Audit Committee charter

Zain Bahrain

Policy Details & Approvals

Approvals

This Charter has been approved by the Board of Directors at their meeting held on:

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Reference number

Last reversion date

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Signature

Date

AbdulRahman Al Shafei

Manager, Investor Relations, Corporate Governance, Compliance & General Management Office

Prepared by

Signature

Date

Latifa Salahuddin

Director, Legal Department and Board Secretary

Reviewed by

Signature

Date

Mohammed Zainalabedin

General Manager

Approved by

Board Of Directors

Targeted Audience

Internal Circulation

Open Circulation

Strictly Confidential

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Change History:

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Table of Contents

Audit

Draft

1Introduction4

2Purpose6

3Organization of the Audit Committee8

4Audit Committee Responsibilities19

5Responsibilities of the Audit Committee Members31

6Relationship with Others32

7Members' Orientation33

8Approval34

9Definitions35

10List of Terms and Abbreviations39

The Board of Directors (hereinafter referred to as the "Board" or the "Directors") may amend this Board Charter (hereinafter referred to as the "Charter") or grant waivers in exceptional circumstances, provided that any such modification or waiver does not violate any applicable laws, rules, regulations, Zain Bahrain B.S.C.’s ("Zain") Delegation of Authority Matrix and "Articles of Association" and further provided that any such modification or waiver is appropriately disclosed to the concerned parties.

· The changes to this document will be consecutively numbered and dated.

1 Introduction

1.1 The Board of Directors of Zain, in its adoption to "Corporate Governance Code" in line with the "Central Bank of Bahrain Rule Book – Volume 6: Capital Markets" issued by the Central Bank of Bahrain (hereinafter referred to as the "CBB") and the "Corporate Governance Code" issued by the Ministry of Industry and Commerce (hereinafter referred to as the "MoIC"), and assurance to that it remains aligned with leading practices in terms of "Corporate Governance" issued by the Organization for Economic Cooperation and Development (hereinafter referred to as the "OECD"), has prepared and approved this Charter.

1.2 As per "Principle 1 issued by the Corporate Governance Code: The Company shall be headed by an effective, collegial and informed Board" The Audit Committee (hereinafter referred to as the "Committee") will act only within its mandate and therefore the Board will not allow the Committee to dominate or effectively replace the whole Board in its decision making responsibility.

1.3 This Charter will govern the operations of the Audit Committee and details the scope of the Committee's responsibilities and how it will carry out those responsibilities, including but not limited to its structure and procedures.

1.4 The Committee will review this Charter annually and will recommend to the Board any changes to the extent required under any applicable regulations, as well as to bringing it in line with leading practices.

1.5 As per "Principle 1 issued by the Corporate Governance Code: The Company shall be headed by an effective, collegial and informed Board" and "Appendix B: Audit Committee" the Board will evaluate, with the assistance of the Nomination and Remuneration Committee (hereinafter referred to as the "NRC"), the performance of the Audit Committee annually, based on a self-evaluation report prepared by the Audit Committee. The Audit Committee evaluation will include an assessment of the performance and commitment of each member to the activities of the Committee as well as his/her constructive involvement in discussion and decision making.

2 Purpose

2.1 The Board of Directors being the governing body of Zain will ensure, through its Audit Committee, that the Company's management maintains adequate policies, procedures and internal controls for:

2.1.1 Safeguarding the Company's assets.

2.1.2 Properly recording the transactions and events as they take place.

2.1.3 Preparing reliable financial information.

2.1.4 Overseeing and monitoring the enterprise wide risks for managing the Company's operations.

2.2 The above aspects will be independently and periodically assessed by the Company's internal as well as "External Auditors".

2.3 To further strengthen the Internal Audit Function (hereinafter referred to as the "IAF") and to ensure its objectivity and independence, the Board established this Committee. The primary purpose of the Audit Committee of the Board of Directors of Zain is to monitor the following Company affairs on behalf of the Board:

2.3.1 Adequacy and soundness of internal control systems, financial accounting and reporting policies and practices, and effectiveness of internal and "External Audit" functions.

2.3.2 Adherence to the Company's approved policies and procedures.

2.3.3 Adequacy and soundness of policies and procedures in respect of the safety and security of the Company's assets, resources and integrity of the Company's financial statements.

