Governance

This report, approved by the Board, has been prepared in accordance with the requirements of the Companies Act 1985 (the 'Act'), as amended by the Directors' Remuneration Report Regulations 2002, and the Listing Rules of the Financial Services Authority. Furthermore, the Board has applied the principles of good governance relating to Directors' Remuneration contained within the Combined Code.

The Act requires the auditors to report to the Company's shareholders on the audited information within this report and to state whether, in their opinion, those parts of the report have been prepared in accordance with the Act. The auditors' opinion is set out in the Independent auditors’ report to the members of Wolseley plc (Company) and those aspects of the report which have been subject to audit are clearly marked.

Remuneration Committee

The Board sets the Company's remuneration policy. The Remuneration Committee makes recommendations to the Board, within its agreed terms of reference (available on the Company's website, www.wolseley.com) on the Company's framework of executive remuneration and its cost, which takes into account all factors which it deems necessary. It also determines, with agreement of the Board, specific remuneration packages for each of the Executive Directors, the Chairman, the Company Secretary and members of the Executive Committee. The Chairman and the Executive Directors of the Board determine the remuneration of the Non Executive Directors. The committee is also responsible for the Company's share incentive schemes for employees. The current members of the committee, as detailed on the Board committees page, consist of three Non Executive Directors and the Chairman (as permitted by the Code), all of whom are independent within the definition set out in the Code, and the Company Secretary acts as its secretary. The Group Chief Executive and the Group HR Director are normally invited to attend the meetings of the committee to respond to specific questions raised by members of the committee. This specifically excludes such matters concerning the details of and any discussions relating to their own remuneration. The committee has access to detailed external research on market data and trends from experienced independent consultants. Since 2003, the committee has sought external advice from Hewitt New Bridge Street (formerly known as New Bridge Street Consultants LLP). Hewitt New Bridge Street provides no other services to the Company.

The committee met four times during the year, at which all committee members were in attendance. At these meetings, amongst other items, the committee considered:

• determination of bonus performance criteria and a review of performance prior to payment;
• operation and award levels under the long term incentive plan and executive share option scheme;
• awards in relation to all employee share plans; and
• consideration and review of remuneration policy, for both Executive Directors and Executive Committee members.

The Remuneration report has been received and adopted by shareholders at each of the Annual General Meetings held since 2003 and shareholders will again be invited to receive and adopt this report at the Annual General Meeting to be held on 18 November 2008.