THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR …€¦ · financial report for the year 2016 capital...

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents ofthis circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any losshowsoever arising from or in reliance upon the whole or any part of the contents of this circular.If you are in doubt as to any aspect of this circular or as to the action you should take, you should consult your stockbroker or otherregistered dealer in securities, bank manager, solicitor, professional accountants or other professional adviser.If you have sold or transferred all your shares in Inner Mongolia Yitai Coal Co., Ltd., you should at once hand this circular and theaccompanying proxy form to the purchaser (s) or transferee (s) or to the bank, stockbroker or other agent through whom the sale or thetransfer was effected for transmission to the purchaser (s) or transferee (s) .

REPORT OF THE BOARD FOR THE YEAR 2016REPORT OF THE BOARD OF SUPERVISORS FOR THE YEAR 2016

PERFORMANCE REPORT OF THE INDEPENDENT NON-EXECUTIVE DIRECTORSFOR THE YEAR 2016

PROFIT DISTRIBUTION FOR THE YEAR 2016FINANCIAL REPORT FOR THE YEAR 2016

CAPITAL EXPENDITURE FOR THE YEAR 2017APPOINTMENT OF AUDIT INSTITUTION FOR 2017

APPOINTMENT OF INTERNAL CONTROL AUDIT INSTITUTION FOR 2017ENTRUSTED WEALTH MANAGEMENT USING IDLE EQUITY FUND

PURCHASE OF LIABILITY INSURANCE FOR DIRECTORS,SUPERVISORS, SENIOR MANAGEMENT

RE-ELECTION AND APPOINTMENT OF DIRECTORSRE-ELECTION AND APPOINTMENT OF SUPERVISORS

COMPENSATION PACKAGE FOR DIRECTORS OFTHE SEVENTH SESSION OF THE BOARD

COMPENSATION PACKAGE FOR SUPERVISORS OFTHE SEVENTH SESSION OF THE BOARD OF SUPERVISORSAMENDMENTS TO POLICY ON THE MANAGEMENT OF

THE EXTERNAL GUARANTEE OF INNER MONGOLIA YITAI COAL CO., LTD.AMENDMENTS TO RULES OF PROCEDURE OF THE BOARD OF SUPERVISORS

THE COMPANY ENTERED INTO THE CROSS-GUARANTEE AGREEMENTWITH INNER MONGOLIA YITAI GROUP CO., LTD.

PROVIDE GUARANTEE TO SUBSIDIARIESGENERAL MANDATE TO THE BOARD OF THE COMPANY

FOR THE ISSUANCE OF H SHARESAND

NOTICE OF ANNUAL GENERAL MEETING FOR THE YEAR 2016

Independent Financial Adviser to the Independent Board Committee andthe Independent Shareholders in Respect of the Guarantee

A letter from the Board is set out on pages 3 to 39 of this circular.A notice convening the AGM to be held at Thursday, 25 May 2017 at 9:00 a.m. is set out on pages 68 to 75 of this circular. A form ofproxy for use at the AGM is also enclosed. Such form of proxy is also published on the website of The Stock Exchange of Hong KongLimited (www.hkexnews.hk) .Whether or not you propose to attend the AGM, you are requested to complete and return the enclosed form of proxy in accordance withthe instruction printed thereon and return it to the Hong Kong share registrar of the Company, Computershare Hong Kong InvestorServices Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible but in any event notless than 24 hours before the time appointed for the holding of the AGM (i.e. 9:00 a.m. on Wednesday, 24 May 2017) or 24 hours beforethe time appointed for the holding of any adjournment thereof. Completion and return of the form of proxy will not preclude theShareholders from attending and voting in person at the AGM or any adjournment thereof if they so wish.

13 April 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

* For identification purpose only

Page

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . 40

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . 42

APPENDIX I GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

APPENDIX II BIOGRAPHICAL DETAILS ABOUT CANDIDATES OFTHE SEVENTH SESSION OF THE BOARD . . . . . . . . . . . . . . . . . . . 60

APPENDIX III BIOGRAPHICAL DETAILS ABOUT CANDIDATES OF THESEVENTH SESSION OF THE BOARD OF SUPERVISORS . . . . . . . . 64

APPENDIX IV INSTRUCTION ON ELECTION OF DIRECTORS ANDSUPERVISORS BY ADOPTING CUMULATIVEVOTING SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

NOTICE OF ANNUAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

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CONTENTS

In this circular, unless the context otherwise requires, the following expressions have the following

meanings:

“AGM” the annual general meeting of the Company for the year 2016

which will be held on 25 May 2017

“Articles of Association” Articles of Association of the Company

“Board” the Board of Directors of the Company

“Board of Supervisors” the board of supervisors of the Company

“Coal-to-oil Company” Inner Mongolia Yitai Coal-to-oil Co., Ltd. (內蒙古伊泰煤製油有限責任公司)

“Company” Inner Mongolia Yitai Coal Co., Ltd. (內蒙古伊泰煤炭股份有限公司) , a joint stock limited company incorporated in the PRC on 23

September 1997, whose H-shares are listed on the Hong Kong

Stock Exchange under the stock code of 3948 and whose B shares

are listed on the Shanghai Stock Exchange under the stock code of900948

“Connected Transactions” has the meaning ascribed to it under Chapter 14A of the Listing

Rules

“Controlling Shareholder” has the meaning ascribed to it under the Listing Rules, and in this

circular, it refers to Yitai Group

“CSRC” China Securities Regulatory Commission

“Director (s) ” the Director (s) of the Company

“General Mandate” authorize the Board to allot, issue and deal with, or conditionally or

unconditionally agree to allot, issue and deal with the aggregate par

value of H-shares up to 20% of the numbers of the issued H-shares

of the Company on the day when this resolution is passed, and to,

within such limit, determine the number of H-shares to be allotted

or issued.

“Group” the Company and its subsidiaries

“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Huzhun Railway Company” Inner Mongolia Yitai Huzhun Railway Co., Ltd. (內蒙古伊泰呼准鐵路有限公司)

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DEFINITIONS

“Independent Shareholders” the shareholders of the Company other than the Controlling

Shareholders and their associates

“Latest Practicable Date” 10 April 2017, being the latest practicable date prior to the printing

of this circular for ascertaining certain information herein

“Listing Rules” the Rules Governing the Listing of Securities on The Stock

Exchange of Hong Kong Limited

“PRC” the People’s Republic of China, which for the purposes of this

circular, excludes the Hong Kong, the Macau Special

Administrative Region of the PRC and Taiwan

“RMB” RMB, the lawful currency of the PRC

“Shareholder (s) ” the shareholder (s) of the Company

“Shares” shares of the Company

“Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary” or “subsidiaries” has the meaning ascribed to it under the Listing Rules

“Xinjiang Energy Company” Yitai Xinjiang Energy Co., Ltd. (伊泰新疆能源有限公司)

“Yili Energy Company” Yitai Yili Energy Co., Ltd. (伊泰伊犁能源有限公司)

“Yitai Chemical” Inner Mongolia Yitai Chemical Co., Ltd. (內蒙古伊泰化工有限責任公司)

“Yitai Group” Inner Mongolia Yitai Group Co., Ltd. (內蒙古伊泰集團有限公司)

and its subsidiaries, a limited liability company established in the

PRC and one of the Company’s Controlling Shareholder

“Yitai Investment” Inner Mongolia Yitai Investment Co., Ltd. (內蒙古伊泰投資有限責任公司)

“%” percent

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DEFINITIONS

Executive DirectorsMr. Zhang DonghaiMr. Liu ChunlinMr. Ge YaoyongMr. Zhang DongshengMr. Zhang JingquanMr. Lv GuiliangMr. Song Zhanyou

Independent non-executive DirectorsMr. Yu YouguangMr. Zhang ZhimingMr. Tam Kwok Ming, BannyMr. Huang Sujian

Registered office:Yitai Building, North Tianjiao RoadDongsheng District, OrdosInner Mongolia, the PRC

Principal place of business in Hong Kong:18/F, Tesbury Centre,28 Queen’s Road EastWan ChaiHong Kong

13 April 2017

To the Shareholders

Dear Sir or Madam,

REPORT OF THE BOARD FOR THE YEAR 2016REPORT OF THE BOARD OF SUPERVISORS FOR THE YEAR 2016

PERFORMANCE REPORT OF THE INDEPENDENT NON-EXECUTIVE DIRECTORSFOR THE YEAR 2016

PROFIT DISTRIBUTION FOR THE YEAR 2016FINANCIAL REPORT FOR THE YEAR 2016

CAPITAL EXPENDITURE FOR THE YEAR 2017APPOINTMENT OF AUDIT INSTITUTION FOR 2017

APPOINTMENT OF INTERNAL CONTROL AUDIT INSTITUTION FOR 2017ENTRUSTED WEALTH MANAGEMENT USING IDLE EQUITY FUND

PURCHASE OF LIABILITY INSURANCE FOR DIRECTORS,SUPERVISORS, SENIOR MANAGEMENT

RE-ELECTION AND APPOINTMENT OF DIRECTORSRE-ELECTION AND APPOINTMENT OF SUPERVISORS

COMPENSATION PACKAGE FOR DIRECTORS OFTHE SEVENTH SESSION OF THE BOARD

COMPENSATION PACKAGE FOR SUPERVISORS OFTHE SEVENTH SESSION OF THE BOARD OF SUPERVISORSAMENDMENTS TO POLICY ON THE MANAGEMENT OF

THE EXTERNAL GUARANTEE OF INNER MONGOLIA YITAI COAL CO., LTD.AMENDMENTS TO RULES OF PROCEDURE OF THE BOARD OF SUPERVISORS

THE COMPANY ENTERED INTO THE CROSS-GUARANTEE AGREEMENTWITH INNER MONGOLIA YITAI GROUP CO., LTD.

PROVIDE GUARANTEE TO SUBSIDIARIESGENERAL MANDATE TO THE BOARD OF THE COMPANY

FOR THE ISSUANCE OF H SHARESAND


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LETTER FROM THE BOARD


1. INTRODUCTION

The purpose of this circular, of which this letter forms a part, is to give you the notice of the AGM

and to provide you with all the information reasonably necessary to enable you to make an informed

decision on whether to vote for or against the proposed resolutions at the AGM.

At the AGM, ordinary resolutions will be proposed to approve, among others; (i) report of the Board

for the year 2016; (ii) report of the Board of Supervisors for the year 2016; (iii) performance report of the

independent non-executive directors for the year 2016; (iv) profit distribution for the year 2016; (v) financial

report for the year 2016; (vi) capital expenditure for the year 2017; (vii) appointment of audit institution for

2017; (viii) appointment of internal control audit institution for 2017; (ix) entrusted wealth management

using idle equity fund; (x) purchase of liability insurance for Directors, supervisors, senior management;

(xi) re-election and appointment of Directors; (xii) re-election and appointment of supervisors; (xiii)

compensation package for Directors of the seventh session of the Board; (xiv) compensation package for

supervisors of the seventh session of the Board of Supervisors; (xv) amendments to Policy on the

Management of the External Guarantee of Inner Mongolia Yitai Coal Co., Ltd.; (xvi) amendments to Rules

of Procedure of The Board of Supervisors; and (xvii) the Company entered into the cross-guarantee

agreement with Yitai Group. Special resolutions will be proposed at the AGM to approve (xviii) the

Company provides guarantee to subsidiaries; and (xix) the general mandate to the Board of the Company

for the issuance of H-shares of the Company.

2. REPORT OF THE BOARD FOR THE YEAR 2016

An ordinary resolution will be proposed at the AGM to approve the report of the Board for the year

2016. The full text of the report of the Board for the year 2016 is set out in the annual report of the

Company which has been dispatched to the Shareholders and also published on the website of the Hong

Kong Stock Exchange (www.hkexnews.hk) and the website of the Company (www.yitaicoal.com) .

3. REPORT OF THE BOARD OF SUPERVISORS FOR THE YEAR 2016

An ordinary resolution will be proposed at the AGM to approve the report of the Board of

Supervisors for the year 2016. The full text of the report of the Board of Supervisors for the year 2016 is set

out in the annual report of the Company which has been dispatched to the Shareholders and also published

on the website of the Hong Kong Stock Exchange (www.hkexnews.hk) and the website of the Company

(www.yitaicoal.com) .

4. PERFFORMANCE REPORT OF THE INDEPENDENT NON-EXECUTIVE DIRECTORSFOR THE YEAR 2016

The full content of the report of independent non-executive Directors of the Company is set out

below:

We, as independent Directors of Inner Mongolia Yitai Coal Co.,Ltd. (the “Company”) , has

performed honestly and diligently and taken our role as independent directors to supervise the Company on

standardized operation in 2016 according to the Company Law, the Code of Corporate Governance for

Listed Companies in China and the Guidelines for Introducing Independent Directors to the Board of

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Directors of Listed Companies and the requirements of the Articles of Association and the Work System for

Independent Directors in order to protect the legal interest of all Shareholders, in particular minorityShareholders. We hereby present our report during our term of office in 2016 as follows:

I. Performance Of Duties by Independent Directors

The fifth session of the Board comprised of 11 Directors, including 4 independent Directors,

representing more than one third of the number of Directors. The Board established strategy

committee, audit committee, remuneration and appraisal committee, nomination committee and

production committee, of which, the majority members of audit committee, remuneration and

appraisal committee and nomination committee was independent Directors, and led by independent

Directors.

(I) Basic Information on Current Independent Directors

Yu Youguang: Gender: Male. Ethnicity: Han ethnicity, born in 1955, holds an associate

degree and is a certified accountant and senior auditor. Mr. Yu is the deputy president of Inner

Mongolia Zhongtian Huazheng Accounting Firm (內蒙古中天華正會計師事務所) and the

executive councilor of Certified Public Accountant Association of Inner Mongolia Autonomous

Region (內蒙古自治區註冊會計師協會) . He has extensive experience in financial affairs andaccounting. He taught in Inner Mongolia Light Industry School (內蒙古輕工業學校) from

July 1981 to November 1985. He worked in the Audit Bureau of Baotou (包頭審計局) from

November 1985 to September 1999. He has been serving as the deputy president of Inner

Mongolia Zhongtian Huazheng Accounting Firm since September 1999. He was appointed as

independent Director of the Company since June 2013.

Tam Kwok Ming, Banny： Gender: Male, Ethnicity: Han ethnicity, born in 1963, Hong

Kong resident, Mr. Tam obtained a certification of accountancy from the Hong Kong

Polytechnic University (香港理工大學) in 1993. He holds the qualification of Certified Public

Accountant and a fellow member of Hong Kong Institute of Certified Public Accountants (香港會計師公會) . Mr. Tam is currently a partner of a Hong Kong accounting firm. He was

appointed as independent Director of the Company since February 2011.

Zhang Zhiming: Gender: Male. Ethnicity: Han ethnicity. Mr. Zhang was born in 1962

and possesses a doctoral degree of laws and now serves as the professor and doctoral

supervisor of Renmin University of China (中國人民大學) . Mr. Zhang finished his

undergraduate courses in law from Peking University (北京大學) in 1983 and the graduate

courses in law from the same university in 1986. He obtained a doctoral degree of law fromGraduate School of Chinese Academy of Social Sciences (中國社會科學院研究生院) in 1998

and worked in Social Sciences in China Press (《中國社會科學》雜誌社) of Chinese Academy

of Social Sciences as the editor and associate senior editor from 1986 to 1994. From 1994 to

2004, Mr. Zhang was appointed as the associate researcher and researcher in Institute of Law

(法學研究所) of Chinese Academy of Social Sciences, and the professor and doctoral

supervisor in Graduate School of Chinese Academy of Social Sciences from 1998 to 2004.

From June 2004 to July 2005, Mr. Zhang served as the vice president, member of the Party

Committee and the professor of National Prosecutors College of P.R.C (國家檢察官學院) ,

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and now serves as the professor and doctoral supervisor in Institute of Law of Renmin

University of China since September 2005, while holding the post of the independent directorof Shanxi Top Energy Co., Ltd. (山西通寶能源股份有限公司) , Shanxi Taigang Stainless

Steel co., Ltd. (山西太鋼不銹鋼股份有限公司) , Zhejiang China Commodities City Group

Co., Ltd. (浙江中國小商品城集團股份有限公司) and Wolong Real Estate Group Co., Ltd

(臥龍地產集團股份有限公司) . Mr. Zhang has been serving as the independent Director of

our Company since June 2015.

Huang Sujian: Gender: Male. Ethnicity: Han ethnicity. Mr. Huang was born in 1955,

and has been working in the Institute of Industrial Economics (工業經濟研究所) of Chinese

Academy of Social Sciences since 1988 and is a researcher of the Institute of Industrial

Economics of Chinese Academy of Social Sciences currently. He achieved a bachelor’s degree

and a master’s degree of economics from Xiamen University in 1982 and 1985, respectively,

and a doctoral degree of economics from the Chinese Academy of Social Sciences in 1988. He

mainly researches in company merger and acquisition, business organization and enterprise

reform. Mr. Huang Sujian has been the independent Director of the Company since November

2016.

(II) Adjustment of Independent Directors during the Reporting Period

The Company received the resignation report submitted by the independent Director Mr.

Qi Yongxing on 15 April 2016. For working reason (1) , Mr. Qi Yongxing resigned from the

position of independent Director and other related positions assumed by him on each

committee of the Board. At the 19th meeting of the 6th session of the Board held on 15 August

2016 and the first extraordinary general meeting of Shareholders of 2016 held on November

29, 2016, Mr. Huang Sujian was elected as the independent Director of the Company after

deliberation and succeeded Mr. Qi Yongxing in the positions on strategy committee, audit

committee, nomination committee, remuneration and appraisal committee and production

committee of the Board.

(III) Independence

As the Company’s independent Directors, we hold no other post of the Company than

independent Directors. Moreover, we hold no post at the major Shareholders and have no such

relationship with the Company, the major Shareholders or other interested institutions and

personnel of the Company as may interfere with our independent and objective judgment. We

have never obtained additional undisclosed benefits from the Company, the major Shareholders

or other interested institutions and personnel of the Company. Therefore, there exists nosituation that will affect the independence of us.

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(1) Mr. Qi Yongxing serves in the capacities of associate dean and associate professor in the MBA Institute of

Education in Inner Mongolia Finance & Economics College. In accordance with relevant state regulations,

current party and political leaders and cadres shall not take part-time job in enterprises, therefore Mr. Qi

Yongxing resigned as the independent non-executive Director of the Company.

II. Performance of Duties by Independent Directors during the Year

(I) Attendance at meetings

1. The Company held 8 Board meetings during the year, i.e. the 15th meeting of the

6th session of the Board to the 22th meeting of the 6th session of the Board) .

Among which, 2 meetings were held on-site (the 15th, 19th of the 6th session

were held on-site) and 6 meetings were held through telecommunication. The

Company held 2 general meetings during this year (annual general meeting of

2015, the first extraordinary general meeting of 2016) .

Name of independentDirector

Mandatorytimes of

attendance inBoard meetingsduring the year

Times ofattendancein person

Times ofattendance by

telecommunication

Times ofattendanceby proxy

Times ofabsence

Times ofattendancein generalmeetings

Yu Youguang 8 2 6 0 0 2

Qi Yongxing 7 2 5 0 0 1

Tam Kwok Ming, Banny 8 2 6 0 0 2

Zhang Zhiming 8 2 6 0 0 2

Huang Sujian 1 0 1 0 0 1

2. During the year, we did not authorize other independent Directors to attend the

meetings on behalf of ourselves.

