Location: AICPA Washington Office

(Reference: AICPA International Practices Task Force - December 2, 1997 meeting)

Certain notionally adjusted financial information has been included in the prospectus relating to the Hong Kong Offering as required by the Hong Kong Stock Exchange. Such information has been reproduced here to maintain consistency of information disclosed to potential investors in the US and International Offerings. This information does not purport to represent what the combined results of operations of the Company would actually have been if the events described had in fact occurred on such dates, or at January 1, 1994, or to project the combined statements of income for any future date or period.

The Company and the Parent Company have entered into an agreement in respect of the mining rights of the Company's four existing mines and Jining II pursuant to which the Company will pay an annual fee of RMB12.98 million to the Parent Company in respect of the mining rights associated with the Company's four existing mines and Jining II for the remaining unexpired term of the mining rights in respect of each such mine. Had an agreement been in place starting from January 1, 1994, the Company would have incurred an additional annual fee of RMB13.0 million for each of the three years ended December 31, 1996 and RMB4.3 million for the four months ended April 30, 1997.

As part of the Restructuring, the land use rights were transferred from the Parent Company to the Company for a term of 50 years at a value of RMB283.3 million. Had the land use rights been transferred at January 1, 1994, the additional amortization would have been RMB5.7 million for each of the three years ended December 31, 1996 and RMB1.9 million for the four months ended April 30, 1997.

The Company on October 1, 1997 entered into a bank loan of RMB1.8 billion to replace the borrowings from the Parent Company. The bank loan carries interest at 12.42% per annum, is repayable in semiannual installments of RMB90 million, is guaranteed by the Parent Company and is not secured by any assets of the Company. Had this bank loan arrangement been in place starting from January 1, 1994, the Company would have incurred additional interest expenses of RMB137.8 million, RMB113.2 million and RMB64.1 million for the three years ended December 31, 1994, 1995 and 1996, respectively, and RMB21.1 million for the four months ended April 30, 1997.

Taking into account notional adjustments for the annual fee in respect of the mining rights, amortization of land use rights and additional interest expenses, the Company's notionally adjusted track record for each of the three years ended December 31, 1996 and the four months ended April 30, 1997 would have been as follows: