The following statement, which should be read in conjunction with the report of the auditors, is made with a view to distinguishing for shareholders the respective responsibilities of the directors and of the auditors in relation to the financial statements.

The directors are required by the Companies Act 1985 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss of the Group for the financial year.

The directors consider that, in preparing the financial statements, appropriate accounting policies have been consistently applied, supported by reasonable and prudent judgements and estimates, and that all applicable accounting standards have been followed.

The directors are satisfied that the Group has adequate resources to meet its operational needs for the foreseeable future and, accordingly, they continue to adopt the going concern basis in preparing the financial statements.

The directors are responsible for ensuring that accounting records are kept which disclose, with reasonable accuracy, the financial position of the Company and which enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Internal Financial Controls
In June 1998, The London Stock Exchange published a new Combined Code on Corporate Governance and made related changes to its Listing Rules. Although the new rules apply to the reporting of financial years ending on or after 31 December 1998, in the case of Code Provision D.2.1, in respect of internal control, a working party (the Turnbull Committee) has been convened by the Institute of Chartered Accountants in England and Wales to produce guidance for directors on the scope, extent, nature and review of internal control. The proposed guidance has been published for consultation and the working party has announced that it intends to produce the final guidance by late Summer 1999 once it has had the opportunity to analyse comments.

GUS is well advanced in reviewing its internal control systems and it will report on this next year after final guidance from the Turnbull Committee has been issued. In the meantime, as permitted by the Stock Exchange, it continues to report on internal financial control, as hitherto.

The Board is responsible for the Group's system of internal financial control. Such systems can only provide reasonable and not absolute assurance against material financial loss or mis-statement. The Board has reviewed the effectiveness of the key procedures which have been established to provide internal financial control. These key procedures, which operated throughout the year, are as follows:

• Control environment and procedures:
  The Group consists of a number of major trading divisions each with its own management and control structures. The divisions operate within a framework of policies and procedures laid down in organisation and authority manuals, and personnel are required to comply with these procedures. Policies and procedures cover key issues such as authorisation levels, segregation of duties, compliance with legislation, physical and data security.

• Identification and evaluation of business risks:
  The Group has an annual reporting procedure that identifies major financial, commercial and operating risks within the Group. There are procedures for the regular review and management of those risks.

• Information and financial reporting systems:
  The Group has a comprehensive system of budgetary control including monthly performance reviews for each major business and division. There are detailed budgets for the year ahead and projections for subsequent years.

• Monitoring systems and corrective action:
  The internal audit department's responsibilities include, specifically, reporting to the Audit Committee on the effectiveness of internal control systems focusing on those areas of greatest financial risk to the Group. Any corrective action which may be necessary is agreed and implemented.

   
  

   
  

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