The objectives of this study were to understand the characteristics of coal liquefaction resids from the direct two-stage coal liquefaction process, the reactivity of these resids in hydroconversion, and the relationship between resid reactivity and resid composition. A suite of 15 distillation resids obtained from two-stage pilot plant liquefaction runs were extensively characterized. An empirical direct liquefaction test was developed to determine the relative resid reactivity in hydroconversion and was applied to these resids. The kinetics of hydrocracking of two of the resids were also investigated in more detail. The presence of about 10-15% of an unconvertible component in the resids was indicated and isolated, The source of this unconvertible component is being investigated.