• OVERVIEW
  • Operating Profit – History
  • Financial highlights
  • Group profile
  • Investment case
  • Customer-focused business model
  • History of consistent growth
  • Five-year financial review
  • Geographical footprint
• DIRECTORATE
  REPORTS
  • Board of directors
  • ­Chairman's report
  • ­Chief executive officer's report
  • ­Chief financial officer's report
• OPERATIONAL REVIEW
  • ­Executive committee
  • Operations
  • ­­Credit
• GOVERNANCE AND SUSTAINABILITY
  • Corporate governance
  • Audit and risk committee report
  • Risk management
  • Sustainability report
  • Remuneration
• ANNUAL FINANCIAL STATEMENTS
  • Directors' responsibility statement
  • Company secretary's certificate
  • Independent auditor's report
  • Directors' report
  • Income statement
  • Balance sheet
  • Statement of changes in equity
  • Cash flow statement
  • Segmental report
  • Notes to the annual financial statements
  • Company income statement
  • Company balance sheet
  • Company statement of changes in equity
  • Company cash flow statement
  • Notes to the company annual financial statements
  • Interest in subsidiary companies

AUDIT AND RISK COMMITTEE REPORT

The Audit and Risk Committee (the committee) has pleasure in submitting its report for the year ended 31 March 2010 in compliance with the requirements of the Companies Act.

INTRODUCTION

As a standing committee of the board, the committee operates within a documented charter and complies with all relevant legislation, regulation and governance codes. The committee’s terms of reference are reviewed annually and approved by the board.

The committee acts as the Audit committee for all the subsidiaries in the Lewis Group except for Monarch Insurance Company Limited (“Monarch”) which has its own Audit and Risk Committee.

OBJECTIVES

The objectives of the committee are:

• To assist the board to discharge its duties relating to the safeguarding of assets, the operation of adequate systems and controls, reviewing of financial information and the preparation of interim and annual financial statements in compliance with all applicable legal requirements and accounting standards.
  
• To facilitate and promote communication and liaison between the board of directors and the company’s management in the respect of the matters referred to above.
  
• To provide a forum for discussing business risk and control issues for developing relevant recommendations for consideration by the board.
  
• To recommend the introduction of measures which the committee believes may enhance the credibility and objectivity of financial statements and reports concerning the affairs of the company.
  
• To assess the independence and objectivity of the external auditors.
  
• To advise on any matter referred to the committee by the board of directors.

Relationship of the Lewis Group Audit and Risk Committee to the Monarch Audit and Risk Committee

• Due to the integrated nature of the group’s systems and processes, the Lewis Audit and Risk Committee bears the responsibility relating to:
  • internal and external audit management;
  • risk management and development; and
  • maintenance of an effective internal control system.
• In order for the Monarch Audit and Risk Committee to discharge its responsibilities under the Short Term Insurance Act, the Lewis Group Audit and Risk Committee refers any issues relating to these matters to the Monarch Audit and Risk Committee where such issues impact on Monarch.
• The duty and scope of the Monarch Audit and Risk Committee in monitoring the compliance with legal and regulatory requirements has been extended to include the Financial Advisory and Intermediary Services Act due to its interrelationship with the insurance activities of the group.
• The minutes of all Monarch Audit and Risk Committee meetings are submitted and reviewed by the Lewis Group Audit and Risk Committee.

MEMBERSHIP

At the year-end the committee comprised the following independent non-executive directors:

H Saven (chairman)
Z Bassa (appointed 1 October 2009)
D M Nurek
B J van der Ross

Biographical details of the committee members are provided here. Fees paid to the committee members are outlined in the table of directors' remuneration in the annual financial statements.

The chief executive officer, chief financial officer, Alan Smart and representatives of the internal and external auditors attend the meetings as invitees.

The Audit and Risk Committee also meets separately with the external and internal auditors when necessary, without members of executive management being present.

Messrs Saven, Nurek and Smart are also members of the Monarch Audit and Risk Committee.

COMMITTEE ACTIVITIES

The committee met four times during the year under review. Attendance of the members has been set out here in the Corporate Governance Report.

The committee attended to the following material matters:

• Financial statements
  • reviewed the interim results and year-end financial statements, including the public announcements of the company’s financial results, and made recommendations to the board for its approval. In the course of its review, the committee :

    	took appropriate steps to ensure that the financial statements were prepared in accordance with International Financial Reporting Standards (IFRS);
    	considered the appropriateness of accounting policies and disclosures made; and
    	completed the standard review of the going concern assumption.
• External auditors
  • reviewed the independence of PricewaterhouseCoopers Inc., the company’s external auditors, and the nominee for the appointment of the designated auditor, before recommending to the board that their re-election be proposed to shareholders;
  • approved, in consultation with management, the audit fee and engagement terms for the external auditors for the 2010 financial year. The fees paid to the auditors are disclosed in note 21 to the annual financial statements;
  • determined the nature and extent of allowable non-audit services and approved the contract terms for the provision of non-audit services. It is the policy of the group that the auditor is restricted from rendering accounting, IT consulting services, company secretarial, internal audit and human resource services;
  • reviewed and approved the external audit plan, ensuring that material risk areas were included and that coverage of the significant business processes was acceptable; and
  • reviewed the external audit reports and management response, considered their effect on the financial statements and internal financial control.
• Internal audit
  • reviewed and approved the existing Internal Audit charter which ensures that the group’s internal audit function is independent and has the necessary resources, standing and authority within the organisation to enable it to discharge its duties;
  • reviewed and approved the annual internal audit plan, ensuring that material risk areas were included and that the coverage of significant business processes was acceptable;
  • reviewed the quarterly internal audit reports, covering the effectiveness of internal control, material fraud incidents and material non-compliance with group policies and procedures. The committee is advised of all internal control developments and advised of any material losses, with none being reported during the year;
  • oversaw the co-operation between internal audit and external auditors; and
  • performed the annual evaluation of internal audit.
• Risk management
  • reviewed and approved the existing charter of the Risk Working Group;
  • reviewed the bi-annual reports prepared by the Risk Working Group and considered whether the current risk environment was appropriate for the business and whether management needed to mitigate or transfer any further portion of the business risks; and
  • evaluated the effectiveness of the risk management process.
• Financial control and compliance
  • reviewed and approved the group’s existing treasury policy and reviewed the quarterly treasury reports prepared by management;
  • reviewed the quarterly legal and regulatory reports setting out the latest legislative and regulatory developments impacting the group;
  • reviewed the quarterly report on taxation;
  • reviewed information technology reports; and
  • considered and, where appropriate, made recommendations on internal financial control.

The committee was not required to deal with any complaints relating to accounting practices or internal audit, nor to the content or audit of the group’s financial statements.

CHANGES TO COMMITTEE STRUCTURE

As part of the group’s implementation of King lll, the board has restructured the Audit and Risk Committee into two separate committees for audit and for risk with effect from the 2011 financial year.

EXPERTISE AND EXPERIENCE OF THE CHIEF FINANCIAL OFFICER

In terms of the JSE Listings Requirements, the Audit and Risk Committee satisfied itself as to the appropriateness of the expertise and experience of the group’s chief financial officer.

APPROVAL OF THE REPORT

The committee confirms it has functioned in accordance with its terms of reference for the 2010 financial year and that its report to shareholders has been approved by the board.

Hilton Saven
Chairman

Audit and Risk Committee
19 May 2010