2.3.4 Performance of the Company's internal and "External Audit" functions and their independence.

2.3.5 Existence of a framework for the identification, management and review of risks, including agreeing risk capacity and tolerance.

2.3.6 Identification of the principal risks of Zain's business and ensuring the implementation of appropriate systems to manage those risks.

2.3.7 Revision and evaluation of strategic risks and the receipt of regular reports on those as well as emerging risks.

2.3.8 Existence of a positive culture of managing opportunities, threats and uncertainties that are embedded throughout the Company.

3 Organization of the Audit Committee 3.1 Structure of the Audit Committee

3.1.1 As per "Principle 3 issued by the Corporate Governance Code: The Board shall have rigorous controls for financial audit and reporting, internal control and compliance with Law" and "Appendix B: Audit Committee" The Committee will be comprised of at least three (3) members, such members must have no conflict of interest with any other duties they have for the company. The majority of members of the committee including its Chairman shall be independent. As of today’s date, the Company is in the process of applying the Corporate Governance requirements and the majority of the members are not independent due to the fact that MTC holds a management agreement with Zain Bahrain. The majority of the members will have the financial and accounting literacy to include the following:

· Ability to read and understand the annual and interim financial statements including the balance sheet, the income statement, the cash flow statement, the statement of changes in shareholders' equity and the related notes to the financial statements which represent an integral part of the latter.

· Understanding of the accounting principles, assumptions and estimates which are applicable to the financial statements.

· Experience in evaluating complex accounting concepts and practices.

· Understanding of internal controls and procedures for financial reporting.

· Understanding of the Audit Committee's functions and importance.

3.1.2 "Executive Directors", including the Chief Officers (hereinafter referred to as the "Officers"), are not eligible for Audit Committee membership. These members will have no conflict of interest with any other duties they have for the Company.

3.1.3 As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, the Board might choose to appoint Non-Board members as experts in the Committee.

3.1.4 As per "Article 173: Commercial Companies Law", the Audit Committee member who is also a member of the Board will fulfill the following conditions:

· He/she will be fully qualified to act.

· He/she would not have been convicted in a crime involving negligent or fraudulent bankruptcy or a crime affecting his/her honor or involving a breach of trust or in a crime on account of his/her breach of the provisions of this law, unless he/she was reinstated.

· Any other conditions set out in the Company’s Articles of Association.

If the member forfeits any of the above conditions, he/she will no longer become member from the date of forfeiture of that condition.

3.1.5 As per "Principle 3 issued by the Corporate Governance Code: The Board shall have rigorous controls for financial audit and reporting, internal control and compliance with law" and "Appendix B: Audit Committee" One of the members will serve as the Chairman of the Committee (hereinafter referred to as the "Chairman"). The Chairman will be designated by the Board and will be an "Independent Director".

3.1.6 The Board will also nominate a "Vice Chairman" to chair the Committee's meeting in case of the Chairman's absence.

3.1.7 Employees of Mobile Telecommunications Company K.S.C. and Zain are not eligible for Audit Committee membership.

3.1.8 Members of the Committee will be appointed by the Board upon the recommendation of the NRC and may be removed by the Board at its discretion.

3.1.9 No Committee member will simultaneously serve on the Audit Committee of a competitor of Zain.

3.1.10 Neither the Chairman of the Board, nor the Chairman of the "Executive Committee" nor the Chairman of the "Board Risk Committee", if any, may chair this Committee.

3.1.11 The Board will issue rules for appointing the members of the Committee and define the term of their office as set by the local rules and regulations unless otherwise stated in addition to the procedure to be followed by the Committee.

3.1.12 The Audit Committee's term of office will be for a period not to exceed the tenure of the Board. The membership of an Audit Committee member, if he/she is a Director, will come to an end at the expiry of his/her membership of the Board or by his/her voluntary resignation from the Committee membership. A Non-Director's membership will cease by way of his/her resignation or at the end of the Committee's term.

3.1.13 As per "Principle 4 issued by the Corporate Governance Code: The Company shall have rigorous procedures for appointment, training and evaluation of the Board" The "Chairman of the Board" will confirm to the shareholders when proposing re-election of a Director that, following a formal performance evaluation, the person's performance continues to be effective and continues to demonstrate commitment to the role. Any term beyond six (6) years for a Director will be subject to particularly rigorous review, and will take into account the need for progressive refreshing of the Board. Serving more than six (6) years is relevant to the determination of a "Non-Executive Director's" independence. This clause is applicable not only to the Directors but also to the Committee members.