3. During the year, we had no disagreements on any matters of the Company.

(II) Site Inspection and Cooperation With the Independent Directors by the Company

In 2016, the Board, management and other relevant personnel of the Company provided

active and necessary support, assistance and cooperation in the perform of our duties. We

understood business situations and financial conditions of the Company through on-the-spot

investigation of the Company; timely learned of the progress of the major events of theCompany through communication with the Directors, management and related personnel of the

Company from time to time; paid attention to related reports on the Company and the impact

of the external environment and the market change on the Company through media and

network; strengthened the study of policies and regulations, actively participated in various

training organized by regulators and updated professional knowledge continuously. By

applying our expertise and experiences in financial management, corporate governance, legal

and other fields, we put forward constructive opinions and suggestions on the Company’s

strategic development and standardization of operation. The duties of independent Directors

had been fully performed by us.

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III. Key Concerns in Annual Performance of Duties

In 2016, we focused on the Company’s daily related party transactions, external guaranty,

engagement of accounting firm, profit distribution, internal control, information disclosure and other

matters. We rendered clear and independent judgments on the legality and compliance of the relevant

determinations, implementations and disclosures made by the Company from the prospective of

promoting the continuous operation and long-term development of the Company and preservation of

the interests of Shareholders.

(I) Related Party Transactions

We made judgement on the necessity, objectivity, fairness and reasonability of the

pricing of daily related transactions as well as whether there is any damage to the interests of

the Company and the Shareholders during the reporting period in accordance with the relevant

provisions and reviewed the daily related transactions following relevant procedures, we

believe that the related party transactions between the Company and related party occurred in

the normal business course, for which the voting procedure of the Board are lawful and

effective. Besides, related Directors were avoided from the voting. The Company is

independent of daily related transaction. The pricing of it was based on market situation

and followed the principles of objectivity, fairness and justice. There is no damage to theinterests of the Company and the Shareholders, and the independence of the Company will not

be affected.

(II) External Guarantees and Occupation of Funds

The Company strictly enforced the provisions on external guarantees of laws and

regulations and the Company’s Articles of Association.

By the end of 2016, the Controlling Shareholders or other related parties of the

Company did not occupy any funds of the Company. The Company provided no guarantee to

the Controlling Shareholders, other related parties in which the Company holds less than 50%

equity, any entity without legal personality or any individual.

(III) Entrusted Financial Management

We released the Independent Opinions on Entrusted Financial Management Utilizing

Part of the Self-Owned Funds of the Company, believing that the funds used for entrusted

financial management are owned by the Company, on the premise of compliance with statelaws and regulations and ensuring the safety of capital, the entrusted financial management

will improve the use efficiency of funds, bring certain returns on investment and have no

impact on the normal capital turnover and the daily operation of the business of the Company.

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(IV) Appointment and Dismissal of staff

During the reporting period, the nomination, voting and hiring procedures for

independent Directors and senior management of the Company conformed to the provisions

of the Company’s articles of association, no violation of the provisions of the Company Law

or other relevant regulations in respect of the appointment was detected.

(V) Performance Forecast and Sales Letters

During the reporting period, the Company released the Announcement of Estimated

Decrease in 2015 Annual Performance of Company on 29 January 2016, the sufficient

communication with respect to performance between the management of the Company and the

chairman of the audit committee and auditors was conducted. We examined the financial report

of the Company according to the Annual Report System of Independent Directors and believe

that performance forecast released by the Company is consistent with the provisions of the

relevant laws and regulations.

(VI) Appointment of Certified Public Accountants

Da Hua Certified Public Accountants (special general partnership) and Deloitte ToucheTohmatsu engaged by the Company possess relevant professional qualifications. In the process

of providing audit service to the Company, they insisted on independent auditing criterion,

fully performed the duties and obligations stipulated in the agreements, completed the auditing

work dutifully and rendered independent audit opinion objectively and fairly.

(VII) Cash Dividends and Other Investor Returns

During the reporting period, the Company paid cash dividends to Shareholders

according to the profit distribution policy under the Articles of Association of the Company

and the annual profit distribution plan deliberated and approved at the general meeting of

Shareholders, so as to give reasonable returns on investment to all the Shareholders and other

investors. There is no damage to the interests of the Company or the interests of medium and

minority Shareholders.

(VIII) Fulfillment of Commitments by the Company and Shareholders

During the reporting period, no breach of commitments by the Company and the

relevant Shareholders had occurred.

(IX) Implementation of Information Disclosure

The Company performed disclosure obligations in strict accordance with the relevant

provisions of Rules Governing the Listing of Stocks on Shanghai Stock Exchange,

Administrative Measures for the Disclosure of Information of Listed Companies and other

laws and regulations, information disclosed by the Company was true, timely, accurate and

complete.

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(X) Implementation of Internal Control

The Company has basically established a relatively perfect internal control system,

which will be improved constantly in practice. The system had been implemented effectively

in the daily operations of the Company and guaranteed the healthy operation and business risk

control of the Company.

(XI) Operation of the Board and the Subordinated Committees

Five special committees subordinated to the Board were set up, including strategy

committee, audit committee, nomination committee, remuneration and appraisal committee and

production committee. During the reporting period, pursuant to the detailed rules for

implementation governing the special committees of the Board each special committee carried

out work smoothly, performed their respective duties diligently and faithfully, standardized

operation and played a proper role.

IV. Other Jobs

1. No proposal for convening the meeting of the Board;

2. No proposal for engagement or dismissal of accounting firms;

3. No independent engagement of external audit institutions and consultancy institutions,

etc..

V. Overall Evaluation and Suggestion

In 2016, in strict accordance with the Company law, Securities law, Code of Corporate

Governance for Listed Companies in China and other laws and regulations and the Articles of

Association as well as the Independent Director System of the Company, we attended the meetings of

the Board and the general meeting of Shareholders, presented independent opinions on significant

matters, performed duties loyally, honestly and diligently and earnestly, safeguarded the legitimate

rights and interests of the Company and all Shareholders, in particular minority Shareholders.

In 2017, we will be diligent and responsible and adhere to the principle of independent and

objective judgment as always and will provide more constructive advices using our professional

knowledges and experiences so as to enhance the decision-making ability and leadership of the Board

and preserve overall interests of the Company and the legitimate rights and interests of allShareholders.

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Contacts

Name: Yu Youguang E-mai: [email protected]

Name: Tam Kwok Ming, Banny E-mai: [email protected]

Name: Zhang Zhiming E-mai: [email protected]

Name: Huang Sujian E-mai: [email protected]

Independent non-executive Directors

Yu Youguang Tam Kwok Ming, Banny Zhang Zhiming Huang Sujian

23 March 2017

5. PROFIT DISTRIBUTION PLAN FOR THE YEAR 2016

In view that the Company is a listed company in the Shanghai Stock Exchange and the Hong Kong

Stock Exchange and should apply to the accounting standards in both places, the net profit after tax of the

parent company prepared in accordance with the accounting standards of both places is the same for this

year。

The Company proposed a cash dividend of RMB1.84 per 10 Shares (tax inclusive) to Shareholders,based on the total share capital of the Company of 3,254,007,000 Shares. The total dividend to be distributed

is RMB598,737,288, representing 30.15% of the net profit attributable to the owner of the parent company

of RMB1,985,762,176.05 as set out in the consolidated statements of the year 2016 of the Company. The

distribution plan complies with the requirements of the Notice on the Further Implementation of Matters

Relevant to Cash Dividend by Listed Companies《 ( 關於進一步落實上市公司現金分紅有關事項的通知》) issued by the CSRC and the Guidance of Cash Dividend of Listed Companies in the Shanghai Stock

Exchange (《上海證券交易所上市公司現金分紅指引》) issued by the Shanghai Stock Exchange.

As at the end of 2016, the accumulative total profit attributable to the shareholders of the parent

company amounted to RMB13,305,339,946.77, undistributed profit of RMB13,227,680,887.27 was carried

over to the next period upon the profit distribution.

The dividend paid in U.S. Dollar to holders of B Shares is calculated based on the middle rate of U.S.

Dollar against RMB as published by the People’s Bank of China on the first working day after the AGM at

which the resolution on distribution of dividend is approved. The dividend paid in Hong Kong Dollar to

holders of H-shares is calculated based on the middle rate of Hong Kong Dollar against RMB as published

by the People’s Bank of China on the first working day after the date of the AGM at which the resolution on

distribution of dividend is approved.

The Company will convene the 2016 AGM on Thursday, 25 May 2017 for consideration and approval

of relevant proposals, including the above proposal regarding final dividends for 2016. The final dividends

for 2016 will be paid on Thursday, 6 July 2017.

- 11 -


6. FINANCIAL REPORT FOR THE YEAR 2016

An ordinary resolution will be proposed at the AGM to approve the financial report of the Company

for the year 2016. The financial report of the Company for the year 2016 has been dispatched to

Shareholders and also published on the website of the Hong Kong Stock Exchange (www.hkexnews.hk) and

the website of the Company (www.yitaicoal.com) .

7. CAPITAL EXPENDITURE OF THE COMPANY FOR THE YEAR 2017

Based on future strategic development needs and the actual situation of production and management,

the Company will carry out preparation steadily for important proposed projects and put more efforts to

promote the projects under progress in 2017. Details about projects and capital expenditure planning in 2017

are as follows:

2017 Capital Expenditure Plan of Inner Mongolia Yitai Coal Co., Ltd.

Unit: RMB0’000

Project NameCapital Expenditure

for 2017

1.2 Mtpa of fine chemicals project of Inner Mongolia

Yitai Chemical Co., Ltd. 328,632.38

2 Mtpa coal-based polygeneration comprehensive

Project of Yitai Xinjiang Energy Co., Ltd. 50,000.00

1 Mtpa Coal-to-oil Project of Yitai Yili Energy Co., Ltd. 50,000.00

2 Mtpa indirect coal to liquids conversion pilot

project of Inner Mongolia Yitai Coal-to-oil Co., Ltd. 95,356.50

Talahao Mine/auxiliary processing plant 49,546.67

The second track of Huzhun Railway 43,617.73

Zhundong Railway – Dongwu Railway connecting line 22,041.00

Dama railway project 10,551.62

Construction of petrochemical gas station 5,684.00

Hangjinqi Xinnuo Municipal Construction Investment

(杭錦旗信諾市政建設投資) 5,300.00

Production and operation investment 65,610.00

Total 726,339.90

Introductions on the Projects are as follows:

- 12 -


(1) 1.2 Mtpa of Fine Chemicals Project of Yitai Chemical

The demonstration project of fine chemicals with production capacity of 1.2 million tons/year

invested by Yitai Chemical, a holding subsidiary of the Company, is located in Dugui Tara Industrial

Park, Hangjinqi, Ordos City. The construction scale amounts to an annual output of 1.2 million tons

of fine chemicals. The project transforms the local coals in Ordos into fine chemicals in production

process, which is an effective way to realize clean utilization of coal.

By the end of 2016, the project had fully entered into device commissioning phase. Single

commissioning, linked commissioning and equipment blow-sweep is ongoing to ensure one-time

successful run.

(2) 2 Mtpa Coal-Based Polygeneration Comprehensive Project of Yitai Xinjiang Energy Co.,Ltd.

The comprehensive coal based polygeneration project with the production capacity of 2 million

tons/year invested by Xinjiang Energy Company, a holding subsidiary of the Company, is located in

Fort Oasis Economic and Technological Development Zone, Urumqi, Xinjiang. The main products

include liquefied petroleum gas (LPG) , naphtha and diesel oil. The by-products consist of sulfur,

mixing alcohol and ammonium sulfate. The project had been filed with in Xinjiang UygurAutonomous Region Development and Reform Commission.

At present, Xinjiang Energy Company is carrying out the preliminary work, design finishing

and warehouse management, etc. All the supporting documents necessary for the examination and

approval of the project, except for EIA (Environmental Impact Assessment) Report, had been

approved. The procedures for granting land use right of the project are being performed orderly.

(3) 1 Mtpa Coal-to-oil Project of Yitai Yili Energy Co., Ltd.

The demonstration project of CTL (coal-to-liquids) with the production capacity of 1 million

tons/year invested by Yili Energy Company, a holding subsidiary of the Company, is located in Yitai

Yili Industrial Park, Qapqal Xibe Autonomous County, Xinjiang Yili Kazak Autonomous Prefecture.

The proposed construction scale amounts to an annual output of 1.02 million tons of oil and other by-

products. The construction unit of the project is Yili Energy Company. The General Office of

National Development and Reform Commission issued the Reply to Implementation of Preliminary

Work of 1 Million Tons/Year Demonstration Project of Yitai Ili Energy Co., Ltd. (Fa Gai Ban

Energy [2014] No. 1578) . According to the Reply, in order to promote the industrialization of

indirect liquefaction technology of domestic independent coal, further enhance the level of conversionefficiency and comprehensive utilization of coal resources and accelerate the quality upgrading

process of petroleum products, we support the implementation of the preliminary work of the project.

At present, centring on the approval of the project, Yili Energy Company vigorously advances

the process of submitting EIA (Environmental Impact Assessment Report) Report and ECA (Energy

Conservation Assessment) Report for approval, properly closes up the phased detailed design. In

respect of project approval, it has started preparation of the application report on Yili coal-to-liquids

project.

- 13 -


(4) 2 Mtpa Indirect Coal To Liquids Conversion Pilot Project of Inner Mongolia Yitai Coal-to-oil Co., Ltd.

The demonstration project of indirect coal liquefaction with the production capacity of 2

million tons/year invested by Coal-to-oil Company, a holding subsidiary of the Company, is located

in Dalu industrial park, Jungar Banner, Ordos City Inner Mongolia Autonomous Region. The

proposed construction scale amounts to an annual output of 2 million tons of oil and other by-

products.

On 8 July, 2016, the EIA (Environmental Impact Assessment) Report on the project was

approved by the Ministry of Environmental Protection; On 2 December, 2016, the Reply of National

Development and Reform Commission to Approval of 2 Million Tons/Year Indirect Coal

Liquefaction Project of Inner Mongolia Yitai Coal-to-oil Co., Ltd. (Fa Gai Energy [2016] No.

2540) was issued.

(5) Talahao Mine and Auxiliary Processing Plant

The project of Talahao Mine (塔拉壕煤礦) and the supporting coal preparation plant is

located in Dongsheng District, Ordos, Inner Mongolia. The recoverable reserves of the mine is 650

million tons, the designed production capacity of the mine is 6 million tons/year and the designedservice life is 76.9 years. In addition, the supporting coal preparation plant of the same size will be

constructed. The coal product will be transported outward mainly by railway to supply surrounding

coalification factories and power plants. The trial production has been carrying out at present.

(6) The Second Track of Huzhun Railway Project

Huzhun Railway, a holding subsidiary of the Company, intends to continue to invest in the

construction of the Second Track of Huzhun Railway Project. The Second Track of Huzhun Railway

Project consist of the second track from Togtoh to Zhou Jiawan and the second track from Jialanying

to Togtoh, the length of which are 55.47 km and 58.76 km respectively.

After the construction project of the second uplink line from Wangqi to South Huhe is

completed, the delivery ability of Huzhun railway will be greatly increased and the double line of

Huzhun railway will be directly connected with Hohhot South Station, which will avoid angle

transportation, greatly improve delivery capacity and transport efficiency and reduce transportation

costs. At that time, the function of outward transportation channel of Huzhun railway will be fully

realized, which will meet the demand of outward transportation of local coal.

(7) Zhundong Railway – Dongwu Railway Connecting Line Project

This project is located within Ordos city, Inner Mongolia autonomous region and passed

Jungar Banner and Ejin Horo Banner. The railway line starts at Hou Jialiang station of Zhundong

railway in the east and ends at Hayler Sihao station of the already existing Dongwu railway in the

west, the length of which is 12.185 km. Two stations of Houjialiang and Hayler Sihao will be

constructed. The project is conducive to the resources exploitation of the mining area in southern

Ordos and promote local economic and social development; moreover, it will further optimize the

- 14 -


railway network structure of the mining area in western Ordos, promote coal resources development

of the mining area along the railway line and enhance the ability of coal outward transport of themining area.

(8) Dama Railway Project

Dama railway project was invested by Inner Mongolia Yitai Zhundong Railway Co., Ltd. (內蒙古伊泰准東鐵路有限責任公司) a holding subsidiary of the Company. The newly constructed

railway section from Dafanpu west to Mazha is located within Jungar Banner, Ordos, Inner Mongolia.

The railway track starts from the loaded track at Dafanpu west (newly built) and ends at Mazha

station which is part of Suzhun railway under construction, the length of which is 58.89 km.

(9) Other Proposed Investment Projects of the Company for 2017

The Company plans to invest in other projects in 2017, which include construction project of

petrochemical gas station with proposed capital expenditure of RMB56.84 million; Hangjinqi Xinnuo

municipal construction project with proposed capital expenditure of RMB53 million; proposed

production and business investment of RMB656.1 million.

In conclusion, the proposed capital expenditure of the Company in 2017 amounts toRMB7,263,399,000, which will mainly consist of its own funds and bank loans.

8. THE APPOINTMENT OF AUDIT INSTITUTION FOR 2017

An ordinary resolution will be proposed at the AGM to approve the re-appointment of Da Hua

Certified Public Accountants (special general partnership) and Deloitte Touche Tohmatsu as the PRC

auditor and the international auditor of the Company respectively (with effect from the approval of the

resolution at the AGM and holding office until the conclusion of the next annual general meeting) and to

authorize the management to communicate with the above-mentioned audit institutions and determine the

audit fees.

9. THE APPOINTMENT OF INTERNAL CONTROL AUDIT INSTITUTION FOR 2017

An ordinary resolution will be proposed at the AGM to approve the re-appointment of Da Hua

Certified Public Accountants (special general partnership) as the internal auditor (with effect from the

approval of the resolution at the AGM and holding office until the conclusion of the next annual general

meeting) and authorize the management to communicate with the above-mentioned audit institution and

determine the relevant fees.

10. ENTRUSTED FINANCIAL MANAGEMENT WITH THE SELF-OWNED IDLE FUNDS

To make full use of the self-owned funds of the Company and improve the use efficiency of the self-

owned funds, on the premise of capital safety, lawful implementation and no impact on the normal

production and operation, the Company plans to entrust commercial banks, trust companies, securities

companies, fund companies, insurance companies, asset management companies and other financial

institutions to conduct financial management for it, using no more than RMB7 billion self-owned idle

- 15 -


money. Both parties of the entrusted financial management are independent of each other, which will not

constitute a related party transaction. Up to now, the balance of valid entrusted financial management iszero.

I. Basic Introduction

The temporarily self-owned working capital will be used for the entrusted financial

management, no performance guarantee will be required and there will be no impact on the daily

operations of the Company.

II. Product Description

The Company plans to entrust commercial banks, trust companies, securities companies, fund

companies, insurance companies, asset management companies and other financial institutions to

conduct financial management for it, no investment in stocks and derivatives thereof, securities

investment funds and other products of securities investment will be made.

III. Amount and Term of Entrusted Financial Management

Depending on the amount of working capital, the Company plans to use no more than RMB7billion self-owned idle funds for entrusted financial management, the term of which will be from the

date of approval at the annual general meeting of Shareholders in 2016 to the date of conclusion of

the annual general meeting in 2017.

IV. Description of Necessary Examination and Approval Procedures

According to the requirements of Rules Governing the Listing of Stocks on Shanghai Stock

Exchange, Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

and the Articles of Association of the Company, the aforesaid matter shall be subject to the

deliberation and approval of the general meeting of the Shareholders.

V. Risk Control

The Company will establish and perfect the approval and implementation procedures for the

capital use so as to ensure its effective launch and standardized operation. During the period of

entrusted financial management, the Company will keep in close contact with the entrusted entities,

timely track the operation of the entrusted funds and take corresponding measures to control the

investment risk in case it detects any risk factors possibly affecting the safety of the Company’sfunds.

At the same time, the Company will disclose periodically and report the information about the

entrusted financial management according to the relevant requirements of CSRC and Shanghai Stock

Exchange during the reporting period.

