the principal plus interest of entrusted loans. The Company’s principal uses of the fund include payment for operating expenses, purchase of property, machinery and equipment, and purchase of the Mining Right of Zhaolou Coal Mine.

In the fi rst half of 2008, the net cash fl ow from operating activities of the Group was RMB3,861.4 million, representing an increase of RMB1,831.4 million or 90.2 %, as compared to RMB2,030 million for the same period last year, which is mainly due to the increase of cash generated from sales of products and provision of services.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

As at June 30, 2008, the balance of the Company’s notes receivable and accounts receivable were RMB2,854 million, representing an increase of RMB100.5 million or 3.6% from RMB2,753.5 million as at December 31, 2007. Of this amount, (1) notes receivable accounted for RMB2,626.8 million, representing a decrease of RMB12.15 million or 0.5%, as compared to RMB2,639.0 million as at December 31, 2007; (2) accounts receivable increased from RMB114.5 million as at December 31, 2007 by RMB112.7 million or 98.4 %, to RMB227.2 million as at June 30, 2008, principally due to (a) the reduction of newly occurred accounts receivable in the reporting period; and the Company’s enhanced efforts in collecting previous accounts receivable resulting in the reduction of RMB42.133 million of the balance of accounts receivable; and (b) accounts receivable of Yancoal Australia Pty increased by RMB205.4 million due to the roll-over of settlement of coal sales.

As at June 30, 2008, inventories of the Company increased from RMB440.1 million as at December 31, 2007 by RMB184.3 million or 41.9 %, to RMB624.4 million. Such increase was mainly due to the increase of coal inventory and unit cost.

Prepayments and other loans receivable increased from RMB326.7 million as at December 31, 2007 by RMB599.2 million or 183.4%, to RMB925.9 million as at June 30, 2008. Such increase was mainly due to the increase in the prepayments to the traded coal purchased from external sources of the Group.

Notes payable and accounts payables decreased from RMB657.5 million as at December 31, 2007 by RMB101.7 million or 15.5%, to RMB555.8 million as at June 30, 2008. Such decrease was mainly due to the decrease in commercial acceptance bills.

Other accounts payables and accrued expenses increased from RMB2,671.1 million as at December 31, 2007 by RMB309.9 million or 11.6 %, to RMB2,981 million as at June 30, 2008.

Long-term liabilities decreased from RMB599.3 million as at December 31, 2007 by RMB48.696 million or 8.1%, to RMB550.6 million as at June 30, 2008.

On May 30, 2008, the Company collected RMB780 million of the principal plus interest of the entrusted loan, which was provided to Shandong Xin Jia Industrial Company Limited by the Company.

In the fi rst half of 2008, the Group’s capital expenditure for purchase and replacement of plant, property and machinery equipment was RMB537.4 million, representing a decrease of RMB96.922 million or 15.3%, as compared to RMB634.3 million in the same period last year.

In the fi rst half of 2008, Heze Neng Hua purchased mining rights of Zhaolou coalmine from Yankuang Group at a cash consideration of RMB747.3 million. The purchase fund was from the entrusted loan which was provided by the Company to Heze Neng Hua.

As at June 30, 2008, the Group’s debt to gearing ratio was 3.3%, which was calculated based on equity attributable to equity holders of the Company and total borrowings amounting to RMB24,346.5 million and RMB795 million respectively.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

The following table sets out the Group’s capital expenditure in (a) the fi rst half of 2008; (b) the estimated capital expenditure in the second half of 2008; and (c) for the year of 2008:

	2nd half 2008 2008 1st half 2008 (estimated) (estimated) (RMB million) (RMB million) (RMB million)
The Company Yulin Neng Hua Heze Neng Hua Shanxi Neng Hua Yancoal Australia Pty Total	184.8 952.4 1,137.2 128.7 952.1 1,080.8 964.2 277.5 1,241.7 54.6 139.6 194.2 12.2 13 25.2 1,344.5 2,334.6 3,679.1

The Group believes that it will have suffi cient capital to satisfy its operational and development requirements.

TAXATION

The Company and all of its subsidiaries which are registered in China are subject to an income tax rate of 25% on its taxable profi ts for the reporting period. Yancoal Australia Pty and its wholly-owned subsidiary, Austar Coal Mining Pty Limited, are subject to an income tax rate of 30% on its taxable profi ts for the reporting period.

Outlook for the Second Half of 2008

There is a strong demand and tight supply in China domestic coal market with the coal price maintaining at a high level. As China still sees a high economic growth, the demand of coal for electricity, metallurgy, chemical, building materials and other fundamental industries will remain strong as they sustain a relatively high development pace. In particular, there is a faster increase in demand of coal from the rapid development of electrical industry and coal chemical industry. While the international coal price is in the rising trend, China coal export volume remains steady and coal import volume decreases. The PRC Government continues to regulate and close down sub-standard coalmines and imposes stricter safety production requirements. Consequently, there will be limited room for the increase of coal supply in domestic market. The bottleneck of railway coal transportation capacity will restrain the coal supply in the long run. The central government continues to limit the entry to the industry, regulate development order and improve withdrawal mechanism and at the same time sets out an industry prospect and structure in favor of the development of large scale coal groups so as to enhance concentration in the coal industry in China. The PRC Government has suspended application for exploration rights to facilitate the steady development of China coal market.

Coal is in short supply in the international market, and the coal price will remain volatile at a high level. As the prices of international oil and natural gas have reached successive new high records in the fi rst half of 2008, coal price reached record high and the position of coal as basic energy will be further strengthened accordingly. Increase in demand in the international coal market comes down as the economic development of USA, Japan and other countries slows down. However, the basic scenario of tight demand in the international coal market remains the same and coal price will maintain volatile at a high level. Major coal suppliers around the world will experience diminishing increase in coal supply, while Australia is limited by port capacity, China, Vietnam, Indonesia, and other countries will not signifi cantly increase coal export in order to satisfy the domestic demand for coal.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

Operating Strategies

In the second half of 2008, the Company will face lots of pressures and challenges such as increase in costs, volatility in coal price and diffi culties in acquiring new coal resources. Moreover, factors such as materials price hike, increase in expenses caused by the relevant government policies will have a negative impact on the operating performance of the Company. The temporary cap price of thermal coal imposed by the central government and other state macroeconomic adjustment policies, changes in supply and demand of coal and methanol, and transportation capacity of coal will cause volatility in coal price and methanol price. Meanwhile, the upward movement in the price of coal resources will increase the operating costs of external expansion of the Company.

The Company will continue to enhance its profi tability and Shareholders’ return through implementation of strategies relating to organic development and external expansion in parallel. In the second half of 2008, the Company will focus on the following operating strategies:

Expediting the existing projects construction and continuously seeking for new acquisition opportunities. The PRC government authority has put more emphasis on the development of coal chemical industry. With high prices of methanol products, the industry is positioned in an upward channel. The Company will leverage such favorable policies circumstance for coal chemical industry to ensure the commencement of trial production of the 600,000 tonnes methanol project of Yulin Neng Hua in the third quarter of 2008 following the trial run of the 100,000 tonnes methanol project of Shanxi Neng Hua. The Company will form a solid foundation for the development of its coal chemical products through enhancement of product quality, profi tability and brand image of the Company. The Company will also ensure the trial operation of Zhaolou coalmine in Shandong Province in the 4th quarter of 2008 and accelerate the establishment of Yushuwan coalmine in Shaanxi Province. Meanwhile, the Company will continue to seek new investment opportunities of coal reserves both in China and abroad to expand the scale of coal assets, develop and further extend the deep processing of coal.

Improving operation management and enhancing profi tability of the existing coal mines. Firstly, the Company will stabilize the output and sales volume of its existing coal mines by focusing on optimization of the coalmine production system. Secondly, the Company will improve the marketing and sales system and continue to implement the “Three Nil Project” and the “Four Optimizations”, adjust products variety mix, increase production percentage of high quality clean coal, raise the sales percentage of strategic customers, improve spot auction sales model and leverage the distribution network of the Company to expand the scale of operation of the Company. Lastly, by giving prominence to management and cost control, the Company will ensure effective cost control through steady improvement to be made in the fi nancial control systems, strengthening of capital budgeting management, further expansion of budget range in terms of controllable costs and improving performance assessment systems.

Regulating corporate operations and fulfi lling social responsibilities of the Company. The Company intends to further strengthen the establishment of its internal control system, improve its internal control of work fl ow and system, and enhance corporate governance and promote a better regulated operation.

The Company fully complies with the relevant PRC laws and regulations in relation to environmental protection, saving of resources and reduction of emission. Based on scientifi c and technological advancement, the Company will pay back to the Shareholders for their support with a steady growth in operating results and an eco-friendly environment and contribute to local economy development to achieve a harmonious relationship between the stable and healthy development of the Company and sustainable increase of social benefi ts.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CHANGES IN SHARE CAPITAL AND SUBSTANTIAL SHAREHOLDINGS

Changes in Share Capital during the Reporting Period

During this reporting period, the total number of shares and the capital structure of the Company remained unchanged.

As at June 30, 2008, the share capital of the Company was as follows.

	Unit: share (Par value per share: RMB1.00) Percentage of the total Number capital of of shares the Company
Domestic shares Including: shares held by the founder (Yankuang Group) other shareholders Overseas listed H share Total numbers of shares	2,960,000,000 60.18% 2,600,000,000 52.86% 360,000,000 7.32% 1,958,400,000 39.82%
	4,918,400,000 100.00%

Number of Shareholders as at the end of this Reporting Period

As at June 30, 2008, the Company had a total of 130,440 Shareholders, of which 5 were the holders of A shares subject to a trading moratorium, 130,325 were holders of A shares without trading moratorium and 110 were holders of H shares.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

SUBSTANTIAL SHAREHOLDERS

As at June 30, 2008, the top ten Shareholders and the top ten Shareholders holding tradable shares without trading moratorium of the Company were set out as follows. Such information was provided by Shanghai Branch of China Securities Depository and Clearing Corporation Limited and Hong Kong Registrars Limited.

		Number of	Percentage
		shares held as at	holding of
	Class of	the end of this	the total capital
Name of Shareholders	shares	reporting period	of the Company
		(shares)	(%)
Yankuang Group Corporation Limited
(tradable shares subject to trading moratorium)	A shares	2,600,000,000	52.86
Shareholders holding tradable shares without trading moratorium
HKSCC Nominees Limited	H shares	1,956,645,146	39.78
Fortune SGAM selected sector fund	A shares	14,200,434	0.29
Nanfang Index Composite Equity Fund	A shares	9,721,965	0.20
華安創新證券投資基金	A shares	7,400,734	0.15
廣發小盤成長股票型證券投資基金
(Guangfa Growing shares Securities Investment Fund)	A shares	5,713,414	0.12
Yi Fang Da Value Growing Combined Securities Investment Fund	A shares	4,001,558	0.08
Yinhuafuyu Subject Shares Securities Investment Fund	A shares	4,000,000	0.08
Jiashi CSI 300 Index Securities Investment Fund	A shares	3,746,599	0.08
China Balanced Growth Fund	A shares	3,150,000	0.06
廣發穩健增長證券投資基金
Guangfa Growth Securities Investment Fund	A shares	2,999,880	0.06

As the clearing and settlement agent for the Company’s H shares, HKSCC Nominees Limited held the Company’s H shares in a nominee capacity.

It is uncertain as to whether the shares held by the HKSCC Nominees Limited as disclosed above were pledged, locked-up or held under trust. None of the shares held by all other shareholders were pledged, locked up or held under trust during this reporting period.

Save as disclosed above, except that the fund manager for Guangfa Growing Shares Securities Investment Fund and Guangfa Growth Securities Investment Fund is Guangfa Fund Management Co., Ltd., other related party relationships and concert party actions among the Shareholders are unknown.

During this reporting period, there was no change in the controlling Shareholders or actual controlling person of the Company.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

Save as disclosed below, as at 30 June 2008, no other person (other than a director, chief executive or supervisor of the Company) had an interest or a short position in the shares and underlying shares of the Company as recorded in the register required to be kept under section 336 of the Securities and Futures Ordinance (the “SFO”).

					Percentage in	Percentage
					the relevant	in the total
Name of					class of share	share capital
substantial	Class of			Type of	capital of the	of the
shareholders	shares	Number of shares held	Capacity	interest	Company	Company
Yankuang	Domestic	2,600,000,000 (L)	Benef cial owner	Corporate	87.84% (L)	52.86% (L)
Group	Shares
JP Morgan	H Shares	278,395,383 (L)	Benef cial owner,	Corporate	14.22% (L)	5.66% (L)
Chase &	(Note 2)	(including	Investment		2.60% (S)	1.03% (S)
Co.		82,915,299 (P)	manager and
		50,868,452 (S)	Custodian
			corporation/
			Approved
			lending agent
Penta	H Shares	213,670,000 (L)	Investment	Corporate	10.91% (L)	4.34% (L)
Investment	(Note 3)		manager
Advisers
Limited
Zwaanstra	H Shares	213,670,000 (L)	Interests of	Corporate	10.91% (L)	4.34% (L)
John	(Note 3)		controlled
			corporations

Notes:

1. The letter “L” denotes a long position. The letter “S” denotes a short position. The letter “P” denotes interest in a lending pool.

2. The long positions in H shares included 87,187,317 H shares held as benefi cial owner, 25,377,468 H shares held as investment manager and 82,915,299 H shares held as custodian corporation/approved lending agent. Among the aggregate interests of long position in H shares, 30,506,315 H shares were held as physically settled unlisted derivatives.

3. The aggregate short position in 50,868,452 H shares were held as benefi cial owner. Among the aggregate interests of short position in H shares, 2,634,000 H shares were held as cash settled derivatives listed or traded on a Stock Exchange or traded on a Futures Exchange, 17,601,595 H shares were held as physically settled unlisted derivatives and 23,000,000 H shares were held as cash settled unlisted derivatives.

4. These H shares were held indirectly by Penta Investment Advisers Limited through its controlled companies, of which 926,000 H shares were held as cash settled derivatives listed or traded on a Stock Exchange or traded on a Futures Exchange. Mr. Zwaanstra John, as the 100% controller of Penta Investment Advisers Limited, was deemed as owning interests of the shares held by Penta Investment Advisers Limited.

Pursuant to the Securities Law of the People’s Republic of China, save as disclosed above, no other shareholders were recorded in the register as at June 30, 2008 as having an interest of 5% or more of the Company’s public shares.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

SHAREHOLDINGS OF DIRECTORS AND SUPERVISORS IN THE COMPANY

Save as disclosed below, as at June 30, 2008, none of the directors, chief executive offi cer or supervisors of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (i) as recorded in the register required to be kept under section 352 of the SFO; or (ii) as otherwise notifi ed to the Company and Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (which shall be deemed to apply to the Company’s supervisors to the same extent as it applies to the Company’s directors).

			Number of	Number of
		domestic shares		domestic
			held at the	shares held at
		beginning of this		the end of this	Reasons
Name	Status	Title	reporting period	reporting period	for change
			(shares)	(shares)
Wang Xin	–	Chairman of the Board	0	0	–
Geng Jiahuai	–	Vice Chairman of the Board	0	0	–
Yang Deyu	Benef cial owner	Vice Chairman of the Board and	20,000	20,000	–
		General Manager
Shi Xuerang	–	Director	0	0	–
Chen Changchun	–	Director	0	0	–
Wu Yuxiang	Benef cial owner	Director and Chief Financial Off cer	20,000	20,000	–
Wang Xinkun	–	Director and Vice General Manager	0	0	–
Zhang Baocai	–	Director and Secretary of the Board	0	0	–
Dong Yunqing	–	Employee Representative Director	0	0	–
Pu Hongjiu	–	Independent Non-executive Director	0	0	–
Zhai Xigui	–	Independent Non-executive Director	0	0	–
Li Weian	–	Independent Non-executive Director	0	0	–
Wang Junyan	–	Independent Non-executive Director	0	0	–
Song Guo	Benef cial owner	Chairman of the Supervisor Committee	1,800	1,800	–
Zhou Shoucheng	–	Vice Chairman of the Supervisor Committee	0	0	–
Zhang Shengdong	–	Supervisor	0	0	–
Zhen Ailan	–	Supervisor	0	0	–
Wei Huanmin	–	Employee Representative Supervisor	0	0	–
Xu Bentai	–	Employee Representative Supervisor	0	0	–

All the interests disclosed above represent long position in the shares of the Company.

As at June 30, 2008, the total number of domestic shares of the Company held by the directors and supervisors of the Company was 41,800 shares, representing 0.0008% of the total share capital of the Company.

As at June 30, 2008, none of the directors, chief executive offi cer or supervisors of the Company or their spouses or children under the age of 18 was given the right to acquire shares or debentures of the Company or any associated corporation.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

DISCLOSURE OF SIGNIFICANT EVENTS

Final Dividends Distribution for Year 2007

At the 2007 annual general meeting of the Company held on 27th June, 2008, the Shareholders approved the fi nal dividends of RMB836.1 million (tax included), or a distribution of RMB0.170 (tax included) per share to the Shareholders.

As at this reporting date, the 2007 fi nal cash dividends had been paid to the Shareholders.

Interim Dividends Distribution

There will be no payment of interim dividend or issue of bonus shares for the fi rst half-year of 2008.

Election of New Session of Directors and Supervisors

At the 2007 annual general meeting of the Company held on 27th June, 2008, Mr. Wang Xin, Mr. Geng Jiahuai, Mr. Yang Deyu, Mr. Shi Xuerang, Mr. Chen Changchun, Mr. Wu Yuxiang, Mr. Wang Xinkun and Mr. Zhang Baocai were elected as directors of the fourth session of the Board. Mr. Pu Hongjiu, Mr. Zhai Xigui, Mr. Li Weian, and Mr. Wang Junyan were elected as independent directors of the fourth session of the Board.

Mr. Song Guo, Mr. Zhou Shoucheng, Mr. Zhang Shengdong and Ms. Zhen Ailan were elected as shareholders representative supervisors of the fourth session of the supervisor committee.

On May 21, 2008, Mr. Dong Yunqing was elected by employees representatives as the employee representative director of the fourth session of the Board. Mr. Wei Huanmin and Mr. Xu Bentai were elected as the employee representative supervisors of the fourth session of the supervisory committee.

Among the directors of the third session of the Board, Mr. Cui Jianmin, Mr. Wang Xiaojun and Mr. Wang Quanxi had already held the position as independent director for two consecutive sessions, and they did not hold the same position any longer in compliance with the listing regulations. Among the members of the third supervisory committee, Mr. Meng Xianchang and Mr. liu Weixin were no longer the supervisors after they completed their respective term of offi ce.

The term of offi ce for the directors of the fourth session of the Board and that of the supervisors of the fourth session of the supervisory committee are both three years, which commenced from the conclusion of the 2007 annual general meeting shareholders’ meeting appointing the directors of the fi fth session of the Board and the supervisors of the fi fth session of the supervisory committee.

Election of Chairman, Vice Chairman and Appointment of Senior Management

At the fi rst meeting of the fourth session of the Board held on June 27, 2008, Mr. Wang Xin was elected as the chairman of the fourth session of the Board; Mr. Geng Jiahuai and Mr. Yang Deyu were elected as the vice-chairmen of the fourth session of the Board; Mr. Yang Deyu was appointed as the general manager of the Company; Mr. Jin Tai, Mr. Zhang Yingmin, Mr. He Ye, Mr. Qu Tianzhi, Mr. Wang Xinkun, Mr. Tian Fengze, Mr. Shi Chengzhong and Mr. Lai Cunliang were appointed as the deputy general managers; Mr. Wu Yuxiang was appointed as the chief fi nancial offi cer; Mr. Zhang Baocai was appointed as the secretary of the Board; Mr. Ni Xinghua was appointed as the chief engineer; Mr. Wu Yuxiang and Mr. Zhang Baocai were appointed as the Company’s authorized representatives.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

Establishment of Special Committee of the Board

At the fi rst meeting of the fourth session of the Board, the establishment of the audit committee of the fourth session of the Board was approved. Mr. Zhai Xigui, Mr. Pu Hongjiu, Mr. Li Weian, Mr. Wang Junyan, Mr. Chen Changchun and Mr. Dong Yunqing were appointed as members of the audit committee with Mr. Zhai Xigui being the chairman of the Audit Committee and the Audit Department under the Board as the working department of the Audit Committee.

The establishment of the remuneration committee of the fourth session of the Board was approved. Mr. Li Weian, Mr. Wang Junyan and Mr. Dong Yunqing were appointed as members of the remuneration committee with Mr. Li Weian being the chairman of the Remuneration Committee and the Human Resource Department of the Company as the working department of the Remuneration Committee.

Election of Chairman and Vice Chairman of the Supervisor Committee

At the fi rst meeting of the fourth session of the supervisor committee held on 27th June, 2008, Mr. Song Guo was elected as the chairman of the supervisor committee, and Mr. Zhou Shoucheng was elected as the vice-chairman of the supervisor committee.

Amendments to the Articles of Association of the Company

As approved by the fi rst extraordinary general meeting for the year 2008 held on January 30, 2008, the Company amended the terms of the articles of association relating to certain powers of its independent directors. Details of the amendments to the Articles of Association were posted on the websites of both the Hong Kong Stock Exchange and the Company on January 31, 2008.

The “Resolution on Making Amendments to the Articles of Association of Yanzhou Coal Mining Company Limited” was approved in the 2nd meeting of the fourth session of the Board held on July 18, 2008. Some articles were added to prevent the controlling Shareholder or its related parties to appropriate funds of the Company. The resolution will be presented to the next General Meeting of the Company for their consideration and approval. Relevant details were posted on the websites of both the Hong Kong Stock Exchange and the Company on July 18, 2008.

Acquisition of Mining Rights of Zhaolou Coalmine by Heze Neng Hua

Pursuant to the approval at the fi rst extraordinary general meeting held on January 30, 2008, Heze Neng Hua purchased the mining rights of Zhaolou coalmine from Yankuang Group at a cash consideration of RMB747.3 million. Heze Neng Hua obtained the mining right certifi cate of Zhaolou Coalmine issued by the Ministry of Land and Resources on 5th May, 2008.

The purchase of mining rights of Zhaolou coalmine increased the total volume of the coal reserves of the Group and the Group’s capability for sustainable development. As Zhaolou Coalmine is under construction, such purchase would have no infl uence on the operating results of the Group in this reporting period. The purchase consideration accounted for 14.0% of the unaudited total profi t of the Group for the fi rst half of 2008 calculated under PRC GAAP.

Details of the purchase were posted on the websites of both the Hong Kong Stock Exchange and the Company on December 4, 2007 and on January 30, 2008 respectively.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

Acquisition of Equity Interest in Yulin Neng Hua from the other Shareholders

As considered and approved at the daily operation meeting by the general managers held on May 19, 2008, the Company has acquired 2% equity interest of Yulin Neng Hua Co., Ltd from Shandong Chuangye Investment Development Co., Ltd and 1% from China Hualu Engineering Company at a total cash consideration of RMB24 million with the Company internalgenerated cash.

Yulin Neng Hua completed the registration procedures for the above-mentioned equity transfer on June 24, 2008. After the acquisition, Yulin Neng Hua became a wholly-owned subsidiary of the Company.

Increase in the Registered Capital of Yulin Neng Hua

As considered and approved at the daily operation meeting by the general managers held on May 19, 2008, the Company injected an additional RMB600 million into Yulin Neng Hua, which will be used in Yulin Neng Hua Methanol Project construction. The registered capital of Yulin Neng Hua has increased to RMB1, 400 million from RMB800 million. Among the newly injected capital, RMB500 million was fi nanced from the fund raised by issuing new H shares in 2004. As at the date of this report, the Company has consumed all the proceeds raised by issuing new H shares in 2004.

Material Litigation and Arbitration

On December 13, 2004, the Company provided an entrusted loan of RMB640 million to Shandong Xin Jia Industrial Company Limited (the “Entrusted Loan”). On December 22, 2004, the Company made an application to lock up the 289 million shares in Huaxia Bank Company Limited (“Huaxia Shares”) held by Lianda Group Limited (“Lianda Group”), the guarantor of the Entrusted Loan.

In November 2005, Shandong RunHua Group Company Limited (“RunHua Group”) started legal proceedings in another action for the transfer of 240 million shares in Huaxia Bank held by Lianda to it.

According to the mediation proposal of the Supreme People’s Court, RunHua Group shall voluntarily guarantee the realization of the debt of Yanzhou Coal. The Higher People’s Court of Shandong Province in November, 2007 transferred 200 million Huaxia Shares out of 289 million Huaxia Shares attached to the Company to RunHua Group for Runhua Group to

On May 30, 2008, the Company collected the principal plus interest of the entrusted loan in the total sum of RMB780 million, among which, the interest income accounted for 3.5% of the Company’s unaudited net profi t for the fi rst half of 2008 under PRC GAAP.

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

Material Contracts

Save as the relevant agreements disclosed in the section headed “Disclosure of Signifi cant Events”, the Company has not been a party to any material contract during this reporting period.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CORPORATE GOVERNANCE

1. In accordance with the requirements under special program on governance of listed companies launched by CSRC, Shandong Securities Regulatory Bureau and Shanghai Stock Exchange, the Company has taken action to modify and improve its internal control system and specifi c system. “Report with regard to the thorough implementation of specifi c corporate governance activities of Yanzhou Coal Mining Company Limited” was approved and the amendment to the “Information disclosure management system of Yanzhou Coal Mining Company Limited” was made and approved at the second meeting of the fourth session of the Board held on 18th July, 2008. (The relevant details of the purchase were posted on the websites of both The Hong Kong Stock Exchange Limited and the Company on 18h July, 2008).

2. In accordance with the requirements under special program launched by CSRC, Shandong Securities Regulatory Bureau and Shanghai Stock Exchange on the prevention of appropriation of funds of the listed company by the controlling shareholder and its related parties, “Self-inspection report with regard to specifi c activities to prevent appropriation of funds of the Company by the controlling shareholder and related parties of Yanzhou Coal Mining Company Limited” and “Administrative measures with regard to the prevention of appropriation of funds by the controlling shareholder of Yanzhou Coal Mining Company Limited and its related parties” were completed and approved at the second meeting of the fourth session of the Board held on 18th July, 2008. The Company carried out self-inspection. There were no appropriation of funds of the Company by the controlling shareholder and its related parties of the Company in non-operational activities.

3. During this reporting period, the Company has been steadily promoting internal control system construction pursuant to the US Sarbanes-Oxley Law, the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), Guide on Internal Control of the Listed Companies of Shanghai Stock Exchange, and the Rules Governing the Listing of Securities on The Stock Exchange Hong Kong Limited.

