External directorships

Executive Directors are encouraged to take on not more than one external Non Executive Directorship on a non-competitor board, as the Committee believes there are significant benefits to be achieved to both the Company and the individual. In order to avoid any conflict of interest, all appointments are subject to the Board’s approval. Executive Directors may retain payments received in respect of these appointments. Mr Banks is a Non Executive Director of Bunzl plc and of TowneBank/Peninsula (formerly Harbor Bank), for which the annual rate of his fees is respectively £56,500 and $600 per meeting attended. Mr Banks attended one meeting of the Board of TowneBank/Peninsula during the year (2005: £56,000 and $0). Mr Hornsby is a Non Executive Director of Virginia Company Bank for which he received 3,000 stock options at $10 each on appointment. Mr Hord is a Non Executive Director of Investors Management Corporation for which the annual rate of his fees is $22,000 (2005: $18,000). Mr Webster is a Non Executive Director of Bradford and Bingley plc, for which the annual rate of his fees is £60,000 (2005: £60,000).

Executive share ownership

A share ownership programme was introduced with effect from 1 August 2004. It is designed to encourage all Directors and members of the Executive Committee to build up a shareholding with a value of 1.5 times annual base salary for the Group Chief Executive; 1 times annual base salary for all Executive Directors; 1 times annual fees for all Non Executive Directors, including the Chairman; and 0.5 times annual base salary for all Executive Committee members. For Executive Directors and members of the Executive Committee this may be achieved by retaining shares received as a result of participating in a Company employee share plan (other than the shares sold to finance option exercises, or to pay a National Insurance or income tax liability or overseas equivalent). The programme specifically excludes the need for executives to make a personal investment should awards not vest. Normally these levels of shareholding should be expected to be achieved within three to five years from the time the individual is included in the programme. The Committee reviewed and noted the progress which has been made towards meeting these targets during the year. Directors’ current shareholdings are set out in the Report of the Directors section.

Policy on remuneration of Non Executive Directors

The remuneration of Non Executive Directors during the year under review was made up of a basic fee and an additional fee where a Non Executive Director acts as Chairman of either the audit or remuneration committees and for the Director nominated as Senior Independent Non Executive Director. Fees are reviewed from time to time by the Board. The Non Executive Directors have letters of engagement rather than service contracts and do not participate in any incentive plan, nor is any pension payable in respect of their services as Non Executive Directors. The Board’s policy is that Non Executive Directors are normally appointed for an initial term of three years, which is then reviewed and extended for a further three-year period. Appointments may, however, be terminated upon six months’ notice. There are no provisions for compensation in the event of termination. The terms and conditions of appointment of the Non Executive Directors are available for inspection at the Company’s registered office during normal business hours and at the Annual General Meeting.

The Board of Directors of Wolseley plc has approved this Remuneration report.

On behalf of the Board

Andrew J Duff

Chairman of the Remuneration Committee
25 September 2006