Report of the Directors

Corporate Governance Report

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The Audit Committee

The membership of the Audit Committee is set out in the ‘Board Committee Terms of Reference’ section.

The terms of reference of the Audit Committee are summarised in the ‘Board Committee Terms of Reference’ section. The terms of reference can be found in the Investor Relations / Corporate Governance section of the company’s website or may be obtained from the Company Secretary.

The Audit Committee Report describes the work of the Audit Committee in discharging its responsibilities.

Financial Experience

The board is satisfied that at least one member of the Audit Committee, Alan Ferguson, has recent and relevant financial experience. His biographical details are set out in the Board of Directors section.

Financial and Business Reporting

In its reporting to shareholders the board recognises its responsibility to present a fair, balanced and understandable assessment of the group’s position and prospects. This responsibility covers the Annual Report and Accounts and extends to interim and other price sensitive public reports and reports to regulators as well as to information required to be presented by statutory requirements.

The Business Review sets out explanations of the basis on which the company generates or preserves value over the longer term (the business model) and the strategy for delivering the objectives of the company. This annual report is intended to provide the information necessary to enable an assessment of the company’s performance, the business model and its strategy.

The group’s organisational structure is focused on its three divisions. These are all separately managed but report to the board through a board director. The CEC receives and reviews monthly summaries of financial results from each division through a standardised reporting process. Forecasts are prepared monthly throughout the year. The group has in place a comprehensive annual budgeting and planning process including plans for the following two years. Budgets are approved by the board. Variances from budget are closely monitored. In addition to the annual budgeting process, there is a ten year strategy review process as referred to in the Our Strategy section.

Directors’ and Auditor’s Responsibility

A statement of the directors’ responsibility for preparing the Annual Report and Accounts is set out in the Responsibility of Directors section. A statement by the auditor, KPMG Audit Plc about its reporting responsibilities is set out in the Independent Auditor’s Report.

Risk Management and Internal Control

The board is ultimately responsible for maintaining sound risk management and internal control systems (including financial controls, controls in respect of the financial reporting process and controls of an operational and compliance nature).

As the company is the parent company of a group, its internal control systems are on a groupwide basis and the review of their effectiveness is implemented and reported from a groupwide perspective. The directors’ review of the effectiveness of internal control systems and the application of the Revised Guidance for Directors on the Combined Code issued by the FRC in October 2005 (Revised Turnbull Guidance) extends to the company and its subsidiaries.

The group’s risk management systems and internal control systems are designed to meet the group’s needs and manage the risks to which it is exposed, including the risk of failure to achieve business objectives, but such risks cannot be eliminated. Such systems can only provide reasonable, but not absolute, assurance against a failure to meet business objectives or against the risk of material misstatement or loss. They can never completely protect against such factors as unforeseeable events, human fallibility or fraud.

The board confirms that there is a framework of continuous and ongoing processes (established in accordance with the Revised Turnbull Guidance) in place for identifying, evaluating and managing the significant risks faced by the group. These processes are regularly reviewed by the board and the Audit Committee as appropriate and have been in place during the year ended 31st March 2012 and up to the date of approval of this annual report.

The board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. The board’s view of the group’s key strategic and operating risks and how the company seeks to manage those risks is set out in the Risks and Uncertainties section.

The Risk Management and Internal Control Systems

The group’s risk management and internal control systems comprise group policies, procedures and practices covering a range of areas including the appropriate authorisation and approval of transactions, the application of financial reporting standards and the review of financial performance and significant judgments.

The Group Control Manual, which is distributed to all group operations, clearly sets out the composition, responsibilities and authority limits of the various board and executive committees and also specifies what may be decided without central approval. It is supplemented by other specialist policy and procedures manuals issued by the group, divisions and individual businesses or departments.

Review of Effectiveness of the Group’s Risk Management and Internal Control Systems

A key responsibility of the board is for reviewing, assessing and confirming the adequacy and effectiveness of the group’s risk management and internal control systems (including financial controls, controls in respect of the financial reporting process and controls of an operational and compliance nature). The board has delegated part of this responsibility to the Audit Committee. In addition to determining risk appetite, the board specifically reviews EHS strategy, performance and assurance processes as well as the performance of group HR and IT. The Audit Committee reviews other key risk areas and the assurance processes in respect of the management of risk.

The board, through setting its own annual agenda plan and in approving that of the Audit Committee, defines the process to be undertaken for the review, including the scope and frequency of assurance reports received throughout the year. The board and Audit Committee agenda plans are designed to ensure that all significant areas of risk are reported on and considered during the course of the year.

The Audit Committee receives and considers regular reports and presentations from management, from the heads of group corporate functions such as group treasury and from internal audit. These identify and provide assessments of areas of significant risk either for the businesses or the group as a whole and of the effectiveness of the control systems in managing those risks. Any significant issues are highlighted and discussed. The Audit Committee is thus able to focus on the key risk areas and effectively assess how they have been identified, evaluated and managed. In assessing the effectiveness of the control systems, the Audit Committee considers carefully the impact of any weaknesses, whether necessary actions are being taken promptly and whether more extensive monitoring is needed. Amongst other matters, the Audit Committee reviews the group’s credit control procedures and risks, controls over precious metals, IT controls and the group’s whistleblowing procedures. The Audit Committee also reviews the performance of both the internal and external auditors. The Audit Committee also considers observations by the external auditor in relation to internal financial control.

The group’s internal audit function plays an important part in the assessment of the risks facing the group and is responsible for independently monitoring and assessing the adequacy and effectiveness of the group’s systems of internal financial control. Internal audit reports on control effectiveness to the Audit Committee in line with the agreed audit plan and Audit Committee agenda plan. The internal audit function is a unified, groupwide function under the leadership of the Head of Internal Audit and Risk. The global nature of the function allows for more holistic assurance and consistency in approach. The Head of Internal Audit and Risk has a dual reporting line to the Group Finance Director and to the Chairman of the Audit Committee. The Audit Committee approves the plans for internal audit reviews and receives the reports produced by the internal audit function on a regular basis. Plans for corrective action and control improvement are agreed with management to address any issues, non-compliance or control deficiencies identified by internal audits. Internal audit follows up the implementation of its recommendations, including any recommendations to improve internal controls, and reports the outcome to senior management and to the Audit Committee.

Each year businesses are required to formally review their financial and non-financial controls and their compliance with group policies and statutory and regulatory obligations and to provide assurance on these. The results of these reviews are collated and summarised by the internal audit function and a report is made annually to the Audit Committee.

The Audit Committee conducts an annual assessment of effectiveness on behalf of the board in order for the board to report on effectiveness in the annual report. The Audit Committee reports to the board on the operation and effectiveness of the risk management and internal control systems and such reports are considered by the board in forming its view of their effectiveness. A report from the Audit Committee on its activities and on the work of internal audit is given in the Audit Committee Report.

The board, in part through the Audit Committee, has conducted an overarching review of the effectiveness of the company’s risk management and internal control systems, covering all material controls, including financial, operational and compliance controls, for the year ended 31st March 2012 and up to the date of its approval of this annual report on 6th June 2012. The review process accords with the Revised Turnbull Guidance. Following this review, the group is enhancing and standardising the stock take procedures across its gold and silver refineries.

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