3.1.14 The Secretary of the Board will act as the Committee Secretary (hereinafter referred to as the "Secretary") to keep records of its proceedings and resolutions. He/she can be one of the Committee's members or a Non-Committee member and he/she can be from outside the Board. If the Secretary is not a Committee member, he/she will attend the Committee meetings without having any voting right. The Secretary, if not a Committee member, will not be involved in other duties or responsibilities that would result in a conflict of interest with his/her duties as the Committee's Secretary. The Secretary will be a person with legal or similar professional experience. The Secretary is responsible for the following:

· Keeping complete records of the Committee's meetings for the purpose of issuing reports about the performance of the Committee to the Board.

· Circulating the Committee's resolutions to the concerned parties.

· Coordinating with concerned departments regarding the Committee's resolutions that necessitate legal compliance and regulatory procedures.

· Establishing a mechanism for tracking and following-up on the Committee's resolutions.

· Executing any other task or responsibility assigned to him/her by the Committee's Chairman or any of its members.

3.1.15 The Board through the Audit Committee will have access to the Secretary, who will have responsibility for reporting to the Committee on its procedures.

3.1.16 The Board may remove an Audit Committee member from the membership by a majority vote.

3.2 Remuneration of the Committee

3.2.1 The Committee members will not be entitled to a segregated compensation but rather will be entitled to the regular annual board remuneration.

3.2.2 The above amounts will be approved by the Board based on the recommendations from the NRC.

3.2.3 As per "Principle 5 issued by the Corporate Governance Code: The Company shall remunerate Directors and officers fairly and responsibly", remuneration will be sufficient enough to attract, retain and motivate the Audit Committee members. However; the Company will avoid paying more than what is necessary for that purpose.

3.2.4 As per "Principle 5 issued by the Corporate Governance Code: The Company shall remunerate Directors and officers fairly and responsibly" issued by the Corporate Governance Code, due to the fact that all Audit Committee members are Non-Executive Directors, accordingly their remuneration will not include performance related elements such as: grants of shares, share options or other deferred stock related incentive schemes, bonuses or pension benefits.

3.2.5 Committee members who are resident outside the Company's registered office location are entitled to all out of pocket expenses incurred by them to attend the meeting.

3.2.6 The Secretary will not be entitled to any compensation but rather will be entitled to the regular remuneration if he/she is a Director.

3.2.7 Board of Directors' reports presented to the "General Assembly" will disclose the remunerations and other payments made to the Committee members.

3.3 Meetings and Procedures of the Committee:

3.3.1 The Committee will approve its tentative yearly meeting schedule at the first meeting of each year.

3.3.2 The Audit Committee will meet at the invitation of its Chairman or any two (2) members. Such an invitation to be accompanied by the agenda for the meeting as well as the material packages will be hand delivered or sent to the members electronically prior to the date of the meeting.

3.3.3 The agenda of each meeting will be prepared by the Secretary of the Committee after the approval of the Chairman.

3.3.4 As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, the Committee will meet at least four (4) times in every financial year and may meet more frequently from time to time as it deems necessary or as may be required by the Board. These meetings may be scheduled in conjunction with regularly scheduled meetings of the entire Board. Unless otherwise directed by the Board, (meetings can be attended in person or via tele-conference or video-conference), the Committee will meet at the Company's registered office.

3.3.5 As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, anyone will be entitled to be attend and present at a meeting of the Committee based on the consent of the Chairman.

3.3.6 The Chairman will preside, when present, at all meetings of the Committee.

3.3.7 The presence of the majority of Committee members with the presence of the Chairman or his/her deputy will constitute a quorum for the Committee's meetings.

3.3.8 A member cannot elect another member of the Committee to act on his/her behalf and to vote in the meetings.

3.3.9 In case of emergencies or situations beyond the Committee's control and where the Audit Committee cannot be convened, the Audit Committee can take its decisions via circulation.

