Annual Financial Report

RNS Announcement

12 June 2015

For Immediate Release

TalkTalk Telecom Group PLC (the "Company")

Publication of Annual Report 2015

The following documents have today been posted or otherwise made available to shareholders:

· Annual Report 2015

· Notice of 2015 Annual General Meeting

· Form of Proxy for the 2015 Annual General Meeting

In accordance with Listing Rule 9.6.1 a copy of each of these documents has been uploaded to the National Storage Mechanism and will be available for viewing shortly at http://www.morningstar.co.uk/uk/NSM.

These documents are also available to view and download from the Company's website at http://www.talktalkgroup.com.

Copies of the Annual Report 2015 and Notice of the 2015 Annual General Meeting may also be obtained from:

Company Secretary

11 Evesham Street

London

W11 4AR

Compliance with the Disclosure and Transparency Rule 6.3.5 ("DTR 6.3.5") - Extracts from the Annual Report 2015

The information below, which is extracted from the Annual Report 2015, is included solely for the purpose of complying with DTR 6.3.5. It should be read in conjunction with the Company's Preliminary results announcement for the 12 months to 31 March 2015 issued on 14 May 2015 (available at http://www.talktalkgroup.com/~/media/FilesTalkTalk-Group/pdfs/reports/2015/preliminary-results-12-months-to-31-march-2015.pdf). Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report 2015. All page numbers and cross-references in the extracted information below refer to page numbers in the Annual Report 2015.

For further information please contact:

Tim Morris, Company Secretary +44 (0)203 417 1052

For media enquiries:

Alex Birtles +44 (0)7557 435 686

Directors' Responsibilities

The Directors' responsibility statement below has been prepared in conjunction with the Annual Report 2015, whereas this dissemination document contains extracts from the Annual Report 2015 to comply with DTR 6.3.5.

Sir Charles Dunstone - Chairman

Dido Harding - Chief Executive Officer

Iain Torrens - Chief Financial Officer

Tristia Harrison - Managing Director, Consumer

Charles Bligh - Managing Director, TalkTalk Business

John Gildersleeve - Senior Independent Director

Ian West - Non-Executive Director

John Allwood - Non-Executive Director

Brent Hoberman - Non-Executive Director

Sir Howard Stringer - Non-Executive Director

James Powell - Non-Executive Director

We confirm to the best of our knowledge:

1. The financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

2. The management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Principle Risks and Uncertainties

1. Regulatory Environment

Potential impact: Changes in BT's regulated wholesale prices for copper and fibre products can significantly impact the Group's performance. Mergers can change the competitive landscape of markets we buy in or sell into.

Mitigation: We have continued to actively participate in Ofcom's consultations impacting on wholesale prices, especially this year the debate around applying a margin test to fibre products. In particular, we have provided Ofcom with evidence, argument and expert opinion to support the case that competition, consumers' interests and the development of a mass market for super-fast broadband will be best served by reductions in wholesale prices or, in the case of fibre, a wider margin between wholesale and retail prices. Ofcom commencing its Strategic Review of the telecoms industry is a positive step, with TalkTalk fully engaged in the consultation process. We have also engaged with the Competition and Markets Authority ('CMA') on regulatory assessment of the proposed merger between BT and EE.

2. Customer Experience

Potential impact: Failure to deliver a seamless and positive end to end experience of TalkTalk's products and services or to deal with customers' queries and complaints effectively could damage our brand and lead to increased churn.

Mitigation: We are committed to continuously reviewing and improving the level and quality of customer service we provide. This financial year, we have continued to develop and deliver a number of major initiatives under Making TalkTalk Simpler to i) reduce the likelihood of customers experiencing service issues; ii) improve the ability of our customers to self-help online; and iii) deliver better training and tools to our Customer Service teams so that queries and complaints can be handled more effectively.

3. Technology Innovation and Change Management

Potential impact: In order to deliver high value and market-disruptive products and services, at competitive prices, we need to continuously innovate, whilst sustaining our focus on simplifying our systems and processes. In FY16 and beyond we will be delivering a number of major product innovation initiatives alongside a significant IT change agenda. Failure to manage this level of innovation and change successfully could have an adverse impact on the services we provide to our customers and on our financial performance.