- 16 -


IV. Influence on the Daily Operations of Company

The Company will make adequate forecasts and estimates of the risks and benefits associated

with the financial products, as well as of the future capital demands. The relevant funds usage will

not affect the Company’s daily business operations and developments. Purchase of financial products

at the proper time utilizing the self-owned idle funds of the Company will generate certain return on

investment and improve the use efficiency of the self-owned idle funds of the Company and will not

damage the interests of the Company’s Shareholders.

VII. Opinions of Independent Director

On the premise of ensuring the safety and liquidity of capital, the entrusted financial

management utilizing the temporarily idle funds of the Company will improve the use efficiency of

the self-owned idle funds, increase the earnings and further raise the overall revenue of the Company,

all of which conform to the interests of the Company and all Shareholders. There is no damage to the

interests of the Company and all Shareholders, especially minority Shareholders; the relevant

approval procedures are consistent with the relevant provisions of the laws and regulations and the

Articles of Association. Therefore, the Company’s independent Directors rendered the opinion

agreeing to the matters on entrusted financial management.

11. PURCHASE OF LIABILITY INSURANCE FOR DIRECTORS, SUPERVISORS AND SENIORMANAGEMENT OF THE COMPANY

According to the Code of Corporate Governance for Listed Companies in China enacted by CSRC

and the Listing Rules, in order to motivate Directors, supervisors and senior management to perform their

duties diligently and effectively and to avoid the risks of litigation caused by performance of their duties, the

Company intends to purchase liability insurance for Directors, supervisors and senior management

(“Directors’ Liability Insurance”) .The concrete scheme of Directors’ Liability Insurance is as follows:

I. Applicant: Inner Mongolia Yitai Coal Co., Ltd

II. Insured: Directors, supervisors and senior management of the Company

III. Limitation of Liability: not more than RMB11 million/year

IV. Total Insurance Premium: not more than RMB60,000/year

V. Term of Insurance: one year and renewal on annual basis

Application is to be submitted to the general meeting of Shareholders for authorizing the management

of the Company to deal with the issues relating to Directors’ Liability Insurance (including but not limited

to determine of insured amount, insurance premium and other clauses; execution of relevant legal documents

and other related issues, etc.) and to renew or repurchase the insurance at or prior to the expiry of the

contract for Director’s Liability Insurance based on the above-mentioned scheme.

- 17 -


12. RE-ELECTION AND APPOINTMENT OF DIRECTORS

As the term of the sixth session of the Board will be expired on 30 May 2017, the Board passed the

resolution for the proposed re-election and appointment of the members of the seventh session of the Board

on 23 March 2017. The current Directors of the Company will continue to perform their duties as the

Company has not held the AGM. The next session of the Board shall comprise 11 Directors, and currently

the nomination committee of the Company has recommended the Director candidates for this general

election as follows:

Executive Directors Zhang Donghai (張東海) , Liu Chunlin (劉春林) , Ge Yaoyong

(葛耀勇) , Zhang Dongsheng (張東升) , Wang Sanmin (王三民) ,

Lv Guiliang (呂貴良) , Song Zhanyou (宋占有)

Independent Non-Executive

Directors

Yu Youguang (俞有光) , Zhang Zhiming (張志銘) , Huang Sujian

(黃速建) , Wong Hin Wing (黃顯榮)

The biographies of the Director candidates of the seventh session of the Board are set out in

Appendix II to this circular.

After the seventh session of the Board has taken office, Zhang Jingquan and Tam Kwok Ming,Banny, Directors of the sixth session of the Board, shall cease to be a Director. There is no disagreement

between he and the Board and there is no other matter in relation to his retirement that needs to be brought

to the attention of the Shareholders or the Hong Kong Stock Exchange.

According to the articles of association of the Company, each session of Directors has a term of three

years. If candidates above are appointed as Directors of the seventh session of the Board at the AGM, they

will enter into service agreements with the Company. Remuneration of each Director will be determined in

accordance with the remuneration standard of directors of the Company. Allowance for domestic

independent non-executive Director of the Company is RMB200,000 per year; and allowance for overseas

independent non-executive Directors of the Company is RMB250,000 per year; remuneration of Directors as

managerial personnel in the Company shall be received based on their actual managerial duties and they are

also entitled to a Director allowance of RMB24,000 per year; Directors who do not serve as managerial

personnel in the Company are only entitled to a Director allowance of RMB24,000 per year.

Save as disclosed in the biographies of the candidates above, each of them confirmed that: (1) he

does not hold any position in the Company or any subsidiary of the Company, and he has not held any

position as a director or a supervisor in any other listed companies in the last three years; (2) he does not

have any relationship with any other Directors, supervisors, senior management, or substantial or ControllingShareholders or shareholders of any subsidiary of the Company; and (3) he does not have any interest in the

Shares (within the meaning of Part XV of the SFO) as of the Latest Practicable Date.

In addition, the candidates above have no other events required to be disclosed pursuant to Rule

13.51 (2) (h) to (v) of the Listing Rules, nor is there any other matters in relation to proposed appointment

of Directors that need to be brought to the attention of Shareholders.

- 18 -


The Company adopts the cumulative voting system on election of Directors, and the instruction of

which is set out in Appendix IV to this circular.

13. PROPOSED RE-ELECTION AND APPOINTMENT OF SUPERVISORS

As the term of the sixth session of the board of supervisors (the “Board of Supervisors”) will be

expired on 30 May 2017, the Board of Supervisors passed the resolution for the proposed re-election and

appointment of the members of the seventh session of the Board of Supervisors on 23 March 2017 and the

staff supervisor has already been established through democratic election in the meeting of the Board on 23

March 2017. The current supervisors of the Company will continue to perform their duties as the Company

has not held the AGM. The next session of the Board of Supervisors shall comprise 7 supervisors, and

currently the nomination committee of the Company has recommended the supervisor candidates for this

general election as follows:

Shareholder Representative

Supervisors

Yuan Bing (袁兵) , Liu Xianghua (劉向華)

Independent Supervisors Wang Yongliang (王永亮) , Wu Qu (鄔曲)

At the same time, the labor union of the Company has selected staff representative supervisorcandidates through democratic election as follows:

Staff Representative

Supervisor

Jia Xiaolan (賈小蘭) , Li Cailing (李彩玲) , He Peixun (賀佩勳)

The biographies of the supervisor candidates of the seventh session of the Board of Supervisors are

set out in Appendix III to this circular.

After the seventh session of the Board of Supervisors has taken office, Li Wenshan (李文山) , Han

Zhanchun (韓占春) , Wang Xiaodong (王小東) and Ji Zhifu (姬志福) , supervisors of the sixth session of

the Board of Supervisors, shall cease to be supervisors. They have confirmed that there is no disagreement

between each of them and the Board of Supervisors and there is no other matter in relation to their

retirement that needs to be brought to the attention of the Shareholders or the Hong Kong Stock Exchange.

According to the articles of association of the Company, each session of supervisors has a term of

three years. If candidates above are appointed as supervisors of the seventh session of the Board of

Supervisors at the AGM, they will enter into service agreements with the Company. Remuneration of each

supervisor will be determined in accordance with the remuneration standard of supervisors of the Company.Allowance for independent supervisors is RMB100,000 per year; remuneration of Supervisors working for

the Company shall be received based on their actual work posts and they are also entitled to a Supervisor

allowance of RMB12,000 per year; supervisors who do not hold any post in the Company are only entitled

to a supervisor allowance of RMB12,000 per year.

Save as disclosed in the biographies of the candidates above, each of them confirmed that: (1) he

does not hold any position in the Company or any subsidiary of the Company, and he has not held any

position as a director or a supervisor in any other listed companies in the last three years; (2) he does not

- 19 -


have any relationship with any other Directors, supervisors, senior management, or substantial or Controlling

Shareholders of the Company or shareholders of any subsidiary of the Company; and (3) he does not haveany interest in the Shares (within the meaning of Part XV of the SFO) as of the Latest Practicable Date.

In addition, the candidates above have no other events required to be disclosed pursuant to Rule

13.51 (2) (h) to (v) of the Listing Rules, nor is there any other matters in relation to proposed appointment

of supervisors that need to be brought to the attention of Shareholders.

The Company adopts the cumulative voting system on election of supervisors, and the instruction of

which is set out in Appendix IV to this circular.

14. COMPENSATION SCHEME OF THE DIRECTORS ON THE SEVENTH SESSION OF THEBOARD

In order to fully arouse the enthusiasm and creativity of the Directors and improve the level of

management, after the deliberation of the remuneration and appraisal committee of the Board, the following

compensation scheme of the Directors on the seventh session of the Board was formulated based on the

Articles of Association and the actual operation and development status of the Company and by reference to

the compensation levels of the same industry and region:

I. Applicants: the Directors receiving compensation from the Company

II. Applicable Term: Term of Office on the seventh session of the Board

III. Compensation Standard:

1. The annual salary system will be applicable to the chairman of the Board. The salary

will be composed of basic annual salary, performance annual salary and Directors’

allowance. The basic annual salary amounts to RMB800,000 and the performance

annual salary will be paid according to the performance evaluation results;

2. The independent non-executive Directors who do not assume management position of

the Company will receive compensation based on the management position and also the

Directors’ allowance. The directors’ allowance of the independent non-executive

Directors is RMB24,000/year;

3. The independent non-executive Directors who do not assume management position of

the Company will receive the Directors’ allowance. The Directors’ allowance of theindependent non-executive Directors is RMB24,000/year;

4. The Directors’ allowance is RMB200,000/year for the domestic independent non-

executive Directors of the Company and RMB250,000/year for the overseas

independent non-executive Directors of the Company.

- 20 -


IV. Miscellaneous

1. The basic salary of the Directors will be paid on a monthly basis; The expenses actually

incurred by the Directors for attending the meetings held by the Company and other

costs will be reimbursement by the Company;

2. In case of departure of the Directors due to expiration, re-election and resignation

during the term of office, the compensation will be calculated and paid according to the

actual length of the term of office;

3. The actual amount of the performance salary will be floating based on the Company’s

annual operating results;

4. All the amount of the above-mentioned compensation will be pretax and the Company

will withhold the relevant individual income tax.

15. COMPENSATION SCHEME OF THE SUPERVISORS ON THE SEVENTH SESSION OFTHE BOARD OF SUPERVISORS

In order to fully arouse the enthusiasm and creativity of the supervisors of the Company and improvethe level of management, after the deliberation of the remuneration appraisal committee of the Board of

Supervisors, the following compensation scheme of the seventh session of the Board of Supervisors was

formulated based on the Articles of Association and the actual operation and development status of the

Company and by reference to the compensation levels of the same industry and region:

I. Applicants: the supervisors receiving compensation from the Company

II. Applicable Term: Term of Office on the seventh session of the Board of Supervisors

III. Compensation Standard:

1. The non-independent supervisors will receive compensation based on the actual position

assumed at the Company and also the supervisors’ allowance. The allowance of the

independent supervisors is RMB12,000/year;

2. The allowance of the independent supervisors of the Company is RMB100,000/year.

IV. Miscellaneous

1. The basic salary of the Company’s supervisors will be paid on a monthly basis; The

expenses actually incurred by the supervisors for attending the meetings held by the

Company and other costs will be reimbursement by the Company;

2. In case of departure of the supervisors due to expiration, re-election and resignation

during the term of office, the compensation will be calculated and paid according to the

actual length of the term of office;

- 21 -


3. The actual amount of the performance salary will be floating based on the Company’s

annual operating results;

4. All the amount of the above-mentioned compensation will be pretax and the Company

will withhold the relevant individual income tax.

16. AMENDMENTS TO POLICY ON THE MANAGEMENT OF THE EXTERNAL GUARANTEEOF INNER MONGOLIA YITAI COAL CO., LTD.

The Company proposes to amend the existing Policy on the Management of the External Guarantee.

The specific amendments are as follows:

Articles Before Amendment After Amendment

Article 16 of

Section 2

Any of the external guarantees shall be

deliberated and approved by the

shareholders’ general meeting, shall be

subject to the deliberation and approval

of the Board of Directors before

presen t ing the proposa l to the

shareholders’ general meeting. The

following guarantees provided by the

Company are subject to approval at the

shareholders’ general meeting:

(1) any subsequent guarantee of the

Company and its controlling

subsidiaries after the total amount

of external guarantees reaches or

exceeds 50% of the latest audited

net assets;

(2) any guarantee provided with a

gearing ratio of over 70%;

(3) any single guarantee exceeding

10% of the latest audited net assets;

(4) a n y g u a r a n t e e p r o v i d e d t o

shareholders, actual controllers,

and their respective connected

parties of the Company;

Any of the external guarantees shall be

deliberated and approved by the

shareholders’ general meeting, shall be

subject to the deliberation and approval

of the Board of Directors before

presen t ing the proposa l to the

shareholders’ general meeting. The

following guarantees provided by the

Company are subject to approval at the

shareholders’ general meeting:

(1) any subsequent guarantee of the

Company and its controlling

subsidiaries after the total amount

of external guarantees reaches or

exceeds 50% of the latest audited

net assets;

(2) any guarantee provided with a

gearing ratio of over 70%;

(3) any single guarantee exceeding

10% of the latest audited net assets;

(4) a n y g u a r a n t e e p r o v i d e d t o

shareholders, actual controllers,

and their respective connected

parties of the Company;

- 22 -


Articles Before Amendment After Amendment

(5) on an accumulative basis in 12consecutive months, any guarantee

provided in an amount exceeds

30% of the latest audited total

asset value of the Company;

(6) the guarantee that exceeds 50% of

the latest audited net assets of the

Company and the absolute amount

exceeds RMB50 million on an

a c c u m u l a t i v e b a s i s i n 1 2

consecutive months;

(7) such other guarantees as required

by Shanghai Stock Exchange and

the Articles of Association.

The guarantees aforesaid except for

subparagraph (4) shall be subject tomore than two-thirds of the voting rights

held by Shareholders present at the

meeting. When the shareholders’

general meeting is considering the

guarantee se t out in preceding

subparagraph (4) , the shareholders or

the shareholders controlled by the actual

controllers shall refrain from the voting,

and this voting shall be passed by more

than half of other shareholders attending

the shareholders’ general meeting.

(5) on an accumulative basis in 12consecutive months, any guarantee

provided in an amount exceeds

30% of the latest audited total

asset value of the Company;

(6) the guarantee that exceeds 50% of

the latest audited net assets of the

Company and the absolute amount

exceeds RMB50 million on an

a c c u m u l a t i v e b a s i s i n 1 2

consecutive months;

(7) such other guarantees as required

by Shanghai Stock Exchange and

the Articles of Association.

The guarantee set out in preceding

subparagraph (5) shall be subject tomore than two-thirds of the voting rights

held by Shareholders present at the

meeting. When the shareholders’

general meeting is considering the

guarantee se t out in preceding

subparagraph (4) , the shareholders or

the shareholders controlled by the actual

controllers shall refrain from the voting,

and this voting shall be passed by more

than half of other shareholders attending

the shareholders’ general meeting.

- 23 -


17. AMENDMENTS TO RULES OF PROCEDURE OF THE BOARD OF SUPERVISORS

To maintain the independence of the Board of Supervisors and comply with the regulatory

requirements in the PRC, the Board of Supervisors proposes to amend the existing Rules of Procedure of the

Board of Supervisors.

The specific amendments are as follows:

Article Before Amendment After AmendmentReasons forAmendment

Article 4 Article 4 The office of the Board

of Supervisors

The Company sets up the officeof the Board of Supervisors

which works jointly with the

administrative office of the

Board and is responsible for the

daily routine of the Board of

Supervisors. The office of the

Board of Supervisors is subject

to the leadership of the chairman

of the Board of Supervisors and

is responsible for keeping the

s e a l o f t h e B o a r d o f

Supe rv i so r s , d ra f t i ng and

keeping the meeting materials

of the Board of Supervisors.

Article 4 The office of the Board

of Supervisors

The Company sets up the officeof the Board of Supervisors

which is responsible for the

daily routine of the Board of

Supervisors. The office of the

Board of Supervisors is subject

to the leadership of the chairman

of the Board of Supervisors and

is responsible for keeping the

s e a l o f t h e B o a r d o f

Supe rv i so r s , d ra f t i ng and

keeping the meeting materials

of the Board of Supervisors.

T o m a i n t a i n t h e

independence of the

Board of Supervisors

- 24 -


Article Before Amendment After AmendmentReasons forAmendment

Article 14 Ar t i c l e 14 Procedures o f

proposal at the Interim Meeting

Each supervisor shall have one

vote in the meeting of the Board

of Supervisors, to be exercised

by way of a show of hands or by

vote recognized by the Board of

Supervisors.

T h e S u p e r v i s o r s ’ v o t i n g

intentions include For, Against

and Abstain. Supervisors present

shall select one of the above-

mentioned intentions. If a

supervisor selects no or two or

above intentions, the chairman of

the meeting shall request thesupervisor to reselect. Any

supervisor refusing to reselect

shall be deemed abstention. Any

supervisor who leaves the venue

in the course of the meeting and

does not return for voting shall

be deemed abstention.

Resolutions at the meeting of the

Board of Supervisors shall be

passed by half or more of all

supervisors’ votes.

Article 14 Resolutions at the

Meet ing of the Board of

Supervisors

Each supervisor shall have one

vote in the meeting of the Board

of Supervisors, to be exercised

by way of a show of hands or by

vote recognized by the Board of

Supervisors.

T h e S u p e r v i s o r s ’ v o t i n g

intentions include For, Against

and Abstain. Supervisors present

shall select one of the above-

mentioned intentions. If a

supervisor selects no or two or

above intentions, the chairman ofthe meeting shall request the

supervisor to reselect. Any

supervisor refusing to reselect

shall be deemed abstention. Any

supervisor who leaves the venue

in the course of the meeting and

does not return for voting shall

be deemed abstention.

Resolutions at the meeting of the

Board of Supervisors shall be

passed by at least two-thirds of

the supervisors’ votes.

In accordance with the

provisions under the

Circular Regarding

C o m m e n t s o n t h e

A m e n d m e n t s t o

Articles of Association

of Companies Listed in

Hong Kong

- 25 -


18. ENTERING INTO THE CROSS-GUARANTEE AGREEMENT WITH INNER MONGOLIAYITAI GROUP CO., LTD.

Parties: • the Company

• Yitai Group

Date: • 23 March 2017

Nature of thetransaction:

• The Company and Yitai Group and the respective subsidiaries

provide guarantee services in respect of their borrowings or

funds from financial institutions for each other

Principal terms: • The Company will provide guarantee services in respect of

borrowings or funds from financial institutions of Yitai Group

and its subsidiaries for each accounting year of 2017, 2018 and

2019.

• The amount of guarantee in each year does not exceed RMB2

billion.

• Entities of the guarantee include the Company and its

subsidiaries/Yitai Group and its subsidiaries.

• The guarantee is a joint liability guarantee.

• The guarantee agreement shall be valid after being signed and

sealed by the legal representative or authorized representative of

the Company and Yitai Group and being approved by both

parties’ authorities.

• The cross-guarantee agreement between Yitai Group and the

Company will be effective from the date of approval by the

general meeting and expired on 31 December 2019.

• Counter guarantee for the cross guarantee between the Company

and Yitai Group: the counter guarantee is provided unilaterally,

and the Company and its subsidiaries are not obliged to makeany counter guarantee for the guarantee of Yitai Group and its

subsidiaries. The Company and its subsidiaries will enter into a

corresponding counter-guarantee agreement with Yitai Group

and its subsidiaries after providing the actual guarantee.

- 26 -


• The counter-guarantee is a joint liability guarantee, with a term

ends up with the settlement of bank borrowings within thecross-guaranteed amount in this agreement or the debts settled

by the guarantor on his behalf by the warrantee. It includes all

obligations of the warrantee, i.e., all the amounts repaid by the

guarantor, compensation (the interest of the amounts repaid by

the guarantor as of the settlement date calculated at one-year

benchmark lending rate of the People’s Bank of China) , and

other expenses incurred for realization of creditor’s rights to the

guarantor (including but not limited to litigation costs, attorney

fees, etc.) .