3.3.10 The Committee's resolutions will be taken by a majority of votes.

3.3.11 The Chairman will have a casting vote in case of an equality of votes in line with the Committee's authority specified in the DoA.

3.3.12 As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, Officers of the Company might be invited by the Chairman to attend the Committee meeting. The Non-Committee members will be involved in the discussions but will not have any voting right.

3.3.13 The Committee will keep written minutes of its meetings as detailed in this Charter under "Section 3.4 "Minutes of Meetings" below".

3.4 Minutes of Meetings

3.4.1 The deliberations and resolutions of the Audit Committee will be recorded in minutes. Such minutes will be kept with the Board of Directors' records. These minutes will be provided to each of the Committee members after the approval of all Committee members who have attended the meeting.

3.4.2 The Committee will keep a record of its meetings and report on them to the Board. The Committee's meetings will be documented as follows:

· The minutes will specify the date and the place of the meeting, the name of attendees and absentees, summary of discussions held in the meeting and their related decisions and recommendations.

· The draft minutes will be prepared by the Secretary after each meeting and will be sent to all Committee members for review. Any comments on the minutes from any of the Committee members will be provided during a week from the draft's receipt date, or otherwise the minutes will be considered as approved.

· The Secretary will amend the draft minutes based on the members' comments, if any, and will send the minutes along with these comments to the Chairman.

· The Secretary will prepare the final minutes according to the Chairman's recommendations and will send them to the Committee members duly signed by the Chairman and himself.

· The signed copy of the minutes will be kept attached with the related documents and correspondence in a special file held by the Board Secretary.

3.5 Authority of the Committee

3.5.1 The Audit Committee's role will be to review and advise but not to make any business decisions. The Committee will demonstrate a constructive, supportive and advisory approach.

3.5.2 To achieve its objectives the Audit Committee is authorized to:

· Perform the specific duties and functions enumerated in this Charter and upon the directions and approval of the Board, to investigate any of the Company's activities.

· Have full access to the Company's Officers and employees at all levels and authority to seek reports or information about the Company's financial affairs, as it deems necessary to fulfill its responsibilities, in coordination with the Chief Executive Officer (hereinafter referred to as the "CEO").

· Communicate its findings and recommendations for any corrective actions to the Board and will not issue any directives to the Company's Officers and employees in this regard. The Board will either accept and implement the recommendations of the Audit Committee or advise the Committee of the reasons for any deviations from the proposal.

· As per "Principle 1 issued by the Corporate Governance Code: The Company shall be headed by an effective, collegial and informed Board" Grant Non-Executive Directors free access to the Company's management beyond that provided in Board meetings. Such access will be through the Chairman of the Audit Committee or the CEO. The Board should make this policy known to management to alleviate any management concern about a Director's authority in this regard.

3.5.3 Individual members of the Committee will not access independently the Company's Officers or employees without the Chairman's approval or a resolution from the Audit Committee.

3.5.4 As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, in discharging its oversight role, the Committee, in coordination with the CEO, is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company and the power to retain outside counsel, auditors or consultants, or incur additional expenses for this purpose, that will be paid by the Company without seeking the approval of the Board or the Officers. The Audit Committee may require any Officer or employee of the Company or any of its subsidiaries and the Company's advisors (including but not limited to: consultants, auditors and legal advisors) to meet with the Committee, after coordinating with the CEO.

3.6 Reporting Responsibilities of the Committee

3.6.1 The Chairman will report formally to the Board on its proceedings after each meeting on all matters within his/her duties and responsibilities.

3.6.2 Make recommendations to the Board as it deems appropriate on any area within its responsibilities where action or improvement is desired.

3.6.3 Prepare an "Annual Report" concerning the number of meetings held during the year along with the number of meetings attended by each member.

3.6.4 Review any other reports relating to the Committee's responsibilities and issued by the Company.

4 Audit Committee Responsibilities

4.1 The Audit Committee will carry out the following responsibilities as set out below:

4.1.1 Internal Controls and Finance and Accounting Policies and Procedures

· Review with the Company's management and internal auditor and "External Auditor" the Company's policies to reasonably assure the adequacy of accounting principles and financial practices applied.

· Review the effectiveness of the Company's internal controls' system, including information technology and telecom (industry specific) security and controls.

· Understand the scope of internal and "External Auditors" review of internal controls over financial reporting, and review reports on significant findings, implications and recommendations together with management's responses.

