Nominations committee

The nominations committee meets on an as needed basis and, at the date of this report, is comprised of Mr Whybrow (Chairman), Mr Davis, Mr Duff, Mr Hornsby and Mr Walker. Mr Banks stepped down as a member of this committee upon his retirement on 31 July 2006 and was succeeded by Mr Hornsby. Mr Whybrow would not chair the committee when it considers the appointment of a successor chairman. The committee reviews the structure, size and composition of the Board and its committees and makes recommendations with regard to any changes that are considered necessary, both in the identification and nomination of new Directors and the continuation of existing Directors in office. The committee retains external search consultants as appropriate. The committee also advises the Board on succession planning for executive board appointments although the Board itself is responsible for succession generally. The committee met once during the year and Director attendance for such meeting is shown in the table later in this section, although, as reported last year, a working party was established, which met on a number of occasions, to consider the issues arising out of Mr Banks' retirement.

Audit committee

The audit committee comprises Messrs Davis, Stein and Murray (who chairs the committee). The committee's membership is reviewed by the nominations committee and by Mr Murray at regular intervals. Members of the committee are appointed by the Board following recommendations by the nominations committee. The committee is normally comprised of three independent Non Executive Directors. Two members constitute a quorum.

Each member of the committee brings relevant financial experience from senior executive levels. The expertise and experience of the members of the committee are summarised in the performance review. The Board considers that each member of the committee is independent within the definition set out in the Code. Mr Stein is considered by the Board to have significant, recent and relevant financial experience, as he is currently Finance Director of GKN plc.

All members of the committee receive appropriate induction, which is in addition to the induction which all new Directors receive and includes an overview of the business, its financial dynamics and risks. Audit committee members are expected to have an understanding of the following areas: the principles of, contents of and developments in, financial reporting, including the applicable accounting standards and statements of recommended practice; key aspects of the Company's approach, including corporate policies; company financing; systems of internal control; and matters that require the use of judgement in the presentation of accounts and key figures as well as the role of internal and external auditors. Members of the committee undertake ongoing training as required.

The committee meets regularly throughout the year and its agenda is linked to events in the Company's financial calendar. The agenda is mostly cyclical such that the committee Chairman approves the agenda on behalf of all members of the committee; each member of the committee may require reports on matters of interest in addition to the regular items. Members' attendance at the meetings held during the year is set out in the table later in this section.

The committee invites the Chairman, the Group Chief Executive, the Group Finance Director, the Director of Financial Reporting and Strategic Planning, the Group Financial Controller and the Head of Internal Audit together with senior representatives of the external auditors to attend each meeting although it reserves part of each meeting for discussions without the invitees being present. Other senior management are invited to present such reports as are required for the committee to discharge its duties.

The Chairman of the audit committee attends the Annual General Meeting to respond to any shareholder questions that might be raised on the committee's activities. The remuneration of the members of the committee is set out in the Remuneration report and the policy with regard to the remuneration of Non Executive Directors is set out on Remuneration report.

The committee is required to assist the Board to fulfil its responsibilities related to external financial reporting and associated announcements. During the year, the committee reviewed the proposed introduction of a statutory operating and financial review and its subsequent replacement by a business review; the progress made towards financial reporting under International Financial Reporting Standards ("IFRS"); the interim and annual financial statements and the restatement of the 2005 preliminary statement under IFRS; the interim and preliminary announcements made to the London and New York Stock Exchanges and the Form 20-F, which is filed with the Securities and Exchange Commission in the USA, having received the appropriate information on the accounting principles, policies and practices adopted in the preparation of the accounts; changes proposed to those principles, policies and practices; significant accounting issues; operation of the Company's whistleblowing policy; litigation and contingent liabilities and tax matters, including contingencies against tax liabilities together with compliance with statutory tax obligations.

The committee is also responsible for the development, implementation and monitoring of the Company's policy on external audit. The committee reserves oversight responsibility for monitoring the independence, objectivity and compliance with ethical and regulatory requirements. The committee recommends the appointment and reappointment of the Company's external auditors. The committee reviews the scope, results (including schedules of unadjusted errors and representation letters) and cost-effectiveness of the audit as well as the auditors' remuneration and performance. The committee also ensures that key partners within the external auditors are rotated from time to time in accordance with both UK and US rules. In line with this policy, there was a rotation of the engagement partner for the year ended 31 July 2006. The Committee also monitors the extent of non-audit work which the external auditors can perform, to ensure that the provision of those non-audit services that can be undertaken by the external auditors falls within the agreed policy and does not impair their objectivity or independence. Under the policy, the external auditors cannot be engaged to perform any of the following services:

• Bookkeeping services related to accounting records or financial statements;
• Financial information systems' design and implementation;
• Appraisal or valuation services, fairness opinions and contributions in kind reports;
• Actuarial services;
• Internal audit outsourcing services;
• Management functions including human resources;
• Broker or dealer, investment advisor or investment banking services; or
• Legal and other services unrelated to the audit.