In April 2008, the management completed its evaluation of the effectiveness of the Group’s internal control as of December 31, 2007 and the same was considered and approved in the 16th meeting of the third session of the Board held on 18th April, 2008.

The management evaluation results were audited by Deloitte Touche Tohmatsu Certifi ed Public Accountants Ltd in June, 2008.

22

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CONNECTED TRANSACTIONS

Details of the connected transactions for the fi rst half year of 2008 are set out in note “25. related parties relations and related transactions” to the fi nancial statements prepared in accordance with the IFRS contained herein.

BORROWINGS

Details of the borrowings are set out in note “VII.18 short term borrowings” and note “VII.29 long term borrowings” to the fi nancial statements prepared in accordance with the PRC GAAP 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 specifi c 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 to the Listing Rules. The Company has adopted a code of conduct regarding the securities transactions of the directors of the Company on terms no less 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 to the Listing Rules (the “Code Provision”).

There is no signifi cant difference between the compliance with the Code Provision by the Company during this reporting period and that disclosed in the Company’s 2007 Annual Report.

IMPACT OF FLUCTUATIONS IN EXCHANGE RATES ON THE COMPANY

China implements a managed fl oating exchange rate regime based on market supply and demand with reference to a basket of currencies.

The impact of fl oating exchange rate to the Group is mainly refl ected in (a) coal exports of the Group are calculated in US dollar, with a resulting impact on income through coal export which is calculated in RMB; (b) exchange gains or losses arising from translations of foreign currencies for deposits held in foreign currencies; and (c) impact on the Group’s import costs of equipment and fi ttings.

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

23

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

EMPLOYEES

As at June 30, 2008, the Company had 42,615 employees in total, of whom 2,750 were management personnel, 1,625 were technicians, 28,675 were directly involved in coal production and 9,565 were supporting staff.

POLICY OF REMUNERATION

The remunerations for the directors, supervisors and senior management of the Company shall be proposed by the Remuneration Committee to the Board. The remuneration for the directors and the supervisors of the Company has to be approved in the shareholders’ general meeting after being reviewed and approved by the Board; while the remuneration for the senior management has to be approved by the Board.

The Company adopts a combined annual remuneration and risk control system for assessing and rewarding the directors and senior management of the Company. The annual remuneration consists of basic salary and benefi t income: basic salary is determined according to the operational scale of the Company with reference to the market wages and the income of employees whereas benefi t income is determined by the actual operational achievement of the Company. The annual remunerations for the directors and senior management of the Company are paid on a monthly basis and are confi rmed after the performance review to be carried out in the following year.

The remuneration policy of the other employees of the Company is principally a position and skill remuneration system, which determines the remuneration of the employees on the basis of their positions and responsibilities and their quantifi ed assessment results. Their rewards are linked to the Company’s overall economic effi ciency.

AUDITORS

During the period from January 1, 2008 to June 27, 2008, the Company retained Deloitte Touche Tohmatsu (Certifi ed Public Accountants in Hong Kong) and Deloitte Touche Tohmatsu Certifi ed Public Accountants Ltd. (Certifi ed Public Accountants in the PRC (excluding Hong Kong)) as its international and domestic auditors, respectively.

In order to improve the corporate governance of the Company and reduce the cost, the Company decided not to renew the appointment of Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certifi ed Public Accountants Ltd as the auditor of the Company. Grant Thornton and Shine Wing Certifi ed Public Accountants Ltd were appointed as the Company’s international and PRC auditors for the year 2008, respectively, as approved in the 2007 Annual General Meeting. The term of the appointment of Grant Thornton and Shine Wing Certifi ed Public Accountants Ltd commenced from the conclusion date of the 2007 Annual General Meeting and would expire by the conclusion date of 2008 Annual General Meeting.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

Appropriation of Funds and External Guarantees

As at June 30, 2008, no external guarantees have been made by the Company, and the Company’s controlling shareholders and its subsidiaries have not appropriated the Company’s funds for non-operating items.

The above information concerning the use of funds and external guarantee by the Company constitutes a disclosure required under the relevant laws of China (excluding Hong Kong).

External Equity Investment

As at June 30, 2008, the external equity investments made by the Company are set out as follows:

Brief Name No. Code of Stock of Stock	Number of Initial shares held on investment Book value on Book value on June 30 2008 cost June 30, 2008 January 1, 2008 (shares) (RMB) (RMB) (RMB)
1 600642 Shenergy 2 601008 Lianyungang Total	22,323,900 60,420,274 201,584,817 393,123,879 1,150,000 1,760,419 6,992,000 15,962,000
	– 62,180,693 208,576,817 409,085,879

The source of Shenergy shares: 14,882,600 social legal person shares transferred to the Company by an agreement in 2002, and 7,441,300 distribution shares and bonus shares received in 2004.

The source of Lianyungang shares: subscribed shares when Lianyungang was established, as the Company was one of the promoters of Lianyungang.

Save as disclosed above, the Company has made no other external equity investment in listed companies and fi nancial institutions as at this reporting date.

The above information concerning equity investment is made pursuant to disclosure requirement under the relevant laws of China (excluding Hong Kong).

25

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

The Performance of the Special Undertakings made by the Company regarding Share Reform On 31st March 2006, the Company implemented the share reform plan. The special undertakings made by Yankuang Group Co., Ltd. (“Yankuang Group”) and set out as follows:

Name of
Shareholder	Special undertakings		Performance of undertakings
Yankuang	(1)	The formerly non-tradable shares of the Company held by	The formerly non-tradable shares
Group		Yankuang Group should not be listed for trading purpose	in the Company held by Yankuang
		within forty-eight months from the date of execution of the	Group have not been traded.
		relevant share reform plan;
	(2)	In 2006, Yankuang Group would transfer part of its	In 2006, Yankuang Group
		operations and new projects relating to coal and power	completed the transfer of the coal
		which are in line with the Company’s development	project and new electricity project
		strategies to the Company in accordance with the relevant	to the Company, which is in line
		PRC regulations, with a view to enhancing the operating	with the Company’s development
		results of the Company and reducing the connected	strategies. Yankuang Group is in
		transactions and competition between Yankuang Group	the process of implementing its
		and the Company. Yankuang Group should allow the	other undertakings and there has
		Company to participate and invest in, for the purpose of	not been material progress in this
		co-development of, the coal liquefaction project, which is	respect.
		being developed by Yankuang Group.
	(3)	All the relative expenses incurred for execution of the share	The undertaking had been already
		reform plan would be borne by Yankuang Group.	performed.

The above information concerning the share reform undertaking and the performance of the undertakings by the Company constitutes a disclosure required under the relevant laws of China (excluding Hong Kong).

26

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

Entrusted Loan

Entrusted loans occurred during this reporting period and that occurred in the previous reporting period and continued in this reporting period are set out in the following table.

						Whether		Accumulated
						there is a	Whether	interest
		Amount of				provision	principal	income during
		Entrusted		Annual		for	has been	this reporting
No.	Borrower	Loan	Term of Loan	Interest	Approval Process	devaluation	paid	period
1	Shandong	RMB640	From December 20,	7%	Reviewed and approved at	No	Yes	RMB
	Xinjia Industrial	million	2004 to January 19,		board meeting on December			140,000,000
	Co., Ltd		2005		13, 2004
2	Yancoal	US$90	From November 7,	4.23%-	Reviewed and approved at	No	US$ 4.5	US$
	Australia Pty	million	2005 to November 7,	6.96%	board meeting on June 28,		million	11,414,500.23
	Limited		2008		2005
					Extended 1 year’s time for
					repayment as approved at
					board meeting on August 17,
					2007
3	Yanzhou Coal	RMB500	From October 20, 2006	6.30%	Reviewed and approved at	No	Transferred	RMB
	Yulin Neng	million	to October 20,2009		the daily operation meeting		to the	16,012,500
	Hua Company				by the general managers on		registered
	Limited				September 11, 2006		capital
4	Yanzhou Coal	RMB500	From May 17, 2007 to	6.57%	Reviewed and approved at	No	No	RMB
	Yulin Neng	million	May 17, 2010		board meeting on October			16,698,750
	Hua Company				25, 2006
	Limited
5	Yanmei	RMB500	From April 11, 2008 to	7.2%	Reviewed and approved at	No	No	RMB
	HezeNeng	million	April 11, 2013		the daily operation meeting			7,100,000
	Hua Company				by the general managers on
	Limited				July 27, 2007
6	Shanxi Tianhao	RMB190	From March 28, 2008 to	7.2%	Reviewed and approved at	No	No	–
	Chemicals	million	March 28, 2013		the daily operation meeting
	Company		The loan was drawn		by the general managers on
	Limited		twice with total amount		July 27, 2007
			of RMB80 million
7	Yanzhou Coal	RMB1,500	From October 15,2007	7.2%	Reviewed and approved at	No	No	RMB
	Yulin Neng	million	to October 15, 2012		board meeting on August 17,			30,164,000
	Hua Company		The loan was drawn		2007
	Limited		eighteen times with total
			amount of RMB1,040
			million
8	Shanxi Heshun	RMB50	From December 24,	7.47%	Reviewed and approved at	No	No	RMB
	Tianchi Energy	million	2007 to December 24,		the daily operation meeting			1,867,500
	Company		2010		by the general managers on
	Limited				November 5, 2007
9	Yanmei Heze	RMB850	From April 11, 2008 to	7.74%	Reviewed and approved at	No	No	RMB
	Neng Hua	million	April 11, 2013		the daily operation meeting			3,816,250
	Company		The loan has been		by the general managers
	Limited		drawn with total amount		dated January 14, 2008
			of RMB250 million

27

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

As at the daily operation meeting by the general managers held on 22nd January, 2007, Shanxi Neng Hua, was approved to extend an entrusted loan of RMB200 million to Shanxi Tianhao Chemicals Company Limited. The details are shown as below:

						Whether		Accumulated
		Amount of				there is a	Whether	interest income
		Entrusted		Annual	Approval Process	provision for	principal has	during this
No.	Borrower	Loan	Term of Loan	Interest		devaluation	been paid	reporting period
1	Shanxi	RMB200	From March	6.48%	Reviewed and	No	No	RMB4,528,800
	Tianhao	million	29, 2007 to		approved at the daily
	Chemicals		March 28,		operation meeting by
	Company		2012		the general managers on
	Limited				January 22, 2007

During this reporting period, there is no other entrusted loans by the Company occurred. Save as disclosed above, the Company currently has no other plans to make entrusted loans.

The above information concerning entrusted loans is made pursuant to disclosure requirement under the relevant laws of China (excluding Hong Kong).

Forecast on the operating results of the Group for the fi rst three quarters of 2008

In accordance with relevant regulations of China Securities Regulatory Commission and Shanghai Stock Exchange, in respect of the interim report for the fi rst half of 2008 prepared under PRC GAAP published domestically, the Company is required to disclose the estimated operating results of the Group for the fi rst 3 quarters of 2008.

Due to the coal price hikes of coal in the domestic and international markets, it is estimated that the realized net profi t attributable to the equity holders of the Company for the fi rst 3 quarters of 2008 will increase by more than 260% as compared with the same period last year. As disclosed in the third quarterly report for 2007, the realized net profi t attributable to the equity holders of the Company for the fi rst 3 quarters of 2007 was RMB1,825.1 million.

DOCUMENTS AVAILABLE FOR INSPECTION

The following documents are available for inspection in the offi ce of the secretary to the Board at 298 Fushan Street South, Zoucheng, Shandong Province, the PRC:

• the full text of the interim report signed by the Chairman;

• fi nancial statements bearing the chop of the Company and signed by corporate representative, person responsible for accounting work and responsible person of the accounting department;

• all documents which were published during the reporting period in newspapers designated by the China Securities Regulatory Commission;

• the Articles of Association of the Company;

• the full text of the interim report released in other stock markets.

On behalf of the Board

Wang Xin Chairman

Zoucheng, PRC, August 22, 2008

28

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED BALANCE SHEET

Prepared by: Yanzhou Coal Mining Company Limited ASSET NOTES	Unit: RMB June 30, 2008 Dec 31, 2007
CURRENT ASSET: Cash at bank and on hand VII.1 Tradable f nancial assets Notes receivable VII.2 Accounts receivable VII.3 Prepayments VI.4 Intersts receivable Dividends receivable Other receveiables VII.5 Inventories VII.6 Non-current assets due within one year VII.8 Other current assets TOTAL CURRENT ASSETS NON CURRENT ASSETS: Available-for-sale f nancial assets VII.7 Entrust loan Long-term accounts receivable Long-term equity investments VII.9 Investment real estate Fixed assets VII.10 Construction in progress VII.11 Construction materials VII.12 Disposal of f xed assets Intangible assets VII.13 Development expenditure Goodwill VII.14 Long-term deferred assets VII.15 Deferred tax assets VII.16 Other non-current assets VII.17 TOTAL NON-CURRENT ASSETS TOTAL ASSETS	9,426,103,280 5,779,552,295 – – 2,830,451,585 2,732,422,448 290,002,735 120,548,231 612,215,615 59,832,653 – – – – 319,908,819 315,801,434 624,445,356 440,133,628 – 640,000,000 – 10,933,507
	14,103,127,390 10,099,224,196
	208,576,817 409,085,879 – – – – 850,810,268 898,001,770 – – 7,830,789,719 8,242,576,351 4,873,404,940 4,289,220,537 68,335,812 229,460,787 (26,496) – 1,525,060,267 788,504,784 – – 10,045,361 10,045,361 21,971,766 21,728,081 31,174,701 31,174,701 317,368,299 306,476,992
	15,737,511,454 15,226,275,243
	29,840,638,844 25,325,499,439

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Chief Financial Offi cer: Wang Xin Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

29

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED BALANCE SHEET – CONTINUED

Prepared by: Yanzhou Coal Mining Company Limited

Unit: RMB

LIABILITIES AND SHAREHOLDERS’ EQUITY NOTES	June 30,2008 Dec 31,2007
CURRENT LIABILITIES: Short-term borrowings VII.18 Tradable f nancial liabilities Notes payable VII.19 Accounts payable VII.20 Advances from customers VII.21 Salaries and wages payable VII.22 Taxes payable VII.23 Interest payable VII.24 Dividends payable VII.25 Other payables VII.26 Non-current liabilities due within one year VII.28 Other current liabilities VII.27 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES: Long-term borrowings VII.29 Bonds payable Long-term payable VII.30 Deferred tax liabilities VII.31 Other non-current liabilities TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES OWNERS’ EQUITY: Share capital VII.32 Capital reserves VII.33 Surplus reserves VII.34 Undistributed prof ts VII.35 Currency translation differences Equity attributable to shareholders of the Company Minority interest TOTAL OWNERS’ EQUITY TOTAL LIABILITIES AND OWNERS’ EQUITY	464,909,673 – – – 83,765,827 154,519,715 504,083,007 559,346,058 1,295,765,305 983,294,466 349,438,756 337,275,927 471,132,096 228,657,191 333,361 – 836,128,000 – 1,717,861,151 1,909,171,032 731,856,287 487,447,969 20,455,066 19,634,780
	6,475,728,529 4,679,347,138
	247,000,000 258,000,000 – – 635,565,322 636,193,076 36,599,031 86,726,297 – –
	919,164,353 980,919,373
	7,394,892,882 5,660,266,511
	4,918,400,000 4,918,400,000 4,792,987,286 4,943,369,082 2,037,940,337 2,037,940,337 10,655,869,374 7,729,922,091 (11,074,382) (13,941,634)
	22,394,122,615 19,615,689,876
	51,623,347 49,543,052
	22,445,745,962 19,665,232,928
	29,840,638,844 25,325,499,439

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Chief Financial Offi cer: Wang Xin Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

30

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED INCOME STATEMENT

Prepared by: Yanzhou Coal Mining Company Limited

Unit: RMB

ITEM NOTES	For the period ended For the period ended June 30, 2008 June 30, 2007
1. TOTAL OPERATING REVENUE Including: operating revenue VII.36 2. TOTAL OPERATING COST Including: Operating cost VII.36 Operating taxes and surcharges VII.37 Selling expense General and administrative expenses Financial expenses VII.38 Impairment loss of assets VII.39 Add: Gain on fair value change (The loss is listed beginning with “–”) Investment income (The loss is listed beginning with “–”) VII.40 prof t on exchange (The loss is listed beginning with “–”) 3. Operating prof t (The loss is listed beginning with “–“) Add: Non-operating revenue VII.41 Less: Non-operating expenditures VII.42 Including: Losses on disposal of non-current assets 4. Total prof t (The total loss is listed beginning with “–”) Less: Income tax VII.43 5. Net prof t(The net loss is listed beginning with “–”) Net prof t attributed to shareholders of the Company Minority interest 6. Earnings per share (1) Earnings per share, basis (2) Earnings per share, diluted	12,854,551,885 7,778,210,254 12,854,551,885 7,778,210,254
	7,601,717,189 5,864,533,812 5,844,185,029 4,249,847,298 192,387,138 141,916,649 301,093,111 401,762,863 1,254,512,746 1,141,364,185 (18,835,362) (70,357,183) 28,374,527 – – – 85,038,498 – – –
	5,337,873,194 1,913,676,442 8,943,183 4,890,331 20,953,182 31,790,839 – 933,903
	5,325,863,195 1,886,775,934 1,564,212,736 782,103,654
	3,761,650,459 1,104,672,280 3,762,075,283 1,108,918,499 (424,824) (4,246,219)
	0.76 0.23 0.76 0.23

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Wang Xin

Chief Financial Offi cer: Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

31

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED CASH FLOW STATEMENT

Prepared by: Yanzhou Coal Mining Company Limited

Prepared by: Yanzhou Coal Mining Company Limited ITEM NOTES	Unit: RMB For the period ended For the period ended June 30, 2008 June 30, 2007
1. CASH FLOW FROM OPERATING ACTIVITIES: Cash received from sales of goods or rendering of services Tax refunding Other cash received relating to operating activities VII.44 Sub-total of cash inf ows Cash paid for goods and services Cash paid to and on behalf of employees Taxes payments Other cash paid relating to operating activities VII.44 Sub-total of cash outf ows NET CASH FLOW FROM OPERATING ACTIVITIES 2. CASH FLOW FROM INVESTING ACTIVITIES: Cash received from recovery of investments Cash received from return of investments income Net cash received from disposal of f xed assets, intangible assets and other long-term assets Net cash received from disposal of sub companies and business units Other cash received relating to investing activities VII.44 Sub-total of cash inf ows Cash paid to acquire f xed assets, intangible assets and other long-term assets Cash paid for investments Other cash paid relating to investing activities VII.44 Sub-total of cash outf ows NET CASH FLOW USED ININVESTING ACTIVITIES	13,964,780,000 9,497,401,974 – 65,432,752 74,002,369
	14,030,212,752 9,571,404,343
	4,078,423,718 2,714,328,904 1,745,434,452 1,201,419,729 3,100,268,246 1,993,751,570 781,325,444 1,626,325,649
	9,705,451,860 7,535,825,852
	4,324,760,892 2,035,578,491
	640,000,000 149,001,352 5,072,282 5,389,105 – 1,897,926 56,252,869
	795,971,560 61,641,974
	1,854,447,199 880,996,204 – 14,966,200 999,104,888 –
	2,853,552,087 895,962,404
	(2,057,580,527) (834,320,430)

32

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED CASH FLOW STATEMENT – CONTINUED

Prepared by: Yanzhou Coal Mining Company Limited

Unit: RMB

ITEM NOTES	For the period ended For the period ended June 30, 2008 June 30, 2007
3. CASH FLOW FROM FINANCING ACTIVITIES: Cash received from investors Cash received from borrowings Sub–total of cash inf ows Repayments of borrowings and debts Cash paid for distribution of dividends or prof ts, or cash paid for interest expenses Sub-total of cash outf ows NET CASH FLOW USED IN FINANCING ACTIVITIES 4. EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 5. NET INCREASE (DECREASE) ON CASH AND CASH EQUIVALENTS VII.44 Add: Cash and cash equivalent, opening VII.44 6. Cash and cash equivalents, closing VII.44	– 24,000,000 460,209,132 –
	460,209,132 24,000,000
	11,000,000 14,902,693 13,600,088
	25,902,693 13,600,088
	434,306,439 10,399,912 (54,040,708)
	2,647,446,096 1,211,657,973 5,719,545,348 5,910,475,432
	8,366,991,444 7,122,133,405

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Wang Xin

Chief Financial Offi cer: Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

33

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

THE BALANCE SHEET OF PARENT COMPANY

Prepared by: Yanzhou Coal Mining Company Limited

Unit: RMB

ASSET NOTES	June 30, 2008 Dec 31, 2007
CURRENT ASSET: Cash at bank and on hand Tradable f nancial assets Notes receivable Accounts receivable VIII.1 Prepayments Intersts receivable Dividends receivable Other receveiables VIII.2 Inventories Non-current assets due within one year Other current assets TOTAL CURRENT ASSETS NON CURRENT ASSETS: Available-for-sale f nancial assets Hold-to-maturity investment Long-term accounts receivable Long-term equity investments VIII.3 Investment real estate Fixed assets Fixed assets under construction Materials construction Disposal of f xed assets Entrust loan Intangible assets Goodwill Long-term deferred assets Deferred tax assets Other non current assets TOTAL NON CURRENT ASSETS TOTAL ASSETS	9,175,551,057 5,635,285,807 – – 2,829,551,584 2,730,805,288 48,477,299 90,610,323 605,559,023 57,089,331 – 76,482,715 – – 558,985,347 956,461,123 552,862,017 325,619,749 586,615,500 837,224,200 – 10,933,507 14,357,601,827 10,720,512,043 208,576,817 409,085,879 – – – – 3,999,927,366 4,023,118,868 – – 6,400,383,719 6,849,270,087 121,158,661 70,713,274 1,541,816 1,656,966 (26,496) – 2,920,000,000 2,170,189,800 637,781,648 647,787,472 – – – – – – 117,969,597 117,925,900 14,407,313,128 14,289,748,246
	28,764,914,955 25,010,260,289

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Chief Financial Offi cer: Wang Xin Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

34

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

THE BALANCE SHEET OF PARENT COMPANY – CONTINUED

Prepared by: Yanzhou Coal Mining Company Limited LIABILITIES AND SHAREHOLDERS’EQUITY NOTES	Unit: RMB June 30, 2008 Dec 31, 2007
CURRENT LIABILITIES: Short-term borrowings Tradable f nancial liabilities Notes payable Accounts payable Advances from customers Salaries and wages payable Taxes payable Interest payable Dividends payable Other payables Non-current liabilities due within one year Other current liabilities TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES: Bank borrowings Bonds payable Long-term payable Special accounts payable Accrued liabilities Deferred tax liabilities Other non-current liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES OWNERS’ EQUITY: Share capital Capital reserves Less: treasury stock Surplus reserves Undistributed prof ts TOTAL OWNERS’ EQUITY TOTAL LIABILITIES AND OWNERS’ EQUITY	– – – – 83,765,828 154,519,715 417,991,069 484,693,966 1,248,588,598 963,437,277 332,604,296 299,831,899 469,852,581 225,673,305 – – 836,128,000 – 1,193,540,537 1,480,813,707 615,083,145 395,837,955 20,455,066 19,634,780 5,218,009,120 4,024,442,604 – – – – 635,565,322 636,193,076 – – – – 36,599,032 86,726,297 – – 672,164,354 722,919,373 5,890,173,474 4,747,361,977 4,918,400,000 4,918,400,000 4,792,419,721 4,942,801,517 – – 2,037,940,337 2,037,940,337 11,125,981,423 8,363,756,458 22,874,741,481 20,262,898,312
	28,764,914,955 25,010,260,289

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Chief Financial Offi cer: Wang Xin Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

35

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

THE INCOME STATEMENT AND OF PARENT COMPANY

Prepared by: Yanzhou Coal Mining Company Limited

Unit: RMB

ITEM NOTES	For the period ended For the period ended June 30, 2008 June 30, 2007
1. TOTAL OPERATING REVENUE VIII.4 Less: Operating cost VIII.4 Operating taxes and surcharges Selling expense General and administrative expense Financial expense Impairment loss of assets Add: Gain from the fair value changes (The loss is listed beginning with “–”) Investment income(The loss is listed beginning with “–”) VIII.5 Including: Investment income of associates 2. Operating prof t (The loss is listed beginning with “–”) Add: Non-operating income Less: Non-operating expense Including: Loss on disposal of non-current assets 3. Total prof t (The total loss is listed beginning with “–”) Less: Income tax 4. Net prof t (The net loss is listed beginning with “–”) 5. Earnings per share (1) Earnings per share, basis (2) Earnings per share, diluted	11,952,199,153 7,162,658,571
	5,359,117,869 3,840,005,245 189,492,320 139,118,045 184,673,362 308,175,534 1,113,163,894 789,079,053 76,622,616 20,989,335 28,374,527 – – – 173,966,431 45,784,600 – –
	5,174,720,996 2,111,075,959 8,349,272 4,766,708 20,589,502 30,965,745 –
	5,162,480,766 2,084,876,922 1,564,127,801 781,574,081
	3,598,352,965 1,303,302,841 0.73 0.26
	0.73 0.26

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Wang Xin

Chief Financial Offi cer: Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

36

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CASH FLOW STATEMENT OF PARENT COMPANY

Prepared by: Yanzhou Coal Mining Company Limited

Unit: RMB

ITEM NOTES	For the period ended For the period ended June 30, 2008 June 30, 2007
1. CASH FLOW FROM OPERATING ACTIVITIES: Cash received from sales of goods and rendering of services tax refunding Other cash received relating to operating activities Sub-total of cash inf ows Cash paid for goods and services Cash paid to and on behalf of employees Taxes payments Other cash paid relating to operating activities Sub-total of cash outf ows NET CASH FLOW FROM OPERATING ACTIVITIES 2. CASH FLOW FROM INVESTING ACTIVITIES: Cash received from recovery of investments Cash received from return of investments Net cash received from disposal of f xed assets, intangible assets and other long-term assets Net cash amount received from the disposal of sub companies and other business units Other cash received relating to investing activities Sub-total of cash inf ows Cash paid to acquire f xed assets, intangible assets and other long-term assets Cash paid for investments Net cash amounts paid by subcompanies and other business units Other cash paid relating to investing activities Sub-total of cash outf ows NET CASH FLOW USED IN INVESTING ACTIVITIES	13,230,206,804 8,896,779,966 – – 53,627,892 327,260,363
	13,283,834,696 9,224,040,329 3,376,683,156 2,400,967,039 1,585,691,162 1,009,086,334 3,059,589,346 1,968,014,619 1,064,865,109 1,621,494,721
	9,086,828,773 6,999,562,713
	4,197,005,923 2,224,477,616
	640,000,000 213,000,000 223,060,387 23,306,314 5,072,282 4,040,767 – – – 5,207,360
	868,132,669 245,554,441 184,773,838 204,372,140 1,284,000,000 1,090,966,200 – – 992,867,951 – 2,461,641,789 1,295,338,340
	(1,593,509,120) (1,049,783,899)