· Review with the Chief Audit Executive (hereinafter referred to as the "CAE") and the "External Auditors" the coordination of audit efforts to ensure complete coverage of key business controls and high risk areas, improve efficiency and the effective use of audit resources.

· Review and comment on any significant new or changes to existing finance and accounting policies and procedures adopted by management.

4.1.2 External Audit and Financial Statements

· As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, recommend to the Board the appointment, dismissal and remuneration of "External Auditors". Any such recommendation will be made with regard to their independence, cost and competencies.

· In appointing an "External Auditor" for the Company, the management of the Company and the Audit Committee will comply with the related guidelines issued by the MoIC.

· An invitation for "External Audit" proposals should be requested from the firms short-listed by the IAF. A formal documented evaluation of the auditors included in the short-list should be carried out by the CAE in coordination and agreement with the CEO. The evaluation should take into account specific industry expertise, size of the audit firm, other similar audits, the value that could be added as well as the fees. The evaluation and management's recommendation will be submitted to the Audit Committee for review. The Committee's recommendations will be subject to the Board's approval.

· As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, make a determination at least once each year of the "External Auditor's" independent report, including:

· Determining whether its performance of any non-audit services compromised its independence. Additionally, the Audit Committee will pre-approve all non-audit services provided by the "External Auditors", including specific pre-approval of internal controls related services, and will not engage the "External Auditors" to perform non-audit services prohibited by law or regulations.

· Obtaining from the "External Auditor" a written report listing any relationships between the "External Auditor" and the Company or with any other person or entity that may compromise the "External Auditor's" independence.

· Recommend a frequency for change/rotation of "External Auditors" on a periodic basis.

· Review "External Audit" reports, work with and support the "External Auditors" where practicable and provide an alternative communication link between the "External Auditors" and the Board as and when needed.

· Oversee the arrangements for the completion of the quarterly interim reviewed financial statements and year-end audited financial statements. Review together with the "External Auditor" the audit plan (proposed audit scope); including coordination of the audit effort with the IAF.

· As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, review with the "External Auditor" the audited financial statements with respect to the audit approach, accounting adjustments and reclassifications, recommendations for improving the internal controls and any other significant audit findings before these are presented to the Board as well as discuss any restrictions on its access to requested information and any disagreements or difficulties encountered with Officers.

· As per "Chapter HC-3 Issued by the Central Bank of Bahrain Rule Book – Volume 6: Capital Markets: Audit Committee and Financial Statements Certification" Make effective use of the work of the "External Auditor" as well as the internal auditor and ensure the integrity of the Company's accounting and financial reporting systems through regular independent review. Audit findings will be used as an independent check on the information received from management about the Company's operations and performance as well as the effectiveness of its internal controls.

· Discuss the adopted accounting policies and any changes in accounting policies, providing opinion and recommendations to the Board.

· As per "Chapter HC-3: Audit Committee and Financial Statements Certification" issued by the Central Bank of Bahrain Rule Book – Volume 6: Capital Markets, recommend any additional or specific audit required in respect of the financial statements and other specific part of the business.

· As per "Chapter HC-3: Audit Committee and Financial Statements Certification" issued by the Central Bank of Bahrain Rule Book – Volume 6: Capital Markets, recommend and table for discussion a management letter to be provided to the external auditor.

· Annually review and evaluate the "External Auditor's" qualifications, performance and independence, including a review and evaluation of the lead partner, taking into account the opinions of the Company's Chief Officers and the CAE and present its conclusions to the Board. The Audit Committee will also consider the regular rotation of the "External Audit" firm itself to assure continuing auditor independence in fact and in appearance.

· Review the scope, terms of reference and remuneration for any tax services assignment which can be performed by external consultants.

· On a regular basis, meet separately with the "External Auditors" to discuss major observations arising from interim and final audits and any other matter which the auditors wish to highlight.

· Review the "Management Letter" issued by the "External Auditors" and follow up the actions taken in response.

· Consider, review and follow-up with management any findings raised as part of the "External Auditor's" "Management Letter", and management's response thereto, including timetable for implementation of any recommendations.

· As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, review with the Officers and the "External Auditor" the interim and annual financial statements prior to presentation to the Board, and give comments and recommendations with respect thereto.