Mitigation: A new Group Change Director reporting directly to the CEO has been appointed. The Group Change Director has established a new central Project Management Office (PMO), responsible for overseeing the governance of change across the organisation. The Executive Committee regularly monitors the progress of significant change programmes and associated risks through the Group PMO.

4. Data and Cybersecurity

Potential impact: Failure to prevent the loss or exploitation of personally identifiable or commercially sensitive information could result in loss of competitive advantage, regulatory fines, damage to the brand, and ultimately, churn.

Mitigation: The Group continually reviews and seeks best practice external guidance on its data and cyber security capability and invests in and implements new solutions, both to prevent and detect incidents. TalkTalk continues to adopt the Ten Steps to Cyber Security as a control framework for mitigating key areas of risk. Progress is monitored via the in house Data Council, which convenes monthly and is chaired by the Chief Technology Officer (CTO). In FY15, key initiatives including the encryption of hardware and removable media, a data loss prevention solution, vulnerability scanning and penetration testing have been completed. A new Head of Security has also been appointed to establish and oversee the new Security Operations Centre, the activities of which have been outsourced to cyber security experts BAe systems.

5. Infrastructure Stability and Resilience

Potential impact: Failure to maintain sufficient and acceptable levels of network and system performance for the Group's Consumer and Business customers could lead to complaints and, ultimately, churn.

Mitigation: There has been significant focus during the year on ensuring optimum levels of capacity are delivered and maintained to avoid network congestion for customers. In FY16 we will continue to invest in our infrastructure and deliver a number of IT change programmes which will improve stability and resilience.

6. Regulatory Compliance

Potential impact: Failure to operate effective processes and controls across the Group may have an adverse impact on the services we deliver to our customers, leading to churn and non-compliance with regulatory requirements. The fines that Ofcom can impose on the Group and the associated negative publicity could adversely impact our brand, reputation and profitability.

Mitigation: There has been continued focus this year on improving processes and controls and clarifying lines of accountability both in first line operations and in our second line assurance function. There has been significant progress with delivering improvements in our complaints handling processes during the period. This has resulted in a reduction in market share of Ofcom complaints from our customers and in our market share of complaints for the sector. The Group's Regulatory Compliance Committee has continued to convene throughout the year to monitor the mitigation of operational risks which could give rise to customer complaints and regulatory breaches. The Director of Quality and Compliance has chaired weekly operational compliance meetings throughout the year, attended by senior executives.

7. Growth in a Highly Competitive and Consolidating Industry

Potential impact: With BT's planned acquisition of EE, Three's planned acquisition of O2 and with the move towards triple and quad play bundles, the medium to long term industry structure is less certain. There is a risk that industry consolidation creates fewer larger and lower cost competitors and weakens TalkTalk's ability to remain competitive in a triple and quad play market.

Mitigation: Our focus remains on: i) engaging with the CMA and Ofcom to put in place appropriate remedies in support of fair completion when mergers and acquisitions take place; ii) delivery of our commercial priorities designed to strengthen our market position as a leading and disruptive quad play provider; and iii) implementing our 'Making TalkTalk Simpler' initiatives.

8. Key Suppliers

Potential impact: TalkTalk relies on a number of key suppliers to provide network, equipment and services. A failure in their people, systems or processes or to act in an ethically responsible manner could significantly affect TalkTalk's reputation and financial performance.

Mitigation: We continue to review and improve our processes and controls around supplier selection and in-life risk management. In FY15 there has been significant focus on establishing a robust governance framework for our strategic suppliers in particular. This helps to reduce the likelihood and potential impact of business interruption due to supplier failure.

9. Scaling TV

Potential impact: Now that TalkTalk has successfully established its TV proposition, the business must ensure that it can continue to build scale effectively. Failure to innovate, deliver high quality content at competitive prices or continuously monitor and improve the quality of our TV service could adversely impact our brand and reputation, leading to churn.

Mitigation: Service quality remains a key area of focus and we have been working closely with our strategic partners to improve the speed and performance of the set-top box and remote control. We run an extensive customer feedback programme and conduct benchmarking tests and field research. We continually develop and renew our partnerships with content providers to ensure a broad range of family entertainment as we build scale including a new deal with Netflix. In Q4 FY15 we also announced the acquisition of Tesco's blinkbox business, which will help accelerate our product innovation and TV growth plans.