37

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CASH FLOW STATEMENT OF PARENT COMPANY – CONTINUED

Prepared by: Yanzhou Coal Mining Company Limited

Unit: RMB

ITEM NOTES	For the period ended For the period ended June 30, 2008 June 30, 2007
3. CASH FLOW FROM FINANCING ACTIVITIES: Cash received from investors Cash received from borrowings Cash received relating to other f nancial activities Sub–total of cash inf ows Repayments of borrowings Cash paid for distribution of dividends or prof ts, or cash paid for interest expenses Cash payment relating to other f nancial activities Sub-total of cash outf ows NET CASH FLOW USED IN FINANCING ACTIVITIES 4. EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 5. NET INCREASE (DECREASE) ON CASH AND CASH EQUIVALENTS Add: Cash and cash equivalent, opening 6. Cash and cash equivalents, closing	– – – – – – – – – – – – – – – – – – (56,099,503) – 2,547,397,300 1,174,693,717 5,626,433,656 5,599,896,104
	8,173,830,956 6,774,589,821

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Chief Financial Offi cer: Wang Xin Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

38

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD FROM JANUARY 1, 2008 TO JUNE 30, 2008

Prepared by: Yanzhou Coal Mining Company Limited

Uni: RMB

ITEM	Attribute to shareholders of the Parent Company Minority interest Total Share capital Capital reserves Surplus reserves Retained earnings Translation reserve
1. Balance at December 31, 2007 Add: Change in accounting policies Correction of errors in the early stage 2. Balance at January 1, 2008 3. Changes for the year (The decrease is listed beginning with “–”) (I) Net prof t (II) Gain and loss directly recognized in shareholders' equity 1. Net fair value changes of available-for-sale f nancial assets 2. Effect from equity change of other shareholders of investors under the equity method 3. Conversion differences for accounting statement 4. Others Sub-total of (I) and (II) (III) Owner's contributions and reduction in capital 1. Capital contribution from owners 2. The Amount listed in the Shareholder equity from share payment 3. Others (IV) Prof t distribution 1.Transfer to surplus reserve 2.Provision for general risks 3.Distribution to shareholders 4. Others (VI) Internal settlement and transfer of owners’ equities 4. Balance at June 30, 2008	4,918,400,000 4,943,369,082 2,037,940,337 7,729,922,091 (13,941,634) 49,543,052 19,665,232,928
	4,918,400,000 4,943,369,082 2,037,940,337 7,729,922,091 (13,941,634) 49,543,052 19,665,232,928
	– (150,381,796) – 2,925,947,283 2,867,252 2,080,295 2,780,513,034 3,762,075,283 (424,824) 3,761,650,459 – (150,381,796) – – 2,867,252 2,505,119 (145,009,425) (150,381,796) (150,381,796) – – – 2,867,252 2,867,252 2,505,119 2,505,119 – (150,381,796) – 3,762,075,283 2,867,252 2,080,295 3,616,641,034 – – – – – – – – – – – – – (836,128,000) – – (836,128,000) – – (836,128,000) (836,128,000) – – – – – – – –
	4,918,400,000 4,792,987,286 2,037,940,337 10,655,869,374 (11,074,382) 51,623,347 22,445,745,962

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Wang Xin

Chief Financial Offi cer: Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

39

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY – CONTINUED

FOR THE YEAR ENDED DECEMBER 31, 2006 TO DECEMBER 31, 2007

Prepared by: Yanzhou Coal Mining Company Limited

Uni: RMB

ITEM	Attribute to shareholders of the Parent Company Share capital Capital reserves Surplus reserves Retained earnings Translation reserve Minority interest Total
1. Balance at December 31, 2006 Add: Change in accounting policies Correction of errors in the early stage 2. Balance at January 1, 2007 3. Changes for the year (The decrease is listed beginning with “–“) (I) Net prof t (II) Gain and loss directly recognized in shareholders' equity 1.Net fair value changes of available-for-sale f nancial assets 2. Acquisition of 2% shareholders equity of Shanxi Neng Hua 3. Foreign currency conversion differences 4. Wei Jian Fei transfer in 5. Income tax effect related to items recorded in shareholders’ equity Sub-total of (I) and (II) (III) Owner's contributions and reduction in capital 1. Capital contribution from owners 2. Acquisition of 2% shareholders’equity of Shanxi Neng Hua 3. others (IV) Prof t distribution 1. Transfer to surplus reserve 2. Provision for general risks 3. Distribution to shareholders 4. others (VI) Internal settlement and transfer of owners’ equities 4. Balance at December 31, 2007	4,918,400,000 4,710,915,252 1,751,118,730 6,307,125,592 (15,505,409) 62,207,957 17,734,262,122
	– –
	4,918,400,000 4,710,915,252 1,751,118,730 6,307,125,592 (15,505,409) 62,207,957 17,734,262,122
	– 232,453,830 286,821,607 1,422,796,499 1,563,775 (12,664,905) 1,930,970,806 2,693,298,106 (2,339,540) 2,690,958,566 – 237,424,785 – 1,563,775 – 238,988,560 312,943,837 312,943,837 – 1,563,775 1,563,775 – (75,519,052) (75,519,052) – 237,424,785 – 2,693,298,106 1,563,775 (2,339,540) 2,929,947,126 – (4,970,955) – – – (9,995,245) (14,966,200) 24,000,000 24,000,000 (4,970,955) (9,995,245) (14,966,200) (24,000,000) (24,000,000) – – 286,821,607 (1,270,501,607) – (330,120) (984,010,120) 286,821,607 (286,821,607) – – (983,680,000) (330,120) (984,010,120) – – – – – – – –
	4,918,400,000 4,943,369,082 2,037,940,337 7,729,922,091 (13,941,634) 49,543,052 19,665,232,928

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Wang Xin

Chief Financial Offi cer: Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

40

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

STATEMENT OF CHANGES IN EQUITY OF THE PARENT COMPANY

For Six Months from January to June, 2008

Prepared by: Yanzhou Coal Mining Company Limited

Unit: RMB

ITEM	Share capital ` Surplus reserves Retained earnings Total
1. Balance at December 31, 2007 Add: Change in accounting policies Correction of errors in the early stage 2. Balance at January 1, 2008 3. Changes for the year(The loss is listed beginning with “–“) (I) Net prof t (II) Gain and loss directly recognized in shareholders’ equity 1. Net fair value changes of available-for-sale f nancial assets 2. Effect from equity change of other shareholders of investors under the equity method 3. Income tax eff ect related to items recorded n shareholders’ equit 4. Others Sub-total of (I) and (II) (III) Owner’s contributions and reduction in capital 1. Capital contribution from owners 2. Share payment amount accrued to the owners’equities in the payment of shares 3. Others (IV) Prof t distribution 1. Transfer to surplus reserve 2. Distribution to shareholders 3. Others (VI) Internal settlement and transfer of owners’ equities 4. Balance at June 30, 2008	4,918,400,000 4,942,801,517 2,037,940,337 8,363,756,458 20,262,898,312
	4,918,400,000 4,942,801,517 2,037,940,337 8,363,756,458 20,262,898,312
	– (150,381,796) – 2,762,224,965 2,611,843,169 3,598,352,965 3,598,352,965 – (150,381,796) – – (150,381,796) (150,381,796) (150,381,796) – – – – – (150,381,796) – 3,598,352,965 3,447,971,169 – – – – – – – – – – – (836,128,000) (836,128,000) – (836,128,000) (836,128,000) – – – – – –
	4,918,400,000 4,792,419,721 2,037,940,337 11,125,981,423 22,874,741,481

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Wang Xin

Chief Financial Offi cer: Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

41

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

STATEMENT OF CHANGES IN EQUITY OF THE PARENT COMPANY – CONTINUED

For Six Months from January to June, 2008

Prepared by: Yanzhou Coal Mining Company Limited

Unit: RMB

ITEM	Share capital ` Surplus reserves Retained earnings Total
1. Balance at December 31, 2006 Add: Change in accounting policies Correction of errors in the early stage 2. Balance at January 1, 2007 3. Changes for the year(The loss is listed beginning with “–“) (I) Net prof t (II) Gain and loss directly recognized in shareholders’ equity 1. Net fair value changes of available-for-sale f nancial assets 2. Effect from equity change of other shareholders of investors under the equity method 3.Income tax effect related to items recorded in shareholders’ equity 4. Others Sub-total of (I) and (II) (III) Owner’s contributions and reduction in capital 1. Acquisition of 2% shareholders equity of Shanxi Neng Hua 2. Share payment amount accrued to the owners’equities in the payment of shares 3. Others (IV) Prof t distribution 1. Transfer to surplus reserve 2. Distribution to shareholders 3. Others (VI) Internal settlement and transfer of owners’ equities1 4. Balance at December 31, 2007	4,918,400,000 4,710,347,687 1,751,118,730 6,766,041,995 18,145,908,412
	– –
	4,918,400,000 4,710,347,687 1,751,118,730 6,766,041,995 18,145,908,412
	– 232,453,830 286,821,607 1,597,714,463 2,116,989,900 2,868,216,070 2,868,216,070 – 237,424,785 – – 237,424,785 312,943,837 312,943,837 – (75,519,052) (75,519,052) – – 237,424,785 – 2,868,216,070 3,105,640,855 – (4,970,955) – – (4,970,955) (4,970,955) (4,970,955) – – – – 286,821,607 (1,270,501,607) (983,680,000) 286,821,607 (286,821,607) – (983,680,000) (983,680,000) – – – – – –
	4,918,400,000 4,942,801,517 2,037,940,337 8,363,756,458 20,262,898,312

The accompanying notes form an integral part of these fi nancial statements.

Head of the Company: Wang Xin

Chief Financial Offi cer: Wu Yuxiang

Head of Accounting Department: Zhao Qingchun

42

Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

I. GENERAL

Yanzhou Coal Mining Company Limited (the “Company”) is a stock company with limited liability established in the People’s Republic of China (the “PRC”). The Company was established in September, 1997 by Yankuang Group Corporation Limited (the “Yankuang Group”) in accordance with the Tigaisheng (1997) No. 154 document issued by “National Economic System Reform Commission of People’s Republic of China (“System Reform Commission”). The address of the registered offi ce is Zoucheng City, Shandong Province. The total share capital was RMB1,670 million with Par value per share of RMB1.00 when the Company was set up.

As approved by Zhengweifa (1997) No.12 document issued by Securities Committee of State Council, the Company issued H shares with face value of RMB820 million to Hong Kong and international investors in March 1998. The American underwriters exercised the excessive issue option and the Company issued additional H Shares of RMB30 million. The above shares were listed and traded on Stock Exchange of Hong Kong Limited on April 1st, 1998, and the American Depository Shares was listed in the New York Stock Exchange on March 31, 1998. The total share capital has changed to RMB2,520 million after these issues.

The company issued 80 million new A shares with Par value per share of RMB3.37 Yuan per share in June 1998. The above shares went public and were traded on Shanghai Stock Exchange since July 1, 1998. After many issues and bonus shares, the share capital of the Company increased to RMB4,918.4 million by June 30, 2008.

The Company and its subsidiary companies (hereinafter collectively referred to as the “Group”) are mainly engaged in the coal mining and preparation, coal sales, cargo transportation by self-operated railways, road transportation, port operation, comprehensive scientifi c and technical service for coal mines, methanol production and sales etc.

II. THE PREPARATION FOUNDATION OF FINANCIAL STATEMENTS

The Group has adopted the Accounting Standards for Business Enterprises (hereinafter referred to as “new CASs” or “ASBEs”) and No.38 specifi c accounting standard issued by the Ministry of Finance (MOF) on February 15, 2006, and later issued application guide to the ASBE, the interpretation of ASBE and relevant regulations.

III. DECLARATION OF COMPLIANCE WITH ASBES

The fi nancial statements of the Group and the company have been prepared are in accordance with the new ASBEs and has been presented completely and genuinely the fi nancial information of the Company such as its fi nancial position, operating results and cash fl ows and so on. In addition, the fi nancial statements of the Group and the Company are presented and disclosed in accordance with Information Disclosure and Presentation Rules for Companies Making Public Offering No. 15 General Provisions on Financial Reporting (Revised 2007) issued by China Securities Regulatory Commission (hereinafter referred to briefl y as “CSRC”).

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YANZHOU COAL MINING COMPANY LIMITED

IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting period

The accounting period is from the Calendar year January 1 to December 31.

2. Recording currency

The recording currency of the Company is Renminbi (RMB). As the primary economic environment for overseas affi liates of the Company, Yancoal Australia Pty Limited and Austar Coal Mine Pty Limited are in Australia, the recording currency of the two Companies is AUD. On the conversion method from AUD to RMB, please refers to IV.5.

3. Basis of accounting and principle of measurement

The Company has adopted the accrual basis of accounting and used the historical cost convention as the principle of measurements for assets and liabilities except for tradable fi nancial assets and available-for-sale fi nancial assets, which are measured at their fair values.

4. Cash and cash equivalents

Cash in cash fl ow are cash on hand and deposits available for payment at any time. Cash equivalents in cash fl ow are short-term (normally become due within 3 months after purchasing date), highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignifi cant risk of changes in value.

5. Foreign currency translation

(1) Foreign currency transaction

Foreign currency transactions are converted to RMB at the spot exchange rate of the day when the transaction occurs. At the balance sheet date, foreign currency monetary items are translated to RMB using the spot exchange rate of the day. Exchange differences arising are recognized in profi t or loss for the current period, except for the exchange differences arising on the borrowing costs eligible for acquisition, construction or production of assets which are qualifi ed for capitalization. Foreign currency non-monetary items measured at fair value are translated using the exchange rates at the date when the recognized fair value is determined. The differences between the amount of the recording currency before and after conversion are recognized in profi t or loss or interests of shareholders as changes of fair value. Foreign currency non-monetary items measured at historical cost are translated at the spot Exchange rates at the date of the transactions, and do not change the RMB amount.

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YANZHOU COAL MINING COMPANY LIMITED

IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

5. Foreign currency translation – continued

• (2) Translation of fi nancial statements denominated in foreign currency

• Assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date, all equity items except for inappropriate profi ts (or accumulated losses) are translated at the spot exchange rates at the dates on which such items arise. Income and expenses in the income statement for offshore operations are translated at the spot exchange rates at the dates of the transactions; all exchange differences resulting from the translation are recognized in the equity on the balance sheet. The exchange differences due to the exchange rate fl uctuation should be presented in the “translation reserve” item in shareholders’ equity in case of a net investment of overseas operations of foreign currency monetary items. The disposal of offshore operations shall be included in profi t or loss for the current period.

Cash fl ows denominated in foreign currency or from a foreign subsidiary are translated at the spot exchange rates at the date of transaction. The effect of fl uctuations exchange rates on cash is presented separately in the cash fl ow statement.

6. Financial assets

• (1) Classifi cation of fi nancial assets

Upon initial recognition, fi nancial assets are classifi ed into the following categories: fi nancial assets at ‘fair value through profi t or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) fi nancial assets and ‘loans and receivables’.

• 1) Financial assets at FVTPL:A fi nancial asset is held for trading if it has been acquired principally for the purpose of selling in the short term and presented as the tradable fi nancial assets in the balance sheet.

• 2) Held-to-maturity investment

• Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fi xed maturity date that the enterprise has the clear intention and ability to hold to maturity.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

6. Financial assets – continued

• (1) Classifi cation of fi nancial assets – Continued

• 3) Receivables: Non-derivative fi nancial assets with fi xed or determinable payments are not quoted in an active market, including notes receivables, accounts receivables, interest receivables, dividend receivables and other receivables.

• 4) AFS fi nancial assets

  • AFS fi nancial assets are those non-derivative fi nancial assets that are designated as available for sale or are not classifi ed as (1) fi nancial assets at FVTPL, (2) loans and receivables, or (3) held-tomaturity investments.

(2) Recognition and measurement of fi nancial assets

Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of fi nancial assets and fi nancial liabilities (other than fi nancial assets at fair value through profi t or loss) are added to or deducted from the fair value of the fi nancial assets, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of fi nancial assets at fair value through profi t or loss are recognized directly in profi t or loss. Financial assets are no longer recognised when the rights to receive cash fl ows from the assets expire or, the fi nancial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the

Financial assets and AFS fi nancial assets at FVTPL are subsequently measured at fair value. The receivables and held-to-maturity investments are carried at the amortized cost using the effective interest rate method.

Changes in fair value of fi nancial assets at FVTPL are included in profi t or loss for the period at fair value. The received interest during the period holding assets shall be recognized as investment income. On disposing of it, the difference between fair value and initial accounting value shall be recognized as in profi t or loss statements on investment, and the profi t or loss at the fair value is also adjusted accordingly.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

6. Financial assets – continued

(2) Recognition and measurement of fi nancial assets – continued

The changes in fair value of AFS fi nancial assets are recorded in the shareholder’s equity. The interest calculated by actual interest rate during the period holding assets shall be recognized as investment income. The cash dividends on investments in an available-for-sale equity instrument shall be recorded into the investment income when cash dividends are declared and issued by the investee. On disposing it, the difference after changing the fair value accumulated amount from the amount received and the carrying amount deducting the original shareholder’s equity shall be recorded into the investment profi t and loss.

• (3) Impairment of fi nancial assets

The Company estimates the carrying amount of a fi nancial asset at the balance sheet date (other than those at FVTPL). If there is objective evidence that the fi nancial asset is impaired, the Company shall determine to accrue the amount of any impairment loss.

If the fair value of an AFS fi nancial asset declines substantially or non-temporarily, the accumulated loss arising from this decline that had been recognized directly in shareholders’ equity shall be recognized in the profi t or loss statement. After an impairment loss has been recognized on an AFS fi nancial asset, if the fair value of the fi nancial asset increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognized, the impairment loss shall be reversed, with the amount of the reversal of AFS debt instrument recognized in profi t or loss.

The impairment losses are not reversed if investments in equity instrument that is not quoted in an active market whose fair value cannot be measured reliably.

7. Accounting method for bad debt provisions of the receivables

The receivables with individual amount of over RMB8 million are considered as the signifi cant receivables. If there is objective evidence that all receivables can not be recovered in accordance with the former stipulations, the impairment shall be assessed separately based on the difference between current value of future cash fl ow and the carrying amount, and the Company shall be determined to accrue the bad debt provisions.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

1. Accounting method for bad debt provisions of the receivables – continued The insignifi cant receivables shall be classifi ed into several combinations based on credit risk characteristics together with signifi cant receivables without impairment after separate assessment. According to the actual loss rate of the same or similar receivables combinations that has similar credit risk characteristics, the proportion of accrued bad debts provisions in each combination is determined with the current situations. Consequently, the bad debts provisions of the year shall be calculated out. If there is defi ned evidence for the receivables not to or not likely to be received, the receivables with the accounting period exceeding three years are classifi ed into special assets portfolio and accrued bad debts provisions in full amount.

The percentage bad debts provision is as followings according to accounting aging:

Accounting aging Accrual percentage within 1 year 4% 1-2 years 30% 2-3 years 50% over 3 years 100%

8. Inventories

• (1) The classifi cation of inventories: The inventories include the raw materials, the fi nished goods, and so on.

• (2) The pricing method of receiving and issuing inventories: The Company adopts a perpetual inventory system to calculate its inventory, using the actual cost pricing for procurement and inventories, and weighted average approach for consumptions and sales of the raw materials and the fi nished goods.

• (3) Pricing principles of the end-of-period inventories, recognition standard and accrual method for inventories impairment provision: The end-of-period inventories are measured at the lower one between the cost and the convertible net value. At the end of the period, if the inventories are damaged, become partially or completely obsolete or sold at price lower than cost, unrecoverable cost shall be estimated and recognized as a provision for decline in value on the basis of complete inventories check. The excess of cost over the convertible net value is generally recognized as provision for decline in value of inventories on a separate inventory item.

• (4) The convertible net value is the estimated selling price in the ordinary course of business minus the estimated completion costs and the estimated sales expenses and the relevant taxes and expenses. To recognize the convertible net value of the inventories needs to consider the purpose to hold the inventories and the effects of the events occurred after the balance sheet date based on the defi ned available evidence.

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

9. Long-term equity investments

(1) Initial measurement of long-term equity investments

For a business combination involving enterprise under common control, the initial investment cost of the long-term equity investment is the carrying amount of the owner’s equity of the party being absorbed at the combination date. For a business combination not involving enterprises under common control, the initial investment cost of the long-term equity investment acquired is the aggregate of the fair value, at the acquisition date, of the acquiree’s identifi able assets, liabilities and contingent liabilities acquired. For a long-term equity investment acquired by cash payment, the initial investment cost shall be the actual purchase price that has been paid. Initial investment cost also includes those costs, taxes and other necessary expenditures directly attributable to the acquisition of the long-term equity investment. For a long-term equity investment acquired by the issue of equity securities, the initial investment cost shall be the fair value of the securities issued. A long-term equity investment invested by investors, the initial investment cost use the values described in investment contract or agreement. For a long-term equity investment acquired by debts re-organization or non-currency assets transaction, the initial investment cost shall be recognized in accordance with relevant accounting standards.

(2) Subsequent measurement of long-term equity investments

The cost method is applied in calculating the subsidiaries investment, equity method used in adjusting the consolidated fi nancial statements. If the Company does not have joint control or signifi cant infl uence over the investee, the investment is not quoted in an active market and its fair value cannot be reliably measured, a long-term equity investment shall be caculated using the cost method. If the Company does not have control, joint control or signifi cant infl uence over the investee and the fair value of the long-term equity investment can be reliably measured, the investment shall be calculated as an available-for-sale

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Interim Report 2008

YANZHOU COAL MINING COMPANY LIMITED

IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

10. Fixed assets

• (1) Recognition of Fixed assets: Fixed assets are tangible assets that are held for production or operation, and have a service life more than one accounting year.

• (2) Category of fi xed assets: Buildings, coal mine buildings, ground buildings, railway structure, harbour works and craft, plant, machinery and equipment, transportation equipment etc.

• (3) Measurement of fi xed assets: The fi xed assets shall be initially measured at actual cost of acquisition considering the effect of any expected costs of disposing the asset. Among these, the costs of outsourcing fi xed assets include duties and expenses such as purchasing cost, VAT, import tariff, other expenses incurred to ensure estimated usage of the fi xed assets that can be directly included in the assets. The costs to build the fi xed assets include necessary expenses incurred to ensure the usage status of the assets. The accounting value of the fi xed assets invested by the investors shall be accordance with the values specifi ed in the investment contract or agreement, while for not fair value specifi ed in the contract or agreement, shall be regarded as fair value in accounting value.

		Estimated	annual
	Useful	residual	depreciation
Category	life	value	rate
	(years)	(%)	(%)
House Buildings	15-30 years	3	3.23-6.47%
Ground buildings	15-25 years	3	3.88-6.47%
Port works and vessels	40 years	3	2.43%
Plant, machinery and equipment	5-15 years	3	6.47-19.40%
Transportation equipment (Note)	6-18 years	3	5.39-16.17%

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YANZHOU COAL MINING COMPANY LIMITED

IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

10. Fixed assets – continued

• (4) Depreciation approach of fi xed assets: The depreciation is provided to all fi xed assets except those that have already accrued depreciation and lands category. The mining structures are depreciated using the estimated production capacity method, and other fi xed assets using the average service life method, calculating depreciation rate by month and record it into the current cost or expenses of relevant assets according to their various purposes. The Company’s estimated residual value for fi xed assets is 3%, the estimated residual rate; useful life and annual depreciation rate of each category of fi xed assets using the composite life method are as follows:

The vessels of Shandong Yancoal Shipping Co., Ltd. are depreciated over 18 years. All the other transportation equipments are depreciated over 6 to 9 years.

The mining structures are depreciated using production volume method at RMB2.5 per tonne of raw coal mined.

Land category only refers to that of Australian Southland coal mine and no depreciation is provided for as Austar enjoys the permanent ownership.

• (5) Treatment of subsequent costs incurred on fi xed assets

• The subsequent costs incurred on fi xed assets mainly include expenses for repair, renovation and improvement, which shall be recognized as addition to the asset provided economic benefi ts associated with the item will fl ow to the Company and the cost could be reliably measured. For the replaced parts, carrying value shall not be recognized and other subsequent costs incurred shall be recognized in the gain and loss in the period.

• (6) The Company shall review the useful life and estimated net residual value of a fi xed asset and the depreciation method applied at least at each fi nancial year-end. A change in the useful life or estimated net residual value of a fi xed asset or depreciation method used shall be treated as a change in an accounting estimate.

• (7) Fixed assets that can not bring economic returns after treatment or are not expected to bring economic returns after use or treatment shall be no longer recognized. When a fi xed asset is sold, transferred, scraped or damaged, the enterprise shall recognize the amount of any proceeds on disposal of the asset net of the carrying value and related taxes in profi t or loss for the current period.

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YANZHOU COAL MINING COMPANY LIMITED

IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

11. Fixed assets under construction

• (1) the pricing approach of the fi xed assets under construction: To be measured at the actual costs incurred for the construction. The self-operated construction is recorded at all cost of direct materials, direct salary, and direct construction expenditures etc. And the contracting construction is recorded at the payable construction cost and so on. The equipment installation cost is measured at value of the installed equipment, installation cost, all expenses incurred for project test-run. The cost of fi xed assets under construction includes capitalized borrowing costs, gain and loss from currency exchange.

• (2) Standard and time of transfer from the fi xed assets under construction to the fi xed assets: The fi xed assets under construction shall be transferred to the fi xed assets from the date of starting its estimated usable condition based on their construction budget, construction pricing or project actual cost and so on, and its depreciation will begin from the next month. The difference of the fi xed assets original values shall be adjusted upon the resolution procedures of the project completion.

12. Borrowing costs

• (1) Borrowing costs incurred that are directly attributable to the acquisition, construction or production of a qualifying asset shall be capitalized as part of the cost of that assets. The actual amounts of ancillary costs incurred shall be recognized as an expense in the period in which they are incurred. Qualifying assets are assets (fi xed assets, investment property, inventories, etc) that necessarily take a substantial period of time (normally over one year) for acquisition, construction or production to get ready for their intended use or sale.

• (2) Capitalization of borrowings cost: Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset (that necessarily take a substantial period of time for acquisition, construction or production go get ready for their intended use or sale), when expenditures for the asset and borrowing costs are being incurred, activities relating to the acquisition, construction or production of the asset that are necessary to prepare the asset for its intended use or sale have commenced shall be capitalized,capitalization of borrowing costs shall be suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of more than 3 months and borrowings cost of that assets discontinue the capitalization when acquired and constructed production is available for use.

