Wolseley plc

Annual Report and Accounts 2007

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Remuneration report

Performance bonuses Performance bonus arrangements for the Executive Directors are designed to encourage individual performance, corporate operating efficiencies and profitable growth. Stretching targets are set for each element of the bonus, determined by the committee each year, which also considers the levels of performance targets to be achieved for bonus payments to be made in the succeeding year. The annual bonus awards are based on a mix of demanding financial targets, derived from the Company’s historic performance, annual long-term strategic business plan and annual budget, as well as market expectations. For 2006/07, performance was measured against annual targets of return on capital employed, working capital, Group profit before tax and, where relevant, profit before tax for the appropriate division which, in aggregate, accounted for 90 per cent of the potential bonus with the majority relating to the profit before tax targets. For 2007/08, performance will be measured by trading margin, cash flow and growth in earnings per share (‘EPS’), reflecting key performance indicators in line with the Group’s ‘Earn, Turn, Grow’ initiative. These elements will account for 80 per cent of the bonus with the balance depending on specific personal objectives set for each Executive Director.

The following percentages of base salary, which vary between Executive Directors depending on their particular responsibilities and spheres of influence, will be paid as bonus for the year ended 31 July 2007, subject to the achievement of the minimum, on-target and maximum levels of performance for each element (with the percentages increasing on a linear basis for achievement between each level):

For the year ending 31 July 2008, the committee has determined that there will be no change from 2007 for the percentage of base salary payable as bonus for the achievement of minimum, on-target and maximum targets.

Emoluments The emoluments for 2006 and 2007 of the Directors who served during the financial year are set out below:

Other senior executives There are a number of senior executives whose roles significantly influence the ability of the Group to meet its strategic objectives. They include non-Board members of the Executive Committee and members of the Executive Committee Advisory Group. The committee determines the level of remuneration for this group, based on proposals from the Group Chief Executive. Their total remuneration including salary, actual bonus and the fair value of long-term incentives granted/awarded during the year ended 31 July 2007 is summarised below:

Service agreements The Executive Directors have service agreements with Wolseley plc which are subject to a maximum of 12 months’ notice of termination if given by the Company and six months’ notice of termination if given by the Executive Director. Such notice periods reflect current market practice and the balance that should be struck between providing contractual protection to the Directors that is fair and the interests of shareholders. The Non Executive Directors do not have service agreements and their terms of service are contained in their respective letters of engagement. The date of each service agreement and the year in which each Executive Director was last elected or re-elected are noted in the table below. There are no provisions in any service agreement for early termination payments and, in the event of early termination of any service agreement, the committee will give full and proper consideration to mitigation, which should be taken into account when computing any compensation payable.