China Shenhua Energy : Rules of Procedures of the Audit Committee of the Board of Directors of China Shenhua Energy Company Limited

(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 01088)

Rules of Procedures of the Audit Committee of the Board of

Directors of China Shenhua Energy Company Limited

These rules were passed on 26 August 2005 at the 5th meeting of the first session of the board of directors, and were revised on 17 August 2007 at the 16th meeting of the first session of the board of directors of the Company, on 28 March 2014 at the 43rd meeting of the second session of the board of directors of the Company and on 28 August 2020 at the 3rd meeting of the fifth session of the board of directors of the Company.

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CHAPTER 1 GENERAL PROVISIONS

Article 1

These rules are formulated in accordance with Company Law of the People's Republic of China (revised in 2018), Code of Corporate Governance for Listed Companies (revised in 2018), the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Rules Governing the Listing of Stocks on Shanghai Stock Exchange (revised in 2019), the Operational Guidelines of the Shanghai Stock Exchange for the Audit Committee under the Board of Directors of Listed Companies and other relevant laws, regulations and Provisions of the securities regulatory authorities and listing supervision rules of the place where the company's shares are listed and the Articles of Association (the "Articles of Association") of China Shenhua Energy Company Limited (the "Company") and Rules of Procedure of the Board of Directors of China Shenhua Energy Company Limited with reference to the Company's actual situation in order to regulate the rules of procedures of meetings of the Audit Committee of the board of directors of the Company and fully protect the legitimate interests of the Company and its shareholders.

Article 2

The Audit Committee is a special committee of the Board and shall be responsible to and report to the Board.

Article 3

The Audit Committee is responsible for reviewing and supervising the preparation procedures of financial reports and the internal control procedures of the Company, reviewing on financial reporting, financial control, internal control and risk management systems of the Company, supervising the external audit of the Company in a practical and effective manner, guiding the internal audit of the Company, and enhancing the establishment of effective internal control to provide financial reports that are true, accurate and complete.

CHAPTER 2 DUTIES OF THE AUDIT COMMITTEE

Article 4

The duties of the Audit Committee include:

1. to supervise and evaluate the external audit work and propose engagement or replacement of the external audit institutions;
2. to supervise and evaluate the internal audit work and take charge of coordination of the internal and external audits;

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1. to review the financial information of the Company and its disclosure;
2. to supervise and evaluate the internal control of the Company;
3. other matters under laws, regulations, the Articles of Association and the authorisation of the Board.

Article 5

The Audit Committee supervises and evaluates the work of the external audit and proposes engagement or replacement of the external audit institutions.

1. To review, monitor and evaluate if the external auditors are independent and objective and if the audit procedures are effective under applicable standards; supervise and evaluate if the external audit institutions are diligent and responsible;
2. to evaluate the influence of non-audit services provided by the external audit institutions on their independence; to develop and implement policies on the engagement of an external auditor to provide non-audit services;
3. to review the remuneration for audit service and appointment terms applicable to the external audit institutions;
4. to discuss with the external auditor the nature and scope of the audit and reporting obligations before the audit commences; to discuss and communicate on the audit scope, audit plan, audit method, and material matters identified in the audit process, and consider and approve the external audit (review) plan;
5. to advise the Board on engagement or replacement of the external audit institutions, be responsible for making recommendations to the Board on the appointment, reappointment and removal of the external auditor, and handle any questions of resignation or dismissal of that auditor;
6. to act as the major representative between the Company and the external auditor, supervise their relationship, and coordinate the communication between the management and the external audit institution on major audit issues;
7. to review the external auditor's management letter, any material queries raised by the auditor to the management in respect of the accounting records, financial accounts or systems of control and management's response. To ensure that the Board will provide a timely response to the issues raised in the external auditor's management letter.

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Article 6

The Audit Committee supervises and evaluates the internal audit work and takes charge of the coordination of internal and external audits.

1. To supervise the appointment and dismissal of the head of internal audit department and make relevant recommendations;
2. to review the annual internal audit plan of the Company;
3. to supervise the implementation of internal audit plan of the Company;
4. to review the internal audit reports, evaluate the results of internal audit and supervise the rectification of material matters;
5. to guide the internal audit department on effective operation, and to review and monitor the effectiveness of the internal audit function;
6. to ensure that the internal audit function is adequately resourced and has appropriate standing within the Company;
7. to review various audit reports, rectification plans and rectification progress related to audit matters submitted by the internal audit department of the Company to the management;
8. to coordinate communications between the internal audit department and the external audit institution and accommodation provided by the internal audit department for the external audit;
9. to review the following arrangements set by the Company: employees may raise concerns about possible improper behaviours in financial reporting, internal control or other aspects in a secret manner. The Audit Committee shall ensure that appropriate arrangements are in place for the Company to conduct an impartial and independent investigation and take appropriate action on such matters.

Article 7

The Audit Committee reviews the financial information of the Company and its disclosure.