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YANZHOU COAL MINING COMPANY LIMITED

IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

12. Borrowing costs – continued

• (3) Calculation approach for capitalized borrowing costs:

• Where funds are borrowed under a specifi c-purpose borrowing for the acquisition, construction or production of a qualifying asset, the amount of interest to be capitalized shall be the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or any investment income on the temporary investment of those funds. Where funds are borrowed under general-purpose borrowings and are utilized for the acquisition, construction or production of a qualifying asset, an enterprise shall determine the amount of interest to be capitalized on such borrowings by applying a capitalization rate to the weighted average of the excess amounts of cumulative expenditures on the asset over and above the amounts of specifi c- purpose borrowings. The capitalization rate shall be the weighted average of the interest rates applicable to the general-purpose borrowings.

13. Intangible assets

• (1) The pricing method of intangible assets: The intangible assets of the Group include mainly the land use rights and the mining rights etc. For purchased intangible assets, actual paid cost and other relevant expenses are used as the actual cost. For intangible assets invested by investors, the actual cost is determined according to the values specifi ed in the investment contract or agreement, while for the unfair agreed value in contract or agreement, the actual cost is determined at the fair value.

• (2) Amortization and term of the intangible assets: The land use rights and the mining rights are evenly amortized over transferred term since the rights are obtained. The amortized amounts shall be included in the cost of related assets or profi t or loss for the period in which they are incurred based on the benefi ciary objects.

• (3) For an intangible asset with a fi nite useful life, the Company shall review the useful life and the amortization method applied at each fi nancial year-end. A change in the useful life or amortization method used shall be accounted for as a change in an accounting estimate. For an intangible asset with an indefi nite useful life, the Company shall reassess the useful life of the asset in each accounting period. If there is evidence indicating that the useful life of that intangible asset is fi nite, the Company shall estimate the useful life of that asset and apply the accounting requirements of the Standard accordingly.

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IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

14. Impairment of non-fi nancial assets

The Company assesses at each balance sheet date whether there is any indication that the long-term equity investments measured by equity method, investment property, fi xed assets, and construction in progress and intangible assets with fi nite useful life may be impaired. If there is objective evidence that one or more events that occurred after the initial recognition of the asset and that event has an impact on the estimated future cash fl ows of the fi nancial asset which can be reliably estimated, a fi nancial asset is impaired. Goodwill arising in a business combination and an intangible asset with an indefi nite useful life shall be tested for impairment annually, irrespective of whether there is any indication that the asset may be impaired. For the purpose of impairment assessment, goodwill shall be considered together with the related asset groups or sets of asset group allocated with goodwill should be assessed for impairment at each fi nancial year-end. If the recoverable amount of the asset groups or set of asset groups is less than the book value, the difference will be recognized as impairment loss and once an impairment loss is recognized, it shall not be reversed in a subsequent period. The recoverable amount of an asset is the higher of its fair value cost of disposal and the present value of the future cash fl ows expected to be derived from the asset costs of disposal.

The signs of impairment are as follows:

• (1) The current market price of an asset substantially declines, exceeding obviously the expected decline caused by time changes or normal application.

• (2) The current or future signifi cant changes in the economic, technical or legal environment of the enterprise and in the market of an asset shall have adverse impacts on the enterprise.

• (3) The improved market rate or other return on investment in the period shall have an effect on the discount rate used by enterprise to calculate estimated cash fl ow present value, leading to substantial decline in recoverable amount of assets.

• (4) There is evidence to demonstrate that the assets have already gone absolute or its entity has already been damaged.

• (5) The assets have already been or will be left unused, or will stop using, or are under the plan to be disposed in advance.

• (6) The evidences of internal reports demonstrate that economic returns of assets have already been lower or will be lower than expectations, for example, net cash fl ow created by assets or operating profi t (or loss) realized by assets are much lower (or higher) than expected amounts.

• (7) Other signs to indicate that assets value have already been impaired.

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IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

15. Goodwill

Goodwill means equity investment cost or the differences between the merger costs and the shareholder’s equity book value of the combined party under the corporate merger not under the same control.

Impairment test shall be conducted at least once for goodwill separately listed in the fi nancial statements at every year. For the purpose of impairment testing, the carrying amount of goodwill shall be allocated on a reasonable basis to each of the related asset groups or related sets of asset groups based on the synergistic effects of business combination.

16. Employee benefi ts

(1) Employee benefi ts

Mainly include salary, bonus, allowance and subsidy, employee welfare expenses, social insurance cost, public accumulation fund for housing construction, labour union expenditures, employee education funds and other expenses associated with service rendered by employees.

In the accounting period in which an employee has rendered service to the company, the company shall recognize the employee benefi ts payable for that service as a liability, and recorded into related assets or current profi t or loss in accordance with the objects that benefi ted from the service rendered by employees. Any compensation liability arising from the termination of employment relationship with employees should be charged to the profi t or loss for the current period.

17. Estimated Liability

• (1) The recognition principles of the estimated liability: the Company recognizes it as a provision when an obligation related to an contingency such as the external guarantee, pending litigation or arbitration, product quality warranty, downsizing scheme, loss contract, restructuring obligation, fixed assets retirement obligation and so on satisfy all of the following conditions:

• 1) The obligation is a present obligation of the Company;

• 2) It is probable that an outfl ow of economic benefi ts from the Company will be required to settle the obligation;

• 3) The amount of the obligation can be measured reliably.

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IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

17. Estimated Liability – continued

• (2) The measurement approaches of the estimated liability: the estimated liability is primarily measured according to the estimated optimal value paid to implement the relevant present obligations considering the factors such as the risks, uncertainties and currency time values related to the contingencies. If the currency time value has major effects, the estimated optimal value is determined after the discounting of the relevant future cash fl ow. If any change happens to the estimated optimal value during reviewing the carrying amount of the estimated liabilities on the balance sheet date, the adjustment will be made to the carrying amount to refl ect the current estimated optimal value.

18. Provision for production maintenance and production safety expenses

• Pursuant to the rules and regulations jointly issued by Ministry of Finance, State Administration of Coal Mine Safety and related government authorities in PRC, the Company has to accrue for production maintenance expenses (Wei Jian Fei) at RMB6 per ton of raw coal mined, which is used to maintain production and technical improvement of coal mines. The Company also accrues for production safety expenses at RMB8 per ton raw coal mined (standards for the Company’s subsidiary Shanxi Heshun Tianchi Energy Company Limited is RMB15 per ton raw coal mined) and is used for purchase of coal production equipment and safety expense of coal mining structure.

Provisions for production maintanence and production safety expenses are charged as production cost (manufacturing expense) and credited to long term payables, and charge expenditure offsetting directly with long-term account payable when actually incurs. For capital expenditures, fi xed assets are recognized with the same amount credited to accumulated depreciation. No further depreciation is provided on usage.

19. Reform and specifi c development fund

Pursuant to “Notice of setting up reform and specifi c Development Fund for provincial key coal corporations” Lucaiqi [2004] No. 28, which was jointly issued by Shandong Province Finance Bureau, State-owned Assets Supervision and Administration Commission of Shandong Provincial Government, Shandong Province Coal Mine Industry Bureau, Reform and Specifi c Development Fund is accrued at RMB5.00 per tonne of raw coal mined from July 1, 2004 and is used for related expenditures on new mine construction.

Pursuant to “Notice of calling off reform and specifi c Development Fund for provincial key coal corporations” Lucaiqi [2004] No. 44, which was jointly issued by Shandong Province Finance Bureau, State-owned Assets Supervision and Administration Commission of Shandong Provincial Government, Shandong Province Coal Mine Industry Bureau, Reform and Specifi c Development Fund is called off accruals to the Company since January 1, 2008.

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IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

20. Revenue recognition

The business revenues are generated mainly from sales of goods, rendering of services and abalienating the right to use assets. The revenue is recognized when the Company has received the economic benefi ts associated with the transaction, and relevant amount of revenue can be reliably measured and meets the recognition standards of special revenue.

• (1) Revenue from sales of goods:

Revenue is recognized when the Company has transferred to the buyer the signifi cant risks and rewards of ownership of the goods, retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, will receive the economic benefi ts associated with the transaction, and can reliably measure the relevant amount of revenue and costs.

• (2) Revenue from rendering of services:

When the provision of services is started and completed within the same accounting year, revenue is recognized at the time of completion of the services. When the provision of services is started and completed in different accounting years and the outcome of a transaction involving the rendering of services can be estimated reliably, revenue is recognized at the balance sheet date by the use of the percentage of completion method.

• (3) Revenue from abalienating the right to use assets

The revenue is recognized when the Company has received the economic benefi ts associated with the transaction, and can reliably measure the relevant amount of revenue.

• 1) Interest income is measured based on the length of time for which the Company’s cash is used by others and the applicable interest rate.

• 2) Business lease income is recognized by the straight-line methods in the leasing period.

21. Leases

The lease engaged by the Company is the operating lease and is a lease that does not transfer substantially all the risks and rewards incident to ownership of an asset. Lease payments under operating leases are recorded into an expense in the income statement on a straight-line basis over the lease term.

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IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

22. Deferred income tax assets and liabilities

The deferred income tax assets and liabilities are recognized based on the differences arising from the difference between the carrying amount of an asset or liability and its tax base (temporary differences). For any deductible loss or tax deduction that can be deducted the amount of the taxable income the next year according to the taxation regulations, the corresponding deferred income tax asset shall be determined considering the temporary difference. On the balance sheet date, the deferred income assets and deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled.

An enterprise shall recognize the deferred income tax liability arising from a deductible temporary difference to the extent of the amount of the taxable income which it is most likely to obtain and which can be deducted from the deductible temporary difference. For the recognized deferred income tax asset, if it is unlikely to obtain suffi cient taxable income to offset against the benefi t of the deferred income tax asset, the carrying amount of the deferred income tax assets shall be written down. Any such write-down should be subsequently reversed where it becomes probable that suffi cient taxable income will be available.

23. Accounting calculation of the income tax

The accounting calculation of the income tax adopts the balance sheet liabilities approach. The income taxes include the current and deferred income tax. The current income tax and deferred income tax expenses and earnings are recorded into the current profi t and loss, except those related to the transactions and events are recorded directly into the shareholder’s equity and the deferred income tax is adjusted into the carrying amount of goodwill arising from the business combination.

The current income tax expense is the income tax payable, that is, the amount of the current transactions and events calculated according to the taxation regulations paid to the taxation authorities by the enterprises. The deferred income tax is the difference between the due amounts of the deferred income tax assets and liabilities to be recognized according to the balance sheet liabilities approach in the period end and the amount recognized originally.

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IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

24. Business Combinations

A business combination is a transaction or event that brings together of separate enterprises into one reporting entity. The Company recognizes the assets and liabilities arising from the business combinations at the combinations date or acquisition date. Combinations date or acquisition date is the date on which the absorbing party effectively obtains control of the party being absorbed.

• (1) Business combinations involving enterprises under common control:

Assets and liabilities that are obtained by the absorbing party in a business combination are measured at their carrying amounts at the combination date as recorded by the party being absorbed. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination is adjustment to capital reserve. If the capital reserve is not suffi cient to absorb the difference, any excess shall be adjusted against retained earnings.

• (2) Business combinations not Involving enterprises under common control:

The cost of combination for a business combination not involving enterprises under common control is the aggregate of the fair values, at the acquisition date, of the assets given, liabilities incurred or assumed, equity securities issued by the acquirer. Where the cost of a business combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifi able assets, liabilities and contingent liabilities acquired, the difference shall be recognized as goodwill. Where the cost of combination is less than the acquiree’s interest in the fair value of the acquiree’s identifi ed assets, liabilities and contingent liabilities acquired, after the reviewing, the acquirer shall recognize the remaining difference immediately in profi t or loss for the current period.

25. Segment reporting

A business segment is a distinguishable component of the Company that is engaged in providing an individual or a group of related products or services and that is subject to risks and returns that are different from those of other components. A geographical segment is a distinguishable component of the Company that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.

The Company takes the business segment as the primary reporting format and the geographical segment as secondary reporting format. Inter-segment transfers are measured on the basis of actual transaction price for such transfers. The segment incomes and the segment expenses are recognized by the actual incomes and expenses in each segment. If the incomes and expenses are not recognized, they are distributed distinctly according to the ratio of the corresponding segment assets carrying amount.

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IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

26. Fair values recognition of the fi nancial instruments

• If there are fi nancial instruments of the active market, their fair values are determined by the preceding prices, and if not, the fair values are determined by adopting the estimation techniques, including to consult the latest prices in the marketing transaction by the parties who are familiar with the market and under the volunteer transaction, to consult the current fair values of the other identifi ed fi nancial assets, discounted cash fl ow techniques and options pricing modes and so on. To adopt the estimation techniques needs to apply the market parameters as many as possible instead of the relevant specifi ed parameters of the Company.

27. Preparation methods for consolidated fi nancial statements

• (1) The consolidated scope recognition principles: the Company takes the subsidiaries owning the actual controlling power and the main bodies for the special purpose into the scope of the consolidated fi nancial statements.

• (2) The accounting methods introduced in the consolidated fi nancial statements: The consolidated fi nancial statements are prepared pursuant to Enterprises accounting criteria No.33-consolidated financial statements and relevant provisions. All major inter-segment transactions, balances, income and expenses in the consolidation scope are eliminated in full on consolidation. Shareholder’s equity in the net assets of consolidated subsidiaries are identifi ed separately from the Group’s equity therein.

If any confl icts between the accounting policies or the accounting period introduced in the subsidiaries and those of the Company, the necessary adjustment shall be made to the fi nancial statements of the subsidiaries according to the accounting policies or the accounting period in the Company during the preparation of the

For those subsidiaries acquired not under common control, some few fi nancial statements are adjusted based on the fair values of the identifi able net assets after the acquisition date in preparing consolidated fi nancial statements. For those subsidiaries acquired under common control, which are considered to be existed at the opening of the consolidation period, the assets, liabilities, the operating results and cash fl ows from the opening of the consolidation period are presented in the consolidated fi nancial statement according to the original carrying amounts.

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IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

28. Signifi cant Accounting Policies and Accounting Estimates

The management of the Company needs to apply the estimates and assumptions to impose effects on the application of the accounting policies and the amount of the assets, liabilities and income. However, the actual conditions are possibly different from the estimates, so the Company confi rms the infl uences of the accounting modifi cations in the current and future of the modifi cation time in accordance with the past experiences and other factors including the reasonable prospects for the future events, the continuous assessment to the signifi cant accounting estimates and key assumptions.

The key assumptions and the uncertainties leading to the possible major adjustments for the carrying amounts of the assets, liabilities in the future are as follows:

• (1) The charges on land subsidence, recovery, reformation and environmental protection The expenses of staff deposition, land and its attachment usage caused by the coal mines exploitation are calculated into the current loss and profi t statements. The authority reviews regularly the accrual whether it refl ects the charges on environmental protection arising from the exploitation of coal mines at present and in the past. Additionally, the authority will estimate the charges on land subsidence according to the past experiences.

• (2) Coal reserves

The coal reserves are coal amount that can be mined legally and profi tably from the mine area developed by the Company. To calculate the coal reserves needs to apply the estimates and assumptions to the extent of geology, technology and economic factors including capacity, grade, production technology, recovery rate, exploitation cost, transportation cost, products demands and goods prices.

To assess the quantity and grade of the reserves needs to apply the data of formation, volume and depth of a mine area. These data are derived from the geological analysis.

The economic assumptions to be used for assessment of coal reserves and the geological data are different in different business periods, so the assessment of coal reserves is changeable in different periods accordingly. The changeable reserves assessment will have effects on the operating results and accounting conditions of the Company in the following factors:

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IV. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PREPARATION METHODS FOR CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

28. Signifi cant Accounting Policies and Accounting Estimates – continued

• (2) Coal reserves – Continued

• 1) The carrying amount of the assets will be possibly affected by the change of the future contingent

• 2) The depreciation or the amortization calculated based on the working amount or the service life of the assets will be possibly changed.

• 3) The changeable reserves assessment has effects on the estimation time and expenses to implement the assets retirement obligation and the real obligation of land reclamation and environmental restoration, the recognized contingent carrying amount of liability will be changeable accordingly.

• 4) The changeable assessment of potential returned tax earnings changes possibly the carrying amount of deferred income tax assets.

(3) Service life of fi xed assets

The management of the Company will estimate the service life of fi xed assets based on the past experience of estimation of the actual service life of the fi xed assets in past years with the similar characters and functions. If there are any differences between the service life and the estimated service life before, the adjustment will be made to the contingent service life by the management. As a result, the possible major adjustment will be made to the carrying amount of the fi xed assets in the balance sheet.

(4) Non-current assets impairment

The non-current assets (including the fi xed and intangible assets) are calculated by the cost minus depreciation and amortization. When any events or conditions changes cause that the carrying amount is not recoverable, the auditing shall be made to check whether the carrying amount in the item has been in impairment or not. If the carrying amount of one asset exceeds its recoverable amount, the impairment shall be recognized according to the difference between them. The recoverable amount is determined by a higher one between the net value of assets fair value minus deposition fee and the current value of assets contingent future cash fl ow. To estimate the recoverable amount of the assets needs various assumptions including of the future cash fl ow and of discount rate. If there is any divergence between the future events and the assumptions, the adjustments shall be made to the recoverable amounts and the adjustments will have potential effects on the operating results and accounting conditions of the Company.

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V. TAXES

The major tax categories and tax rate applicable to the Group are as follows:

1. Income tax

Income tax is calculated at 25% of the total assessable income of the companies of the Group that registed in PRC.

Income tax for Yancoal Australia Pty Limited and Austar Coal Mine Pty Limited is calculated at 30% of the total assessable income of the company.

2. Value added tax

The value added tax is applicable to the product sales income of the Group. The value added tax is paid at 17% of the corresponding revenue, except for the value added tax on revenue from coal products sales is calculated at 13%. The value added tax payable on purchase of raw materials and so on can offsets the tax payable on sales at the tax rate of 17%, 13%, 7%, 6%, 4%. The value added tax payable is the balance between current tax payable on purchase and current tax payable on sales.

Pursuant to the Document (Caishui [2006] No. 139) which was jointly issued by the Ministry of Finance and the State Administration of Taxation, the coal product export refund tax preferential was cancelled and the value added tax export refund rate was 0%.

3. Business tax

Business tax is applicable to coal transportation service income of the Group. Business tax is paid at the 5% of the corresponding revenue, except the business tax on revenue from coal transportation service is calculated at 3%.

4. City construction tax & education fee

Subject to all taxes applicable to domestic enterprise according to the “Reply Letter to Yanzhou Coal Mining Co., Ltd.” issued by State Administration of Taxation (Guoshuihan [2001] No. 673), city construction tax and education fee are still calculated and paid at 7% and 3%, respectively, on the total amount of VAT payable and business tax payable.

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V. TAXES – CONTINUED

5. Resource tax

Pursuant to the “Notice of the adjustment of resource tax amount of Shandong province” (Caishui [2005] No.86), which was jointly issued by the Ministry of Finance and the State Administration of Taxation, resource tax in Shandong province is calculated and paid at the amount of RMB3.60 per tonne. Meanwhile, pursuant to the “Notice of the adjustment of resource tax amount of Shanxi province” (Caishui [2004] No.187), which was jointly issued by the Ministry of Finance and the State Administration of Taxation, resource tax of Shanxi province is calculated and paid at the amount of RMB3.20 per tonne of raw coal.

Resource taxes are paid as the total of sold raw coal tonnes plus received raw coal multiplying applicable tax rate.

6. Real estate tax

The tax calculation is based on the 70% of original value of real estate with the applicable tax rate of 1.2%.

VI. SCOPE OF CONSOLIDATION AND DETAILS OF SUBSIDIARIES

						Voting
	Place of	Registered	Business	investment	Equity held by	right held by
Name of subsidiaries	registration	capital	scope	capital	the company	the company
I. subsidiaries acquired under common control
Qingdao Free Trade Zone Zhongyan	Qingdao, Shandong	RMB2,100,000	Trade and storage	RMB2,710,000	52.38%	52.38%
Trade Co., Ltd			in free trade zone
Yanzhou Coal Mining Yulin	Yulin,Shaanxi	RMB800,000,000	Production and sales	RMB800,000,000	100.00%	100.00%
Neng Hua Co., Ltd			of methanol and
			acetic acid
Yancoal Australia Pty Limited	Australia	AUD 64,000,000	investment and	RMB403,280,000	100.00%	100.00%
			shareholding
Austar Coal Mine Pty Limited.	Australia	AUD 64,000,000	Coal mining	RMB403,280,000	100.00%	100.00%
			and sales
Yanmei Heze Neng Hua Co.,Ltd	He Ze, Shandong	RMB1,500,000,000	Coal mining	RMB1,424,340,000	96.67%	96.67%
			and sales
Yankuang Shanxi Neng Hua Co,.Ltd	Jinzhong, Shanxi	RMB600,000,000	Thermoelectricity	RMB508,210,000	100.00%	100.00%
			investment, coal
			technology service
Shanxi Heshun Tianchi Energy Co,.Ltd	Jinzhong, Shanxi	RMB90,000,000	intensive process of	RMB73,180,000	81.31%	81.31%
			coal product
Shanxi Tianhao Chemicals Co.,Ltd	Xiaoyi, Shanxi	RMB150,000,000	Production and sales of	RMB149,770,000	99.85%	99.85%
			methanol and coals
II. subsidiaries acquired not under common control
Shangdong Yanmei Shipping Co., Ltd.	Jining, Shandong	RMB5,500,000	Freight transportation	RMB10,570,000	92.00%	92.00%
			and coal sales

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VI. SCOPE OF CONSOLIDATION AND DETAILS OF SUBSIDIARIES – CONTINUED

1. Qingdao Free Trade Zone Zhongyan Trade Co., Ltd Qingdao Free Trade Zone Zhongyan Trade Co., Ltd. (as referred to “Zhongyan Trade”), established in the end of 1997 with the registration capital of RMB2,100,000, was fi nanced RMB700, 000 respectively by the Zhongyan Trade, Qingdao Free Trade Huamei Industrial Trade Company(as referred to “Huamei Industrial Trade”), China Coal Mine Equipment & Mineral Imp. & Exp. Corp (as referred to “Zhongmei Company”). In the year 2000, Huamei Industrial Trade withdrew his investment and Zhongyan Trade and Zhongmei Company hold respectively 52.38% and 47.62% of the total fund after purchasing the investment of Huamei Industrial Trade. The corporation business licence code is 370220018000118, and the legal representative is Mr. Shao Huazhen. The company is mainly engaged in the international trade in free trade zone of Qingdao, product machining, commodity exhibition and storage, and so on.

2. Yanzhou Coal Mining Yulin Neng Hua Co., Ltd Yanzhou Coal Mining Yulin Neng Hua Co., Ltd (as referred to “Yulin Neng Hua”) was fi nanced and established by Yulin Neng Hua, Shandong Chuangye Investment Development Co,. Ltd, China Hualu Engineering Co., Ltd in Feb. 2004. Yulin Neng Hua occupied 97% of the total capital of RMB800 million. In April 2008, Yulin Neng Hua held 100% of equity after assignment of equity from Shandong Chuangye Investment Development Co., Ltd, China Hualu Engineering Co., Ltd. The corporation business licence code is 612700100003307, and the legal representative is Mr. Wang Xin. The company is mainly engaged in the methanol production with the capacity of 600 thousand tons per year, acetic acid production with the capacity of 200 thousand tons per year and its compatible coal mine, and the power plant and so on.

3. Yancoal Australia Pty Limited

Yancoal Australia Pty Limited (as referred to “Yancoal Australia Pty”), a wholly owned subsidiary of the Company, was established in Nov. 2004 with the actual registration capital of AUD 64 million. The corporation business licence code is111859119 and it mainly take responsibility of the activities such as operations, budget, investment and fi nance of the company in Australia.

1. Austar Coal Mine Pty Limited

Austar Coal Mine Pty Limited (as referred to “Austar Company”), a wholly owned subsidiary of Yancoal Australia Pty, was established in Dec. 2004 with the actual registration capital of AUD 64 million. The corporation business licence code is 111910822, and it is mainly engaged in the coal production, process, washing and sales and so on in Southland Coal Mine in Australia.

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VI. SCOPE OF CONSOLIDATION AND DETAILS OF SUBSIDIARIES – CONTINUED

1. Yanmei Heze Neng Hua Co., Ltd

Yanmei Heze Neng Hua Co., Ltd (as referred to “Heze Neng Hua”) was established and fi nanced jointly by the Company, Coal Industry Jinan Design &Research Co., Ltd (as referred to “design institute”) and Shandong Provincial Bureau for Coal Geology in Oct. 2002 with the registration capital of RMB600 million, of which, the Company held 95.67%. In July, 2007, Heze Neng Hua increased the registration capital to RMB1.5 billion, in which, this company held 96.67%. The corporation business license code is 370000018086629, and the legal representative is Mr. Wang Xin. The company is mainly engaged in the preparation work and the coal sales in Juye Coal fi eld.

1. Yanzhou Coal Mining Shanxi Neng Hua Co., Ltd

2. The former of Yanzhou Coal Mining Shanxi Neng Hua Co., Ltd (as referred to “Shanxi Neng Hua”) was Yankuang Jinzhong Neng Hua Co., Ltd established jointly by Yankuang Group, Yankuang Lunan Fertilizer Plant in 2002. In Nov. 2006, Yankuang Group and Yankuang Lunan Fertilizer Plant transferred the equities of Shanxi Neng Hua to this company and thus this company held 100% in the total registration capital of RMB600 million. The corporation business license code is 140700100002399_1-1, and the legal representative is Mr. Qu Tianzhi. The company is mainly engaged in thermoelectricity investment, mining machinery and equipment and electronic products sales and the comprehensive development in coal technology service, and so on.

3. Shanxi Heshun Tianchi Energy Co., Ltd

4. The former of Shanxi Heshun Tianchi Energy Co., Ltd (as referred to “Heshun Tianchi’) was Guyao coal mine found in Heshun County in 1956. In July 2003, Heshun Tianchi was fi nanced and established jointly by Shanxi Neng Hua, Heshun County State-Owned Assets Managing Co., Ltd and Jinzhong City State-Owned Assets Managing Co., Ltd with the registration capital of RMB90 million, of which, Shanxi Neng Hua held equity of 81.31%. Tianchi Coal Field in Heshun has an area of 17.91 km[2] , the design capacity of 1.20 million tons per year. The coal mine was put into operation in Nov. 2006. The corporation business license code is 40000105861107(2/1), and the legal representative is Mr. Wang Xisuo. The company is mainly engaged in raw coal exploitation, extensive coal process and other mining products production and sales and so on.

