Corporate Governance

Audit Committee

CHINA NATURAL RESOURCES, INC.

AMENDED AND RESTATED CHARTER OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
(as of November 1, 2007)

A. Purpose

 The Audit Committee (the 'Committee') of China Natural Resources, Inc. (the 'Company') is formed to assist the Board of Directors in fulfilling its oversight responsibilities by:

• reviewing the financial information that is provided to members and others; 
• reviewing the systems of internal controls that management and the Board have established; 
• appointing and retaining and overseeing the performance of the Company's independent registered public accounting firm (the 'independent auditors'); and 
• overseeing the Company's accounting and financial reporting processes and the audits of the Company's financial statements.

B. Composition and Process

 The Committee shall consist of at least three directors, each of whom shall satisfy the independence requirements of the Securities and Exchange Commission ('SEC') and The Nasdaq Stock Exchange or other self-regulatory authority having primary jurisdiction over the Company (the 'Principal Exchange').  Committee members shall be appointed by the Board; Committee members may be removed by the Board; and vacancies may be filled by the Board (and shall be filled by the Board to meet the minimum constituency requirement set forth in the preceding sentence).  The Board shall designate, and may remove and replace, a Committee Chairperson.

 Each member of the Committee shall be financially literate, as determined by the Company's Board of Directors in the exercise of its reasonable business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the Committee。  In addition, at least one member of the Committee shall have employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight。  At least one member of the committee shall be an 'audit committee financial expert,' within the meaning of SEC rules and regulations。

 The Committee shall meet at least twice per year or more frequently as circumstances require。 The Committee shall meet periodically with management, the head of the Company's internal audit department, if any, and the independent auditor in separate sessions。

C. Relationship with Independent Registered Public Accountants

 The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditors (including resolution of disagreements between management and the independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company。 The Company's independent auditors shall report directly to the Committee。

 The Committee shall pre-approve all permissible non-audit services and all audit, review or attest engagements required under the securities laws (including the fees and terms thereof) to be performed for the Company by its independent auditor; provided, however, that de-minimus non-audit services may instead be approved in accordance with applicable SEC rules. The Committee may delegate to the Chair of the Committee or to a subcommittee the authority to grant pre-approvals of audit and permissible non-audit services, provided that the decisions of such Chair or subcommittee shall be presented to the full Committee at its next scheduled meeting.

D. Primary Responsibilities

 The Committee shall:

1. Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.

2. Meet and review and discuss with management and the independent auditor, annual financial statements and any interim financial statements prepared by the Company, including the Company's specific disclosures under 'Management's Discussion and Analysis of Financial Condition and Results of Operations' in such reports, and recommend to the Board whether the audited financial statements should be included in the Company's Annual Report on Form 20-F.

3。 Review major issues regarding accounting principles and financial statements, including any significant changes in the Company's selection or application of accounting principles, any major issues as to the adequacy of the Company's internal controls and any special audit steps adopted in light of material control deficiencies。

4。 As, when and to the extent that the Company becomes obligated under rules and regulations of the SEC, the Principal Exchange or other regulatory body with jurisdiction over the Company to provide an internal controls report, to review and discuss with management and the independent auditor the Company's internal controls report and the independent auditor's attestation of the report prior to the filing of the Company's Annual Report on Form 20-F。

5。 Review analyses prepared by management or the independent auditor of significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements, including the effects of alternative generally accepted accounting principles ('GAAP') methods on the Company's financial statements。

6. Review and discuss all reports provided by the independent auditor on:

 (a) critical accounting policies and practices to be used;

 (b) alternative treatments within GAAP for policies and practices related to material items that have been discussed with management, including the ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the independent auditor; and

(c) other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.

7。 Review the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the Company's financial statements。

8. Discuss with management the Company's earnings press releases as well as financial information and earnings guidance provided to analysts and rating agencies, if any; provided, however, that any such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made), and the Committee need not discuss in advance each earnings release or each instance in which the Company may provide earnings guidance.

9. Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any problems or difficulties the auditor may have encountered in the course of the audit work and management's response, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.

10. Discuss with management the Company's major financial risks and exposures and the steps management has taken to monitor and control such risks and exposures, including the Company's policies with respect to risk assessment and risk management.

11. Review disclosures made to the Committee by the Company's chief executive officer and chief financial officer during their certification process for the Annual Report on Form 20-F and any interim financial reports about any significant deficiencies and material weaknesses in the design or operation of the Company's internal control over financial reporting and any reported fraud involving management or other employees who have a significant role in the Company's internal control over financial reporting.

12。 At least annually, evaluate the qualifications, performance and independence of the independent auditor, including assessing whether all relationships between the independent auditor and the Company and the provision of permitted non-audit services are compatible with maintaining the auditor's independence。 In connection with its evaluation, the Committee shall obtain and review a report by the independent auditor regarding its internal quality control procedures and consider whether such quality controls are adequate。

13。 Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit。

14。 Set hiring policies for employees or former employees of the Company's independent auditor。

15. Discuss with the independent auditor and management, the internal audit department staffing and responsibilities and any recommended changes thereto.

16。 Establish and review periodically procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting or auditing matters and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters。

17。 Review with the Company's counsel legal matters that may have a material impact on the Company's financial statements, the Company's compliance policies and any material reports or inquiries received from regulators or governmental agencies。

18. Review and approve the Company's policies and procedures with respect to related persons transactions and perform the responsibilities assigned to the Committee as set forth therein.

19. Fulfill such other duties and responsibilities as may be assigned to the Committee, from time to time, by the Board or the Chairman of the Board, or as may be required by law or regulation.

While the Committee has the responsibilities and authority set forth in this Charter, it is not the duty of the Committee to plan or conduct audits of the Company's financial statements or of its internal control over financial reporting or to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles。 This is the responsibility of management and the independent auditor。

E. Charter

 The Committee shall review and reassess the adequacy of this Charter annually, and recommend to the Board any additions and/or modifications deemed necessary or appropriate.  The Company is a 'foreign private issuer' as defined in Rule 405 of the Securities Act of 1933, as amended, and, accordingly, is excused from compliance with certain corporate governance requirements imposed by self-regulatory authorities including the Principal Exchange.  Accordingly, in connection with its annual review and reassessment of this Charter, the Committee shall determine whether it is appropriate to modify the Charter to reflect (1) cessation of the Company's status as a foreign private issuer, (2) changes in rules and regulatory requirements applicable to foreign private issuers and/or (3) voluntary compliance by the Company with requirements not otherwise applicable to foreign private issuers.

F. Enabling Provision

 The Committee shall have the authority to engage (and terminate and/or replace) independent counsel and other consultants and/or advisors, as it determines necessary to carry out its duties. The Committee may conduct or authorize investigations into any matters within the scope of its responsibilities and may meet with any employees of the Company or any third parties it deems necessary in connection with such investigations. The Company shall provide for appropriate funding, as determined by the Committee, for the payment of: compensation to counsel and other advisors engaged by the Committee; compensation to the independent auditor, and ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
 

 

 

Audit Committee Members

Contact Audit Committee:   auditcommittee@e222e.com