REPORT OF THE AUDIT COMMITTEE
for the year ended 30 June 2015

This report sets out how the Audit Committee discharged its responsibilities during the financial year ended 30 June 2015 as required in terms of section 94 of the Companies Act of South Africa.

MANDATE AND TERMS OF REFERENCE

The responsibilities of the Audit Committee are incorporated into the committee’s charter which is reviewed annually and approved by the Board. The committee has conducted its affairs in compliance with this charter and has discharged its responsibilities contained therein.

A copy of the charter can be found on our website www.rclfoods.com.

AUDIT COMMITTEE MEMBERSHIP AND RESOURCES

The Audit Committee consists of three independent nonexecutive directors. All members of the committee have the requisite financial knowledge and commercial skills and experience to contribute effectively to committee deliberations.

The committee met three times during the year as per the Audit Committee charter. The Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Group Audit and Risk Manager (GARM) and representatives from the external auditors attend meetings by invitation. Other members of the Board and management team attend as required. The committee meets separately with the external auditors and internal auditors at least once a year without management present, to ensure that all relevant matters have been identified and discussed without undue influence.

Board members 26 August
 2014
12 November
 2014
17 February
 2015
NP Mageza
ACCA(UK)
Appointed: September 2009
Present Present Present
DTV Msibi
BBusSc, BCom (Hons), MCom, CA(SA)
Appointed: August 2013
Present Apologies Present
RV Smither (Committee Chairman)
CA(SA)
Appointed: December 2008
Present Present Present


ELECTION OF COMMITTEE MEMBERS

In terms of section 94 (2) of the Companies Act, it is proposed in the notice of the annual general meeting to be held on 26 November 2015 that Messrs RV Smither, NP Mageza and DTV Msibi be re-appointed as members of the Audit Committee until the next annual general meeting in 2016.

ROLES AND RESPONSIBILITIES

The Audit Committee’s roles and responsibilities include its statutory duties per the Companies Act of South Africa and the responsibilities assigned to it by the Board. The Audit Committee fulfils an oversight role regarding financial reporting risks, internal financial controls, fraud risk and Information Technology (IT) risks as it relates to financial reporting.

The Audit Committee has discharged its key responsibilities as follows:

Reviewed the interim results, period-end financial statements, sustainability disclosure and integrated report, culminating in a recommendation to the Board. In the course of its review the committee:
  - took appropriate steps to ensure that the financial statements are prepared in accordance with International Financial Reporting Standards (IFRS); and
  - considered and, when appropriate, made recommendations on financial statements, accounting practices and internal financial controls.
Confirmed the Internal Audit charter and audit plan and revised structure;
Evaluated the effectiveness of internal controls and governance processes and satisfied itself about the adequacy and effectiveness of the Group’s system of internal financial controls;
Reviewed the appropriateness of the combined assurance model in addressing all significant risks facing the Group;
Considered and recommended to the Board the appointment and retention of external auditors;
Approved the audit fees and engagement terms of the external auditors; and
Determined the nature and extent of allowable nonaudit services and approved the terms for the provision of non-audit services by the external auditors.


The role of the Audit Committee applies to all the divisions of the Group.

EXPERTISE AND EXPERIENCE OF THE CFO AND FINANCE FUNCTION

The Audit Committee performed an assessment of the Chief Financial Officer (CFO), Robert Field and the finance function. Based on the 2015 assessment the Audit Committee is satisfied that Robert Field and his management team have the appropriate expertise and experience to service the Group’s finance function. It further considered and satisfied itself of the overall appropriateness of the expertise and adequacy of resources of the Group’s finance function. The Annual Financial Statements were compiled under the supervision of Robert Field, CA(SA).

EXTERNAL AUDIT

PricewaterhouseCoopers (PWC) are the incumbent auditors for all the Group companies. The committee continually monitors the independence and objectivity of the external auditors and satisfied itself with the ethical requirements regarding independence. The external auditors were considered independent with respect to the Group, as required by the codes endorsed and administered by the Independent Regulatory Board for Auditors and the South African Institute of Chartered Accountants.

During the period, PWC provided certain non-audit services, including tax services and a review of the Group commodity procurement process. Total fees incurred during the 2015 financial year to PWC were R22,0 million of which R5,1 million related to non-audit services.

The Audit Committee has nominated, for election at the annual general meeting, PWC as the external audit firm responsible for performing the functions of auditor for the 2016 financial year. The Audit Committee has satisfied itself that the audit firm and designated auditor are accredited as such on the JSE list of auditors.

INTERNAL AUDIT

The Audit Committee is responsible for ensuring that the RCL FOODS’ internal audit function is independent and has the necessary resources and authority to enable it to discharge its duties.

Internal audit comprises a dedicated team of appropriately qualified and technically experienced personnel. Where necessary, certain audits are outsourced to consultants with appropriate skills and technical expertise. The activities of the internal audit function are co-ordinated by the GARM. To ensure independence, the GARM reports functionally to the Audit Committee and, only from an administrative perspective, to the CEO.

INTERNAL FINANCIAL CONTROLS

The committee is satisfied that the company’s system of internal financial controls is effective and forms a basis for the preparation of reliable financial statements, which is based on the review of the design, implementation and effectiveness of the Group's system of internal financial controls conducted by the internal audit function during the year under review, and reports made by the independent external auditors on the results of their audit and management reports. No findings have come to the attention of the committee to indicate that any material breakdown in internal controls has occurred during the past financial year.

GOING CONCERN ASSESSMENT

The Audit Committee reviewed a documented assessment by management of the going concern premise of the Group before concluding to the Board that the company will be a going concern in the foreseeable future.

RV Smither
Chairman of the Audit Committee

1 September 2015