5. Shanxi Tianhao Chemicals Co., Ltd

6. Shanxi Tianhao Chemicals Co., Ltd(as referred to “Tianhao Chemicals”) was established jointly by six shareholders of Xiaoyi City Township Enterprise Supplying & Marketing Company, Shanxi Jinhui Coke Chemical Co., Ltd, Xiaoyi City Jinda Coke Co., Ltd and 3 local natural persons in Jan. 2002 with the registration capital of RMB10.01 million. In Feb. 2004, Shanxi Neng Hua increased investment to Tianhao Chemical by RMB60 million, holding 60% equity. In Oct. 2005, the registration capital was raised to RMB150 million but the equity held by Shanxi Neng Hua was raised to 99.85% because of the withdrawal of other shareholders. The corporation business license code is 140000100095998, and the legal representative is Mr. Yin Mingde. The company is mainly engaged in methanol, coke production, development and sales, and inland transportation service.

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VI. SCOPE OF CONSOLIDATION AND DETAILS OF SUBSIDIARIES – CONTINUED

9. Shangdong Yanmei Shipping Co., Ltd.

The former of Shangdong Yanmei Shipping Co., Ltd.(as referred to “Yanmei Shipping“) was Zoucheng Nanmei Shipping Co., Ltd established in May 1994 with the registered capital of RMB5.5 Million. The company name was changed into after “Yanmei Shipping“spent RMB105.7 million purchasing 92% of the registered capital in 2003, and Shandong Chuangye Investment and Development Co., Ltd. attained the other 8%. The corporation business license code is 370811018006234, and the legal representative is Mr.Wang Xinkun. The company is mainly engaged in provincial cargo transportation along the middle and down streams, branches of Yangtze River.

VII. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Bank Balance and Cash

Items	At June 30,2008 At December 31, 2007 Original currency Exchange rate RMB equivalent Original currency Exchange rate RMB equivalent
Cash on hand Including: RMB USD Cash in bank Including: RMB USD HKD EUR AUD Other monetary assets Total	563,365 – 304,445 396,031 396,031 156,425 156,425 24,390 6.8608 167,334 20,264 7.3046 148,020 9,422,616,452 5,777,146,044 8,315,336,800 8,315,336,800 4,891,099,366 – 4,891,099,369 114,442,015 6.8608 785,163,777 87,067,881 7.3046 635,996,044 112,599,031 0.8798 99,064,627 110,904,279 0.9364 103,850,767 2,275,022 10.8071 24,586,390 2,906,514 10.6669 31,003,494 30,086,844 6.5964 198,464,858 18,029,576 6.3893 115,196,370 2,923,463 (2,101,806)
	9,426,103,280 5,779,552,295

• (1) Bank balance and cash in current period increased by 63.09%, which is primarily due to increase of coal sales and RMB780 million from entrust loan and the interest arised.

• (2 )See VII.44 for details of restricted bank balance and cash.

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2. Notes Receivable

Notes category	At June 30, At December 31, 2008 2007
Bank acceptance bills Total	2,830,451,585 2,732,422,448
	2,830,451,585 2,732,422,448

3. Accounts Receivable

(1) The risks analysis of accounts receivable

Item	At June 30, 2008 At December 31, 2007 Bad debt Bad debt Amount Provision Amount Provision RMB % RMB RMB % RMB
Individually signif cant amount Individually insignif cant amount with high risks after the combination of credit risk characteristics Other insignif cant amount Total	175,628,311 56.47% 3,412,497 78,081,784 55.16% 3,123,271 15,041,733 4.84% 15,041,733 15,384,906 10.87% 15,384,906 120,328,506 38.69% 2,541,585 48,077,355 33.97% 2,487,637
	310,998,550 100.00% 20,995,815 141,544,045 100.00% 20,995,814

• (2) The aging analysis of accounts receivable as follows:

Item	At June 30, 2008 At December 31, 2007 Bad debt Bad debt Amount Provision Amount Provision RMB % RMB RMB % RMB
Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total	294,731,350 94.77% 5,551,348 124,377,863 87.87% 5,605,936 – – – 1,771,331 1.25% – 1,225,467 0.39% 402,734 9,945 0.01% 4,972 15,041,733 4.84% 15,041,733 15,384,906 10.87% 15,384,906
	310,998,550 100.00% 20,995,815 141,544,045 100.00% 20,995,814

(3) See note IV.7 method and proportion for bad debt provision.

• (4) Accounts receivable due from shareholders of the Company holding more than 5%(including 5%) shares are excluded for the period.

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3. Accounts Receivable – continued

• (5) Accounts receivable increased by 119.72%, which is primarily due to increase of accounts receivable of coal sales of the subsidiary Austar Pty.

• (6) Total balance of the fi ve largest accounts receivables as up to RMB254.33 million, with the aging within 1 year, accounting for 81.78% of the total.

• (7) Accounts receivable due from related parties was RMB62.77 million, accounting for 20.18% of the total receivables.

4. Prepayments

Item	At June 30, 2008 At December 31, 2007 RMB % RMB %
Within 1 year 1 to 2 years Total	612,215,615 100% 59,371,153 99% – – 461,500 1%
	612,215,615 100% 59,832,653 100%

• (1) Prepayments in the period increased by 923.21% mainly due to increase of prepayment of the traded coal.

• (2) Prepayments by the end of the period due from shareholders of the Company holding more than 5% (including 5%) shares are not included.

• (3) RMB541.26 million was prepaid for the traded coal, which accounts for 88.41% of prepayments.

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VII. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

5. Other Receivables

• (1) The risks analysis of other receivables

Item	At June 30, 2008 At December 31, 2007 Bad debt Bad debt Amount Provision Amount Provision RMB % RMB RMB % RMB
Individually signif cant amount Individually insignif cant amount with high risks after the combination of credit risk characteristics Other insignif cant amount Total	322,658,085 85.27% 37,440,406 200,835,408 58.06% 8,033,416 19,145,084 5.06% 19,145,084 26,276,941 7.60% 19,295,412 36,597,465 9.67% 1,906,325 118,806,373 34.35% 2,788,460
	378,400,634 100.00% 58,491,815 345,918,722 100.00% 30,117,288

• (2) The aging analysis of other receivables

Item	At June 30, 2008 At December 31, 2007 Bad debt Bad debt Amount Provision Amount Provision RMB % RMB RMB % RMB
Within 1 year 1to 2 years 2 to 3 years Over 3 years Total	34,991,156 9.25% 2,026,722 290,348,682 83.94% 7,277,913 324,060,945 85.64% 37,218,284 25,769,115 7.45% 3,215,373 203,449 0.05% 101,725 3,523,984 1.02% 328,590 19,145,084 5.06% 19,145,084 26,276,941 7.60% 19,295,412
	378,400,634 100.00% 58,491,815 345,918,722 100.00% 30,117,288

• (3) See noteIV.7 method and proportion for bad debt provision.

• (4) Other receivables due from shareholders of the Company holding more than 5% (including 5%) shares are not included by the end of the period.

• (5) Total balance of the fi ve largest other receivables amounts to RMB196.42 million, with the average aging of 1 to 2 year, which accounts for 51.91% of the total.

• (6) Other receivables due from related parties was RMB0.33 million, accounting for 0.09% of other receivables.

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VII. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

6. Provision for Decline in Value of Inventories

Items	At June 30, At December 31, 2008 2007
Raw materials Finished goods Subtotal Less:provision for decline in value of inventories Total	255,068,992 248,411,286 369,376,364 191,722,342 624,445,356 440,133,628 – –
	624,445,356 440,133,628

Notes: Inventories increased by 41.88% due to increase of coal inventory and unit cost.

7. Available-For-Sales Financial Assets

Items	At June 30, At December 31, 2008 2007
Shenergy Co.ltd (“Shenergy”) Jiangsu Lianyungang Port Co.Ltd Total	201,584,817 393,123,879 6,992,000 15,962,000
	208,576,817 409,085,879

• (1) the above fair value was based on the closing price of Shanghai Stock Exchange on 30. June,2008.

• (2) Available-for-sale fi nancial assets decreased by 49.01%, which is mainly due to the decreased share price of available for sale shares.

8. Non Current Assets due within a Year

Items	At June 30, At December 31, 2008 2007
Entrust loan Total	– 640,000,000
	– 640,000,000

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8. Non Current Assets due within a Year – continued

Note: On December 31, 2007, the amount represents a loan granted to an independent third party, which carries interest at 7.00% per annum and is guaranteed by other independent third parties. The loan (the “Default Loan”) is secured by certain state legal person shares of a company listed on the SSE (“the Secured Shares”) and certain equity interest in another unlisted company held by the guarantor. The Default Loan was defaulted in January 2005 and the Company had applied to the People’s Supreme Court of the Shangdong province (the “Court”) to freeze the Secured Shares. The Company has also applied to the Court to dispose the Secured Shares by way of a public auction and the proceeds would be applied to repay the Default Loan and the associated interests to the Company.

In 2006, Shandong Runhua Group Company Limited (“Runhua Group”) has also claimed for a portion of the Secured Shares. To protect the Company’s priority rights in the Secured Shares to recover the Default Loan, the Company sought support from the Shandong provincial government and the State-owned Assets Supervision and Administrative Committee. In January 2007, these government authorities in Shandong province and the State-owned Assets Supervision and Administrative Committee (the “SASAC”) rendered a formal written request to the Supreme Court to protect the Company’s priority right on the Secured Shares.

In October, 2007, the Company, Runhua Group and the guarantor reached an agreement in the presence of the Court. According to the settlement agreement, 240 million of the frozen 289 million secured shares held by the guarantor should belong to Runhua Group, and 200 million Secured Shares should be transferred to Runhua Group and used as dynamic seizure(only for the settlement of the debt). Runhua Group volunteered to warrant creditor’s rights of the Company. Meanwhile, the agreements promised that the Company can apply to disposal the frozen 49 million shares after June 6,2008 (the date the restriction on trading of the secured shares is removed)and to pay the guarantor’s debt to the Company with priority. If the proceed reveived from the disposal of the 49 million Secured Share would not be suffi cient to cover the loan principal and interest of the Default Loan by that time, the Company has the right to request for the disposal of the remaining 40 million Secured shares. If the disposal of the above mentioned 89 million Secured shares would still not be suffi ent for the settlement up to more than RMB700 million, the company would have the right to further request for the disposal of the 200 million Secured Shares to Runhua for full settlement up to more than 700 million(interest included). By June 30, 2008, the Company has executed the secured share rights and taken back RMB640 million and interest of RMB140 million.

9. Long-Term Equity Investments

• (1) Long-term equity investments

Items	At June 30, At December 31, 2008 2007
Equity investments under cost method Equity investments under equity method Long-term equity investments – Total Less: provision for impairment Long-term equity investments – net	440,000 440,000 850,370,268 897,561,770 850,810,268 897,561,770 – – 850,810,268 898,001,770

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VII. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

9. Long-Term Equity Investments – continued

(2) Under cost method and equity method

			Balance by end			Balance by the end
Name of investees	Account for	Initial amount	of the year	Addition	Reversals	of the year
Under cost method
Zhejiang Jiangshan Concrete Co.Ltd		440,000	440,000	–	–	440,000
Under equity method
China HD Zoucheng Co.Ltd.	30.00%	900,000,000	897,561,770	–	47,191,502	850,370,268
Total		900,440,000	898,001,770	–	47,191,502	850,810,268

• (3) A list of associates and their key fi nancial information

					Net assets
			Shares	Ratio of	by the end	Operating
Associates	Registered location	Business nature	proportion	voting share	of the period	revenue	Net prof t
China HD	Zoucheng	Electricity power resources	30%	30%	2,834,567,560	1,509,493,606	(157,305,006)
Zouchengg Co.Ltd.	Shandong	and relevant development

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VII. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

10. Fixed Assets

(1) Fixed assets list

	Mining Railway Harbor works Plant, machinery Transportation Lands Buildings structure structure and craft and equipment equipment Total
Cost At December 31, 2007 Exchange gain and loss Addition Transfer from f xed assets under construction Disposals At June 30, 2008 Accumulated depreciation At Deeember31, 2007 Exchange gain and loss Addition Disposals At June 30, 2008 Impairment At December 31, 2007 At June 30, 2008 Net At December 31, 2007 At June 30, 2008	57,312,020 2,626,234,523 3,691,820,776 886,253,749 250,348,889 9,701,345,002 399,062,545 17,612,377,504 1,858,012 378,989 – – – 30,851,070 – 33,088,071 – 36,977,793 – 32,416,277 – 119,317,338 2,070,776 190,782,184 – 36,977,793 – 34,653,277 – 119,293,988 – 190,925,058 – 2,432,394 – 742,513 – 9,999,770 – 13,174,677
	59,170,032 2,661,158,911 3,691,820,776 917,927,513 250,348,889 9,841,513,640 401,133,321 17,823,073,082
	– 1,357,868,551 1,724,184,927 473,017,435 24,276,681 5,504,980,111 265,430,485 9,349,758,190 – 91,017 – – – 5,145,912 – 5,236,929 – 54,882,190 44,917,500 55,368,516 2,702,601 453,815,394 16,269,962 627,956,163 – 1,354,258 – 331,869 – 9,024,755 – 10,710,882
	– 1,411,487,500 1,769,102,427 528,054,082 26,979,282 5,954,916,662 281,700,447 9,901,757,260
	– 20,042,963 – – – – – 20,042,963
	– 20,042,963 – – – – – 20,042,963
	57,312,020 1,248,323,009 1,967,635,849 413,236,314 226,072,208 4,196,364,891 133,632,060 8,242,576,351
	59,170,032 1,229,628,448 1,922,718,349 389,873,431 223,369,607 3,886,596,978 119,432,874 7,830,789,719

(2) There is no provision and depreciation of fi xed assets of lands, as subsidiary company Austar enjoys the permanent ownership of the land of Australia Southland coal mine.

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VII. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

11. Construction in Progress

• (1) List of construction in progress

Items	At Transfers Proportion Budget December 31, 2007 Addition upon completions At June 30, 2008 to budget
Technical revamping Infrastructure construction Repairing construction Total	1,025,380,000 389,520,202 157,991,058 152,167,720 395,343,540 38.56% 10,584,603,223 3,899,700,335 612,563,901 38,191,335 4,474,072,901 42.27% 302,370,000 – 4,554,502 566,003 3,988,499 1.32%
	11,912,353,223 4,289,220,537 775,109,461 190,925,058 4,873,404,940

(2) Projects funds are internally generated funds, no interest was capitalized for the year.

12. Materials held for Construction of Fixed Assets

Items	At June 30, At December 31, 2008 2007
Materials held for construction Total	68,335,812 229,460,787
	68,335,812 229,460,787

Notes: Materials decreased by 70.22% due to materials being consumed in constructions under progress.

13. Intangible Assets

Items	Land use rights Mining rights Total
Cost At December 31, 2007 Exchange gain and loss Addition At June 30, 2008 Accumulated amortization At December 31, 2007 Exchange gain and loss Amortization for this period At June 30, 2008 Book value At December 31, 2007 At June 30, 2008	696,672,107 252,771,389 949,443,496 – 3,803,012 3,803,012 – 743,535,688 743,535,688
	696,672,107 1,000,110,089 1,696,782,196
	106,284,378 54,654,334 160,938,712 – 211,032 211,032 8,626,527 1,945,658 10,572,185
	114,910,905 56,811,024 171,721,929
	590,387,729 198,117,055 788,504,784
	581,761,202 943,299,065 1,525,060,267

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13. Intangible Assets

• (1) Land use rights

When the Company was set up, Yankuang Group invested RMB310.24 million as land use rights, RMB8.89 million for land use rights of Jining III, RMB267.53 million for land use rights of Railway Assets, RMB11.38 million for land use rights of Heshun Tianchi, and RMB18.59 million for land use of Yunlin Nenghua.

The original land use rights of the Company are revaluated by reference to the revaluation report [97] Zhongdizi [zong] zi No.032 of China Land Consultation and Evaluation Centre with the method of cost approaching and coeffi cient-revising of benchmark land price to determine the value of the land. Land use rights of Jining III are revaluated by reference to the revaluation report Ludijia [2000] No. 7 of Shandong Land Evaluation Offi ce with the method of cost approaching and coeffi cient-revising of benchmark land price. Land use rights of Railway Assets are revaluated by reference to the revaluation report [2001] Luzhengkuai Pingbaozi No. 10041 of Shandong Zhengyuan Hexin Limited Liability CPA with the method of cost revaluation.

The original land use rights are injected by Yankuang Group. The land use rights of Jining III and Railway Assets were acquired from Yankuang Group at revaluated amount.The land use right of Heshun Tianchi is purchased from the local government. The land use right of Heshun Tianchi is purchased from the local government.

• (2) Mining rights: including mining rights RMB132.48 million of Jining III and mining rights RMB120.29 million of Southland. Mining rights of Jining III are purchased by Yankuang Group at evaluation price, and are revaluated by reference to the revaluation report Haidiren Pingbaozi [2000] No. 11 Zong No. 24 of Beijing Haidiren Resource Consulting Co., Ltd. with the method of discounting cashfl ow. Austar acquired mining rights of Southland through Southland Coal Pty limited at market value.

• (3) Current intangible assets increased by 93.41%, due to the newly increased mining rights of RMB747.34 million of Zhaolou Coalmine of Heze Neng Hua. Relevant details concerning acquisition of mining rights of Zhaolou Coalmime was set out in Note X. (2).

14. Goodwill

Items	At June 30, At December 31, 2008 2007
Acquistion of Yanmei Shipping Goodwill-Net	10,045,361 10,045,361 10,045,361 10,045,361

Note: Yanmei Shipping is the subsidiary acquired in a business combination not involving enterprises under common control. The goodwill is the excess of the cost of acquisition over the Yanmei Shipping’s interest in the fair value of the identifi able net assets at the date of acquisition.

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VII. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

15. Long-Term Deferred Assets

Items	At June 30, At December 31, 2008 2007
Prepayment for resource compensation fees of Heshun Tianchi Net	21,971,766 21,728,081
	21,971,766 21,728,081

Note: In accordance with the relevant regulations, Heshun Tianchi is required to pay resources compensation fees to the Heshun Municipal Coal Industry Bureau at a rate of RMB2.7 per tonne of raw coal mined. Heshun Tianchi has prepaid part of the fees which would be amortized according to the actual production.

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VII. NOTES TO CONSOLIDATION FINANCIAL STATTMENTS – CONTINUED

16. Deferred tax assets

17.	Items	At June 30, At December 31, 2008 2007
	Deductable temporary difference Total Other non-current assets Items	31,174,701 31,174,701
		31,174,701 31,174,701
		At June 30, At December 31, 2008 2007
	Deposit made on investment(Note) Prepayment for equipment Total	117,925,900 117,925,900 199,442,399 188,551,092
		317,368,299 306,476,992

Note: The balance RMB117.93 million represent the prepaid investment for the establishment of Yulin Yushuwan Coal Mine in Shanxi. Pursuant to agreements among the Company and other two parties. Related formalities are still in progress as at June 30, 2008.

18. Short-term borrowing

Borrowing category	At June 30, At December 31, 2008 2007
Secured borrowing Total	464,909,673 –
	464,909,673 –

Note: All short-term borrowing arose from the subsidiary Australian Company and is secured by Shandong Branch Bank of China Bank.

19. Notes payable

Items	At June 30, At December 31, 2008 2007
Commercial note payable Total	83,765,827 154,519,715
	83,765,827 154,519,715

Note: Notes payable decreased by 45.79% mainly due to decrease of unaccepted notes by the end of the period.

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20. Accounts payable

Balance of accounts payable is RMB504,083,007 as at June 30, 2008 (Balance as at December 31, 2007 was RMB559,346,058).

Balance of accounts payable to related parties is RMB15.85 million.

21. Advances from customers

Balance of advances from customers was RMB1,295,765,305 as at June 30, 2008(that as at December 31, 2007 was RMB983,294,466). The balance increased by 31.78% compared with that of last period due to increase of coal sales.

Amounts advanced includes RMB52.91 million of coal sales from shareholders of the Group holding 5% (including) of the total shares of the Company.

23. Salaries and wages payable

Items

At December Addition for Payment for At June 31, 2007 this period the period 30, 2008

Salary (including bonus, allowance and subsidies) Staff welfare Social insurance including: 1. Medical insurance 2. Unemployment insurance 3. Fertility insurance 4. Injury insurance 5. Maternity insurance Housing fund Union fund and Staff education fund Total

284,760,432 1,202,950,477 1,228,263,733 259,447,176 – 44,238,366 44,238,366 – 19,788,930 376,441,454 355,751,531 40,478,853 7,085,981 83,721,848 72,222,478 18,585,351 2,927,497 233,915,735 228,579,467 8,263,765 6,949,859 23,442,060 24,854,458 5,537,461 381,105 23,633,440 18,549,829 5,464,716 2,444,488 11,728,371 11,545,299 2,627,560 1,253,649 28,121,445 26,574,338 2,800,756 31,472,916 50,572,424 35,333,369 46,711,971 337,275,927 1,702,324,166 1,690,161,337 349,438,756

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23. Taxes payable

Items	At June 30, At December 31, 2008 2007
Value added tax City construction tax Income tax Resource tax Others Total	254,409,301 179,680,281 (46,901,332) 7,132,009 268,597,414 9,933,655 (37,255,676) 9,261,436 32,282,389 22,649,810
	471,132,096 228,657,191

Note: Taxes increased by 51.47% compared with that of last period, mainly due to increase of income tax payable in this period.

24. Interest payable

25.	Items	At June 30, At December 31, 2008 2007
	Interest of long-term borrowing Total Dividend payable Items	333,361 –
		333,361 –
		At June 30, At December 31, 2008 2007
	Dividend payable for ordinary shares Total	836,128,000 –
		836,128,000 –

• Note: Based on the total issued shares by December 31, 2007, fi nal dividend of RMB1.7 (tax included) for every ten shares and total amounts 836.13 million is to be issued, which was approved by the sixteenth meeting of the third session of the Board, dated on April 18, 2008. The proposal was approved by the annual general meeting of the Company on June 27, 2008.

26. Other payables

The balance of other payables was RMB1,717,861,151 at June 30, 2008 (Balance at December 31, 2007 was RMB1,909,171,032),.

RMB518.43 million payable to shareholders of the group holding more 5% of the total shares of the Company and related parties is included in the balance.

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27. Other current liabilities

Items	At June 30, At December 31, 2008 2007
Land subsidence, restoration, rehabilitation and environmental cost Total	20,455,066 19,634,780
	20,455,066 19,634,780

Note: The consequence of coal mining activities is land subsidence caused by the resettlement of the land above the underground mining sites. Depending on the circumstances, the Company may relocate inhabitants from the land above the underground mining sites prior to mining those sites or the Company may compensate the inhabitants for losses or damages from land subsidence after the underground sites have been mined.

Based on their past experiences, the management provides reserves according to the best estimation as they could make on the likely expenditures in the future, and reverse the accruals after payment. Considering the time difference bettween the payment and mining exsits, if the accumulated payment is more than the accruals provided, such excess of payment would be presented under current assets at the year end;If the accumulated payment is less than the accruals provided, such shortage of payment would be presented under current liabilities at the year end.

28. Non-current liabilities due within one year

Items	At June 30, At December 31, 2008 2007
Wei Jian Fei Work Safety Expense long-term borrowing due within a year Mining right fee of Jining III Total Long-term loan Lender Currency Loan category	306,577,045 204,389,437 341,252,685 199,659,732 72,000,000 72,000,000 12,026,557 11,398,800
	731,856,287 487,447,969
	At June 30, At December 31, 2008 2007
China Minsheng Bank RMB Guaranteed loan State Development Bank RMB Guaranteed loan Subtotal Less: long-term loan due within one year Total	110,000,000 110,000,000 209,000,000 220,000,000 319,000,000 330,000,000 72,000,000 72,000,000
	247,000,000 258,000,000

29. Long-term loan

Note: All guaranteed loan of the Company by the end of this period is guaranteed by Yankuang Group.

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30. Long-term payable

Items	At June 30, At December 31, 2008 2007
Payable for acquisition of Jining III’s mining rights(1) Reform and Specif c Development Fund(3) Wei Jian Fei(2) Work Safety Expense(2) Total Long-term payable due within one year Long-term payable due after one year	36,078,960 36,078,960 611,512,919 611,512,916 306,577,045 204,389,437 341,252,685 199,659,732
	1,295,421,609 1,051,641,045
	659,856,287 415,447,969
	635,565,322 636,193,076

• (1) The amount represents the remaining balances of payable to Yankuang Group for acquisition of Jining III’s mining rights,details of which are set out in Note X. 2.

• (2) See note IV.(18) for related regulations and provision standards of Wei Jian Fei and work Safety Expense.

• (3) See note IV.(19) for related regulations and provision standards of Reform and Specifi c Development Fund.

31. Deferred tax liability

• (1) Deferred tax liability confi rmed

Items	At June 30, At December 31, 2008 2007
Income tax from temporary difference of tax payable Total	36,599,031 86,726,297
	36,599,031 86,726,297

• (2) Temporary difference of deferred tax assets confi rmed at end of this period

Temporary difference to be taxed	At June 30, At December 31, 2008 2007
Changes on fair value of AFS f nancial assets Total Tax rate Deferred tax liability conf rmed	146,396,124 346,905,186 146,396,124 346,905,186 25% 25% 36,599,031 86,726,297

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VII. NOTES TO CONSOLIDATION FINANCIAL STATTMENTS – CONTINUED

32. Share capital

Shareholders names/class	At June 30, At December 31, 2008 2007
Listed shares with restricted trading conditions Shares held by state-owned legal person Shares held by natural persons Subtotal shares with trading moratorium conditions Shares without trading moratorium condition A shares H shares Subtotal of shares without trading moratorium Total share capital	2,600,000,000 2,600,000,000 61,800 61,800 2,600,061,800 2,600,061,800 359,938,200 359,938,200 1,958,400,000 1,958,400,000 2,318,338,200 2,318,338,200
	4,918,400,000 4,918,400,000

• (1) The share reform plan has been implemented by April 3, 2006. On the fi rst trading day after the completion of the share reform, the shares owned by Yankuang Group, the sole unlisted share holder of the Company, became tradable. However, Yankuang Group committed that it will not sell these shares in 48 months after the implementation of the reform.

• (2) The share capital has been verifi ed by Deloitte Touche Tohmatsu Certifi ed Public Accountants Ltd. (formerly known as Deloitte Touche Tohmatsu Shanghai CPA) on capital verifi cation report Deshibao (Yan) zi No. 588, capital verifi cation Deshibao (Yan)zi (98) No. 439, capital verifi cation Deshibao (Yan)zi (01) No. 006 and capital verifi cation Deshibao (Yan)zi(01) No.040, and Deshibao (Yan)zi (04) No.037, and Deshibao (Yan)zi (05) No.0031.