· Review with management, CAE and "External Auditor" the effect of changes in applicable accounting standards and the changes of the regulations on the Company's financial statements.

· Regularly review with the "External Auditors" any audit problems or difficulties encountered during the course of the audit work, including any restrictions on the scope of the "External Auditors" activities or access to requested information and management's response.

· Regularly report to the Board any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent "External Auditor", or the performance of the IAF.

· As per "Principle 3 issued by the Corporate Governance Code: The Board shall have Rigorous Controls for Financial Audit and Reporting, Internal Control and Compliance with Law" Encourage management accountability for the financial statements required by the Directors, the Company's CEO and Chief Financial Officer. The CEO and Chief Financial Officer will state in writing to the Audit Committee and the Board as a whole that the Company's interim and annual financial statements present a true and fair view, in all material respects, of the Company's financial condition and results of operations in accordance with applicable accounting standards.

4.1.3 Internal Audit

· Ensure that the Company maintains an IAF/function to provide management and the Audit Committee with ongoing assessments of the Company's risk management processes and system of internal controls.

· As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, review and discuss with the Board, the IAF's budget.

· As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, review and discuss the adequacy of the Company's internal auditing personnel.

· Review the annual performance appraisal and bonus, based on performance and salary increment of the CAE, in coordination with the CEO.

· Oversee the IAF and review its charter, scope, efficiency, independence, objectivity, performance and work plan.

· Review, for the purpose of carrying out internal audit work and preparation of the internal audit plan, the internal audit risk assessment to decide on the effectiveness of the internal audit plan.

· Evaluate the internal audit procedures for establishing the annual internal audit plan.

· As per "Chapter HC-3: Audit Committee and Financial Statements Certification" issued by the Central Bank of Bahrain Rule Book – Volume 6: Capital Markets, approve the internal audit charter as well as internal audit policies and procedures.

· As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, review the internal audit scope, internal audit risk assessment and nature of the internal audit plan as well as any subsequent changes, including whether or not the internal audit plan is sufficiently linked to the Company's overall business objectives and management's success and risk factors.

· Review all internal audit reports, including executive summary, observations/findings, implications, recommendations, management replies as well as the exceptions noted and pursue the implementation of the corrective measures in respect to the comments included in the internal audit report.

· Review and discuss all the follow-up reports of the internal audit as well as the status of all the significant observations/findings in the internal audit report.

· Review with the CAE the results of the internal audit efforts on a yearly basis, or as deemed necessary, and peruse periodical and annual internal audit reports.

· Supervise the Company's IAF/function to ensure its effectiveness in executing the activities and duties specified in the internal audit charter.

· Review and approve, on a regular basis, the IAF risk register, audit plan and all major changes to the plan.

· As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, ensure that there are no unjustified restrictions or limitations and review and concur in the appointment, replacement or dismissal of the CAE.

· Review the effectiveness of the IAF, including compliance with the "Institute of Internal Auditors' (IIA) International Standards for the Professional Practice of Internal Auditing".

· On a regular basis, meet separately with the CAE to discuss any matters that the Audit Committee or CAE believes should be discussed privately.

4.1.4 Compliance with Laws, Regulations and Internal Policies

· Review the effectiveness of the system for monitoring compliance with applicable laws and regulations, the results of management's investigation and follow-up (including any disciplinary action) of any instances of non-compliance.

· Review the findings of any examinations by regulatory agencies (including but not limited to: Telecommunication Regulatory Authority of Bahrain "Financial Impact", MoIC, Ministry of Finance, BB, CBB and internal/"External Auditor's" observations.

· As per "Appendix B: Audit Committee" issued by the Corporate Governance Code, review the Company's internal compliance and ethics programs, including consideration of legal and regulatory requirements and review with management its periodic evaluation of the effectiveness of such programs.

· Review the process for communicating the "Code of Conduct and Ethics" to the Company's employees and for monitoring compliance therewith.

· Review the scope and status of systems designed to promote the Company's compliance with laws, regulations, internal procedures and the "Code of Conduct and Ethics" through the review of reports from the IAF as well as from third parties as determined by the Committee.

