Dear Shareholder

On behalf of the Board, I am pleased to present this year's Audit Committee Report. During the year we have focused on the key issues in relation to the Group's financial reporting, including key accounting judgements and the ongoing quality of related disclosures. We have also covered other important areas, including the changes made to the Group's risk management processes, the assessment of material control processes and the development of the viability statement and related financial stress testing in order to meet the requirements of the revised UK Corporate Governance Code.

Committee Membership

It has also been a year of change for the Audit Committee (the Committee). We have welcomed Tony Rice to the Committee and look forward to the fresh perspective he will bring given his strong FTSE background and diverse experience. We were sorry to lose Chris Richards from the Committee and thank him for his valuable contribution over the past six years.

External Auditor

Following the tender for the external audit and the appointment of PricewaterhouseCoopers LLP (PwC) as reported last year, the Committee has overseen a smooth transition from the former auditor to PwC, ensuring the continued effectiveness of the external audit. In this respect, the Committee has paid particular focus to reviewing and approving the plan for the external audit, considering the reports from the external auditor on accounting and control matters, and engaging with them on significant judgements.

Internal Audit and Risk Assurance

The Committee has overseen the continued establishment of the internal audit function under the leadership of the Head of Internal Audit and Risk Assurance, John Wilson, following his appointment in 2015. Audit planning and risk management have both been enhanced, and greater rigour has been introduced to the methodology used in both areas. Carefully directed use of external expertise is in place to ensure that appropriate skills are deployed in audits of technical areas. Good progress is being made in developing the internal control framework to strengthen controls around each of our principal risks. Further details of the Group's risk management and internal control processes are provided in the Audit Committee Report.

Annual Report 2016

Finally, we specifically reviewed, at the request of the Board, whether the 2016 Annual Report was fair, balanced and understandable and concluded that it was. The basis supporting our conclusion is set out in the Audit Committee Report.