• (3) Each share has a par value of RMB1.

33. Capital reserves

Items	At December At June 31, 2007 Addition Reversals 30, 2008
Share premium Other capital reserves Total	2,861,963,645 – – 2,861,963,645 2,081,405,437 – 150,381,796 1,931,023,641
	4,943,369,082 – 150,381,796 4,792,987,286

Note: Decrease in capital reserves for the period was caused by the loss of RMB200.51 million on changes of fair value of available-for-sale fi nancial assets; interrelated income tax RMB50.13 million is affected.

83

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VII. NOTES TO CONSOLIDATION FINANCIAL STATTMENTS – CONTINUED

34. Surplus reserves

Items	At December At June 31, 2007 Addition Reversals 30,2008
Statutory common reserve fund Total	2,037,940,337 – – 2,037,940,337
	2,037,940,337 – – 2,037,940,337

35. Unappropriated profi ts

Items	From January – June, 2008 In 2007
Opening balance Add:Net prof t for the year Less:Appropriations to statutory common reserve fund Distribution of dividend Closing balance	7,729,922,091 6,307,125,592 3,762,075,283 2,693,298,106 286,821,607 836,128,000 983,680,000 10,655,869,374 7,729,922,091

Note: As stated in Note VIII.21,based on the total shares issued by December 31, 2007, the Company has approved to distribute a cash dividend of RMB1.7(tax included)for every ten shares, the amount is RMB836.13 million.

36. Operation revenue and operating cost

(1) Operation revenue

Items	January – January – June, 2008 June, 2007
Principal operations Revenue from domestic sales of coal products Revenue from export sales of coal products Sales of coal purchased from other companies Revenue from railway transportation services Subtotal of principal operations Other operations Sales of materials Others Subtotal of other operations Total	10,652,860,450 5,986,963,419 833,655,252 1,079,248,963 765,784,665 152,576,028 115,786,695 94,381,231 12,368,087,062 7,313,169,641
	414,313,834 431,028,758 72,150,989 34,011,855 486,464,823 465,040,613
	12,854,551,885 7,778,210,254

84

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VII. NOTES TO CONSOLIDATION FINANCIAL STATTMENTS – CONTINUED

1. Operation revenue and operating cost – continued (2) Operation cost

(3)	Items	January – January – June, 2008 June, 2007
	Principal operations Domestic sales of coal products Export sales of coal products Sales of coal purchased from other companies Railway transportation services Subtotal of principal operations cost Other operations cost Sales of materials Others Subtotal of other operations cost Total Operating gross prof t Items	4,105,091,238 2,915,613,344 389,259,695 643,442,670 727,380,540 145,124,851 118,065,246 89,976,013 5,339,796,719 3,794,156,878
		425,794,148 436,926,799 78,594,162 18,763,621 504,388,310 455,690,420
		5,844,185,029 4,249,847,298
		January – January – June, 2008 June, 2007
	Gross prof t of principal operation Domestic sales of coal products Export sales of coal products Sales of coal purchased from other companies Railway transportation services Subtotal gross prof t of principal operation Other operation gross prof t Sales of materials Others Subtotal of other operation gross prof t Total	6,547,769,212 3,071,350,075 444,395,557 435,806,293 38,404,125 7,451,177 (2,278,551) 4,405,218 7,028,290,343 3,519,012,763
		(11,480,314) (5,898,041) (6,443,173) 15,248,234 (17,923,487) 9,350,193
		7,010,366,856 3,528,362,956

85

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VII. NOTES TO CONSOLIDATION FINANCIAL STATTMENTS – CONTINUED

36. Operation revenue and operating cost – continued

• (4) Total sales amount of the 5 largest customers from January to June in 2008 is RMB3,974.14 million, which accounts for 31% in total revenue; total sales amount of the 5 largest customers in the same period in 2007 was RMB1,752.20 million, accounting for 23% of the total revenue.

The Company exports coal through China National Coal Group Corporation, Minerals Trading Co., Ltd, respectively. Currently, the Company does not have direct export rights, so has to export coal through trading companies, and the fi nal decision on customer selection of the Company’s export sales is jointly determined by the Company and the above-mentioned trading companies. Therefore the sales amounts of sales made through these companies are excluded from sales of the 5 largest customers.

• (5) Operating revenue of the period increased by 65.26% compared with the same period of last year,which mainly due to rise in coal prices; operating cost was increased by 37.52% caused by expenditure increase of land subsidence compensation fee and for relevant man power cost which are included in coal cost.

37. Operating taxes and surcharges

Items Tax base Proportion	January – January – June, 2008 June, 2007
Business tax Turnover tax City construction tax Turnover tax 7% Education fee Turnover tax 3% Resource tax Total	5,095,900 3,619,649 80,745,454 49,733,677 46,447,063 27,533,175 60,098,721 61,030,148
	192,387,138 141,916,649

• Note: Operating taxes and surcharges of this period increased by 35.56% compared with the same period of last year; mainly due to the simultaneous increase of turnover tax and surcharges with income increase.

38. Financial expenses

Items	January – January – June, 2008 June, 2007
Interest expenses Less: interest income Add : exchange loss Add: other expenses Total	15,340,244 13,600,088 52,493,847 48,557,046 13,298,706 (35,107,087) 5,019,535 (293,138)
	(18,835,362) (70,357,183)

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VII. NOTES TO CONSOLIDATION FINANCIAL STATTMENTS – CONTINUED

39. Impairment loss

40.	Items	January – January – June, 2008 June, 2007
	Bad debt Total Investment income Sources of investment income	28,374,527 –
		28,374,527 –
		January – January – June, 2008 June, 2007
	Income of entrust loan Losses recognized under equity method of associated enterprises Total	132,230,000 – (47,191,502) –
		85,038,498 –

Note: Entrust loan income is interest of entrust loan called back by the Company in the period. Details are set out in Note VII.8.

41. Non-operating income

Items	January – January – June, 2008 June, 2007
Gain on disposal of non-current assets Others Total Non-operating expense Items	8,050,058 2,589,018 893,125 2,301,313
	8,943,183 4,890,331
	January – January – June, 2008 June, 2007
Loss on disposal of non-current assets Donation expenditure Others Total	903,583 933,903 18,150,000 – 1,899,599 30,856,936
	20,953,182 31,790,839

42. Non-operating expense

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VII. NOTES TO CONSOLIDATION FINANCIAL STATTMENTS – CONTINUED

43. Income taxes

Items	January – January – June, 2008 June, 2007
Current tax expense Total	1,564,212,736 782,103,654
	1,564,212,736 782,103,654

Note: current tax expense increased by 100% compared with that of last period. Mainly due to the signifi cant increase of total profi t amount in current period.

(1) Cash and cash equivalents are including:

Items	At June 30, At December 31, 2008 2007
Cash Including: cash on hand Deposits that can be readily drawn on demand Other currency that can be readily drawn on demand Cash and cash equivalents balance Restricted cash and cash equivalents(note)	563,366 304,445 8,363,504,616 5,717,139,097 2,923,463 2,101,806 8,366,991,445 5,719,545,348 1,059,111,835 60,006,947

Note: The amount RMB53,355,030 represents the deposits placed in banks secured for the future payment of land subsidence, restoration, rehabilitation and environmental costs of Austar under the request of Australia government and for issuing letter of credit and cash acceptance; Subsidiary Hezhe Nenghua’s deposit RMB4,036,704 of Work Safety Expenses; Fixed deposit of RMB975,894,368 of the Company and deposit and mortgage of RMB25,825,734 placed in the back. The above mentioned limited amounts the group totals up to RMB1,059,111,835.

88

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VII. NOTES TO CONSOLIDATION FINANCIAL STATTMENTS – CONTINUED

• (2) Cash received/paid relating to operating activities/investment/fi nance activities

• 1) Other cash relating to operating activities

Items	January- January – June, 2008 June, 2007
Interest income Non operating income Received cash from funds paid on other’s behalf Other operating income Total Other cash paid relating to operating activities Items	52,493,847 48,557,046 – 301,313 12,938,905 – 25,144,010
	65,432,752 74,002,369
	January- January – June, 2008 June, 2007
Payments for selling and administrative expenses Non-operating expenses Others Total	697,452,956 851,208,552 19,185,783 – 64,686,705 775,117,097
	781,325,444 1,626,325,649

• 2) Other cash paid relating to operating activities

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VII. NOTES TO CONSOLIDATION FINANCIAL STATTMENTS – CONTINUED

• (2) Cash received/paid relating to operating activities/investment/fi nance activities – continued

• 3) Other cash received relating to investing activities

Items	January – January – June, 2008 June, 2007
Cash received from bank securities Others Total Other cash paid relating to investing activities Items	– 56,252,869 1,897,926 –
	1,897,926 56,252,869
	January – January – June, 2008 June, 2007
Addition of f xed certif cates of deposit and restricted deposit Total	999,104,888 –
	999,104,888 –

• 4) Other cash paid relating to investing activities

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VII. NOTES TO CONSOLIDATION FINANCIAL STATTMENTS – CONTINUED

(3) Supplemental information of consolidated cash fl ow statement

	January –	January –
Items	June, 2008	June, 2007
1. Reconciliation of net prof t to net cash f ow
from operating activities
Net prof t	3,761,650,459	1,104,672,280
Add: Provision of impairment of assets	28,374,527	–
Depreciation of f xed assets	562,709,952	565,217,557
Amortization of intangible assets	10,783,217	11,698,052
Amortization of long-term deferred expenses	(243,685)	97,898,250
Losses on disposal of f xed assets, intangible and
other long-term assets (“-” represents gain)	(7,146,475)	(1,655,115)
Provision for Wei Jian Fei, Work Safety Expense,
Reform and Specif c Development Fund	287,438,865	325,309,383
Financial expenses (“-” represents gain)	15,340,244	13,600,088
Loss arising from investments (“-” represents gain)	(85,038,498)	–
Decrease in deferred taxes assets (“-” represents increase)	–	–
Decrease in inventories (“-” represents increase)	(184,311,728)	(110,944,426)
Decrease in receivables under operating activities
(“-” represents increase)	465,405,531	941,623,641
Increase (decrease) in payables under operating
activities (“-” represents decrease)	(530,201,517)	(911,841,219)
Net cash f ow from operating activities	4,324,760,892	2,035,578,491
2. Signif cant investing and f nancing activities not relating
to net cash f ow
3. Changes in cash and cash equivalents
Cash, closing	8,366,991,444	7,122,133,405
Less: Cash, opening	5,719,545,348	5,910,475,432
Net addition in cash and cash equivalents	2,647,446,096	1,211,657,973

91

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YANZHOU COAL MINING COMPANY LIMITED

VIII. NOTES TO STATEMENTS OF FINANCIAL STATEMENTS OF THE PARENT COMPANY

1. Accounts receivable

• (1) The risks analysis of accounts receivable

Item	At June 30, 2008 At December 31, 2007 Amount Bad debt Amount Bad debt RMB % Provision RMB % Provision
Individually signif cant amount Individually insignif cant amount with high risks after the combination of credit risk characteristics Other insignif cant amount Total	28,524,122 47.10% 3,411,396 78,081,784 69.98% 3,123,271 15,041,733 24.28% 15,041,733 15,384,906 13.79% 15,384,906 25,879,431 28.61% 2,514,858 18,111,620 16.23% 2,459,810
	69,445,286 100.00% 20,967,987 111,578,310 100.00% 20,967,987

• (2) The aging analysis of accounts receivable

Item	At June 30, 2008 At December 31, 2007 Amount Bad debt Amount Bad debt RMB % Provision RMB % Provision
Within 1 year 2 to 3 years Over 3 years Total	54,349,417 78.26% 5,899,186 96,183,459 86.20% 5,578,109 54,136 0.08% 27,068 9,945 0.01% 4,972 15,041,733 21.66% 15,041,733 15,384,906 13.79% 15,384,906
	69,445,286 100.00% 20,967,987 111,578,310 100.00% 20,967,987

• (3) Accounts receivable due from shareholders of the Company holding more than 5%(including)of the total shares are not included for the period.

• (4) Total balance of the fi ve largest accounts receivables totals up to RMB43.59 million, with the aging within 1 year, which accounts for 62,77% of the total.

• (5) Accounts receivable decreased by 37.36% compared with that of last period, which is primarily due to decrease of materials sale receivable.

• (6) Accounts receivable due from related parties and their holding companies was RMB62.77 million, accounting for 90.38% of amount receivable.

92

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YANZHOU COAL MINING COMPANY LIMITEDYANZHOU COAL MINING COMPANY LIMITED

VIII. NOTES TO STATEMENTS OF FINANCIAL STATEMENTS OF THE PARENT COMPANY – CONTINUED

2. Other receivables

• (1) Risk analysis of other receivables

Item	At June 30, 2008 At December 31, 2007 Amount Bad debt Amount Bad debt RMB % Provision RMB % Provision
Individually signif cant amount Individually insignif cant amount with high risks after the combination of credit risk characteristics Other insignif cant amount Total	417,613,012 67.63% 37,510,134 871,490,578 88.33% 8,033,416 19,143,179 3.10% 19,143,179 26,276,941 2.66% 19,295,412 180,720,970 29.27% 1,838,501 88,810,892 9.00% 2,788,460
	617,477,161 100.00% 58,491,814 986,578,411 100.00% 30,117,288

• (2) Aging analysis of other receivables

Item	At June 30, 2008 At December 31, 2007 Amount Bad debt Amount Bad debt RMB % Provision RMB % Provision
Within 1year 1 to 2 years 2 to 3 years Above 3 years Total	274,183,574 65.67% 2,028,627 506,790,229 51.37% 7,277,913 323,946,959 29.69% 37,218,284 172,137,882 17.45% 3,215,373 203,449 0.05% 101,724 281,373,359 28.52% 328,590 19,143,179 4.59% 19,143,179 26,276,941 2.66% 19,295,412
	617,477,161 100.00% 58,491,814 986,578,411 100.00% 30,117,288

• (3) See note IV.7 for provision method and proportion of bad debt.

• (4) Other receivables due from shareholders of the Company holding more than 5% (including 5%) of total shares are not included by the end of the period.

• (5) Total balance of the fi ve largest other receivables amounts to RMB196.42 million, with the average aging of 1-2 year, which accounts for 31.81% of other receivables.

• (6) Other receivables due from related parties and their holding companies was RMB217.33 million by the end of the period, accounting for 35.19% of other receivables.

• (7) Accounts receivable decreased by 37.41% compared with last period, mainly due to decrease of balance due from Yancoal Australia Pty.

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VIII. NOTES TO STATEMENTS OF FINANCIAL STATEMENTS OF THE PARENT COMPANY – CONTINUED

3. Long-term equity investment

• (1) Long-term equity investment

Items	At June 30, At December 31, 2008 2007
Long-term equity investments under cost method Long-term equity investments under equity method Long-term equity investments-Total Less: provision for impairment Long-term equity investments – net	3,149,557,098 3,125,557,098 850,370,268 897,561,770
	3,999,927,366 4,023,118,868
	– –
	3,999,927,366 4,023,118,868

• (2) Under cost method and equity method

Name of		Initial	Openning			Closing
investees	Proportion	amount	balance	Addition	Reversals	balance
Under cost method
Qingdao Zhongyan	52%	1,100,000	2,709,903	–	–	2,709,903
Yanmei Shipping	92%	3,430,000	10,575,733	–	–	10,575,733
Heze Neng Hua	97%	1,450,000,000	1,424,343,543	–	–	1,424,343,543
Yancoal Australia Pty	100%	403,281,954	403,281,954	–	–	403,281,954
Yulin Neng Hua	100%	776,000,000	776,000,000	24,000,000	–	800,000,000
Shanxi Neng Hua	52%	600,000,000	508,205,965	–	–	508,205,965
Zhejiang Zhongshan
Concret Co.Ltd		440,000	440,000	–	–	440,000
Subtotal		3,234,251,954	3,125,557,098	24,000,000	–	3,149,557,098
Under equity method
China HD Zoucheng
Co.Ltd.	30%	900,000,000	897,561,770	–	47,191,502	850,370,268
Subtotal		900,000,000	897,561,770	–	47,191,502	850,370,268
Total		4,134,251,954	4,023,118,868	24,000,000	47,191,502	3,999,927,366

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VIII. NOTES TO STATEMENTS OF FINANCIAL STATEMENTS OF THE PARENT COMPANY – CONTINUED

3. Long-term equity investment – continued

• (3) A list of associates and their key fi nancial information

Name of	Registered	Business	Shares	Ratio of	Net assets by the	Operating income for	Net prof t for
investees	location	nature	proportion	voting share	end of the period	the current year	the current year
China HD	Zoucheng	Electricity	30%	30%	2,834,567,560	1,509,493,606	(157,305,006)
Zouchengg	Shandong	power
Co.Ltd.		resources
		and related
		development

4. Operation revenue and operation cost

• (1) Operation Revenue

Items	January to January to June in 2008 June in 2007
Principal operation income Domestic sales of coal products Export sales of coal products Sales of traded coal products Railway transportation services Subtotal Other operation income Sales of materials Others Subtotal Total	10,508,146,590 5,872,533,751 93,060,579 588,102,994 765,784,664 152,576,028 115,786,695 94,381,231
	14,482,778,528 6,707,594,004
	414,313,834 431,028,758 55,106,791 24,035,809
	469,420,625 455,064,567
	11,952,199,153 7,162,658,571

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VIII. NOTES TO STATEMENTS OF FINANCIAL STATEMENTS OF THE PARENT COMPANY – CONTINUED

1. Operation revenue and operation cost – continued (2) Operation cost

(3)	Items	January to January to June in 2008 June in 2007
	Principal operation cost Domestic sales of coal products Export sales of coal products Sales of traded coal products Railway transportation services Subtotal Other operation cost Sales of materials Others Subtotal Total Operation gross prof t Items	3,997,285,222 2,870,190,295 24,965,769 287,434,279 727,380,540 145,124,851 118,065,246 89,976,013
		4,867,696,777 3,392,725,438
		425,794,148 436,926,799 65,626,944 10,353,008
		491,421,092 447,279,807
		5,359,117,869 3,840,005,245
		January to January to June in 2008 June in 2007
	Principal operation gross prof t Domestic sales of coal products Export sales of coal products Sales of traded coal products Railway transportation services Subtotal Other operation gross prof t Sales of materials Others Subtotal Total	6,510,861,368 3,002,343,456 68,094,810 300,668,715 38,404,124 7,451,177 (2,278,551) 4,405,218
		6,615,081,751 3,314,868,566
		(11,480,314) (5,898,041) (10,520,153) 13,682,801
		(22,000,467) 7,784,760
		6,593,081,284 3,322,653,326

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VIII. NOTES TO STATEMENTS OF FINANCIAL STATEMENTS OF THE PARENT COMPANY – CONTINUED

5. Investment income

Sources of investment income	January to January to June in 2008 June in 2007
Income of entrust loan Prof ts conf rmed by equity laws of associated enterprises Total	221,157,931 45,784,600 (47,191,500) –
	173,966,431 45,784,600

IX. SEGMENT REPORT

1. Main report – business segment

• (1) Segment information in January-June in 2008

Items

Railway Coal mining transportation Chemical Inter-segment business business business elimination Others Total

Operating revenue – External – Inter-segment Operating cost and expenses – External – Inter-segment – Operating expense during the period Total operating prof t Total assets Total liabilities

12,621,867,668 180,751,429 67,656,917 (32,482,367) 16,758,238 12,854,551,885 12,621,867,668 148,269,062 67,656,917 – 16,758,238 12,854,551,885 – 32,482,367 – (32,482,367) – – 12,621,867,668 180,751,429 67,656,917 (32,482,367) 16,758,238 12,854,551,885 7,322,702,530 153,062,668 76,343,663 (140,622,094) 61,469,067 7,472,955,834 5,662,869,927 118,065,246 50,319,476 – 12,930,380 5,844,185,029 – 34,967,423 – (34,967,423) – – 1,659,832,603 43,752,856 26,024,187 (105,654,671) 48,538,687 1,672,493,662 7,322,702,530 153,062,668 76,343,663 (140,622,094) 61,469,067 7,472,955,834 5,299,165,138 27,688,761 (8,686,746) 108,139,727 (44,710,829) 5,381,596,051 30,370,694,041 780,295,218 496,840,584 (7,189,283,384) 5,382,092,385 29,840,638,844 7,709,207,221 25,996,446 298,561,536 (3,913,679,300) 3,274,806,980 7,394,892,883

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IX. SEGMENT REPORT – CONTINUED

1. Main report – business segment – continued Surplus information during January-June in 2008

Items	Railway Coal mining transportation Chemicals business business business Others Total
Depreciation and amortization Loss of assets devaluation Capital expenditure	524,123,561 39,158,535 4,854,751 5,356,322 573,493,169 28,374,527 – – – 28,374,527 422,577,525 – 27,073,908 619,777,811 1,069,429,244

• (2) Segment information during January-June in 2007

Items	Railway Coal mining transportation Chemical Inter-segment business business business elimination Others Total
Operating revenue – External – Inter-segment Operating cost and expenses – External – Inter-segment – Operating expense during the period Total operating prof t Total assets Total liabilities	7,683,829,023 156,732,482 – (62,351,251) – 7,778,210,254 7,683,829,023 94,381,231 – – – 7,778,210,254 62,351,251 – (62,351,251) –
	7,683,829,023 156,732,482 – (62,351,251) – 7,778,210,254 5,536,999,891 218,367,200 – (12,420,557) 171,517,972 5,864,533,812 4,159,871,285 89,976,013 – – – 4,249,847,298 49,930,694 – (49,930,694) – – 1,377,128,606 78,460,493 – (12,420,557) 171,517,972 1,614,686,514
	5,536,999,891 218,367,200 – (12,420,557) 171,517,972 5,864,533,812 2,146,829,132 (61,634,718) – – (171,517,972) 1,913,676,442
	15,212,084,027 826,550,791 – – 6,990,091,415 23,028,726,233 4,398,039,071 17,508,313 – – 620,775,080 5,036,322,464

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IX. SEGMENT REPORT – CONTINUED

1. Main report – business segment – continued

Surplus information during January-June in 2007

		Railway
	Coal mining	transportation	Chemicals	Unlocated
Items	business	business	business	items	Total
Depreciation and
amortization	526,006,020	41,880,719	–	9,028,870	576,915,609
Capital expenditure	822,976,887	2,795,782	–	18,669,066	844,441,735

2. Subordination report – geographical segment

Items	China Australia Inter-segment elimination Total This Last This Last This Last This Last period period period period period period period period
Operating revenue External Inter-segment Total Total segment assets	12,113,957,212 7,287,047,107 740,594,673 491,163,147 – – 12,854,551,885 7,778,210,254 – – – – – – – –
	12,113,957,212 7,287,047,107 740,594,673 491,163,147 – – 12,854,551,885 7,778,210,254
	29,230,044,937 21,479,211,572 1,818,104,376 1,549,514,661 1,207,510,469 – 29,840,638,844 23,028,726,233

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X. RELATIONSHIP OF RELATED PARTIES AND TRANSACTIONS

I. Relationship of Related Parties

See note VI, ENTERPRISES COMBINATION AND CONSOLIDATED FINANCIAL STATEMENT for related parties where a control relationship exists.

1. Other related parties where a control relationship exists

Name of	Registration	Major			Statutory
related parties	address	business	Relationship	Nature	representative
Yankuang Group	Zoucheng	Industry	Major	State-owned	Geng Jia Hua
	Shandong	processing	shareholder

2. For other related parties where a control relationship exists, the registered capital the changes therein are as follows:

Name of related parties	December 31, June 30, 2007 Addition Reversal 2008
Yankuang Group	3,353,388,000 3,353,388,000

3. For other related parties where a control relationship exists, the proportion and changes of equity interest are as follows:

Name of related parties	Shares Proportion June 30, December 31, June 30, December 31, 2008 2007 2008 2007
Yankuang Group	2,600,000,000 2,600,000,000 52.86% 52.86%

4. Related parties where a control relationship does not exist

Names of related parties	Relationship	Transactions with the Company
Huadian Zoucheng	Investment holding	Payment into or out of account

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X. RELATIONSHIP OF RELATED PARTIES AND TRANSACTIONS — CONTINUED

II. Related Party Transactions

1. Pricing policies

Products prices selling to related parties and materials prices purchased from related parties are determined according to market price and negotiated price.

2. Transaction with key management

Total amount of salaries paid to key management (including salaries, welfare and subsidies paid in the form of cash, goods and others), for the period ended June 30, 2008 is RMB1.91 million. RMB2.07 million was paid as compared with same period in 2007.

3. Acquisition of Jining III

On January 1, 2001, the Company acquired Jinjing III according to the “Agreement for Acquisition of Jining III” signed with Yankuang Group at the consideration of RMB2,450.9 million and mining rights of RMB132.48 million totally RMB2,583.38 million.

By June 30, 2008, the Company had paid RMB253.039 million to Yankaung Group for the above acquisition, including the consideration of RMB245.09 million and the mining rights of RMB92.73 million.

According to the agreement, the Company will pay the interest-free consideration for the cost of mining rights over ten years by equal instalments before December 31 of each year commencing from year 2001. The Company is scheduled to pay for the mining rights of RMB13.248 million as the eighth instalment before December 31, 2008.

The consideration for the acquisition is determined according to revaluation price.

4. Acquisition of Zhaolou Coalmine

During the period the subsidiary Heze Neng Hua purchased mining rights of Zhaolou Coalmine which was held by Yankuang Group at a trading price of RMB747.34 million which was evaluated in Yankuang Group Zhaolou Coal Mine Mining Rights Evaluation Report issued by Beijing Jingwei Assets Evaluation Co.Ltd. By June 30, 2008, Heze Neng Hua has fully paid the amount for mining rights; procedures for transferring related property rights have been completed.

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X. RELATIONSHIP OF RELATED PARTIES AND TRANSACTIONS — CONTINUED

II. Related Party Transactions — continued

5. Borrowing guarantee

As stated in NoteVII.29, Yankuang Group provided loan guarantee of RMB319 million for the subsidiary Shanxi Neng Hua of the Company.

