Dear Shareholder

This has been a year of change for the Board, and a particularly busy one for the Committee, as we have recruited three new Directors. As we are a small and collegiate Board, we always take great care with the appointment of any new colleague, and so this is a very thorough and time-consuming process.

When I wrote to you last year, we had just started to look for a new Chief Executive Officer. We were pleased to welcome Nick Wilkinson to the Board at the start of February this year. Nick brings an excellent retail skill-set with multi-channel experience across a number of consumer sectors and geographies, and is an excellent cultural fit. The Board is confident that Nick's proven business leadership and track record will help us to deliver our ambitious plans for growth in market share and creation of substantial value for shareholders. Nick has instigated a review of our "purpose" and the goals that we have in place to achieve this, the results of which are reflected in this report.

In May, Keith Down, the Chief Financial Officer, stepped down from the Board for personal reasons, to take up a role closer to his family home. Keith was CFO for two and half years and I would like to thank him and wish him well in his next role.

We have appointed Laura Carr as our new CFO. Laura will join us in November. She brings a breadth of business and finance experience, which will really help us to achieve our ambitious business plans to become the leading multi-channel retailer in our space. She will also work well with Nick and the rest of the Executive team, and will be a welcome addition to our Board.

David Stead, Dunelm's former CFO, has been our interim CFO since April, and I am grateful to him for stepping out of retirement and providing us with the diligent and astute support which we valued so much in the past.

Simon Emeny retired from the Board at the AGM as planned. I would like to thank Simon for his ever-relevant challenge and useful input over a momentous decade for both retailing generally and Dunelm specifically.

We appointed Rachel Osborne as a Non-Executive Director, to replace Simon, and also strengthen the financial expertise on our Board and Audit and Risk Committee. Shortly after joining us, Rachel changed her executive role which created a competitive conflict, and as a result decided to step down from the Dunelm Board. I thank Rachel for her contribution over her short tenure. We have started the process to appoint a successor. We may also consider the appointment of an additional Non-Executive Director this coming year should a suitable candidate become available.

Whilst we have welcomed new Directors to the Board this year, we have continued to benefit from the advice and counsel offered by my other Board colleagues, all of whom have now served at last three years on the Board. Two of them have taken on additional responsibilities following Simon Emeny's retirement: Liz Doherty was appointed Senior Independent Director, and William Reeve assumed the chair of the Remuneration Committee.

The Committee has continued to monitor external developments, including the increasing emphasis on diversity and culture. When Laura joins us in the Autumn, 37% of our Board will be female (44% if you include the Company Secretary). The Executive Board will be 50% female. Whilst we are proud of this, our gender pay gap has shown us that there is more to do to enable more of our female colleagues to progress. We know that we also have more work to do to promote diversity in the wider sense.

Preservation of our culture has always been a priority, as we seek to retain the values instilled by the Adderley family who founded the business as we continue to grow. This year the Board formally looked at how we monitor culture in the "governance" sense of how the business treats its colleagues, customers and others, and we have agreed a set of KPIs to help us monitor this.

In the last two years we had an externally facilitated Board review. This year I conducted an internal review based on a number of questions aimed at improving the Board's effectiveness as we move forward. We agreed a number of actions around succession planning, diversity and meeting effectiveness. Further details are set out in the corporate governance report.

I look forward to meeting shareholders at the AGM.

Yours sincerely,

Andy Harrison

Chair of the Nominations Committee

12 September 2018