1. To review the disclosure of financial information, review the financial statements and reports, review the financial statements, quarterly, interim and annual financial reports before submitting to the Board, and provide opinions on the truthfulness, completeness and accuracy of the Company's financial reports;

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1. to focus on significant accounting and audit matters of the Company's financial reports, including adjustments to material accounting errors, changes in significant accounting policies and estimates, issues involving significant accounting judgments, and items resulting in modified audit reports;
2. to pay special attention to the possibilities of fraud, corrupt practice and material misstatements relating to financial reporting;
3. to supervise the rectification of financial reporting matters;
4. members of the Audit Committee shall communicate with the directors and senior officers and hold meetings with the external auditors at least twice a year. The Audit Committee shall consider any significant or unusual items that are, or may need to be, reflected in reports and accounts and shall give due consideration to any matters that have been raised by the Company's accountants, head of compliance department or external auditor;
5. to review the Company's financial and accounting policies and practice.

Article 8

The Audit Committee supervises and evaluates internal control of the Company.

1. To evaluate the adequacy of the Company's internal control system;
2. to review the self-evaluation reports of internal control;
3. to review the internal control audit reports issued by the external audit institutions, as well as the matters and improvement measures formulated after communication with the external audit institutions;
4. to evaluate the internal control assessment and audit results, and to supervise the rectification of deficiencies in internal control;
5. to review the Company's financial monitoring, risk management and internal monitoring system and to discuss with the management the risk management and internal control system and ensure that the management has discharged its duty to establish an effective system;
6. to consider any findings of major investigations of risk management and internal control matters on its own initiative or as delegated by the Board and the management's responses.

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Article 9

The Audit Committee shall report and make recommendation to the Board on measures that must be carried out and matters to be improved.

Article 10

The Audit Committee may engage intermediaries to provide professional advice if considered necessary, and the Company shall bear the costs. The Audit Committee has the right to engage intermediaries including independent advisers and legal advisers, if needed, in performing its duties. The Company shall provide financial resources and funding as the Audit Committee thinks fit for payment of:

1. the remuneration for audit service and the services related to audit, review and verification as provided by the external audit institutions;
2. the remunerations for intermediaries engaged by the Audit Committee.

Article 11

Restrictions on powers and duties of the Audit Committee.

In performing its powers and duties hereunder, the Audit Committee has no obligation for planning and implementing audit activities or for ensuring the Company's financial reports are complete and accurate or for preparation of the financial reports. The management of the Company shall be responsible for preparation of the financial reports, and the external auditors are responsible for the audit issues.

CHAPTER 3 COMPOSITION OF THE AUDIT COMMITTEE

Article 12

Members of the Audit Committee are appointed by the Board from members of the Board. The Audit Committee shall consist of three members or above, all being non- executive directors and with a majority of independent directors. At least one of the independent non-executive directors shall be an accounting professional with "appropriate professional qualifications" or "appropriate accounting or related financial management expertise" as required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. All members of the Audit Committee must be competent of performing the duties of the Audit Committee by possessing professional knowledge and commercial experience.

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Article 13

The Audit Committee shall have one chairman as convenor of the Audit Committee, who shall be an independent director and is responsible for chairing the meetings of the Audit Committee. The candidate of chairman shall be nominated by the Chairman of the Board and considered and approved by the Board. The convenor of the Audit Committee shall be an accounting expertise. Duties and powers of the chairman of the Audit Committee include:

1. to convene and chair the meetings of the Audit Committee;
2. to supervise and inspect the implementation of resolutions of meetings of the Audit Committee;
3. to sign on important documents of the Audit Committee;
4. to report to the Board on a regular basis;
5. other duties and powers authorised by the Board.

Article 14

The term of office of members of the Audit Committee shall be the same as that of directors, renewable upon re-election at its expiry. If during the term, a member of the Audit Committee no longer serves as a director and non-executive director of the Company, the Board shall fill the vacancy in time in accordance with these rules in order to meet the requirements herein on the composition of the Audit Committee. The members shall perform the relevant duties hereunder until the vacancy is filled by the Board under these rules.

Article 15

Member of the Audit Committee shall participate in relevant training courses to obtain professional knowledge in a timely manner in areas including law, accounting and regulation of listed companies for performing their duties.

Article 16

The Board shall conduct regular evaluation on the independence and performance of duties of the Audit Committee, and may replace those unfit to continue to serve as members when necessary.

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Article 17

A former partner of the external audit institution which is the Company's existing auditor may not act as a member of the Audit Committee within 2 year commencing from the later of the following dates:

1. when he/she ceases to be a partner of the external audit institution;
2. or when he/she ceases to have any financial interests in the external audit institution.

CHAPTER 4 MEETINGS OF THE AUDIT COMMITTEE

Article 18

Meetings of the Audit Committee are divided into regular meetings and extraordinary meetings. The convenor of the Audit Committee shall convene and chair the meetings of the Audit Committee. When the convenor of the Audit Committee fails or refuses to perform the duties, an independent director shall be appointed to perform the duties instead.