6. Materials purchasing

Names of related parties	January-June in 2008 January-June in 2007 Amount proportion Amount proportion
Yankuang Group and its aff liates Goods sales Names of related parties	204,827,662 8.23% 256,123,024 28.74%
	January-June in 2008 January-June in 2007 Amount proportion Amount proportion
Yankuang Group and its aff liates	789,462,000 5.61% 669,489,716 10.34%

7. Goods sales

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X. RELATIONSHIP OF RELATED PARTIES AND TRANSACTIONS — CONTINUED

II. Related Party Transactions — continued

8. Other transactions

• (1) Pursuant to an agreement signed between the Company and Yankuang Group, Yankuang Group manages the retirement benifi ts, medical benefi ts and other benefi ts of the two companies and makes combined payments of the total retirement benefi ts of the two companies to the government department in charge of the related funds. Amount charged to expenses of the Company for the period ended June 30, 2008 and 2007 are RM 378.267 million and RMB497.78 million respectively.

• (2) Pursuant to an agreement signed by the Company and Yankuang Group, the department and subsidiaries of Yankuang Group provided the following services and charged related service fees during the year: (RMB’000)

Products and services provided to the Company by Yankuang Group	January-June in January-June in 2008 2007
Fuel and power purchased from the Group Electricity Laboring received from the Group Project construction Road transportation fee Gas and heating expenses Buildings management fee Children tuition fee Technicians training fee Repairs service Public facilities expenses Mining rights expense Others Subtotal	178,208 186,892 37,524 26,762 43,876 32,375 13,000 13,000 43,100 43,100 20,400 20,400 10,000 10,000 101,361 98,258 5,846 3,644 – 6,490 26,850 26,850
	301,957 280,879

• (3) During the period January to June in 2008 and 2007, the Company and Yankuang Group have made payments or collected receipts to or from individual third party or government authorities on behalf of each other, in respect of goods purchased, services received, other expenses and insurances. These payments and receipts made on behalf of the other have been recorded in other payables.

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X. RELATIONSHIP OF RELATED PARTIES AND TRANSACTIONS — CONTINUED

iii Amount due to or from related parties

			June 30,	December 31,
	Names of related parties	Account	2008	2007
	Yankuang Group and its aff liates	Notes receivable	203,645,337	93,466,672
	Yankuang Group and its aff liates	Accounts receivable	62,767,689	6,019,424
	Yankuang Group and its aff liates	Other receivables	325,466	36,054,895
	Yankuang Group and its aff liates	Accounts payable	15,852,117	40,929,264
	Yankuang Group and its aff liates	Advance	52,909,695	40,737,634
	Yankuang Group and its aff liates	Other payables	518,427,743	736,881,732
	Yankuang Group and its aff liates	Long-term payable	36,078,960	36,078,960

Note: Other receivables and payables due from/to Yankuang Group and its affi liates are interest free and receivable on demand.

XI. CONCENTRATION OF CREDIT RISK

The Company maintains its cash and cash equivalents with reputable banks in the PRC, therefore the directors consider that the credit risk for such is minimal.

The Company generally grants long-term customers credit terms with a range from one to four months, depending on the situations of the individual customers. For small to medium size new customers, the Company generally requires them to pay for the products before delivery.

Most of the Company’s domestic sales are sales to electric power plants, metallurgical companies, construction material producers and railway companies. The Company generally has established long-term and stable relationships with these companies. The Company also sells its coal to provincial and city fuel trading companies.

As the Company does not currently have direct import/export rights, all of its export sales must be made through National Coal Corporation or Minmetals Trading. The quality, prices and fi nal customer destination of the Company’s export sales are determined by the Company, National Coal Corporation, Shanxi Coal Co. or Minmetals Trading.

For the six months ended June 30, 2008 and 2007, operating income from the Company’s fi ve largest domestic customers accounted for approximately 31% and 23%, respectively, of the Company’s total operating income. Huadian Power International Corporation Limited became the Company’s largest domestic customer for the six months ended June 30, 2008 and 2007, respectively.

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XI. CONCENTRATION OF CREDIT RISK — CONTINUED

Percentage of accounts receivable from fi ve customers of the largest receivable balances at June 30, 2008 and June 30, 2007 are 82% and 45% respectively.

As at 30 June 2008, the Company has exposure to credit risk in the event of the counterparties failed to perform their obligation in relation to the Default Loan. In order to minimize the credit risk, the management of the Company has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Company reviews the recoverable amount of other loan receivables at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the Company considered that the Company’s credit risk is signifi cantly reduced.

XII. CAPITAL COMMITMENTS

By June 30, 2008, long-term purchase of assets expenditure contracted for but not paid are as follows (RMB ’000):

Commitments	June 30, December 31, 2008 2007
Capital expenditure contracted for but not provided in the f nancial statement in respect of – purchase of assets Recognition for coal mines management of Shandong Province to be paid Total	278,271 1,069,610
	873,632 873,632
	1,151,903 1,943,242

Except for the above stated commitments, the Company has no other signifi cant commitments to claim by June 30, 2008.

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XIII. OTHER IMPORTANT EVENTS

1. Acquisition of Zhoulou Coal Mine

Pursuant to the supplementary agreement between Yankuang Group and the Company on the acquisition of Heze Neng Hua shares, after acquisition shares of Heze Neng Hua, Heze Neng Hua will purchase mining right of Zhaolou Mine. As stated in Note X. 2, Heze Neng Hua has fi nished acquisition of mining right of Zhaolou Mine during this period. But the remaining procedures on transferring of the land use are still in the process by June 30, 2008.

2. Mining rights

According to the Mining Rights Agreement signed between the Company and the Group in October, 1997 and supplementary agreement signed in February, 1998, an annual fee as compensation for mining rights of fi ve coal mines owned by the Group is RMB12.98 million which is subject to new regulations after a ten-year period if they comes out.

Pursuant to Implement Scheme about Experimental Units of Coal Mining Rrights Paid which was approved by the State Council and jointly issued by Ministry of Finance, State Resources Department and Development and Reformation Committee in September, 2006, despite free mining rights developed and invested by the country, enterprises should pay mining price on the base of reevaluation on remaining resource reserves. Shandong Province is one of the experimental provinces carrying paid mining rights. By the publishing date of the report, no detailed implement rules concerning paid mining rights have been released in Shandong Province. In 2008, compensation fee of RMB5 is accrued at per ton raw coal minded for the fi ve coal mines owned by the Company, which is subject to detailed scheme when it comes out. RMB82.03 million has been accrued according to this criterion during the period from January 1, 2008 to June 30, 2008.

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XIV. SUPPLEMENT

1. Differences Regulation of Net Profi t and Net Assets (RMB’000)

Items	Net Prof t	Net Prof t	Net assets	Net assets
	January-June in	January-June in	At June 30,At December 31,
	2008	2007	2008	2007
As per the f nancial
statements prepared
under IFRS	3,912,641	1,502,360	24,346,529	21,417,537
Differences regulation
Work Safety Expense and
Wei Jian Fei (1)	(167,960)	(176,645)	(1,169,925)	(1,000,766)
Reform and Specif ed
Development
Fund regulation (2)	–	(82,344)	(611,513)	(611,513)
Regulation of pre-operating
fee of subsidiaries	–	(93,491)	–	–
Combination regulation
under common control (3)	2,461	2,461	(414,526)	(416,989)
Deferred tax effect (4)	16,003	(41,677)	247,540	231,537
Others	(1,070)	(1,746)	(3,982)	(4,116)
As per PRC ASBE	3,762,075	1,108,918	22,394,123	19,615,690

• (1) According to relevant regulations of related institutes of China, Wei Jian Fei and Work Safety Expense is accrued based on raw coal minded by coal mine enterprises and is recorded as expense in the corresponding period. Fixed assets formed from expense of Wei Jian Fei and Work Safety Expense should be recorded in relevant assets and accumulated depreciation of the whole amount should be carried forward. As per IFRS, expense should be recognized when occurs; relevant capital expenditure should be recognized as fi xed assets, and depreciation should be accrued in the same way.

• (2) Pursuant to relevant regulations of related institutes of China, Reform and Specifi c development Fund should be accrued based on raw coal minded, and be recorded in the current period. As per IFRS, expense should be recognized when occurs. See Note IV 19, the Company stopped accruing Reform and Specifi c development Fund from January 1, 2008.

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XIV. SUPPLEMENT — CONTINUED

1. Differences Regulation of Net Profi t and Net Assets (RMB’000) — continued

• (3) Pursuant to PRC GAAP, when relevant assets and subsidiaries purchased from Yankuang Group come into combination with enterprises under the common control, assets and liabilities of acquiree should be measured based on fair value on the date of acquisition. The difference of fair value of net assets acquired by the Company and consolidation price paid was adjusted as capital reserves. While pursuant to IFRS, acquirees recognize identifi able assets, liabilities and contingent liabilities according to the fair value on the date of acquisition. When the cost of a business combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifi able asset, liabilities and contingent liabilities, the difference shall be recognized as goodwill.

• (4) The regulation represents regulation of deferred tax income brought by differences in (1)-(3) guide lines.

2. Extraordinary Gain

Items January-June in 2008	Items January-June in 2008
Gain and loss from disposal of non current assets Other net non-business revenues and expenses excluding the above items Subtotal Taxes effect Extraordinary gain – total including:attributable to shareholders of the parent company	7,146,475 (19,156,473) (12,009,998) (3,002,500) (9,007,498) (9,001,670)

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XIV. SUPPLEMENT — CONTINUED

3. Return on Net Assets and Earning Per Share

Pursuant to calculation and disclosure of Return on net assets and earning per share---chapter 9 in Information Disclosure Rules For Companies Listed Issued by China Securities Regulatory Commission, the diluted/ weighted average return on net assets and earning per share of the Company are as follows:

(1) January-June in 2008

(2)

Prof t during the report period Return on net assets Earning per share Weighted Earning per Diluted earning Diluted average share, basic per share

Net prof t attributable to shareholders of the parent company 16.80% 17.50% 0.7649 0.7649 Net prof t attributable to shareholders of the parent company, excluding extraordinary gain 16.84% 17.54% 0.7667 0.7667 January-June in 2007 Prof t during the report period Return on net assets Earning per share Weighted Earning Diluted earning Diluted average per share per share Net prof t attributable to shareholders of the parent company 6.19% 6.06% 0.2255 0.2255 Net prof t attributable to shareholders of the parent company, excluding extraordinary gain 6.34% 6.20% 0.2310 0.2310

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XIV. SUPPLEMENT — CONTINUED

1. Return on Net Assets and Earning Per Share — continued (3) Calculation process of return on net assets

	Sequence	January-June in	January-June in
Items	number	2008	2007
Net prof t attributable to
shareholders of the
parent company	1	3,762,075,283	1,108,918,499
Extraordinary gain attributable
to parent company	2	(9,001,670)	(27,264,400)
Net prof t attributable to
shareholders of the parent
company, excluding
extraordinary gain	3=1-2	3,771,076,953	1,136,182,899
Net assets attributable to
shareholder of the parent
company at the end of the period	4	22,394,122,615	17,917,222,025
Diluted Return on net assets (I)	5=1÷4	16.80%	6.19%
Diluted Return on net assets (II)	6=3÷4	16.84%	6.34%
Net assets attributable to
shareholders of the parent
company at the beginning
of the period	7	19,615,689,876	17,756,653,886
Net assets added by new issuing
and debt-to-equity and attributable
to shareholders of the parent company	8	–	–
Months added from the next month to
the end month of the period	9	–	–
Decreased net assets by buy-back
and bonus in cash and attributable
to shareholders of the parent company	10	–	–
Months decreased from the next month
to the end month of the period	11	–	–
Duration the period	12	6	6
Net prof t weighted average attributable	13=7+1÷②
to shareholders of the	+8×9÷12
parent company	–10×11÷12	21,496,727,518	18,311,113,136
Weighted average return on net assets (I)	14=1÷13	17.50%	6.06%
Weighted average return on net assets(II)	15=3÷13	17.54%	6.20%

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XIV. SUPPLEMENT — CONTINUED

3. RETURN ON NET ASSETS AND EARNING PER SHARE — CONTINUED (4) Calculation process of basic earning per share and diluted earning per share

	Sequence	January-June in	January-June in
Items	number	2008	2007
Net prof t attributable to shareholders
of the parent company	1	3,762,075,283	1,108,918,499
Extraordinary gain attributable to
parent company	2	(9,001,670)	(27,264,400)
Net prof t attributable to shareholders
of the parent company,
excluding extraordinary gain	3=1-2	3,771,076,953	1,136,182,899
Total shares at the beginning of the period	4	4,918,400,000	4,918,400,000
Shares added through reserves fund
addition and shares dividend
distribution addition (I)	5	–	–
Shares added by issuing and
debt-to-equity (II)	6	–	–
Shares added (II)months from next
month to the end of the period	7	–	–
Shares decreased by buy-back
and shares shrink	8	–	–
Month from the next month
to the end of the month	9	–	–
Duration the period	10	6	6
Weighted average of common	11=4+5+6
shares issued	×7÷10-8×9÷10	4,918,400,000	4,918,400,000
basic earning per share (I)	12=1÷11	0.7649	0.2255
basic earning per share (II)	13=3÷11	0.7667	0.2310
common shares interest with
diluted potential which is
recognized as expenses	14	–	–
Converting fee	15	–	–
income tax rate	16	25%	25%
Shares added through stock
warrant and option excertion	17	–	–
Diluted earning per share (Î)	18=[1+(14-15)
	×(1-16)]÷(11+17)	0.7649	0.2255
Diluted earning per share (II)	19=[3+(14-15)
	×(1-16)]÷(11+17)	0.7667	0.2310

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XIV. SUPPLEMENT — CONTINUED

4. PROVISION LIST OF ASSETS DEVALUATION

Items	Reversals December 31, Other June 30, 2007 Provision Reversals transferring 2008 51,113,102 28,374,527 – – 79,487,629 51,113,102 28,374,527 – – 79,487,629
Devaluation Provision for bad debt Total

XV. APPROVAL OF FINANCIAL STATEMENTS

The fi nancial statements have been approved by board of directors on August 22, 2008.

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CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2008

Notes	Six months ended June 30, 2008 2007 RMB’000 RMB’000 (unaudited) (unaudited)
Gross sales of coal 5 Railway transportation service income Total revenue Transportation costs of coal 5 Cost of sales and service provided 6 Gross prof t Selling, general and administrative expenses Share of loss of an associate Other income 7 Interest expenses 8 Prof t before income taxes 9 Income taxes 10 Prof t for the period Equity attributable to: Equity holders of the Company Minority interests Dividends 11 Earnings per share, basic 12 Earnings per ADS, basic 12	12,065,436 6,928,217 111,931 91,296
	12,177,367 7,019,513 (219,511) (323,561) (5,172,474) (3,389,616)
	6,785,382 3,306,336 (1,422,260) (1,156,437) (47,192) – 194,152 105,139 (15,827) (14,851)
	5,494,255 2,240,187 (1,580,496) (737,757)
	3,913,759 1,502,430
	3,912,641 1,502,360 1,118 70
	3,913,759 1,502,430
	836,128 983,680
	RMB0.80 RMB0.31
	RMB7.96 RMB3.05

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CONDENSED CONSOLIDATED BALANCE SHEET

AT JUNE 30, 2008

Notes	At June 30, At December 31, 2008 2007 RMB’000 RMB’000 (unaudited) (audited)
ASSETS CURRENT ASSETS Bank balances and cash Term deposits Restricted cash 13 Bills and accounts receivable 14 Inventories Other loans receivable 15 Prepayments and other receivables 16 Prepaid lease payments Prepayment for resources compensation fees 17 TOTAL CURRENT ASSETS Mining rights 19 Prepaid lease payments Prepayment for resources compensation fees 17 Property, plant and equipment 20 Goodwill Investments in securities 21 Interests in an associate Restricted cash 13 Deposit made on investment Deferred tax assets 23 TOTAL ASSETS	8,366,992 4,424,561 975,894 1,294,984 29,862 11,185 2,854,041 2,753,485 624,445 440,134 – 640,000 925,903 326,668 13,933 13,976 3,240 3,240
	13,794,310 9,908,233 1,098,168 356,012 567,828 576,412 18,732 18,488 13,459,348 13,524,594 298,650 298,650 209,017 409,526 850,370 897,562 53,355 48,822 117,926 117,926 31,175 31,175
	30,498,879 26,187,400

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CONDENSED CONSOLIDATED BALANCE SHEET — CONTINUED

AT JUNE 30, 2008

Notes	At June 30, At December 31, 2008 2007 RMB’000 RMB’000 (unaudited) (audited)
LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Bills and accounts payable 22 Other payables and accrued expenses Provision for land subsidence, restoration, rehabilitation and environmental costs 18 Amounts due to Parent Company and its subsidiary companies 25 Unsecured bank borrowings – due within one year Dividends payable Taxes payable TOTAL CURRENT LIABILITIES Amounts due to Parent Company and its subsidiary companies – due after one year 25 Unsecured bank borrowings – due after one year Deferred tax liabilities 23 TOTAL LIABILITIES SHARE CAPITAL AND RESERVES Share capital 24 Reserves EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY Minority interest TOTAL EQUITY TOTAL LIABILITIES AND EQUITY	555,831 657,517 2,980,965 2,671,117 20,455 19,635 471,977 669,275 536,910 72,000 836,128 – 124,771 9,934
	5,527,037 4,099,478 11,104 14,956 247,000 258,000 292,510 326,354
	6,077,651 4,698,788 4,918,400 4,918,400 19,428,129 16,499,137
	24,346,529 21,417,537 74,699 71,075
	24,421,228 21,488,612
	30,498,879 26,187,400

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2008

	Attributable Future Statutory Investment to equity Share Share development common Translation revaluation Retained holders of Minority capital premium fund reserve fund reserve reserve earnings the Company interest Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note24) (note24)
Balance at January 1, 2007 Gain on fair value change of available- for-sale investments (unaudited) Deferred tax on fair value change of available-for-sale investments (unaudited) Exchange difference arising on translation of foreign operations (unaudited) Net income recognized directly in equity Prof t for the period (unaudited) Total recognized income and expense for the period (unaudited) Appropriations to reserves (unaudited) Dividends (unaudited) Acquisition of a subsidiary (unaudited) Capital contributed by minority equity holders of a subsidiary (unaudited) Balance at June 30, 2007 Balance at January 1, 2008 Losses on fair value change of available -for-sale investments (unaudited) Deferred tax on fair value change of available -for-sale investments (unaudited) Exchange difference arising on translation of foreign operations (unaudited) Net losses recognized directly in equity Prof t for the period (unaudited) Total recognized income and expense for the period (unaudited) Appropriations to reserves (unaudited) Dividends (unaudited) Acquisition of additional interest in the equity of a subsidiary (unaudited) Balance at June 30, 2008	4,918,400 2,981,002 2,218,574 1,704,611 (15,505) 22,754 7,101,943 18,931,779 61,961 18,993,740 – – – – – 49,211 – 49,211 – 49,211 – – – – – (16,240) – (16,240) – (16,240) – – – – (814) – – (814) – (814)
	– – – – (814) 32,971 – 32,157 – 32,157 – – – – – – 1,502,360 1,502,360 70 1,502,430
	– – – – (814) 32,971 1,502,360 1,534,517 70 1,534,587 – – 184,086 – – – (184,086) – – – – – – – – – (983,680) (983,680) – (983,680) – – – – – – – – (11,900) (11,900) – – – – – – – – 24,000 24,000
	4,918,400 2,981,002 2,402,660 1,704,611 (16,319) 55,725 7,436,537 19,482,616 74,131 19,556,747
	4,918,400 2,981,002 2,587,105 2,037,940 (13,942) 260,179 8,646,853 21,417,537 71,075 21,488,612 – – – – – (200,509) – (200,509) – (200,509) – – – – – 50,127 – 50,127 – 50,127 – – – – 2,861 – 2,861 2,861
	– – – – 2,861 (150,382) – (147,521) – (147,521) – – – – – – 3,912,641 3,912,641 1,118 3,913,759
	– – – – 2,861 (150,382) 3,912,641 3,765,120 1,118 3,766,238 – – 101,486 – – – (101,486) – – – – – – – – – (836,128) (836,128) – (836,128) – – – – – – – – 2,506 2,506
	4,918,400 2,981,002 2,688,591 2,037,940 (11,081) 109,797 11,621,880 24,346,529 74,699 24,421,228

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2008

	Six months ended June 30, 2008 2007 RMB’000 RMB’000 (unaudited) (unaudited)
NET CASH GENERATED BY OPERATING ACTIVITIES NET CASH USED IN INVESTING ACTIVITIES Purchase of property, plant and equipment Decrease (increase) in term deposits Settlement received from other loans receivable Expenditure for acquisition of Zhaolou Coal Mine Acquisition of additional interest of Shanxi Group Acquisition of minority interests of Yulin (Increase) Decrease in restricted cash Proceeds on disposal of property, plant and equipment NET CASH GENERATED BY FINANCING ACTIVITIES Capital contribution from minority equity holders of a subsidiary Bank loans NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING Effect of foreign exchange rate changes CASH AND CASH EQUIVALENTS, ENDING, REPRESENTED BY BANK BALANCES AND CASH	3,861,370 2,030,035
	(537,413) (876,028) 319,090 (396,507) 640,000 – (747,339) – – (14,966) (24,000) – (23,210) 58,646 9,636 5,389
	(363,236) (1,223,466)
	– 24,000 453,910 –
	453,910 24,000
	3,952,044 830,569
	4,424,561 4,715,945 (9,613) (15,418)
	8,366,992 5,531,096

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2008

1. GENERAL

Organization and principal activities

The Group represents Yanzhou Coal Mining Company Limited (the “Company”) and its consolidated subsidiaries.

The Company is established as a joint stock company with limited liability in the People’s Republic of China (the “PRC”) and operates six coal mines, namely the Xinglongzhuang coal mine, Baodian coal mine, Nantun coal mine, Dongtan coal mine, Jining II coal mine (“Jining II”) and Jining III coal mine (“Jining III”) as well as a regional railway network that links these mines with the national railway grid. These six coal mines and the railway were originally divisions of the Company’s ultimate holding company, Yankuang Group Corporation Limited (the “Parent Company”), a state-owned enterprise in the PRC. The Parent Company contributed the assets and liabilities of the Xinglongzhuang coal mine, Baodian coal mine, Nantun coal mine and Dongtan coal mine into the Company upon its formation.

The Company acquired from the Parent Company Jining II, Jining III and the assets of the special purpose coal railway transportation business (“Railway Assets”) in 1998, 2001 and 2002, respectively.

In April 2001, the status of the Company was changed to that of a sino-foreign joint stock limited company.

The Company’s A shares are listed on the Shanghai Securities Exchange (“SSE”), its H shares are listed on The Stock Exchange of Hong Kong Limited (the “SEHK”), and its American Depositary Shares (“ADS”, one ADS represents 10 H shares) are listed on the New York Stock Exchange, Inc.

The Company holds a 52.38% interest in the registered capital of Qingdao Free Trade Zone Zhongyan Trade Co., Ltd. (“Zhongyan”), a limited liability company established and operated in the PRC. Zhongyan is engaged in the trading and processing of mining machinery.

The Company holds a 92% interest in the registered capital of Shandong Yanmei Shipping Co., Ltd. (“Yanmei Shipping”), a limited liability company established and operated in the PRC which is principally engaged in the transportation business via rivers and lakes and sale of coal and construction materials.

In 2004, the Company established Yanzhou Coal Yulin Neng Hua Co., Ltd. (“Yulin”), a 97% owned subsidiary, for the future development of the methanol projects of the Group in the Shaanxi Province in the PRC. In the current period, the Company acquired the remaining 3% equity in Yulin.

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1. GENERAL — CONTINUED

Organisation and principal activities – continued

In 2004, the Company acquired the entire interest in the Southland coal mine located in New South Wales, Australia (“Southland”) from independent third parties in 2004 for aggregate cash consideration of AUD29,377,000 (equivalent to RMB187,312,000 then). The Company has also established two wholly-owned subsidiaries in Australia, namely Yancoal Australia Pty Limited (“Yancoal”) and Austar Coal Mine Pty Limited (“Austar”), in 2004 for the Group’s future operations in Southland.

In 2005, the Company acquired a 95.67% equity interest in Yankuang Heze Neng Hua Company Limited (“Heze”) from the Parent Company at cash consideration of RMB584,008,000. The principal activities of Heze are to conduct the initial preparation of the coal mines at the Juye coalfi eld which includes obtaining the approvals for the coal mine projects, applying rights to explore for coal and preparing the construction work of the coal mines. At June 30, 2008, Heze has commenced construction works for the Zhaolou coal mine. The equity interests held by the Company increased to 96.67% after the increase of the registered capital of Heze in 2007.

In 2006, the Company acquired a 98% equity interest in Yankuang Shanxi Neng Hua Company Limited (“Shanxi Neng Hua”) and its subsidiaries (collectively referred as the “Shanxi Group”) from the Parent Company at cash consideration of RMB733,346,000. The principal activities of Shanxi Group are to invest in heat and electricity, manufacture and sale of mining machinery and engine products, coal mining and the development of integrated coal technology.

Shanxi Neng Hua is an investment holding company, which holds 81.31% equity interest in Shanxi Heshun Tianchi Energy Company Limited (“Shanxi Tianchi”) and approximately 99.85% equity interest in Shanxi Tianhao Chemical Company Limited (“Shanxi Tianhao”). The principal activities of Shanxi Tianchi are to exploit and sale of coal from Tianchi Coal Mine, the principal asset of Shanxi Tianchi. Shanxi Tianchi has completed the construction of Tianchi Coal Mine and commenced production by the end of 2006. Shanxi Tianhao is established to engage in the production of methanol and other chemical products, coke production, exploration and sales. The construction of the methanol facilities by Shanxi Tianhao commenced in March 2006 and it has not yet commenced production as at June 30, 2008. In 2007, the Company further acquired the remaining 2% equity interest in Shanxi Neng Hua at cash consideration of RMB14,966,000.

2. BASIS OF PREPARATION

The condensed consolidated fi nancial statements have 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.

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3. SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated fi nancial statements have been prepared on the historical cost basis except for certain fi nancial instruments, which are measured at fair value, as appropriate.

The accounting policies adopted are consistent with those followed in the preparation of the Group’s annual fi nancial statements for the year ended December 31, 2007.

In the current interim period, the Group had applied, for the fi rst time, the new and revised standards and interpretations issued by the International Accounting Standards Board (the “IASB”) and the International Financial Reporting Interpretations Committee (the “IFRIC”) of the IASB, which are effective for the Group’s fi nancial year beginning on January 1, 2008.

The adoption of these new and revised standards and interpretations had no material effect on the results or fi nancial position of the Group for the current or prior accounting periods. Accordingly, no prior period adjustment has been recognized.

The Group has not early applied the new standards or interpretations that have been issued but are not yet effective. The directors of the Company anticipate that the application of these standards or interpretations will have no material impact on the results and the fi nancial position of the Group.

4. 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”) or Minmetals Trading Co., Ltd. (“Minmetals Trading”). The fi nal customer destination of the Company’s export sales is determined by the Company, National Coal Corporation or Minmetals Trading. 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 fi nancial statements as the underlying gross sales, results and assets of these businesses, which are currently included in the coal mining business segment, are insignifi cant to the Group.

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4. SEGMENT INFORMATION — CONTINUED

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	–
Coal railway transportation	–

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

Segment information about these businesses is presented below:

INCOME STATEMENT

INCOME STATEMENT
	For the six months ended June 30, 2008 Coal railway Coal mining transportation Eliminations Consolidated RMB’000 RMB’000 RMB’000 RMB’000
GROSS REVENUE External sales Inter-segment sales Total Inter-segment revenue is charged at prices pre-determined by the relevant governmental authority RESULT Segment results Unallocated corporate expenses Unallocated corporate income Share of loss of an associate Interest expenses ≠ Prof t before income taxes Income taxes Prof t for the period	12,065,436 111,931 – 12,177,367 – 32,483 (32,483) – 12,065,436 144,414 (32,483) 12,177,367 5,863,503 (108,718) – 5,754,785 (249,843) 52,332 (47,192) (15,827) 5,494,255 (1,580,496) 3,913,759
	5,863,503 (108,718) –

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4. SEGMENT INFORMATION — CONTINUED

	For the six months ended June 30, 2007 Coal railway Coal mining transportation Eliminations Consolidated RMB’000 RMB’000 RMB’000 RMB’000	For the six months ended June 30, 2007 Coal railway Coal mining transportation Eliminations Consolidated RMB’000 RMB’000 RMB’000 RMB’000
GROSS REVENUE External sales Inter-segment sales Total Inter-segment revenue is charged at prices pre-determined by the relevant governmental authority. RESULT Segment results Unallocated corporate expenses Unallocated corporate income Interest expenses Prof t before income taxes Income taxes Prof t for the period	6,928,217 91,296 – 7,019,513 – 62,351 (62,351) –
	6,928,217 153,647 (62,351) 7,019,513
	2,453,855 (43,071)	– 2,410,784 (204,372) 48,626 (14,851)
		2,240,187 (737,757)
		1,502,430

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5. SALES OF COAL AND TRANSPORTATION COSTS OF COAL

	Six months ended June 30, 2008 2007 RMB’000 RMB’000
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	11,233,286 5,860,240 126,710 132,271
	11,106,576 5,727,969
	832,150 1,067,977 92,801 191,290
	739,349 876,687
	11,845,925 6,604,656

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.

6. COST OF SALES AND SERVICE PROVIDED

	Six months ended June 30, 2008 2007 RMB’000 RMB’000
Materials Wages and employee benef ts Electricity Depreciation Land subsidence, restoration, rehabilitation and environmental costs Repairs and maintenance Annual fee and amortization of mining rights Other transportation cost Costs of traded coal Others	704,859 560,611 1,267,739 1,141,120 209,377 200,149 547,341 529,481 951,570 419,471 – 204,144 85,303 12,947 65,436 52,247 727,381 – 613,468 269,446
	5,172,474 3,389,616

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7. OTHER INCOME

	Six months ended June 30, 2008 2007 RMB’000 RMB’000
Interest income from bank deposits Gain on exchange rate changes Interest income from entrusted loan(note 15) Others	52,311 48,626 – 36,600 132,230 – 9,611 19,913
	194,152 105,139

8. INTEREST EXPENSES

	Six months ended June 30, 2008 2007 RMB’000 RMB’000
Interest expenses on bank borrowing wholly repayable within 5 years Deemed interest expenses in respect of acquisition of Jining III	14,902 13,601 925 1,250
	15,827 14,851

No interest was capitalized during the periods.

9. PROFIT BEFORE INCOME TAXES

	Six months ended June 30, 2008 2007 RMB’000 RMB’000
Prof t before income taxes has been arrived at after charging (crediting): Depreciation of property, plant and equipment Amortization of mining rights (Included in cost of sales and service provided) Total depreciation and amortization Amortization of prepaid lease payments Gain on disposal of property, plant and equipment	630,903 615,511 8,775 8,081
	639,678 623,592
	8,627 6,826 (7,146) (1,655)

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10. INCOME TAXES

	Six months ended June 30, 2008 2007 RMB’000 RMB’000
Income tax: Current taxes Under (Over) provision in prior year Deferred tax (note 23): Current period Attributable to change in tax rate	1,298,823 804,026 265,390 (21,922)
	1,564,213 782,104
	16,283 24,256 – (68,603)
	16,283 (44,347)
	1,580,496 737,757

The Group is subject to a standard income tax rate of 25%. The effective income tax rate of the Group for the current period is 29% (six months ended June 30, 2007: 33%). The major reconciling items are the amount claimed on the appropriation to future development fund for which a tax deduction is granted and certain expenses not deductible for tax purposes.

On March 16, 2007, the PRC promulgated the Law of the People’s Republic of China on Enterprise Income Tax by Order No. 63 of the President of the People’s Republic of China, which changed the tax rate from 33% to 25% for the Company and its subsidiaries established in the PRC from January 1, 2008.

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11. DIVIDENDS

	Six months ended June 30, 2008 2007 RMB’000 RMB’000
Final dividend approved, RMB0.17 per share (2007: RMB0.120) Special dividend of 2007 approved, RMB0.080 per share	836,128 590,208 – 393,472
	836,128 983,680

Pursuant to the annual general meeting held on June 27, 2008, a fi nal dividend in respect of the year ended December 31, 2007 was approved.

12. 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, 2008 and June 30, 2007 is based on the profi t for the period of RMB3,912,641,000 and RMB1,502,360,000 and on 4,918,400,000 shares in issue during both periods.

The earnings per ADS have been calculated based on the profi t for the relevant periods and on one ADS, being equivalent to 10 H shares. The equivalent H shares to one ADS have been decreased from 50 to 10 H shares from June 27, 2008. The new ADS were distributed to the ADS holders on July 3, 2008. The comparative fi gure of 2007 has been adjusted accordingly.

13. RESTRICTED CASH

At the balance sheet date, the short-term restricted cash represents the bank deposits pledged to certain banks to secure banking facilities granted to the Group. The long-term amount represents the bank deposits placed as guarantee for the future payments of rehabilitation cost of Southland as required by the Australian government. The long-term restricted cash carries interest at 1.8% per annum.

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14. BILLS AND ACCOUNTS RECEIVABLE

	At At June 30, December 31, 2008 2007 RMB’000 RMB’000
Bills receivable Accounts receivable Total bills and accounts receivable Less: Impairment loss Bills and accounts receivable, net	2,626,806 2,638,956 248,203 135,525
	2,875,009 2,774,481
	(20,968) (20,996)
	2,854,041 2,753,485

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 balance sheet date:

	At At June 30, December 31, 2008 2007 RMB’000 RMB’000
1 – 180 days 181 – 365 days	2,852,870 2,753,485 1,171 –
	2,854,041 2,753,485

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15. OTHER LOAN RECEIVABLE

At December 31, 2007, the amount represented a loan granted to an independent third party, which carries interest at 7.00% per annum and is guaranteed by other independent third parties. The loan (the “Default Loan”) is secured by certain state legal person shares of a company listed on the SSE (“the Secured Shares”) and certain equity interest in another unlisted company held by the guarantor. The Default Loan was defaulted in January 2005 and the Company had applied to the The People’s Supreme Court of Shandong Province (the “Court”) to freeze the Secured Shares. The Company has also applied to the Court to dispose the Secured Shares by way of a public auction and the proceeds would be applied to repay the Default Loan and the associated interests to the Company.

In 2006, Shandong Runhua Group Company Limited (“Shandong Runhua”) has also claimed for a portion of the Secured Shares. To protect the Company’s priority rights in the Secured Shares to recover the Default Loan, the Company sought support from the Shandong provincial government and the State-owned Assets Supervision and Administrative Committee (the “SASAC”). In January 2007, these government authorities in Shandong province and the SASAC rendered a formal written request to the Court to protect the Company’s priority right on the Secured Shares.

In October 2007, the Company, Shandong Runhua and the guarantor reached an agreement in the presence of the Court. According to the settlement agreement, 240 million of the total 289 million Secured Shares held by the guarantor should belong to Shandong Runhua and 200 million Secured Shares should be transferred to Shandong Runhua from the guarantor. At the same time, Shandong Runhua has agreed to assist the guarantor to repay the principal and the associated interest of the Default Loan to the Company. The Company has the right to request for the disposal of the frozen 49 million Secured Shares owned by the guarantor for the settlement if the Default Loan is not repaid by the guarantor or Shandong Runhua after June 6, 2008 (the date the restriction on trading of the Secured Shares is removed). If the proceed received from the disposal of the 49 million Secured Shares would not be suffi cient to cover the loan principal and interest of the Default Loan by that time, the Company has the right to request for the disposal of the remaining 40 million Secured Shares held under the Guarantor and not yet transferred to Shandong Runhua for settlement. If the disposal of the above mentioned 89 million Secured Shares would still not be suffi cient for settlement of the liability borne by the guarantor, the Company would have the right to further request for the disposal of the 200 million Secured Shares already transferred by the guarantor to Shandong Runhua for full settlement of approximate RMB700 million (including the interest). By June 30, 2008, the Company has executed the Secured Shares right and collected principal of RMB640 million plus interest of RMB130 million (Note 7).

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16. PREPAYMENTS AND OTHER RECEIVABLES

	At At June 30, December 31, 2008 2007 RMB’000 RMB’000
Advances to suppliers Prepaid freight charges and related handling charges Deposit for environment protection Others	642,758 35,728 – 10,934 200,000 200,000 83,145 80,006
	925,903 326,668

17. PREPAYMENT FOR RESOURCES COMPENSATION FEES

In accordance with the relevant regulations, the Shanxi Group is required to pay resources compensation fees to the Heshun Municipal Coal Industry Bureau at a rate of RMB2.70 per tonne of raw coal mined. At June 30, 2008, the amount represented the prepayment for resources compensation fee based on production volume of approximately 8.13 million tonnes. The current portion represents the amount to be utilized in the coming year which is estimated based on expected production volume.

18. PROVISION FOR LAND SUBSIDENCE, RESTORATION, REHABILITATION AND ENVIRONMENTAL COSTS

	At June 30, 2008 RMB’000
At beginning of period Additional provision in the period Utilization of provision At end of period	19,635 951,570 (950,750) 20,455

The provision for land subsidence, restoration, rehabilitation and environmental costs has been determined by the directors based on their best estimates. However, in so far as the effect on the land and the environment from current mining activities becomes apparent in future periods, the estimate of the associated costs may be subject to change in the near term.

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19. MINING RIGHTS

	RMB’000
COST At January 1, 2008 Exchange difference Addition At June 30, 2008 AMORTIZATION At January 1, 2008 Exchange difference Provision for the period At June 30, 2008 NET BOOK VALUE At June 30, 2008 At December 31, 2007	417,113 3,803 747,339
	1,168,255
	61,101 211 8,775
	70,087
	1,098,168
	356,012

The addition of mining rights of RMB747.339 million during the current period represented the consideration paid for Zhaolou coal mine acquired from the Parent Company.

The Company and the Parent Company have entered into a mining rights agreement pursuant to which the Company has agreed to pay the Parent Company, effective from September 25, 1997, an annual fee of RMB12,980,000 as compensation for the Parent Company’s agreement to give up the mining rights associated with the Xinglongzhuang coal mine, Baodian coal mine, Nantun coal mine, Dongtan coal mine and Jining II. The annual fee is subject to change after a ten-year period. Up to the date of this interim report, compensation fee of RMB5 per tonne for raw coal mined amounting to RMB82,028,000 for the period has been preliminary agreed. The revised compensation is to be settled with the relevant governmental authority directly.

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20. PROPERTY, PLANT AND EQUIPMENT

Harbour Plant, Freehold land works Railway Mining machinery Transportation Construction in Australia Buildings and crafts structures structures and equipment equipment in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000	Harbour Plant, Freehold land works Railway Mining machinery Transportation Construction in Australia Buildings and crafts structures structures and equipment equipment in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
COST At January 1, 2008 Exchange difference Additions Transfers Disposals At June 30, 2008 Accumulated depreciation At January 1, 2008 Exchange difference Provision for the period Eliminated on disposals At June 30, 2008 NET BOOK VALUE At June 30, 2008 At December 31, 2007	57,311 2,580,091 250,349 736,358 3,687,389 9,547,481 354,373 4,681,062 21,894,414 1,858 379 – – – 30,851 – 2,883 35,971 – – – – – 184 254 536,975 537,413 – 56,609 – 30,875 – 89,448 – (176,932) – – (2,432) – (743) – (10,026) – – (13,201)
	59,169 2,634,647 250,349 766,490 3,687,389 9,657,938 354,627 5,043,988 22,454,597
	– 1,225,364 24,277 323,121 1,719,539 4,856,779 220,740 – 8,369,820 – 91 – – – 5,146 – – 5,237 – 53,738 2,703 24,019 119,912 413,245 17,286 – 630,903 – (1,354) – (332) – (9,025) – – (10,711)
	– 1,277,839 26,980 346,808 1,839,451 5,266,145 238,026 – 8,995,249
	56,169 1,356,808 223,369 419,682 1,847,938 4,391,793 116,601 5,043,988 13,459,348
	57,311 1,354,727 226,072 413,237 1,967,850 4,690,702 133,633 4,681,062 13,524,594

21. INVESTMENTS IN SECURITIES

The investment in securities represents available-for-sale equity investments:

	At At June 30, December 31, 2008 2007 RMB’000 RMB’000
Investment in equity securities listed on the SSE – Stated at fair value Unlisted equity securities	208,577 409,086 440 440
	209,017 409,526

The unlisted equity securities are stated at cost less impairment at each balance sheet date because the range of reasonable fair value estimates is so signifi cant that the directors of the Company are of the opinion that their fair value cannot be measured reliably.

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22. BILLS AND ACCOUNTS PAYABLE

The following is an aged analysis of bills and accounts payable at the balance sheet date:

	At At June 30, December 31, 2008 2007 RMB’000 RMB’000
1 – 90 days 91 – 180 days 181 – 365 days 1 – 2 years	499,069 506,474 – – 56,639 126,048 123 24,995
	555,831 657,517

23. DEFERRED TAXATION

	Available- Accelerated Fair value for-sale Tax adjustment on Tax investments depreciation mining rights losses Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2007 Charge to reserve (Charge) credit to income for the year Effect of change in tax rate Balance at December 31, 2007 and January 1, 2008 Charge to reserve (Charge) credit to income for the period (note 10) Balance at June 30, 2008	(11,207) (218,513) (54,103) – (283,823) (78,236) – – – (78,236) – (34,613) 1,513 31,175 (1,925) 2,717 52,972 13,116 – 68,805
	(86,726) (200,154) (39,474) 31,175 (295,179) 50,127 – – – 50,127 – (17,040) 757 – (16,283)
	(36,599) (217,194) (38,717) 31,175 (261,335)

The analysis of deferred tax balances in the fi nancial statements is as follows:

	At At June 30, December 31, 2008 2007 RMB’000 RMB’000
Deferred tax assets Deferred tax liabilities	31,175 31,175 (292,510) (326,354)
	(261,335) (295,179)

There was no material unprovided deferred tax for the period or at the balance sheet date.

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24. SHAREHOLDERS’ EQUITY

Share capital

The Company’s share capital structure at the balance sheet date is as follows:

	Domestic invested shares State legal person Shares (held by the Parent Company) A shares	Foreign invested shares H shares (including H share represented by ADS) Total
Numbers of shares At December 31, 2007 and June 30, 2008 2,600,000,000 360,000,000 Registered, issued and fully paid (RMB’000) At December 31, 2007 and June 30, 2008 2,600,000 360,000 Each share has a par value of RMB1.		1,958,400,000 4,918,400,000 1,958,400 4,918,400

There is no movement in share capital during the period.

Reserves

Future development fund includes future development specifi c fund and reform specifi c development fund.

Pursuant to regulation in the PRC, the Company and Shanxi Tianchi are required to transfer an annual amount to future development specifi c fund at RMB6 per tonne of raw coal mined. The fund can only be used for the future development of the coal mining business and is not available for distribution to shareholders.

Pursuant to the regulations of the Shandong Province Finance Bureau, State-owned Assets Supervision and Administration Commission of Shandong Province and the Shandong Province Coal Mining Industrial Bureau, the Company is required to transfer an additional amount at RMB5 per tonne of raw coal mined from July 1, 2004 to the reform specifi c development fund for the future improvement of the mining facilities and is not available for distribution to shareholders. No further transfer to the reform specifi c development fund is required from January 1, 2008.

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24. SHAREHOLDERS’ EQUITY – CONTINUED

The Company and its subsidiaries in the PRC has to set aside 10% of its profi t for the statutory common reserve fund (except where the fund has reached 50% of its registered capital). The statutory common reserve fund can be used for the following purposes:

• to make good losses in previous years; or

• to convert into capital, provided such conversion is approved by a resolution at a shareholders’ general meeting and the balance of the statutory common reserve fund does not fall below 25% of the registered capital.

In accordance with the Company’s Articles of Association, the profi t for the purpose of appropriation will be deemed to be the lesser of the amounts determined in accordance with (i) PRC accounting standards and regulations and (ii) IFRS or the accounting standards of the places in which its shares are listed.

The Company can also create a discretionary reserve in accordance with its Articles of Association or pursuant to resolutions which may be adopted at a meeting of shareholders.

The Company’s distributable reserve as at June 30, 2008 is the retained earnings computed under PRC GAAP which amounted to approximately RMB11,125.981 million (as at December 31, 2007: RMB8,363.756 million).

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25. 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, 2008 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.

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

	At At June 30, December 31, 2008 2007 RMB’000 RMB’000
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 three years Total Less: amount due within one year Amount due after one year	471,977 669,275 7,478 7,703 3,626 7,253
	483,081 684,231 (471,977) (669,275)
	11,104 14,956

Except for the outstanding consideration as described above, the amounts due to Parent Company and its subsidiary companies have no specifi c terms of repayment but is expected to be repaid within one year.

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25. RELATED PARTY TRANSACTIONS – CONTINUED

During the periods, the Group had the following signifi cant transactions with the Parent Company and its subsidiary companies:

	Six months ended June 30, 2008 2007 RMB’000 RMB’000
Income Sales of coal Sales of auxiliary materials Expenditure Utilities and facilities Annual fee for mining rights Purchases of supply materials and equipment Repairs and maintenance services Social welfare and support services Technical support and training Road transportation services Construction services	586,853 478,902 202,609 190,588 184,054 190,536 – 6,490 204,828 256,123 101,361 98,258 103,350 209,712 10,000 10,000 43,876 32,375 37,524 26,762

Certain expenditures for social welfare and support services (excluding medical and child care expenses) of RMB56.100 million and RMB82.95 million for each of the six months ended June 30, 2008 and 2007 respectively, and for technical support and training of RMB10 million and RMB10 million for each of the six months ended June 30, 2008 and 2007 respectively, 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 retirement benefi t scheme of the Parent Company in respect of retirement benefi ts (note 27).

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25. RELATED PARTY TRANSACTIONS – CONTINUED

Transactions/balances 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 its 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.

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

	Six months ended June 30, 2008 2007 RMB’000 RMB’000
Trade sales Trade purchases Material balances with other state-controlled entities are as follows:	4,229,998 431,030
	386,649 309,291
	At June 30, At December 31, 2008 2007 RMB’000 RMB’000
Amounts due from other state-controlled entities Amounts due to other state-controlled entities	1,370,413 311,922
	51,599 339,979

In addition, the Group has entered into various transactions, including deposits placements, borrowings and other general banking facilities, with certain banks and fi nancial 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 signifi cant to the Group’s operations.

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25. RELATED PARTY TRANSACTIONS – CONTINUED

Compensation of key management personnel

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

	Six months ended June 30, 2008 2007 RMB’000 RMB’000
Directors’ fee Salaries, allowance and other benef t in kind Retirement benef t scheme contribution	417 145 1,281 1,448 208 478
	1,906 2,071

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

26. COMMITMENTS

	At At June 30, December 31, 2008 2007 RMB’000 RMB’000
Capital expenditure contracted for but not provided in the f nancial statements in respect of acquisition of property, plant and equipment Capital expenditure authorised but not contracted for in respect of development of new coal mines	278,271 322,271 – 747,339
	278,271 1,069,610

In accordance with the regulations of the State Administration of Work Safety, the Group has a commitment to incur RMB8 per tonne and RMB15 per tonne of raw coal mined from May 1, 2004 which will be used for enhancement of safety production environment and improvement of facilities (“work safety cost”) respectively. The unutilized work safety cost at June 30, 2008 was RMB341.252 million (December 31, 2007: RMB187.47 million)

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26. COMMITMENTS – CONTINUED

Pursuant to the regulations issued by the Shandong Province Finance Bureau, the Group has to pay a deposit of RMB1,073 million to the relevant government authority, which secured for the environmental protection work done by the Company. As at June 30, 2008 deposit of RMB200 million were made and the Company is committed to further make security deposit of RMB874 million.

27. RETIREMENT BENEFITS

Qualifying employees of the Company are entitled to pension, medical and other welfare benefi ts. The Company participates in a scheme of the Parent Company and pays a monthly contribution to the Parent Company in respect of retirement benefi ts at an agreed contribution rate based on the monthly basic salaries and wages of the qualifi ed employees. The Parent Company is responsible for the payment of all retirement benefi ts to the retired employees of the Company.

Pursuant to the Provision of Administrative Services for Pension Fund and Retirement Benefi ts Agreement entered into by the Company and the Parent Company on January 10, 2006, the monthly contribution rate is set at 45% of the aggregate monthly basic salaries and wages of the Company’s employees for the period from January 1, 2006 to December 31, 2008.

The Company’s subsidiaries are participants in a state-managed retirement scheme pursuant to which the subsidiaries pay a fi xed percentage of the qualifying staff’s wages as a contribution to the scheme. The subsidiaries’ fi nancial obligations under this scheme are limited to the payment of the employees’ contribution. During the period, contributions paid and payable by the subsidiaries pursuant to this arrangement were insignifi cant to the Group.

At the balance sheet date, there were no forfeited contributions which arose upon employees leaving the above schemes available to reduce the contribution payable in the future years.

28. HOUSING SCHEME

The Parent Company is responsible for providing accommodation to its employees and the employees of the Company. The Company and the Parent Company share the incidental expenses relating to the accommodation at a negotiated amount for each of the six months ended June 30, 2007 and 2008. Such expenses, amounting to RMB43.1 million for each of the six months ended June 30, 2007 and 2008, have been included as part of the social welfare and support services expenses summarized in note 25.

The Company currently makes a fi xed monthly contribution for each of its qualifying employees to a housing fund which is equally matched by a contribution from the employees. The contributions are paid to the Parent Company which utilizes the funds, along with the proceeds from the sales of accommodation and, if the need arises, from loans arranged by the Parent Company, to construct new accommodation.

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SUPPLEMENT

I. SUMMARY OF DIFFERENCES BETWEEN CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED UNDER IFRS AND THOSE UNDER PRC GAAP

The Group has also prepared a set of condensed consolidated fi nancial statements in accordance with relevant accounting principles and regulations applicable to PRC enterprises.

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

(1) Future development fund and safety work expense

• (1a) adjustment of future development fund, which is charged to income before income taxes under PRC GAAP, to shareholders’ equity;

• (1b) reversal of the work safety cost provided but not yet utilized for the enhancement of safety production environment and facilities, which is charged as an expense when provided under PRC GAAP; depreciation provided for plant and equipment acquired by utilizing the provision of work safety cost, which under PRC GAAP, work safety cost have been charged as expenses when provision was made.

(2) Consolidation using purchase method under IFRS and using common control method under PRC GAAP

• (2a) Under IFRS, the acquisitions of Jining II, Railway Assets, Heze and Shanxi Group have been accounted for using the purchase method which accounts for the assets and liabilities of Jining II, Railway Assets, Heze and Shanxi Group 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.

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

• (2b) Under IFRS, the mining rights of Shanxi Group are stated at purchase consideration less amortization. Mining rights are amortized on a straight line basis over twenty-seven years, being the useful life estimated based on the total proven and probable reserves of the coal mine. Under PRC GAAP, as both the Company and Shanxi Group 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.

(3) Deferred taxation due to differences between fi nancial statements under IFRS and under PRC GAAP.

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I. SUMMARY OF DIFFERENCES BETWEEN CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARED UNDER IFRS AND THOSE UNDER PRC GAAP – CONTINUED

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

	Net income attributable	Net income attributable	Net income attributable	Net assets attributable to	Net assets attributable to	Net assets 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,
	2008		2007	2008		2007
	RMB’000	RMB’000		RMB’000		RMB’000
As per condensed f nancial statements
prepared under IFRS	3,912,641	1,502,360		24,346,529	21,417,537
Impact of IFRS adjustments in respect of:
– transfer to future development fund which
is charged to income before income taxes	(101,486)	(184,086)		(917,201)		(814,516)
– reversal of work safety cost	(66,474)		(74,903)	(864,237)		(797,763)
– fair value adjustment on mining rights of Shanxi
Group and related amortization	2,461		2,461	(125,922)		(128,385)
– write-off of pre-operating expenses of subsidiaries	–		(93,491)	–		–
– Goodwill arising from acquisition of Jining II,
Railway Assets, Heze and Shanxi Group	–		–	(288,604)		(288,604)
– deferred tax effect on temporary differences
not recognized under PRC GAAP	16,003		(41,677)	247,540		231,537
– others	(1,070)		(1,746)	(3,982)		(4,116)
As per f nancial statements prepared
under PRC GAAP	3,762,075	1,108,918		22,394,123	19,615,690

Note: There are also differences in other items in the condensed fi nancial statements due to differences in classifi cation between IFRS and PRC GAAP.

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CORPORATE INFORMATION

Registered Name: 兗州煤業股份有限公司 English Name: Yanzhou Coal Mining Company Limited Registered Address: 298 Fushan Street South, Zoucheng Shandong Province PRC Post Code: 273500 Company Website: http://www.yanzhoucoal.com.cn Company Email Address: yzc@yanzhoucoal.com.cn Legal Representative: Wang Xin Company Secretary: Zhang Baocai Authorized Representatives: Wu Yuxiang Zhang Baocai Add: 298 Fushan Street South, Zoucheng Shandong Province PRC 273500 Tel: 86-537-5382319 Fax: 86-537-5383311 Place of Listing: A Shares: Shanghai Stock Exchange Ticker Symbol: 600188 Stock Abbreviation: YZMY H Shares: The Stock Exchange of Hong Kong Limited Stock Code: 1171 ADS:

The New York Stock Exchange Ticker Symbol: YZC

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