Report of the audit and risk committee

for the year ended 30 June 2011

Purpose

This report is provided by the Audit and Risk Committee (“ARC”) in respect of the year ended 30 June 2011 of Petmin Limited in compliance with Section 94 of the Companies Act 71 of 2008. The ARC’s operation is guided by a detailed mandate that is informed by the Act and King III and approved by the Board.

ARC membership and attendance at meetings

During the year ended 30 June 2011, the ARC met four times. The ARC consisted of three non-executive directors. The members are considered independent non-executive directors as defined in the Companies Act as amended, however, they are not considered independent as defined by King III. The chairman of the ARC, Mr Alwyn Martin, also represents Dark Capital, Petmin’s anchor black economic empowerment shareholder and is therefore not independent as recommended by King III. In September 2011 Petmin appointed Mr Trevor Petersen to the ARC. Mr Petersen is an independent non-executive director and will assume the role of chairman of the ARC within the next 18 months.

The Petmin executive deputy chairman, chief executive, financial director, technical review committee chairman, external auditor and other service providers attend meetings by invitation.

The table below details the ARC meetings held during the year under review.

Roles and responsibilities

The ARC’s roles and responsibilities include its statutory duties as per the Companies Act as amended and the responsibilities assigned it by the board.

Statutory duties

In the conduct of its duties, the ARC has performed the following statutory duties:

	Nominated for appointment as external auditor of the company, KPMG Inc., a registered auditor which, in the opinion of the ARC, is independent of the company
	Determined the fees to be paid to the external auditor and the terms of engagement.
	Determined the nature and extent of those non-audit services that the external auditor may provide to the company (and the Petmin group).
	Preapproved any proposed agreement with the external auditor for the provision of non-audit services to the company (and the Petmin group).
	Discharged those statutory obligations of an audit committee as prescribed by Section 94 of the Companies Act 71 of 2008 acting in its capacity as the appointed audit committee of the Petmin group subsidiary companies.

External auditor

The ARC has satisfied itself that the external auditor, KPMG Inc., was independent of the company, as set out in section 94(8) of the Companies Act 71 of 2008, which includes consideration of compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors.

The ARC, in consultation with executive management, agreed to the engagement letter, terms, audit plan and budgeted audit fees for the year ended 30 June 2011.

There is a formal policy document governing the process whereby the external auditor is engaged to provide non-audit-related services.

The ARC has satisfied itself that the auditor and designated auditor are accredited and are not disqualified from acting as such.

During the year under review four ARC meetings were held.

On 12 September 2011, the Petmin Board reappointed Mr Martin as the chairman of the ARC for a further period of one year.

Internal controls

During the review period, the Petmin board approved the formation of a technical review committee, tasked, amongst other things, to inform and advise the ARC of all technical risks that might affect the business of Petmin, including its sustainability and profitability.

During the review period KPMG was engaged to review the efficacy of internal financial controls as a non-audit service.

The ARC considered the reports of the technical review committee and the reports of KPMG on its findings on the controls over financial reporting and, considering the information and explanations given by management plus discussions held with the external auditor on the results of their audit, the ARC is of the opinion that the Petmin Group’s system of controls over financial reporting is effective and forms a basis for the preparation of reliable financial statements.

Financial statements (including accounting practices)

The ARC has reviewed the financial statements of the company and the Petmin Group and is satisfied that they comply with International Financial Reporting Standards.

Going concern

The ARC reviewed a documented assessment by management of the going-concern assumption of the company and the Petmin Group before concluding that the company and the Petmin Group is a going concern for the foreseeable future.

Expertise and experience of financial director and finance function

The ARC has satisfied itself that the financial director of Petmin has appropriate expertise and experience.

The ARC has considered, and has satisfied itself of the overall appropriateness of the expertise and adequacy of resources of the Petmin group’s finance function and experience of the senior members of management responsible for the financial function.

Duties assigned by the board

The ARC fulfils an oversight role regarding the company’s integrated annual report and the reporting process, including the system of controls over financial reporting.

During the year under review, the committee met with the external auditor without management being present and met with the head of the technical review committee.

The ARC is satisfied that it has complied with its legal, regulatory and other responsibilities.

Risk management

The board has assigned oversight of the company’s (including the Petmin group’s) risk management function to the ARC. The ARC fulfils an oversight role regarding financial reporting risks, internal controls, fraud risk as it relates to financial reporting and information technology risks as they relate to financial reporting.

The ARC:

	reviewed the group’s policies on risk assessment and risk management, including fraud risks and information technology risks as they pertain to financial reporting and the going concern assessment, and found them to be sound;
	considered and reviewed the findings and recommendations of the external auditor and the technical review committee; and
	considered, and found to be appropriate, management’s assessment of the group’s information technology management policies and controls.

Sustainability reporting

The ARC considered the company’s sustainability information as disclosed in the integrated annual report and has assessed its consistency with operational and other information known to committee members, and for consistency with the annual financial statements. The ARC discussed the sustainability information with management and the chairman of the technical review committee.

The ARC is satisfied that the sustainability information is reliable and consistent with the financial results.

Recommendation of the integrated annual report and annual financial statements for approval by the Board.

The ARC sub-committee recommended the integrated annual report and annual financial statements for approval by the Board of directors on 27 October 2011.

AR Martin
Audit and risk committee chairman

27 October 2011