• Therefore, the cross-guarantee between the Company and Yitai

Group does not violate Notice of Certain Issues in Capital

Transactions between Listed Companies and Connected Parties

and External Guaranties of Listed Companies (Zheng Jian Fa

(2003) No. 56 circular of CSRC) and Notice of the China

Securities Regulatory Commission and the China Banking

Regulatory Commission concerning the Regulation of External

Guarantees to Be Provided by Listed Companies (Zheng Jian Fa(2005) No. 120 circular of CSRC) .

• The specific guarantee within the cross-guaranteed amount in

this agreement shall be subject to approval at general manager’s

work meetings in accordance with authorization granted at the

general meeting, and the relevant legal documentation will be

signed by the chairman of the Company and its authorized

representative.

Pricing policies: • The Company determines the pricing bases based on the

practical operation needs and they are reached after arm’s

length negotiation. When determining the amount of guarantees

required by the Company, the following factors were mainly

considered:

1) The total quantities of the coals purchased by the

Company externally in 2014, 2015 and 2016, is 26.11

million tons, 25.27 million tons and 28.24 million tonsrespectively, and the unit purchasing cost of coals is

RMB200.18 /ton, RMB133.74 /ton and RMB213.29 /ton

at the same period. In the background of the current

policies and market environments, it is expected that the

quantities of the coals to be purchased by the Company

externally in 2017, 2018 and 2019 will range from 25

million to 30 million tons a year. Assuming that the unit

purchasing cost of coals is RMB200 /ton, it is estimated

- 27 -


that in 2017, 2018 and 2019, RMB5 billion to RMB6

billion will be spent by the Company in purchasing coalsexternally, out of which 40% will be borrowed from

financial institutions in the form of working capital loans

in 2017, 2018 and 2019. Therefore, the Company is

expected to apply for RMB2 billion to RMB3 billion

loans from financial institutions each year. At the same

time, in the circumstance that the banks strengthen the

examination and approval of the credit applications from

coal industry, the guarantees in amount of RMB1.2

billion to RMB1.8 billion will be in demand by the

Company based on the assumption that 60% of the

aforesaid loans need to be secured;

2) The total investment in the project of fine chemicals with

production capacity of 1.2 million tons/year constructed

by the holding subsidiary of the Company – Inner

Mongol ia Yi ta i Chemical Co. , Ltd . reached

approximately RMB18.6 billion, out of which RMB12.3

billion was borrowed from the banks. Inner MongoliaYitai Chemical Co., Ltd. intends to draw down the

aforesaid loan amount in full in 2017, 2018 and 2019.

According to the loan agreement, the shareholders of

Inner Mongolia Yitai Chemical Co., Ltd. shall provide

guarantees for it. Given that Yitai Group holds 9.8%

equity in Inner Mongolia Yitai Chemical Co., Ltd., Yitai

Group will have to provide guarantees to the holding

subsidiary of the Company Inner Mongolia Yitai

Chemical Co., Ltd. in 2017, 2018 and 2019 in the total

amount of RMB1.2 billion, which was calculated on a

pro rata basis. The guarantee provided by Yitai Group to

the holding subsidiary of the Company constitutes the

guarantee provided by Yitai Group to the Company.

Based on the above reasons, it is estimated that the Company

will request Yitai Group to provide guaranties to it in the

amount of approximately RMB2 billion for each year in 2017,

2018 and 2019.

When determining the amount of guarantees required by Yitai

Group, the following factors were mainly considered:

- 28 -


In 2017, Yitai Group plans to engage in food (including crude

oil, rapeseed, flax seed, sunflower seeds, wheat, etc.) trade withthe quantities of 1 million tons or so, for which about RMB5

billion will be needed. Yitai Group intends to borrow 40% of

the amount from financial institutions, therefore, the working

capital loans of Yitai Group is estimated to increase by RMB2

billion in 2017. At the same time, Yitai Group intends to

maintain the grain trade scale of 1 million tons per year in 2018

and 2019, therefore, Yitai Group will still need working capital

loans in the amount of RMB2 billion per year in 2018 and 2019.

Yitai Group will be required to provide guarantee for the above-

mentioned loans. Consequently, it is expected that Yitai Group

will require the Company to provide guarantee to it in the

amount of about RMB2 billion per year in 2017, 2018 and 2019.

Please refer to “Internal Control Measures” below in this

circular for the details of the internal control measures.

Reasons for and benefitsof the transaction:

• With the gradual increase in capital demand of the Company, it

is beneficial to the Company to obtain bank credit to support thelong-term and stable development of the Company’s business

with the establishment of mutual cooperation relationship in

which enterprises provide cross guarantee with enterprises

possessing certain strengths. Yitai Group, as a large group

company, is in a good credit condition, thus the terms and

conditions of Cross-guarantee Agreement for the provision of

cross-guarantee services with Yitai Group are consistent with

that of the guarantee companies in the market, are fair and

reasonable and in the interests of the Company and the

Shareholders as a whole. In addition, the provision of cross-

guarantee services between the Company and Yitai Group

doesn’t incur any guarantee fees from each other.

Proposed Annual Caps:

Type of transaction

Proposed Annual Capsfor the year ended 31 December

(RMB million)

2017 2018 2019The Company provides guarantee services to

Yitai Group and its subsidiaries according

to the cross-guarantee agreement between

the Company and Yitai Group 2,000 2,000 2,000

- 29 -


Basis for Annual Caps：

When determining the amount of guarantees required by the Company, the following factors

were mainly considered:

1) The total quantities of the coals purchased by the Company externally in 2014, 2015

and 2016, is 26.11 million tons, 25.27 million tons and 28.24 million tons respectively,

and the unit purchasing cost of coals is RMB200.18/ton, RMB133.74/ton and

RMB213.29/ton at the same period. In the background of the current policies and

market environments, it is expected that the quantities of the coals to be purchased by

the Company externally in 2017, 2018 and 2019 will range from 25 million to 30

million tons a year. Assuming that the unit purchasing cost of coals is RMB200/ton, it is

estimated that in 2017, 2018 and 2019, RMB5 billion to RMB6 billion will be spent by

the Company in purchasing coals externally, out of which 40% will be borrowed from

financial institutions in the form of working capital loans in 2017, 2018 and 2019.

Therefore, the Company is expected to apply for RMB2 billion to RMB3 billion loans

from financial institutions each year. At the same time, in the circumstance that the

banks strengthen the examination and approval of the credit applications from coal

industry, the guarantees in amount of RMB1.2 billion to RMB1.8 billion will be in

demand by the Company based on the assumption that 60% of the aforesaid loans needto be secured;

2) The total investment in the project of fine chemicals with production capacity of 1.2

million tons/year constructed by the holding subsidiary of the Company – Inner

Mongolia Yitai Chemical Co., Ltd. reach approximately RMB18.6 billion, out of which

RMB12.3 billion was borrowed from the banks. Inner Mongolia Yitai Chemical Co.,

Ltd. intends to draw down the aforesaid loan amount in full in 2017, 2018 and 2019.

According to the loan agreement, the shareholders of Inner Mongolia Yitai Chemical

Co., Ltd. shall provide guarantees for it. Given that Yitai Group holds 9.8% equity in

Inner Mongolia Yitai Chemical Co., Ltd., Yitai Group will have to provide guarantees

to Inner Mongolia Yitai Chemical Co., Ltd. in 2017, 2018 and 2019 in the total amount

of RMB1.2 billion, which was calculated on a pro rata basis.

Based on the above reasons, it is estimated that the Company will request Yitai Group to

provide guaranties to it in the amount of approximately RMB2 billion for each year in 2017, 2018

and 2019.

When determining the amount of guarantees required by Yitai Group, the following factorswere mainly considered:

In 2017, Yitai Group plans to engage in food (including crude oil, rapeseed, flax seed,

sunflower seeds, wheat, etc.) trade with the quantities of 1 million tons or so, for which about RMB5

billion will be needed. Among them, Yitai Group intends to borrow 40% of the amount from financial

institutions, therefore, the working capital loans of Yitai Group is estimated to increase by RMB2

billion in 2017. At the same time, Yitai Group intends to maintain the grain trade scale of 1 million

tons per year in 2018 and 2019, therefore, Yitai Group will still need working capital loans in the

- 30 -


amount of RMB2 billion per year in 2018 and 2019. Consequently, it is expected that Yitai Group

will require the Company to provide guarantee to it in the amount of about RMB2 billion per year in2017, 2018 and 2019.

Guarantee services above-mentioned are not secured by the assets of the Company and its

subsidiaries and the relevant terms of the guarantee are on normal commercial terms or favourable.

Thus the provision of guarantee services in respect of borrowings or funds from financial institutions

by Yitai Group and its subsidiaries to the Company and its subsidiaries is fully exempted pursuant to

Rule 14A.90 of the Listing Rules.

Implication under the Listing Rules

As at the Latest Practicable Date, Yitai Group directly and indirectly holds 58.76% of the

existing issued share capital of the Company and is a Controlling Shareholder, and thus constitutes a

connected person of the Company under the Listing Rules. The cross-guarantee agreement between

the Company and Yitai Group and the provision of guarantee services in respect of borrowings or

funds from financial institutions by the Company and its subsidiaries to Yitai Group and its

subsidiaries contemplated thereunder constitute Connected Transactions under Chapter 14A of the

Listing Rules. As the highest applicable percentage ratio of the annual caps in respect of relevant

cross-guarantee agreement will exceed 5% as defined by the Listing Rules, the provision of guaranteeservices in respect of borrowings or funds from financial institutions by the Company and its

subsidiaries to Yitai Group and its subsidiaries contemplated under this agreement and relevant

annual caps are subject to the reporting, annual review, announcement and independent Shareholders’

approval requirements pursuant to Chapter 14A of the Listing Rules. The provision of guarantee

services in respect of borrowings or funds from financial institutions by the Company and its

subsidiaries to Yitai Group and its subsidiaries contemplated under this agreement is fully exempted

pursuant to Rule 14A.90 of the Listing Rules.

Pursuant to Rule 14A.36 of the Listing Rules, any connected person, shareholder and their

associates interested in the cross-guarantee agreement and the transactions contemplated thereunder

shall abstain from voting from relevant resolutions at the AGM. Therefore, given Yitai Group’s

interests, Yitai Group and its associates shall abstain from voting from the resolutions in relation to

the approval of Cross-guarantee Agreement and annual cap for 2017 and 2018 and 2019.

Our Company has formed an independent board committee comprising of the independent non-

executive Directors to provide advice to the independent Shareholders regarding the fairness and

reasonableness of the provision of the terms of guarantee services in respect of borrowings or funds

from financial institutions by the Company and its subsidiaries to Yitai Group and its subsidiaries. TCCapital International Limited has been appointed as the independent financial advisor of our

Company to provide advice on such matters to the independent board committee and the independent

Shareholders.

Therefore, the Directors recommend independent Shareholders vote in favor of the Cross-

guarantee Agreement and the transactions contemplated thereunder as set out in this circular.

- 31 -


Confirmation of Board

Mr. Zhang Donghai, Mr. Liu Chunlin, Mr. Ge Yaoyong, Mr. Zhang Dongsheng, Mr. Zhang

Jingquan, Mr. Lv Guiliang and Mr. Song Zhanyou, the Directors, hold positions or interests in Yitai

Group, thus they had abstained from voting at the Board meeting in respect of such transaction. Save

as disclosed above, none of the Directors has any material interest in the cross-guarantee agreement

entered into by Yitai Group and the Company. The Board had reviewed and approved this Connected

Transaction on 23 March 2017.

The Directors (including the independent non-executive Directors) consider that the cross-

guarantee agreement entered into to conduct mutual insurance transactions between Yitai Group and

the Company and the revised annual caps have been entered into in the ordinary and usual course of

business of the Company and conducted on normal commercial terms, are fair and reasonable and in

the interests of the Company and the Shareholders as a whole.

INTERNAL CONTROL MEASURES

Our Company has adopted the following internal control procedures to ensure that Connected

Transactions are fair and reasonable and on normal commercial terms:

• our Company has adopted and implemented a management system on Connected

Transactions. Under this system, our finance management center is responsible for

conducting reviews on compliance with relevant laws, regulations, company policies

and Listing Rules in respect of Connected Transactions. In addition, the finance

management center, legal affairs department and other relevant departments of our

Company are jointly responsible for evaluating the transaction terms under the

agreements for Connected Transactions, in particular, the fairness of the pricing terms

under each agreement; and

• our independent non-executive Directors have also reviewed and will continue to review

the agreements for Connected Transactions to ensure such agreements, where available,

are entered on normal commercial terms, are fair and reasonable, and are carried out

pursuant to the terms of such agreements. The auditor of our Company will also conduct

an annual review on the pricing and annual caps of such agreements.

Our Company has adopted the following internal control procedures to ensure that the

Continuing Connected Transaction (the “CCTs”) are fair and reasonable and on normal commercial

terms according to the cross-guarantee agreement between the Company and Yitai Group:

The Company has established and adopted a management system on Connected Transactions.

According to the system, the Investor Relation and Management Department and the Financial

Management Center of the Company are responsible for the information gathering on and monitoring

of Connected Transactions, and conducting reviews on compliance with relevant laws, regulations,

company policies and the Listing Rules in respect of the CCTs;

- 32 -


The Financial Management Center, Legal Affairs Department and other relevant departments

of our Company are jointly responsible for evaluating the fairness of the transaction terms under theagreements for CCTs;

The auditor of our Company will also conduct an annual review on annual caps of such CCTs;

The independent non-executive Directors of the Company have also reviewed and will continue to

review the Connected Transactions to ensure such agreements are entered into on normal commercial

terms, are fair and reasonable, and are carried out pursuant to the terms of such agreements.

In order to minimize the risk exposure of the Company in relation to the Yitai Group

guarantee, the audit committee of the Board (all members are independent non-executive Directors)

shall, for the mutual guarantee period:

a) review each guarantee under the cross-guarantee agreement. The audit committee has

the right to fully understand the business operations and financial position of the

borrower before approving each guarantee under the cross-guarantee agreement. It

would not be a breach of the cross-guarantee agreement if after a review of the financial

position of the borrower, the audit committee considers it inappropriate to approve such

guarantee. To facilitate such review process, Yitai Group and its subsidiaries shall

timely provide their financial statements and other relevant information as requested bythe audit committee of the Company. The audit committee will take into account the

following factors for approving such guarantee:

i. No guarantee should be granted to a borrower with negative consolidated equity

attributable to owners; and

ii. No guarantee should be granted to a borrower where an event occurs that may

constitute an event of default under any of its existing loan agreements;

b) monitor the implementation of each individual guarantee provided by the Company

under the cross-guarantee agreement;

c) consider the suitability of the guaranteed company;

d) periodically review the management accounts and relevant financial information, and

inspect the books and records of Yitai Group; and

e) periodically review and examine any material adverse changes on the business,property, assets or operations of Yitai Group, or its ability to perform any of its

obligations under the mutual guarantee agreement.

- 33 -


The Directors consider that the terms of the cross-guarantee agreement have been entered into

after arm’s length negotiation between parties and conducted on normal commercial terms orfavorable, are fair and reasonable and in the interests of the Company and the Shareholders as a

whole. In particular, the Company has considered the following factors: (1) Up to now, no single

default event occurred with respect to the loans provided to Yitai Group and its affiliated companies;

(2) According to the assessment of Yitai Group’ credit standing in 2016 made by Dagong Global

Credit Rating Co., Ltd, the long-term corporate credit rating of Yitai Group maintained to be AA+,

the rating outlook remains stable; (3) Yitai Group and its affiliated companies should provide counter

guarantees to the Company as additional security for the guarantees provided by the Company. The

default risk under the guarantees provided by the Company is relatively low, based on the advantage

of the guarantees of Yitai Group and the additional security provided by Yitai Group and its affiliated

companies, the risks associated with the guarantees provided by the Company is reasonable and

controllable in the opinion of the Directors.

General Information

Information on the Company

The Company is a joint stock liability company incorporated in the PRC on 23 September

1997, which is one of the largest coal enterprises in the PRC. The principal operations of theCompany include coal operations, transportation operations, coal-related chemical operations and

other operations.

Information on Yitai Group

Yitai Group is a limited liability company incorporated in the PRC in 1999 under the laws of

PRC. The operations of Yitai Group include processing, transportation and sales of raw coal, railway

construction and railway transportation of passengers and goods; import of equipment, accessories

and technology for mines; construction and operation of highways; the coal-related chemical

operation and sales of coal-related chemical products.

- 34 -


19. PROVIDING GUARANTEE TO THE HOLDING SUBSIDIARIES

For the reason of business development, the holding subsidiaries of the Company will have to lend

money from financial institutions or finance in other ways at irregular intervals, the Company intends to

provide joint liability guarantee for the loan or financing borrowed by the holding subsidiaries from the

financial institutions so as to support the business development of the holding subsidiaries of the Company.

I. Provision of guarantee

Unit: 0,000 Currency: RMB

Name of the guaranteed partiesEstimated balance

of guarantees

Inner Mongolia Yitai Zhundong Railway Co.,Ltd.(內蒙古伊泰准東鐵路有限責任公司)

100,000

Inner Mongolia Yitai Huzhun Railway Co., Ltd.

(內蒙古伊泰呼准鐵路有限公司)

150,000

Inner Mongolia Yitai Coal-to-oil Co., Ltd.

(內蒙古伊泰煤制油有限責任公司)

60,000

Inner Mongolia Yitai Chemical Co., Ltd.

(內蒙古伊泰化工有限責任公司)

1,230,000

Yitai Xinjiang Energy Co., Ltd.

(伊泰新疆能源有限公司)

100,000

Yitai Yili Energy Co., Ltd.

(伊泰伊犁能源有限公司)

300,000

Yitai Yili Mining Co., Ltd.

(伊泰伊犁礦業有限公司)

20,000

Yitai Supply Chain Finance Services (Shenzhen) Co., Ltd.

(伊泰供應鏈金融服務 (深圳)有限公司)

30,000

Yitai Energy Investment (Shanghai) Co., Ltd.

(伊泰能源投資 (上海)有限公司)

30,000

Yitai (Energy) Shanghai Co., Ltd.

(伊泰 (能源)上海有限公司)

30,000

Inner Mongolia Yitai Jingyue Suancigou Mining Co., Ltd.

(內蒙古伊泰京粵酸刺溝礦業有限公司)

50,000

Total 2,100,000

- 35 -


II. Basic Information of the guaranteed Parties

Basic information of the guaranteed Parties are set out as follows:

Unit: 0’000 Currency: RMB

Name of the guaranteed Parties Business NatureCurrent

ShareholdingRegistered

Capital

Inner Mongolia Yitai Zhundong Railway Co., Ltd.

(內蒙古伊泰准東鐵路有限責任公司)

Railway transportation 96.27% 155,400



Railway transportation 76.99% 207,459.8



Coal-related Chemical 90.2% 136,000






Investment in the

coal mining industry

90.2% 65,000

Inner Mongolia Yitai Coal-to–oil Co., Ltd.


Coal-related Chemical 51% 235,290




Yitai Supply Chain Finance Services (Shenzhen) Co.,

Ltd. (伊泰供應鏈金融服務 (深圳)有限公司)

Supply Chain

Management

100% 5,000



Energy Investment 100% 5,000



Energy Technology 100% 5,000

Inner Mongolia Yitai Jingyue Suancigou Mining

Co., Ltd. (內蒙古伊泰京粵酸刺溝礦業有限責任公司)

Coal Mining 52% 108,000

III. Basic Information on Accumulative External Guarantees as of 31 December 2016

As of 31 December 2016, the aggregate amount of the external guarantees provided by the

Company is RMB9.835 billion, all of which were provided to the holding subsidiaries of the

Company, accounting for 40.95% of the latest audited net assets of the Company valued at

RMB24.016 billion. The above guarantees are in compliance with the Company’s Articles of

Association and relevant laws and regulations and there is no overdue guarantee and illegal guarantee.