Article 19

The Audit Committee shall hold at least four regular meetings every year. The Committee may hold extraordinary meetings as necessary. When two or more members of the Audit Committee propose, or when the chairman considers necessary, an extraordinary meeting can be held.

Article 20

The quorum of the meetings of the Audit Committee shall be two-thirds or more of all its members, each having one vote. Opinions raised by members of the Audit Committee for submission to the Board shall be passed by a majority of all members. Any member of the Audit Committee having a conflict of interest in the items to be discussed by the Audit Committee shall withdraw from the meeting. When a valid opinion cannot be formed by deliberation due to withdrawal of members, the relevant item shall be deliberated by the Board directly.

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Article 21

Members of the Audit Committee shall attend the meeting in person and provide unequivocal opinions on the items being deliberated. If a member is unable to attend a meeting for any reason in person, he/she may authorise another member to attend and to give opinion by signing an instrument of proxy. The instrument of proxy shall contain the scope and validity period of authorisation. A member shall serve as the proxy of one member only. If a member who is an independent director cannot attend a meeting for any reason in person, he/she shall authorise another member who is an independent director to attend the meeting. All persons attending the meeting have the obligation to keep the issues being discussed at the meeting confidential, and no unauthorised disclosure of the relevant information is allowed.

Article 22

The Audit Committee may invite other relevant officers including directors, supervisors, senior officers, representatives of the external audit institution, internal audit officers, financial officers and legal advisers of the Company to be present as non-voting participants at its meetings and to provide necessary information.

Article 23

The meetings of the Audit Committee shall have complete minutes, which shall be signed by the members attending the meeting and kept by the secretary to the Board. Any objection to the resolutions by a member present at the meetings shall be recorded in the minutes.

Article 24

1. m e e t i n g o f t h e A u d i t C o m m i t t e e m a y b e h e l d o n s i t e o r b y w a y o f telecommunications including telephone conference, video conference and written proposal meeting, etc.

Article 25

Where a meeting of the Audit Committee is held by way of telephone or video conference, it shall be ensured that the participating members can hear each other clearly and communicate with each other. Meetings convened in such ways shall be taped. Where the participating members are not able to sign the resolutions of the meetings immediately at such meetings, oral voting shall be adopted, the results of which shall be valid with the resolutions and minutes of the meeting signed after the meeting as soon as practicable. The oral voting of the members has the same effect as written signatures. However, the resolutions and minutes of the meetings signed afterwards shall be consistent with the oral voting.

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Where a meeting of the Audit Committee is held by way of written proposal, the written proposal shall be dispatched by facsimile, e-mail courier or by hand or otherwise to all member, and shall be returned in original copies to the Company for filing after deliberation by the members. A proposal signed by consenting members satisfying the threshold hereunder shall become a resolution of the Audit Committee.

Article 26

Deliberation opinions passed by the meetings of the Audit Committee shall be submitted to the Board in writing (unless prohibited by the laws or regulatory requirements).

Article 27

The Audit Committee shall hold at least one separate meeting every year with the external audit institution in the absence of the management of the Company. The secretary to the Board can attend the meeting as non-voting participant upon the approval of the Audit Committee.

Article 28

The draft minutes for meetings of the Audit Committee shall be reviewed by all members as soon as possible, and the members who would like to make amendments or supplements shall provide their opinions in writing within one week after receipts of the draft minutes. The minutes shall be finalised and sent to all members for records within a reasonable time after the meetings are held.

Article 29

The secretary to the Audit Committee (if not applicable, the secretary to the Board) shall be responsible for circulation of the minutes and reports of the Audit Committee to all members of the Board.

Article 30

The Audit Committee shall make available its terms of reference, explaining its role and powers delegated by the Board.

Article 31

For engaging or replacing the external audit institution of the Company, the Audit Committee shall form deliberation opinions and make recommendations to the Board before the Board considers the relevant proposal.

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Article 32

Where the Board disagrees with the Audit Committee's view on the selection, appointment, resignation or dismissal of the external auditor, the Board shall include in the Corporate Governance Report a statement from the Audit Committee explaining its recommendation and also the reasons why the Board has taken a different view.

Article 33

The Audit Committee shall report to the Board any action or improvement which it deems necessary, and make recommendation as to the steps to be taken.

CHAPTER 5 SUPPLEMENTARY PROVISIONS

Article 34

Unless otherwise specified, the term "above" herein shall include the underlying number.

Article 35

In case of matters not covered in the rules or in conflict with the provisions of laws, administrative regulations, other relevant normative documents and the Articles of Association issued from time to time, the provisions of laws, administrative regulations, other relevant normative documents and the Articles of Association shall prevail.

Article 36

These rules shall be interpreted by the Board.

Article 37

These rules shall come into effect from the date of approval by the Board.

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