4.1.5 Information Technology (hereinafter referred to as "IT") Systems Controls and Telecom Systems Controls

The Committee will consider and review with management, the "External Auditors" and the IAF work relating to:

· The effectiveness or weaknesses of the Company's computerized information system controls and security.

· Any related significant findings/observations, implications and recommendations of the "External Auditors" and IAF together with management's responses thereto, including the timetable for implementation of recommendations to correct weaknesses in the system's controls, including any significant risks related thereto and major controls over such activities.

· The status and adequacy of management information systems and other information technology.

· The Committee will review with the CAE and the "External Auditors" the coordination of the audit effort to ensure complete coverage of key system controls and risk areas related to IT controls.

4.1.6 Other Responsibilities

· Follow-up on allegations of material, financial, ethical or legal irregularities; look into serious violations of the Company's policies, alleged breach of legal provisions or contravention of the "Code of Conduct and Ethics", which are highlighted by the IAF or any other staff member.

· Institute, oversee and direct any special investigations, as needed, concerning matters relating to the Company's financial statements, internal controls, compliance with the laws or business ethics.

· Review all significant issues within the scope of the Committee Charter, including any changes in accounting principles/estimates, with the management and the "External Auditors", prior to any decision being reached on reporting practices to be followed by the Company, and report thereon to the Board.

· Review procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal controls or auditing matters, including procedures for the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

· The Committee will be available at all times to receive suggestions, questions or recommendations from the "External Auditors", IAF or the Officers.

· Perform other activities related to these activities as requested by the Board.

· As per "Principle 3 issued by the Corporate Governance Code: The Board shall have Rigorous Controls for Financial Audit and Reporting, Internal Control and Compliance with Law" and "Appendix B: Audit Committee" The Board should adopt a "Whistleblower" program under which employees can confidentially raise concerns about possible improprieties in financial or legal matters. Under this program, concerns may be communicated directly to any Audit Committee member or, alternatively, to an identified officer or employee who will report directly to the Audit Committee on this point.

Zain Bahrain B.S.C. ("Zain")

Audit Committee Charter

29 | Page

5 Responsibilities of the Audit Committee Members

5.1 The members will make every effort to attend all Committee meetings and to effectively participate in discussions. The members will inform the Chairman if they cannot attend a meeting.

5.2 The members will maintain the confidentiality of the Company's trade secrets gained through performing their duties and will not publicize confidential information to shareholders out of the "General Assembly" or to any other party. In such cases, the member will be dismissed from the Committee and can be held responsible for the financial damages caused by such announcements.

5.3 The members of the Audit Committee will not execute any management job in the Company even by way of consultancy.

5.4 The members will carry on good performance in executing their duties and responsibilities and will be updated in their domain in the interests of the Company.

5.5 The members will be honest, truthful, objective and independent in performing their duties.

5.6 The members will not participate in any occupations that can violate the "Directors’ Code of Conduct Policy" of the Company or its principles. Moreover, the members will not accept any occupations that are liable to give rise to conflicts of interest with the Company and those which may prevent them from executing their duties objectively and independently.

5.7 The members are required to disclose all personal interests (including shares' ownership in the Company) and their nature that are executed with the Company and any personal relation with the Board of Directors and the Officers.

6 Relationship with Others

The sphere of the Committee's responsibilities will make it necessary for it to maintain a good relationship with other committees established at Zain.

6.1Board Risk Committee

6.1.1 The Committee will coordinate with the "Risk Committee", once formed, to ensure that the Company's overall "Risk Management Process" is comprehensive in scope and is functioning effectively and also to seek the "Internal Audit" intervention where required.

6.2Other Board Committees

6.1.2 The Committee may coordinate with other Board committees, as appropriate, to perform its duties and responsibilities.

7 Members' Orientation

7.1New Committee members will be provided with an orientation program which will include presentations by Officers on the Company's strategic plans, its significant financial, accounting and risk management issues, legal affairs, compliance programs, operations, "Directors’ Code of Conduct Policy", management structure, key policies, practices and internal and "External Auditors". In addition, each incoming member will be provided with copies of Zain's "Articles of Association", "Management Agreement", the executive summary of the corporate plan, previous internal audit reports, internal audit plans and other appropriate information.