The specific provisions on the loan and guarantee will be contained in the relevant contracts or

agreements to be concluded between the Company and financial institutions. In addition, the legal

representative or authorized representative of the Company is authorized to sign relevant legal

documents.

- 36 -


20. GENERAL MANDATE TO THE BOARD FOR THE ISSUANCE OF H-SHARES

Based on the need of the ordinary production and operation of the Company, the Company proposed

to the AGM to grant general mandate to the Board under the following conditions, to determine the

allotment and issuance of and dealing with the additional H Shares representing 20% of the aggregate par

value of the issued H-shares of the Company. As at the date of this circular, the Company has 326,007,000

H Shares. Upon the passing of the resolution of General Mandate to issue Shares, and on the basis that no

further Shares are issued before the AGM, the Company may issue a maximum of 65,201,400 H Shares.

Matters that will be considered are as follows:

1. Authorize the Board to, under the general mandate, allot, issue and deal with, or conditionally

or unconditionally agree to allot, issue and deal with the aggregate par value of H-shares up to

20% of the numbers of the issued H-shares of the Company on the day when this resolution is

passed at this general meeting of the Company, and to determine the number of H-shares to be

allotted or issued subject to the precondition in paragraph 2 hereinafter.

2. Authorize the Board to exercise the general mandate pursuant to applicable laws (including

but not limited to the Company Law of the PRC and the Listing Rules) and to obtain all the

approvals from government and/or regulatory authorities (if any) for exercise of the same.

3. The general mandate will remain effective from the date when it is passed at the general

meeting until the earliest of the date on which:

(1) the annual general meeting of the Company in 2017 is concluded;

(2) the 12-month period following the passing of this resolution at the general meeting

expires;

(3) the general mandate granted to the Board as set out in this resolution is revoked or

amended by Shareholders by way of a special resolution at any general meeting.

4. Authorize the Board to approve, execute and do, or procure to be executed and done, all such

documents, deeds and things as it may consider necessary in connection with the allotment and

issuance of and dealing with any new Shares under the general mandate above.

5. Upon completion of the allotment and issuance of new Shares, authorize the Board to increase

the registered capital of the Company and make according amendments to the articles of

association based on the method, class and number of the allotment and issuance of newShares of the Company as well as the actual share structure of the Company upon completion

of the allotment and issuance of new Shares.

POLL PROCEDURE

Pursuant to Rules 13.39 (4) of the Listing Rules, any vote of Shareholders at a general meeting must

be taken by poll. Therefore, all the resolutions set out in the notice of the AGM shall be voted by poll while

Shareholders may cast a vote either personally or by proxy.

- 37 -


ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

AGM

A notice convening the AGM to be held at Thursday, 25 May 2017 at 9:00 a.m. is set out on pages

68 to 75 of this circular. A form of proxy for use at the AGM is also enclosed. Such form of proxy is also

published on the website of the Hong Kong Stock Exchange (www.hkexnews.hk) .

Whether or not you propose to attend the AGM, you are requested to complete and return the

enclosed form of proxy in accordance with the instruction printed thereon and return it to the Hong Kong

share registrar of the Company, Computershare Hong Kong Investor Services Limited, at 17M Floor,

Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible but in any event not

less than 24 hours before the time appointed for the holding of the AGM (i.e. 9:00 a.m. on Wednesday, 24

May 2017) or 24 hours before the time appointed for the holding of any adjournment thereof. Completion

and return of the form of proxy will not preclude the Shareholders from attending and voting in person at

the AGM or any adjournment thereof if they so wish.

In order to ascertain the entitlements of the Shareholders to attend the AGM held at 9:00 am onThursday, 25 May 2017, the register of members of the Company will be closed from Tuesday, 25 April

2017 to Thursday, 25 May 2017 (both days inclusive) , during which period no transfer of Shares will be

effected. To be eligible to attend and vote at the AGM, all transfer documents must be lodged with the H

Share Registrar, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor,

Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong for holders of H Shares no later than 4:30

p.m. on Monday, 24 April 2017.

The register of members of the Company will be closed from Wednesday, 14 June 2017 to Monday,

19 June 2017 (both days inclusive) , during which period no transfer of Shares will be effected. In order to

be entitled to final dividend for the year ended 31 December 2016 (subject to the approval from the

Shareholders) , unregistered H Shareholders must deposit the transfer documents with the Company’s H

share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor,

Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong no later than 4:30 p.m. on Tuesday, 13

June 2017.

Shareholders intending to attend the AGM must return the reply slip to the Company’s H share

registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183

Queen’s Road East, Wan Chai, Hong Kong by hand or by post on or before Thursday, 4 May 2017.

- 38 -


RECOMMENDATION

The Board consider that the proposed resolutions above are in the best interests of the Company and

the Shareholders as a whole, therefore, the Board recommend all qualified Shareholders vote in favor of the

said resolutions at the AGM.

By order of the Board

Inner Mongolia Yitai Coal Co., Ltd.*Zhang Donghai

Chairman


- 39 -


13 April 2017

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTIONS

We refer to the circular issued by the Company to Shareholders dated 13 April 2017 of which this

letter forms a part. Terms defined in the circular shall have the same meanings when used in this letter

unless the context otherwise requires.

We have been appointed by the Board to advise the independent Shareholders as to whether the

Cross-guarantee Agreement is on normal commercial terms and is fair and reasonable so far as the

independent Shareholders are concerned, and is in the interests of the Company and the Shareholders as a

whole.

TC Capital International Limited has been appointed to act as the independent financial adviser to

advise the independent board committee and the independent Shareholders as to whether the terms of the

guarantee services in respect of borrowings or funds from financial institutions by the Company and its

subsidiaries to Yitai Group and its subsidiaries and the respective caps are on normal commercial terms, fair

and reasonable and in the interests of the Company and the Shareholders as a whole. The text of the letter of

advice from TC Capital International Limited, the independent financial adviser, containing its

recommendation and the principal factors it has taken into account in arriving at its recommendation is

set out from pages 42 to 51 of this circular.

Independent Shareholders are recommended to read the letter of advice from TC Capital International

Limited, the independent financial adviser and the letter from the Board contained in this circular as well as

the additional information set out in the appendices to this circular.

- 40 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE


Having considered the terms of the Cross-guarantee Agreement and the advice of TC Capital

International Limited, the independent financial adviser, we are of the opinion that the Cross-guaranteeAgreement is on normal commercial terms and is fair and reasonable so far as the Independent Shareholders

are concerned, and is in the interests of the Company and the Shareholders as a whole. We therefore

recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the

AGM to approve the Cross-guarantee Agreement and the transactions contemplated thereunder.

For and on behalf of

Independent Board Committee

Independent non-executive Directors

Mr. Yu Youguang Mr. Zhang Zhiming Mr. Tam Kwok Ming, Banny Mr. Huang Sujian

- 41 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the full text of a letter of advice from TC Capital International Limited, the

independent financial adviser to the independent board committee and the Independent Shareholders, which

has been prepared for the purpose of incorporation in this circular, setting out its advice to the independent

board committee and the Independent Shareholders on the provision of guarantee services by the Group in

respect of borrowings or funds from financial institutions of Yitai Group and its subsidiaries.

13 April 2017

The Independent Board Committee and the Independent Shareholders

Inner Mongolia Yitai Coal Co., Ltd.*

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS IN RELATION TOPROVISION OF GUARANTEE

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board

Committee and the Independent Shareholders in respect of the provision of guarantee services by the Group

in respect of borrowings or funds from financial institutions of Yitai Group and its subsidiaries (the

“Guarantee”) and the related caps for the years ending 31 December 2017, 2018 and 2019 (the “Caps”) ,

details of which are set out in the letter from the Board (the “Letter from the Board”) in the circular (the

“Circular”) of Inner Mongolia Yitai Coal Co., Ltd. (the “Company”) to the Shareholders dated 13 April

2017, of which this letter forms part. Capitalized terms used in this letter have the same meanings as those

defined in the Circular unless the context otherwise requires.

As stated in the Letter from the Board, as at the Latest Practicable Date, Yitai Group directly and

indirectly held 58.76% of the existing issued share capital of the Company and is a Controlling Shareholder,

and thus constitutes a connected person of the Company under the Listing Rules. The provision of Guarantee

constitutes connected transactions under Chapter 14A of the Listing Rules. As the highest applicable

percentage ratio of the Caps will exceed 5% as defined by the Listing Rules, the Guarantee and the Caps are

subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements

pursuant to Chapter 14A of the Listing Rules.

We have been appointed by the Company to advise (i) the Independent Board Committee and the

Independent Shareholders as to whether or not the Guarantee is entered in the ordinary and usual course of

business of the Company, the terms of the Guarantee are on normal commercial terms, fair and reasonable

insofar as the Independent Shareholders are concerned and in the interests of the Company and the

Shareholders as a whole and the Caps is fair and reasonable; and (ii) whether the Independent Shareholders

- 42 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

should vote in favour of the Guarantee and the Caps. As at the Latest Practicable Date, we did not have any

relationships or interests with the Company or any other parties that could reasonably be regarded asrelevant to the independence of us.

BASIS OF OPINION

In putting forth our recommendation, we have considered, amongst other things, (i) the cross-

guarantee agreement; (ii) the Company’s annual report for the years ended 31 December 2014 (the “2014Annual Report”) and 31 December 2015 (the “2015 Annual Report”) and the Company’s announcement

of annual results for the year ended 31 December 2016 (the “2016 Result Announcement”) ; and (iii) other

information as set out in the Circular. We have also relied on all relevant information, opinions and facts

supplied and representations made to us by the Directors and the representatives of the Company. We have

also studied the relevant market information and trends of the related industry.

We have assumed that all such information, opinions, facts and representations, which have been

provided to us by the Directors or the representatives of the Company, for which they are fully responsible,

are true, accurate and complete in all respects. We have no reason to doubt the truth, accuracy and

completeness of the information and representations provided to us by the Company. The Company has also

confirmed to us that no material facts have been omitted from the information supplied and we have no

reason to suspect that any material information has been withheld by the Company or is misleading.

We consider that we have sufficient information currently available to reach an informed view and to

provide a reasonable basis for our recommendation. We have not, however, carried out any independent

verification of the information provided by the Directors and the representatives of the Company, nor have

we conducted any independent investigation into the business, affairs, operations, financial position or future

prospects of each of the Group and Yitai Group and any of their respective subsidiaries and associates.

PRINCIPAL FACTORS AND REASONS

In formulating our opinion in respect of the Guarantee and the Caps, we have taken into account the

following principal factors and reasons:

1. Background information of the parties to the Guarantee

The Group

As stated in the Letter from the Board, the Company is a joint stock liability company

incorporated in the PRC on 23 September 1997, which is one of the largest coal enterprises in thePRC. The principal operations of the Company include coal operations, transportation operations,

coal-related chemical operations and other operations.

- 43 -


The following tables set out the selected consolidated financial information of the Group

prepared in accordance with IFRS for the four years ended 31 December 2016 as extracted from the2014 Annual Report, the 2015 Annual Report and the 2016 Result Announcement:

For the yearended

31 December2016

For the yearended

31 December2015

For the yearended

31 December2014

For the yearended

31 December2013

RMB’000

(audited)

RMB’000

(audited)

RMB’000

(audited)

RMB’000

(audited)

Revenue 22,317,130 19,116,172 24,806,104 24,274,873

Earnings Before Interest &

Tax (“EBIT”) 3,498,800 1,162,135 4,142,984 5,439,559

Finance costs 933,929 867,812 742,909 805,695

Net profit 2,125,361 252,726 2,761,317 3,924,396

Net cash from operation 8,607,789 2,758,297 5,745,435 5,502,466

Financial ratiosNet margin (%) 9.52% 1.32% 11.13% 16.17%EBIT margin (%) 15.68% 6.08% 16.70% 22.41%

Interest coverage (EBIT/

finance costs) (times) 3.75 1.34 5.58 6.75

As at31 December

2016

As at31 December

2015

As at31 December

2014

As at31 December

2013RMB’000

(audited)

RMB’000

(audited)

RMB’000

(audited)

RMB’000

(audited)

Cash and bank balances 4,432,760 6,605,859 6,959,946 3,814,532

Current assets 11,662,028 13,787,843 13,055,979 10,354,913

Non-current assets 59,279,576 54,380,923 45,688,099 35,129,595

Total assets 70,941,604 68,168,766 58,744,078 45,484,508

Current liabilities 11,542,617 11,885,820 5,626,640 4,536,453

Net current assets 119,411 1,902,023 7,429,339 5,818,460

Non-current liabilities 30,830,687 29,514,599 25,620,785 15,933,646

Total liabilities 42,373,304 41,400,419 31,247,425 20,470,099Total equity 28,568,300 26,768,347 27,496,653 25,014,409

Financial ratiosCurrent ratio (times) 1.01 1.16 2.32 2.28

Total liabilities to total equity

(%) 148.32% 154.66% 113.64% 81.83%

- 44 -


As shown in the above tables, net margin, EBIT margin and interest coverage of the Group

decreased to approximately 1.32%, 6.08% and 1.34 for the year ended 31 December 2015 fromapproximately 11.13%, 16.70% and 5.58 for the year ended 31 December 2014. The Group’s total

liabilities to total equity ratio as at 31 December 2015 was approximately 154.66% and current ratio

was approximately 1.16. The Group recorded cash and bank balances of approximately RMB6,605.86

million, RMB6,959.95 million and RMB3,814.53 million as at 31 December 2015, 31 December

2014 and 31 December 2013 respectively. The 2015 Annual Report mentioned that “in 2015, under

the co-effect of slowdown of national macro-economic growth and structural transformation, coal

consumption in coal consuming industries has declined sharply; on the other hand, given concentrated

release of new domestic capacity, substantial excessive coal capacity and a large scale of coal

importing, the situation of coal oversupply has not changed, causing a severe decline of the coal

market and a drastic drop of the coal price, resulted in continuous declination in the industry profit.”

The representatives of the Company advised that affected by the environment in the coal industry, the

financial results of the Group for the year ended 31 December 2015 deteriorated.

The 2016 Result Announcement mentioned that “with the implementation of the policy of

limited production and coal demand growth, the coal market in the second half of 2016 gradually

picked up and most of the coal enterprises made a profit instead of suffering a loss. But at present,

the fundamentals of the coal demand has not changed significantly, there is still a lack of solid

foundation for the smooth operation of the coal economy. To resolve excess capacity, and promotethe coal supply and demand balance will still be a key policy in the next few years. In 2017, under

the regulation and control by the market and policy and affected by coal production capacity exit,

reduction of production, international market and many other factors, it is expected that the imbalance

situation between supply and demand of the national coal market will be eased and coal prices will

fluctuate in a reasonable range.” Thus most of the financial figures and financial ratios of the Group

for the year ended 31 December 2016 shown in the above tables improved as compared with those for

the year ended 31 December 2015. The Group’s current assets decreased from approximately

RMB13,787.84 million in 2015 to RMB11,662.03 million in 2016 mainly attributable to decrease in

balance of cash and cash equivalents as the Group recorded net cash outflow from financing activities

of approximately RMB3,669.39 million in 2016 compared with net cash inflow of approximately

RMB5,071.09 million in 2015 as the Group made more repayment of borrowings in 2016.

Yitai Group

As stated in the Letter from the Board, Yitai Group is a limited liability company incorporated

in the PRC in 1999 under the laws of PRC. The operations of Yitai Group include processing,

transportation and sales of raw coal, railway construction and railway transportation of passengers

and goods; import of equipment, accessories and technology for mines; construction and operation ofhighways; the coal-related chemical operation and sales of coal-related chemical products.

- 45 -


The following tables set out the selected consolidated financial information of Yitai Group

prepared in accordance with PRC generally accepted accounting principles for the three years ended31 December 2015:

For the yearended

31 December2015

For the yearended

31 December2014

For the yearended

31 December2013

RMB’000

(audited)

RMB’000

(audited)

RMB’000

(audited)

Revenue 20,767,179 27,335,962 27,288,259

Earnings Before Interest & Tax (“EBIT”) 2,116,277 4,413,878 5,447,047

Finance costs 1,719,566 1,457,553 1,738,367

Net profit 186,448 2,190,319 3,044,769

Net cash from operation 2,975,747 6,201,429 3,917,262

Financial ratiosNet margin (%) 0.90% 8.01% 11.16%

EBIT margin (%) 10.19% 16.15% 19.96%Interest coverage (EBIT/finance costs) (times) 1.23 3.03 3.13

As at31 December

2015

As at31 December

2014

As at31 December

2013RMB’000

(audited)

RMB’000

(audited)

RMB’000

(audited)

Cash and bank balances 9,115,223 9,640,160 7,779,150

Current assets 40,260,971 38,153,114 35,620,191

Non-current assets 65,145,333 55,920,930 44,149,319

Total assets 105,406,304 94,074,045 79,769,510

Current liabilities 21,827,980 16,188,348 12,892,708

Net current assets 18,432,991 21,964,766 22,727,483

Non-current liabilities 49,367,647 43,592,655 35,080,595

Total liabilities 71,195,627 59,781,003 47,973,304

Total equity 34,210,677 34,293,041 31,796,206

Financial ratiosCurrent ratio (times) 1.84 2.36 2.76

Total liabilities to total equity (%) 208.11% 174.32% 150.88%

- 46 -


As shown in the above tables, net margin, EBIT margin and interest coverage of Yitai Group

decreased to approximately 0.90%, 10.19% and 1.23 for the year ended 31 December 2015 fromapproximately 8.01%, 16.15% and 3.03 for the year ended 31 December 2014. Yitai Group’s total

liabilities to total equity ratio as at 31 December 2015 was approximately 208.11% and current ratio

was approximately 1.84. Yitai Group recorded cash and bank balances of approximately

RMB9,115.22 million, RMB9,640.16 million and RMB7,779.15 million as at 31 December 2015,

31 December 2014 and 31 December 2013 respectively. The representatives of the Company advised

that the decrease in revenue of Yitai Group for the year ended 31 December 2015 was mainly due to

the decrease in coal demand in 2015 and the decrease in coal price. According to 環渤海動力煤價格指數 (Bohai-Rim Steam-Coal Price Index*) , coal price dropped from around RMB600 per ton in

January 2014 to around RMB400 per ton in May 2015.The coal price raised to around RMB600 per

ton in November 2016 and maintained at around RMB 590 per ton in March 2017. Moreover, the

movement of the financial figures and financial ratios of Yitai Group for the year ended 31 December

2015 were generally in line with those of the Group for the year ended 31 December 2015.

2. Principal terms of the cross-guarantee agreement

The principal terms of the cross-guarantee agreement have been set out in the Letter from the Board

and are summarized below.

Date : 23 March 2017

Parties : (i) the Company; and

(ii) Yitai Group

Nature of the transaction : The Company and Yitai Group and the respective subsidiaries

provide guarantee services in respect of their borrowings or

funds from financial institutions for each other

Principal terms of the

Guarantee

: • The Company will provide guarantee services in respect

of borrowings or funds from financial institutions of Yitai

Group and its subsidiaries for each accounting year of

2017, 2018 and 2019.

• The amount of guarantee in each year does not exceed

RMB2 billion.

• Entities of the guarantee include the Company and its

subsidiaries/Yitai Group and its subsidiaries.

• The guarantee is a joint liability guarantee.

- 47 -


• The guarantee agreement shall be valid after being signed

and sealed by the legal representative or authorizedrepresentative of the Company and Yitai Group and being

approved by both parties’ authorities.

• The cross-guarantee agreement between Yitai Group and

the Company will be effective from the date of approval

by the general meeting and expire on 31 December 2019.

• Counter guarantee for the cross guarantee between the

Company and Yitai Group: the counter guarantee is

provided unilaterally, and the Company and its

subsidiaries are not obliged to make any counter

guarantee for the guarantee of Yitai Group and its

subsidiaries. The Company and its subsidiaries will enter

into a corresponding counter-guarantee agreement with

Yitai Group and its subsidiaries after providing the actual

guarantee.

