Julian Heslop

Julian Heslop

Audit Committee Chairman

Dear Shareholder

I am pleased to present this year's Audit Committee Report which fully reflects the requirements of the UK Corporate Governance Code (the Code) and the Guidance for Audit Committees issued by the Financial Reporting Council (FRC) in September 2012. Our report provides an overview of the work carried out during the period including significant issues considered in relation to the financial statements and how we assessed the effectiveness of the external auditor.

During the period under review we focused particular attention on the tender for external audit services and the establishment of an internal audit and risk management function.

Tender of External Audit Services

KPMG LLP (KPMG) have been our external auditor since 1997. As recommended by the Code, the Audit Committee (the Committee) decided to put out to tender our external audit services. Following a tender exercise, we appointed PricewaterhouseCoopers LLP (PwC) as external auditor, who will, subject to shareholder approval, replace KPMG at the conclusion of the 2015 Annual General Meeting. Further details are given within the Audit Committee Report.

Internal Audit

We recently appointed a Head of Internal Audit and Risk Management to provide assurance on our internal controls and risk management processes. The Committee will continue to review closely progress on management's implementation and monitoring of the internal financial control recommendations received from Deloitte LLP (Deloitte) last year.

The following report explains the judgements and factors the Committee considered in reviewing both the tender of external audit services and internal audit within the Audit Committee Report.

The report also outlines significant accounting matters which received particular focus during the period. It explains why the issues were considered significant and explains how the Committee satisfied themselves on the validity of the judgements made.

Finally, we specifically reviewed, at the request of the Board, whether the 2015 Annual Report was fair, balanced and understandable and concluded that it was. The basis supporting our conclusion is set out within the Audit Committee Report.

Julian Heslop

Audit Committee Chairman

7 September 2015