Awards under employee share schemes

Options were granted under the Employee Share Purchase Plan in March 2006 to 8,151 US-based employees (2005: 9,036) and 442 Canadian-based employees (2005: 941) in respect of a maximum of 817,439 ordinary shares (2005: 2,780,555) exercisable at 1236 pence per share. Options were granted under the UK Employees Savings Related Share Option Scheme in April 2006 to 2,649 employees (2005: 2,246) in respect of a maximum of 621,422 ordinary shares (2005: 582,757) exercisable at 1164 pence per share. Options were granted under the Irish Sharesave Scheme in April 2006 to 229 employees (2005: 145) in respect of a maximum of 86,100 ordinary shares (2005: 70,878) exercisable at 1164 pence per share. In November 2005 options were granted under the Wolseley Share Option Plan 2003 over 4,473,070 ordinary shares (2005: 4,081,340) to senior employees of the Group at an option price of 1185 pence per share. A further award of 111,820 options were granted under the 2003 Plan in January 2006 at an option price of 1281 pence per share. These schemes are described in more detail in the Remuneration report. Details of the total options outstanding at 31 July 2006 are set out in note 29 to the financial statements. Details of the cash awards under the 2001 Long Term Performance Related Incentive Scheme for Mr Banks and the cash and share awards under the Wolseley plc 2002 Long Term Incentive Scheme are set out in the Remuneration report.

Employee policies and involvement

The Group places particular importance on the involvement of its employees, keeping them regularly informed through informal bulletins, such as "Directions" and other in-house publications, meetings and the Company's internal website, on matters affecting them as employees and on the issues affecting their performance. A European Works Council has been operating since 1996 to provide a forum for dialogue and consultation with employees on significant developments in the Group's operations, management's plans and expectations, organisational changes within the Group and for employee representatives to consult management about concerns over any aspect of the Group's operations. At the date of this Report, there are 25 members comprising 14 employee representatives nominated from among employees from each European company with the balance being Company appointees.

Permanent UK employees are usually invited to join the Company's pension arrangements which include defined contribution and defined benefit pension schemes. The principal UK scheme has one corporate and two individual trustees. The Chairman of the trustees is David Tucker and, save for an independent trustee, all of the other trustees are UK-based employees or former employees of the Group. The other main UK scheme provides benefits for employees of the recently acquired William Wilson Group and has five trustees. The Chairman of the trustees is Ian Percy CBE and all of the other trustees are UK-based employees of the William Wilson Group or of the Company. Permanent employees outside the UK are usually offered membership of their employing companies' pension arrangements. Employees are offered a range of benefits depending on the local environment, such as private medical cover. Employees are encouraged to become shareholders in the Company, where possible, through participation in the Company's share schemes. Priority is given to the training of employees and the development of their skills is of prime importance. Employment of disabled people is considered on merit with regard only to the ability of any applicant to carry out the function required. Arrangements to enable disabled people to carry out the function required will be made if it is reasonable to do so. An employee becoming disabled would, where appropriate, be offered retraining. The Group continues to operate on a highly decentralised basis. This provides the maximum encouragement for the development of entrepreneurial flair, balanced by a rigorous control framework exercised by a small head office team. Local managements are responsible for maintaining high standards of health and safety and for ensuring that there is appropriate employee involvement in decision-making.

Creditor payment policy

All Group companies are responsible for establishing terms and conditions of trading with their suppliers. It is the Group's policy that payments to suppliers are made within agreed terms and are, where applicable, consistent with the UK Government-backed Better Payment Practice Code. Copies of this Code can be obtained from the Group Company Secretary at the Company's registered office. At 31 July 2006 the Company had no trade creditors (2005: nil). The amount of trade creditors for the Group as at 31 July 2006 was equivalent to 52 days (2005: 55 days) of trade purchases.

Shareholder services

Shareview is a service offered by our registrars, Lloyds TSB Registrars, which allows shareholders on-line access to a range of shareholder information. Shareview provides access to details of shareholdings in the Company and practical help on transferring shares or updating personal details. It also allows shareholders to choose to receive shareholder communications electronically, rather than by post. To register, shareholders simply need to log on to www.shareview.co.uk with their shareholder reference number, which is shown on the form of proxy sent to all shareholders with this Report. First time users will need to enter certain information and choose a Personal Identification Number before they are able to access their shareholding details.

Shareview dealing is also available to UK-based shareholders. This is a simple and convenient telephone and Internet share purchase and sale service offered by the Registrars. For telephone purchases and sales call 0870 850 0852 between 8.30am and 4.30pm, Monday to Friday. For Internet purchases and sales, log on to www.shareview.co.uk/dealing. A postal dealing service is also available from Lloyds TSB Registrars and a form, together with terms and conditions, can be obtained by calling 0870 242 4244.

CREST

The Company's ordinary shares are in CREST, the settlement system for stocks and shares.

Auditors

PricewaterhouseCoopers LLP are willing to continue as auditors of the Company and Resolution 8 in the Notice of Meeting concerning their reappointment and Resolution 9 in the Notice of Meeting concerning the determination of their remuneration are to be proposed at the Annual General Meeting. The Directors in office at the date of this report confirm that, so far as they are each aware, there is no relevant audit information of which PricewaterhouseCoopers LLP are unaware and each Director has taken all the steps that ought to have been taken as a Director to be aware of any relevant audit information and to establish that PricewaterhouseCoopers LLP are aware of that information. Annual General Meeting resolutions

The resolutions to be proposed at the Annual General Meeting to be held on 29 November 2006, together with explanatory notes, appear in the Notice of Annual General Meeting in the Notice of meeting and which is also available on our website at www.wolseley.com .

Directors' responsibility statement

The Directors are required by UK company law and International Financial Reporting Standards ("IFRS") as adopted by the European Union to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss for that period.

The Directors consider that, in preparing the accounts, appropriate accounting policies have been used and applied consistently, supported by reasonable and prudent judgements and estimates; they have been prepared in accordance with IFRS as adopted by the European Union and on the going concern basis. Applicable UK accounting standards have also been applied.

The Directors are also responsible for maintaining adequate accounting records which disclose with reasonable accuracy the financial position of the Company and the Group, which enable them to ensure that the financial statements comply with the UK Companies Act 1985 and Article 4 of the International Auditing Standards Regulation.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the wolseley.com website. The work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the UK governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.

The Directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and the Group and to prevent and detect fraud or other irregularities. The Directors, having prepared the financial statements, have permitted the auditors to take whatever steps and undertake whatever inspections they consider to be appropriate for the purpose of enabling them to give their audit opinion.

On behalf of the Board

Mark J White

Group Company Secretary and Counsel
Wolseley plc, Registered No. 29846
Theale, Reading
25 September 2006