• The provision of cross guarantee services between theCompany and Yitai Group doesn’t incur any guarantee

fees from each other.

As mentioned above, Yitai Group should provide counter guarantee for the guarantee provided by the

Group while the Group is not obliged to make any counter guarantee for the guarantee provided by Yitai

Group. We consider that the counter guarantee provides protection to the Group without any cost. The

representatives of the Company advised that the Group had only provided a guarantee to its associate

company before and that guarantee was also without any guarantee fee. Given (i) the Group also provide a

guarantee to a third party without any guarantee fee; and (ii) the provision of the cross guarantee is to

facilitate the operation of the both parties as mentioned in the paragraph headed “Reasons for and benefits of

the entering into the cross-guarantee agreement” below and thus not to earn guarantee fee, we consider that

the agreement established without commission basis is reasonable.

3. Reasons for and benefits of the entering into the cross-guarantee agreement

As stated in the Letter from the Board, with the gradual increase in capital demand of the Company,

it is beneficial to the Company to obtain bank credit to support the long-term and stable development of the

Company’s business with the establishment of mutual cooperation relationship in which enterprises providecross guarantee with enterprises possessing certain strengths. Yitai Group, as a large group company, is in a

good credit condition, thus the terms and conditions of provision of the cross-guarantee agreement with Yitai

Group are consistent with that of the guarantee companies in the market, are fair and reasonable and in the

interests of the Company and the Shareholders as a whole.

- 48 -


According to an article namely “China tightens coal and steel finance while encouraging exports”

date 21 April 2016 published on the website of Bloomberg, China’s central bank was tightening finances tosteel and coal projects to help accelerate the government’s culling of industrial overcapacity. As advised by

the representatives of the Company, due to tighten lending policy in coal companies of banks in the PRC,

the Group and Yitai Group are requested by the banks to provide a third party guarantee in making loans.

According to 跟蹤評級公告 (Rating tracking report*) dated 26 July 2016 issued by Dagong Global

Credit Rating Co., Ltd., a credit rating agency recognized by Peoples’ Bank of China, Yitai Group is rated

AA+, with a stable outlook. The representatives of the Company advised that Yitai Group confirmed that it

did not have any repayment default in respect of any loan arrangements with banks as at the Latest

Practicable Date. In August 2016, the All-China Federation of Industry & Commerce (中華全國工商業聯合會) , a unit of the National Committee of the Chinese People’s Political Consultative Conference, published

the list of yearly top 500 private enterprises in the PRC (the “2016 Top 500 List”) in which Yitai Group

ranked 131th in 2016, down from 102nd in 2015.

According to an article namely ““曙光”初現，仍有“硬骨頭”要啃” (Dawn early, there are still hard

bones to chew*) dated 6 March 2017 published on the website of the State Council the People’s Republic of

China (the source of the article was from 新華社 (Xinhua News Agency) ) (the “Article”) , with the

improvement of the supply structure, the coal industry is better than the days. In the first half of 2016, coal

prices began to recover. In September 2016, Shanxi coal industry recorded net profit of RMB 790 million atthat month, ending the 26-month continuous industry-wide losses and into the benign development channel.

The reduction of production capacity of coal enterprises in the PRC leads to recovery of coal prices,

enhancing efficiency of coal enterprises, replacement of production capacity and safe production.

Although the results of Yitai Group for the year ended 31 December 2015 deteriorated as mentioned

in the paragraph headed “Background information of the parties to the Guarantee” above, after considering

(i) the review of coal industry in 2016 and the positive coal industry prospects as mentioned in the Article;

(ii) the credit ranking and repayment history of Yitai Group; (iii) Yitai Group is on the 2016 Top 500 List,

we concur with the Directors that the risk of Yitai Group in defaulting the loans under the Guarantee is

limited.

We concur with the Directors’ view that the entering into the cross-guarantee agreement can facilitate

the operation and growth of the business of the Group and Yitai Group as both parties can secure sufficient

funds for their operations. Therefore we concur with the Directors’ view that the entering into the cross-

guarantee agreement, including the Guarantee, is in the interests of the Company and the Shareholders as a

whole.

- 49 -


4. The Caps and basis of determination

As stated in the Letter from the Board, in 2017, Yitai Group plans to engage in food (including crude

oil, rapeseed, flax seed, sunflower seeds, wheat, etc.) trade with the quantities of 1 million tons or so, for

which about RMB5 billion will be needed. Yitai Group intends to borrow 40% of the amount from financial

institutions, therefore, the working capital loans of Yitai Group is estimated to increase by RMB2 billion in

2017. At the same time, Yitai Group intends to maintain the grain trade scale of 1 million tons per year in

2018 and 2019, therefore, Yitai Group will still need working capital loans in the amount of RMB2 billion

per year in 2018 and 2019. Consequently, it is expected that Yitai Group will require the Company to

provide guarantee to it in the amount of about RMB2 billion per year in 2017, 2018 and 2019.

The management of the Company advised that, as informed by Yitai Group, Yitai Group is actively

expanding its business into the food trade industry. Yitai Group is establishing a Sino-Russian agricultural

products (including agricultural and other sideline products) import and export trade warehousing logistics

base, namely 內蒙古伊泰生態農業有限公司 (Inner Mongolia Yitai Ecological Agriculture Co., Ltd.*) ,

with a designed annual transshipment capacity of 3,500,000 tons in 滿洲里 (Manzhouli) , the Inner

Mongolia, the PRC. According to an article namely, “2016年滿洲里口岸譜寫俄羅斯糧食進口新篇章”

(2016 Manzhouli port write a new chapter in grain trade with Russian*) dated 25 January 2017 published

on the website of 中國滿洲里 (www.manzhouli.gov.cn) , organized by the government of Manzhouli, since

the first batch of Russian rapeseed imports to Manzhoui in 2014, the Manzhouli Inspection and QuarantineBureau is aiming to expand the category and increase the port throughput of grain imports. In 2017, the

government of Manzhouli invites companies to invest in Manzhouli and 內蒙古伊泰生態農業有限公司(Inner Mongolia Yitai Ecological Agriculture Co., Ltd.*) is one of the companies being invited. Although

the existing port throughput of grain imports in Manzhouli is limited, Yitai Group targets to trade 1 million

tons of 4 kinds of grain per year in 2017, 2018 and 2019 in view of the Manzhouli Inspection and

Quarantine Bureau is aiming to expand the category and increase the port throughput of grain imports as

mentioned above and with reference to the designed annual handling capacity of 內蒙古伊泰生態農業有限公司 (Inner Mongolia Yitai Ecological Agriculture Co., Ltd.*) . Based on purchase cost of each kind of

grain, a total purchase cost of approximately RMB5 billion per year is needed by Yitai Group. Based on its

experience of banks’ requirement in the ratio of borrowings and own equity, Yitai Group intends to borrow

40% of the purchase cost from financial institutions. Thus Yitai Group will require the guarantee in the

amount of about RMB2 billion per year in 2017, 2018 and 2019.

In light of the above, we are of the view that the Caps are determined based on reasonable estimation

and after due and careful consideration and they are fair and reasonable so far as the Company and the

Independent Shareholders are concerned.

Shareholders should note that as the Guarantee is relating to future events and was estimated based onassumptions which may or may not remain valid for the entire period up to 31 December 2019, and they do

not represent forecasts of loans to be drawn by Yitai Group under the cross-guarantee agreement.

Consequently, we express no opinion as to how closely the actual loans to be drawn by Yitai Group under

the cross-guarantee agreement will correspond with the Guarantee.

- 50 -


RECOMMENDATION

Having considered the principal factors and reasons as discussed above, we are of the view that,

although the entering into the Guarantee is not in the ordinary and usual course of business of the Company,

we consider that the terms of the Guarantee are on normal commercial terms, fair and reasonable insofar as

the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a

whole and the Caps is fair and reasonable. Accordingly, we would recommend (i) the Independent Board

Committee to advise the Independent Shareholders’ and (ii) the Independent Shareholders, to vote in favour

of the ordinary resolutions in this regard.

Yours faithfully,

For and on behalf of

TC Capital International LimitedEdward WuChairman

Note: Mr. Edward Wu has been a responsible officer of Type 6 (advising on corporate finance) regulated activities under the

SFO since 2005. He has participated in and completed various advisory transactions in respect of connected transactions

of listed companies in Hong Kong.


- 51 -


1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes

particulars given in compliance with the Listing Rules for the purpose of giving information with regard to

the Company. The Directors having made all reasonable enquiries, confirm that to the best of their

knowledge and belief the information contained in this circular is accurate and complete in all material

respects and not misleading or deceptive, and there are no other matters the omission of which would make

any statement herein or this circular misleading.

2. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to Directors, supervisors or chief executives of

the Company, the following persons or corporations (other than Directors, supervisors or chief executives of

the Company) who had interests and short positions in the shares or underlying shares of the Company as

recorded in the register required to be kept under Article 336, Section 571 of the Securities and Futures

Ordinance (Chapter 571 of the Laws of Hong Kong) (“SFO”) or as otherwise notified to the Company, or

directly or indirectly, interested in 5% or more of the nominal value of any class of our share capital

carrying rights to vote in all circumstances at AGM of our Company:

Name of substantialshareholder Class of shares Type of interest

Long/Shortposition No. of shares

Percentageofthe underlyingshares in issue

(%) 6, 7

Percentage ofthe total

issued shares(%) 6, 7

Billion Giant

Development Limited1

H shares Interest of controlled

corporation

Long 20,017,000 6.14 0.61

BOS Trustee Limited

as Trustee1

H shares Trustee Long 20,017,000 6.14 0.61

Chen Yihong2 H shares Interest of controlled

corporation

Long 20,017,000 6.14 0.61

China Datang

Corporation3


corporation

Long 18,031,100 11.08 0.55

CITIC Mezzanine

(Shanghai) Investment

Centre (Limited

Liability Partnership)

H shares Beneficial owner Long 17,543,200 5.38 0.53

Datang International

(Hong Kong)Limited3


Datang International

Power Generation

Co., Ltd.3


corporation

Long 18,031,100 11.08 0.55

Great Huazhong Energy

Co. Ltd


Harvest Luck

Development Limited2


corporation

Long 20,017,000 6.14 0.61

- 52 -

APPENDIX I GENERAL INFORMATION

Name of substantialshareholder Class of shares Type of interest

Long/Shortposition No. of shares

Percentageofthe underlyingshares in issue

(%) 6, 7

Percentage ofthe total

issued shares(%) 6, 7

Inner Mongolia Manshi

Investment Group

Limited


Inner Mongolia OrdosInvestment Holding

Group Co., Ltd.


Yitai Group4 Non-overseas

listed foreign

shares

Beneficial owner/

Interest of

controlled

corporation

Long 1,912,000,000 65.30 58.75

Inner Mongolia Yitai

Investment Co., Ltd.5Non-overseas

listed foreign

shares

Interest of controlled

corporation

Long 1,912,000,000 65.30 58.75

Ordos Hongrui Trade

Company Limited


Poseidon Sports Limited1 H shares Beneficial owner Long 20,017,000 6.14 0.61

Talent Rainbow Far East

Limited1


corporation

Long 20,017,000 6.14 0.61

Yitai Group (Hong

Kong) Co., Ltd.4Non-overseas

listed foreign

shares

Beneficial owner Long 312,000,000 10.65 9.58

Note:

1. According to the disclosure of interest form submitted to the Hong Kong Stock Exchange, Poseidon Sports

Limited holds 20,017,000 shares (long position) of the Company. Talent Rainbow Far East Limited and Smart

Stage Holdings Limited hold 50% and 7.57% of interests in Poseidon Sports Limited, respectively. Talent

Rainbow Far East Limited is wholly owned by Billion Giant Development Limited which is wholly owned by

BOS Trustee Limited as Trustee. Smart Stage Holdings Limited is wholly owned by Wise Bonus Group

Limited which is wholly owned by BOS Trustee Limited as Trustee. Pursuant to the SFO, Billion Giant

Development Limited, BOS Trustee Limited as Trustee and Talent Rainbow Far East Limited are deemed to be

interested in the 20,017,000 shares (long position) held by Poseidon Sports Limited, representing 6.14% of the

H shares in issue.

2. According to the disclosure of interest form submitted to the Hong Kong Stock Exchange, Harvest Luck

Development holds 42.43% of interests in Poseidon Sports Limited while Harvest Luck Development Limited

is wholly owned by Chen Yihong. Pursuant to the SFO, Chen Yihong and Harvest Luck Development Limited

are deemed to be interested in the 20,017,000 shares (long position) held by Poseidon Sports Limited.

3. According to the disclosure of interest form submitted to the Hong Kong Stock Exchange, Datang International

(Hong Kong) Limited holds 18,031,100 shares (long position) of the Company. Datang International (Hong

Kong) Limited is wholly owned by Datang International Power Generation Co., Ltd. while China Datang

Corporation holds 34.71% of interests of Datang International Power Generation Co., Ltd.. Pursuant to the SFO,

Datang International Power Generation Co., Ltd. and China Datang Corporation are deemed to be interested in

- 53 -


the 18,031,100 shares (long position) held by Datang International (Hong Kong) Limited, representing 11.08%

of the H shares in issue as at 12 July 2012. As at 31 December 2016, the above 18,031,100 shares represented

5.53% of the H shares in issue.

4. Yitai Group holds the entire issued share capital of Yitai Group (Hong Kong) Co., Ltd. and is thus deemed to

be interested in the 312,000,000 shares held by Yitai Group (Hong Kong) Co., Ltd.. Yitai Group directly holds

1,600,000,000 domestic shares.

5. Inner Mongolia Yitai Investment Co., Ltd. holds 99.64% of the registered capital of Yitai Group and is thus

deemed to be interested in all of the 1,912,000,000 shares directly or indirectly held by Yitai Group.

6. According to the Articles of Association, the Company has two classes of shares, namely (i) “non-overseas-

listed-foreign shares” which include domestic shares and B shares; and (ii) H shares.

7. The percentage of shareholdings is rounded down to the two decimal places.

Save as disclosed above, as at the Latest Practicable Date, no person, other than the Directors and

supervisors of the Company whose interests are set out in the section headed “DISCLOSURE AND

CONFIRMATION OF INTERESTS”, had any interest or short position in the shares or underlying shares of

the Company that are required to be recorded in the register of interests required to be kept pursuant to

Article 336 of the SFO, or directly or indirectly, interested in 5% or more of the nominal value of any class

of our share capital carrying rights to vote in all circumstances at AGM of our Company.

3. DISCLOSURE AND CONFIRMATION OF INTERESTS

As at the Latest Practicable Date:

a) Saved as disclosed below, none of he Directors, Supervisors or senior management of the

Company has 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)

which were required to be notified to the Company and the Hong Kong Stock Exchange

pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions

which they were taken or deemed to have under such provisions of the SFO) , or which were

required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein,

or which were required to be notified to the Company and the Hong Kong Stock Exchange

pursuant to the Model Code for Securities Transactions by Directors of Listed Issuer;

b) None of the Directors, supervisors or senior management of the Company or their respective

spouse or children under 18 years of age was granted any right to subscribe any equity

securities or debt securities;

c) Save as disclosed below, none of the Directors was interested in any contract or arrangement

subsisting as at the Latest Practicable Date which is significant to the operation of the Group,

entered by any member of the Group since 31 December 2016 (being the date to which the

latest published audited consolidated statements of the Company were made up) ;

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d) None of the Directors has any direct or indirect interest in any assets which have been, since

31 December 2016 (being the date to which the latest published audited consolidatedstatements of the Company were made up) , acquired or disposed of by or leased to, or are

proposed to be acquired or disposed of by or leased to any member of the Group;

e) Save as disclosed in “DIRECTORS’ INTERESTS IN THE COMPETING BUSINESS” of

appendix I, none of the Directors or, so far as was known to them, any of their respective

associates was interested in any business (apart from the Group’s business) which competes or

is likely to compete either directly or indirectly with the Group’s business (as would be

required to be disclosed under Rule 8.10 of the Listing Rules if each of them was a controlling

shareholder)；

f) The Company was not aware of any material adverse change in the financial or trading

position of the Group since 31 December 2016 (being the date to which the latest published

audited consolidated statements of the Company were made up) ;

g) None of the Directors has entered into any service agreements with the Company or any

member of the Group other than contracts expiring or determinable by the employer within one

year without payment of compensation (other than statutory compensation) ; and

h) The Board confirmed that to the best of their knowledge, information and belief having made

all reasonable enquiries, as at the Latest Practicable Date, there was no voting trust or other

agreement or arrangement or understanding (other than an outright sale) entered into by or

binding upon any Shareholder whereby he/she has or may have temporarily or permanently

passed control over the exercise of the voting right in respect of his/her shares to a third party,

either generally or on a case-by-case basis.

4. SERVICE CONTRACTS

The Company has entered into service contracts with all of its Directors and supervisors. None of the

Directors or supervisors has entered into or proposed to enter into any service contracts with the Company

which cannot be terminated by the Company within one year without any compensation (other than the

statutory compensation) .

5. LITIGATION

As at the Latest Practicable Date, the Company was not engaged in any litigation or arbitration of

material importance and no litigation or claim of material importance was known to the Directors to bepending or threatened against the Company.

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6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirm that there was no material adverse change in

the financial or trading position of the Group since 31 December 2016, the date to which the latest published

audited consolidated financial statements of the Company were made up.

7. DIRECTORS’ INTERESTS IN THE COMPETING BUSINESS

As at the Latest Practicable Date, save as disclosed below, none of the Directors or their associates

has any competing interests in any business which competed or are likely to compete, either directly or

indirectly, with the business of the Group:

Name of Director Position of the CompanyPosition withYitai Investment Position with Yitai Group

Mr. Zhang Donghai Chairman, Executive Director director chairman and president

Mr. Ge Yaoyong Executive Director none director and vice president

Mr. Liu Chunlin Executive Director director director and chief accountant

Mr. Zhang Dongsheng Executive Director none director and vice president

Mr. Zhang Jingquan Executive Director andGeneral Manager

none director

Mr. Lv Guiliang Executive Director and Chief

Finance Officer

none none

Mr. Song Zhanyou Executive Director none none

8. DIRECTORS’, SUPERVISORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORTPOSITIONS IN SHARES AND UNDERLYING SHARES

As at the Latest Practicable Date, the interests of the Directors, supervisors and chief executives of

the Company in the shares of the Company and its associated corporations, which were required to be

notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of

the SFO (including interests and short positions which he/she was deemed or taken to have under such

provisions of the SFO) or which were required, pursuant to Section 352 of the SFO, to be entered in the

register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions

by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules, to be notified to the Company

and the Hong Kong Stock Exchange, were as follows:

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Long positions in the shares of associated corporation of the Company

Name of director/supervisor

Name of associatedcorporation Type of interest

Number ofordinary

sharesinterested

Percentage ofthe associatedcorporation’sissued share

capital(%)

Directors:Mr. Zhang Donghai Yitai Investment Beneficial owner 10,903,593 1.51

Interest of spouse 500,000 0.07

Interest held as a trustee 15,831,123 1 2.20

Mr. Liu Chunlin Yitai Investment Beneficial owner 6,000,000 0.83


Mr. Ge Yaoyong Yitai Investment Beneficial owner 5,000,000 0.69

Interest of spouse 51,250 0.01


Mr. Zhang Dongsheng Yitai Investment Beneficial owner 5,000,000 0.69

Interest of spouse 148,947 0.02Interest held as a trustee 7,315,619 1 1.02

Mr. Lv Guiliang Yitai Investment Beneficial owner 2,200,000 0.31

Mr. Song Zhanyou Yitai Investment Beneficial owner 2,200,000 0.31

Mr. Zhang Jingquan Yitai Investment Beneficial owner 2,200,000 0.31

Supervisors:Mr. Li Wenshan Yitai Investment Beneficial owner 4,000,000 0.56


Mr. Wang Xiaodong Yitai Investment Beneficial owner 565,365 0.08

Mr. Ji Zhifu Yitai Investment Beneficial owner 250,000 0.03

Mr. Han Zhanchun Yitai Investment Beneficial owner 250,000 0.03

Note 1:

Pursuant to a trust agreement entered into by 35 individuals and a group of employees of Yitai Group, the directors and

supervisors listed above together with other members of the 35 individuals hold the entire issued share capital of Yitai

Investment on behalf of a group of employees comprised of 2,300 individuals. Our PRC legal advisors are of the

opinion that the trust arrangement is valid and binding under the PRC laws.

