On 10 August 2009, Yanzhou Coal Mining Company Limited (Yanzhou) halted trading in its common shares as it plans to takeover Australia-based Felix Resources Ltd. (Felix). We consider the transaction to be a long term positive for the company, given its rich cash position and negligible debt levels. Given this and positive manufacturing data from China and global commodity prices, although the current price level does not support a HOLD rating, we maintain our HOLD rating and will reassess our target price and rating after the company releases its 1H 09 results on 21 August 2009. The Hong Kong dollar is currently pegged to the US dollar. As a result, no currency impact is expected on the ADR over our investment horizon. Therefore, in line with our fundamental outlook, we maintain our HOLD rating for the ADR (1 ADR = 10 common shares).

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