8 Approval

8.1 This Audit Committee Charter has been approved by the Board of Directors at their meeting held on___________.

9 Definitions9.1 Ministry of Industry and Commerce ("MoIC")

As per "The Introduction" issued by the Corporate Governance Code, the MoIC is the governmental body with responsibility for administering the "Company Law" and the "Corporate Governance Code" as well as the closely-related "Audit Law". The MoIC will actively exercise its monitoring and penalty powers under the "Commercial Companies Law" and will work closely with the CBB and the BB.

9.2 Central Bank of Bahrain ("CBB")

As per "The Introduction" issued by the Corporate Governance Code, as the body responsible for licensing and regulating the BB and for supervision of financial institutions, the CBB will also have an important role in monitoring and enforcement of the "Corporate Governance Code".

9.3 Bahrain Bourse ("BB")

As per "The Introduction" issued by the Corporate Governance Code, and through its authorities to impose listing and delisting standards, its investigation function, and its disciplinary Board with specific penalty powers, the BB will also contribute importantly to enforcement of this "Corporate Governance Code". Among other things, the BB's listing rules will require compliance with this "Corporate Governance Code" and/or such more stringent requirements as the BB will consider necessary from time to time.

9.4 Independent Director

As per "Appendix A: Independent Director" issued by the Corporate Governance Code, an Independent Director is a Director whom the Board has specifically determined has no material relationship which could affect his/her independence of judgment, taking into account all known facts. The Board of Directors should consider that, although a particular Director meets the formal requirements, he/she may not be independent owing to specific circumstances of the person or the Company, ownership structure of the Company, or for any other reason. The Board's determination should be a good faith finding after diligent review and full discussion.

Independent Director means a Director of the Company who, or whose family shareholders either separately or together with him/her or each other, does not have any material pecuniary relationships or transactions with the Company (not counting Director's remuneration for this purpose) and in particular who, during the one (1) year preceding the time in question met all the following conditions:

· Was not an employee of the Company.

· Did not:

· Make to, or receive from, the Company payments of more than BHD31,000 or equivalent (not counting Director's remuneration).

· Own more than a 10% share or other ownership interest, directly or indirectly, in an entity that made to or received from the Company payments of more than such amount.

· Act as a general partner, manager, Director or officer of a partnership or Company that made to or received from the Company payments of more than such amount.

· Have any significant contractual or business relationship with the Company which could be seen to materially interfere with the person's capacity to act in an independent manner.

· Did not own directly or indirectly (including for this purpose ownership by any family member or related person) 5% or more of the shares of any type or class of the Company.

· Was not engaged directly or indirectly as an auditor or professional advisor for the Company.

· Was not an associate of a Director or a member of senior management of the Company.

9.5 Executive Director

As per "The Terms Used in the Code" issued by the Corporate Governance Code, an Executive Director means a Director who is an officer or employee, or is otherwise involved in day-to-day management, of either:

· The Company;

· Another Company which is a "Controlling Shareholder" of the Company;

· Another Company of which the Company is a "Controlling Shareholder"; or

· Another Company which is controlled by a "Controlling Shareholder" of the Company.

9.6 Non-Executive Director

As per "The Terms Used in the Code" issued by the Corporate Governance Code, a Non-Executive Director means any Director who is not an Executive Director.

9.7 Controlling Shareholder

As per "The Terms Used in the Code" issued by the Corporate Governance Code, a Controlling Shareholder means any shareholder who holds 10% or more of the share capital or is able to exercise (or control the exercise of) 10% or more of the voting power in the Company.

9.8 Chief Executive Officer (CEO)

As per "The Terms Used in the Code" issued by the Corporate Governance Code, a CEO means a Company's Chief Executive Officer.

9.9 Company

Zain Bahrain B.S.C.

10 List of Terms and Abbreviations

 

 

 

 

 

 

 

 

 

 

 

BHD

Bahraini Dinar

 

 

 

 

CAE

Chief Audit Executive

 

 

 

 

CBB

Central Bank of Bahrain

 

 

 

 

CEO

Chief Executive Officer

 

 

 

 

DoA

Delegation of Authority

 

 

 

 

IAF

Internal Audit Function

 

 

 

 

MoIC

Ministry of Industry and Commerce

 

No.

Number

 

 

 

NRC

Nomination and Remuneration Committee

 

 

 

 

OECD

Organization for Economic Cooperation and Development