- 57 -


9. QUALIFICATION OF EXPERT AND CONSENT

The expert has given and has not withdrawn its written consent to the issue of this circular with the

inclusion herein of its report and/or references to its name in the form and context in which they respectively

appear.

The following is the qualification of the expert who has provided its opinion or advice, which is

contained in this circular:

Name Qualification

TC Capital International

Limited

A licensed corporation registered under the SFO to conduct in type

1 (dealing in securities) and type 6 (advising on corporate finance)

regulated activities, and the independent financial adviser of the

independent board committee and the Independent Shareholders in

respect of the guarantee.

At the Latest Practicable Date, as far as the Directors are aware, the expert was not beneficially

interested in the share capital of any member of the Group nor did it have any right (whether legally

enforceable or not) to subscribe for or to nominate persons to subscribe for any shares, convertiblesecurities, warrants, options or derivatives which carry voting rights in any member of the Group.

As at the Latest Practicable Date, the expert has given and has not withdrawn its consent to the issue

of this circular with the inclusion of its letter and references to its statements in the form and context in

which they are included.

As at the Latest Practicable Date, the expert did not have any interest in any assets which have been,

since 31 December 2016 (being the date to which the latest published audited consolidated statements of the

Company were made up) , acquired or disposed of by or leased to or are proposed to be acquired or disposed

of by or leased to any member of the Group.

10. MISCELLANEOUS

(1) Ms. Wong Wai Ling of SW Corporate Services Group Limited, external service provider, has

been engaged by the Company as its joint company secretary. Ms. Zhao Xin has obtained the

approval for exemption from the Hong Kong Stock Exchange as to qualification examination

for company secretary of listed company, and is the joint company secretary of the Company.

(2) The registered office of the Company is located at Yitai Building, Tianjiao North Road,

Dongsheng District, Ordos City, Inner Mongolia, the PRC. The Group is principally engaged

in the production and sale of coal, the provision of railway and road transportation services,

the production and sale of coal related chemicals.

(3) The Hong Kong share registrar and transfer office of the Company is Computershare Hong

Kong Investor Services Limited located at 17M Floor, Hopewell Centre, 183 Queen’s Road

East, Wan Chai, Hong Kong.

- 58 -


(4) Where there is any discrepancy between the English and Chinese version, the English text of

the circular shall prevail over the Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at

the principle business place of the Company in Hong Kong at 18/F, Tesbury Centre, 28 Queen's Road East,

Wan Chai, Hong Kong from the date of this circular up to and including at date of AGM:

(a) The Company entered into the Cross-guarantee Agreement with Yitai Group;

(b) the consents referred to in the paragraph of “QUALIFICATION OF EXPERT AND

CONSENT” of this Appendix;

(c) the Letter from the Board, full text of which is set out on pages 3 to 39 of this circular;

(d) the Letter from the Independent Board Committee, full text of which is set out on page 40 to

41 of this circular; and

(e) the letter from the independent financial adviser TC Capital, full text of which is set out on

pages 42 to 51 of this circular.

- 59 -


Candidates for executive Directors:

Zhang Donghai: Gender: Male. Nationality: Chinese. Ethnicity: Han ethnicity. Mr. Zhang was born

in 1970 and joined Communist Party of China in June 1993. He possesses a master’s degree, a title of senior

economist and was awarded as the national model worker and he has not held any right of overseas

permanent residence. Mr. Zhang served in Ikochao League Coal Group Company (伊克昭盟煤炭集團公司) , from April 1990 to July 1999 as the vice chief and the chief of the Beijing branch office of Ikochao

League Coal Group Company and the deputy head of the Operation Department and the deputy manager of

the business operating company under the same company. He had been our vice general manager from July

1999 to February 2001 and has been acting as an executive Director of our Company since March 2001 and

has been served as the chairman of our Company since April 2003. Mr. Zhang served as the vice general

manager of Yitai Group from April 2003 to June 2004, and the general manager of Yitai Group from 2004

to January 2017. He has been acting as a director of Inner Mongolia Yitai Investment Co., Ltd. (內蒙古伊泰投資有限責任公司) since March 2006 and Yitai Group (Hong Kong) Co., Ltd. (伊泰集團（香港）有限公司) since October 2008, respectively. He has been acting as the Chairman of Yitai Group since August

2016. He also serves as the president of Yitai Group since January 2017. Mr. Zhang graduated from Peking

University (北京大學) majoring in business administration in May 2005.

Liu Chunlin: Gender: Male. Ethnicity: Han ethnicity. Mr. Liu was born in 1967 and possesses a

master’s degree and a title of senior accountant. He worked in Ikochao League Coal Company from June1989 to February 1993 and was appointed as the vice chief of the Finance Department of Yitai Group from

February 1993 to August 1997 and as the director of the Finance Department of our Company from August

1997 to July 1999. Mr. Liu served as the financial director of our Company from July 1999 to October 2002,

the deputy chief accountant of Yitai Group from October 2002 to May 2004, the vice president of our

Company from May 2004 to October 2004 and has been the director and chief account of Yitai Group since

June 2004 and the director of Yitai Group since March 2006 and has been the director of Yitai Group (Hong

Kong) Co., Ltd. since October 2008 and has been the executive Director of the Company since March 2001.

Mr. Liu graduated from Tsinghua University (清華大學) in July 2010.

Zhang Dongsheng: Gender: Male. Ethnicity: Han ethnicity. Mr. Zhang was born in 1971 and

possesses a master’s degree and titles of senior economist and business manager. He worked in Ikochao

League Coal Company from October 1989 to January 2002, served as the director of the Operation

Department of our Company from January 2002 to July 2005. Mr. Zhang was the deputy general manager of

Inner Mongolia Yitai Zhundong Railway Co., Ltd. (內蒙古伊泰准東鐵路有限責任公司) from August 2005

to January 2007, and acted as the chairman of Inner Mongolia Yitai Zhundong Railway Co., Ltd. since

November 2008 to August 2014, and served as the general manager of Inner Mongolia Huzhun Railway Co.,

Ltd. (內蒙古伊泰呼准鐵路有限公司) from January 2007 to August 2014 and also as the director of Yitai

Group since November 2008. Mr. Zhang was entitled as the chairman of Inner Mongolia Huzhun RailwayCo., Ltd. (內蒙古伊泰呼准鐵路有限公司) from July 2009 to August 2014. He acted as the deputy general

manager of Yitai Group from March 2014 to January 2017 and served as vice president of Yitai Group since

January 2017 as well as the executive Director of the Company since May 2009. Mr. Zhang graduated from

Beijing Jiaotong University (北京交通大學) majoring in business administration in June 2008.

- 60 -

APPENDIX II BIOGRAPHICAL DETAILS ABOUT CANDIDATES OFTHE SEVENTH SESSION OF THE BOARD

Ge Yaoyong: Gender: Male. Ethnicity: Han ethnicity. Mr. Ge was born in 1970 and possesses a

master’s degree and a title of senior engineer. He served as the deputy manager and the manager of E’qianLeague Coking Factory (鄂前旗焦化廠) from November 1996 to March 2001, and was promoted as the

deputy general manager of the Company from March 2001 to August 2005. Mr. Ge was appointed as the

deputy chief engineer of Yitai Group from August 2005 to November 2008, and from November 2008 to

March 2014, as the general manager of the Company. He was appointed and still serves as the director of

Yitai Group since November 2008. From March 2014 to January 2017, he served as the vice general

manager of Yitai Group and then from January 2017 as the vice president of Yitai Group and also acts as the

chairman and general manager of Inner Mongolia Yitai Property Co. Ltd. (內蒙古伊泰置業有限責任公司)

since July 2014. He also has been the executive Director of the Company since December 2008. Mr. Ge

graduated from Shanxi Mining Institute (山西礦業學院) with a bachelor’s degree majoring in mineral

exploration in July 1991 and graduated from Tsinghua University in January 2010.

Wang Sanmin: Gender: Male. Ethnicity: Mongol ethnicity. Mr. Wang was born in 1974. He is a

member of the Communist Party of China and possesses a master’s degree. Mr. Wang joined Yitai Group in

1996 and joined the Company in April 2005. Mr. Wang held different positions in Yitai Group as the

director of the marketing department and the finance department of Taifeng Simengou Coke Flour Mill,

Taifeng Variety Operating Company, Taifeng Coal Mine, Taifeng Hu City Clean Coal Branch and Taifeng

General Company from 1996 to 2000. He was the head of Finance Department of E’qian League Coking

Factory from December 2000 to October 2001. From October 2001 to April 2004, he held various positionsin Inner Mongolia Yitai Pharmaceutical Co., Ltd. (內蒙古伊泰藥業有限責任公司) as the head of the

Finance Department of Licorice Base, deputy head of the Finance Department, and head of both the Finance

Department and Corporate Management Department of Shenglong Branch. He was the head of the

accounting department of Yitai Group from April 2004 to April 2005. Mr. Wang was the president of the

labor union and the deputy general manager of the Shenglong Branch of Inner Mongolia Yitai

Pharmaceutical Co., Ltd. from April 2005 to September 2006. He was the deputy administrative general

manager of Yitai (Beijing) Pharmatech Co., Ltd. from October 2006 to March 2007. He was the head of our

corporate management department from April 2007 to November 2010. Mr. Wang was the head of the

Supplies Purchase and Supply Department of the Company from December 2010 to March 2013. He was the

deputy manager of the Company from April 2013 to March 2014. He served as the chairman and general

manager of Inner Mongolia Yitai Zhundong Railway Co., Ltd. and Inner Mongolia Yitai Huzhun Railway

Co., Ltd. (內蒙古伊泰呼准鐵路有限公司) from March 2014 to March 2015 and has been the chairman and

general manager of Inner Mongolia Yitai Zhundong Railway Co., Ltd., the chairman and general manager of

Inner Mongolia Yitai Huzhun Railway Co., Ltd. and the chairman of Ordos Dama Railway Co., Ltd. (鄂爾多斯大馬鐵路有限責任公司) from April 2015. He was a Supervisor of the Company from February 2011

to April 2013. Mr. Wang Sanmin graduated from Inner Mongolia Finance & Economics College in July

2005. He was granted the qualification of international accountant in July 2010, operating manager and

licensed pharmacist in March 2006, senior IT project manager in November 2008.

Song Zhanyou: Gender: Male. Ethnicity: Han ethnicity. Mr. Song was born in 1965 and has the

qualification of senior engineer. Mr. Song was appointed as the technician and deputy director in the mining

and stripping division of Houbulian Open Mine (後補連露天礦) owned by Dongsheng Coalfield

Development and Operation Company (東勝煤田開發經營公司) from July 1988 to September 1990,

from October 1990 to September 1994, the chief of Engineering Division of Zhanpanliang Mine (碾盤梁煤礦) belonging to Ikochao League Coal Company. Mr. Song acted as the chief of the Production Technology

- 61 -


Division of Ikochao League Coal Company from October 1994 to February 1999, director of Erdaomao

Mine (二道昂煤礦) of Yitai Group from March 1999 to December 2000, and the deputy manager of theIndustry Company of Yitai Group (內蒙古伊泰集團有限公司產業公司) from January 2001 to March 2001,

the head of Safety Supervision Department of Yitai Group from April 2001 to July 2003; the head of

Corporate Management Department of Yitai Group from August 2003 to April 2007. Served as the director

of the engineering department of Yitai Group and deputy general manager of Inner Mongolia Yitai

Guanglian Coal Chemical Co., Ltd. (伊泰廣聯煤化有限責任公司) from May 2007 to November 2010. He

was also the deputy general manager of Yitai Yili Energy Co., Ltd. from December 2010 to February 2012;

the general manager of Yitai Yili Energy Co., Ltd. from March 2012 to December 2012; and the chairman

and general manager of Yitai Yili Energy Co., Ltd. from January 2013 to March 2014. Mr. Song was

appointed as the deputy manager of the Company in March 2014 and appointed as the executive Director of

the Company in May 2014. Mr. Song graduated from Shanxi Mining Institute (山西礦務學院) with a

bachelor’s degree in mining engineering major in July 1988.

Lv Guiliang: Gender: Male. Ethnicity: Han ethnicity. Mr. Lv was born in 1966 and possesses a

master’s degree of Business Administration and a title of semi-senior accountant. He served in Ikochao

League Coal Company from August 1994 to August 1997 and joined our Company in August 1997, acting

as the vice director of our Finance Department from July 1999 to November 2002, the director of the same

department from March 2004 to February 2009. Since April 2008 and February 2011, Mr. Lv has been

serving as the chief finance officer and the executive Director of our Company, respectively. Mr. Lvgraduated from Huazhong University of Science and Technology (華中科技大學) in June 2011.

Candidates for independent non-executive Directors:

Yu Youguang: Gender: Male. Ethnicity: Han ethnicity, born in 1955, holds an associate degree and is

a certified accountant and senior auditor. Mr. Yu is the deputy president of Inner Mongolia Zhongtian

Huazheng Accounting Firm (內蒙古中天華正會計師事務所) and the executive councilor of Certified

Public Accountant Association of Inner Mongolia Autonomous Region (內蒙古自治區註冊會計師協會) .

He has extensive experience in finance and accounting. He taught in Inner Mongolia Light Industry School

(內蒙古輕工業學校) from July 1981 to November 1985. He worked in the Audit Bureau of Baotou from

November 1985 to September 1999. He has been serving as the deputy president of Inner Mongolia

Zhongtian Huazheng Accounting Firm since September 1999. He was appointed as independent non-

executive Director of the Company since June 2013. Mr. Yu graduated from Inner Mongolia Light Industry

School in July 1981.

Zhang Zhiming: Gender: Male. Ethnicity: Han ethnicity. Mr. Zhang was born in 1962 and possesses

a doctoral degree of laws and now serves as the professor and doctoral supervisor of Renmin University of

China (中國人民大學) . Mr. Zhang finished his undergraduate courses in law from Peking University in1983 and the graduate courses in law from the same university in 1986. He obtained a doctoral degree of

law from Graduate School of Chinese Academy of Social Sciences (中國社會科學院研究生院) in 1998

and worked in Social Sciences in China Press of Chinese Academy of Social Sciences as the editor and

associate senior editor from 1986 to 1994. From 1994 to 2004, Mr. Zhang was appointed as the associate

researcher and researcher in Institute of Law of Chinese Academy of Social Sciences, and the professor and

doctoral supervisor in Graduate School of Chinese Academy of Social Sciences from 1998 to 2004. From

June 2004 to July 2005, Mr. Zhang served as the vice president, member of the Party Committee and the

- 62 -


professor of National Prosecutors College of P.R.C (國家檢察官學院) , and now serves as the professor and

doctoral supervisor in Institute of Law of Renmin University of China since September 2005, while holdingthe post of the independent director of Shanxi Top Energy Co., Ltd. (山西通寶能源股份有限公司) , Shanxi

Taigang Stainless Steel Co., Ltd. (山西太鋼不銹鋼股份有限公司) , Zhejiang China Commodities City

Group Co., Ltd. (浙江中國小商品城集團股份有限公司) and Wolong Real Estate Group Co., Ltd (臥龍地產集團股份有限公司) . Mr. Zhang has been serving as the independent non-executive Director of our

Company since June 2015.

Huang Sujian: Gender: Male. Ethnicity: Han ethnicity. Mr. Huang was born in 1955, and has been

working in the Institute of Industrial Economics of Chinese Academy of Social Sciences (中國社會科學院)

since 1988 and is a researcher of the Institute of Industrial Economics of Chinese Academy of Social

Sciences currently. He achieved a bachelor’s degree and a master’s degree of economics from Xiamen

University (廈門大學) in 1982 and 1985, respectively, and a doctor’s degree of economics from the

Chinese Academy of Social Sciences in 1988. He mainly researches in company merger and acquisition,

business organization and enterprise reform. Mr. Huang Sujian has been the independent non-executive

Director of the Company since November 2016.

Wong Hin Wing: aged 54, holds a master’s degree in Executive Business Administration from The

Chinese University of Hong Kong (香港中文大學) . He is a fellow member of the Hong Kong Institute of

Certified Public Accountants, the Institute of Chartered Accountants in England & Wales, the Association ofChartered Certified Accountants, the Hong Kong Institute of Directors and the Institute of Chartered

Secretaries and Administration. He is also a member of the American Institute of Certified Public

Accountants and a chartered member of the Chartered Institute for Securities & Investment. He is an

independent non-executive director of AEON Credit Service (Asia) Co. Ltd. (AEON信貸財務亞洲有限公司) (a public company listed on the Hong Kong Stock Exchange) , Dongjiang Environmental Company

Limited (東江環保股份有限公司) (a public company with A shares listed on the Small and Medium

Enterprise Board of the Shenzhen Stock Exchange and H shares listed on the Hong Kong Stock Exchange) ,

CRCC High-Tech Equipment Corporation Limited (中國鐵建高新裝備股份有限公司) (a public company

with H shares listed on the Hong Kong Stock Exchange) and China Agri-Products Exchange Limited (中國農產品交易有限公司) (a public company listed on the Hong Kong Stock Exchange) . He is also a Member

of Anhui Provincial Committee of the Chinese People’s Political Consultative Conference, a Member of the

Nursing Council of Hong Kong and a Council member of Hong Kong Institute of Certified Public

Accountants. He has been the chief executive officer and responsible officer of China Silk Road

International Capital Limited (中國絲路國際資本有限公司) (formerly known as Legend Capital Partners,

Inc. (安里俊投資有限公司) ) , a licensed corporation under the Securities and Futures Ordinance since

1997. Prior to this, he had worked with an international audit firm for four years and then a listed company

as chief financial officer for seven years. He has 33 years of experience in accounting, finance, investment

management and advisory.

- 63 -


Candidates for shareholder representative supervisors:

Yuan Bing: Gender: Male. Ethnicity: Han ethnicity. Mr. Yuan was born in 1968. He is a member of

Chinese Communist Party and possesses a bachelor’s degree and a title of political engineer. In September

1989, he worked as a teacher in Ikochao League Husiliang School (伊克昭盟呼斯梁學校) ; in September

1990, he was redesignated to the Administrative department of Labour of Ikochao League Coal Group

Company; in January 1991, redesignated to Qinhuangdao office of Ikochao League Coal Group Company;

has been worked in the Discipline Inspecting Department of Ikochao League Coal Group Company since

February 1995; served as deputy chief of Supervisory Section under Discipline Inspecting Department from

March 1996 to March 1998; the chief of Supervisory Section from April 1998 to March 2001; ombudsman

(deputy division level) in the Discipline Inspecting Department of Yitai Group from April 2001 to July

2004 and commissioner (division level) from August 2004 to October 2008; ombudsman (minister level)

from November 2008 to February 2011; the deputy secretary of Discipline Inspecting Department in Yitai

Group from March 2011 to September 2015 and the secretary of Discipline Inspecting Department in Yitai

Group since October 2015. He was recognized as an outstanding discipline inspecting cadre by Erdos

Discipline Inspection Commission. He is a people supervisor appointed by Erdos People’s Procuratorate and

the Nei Monggol Autonomous Region People’s Procuratorate. He graduated from department of

mathematics of Inner Mongolia Normal University (內蒙古師範大學) and then obtained a bachelor’s

degree in September 1992. He is proceeding to the master’s Degree in Management (EMBA) of Tsinghua

University – Australian National University.