The policy requires pre-confirmation by the committee of any non-audit work subject to de minimis levels. The external auditors provide audit related services such as regulatory and statutory reporting as well as formalities relating to shareholder or other circulars. The external auditors report to the committee any material departures from Group accounting policies and procedures that they identify during the course of their audit work. Within the constraints of applicable US and UK rules, the external auditors undertake due diligence reviews and provide assistance on tax matters given their in-depth knowledge of the Group's business. The provision of non-audit services within such constraints and the agreed policy is assessed on a case-by-case basis so that the best-placed advisor is retained. During the year the committee reviewed the effectiveness of the external auditors and considered whether the agreed plan had been fulfilled and the reasons for any variation from the plan. The committee also considered the external auditors' robustness and the degree to which the external auditors were able to assess key accounting and audit judgements and the context of the management letter.

The committee reviews annually a formal letter provided by the external auditors confirming their independence and objectivity within the context of applicable regulatory requirements and professional standards. The committee also reviewed the terms, areas of responsibility and scope of the audit as set out in the external auditors' engagement letter; the overall work plan for the forthcoming year, together with the associated fee proposal; any major issues which arose during the course of the audit and their resolution; key accounting and audit judgements; the level of errors identified during the audit; and the recommendations made to management by the auditors and management's response.

The total fees paid to PricewaterhouseCoopers LLP in the year ended 31 July 2006 were £9.6 million (2005: £7.2 million) of which £4.2 million (2005: £3.4 million) related to non-audit work. Further disclosure of the non-audit fees paid during the year ended 31 July 2006 can be found in note 3 of the notes to the consolidated financial statements.

The committee also reviews the effectiveness of the Group's internal audit function and its relationship with the external auditors, including internal audit plans and performance. Throughout the year, the committee reviewed the internal audit function's plans and its achievements against plans. The committee considered the results of the audits undertaken by the internal audit function and considered the adequacy of management's response to matters raised, including the time taken to resolve any such matters.

The committee also reviews, where practicable, all proposed announcements to be made by the Company to the extent that they contain material financial information. It also reviews disclosures made by the Group Chief Executive and Group Finance Director during the certification process for the Form 20-F concerning the design and operation of internal controls or material weaknesses in the controls, including any fraud involving management or other employees involved in the Group's financial controls. The committee monitors and reviews the effectiveness of the Group's internal control systems, accounting policies and practices, standards of risk management and risk management procedures and compliance controls as well as the Company's statements on internal controls before they are agreed by the Board for each year's annual report. The committee has also monitored the Company's response to the requirements of the US Sarbanes-Oxley Act as they apply to foreign private issuers with particular focus on the progress made in evaluating internal controls as required by Section 404 of that Act. The Board retains overall responsibility for internal control and the identification and management of business risk. During the year, the committee also reviewed the processes which have been embedded throughout the Group to implement compliance with IFRS reporting requirements.

The Company's whistleblowing policy (which is an extension of the Groupwide Code of Ethics) sets out arrangements for the Company Secretary to receive, in confidence, complaints on accounting, risk issues, internal controls, auditing issues and related matters which would, as appropriate, be reported to the committee. A copy of the Code of Ethics is available on the Company's website at www.wolseley.com.

Each year the committee critically reviews its own performance and considers where improvements can be made. The committee's terms of reference, which had been approved in October 2004, were reviewed during the year.

Remuneration committee

The committee comprises Messrs Davis, Walker and Duff (who chairs the committee), all of whom are independent within the definition set out in the Code. Mr Duff succeeded Mr Walker as chairman of the committee on 1 November 2005. The committee met five times during the year and Director attendance for each meeting is shown in the table below. The committee is responsible for making recommendations on remuneration to the Board. The Board's Remuneration report is set out in the Remuneration report section. During the year as part of its evaluation process the committee reviewed its terms of reference, which had been approved in July 2004. It was agreed that no amendments were required. Copies of these terms of reference are available from the Company Secretary or on the Company's website at www.wolseley.com.

The Chairman of the remuneration committee attends the Annual General Meeting to respond to any shareholder questions that might be raised on the committee's activities.

Treasury committee

The committee comprises the Group Chief Executive, the Group Treasurer and the Group Finance Director, who acts as its Chairman. Mr Banks stepped down as a member of this committee upon his retirement on 31 July 2006 and was succeeded by Mr Hornsby. The committee's role is to consider treasury policy, tax matters and certain transactions on behalf of the Group within a framework delegated by the Board.

Executive committee

The Executive Directors of the Company together with Mr Barden, who has been responsible for Wolseley UK Limited since 1 August 2003, and Mr White, the Group Company Secretary & Counsel, meet at least eight times each year, often on the day before formal Board meetings. The committee addresses operational business issues and shares best practice, thereby allowing the Directors more time at Board meetings to focus on strategy.

Meetings attendance

The following table shows the attendance of Directors at meetings of the Board, audit, remuneration and nominations committees during the year:

^*Chairman
This table shows only those meetings which each Director attended as a member rather than as an invitee.
^tAppointed as a Director on 16 December 2005.