AUDIT COMMITTEE REPORT
One of the standing committees of the Board of Directors of the Company is the Audit Committee. Currently, there are three non-employee
members of the Board on the Audit Committee: Christopher C. Davis; Thomas S. Gayner, who serves as Chairman of the Audit Committee; and G. Richard Wagoner, Jr. The Audit Committee operates under a delegation of authority from the Board of Directors,
which has determined that each Committee member is independent under the listing standards of the New York Stock Exchange. Specifically, the Board determined that none of the members of the Audit Committee (or any immediate family
member) (i) had been employed by or affiliated with the Company within the past three years, (ii) received any compensation from the Company other than Director and Committee fees, (iii) is an employee of a company that makes payments
to or receives payments from the Company in an amount that exceeds the greater of $1 million or 2% of such other companys consolidated gross revenues within the past three years or (iv) has a material relationship with the Company.
Management has the primary responsibility for the preparation of the Companys financial statements in accordance with generally accepted
accounting principles and for the financial reporting process, including its system of internal control. The Companys independent auditor, PricewaterhouseCoopers LLP, is responsible for auditing those financial statements in accordance with
auditing standards generally accepted in the United States of America and for issuing a report thereon. In this context, the Audit Committees responsibility is to monitor and review these processes, as well as the independence and performance
of the Companys auditor. In undertaking its monitoring and reviewing responsibilities, without independent verification, the Audit Committee has relied on (i) managements representation that the financial statements have been
prepared with integrity and objectivity and in conformity with generally accepted accounting principles in the United States of America and (ii) the representations of PricewaterhouseCoopers LLP included in their report on the Companys
The Audit Committee has reviewed and discussed the audited fiscal year 2016 financial statements with the
Companys management. In addition, the Audit Committee has discussed with PricewaterhouseCoopers LLP the matters required to be discussed by PCAOB Auditing Standard No. 16. The Audit Committee has received the written disclosures and the
letter from PricewaterhouseCoopers LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants communications with the Audit Committee concerning independence and has discussed
with the independent accountant the independent accountants independence. The Audit Committee has also considered whether PricewaterhouseCoopers LLPs provision of non-audit services to the Company is compatible with the independence of
The Audit Committee also reviewed matters relating to the Companys internal control over financial reporting.
In 2016, the Audit
Committee again reviewed and reauthorized its policies and procedures with regard to the preapproval of audit and non-audit services performed by the independent auditor in order to assure that the provision of such services does not impair the
auditors independence. Unless a type of service to be provided by the independent auditor has received preapproval, it will require specific preapproval by the Audit Committee. Any proposed services exceeding preapproved cost levels will
require specific preapproval by the Audit Committee. The term of any preapproval is 12 months from the date of preapproval, unless the Audit Committee specifically provides for a different period. The Audit Committee will periodically review and
preapprove the services that may be provided by the independent auditor without obtaining specific preapproval from the Chairman of the Audit Committee, as well as revise the list of preapproved services from time to time, based on subsequent
The Audit Committee will not delegate to management responsibilities to preapprove services performed by the independent
auditor. The Audit Committee may delegate preapproval authority to one or more of its members. The annual audit services engagement terms and fees will be subject to the specific preapproval of the Audit Committee. The Audit Committee will approve,
if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Company structure or other matters. In addition to the annual audit services engagement specifically approved by the Audit Committee, the Audit Committee
may grant preapproval for other audit services, which are those services that only the independent auditor reasonably can provide.
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the
Companys financial statements or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of audit-related services does not impair the independence of the independent auditor.