Liu Xianghua: Gender: Male. Ethnicity: Han ethnicity. Mr. Liu was born in 1978. He is a member of

the Communist Party of China and possesses a bachelor’s degree. Mr. Liu worked for Inner Mongolia

Zhundong Railway Co., Ltd from August 2000 to July 2001. He was the deputy director for administrative

affairs of Inner Mongolia Zhundong Railway Co., Ltd from July 2001 to October 2002 and was the office

director in administrative department of Inner Mongolia Zhundong Railway Co., Ltd from November 2002

to February 2004. Mr. Liu was the head secretary of the general manager office of Yitai Group from March

2004 to August 2005. He was the deputy director of the general manager office of Yitai Group from

September 2005 to December 2005. He was the deputy director of the general manager office of the

Company from January 2006 to November 2010. He was the director of the board office of Yitai Group

from December 2010 to February 2012. He was the secretary of the board of Yitai Group from March 2012

to December 2012. He was the secretary of the board as well as the director of the board office of Yitai

Group from January 2013 to March 2015. He was the secretary of the board as well as the director of the

board office of Yitai Group from April 2015 to October 2016. He has been the secretary of the board as well

as the general manager of the Administrative Department of Yitai Group from November 2016 to now. Mr.

Liu graduated from Inner Mongolia Finance & Economics College (內蒙古財經學院) with a bachelor’s

degree (adult higher education) in law major in July 2007.

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APPENDIX III BIOGRAPHICAL DETAILS ABOUT CANDIDATES OFTHE BOARD OF SUPERVISORS

Candidates for independent supervisors:

Wang Yongliang: Gender: Male. Ethnicity: Han ethnicity. Mr. Wang was born in 1963. He has been

a Supervisor of our Company since February 2011. He is also the director of Inner Mongolia Ikochao

League Law Firm since March 2001. Mr. Wang has extensive experience in legal issues. He was the head of

Business Department of Ikochao League Law Firm (伊盟律師事務所) from April 1996 to March 2001 and

served as the deputy head of the Correctional Division and office of the Judicial Department of Ikochao

League from March 1990 to April 1996. He was a teacher in Ikochao League Politics & Law School (伊盟政法幹校) from December 1986 to March 1990 and a member of Ikochao League Correctional Division (伊盟勞改隊) from August 1985 to December 1986. Mr. Wang graduated from China University of Political

Science and Law (中國政法大學) with a major in civil and commercial law in May 2003. He has a master’s

degree and was granted the qualification of Level 2 Lawyer by the Department of Personnel of Inner

Mongolia in October 2004.

Wu Qu: Gender: Male. Ethnicity: Han ethnicity. Mr. Wu was born in 1965. He has been a Supervisor

of our Company since February 2011. He is also the head of the Auditing Department of Inner Mongolia

Dongshen Accounting Firm Co., Ltd (內蒙古東審會計師事務所有限責任公司) since 2001. Mr. Wu is

very experienced in auditing and finance. He was the finance manager of Ordos Rongze Food Co., Ltd. (鄂爾多斯市榮澤食品有限公司) from December 1998 to October 2000, the head of Finance Department of

Inner Mongolia Shengyi Plastic Products Co., Ltd. (內蒙古勝億塑料製品有限公司) from October 1994 toDecember 1998. He acted as the head of Finance Department of Ikochao League Dongsheng Food Industry

Company (伊克昭盟東勝市食品工業公司) from July 1986 to October 1994. Mr. Wu graduated from

Ikochao League Finance & Economics School (內蒙古伊克昭盟財經學校) in July 1986 and from

Correspondence Institute of the Party School of the Central Committee of C.P.C (中央黨校函授學院)

with a bachelor’s degree, majoring in economic management in December 1998.

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APPENDIX III BIOGRAPHICAL DETAILS ABOUT CANDIDATES OFTHE BOARD OF SUPERVISORS

I. The proposals on the election of directors, independent non-executive directors and supervisors from

respective candidates at the shareholders’ meeting will be grouped and numbered. Investors shouldcast vote with respect to the candidates of each proposal group.

II. The number of declared shares represents the number of electoral votes. With respect to each

proposal group, the total number of votes will be equivalent to the number of directors or supervisors

to be elected for each share held by the shareholders. For example, a shareholder holds 100 shares of

a listed company, 10 directors will be elected at the shareholders’ meeting and there are 12 candidates

for the directors, then the shareholders will have 1000 electoral votes on the proposal group of the

board of directors.

III. The shareholders should cast vote within the quantitative limitation on the votes applicable to each

proposal group. The shareholders may cast vote according to his/her willingness. He/She may

concentrate the votes on one candidate, or vote for different candidates dispersedly with any

combination of the votes. After the vote is completed, the number of the votes for each proposal will

be calculated accumulatively respectively.

IV. Example:

A listed company will hold shareholders’ meeting to re-elect the members of the board of directorsand the board of supervisors by adopting the cumulative voting system. There are 5 directors to be

elected and 6 candidates for the directors; 2 independent non-executive directors to be elected and 3

candidates for the independent non-executive directors; 2 supervisors to be elected and 3 candidates

for the supervisors. The matters to be decided by voting are as follows:

Cumulative Voting on Proposals

4.00 Proposal on Election of Directors Number of Votes

4.01 For example: Chen××

4.02 For example: Zhao××

4.03 For example: Jiang××

...... ......

4.06 For example: Song ××

5.00 Proposal on Election of Independent Non-Executive Directors Number of Votes

5.01 For example: Zhang××

5.02 For example: Wang××

5.03 For example: Yang××

6.00 Proposal on Election of Supervisors Number of Votes6.01 For example: Li××

6.02 For example: Chen××

6.03 For example: Huang××

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APPENDIX IV INSTRUCTION ON ELECTION OF DIRECTORSAND SUPERVISORS BY ADOPTING

CUMULATIVE VOTING SYSTEM

An investor owns 100 shares of the Company at the end of the equity registration date, based on the

cumulative voting system, he/she will be able to cast 500 votes on 4.00 “Proposal on Election ofDirectors”, 200 votes on 5.00 “Proposal on election of independent non-executive directors”, and 200

votes on 6.00 “Proposal on Election of Directors”.

The investor may vote on the proposal 4.00 according to his/her willingness within the limit of 500

votes. He/She may concentrate those 500 votes on one candidate, or vote for different candidates

dispersedly with any combination of the votes.

As shown in the table below:

No. Name of ProposalNumber of Votes

Method A Method B Method C Method …

4.00 Proposal on Election of

Directors

– – – –

4.01 For example: Chen×× 500 100 100

4.02 For example: Zhao×× 0 100 50

4.03 For example: Jiang×× 0 100 200

...... ...... ...... ...... ......4.06 For example: Song×× 0 100 50

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APPENDIX IV INSTRUCTION ON ELECTION OF DIRECTORSAND SUPERVISORS BY ADOPTING

CUMULATIVE VOTING SYSTEM


NOTICE IS HEREBY GIVEN that an annual general meeting for the year 2016 (the “AGM”) of

Inner Mongolia Yitai Coal Co., Ltd. (the “Company”) will be held at Room 1, Conference Center, Building

of Inner Mongolia Yitai Coal Co., Ltd., Ordos, Inner Mongolia, the People’s Republic of China (the

“PRC”) on Thursday, 25 May 2017 at 9:00 a.m. for the purpose of considering, among others, and if

thought fit, passing the following resolutions (with or without modifications) :

ORDINARY RESOLUTIONS

1. To consider and approve the report of the Board for the year 2016.

2. To consider and approve the report of the Board of Supervisors for the year 2016.

3. To consider and approve the performance report of the independent non-executive directors for

the year 2016.

4. To consider and approve the profit distribution for the year 2016.

5. To consider and approve the financial report for the year 2016.

6. To consider and approve the Company’s capital expenditure for the year 2017.

7. To consider and approve the appointment of audit institution of the Company for 2017.

8. To consider and approve the appointment of internal control audit institution of the Company

for 2017.

9. To consider and approve entrusted wealth management using the Company’s idle equity fund.

10. To consider and approve the purchase of liability insurance for Directors, Supervisors, senior

management.

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NOTICE OF ANNUAL GENERAL MEETING


11. To consider and approve the candidates of the executive Director of the seventh session of the

Board of the Company:

11.1 To consider and approve the appointment of Mr. Zhang Donghai as executive Director.

11.2 To consider and approve the appointment of Mr. Liu Chunlin as executive Director of

the Company.

11.3 To consider and approve the appointment of Mr. Ge Yaoyong as executive Director of

the Company.

11.4 To consider and approve the appointment of Mr. Zhang Dongsheng as executive

Director of the Company.

11.5 To consider and approve the appointment of Mr. Wang Sanmin as executive Director of

the Company.

11.6 To consider and approve the appointment of Mr. Lv Guiliang as executive Director of

the Company.

11.7 To consider and approve the appointment of Mr. Song Zhanyou as executive Director of

the Company.

12. To consider and approve the candidates of the independent non-executive Director of the

seventh session of the Board of the Company:

12.1 To consider and approve the appointment of Mr. Yu Youguang as independent non-

executive Director of the Company.

12.2 To consider and approve the appointment of Mr. Zhang Zhiming as independent non-


12.3 To consider and approve the appointment of Mr. Huang Sujian as independent non-


12.4 To consider and approve the appointment of Mr. Wong Hin Wing as independent non-


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13. To consider and approve the candidates of the Supervisor of the seventh session of the Board

of supervisors:

13.1 To consider and approve the appointment of Mr. Yuan Bing as shareholder

representative supervisor.

13.2 To consider and approve the appointment of Mr. Liu Xianghua as shareholder

representative supervisor.

13.3 To consider and approve the appointment of Mr. Wang Yongliang as independent

supervisor.

13.4 To consider and approve the appointment of Mr. Wu Qu as independent supervisor.

14. To consider and approve the compensation package for Directors of the seventh session of the

Board of the Company.

15. To consider and approve the compensation package for supervisors of the seventh session of

the Board of Supervisors of the Company.

16. To consider and approve the amendments to Policy on the Management of the External

Guarantee of Inner Mongolia Yitai Coal Co., Ltd..

17. To consider and approve the amendments to Rules of Procedure of the Board of Supervisors.

18. To consider and approve the entering into Cross-Guarantee Agreement between the Company

and Yitai Group.

SPECIAL RESOLUTIONS

19. To consider and approve the guarantee to be provided by the Company to subsidiaries.

For the reason of business development, the holding subsidiaries of the Company will have to

lend money from financial institutions or finance in other ways at irregular intervals, the

Company intends to provide joint liability guarantee for the loan or financing borrowed by the

holding subsidiaries from the financial institutions so as to support the business development

of the holding subsidiaries of the Company.

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I. Provision of guarantee


Name of the guaranteed partiesEstimated balance

of guarantees

Inner Mongolia Yitai Zhundong Railway Co.,Ltd.

(內蒙古伊泰准東鐵路有限責任公司)

100,000



150,000

Inner Mongolia Yitai Coal-to-oil Co., Ltd.


60,000



1,230,000



100,000



300,000



20,000

Yitai Supply Chain Finance Services (Shenzhen) Co., Ltd.


30,000



30,000



30,000

Inner Mongolia Yitai Jingyue Suancigou Mining Co., Ltd.

(內蒙古伊泰京粵酸刺溝礦業有限公司)

50,000

Total 2,100,000

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II. Basic Information of the guaranteed Parties

Basic information of guaranteed Parties are set out as follows:


Name of the guaranteed Parties Business NatureCurrent

ShareholdingRegistered

Capital

Inner Mongolia Yitai Zhundong Railway Co.,

Ltd. (內蒙古伊泰准東鐵路有限責任公司)

Railway

transportation

96.27% 155,400

Inner Mongolia Yitai Huzhun Railway Co.,

Ltd. (內蒙古伊泰呼准鐵路有限公司)

Railway

transportation

76.99% 207,459.8



Coal-related

Chemical

90.2% 136,000



Coal-related

Chemical

90.2% 157,000



Investment in the

coal mining industry

90.2% 65,000

Inner Mongolia Yitai Coal-to–oil Co., Ltd.


Coal-related

Chemical

51% 235,290



Coal-related

Chemical

90.2% 77,000

Yitai Supply Chain Finance Services

(Shenzhen) Co., Ltd.


Supply Chain

Management

100% 5,000

Yitai Energy Investment (Shanghai) Co.,

Ltd. (伊泰能源投資 (上海)有限公司)

Energy Investment 100% 5,000



Energy Technology 100% 5,000

Inner Mongolia Yitai Jingyue Suancigou

Mining Co., Ltd.

(內蒙古伊泰京粵酸刺溝礦業有限責任公司)

Coal Mining 52% 108,000

III. Basic Information on Accumulative External Guarantees as of 31 December 2016

As of 31 December 2016, the aggregate amount of the external guarantees provide by

the Company is RMB9.835 billion, all of which were provided to the holding

subsidiaries of the Company, accounting for 40.95% of the latest audited net assets of

the Company valued at RMB24.016 billion. The above guarantees are in compliance

with the Company’s Articles of Association and relevant laws and regulations and there

is no overdue guarantee and illegal guarantee.

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The specific provisions on the loan and guarantee will be contained in the relevant

contract or agreements to be concluded between the Company and financial institutions.In addition, the legal representative or authorized representative of the Company is

authorized to sign relevant legal documents.

20. To consider and approve the proposal relating to the General Mandate to the Board of the

Company for the issuance of H shares.

Based on the need of the ordinary production and operation of the Company, the Company

proposed to the AGM to grant General Mandate to the Board of Directors under the following

conditions, to determine the allotment and issuance of and dealing with the additional H Shares

representing 20% of the aggregate par value of the issued H-shares of the Company. As at the

date of this circular, the Company has 326,007,000 H Shares. Upon the passing of the

resolution of General Mandate to issue Shares, and on the basis that no further Shares are

issued before the AGM, the Company may issue a maximum of 65,201,400 H Shares. Matters

that will be considered are as follows:

1. Authorize the Board of Directors to, under the General Mandate, allot, issue and deal

with, or conditionally or unconditionally agree to allot, issue and deal with the

aggregate par value of H-shares up to 20% of the numbers of the same class the issuedH-shares of the Company on the day when this resolution is passed at this general

meeting of the Company, and to determine the number of H-shares to be allotted or

issued subject to the precondition in paragraph 2 hereinafter.

2. Authorize the Board of Directors to exercise the General Mandate pursuant to applicable

laws (including but not limited to the Company Law of the PRC and the Listing Rules)

and to obtain all the approvals from government and/or regulatory authorities (if any)

for exercise of the same.

3. The General Mandate will remain effective from the day when it is passed at the general

meeting until the earliest of the day on which:

(1) the AGM is concluded;

(2) the 12-month period following the passing of this resolution at the general

meeting expires;

(3) the General Mandate granted to the Board of Directors as set out in thisresolution is revoked or amended by Shareholders of the Company by way of a

special resolution at any general meeting.

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4. Authorize the Board of Directors to approve, execute and do, or procure to be executed

and done, all such documents, deeds and things as it may consider necessary inconnection with the allotment and issuance of and dealing with any new shares under

the General Mandate above.

5. Upon completion of the allotment and issuance of new shares, authorize the Board of

Directors to increase the registered capital of the Company and make appropriate

amendments to the Articles of Association based on the method, class and number of

the allotment and issuance of new shares of the Company as well as the actual share

structure of the Company upon completion of the allotment and issuance of new shares.

In addition, reference is made to the Company’s announcement dated 23 March 2017 in

relation to, among others, the Company entered into the services framework agreement with

Keling Environmental Protection Co., Ltd. (“Keling Environmental Protection”) . The

Company hereby clarifies that the proposed annual cap of the Company and Keling

Environmental Protection for 2017 is RMB35 million according to the services framework

agreement.

By order of the Board

Inner Mongolia Yitai Coal Co., Ltd.Zhang Donghai

Chairman

Inner Mongolia, the PRC, 6 April 2017

As at the date of this circular, the executive Directors of the Company are Mr. Zhang Donghai, Mr.

Liu Chunlin, Mr. Ge Yaoyong, Mr. Zhang Dongsheng, Mr. Zhang Jingquan, Mr. Lv Guiliang and Mr. Song

Zhanyou; and the independent non-executive Directors of the Company are Mr. Yu Youguang, Mr. Zhang

Zhiming, Mr. Tam Kwok Ming, Banny and Mr. Huang Sujian.

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Notes:

A. For further details on each of the proposed resolutions, please refer to the circular of the Company to be dispatched to

shareholders on or before 13 April 2017.

B. In order to ascertain the entitlements of the Shareholders to attend the AGM held at 9:00 am on Thursday, 25 May

2017, the register of members of the Company will be closed from Tuesday, 25 April 2017 to Thursday, 25 May 2017

(both days inclusive) , during which period no transfer of Shares of the Company will be effected. To be eligible to

attend and vote at the AGM, all transfer documents must be lodged with the H Share Registrar, Computershare Hong

Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai,

Hong Kong for holders of H Shares no later than 4:30 p.m. on Monday, 24 April 2017.

The register of members of the Company will be closed from Wednesday, 14 June 2017 to Monday, 19 June 2017

(both days inclusive) , during which period no transfer of Shares of the Company will be effected. In order to be

entitled to final dividend for the year ended 31 December 2016 (subject to the approval from the shareholders of the

Company) , unregistered H Shareholders must deposit the transfer documents with the Company’s H share registrar,

Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s

Road East, Wan Chai, Hong Kong no later than 4:30 p.m. on Tuesday, 13 June 2017.

Shareholders intending to attend the AGM must return the reply slip to the Company’s H share registrar,

Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan

Chai, Hong Kong by hand or by post on or before Thursday, 4 May 2017.

C. Each holder of H-shares entitled to attend and vote at the AGM may, by completing the form of proxy of the Company,

appoint one or more proxies to attend and vote at the AGM on his/her behalf. A proxy need not be a Shareholder of the

Company. With respect to any Shareholder who has appointed more than one proxy, the proxy holders may only vote

on a poll.

D. A proxy shall be appointed by a Shareholder by a written instrument signed by the appointor or his attorney duly

authorized in writing. In case of a corporation, the same must be either under its common seal or under hand of its legal

representative or duly authorized attorney (s) . If the written instrument is signed by an attorney of the appointor, the

power of attorney or other documents of authorization of such attorney shall be notarized.

E. To be valid, the form of proxy and the relevant notarized power of attorney (if any) and other relevant documents of

authorization (if any) as mentioned in Note (C) above must be delivered to the Company’s H Share registrar,

Computershare Hong Kong Investor Services Limited (address: 17M floor, Hopewell Centre, 183 Queen’s Road East,

Wan Chai, Hong Kong) , not less than 24 hours before the time appointed for the AGM (i.e. 9:00 a.m. on Wednesday,

24 May 2017) or 24 hours before the time appointed for the holding of any adjournment thereof (as the case may be) .

Completion and return of a form of proxy will not preclude a Shareholder from attending and voting in person at the

meeting if he so desires.

F. A Shareholder or his proxy should produce proof of identity when attending the AGM. Where a Shareholder is a legal

person, the legal representative of that Shareholder or the person authorized by its board of directors or other governing

body shall produce a copy of the resolution of the board of directors or other governing body of such Shareholder

appointing such person to attend the meeting.

G. The AGM is expected to last for not more than half a day. Shareholders who attend the AGM shall bear their own

travelling and accommodation expenses.

H. The three resolutions “to consider and approve the candidates of the executive Director of the seventh session of the

Board of the Company”, “to consider and approve the candidates of the independent non-executive Director of the

seventh session of the Board of the Company” and “to consider and approve the candidates of the Supervisor of the

seventh session of the Board of supervisors” will be formed through voting in cumulative voting system.

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